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Marketing is not a new word but evokes feelings of freshness each time it is used. For there is so much happening in this field that even the oldies have something new to learn every day. In your class itself, I am sure that there are quite a few students opting for marketing than any other discipline. Surely, there must be something in this word marketing, that everyone feels attracted to it. Marketing is ancient art. The first marketing trans- action can be perhaps attributed to Adam and Eve. Its emergence as a management discipline is of relatively recent origin. And within this relatively short period, it has gained a great deal of importance. In fact today marketing is regarded as most important of all management functions of business.
Some definitions of Marketing – • Much of marketing is concerned with the problem of profitably disposing of what is produced. • Marketing is the economic process by which goods and services are exchanged between the producer and the consumer and their val- ues determined in terms of money prices. • Marketing originates with the recognition of a need on the part of a consumer and terminates with the satisfaction of that need by the delivery of a usable product at the right time, at the right place and at an acceptable price. • Marketing is so basic that it cannot be con- sidered a separate function. It is really the whole business seen from the point of view of the final result, i.e., from the point of view of the customer. • Marketing is a viewpoint, which looks at the entire business process as a highly integrated effort to discover, create, arouse and satisfy consumer needs. • Marketing is the delivery of a standard of living to society. American Marketing Association – “It is the process of planning & executing the conception, pricing, promotion & distribution of ideas, goods & services to create exchange that satisfy individual & organisational goals” The Chartered Institute of Marketing defines Marketing as “Marketing is the man- agement process for identifying, anticipating & satisfying customer requirements profitably.” Peter Drucker There will always, one can as- sume, be need for some selling. But the aim of marketing is to make selling superfluous. The aim is to know and understand the customers well that the product or service fits him and sells it- self. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available
Core Marketing Concepts – Needs, Wants And Demands: Marketing thinking starts with the fact of human needs and wants. We all have some needs residing in ourselves. These needs exist. Remember that needs can never be created. Needs: Needs are the basic human requirements. People need food, air, water, clothing & shelter to survive. People also have needs for recreation, education and entertainment. Eg: Hunger food. According to Abraham Maslow’s need hierarchy, all the human needs can be categorized as shown in the diagram.
Human need is a state of felt deprivation of some basic satisfaction. Wants are desires for specific satisfiers of these deeper needs. Demands are wants for specific products that are bagged by an ability and willingness to buy them. Marketers do not create the needs. They can influence the demand by making the product appropriate, attractive, affordable and easily avail- able to target customers. Products: Anything that can be offered to satisfy a need or a want, Persons : Singer Places : Goa Activities : Sing in karaoke lounge. Organizations : Health club Ideas : Osho ashram Other terms can be : Offerings, satisfiers or resources.
Eg: A woman is not buying ‘lipstick’, she is buying ‘.hope’. She is confident that she will definitely look good after using that lipstick. And this hope brings her to the shop. A physical object is a means of packaging a service. The marketers’ job is to sell the benefit or services built in to physical products rather than just describe their physical features. Marketing Myopia Sellers who concentrate their thinking on the physical product instead of the customers need are said to suffer from ‘marketing myopia’. Wants: The needs become wants they are directed to specific objects that might satisfy the needs. “Needs Pre-exists” (can’t be created)
Demands: Demands are wants for specific products that are bagged by an ability and willingness to buy them.
Concepts of Marketing Management The philosophy of marketing which has evolved as marketing management has passed through distinct stages. The orientation of the companies have been changing from production to societal through product, sales, marketing. In this lesson we are going to discuss production and product orientations. There are various concepts of marketing that we as marketers have been following. There were times when the focus was on the production of the commodities, then the focus shifted on to the sales and distribution of the products and finally the focus moved to the real NEEDS of the consumers!
Changing Role Of Marketing Simple Trade Era Production Era Sales Era Competition Marketing Dept. Era Marketing Company Era Consumer Focused Era 1950 – 1960 began 1960’s Coordinate & Control Long – run customer satisfaction Prior to 1920’s 1920 – 1930 1930 – 1950 Sell Surplus
Increase Supply Beat
Company Orientations Towards the Market place Production Concept Product Concept Selling Concept Marketing Concept Societal Marketing Consumers prefer products that are widely available and inexpensive Consumers favor products that offer the most quality, performance, or innovative features Consumers will buy products only if the company aggressively promotes or sells these products Focuses on needs/wants of target markets & delivering value better than competitors Focuses on needs/ wants of target Concept markets & delivering value better than competitors that preserves the consumer’s and society’s well-being.
Selling 1. Emphasis on innovation on every existing technology and reducing every sphere. price determines cost 10. Emphasis is on the product 2. Views business as a good producing process 7. All departments of the business integrated manner. on providing better costs value to the customer by adopting a superior technology 8. Stresses needs and wants of buyers 6. Marketing views the customer last link in business as the very purpose of the business Defining Customer Value and Satisfaction: of new products. Management is profit oriented 4. Selling views customer as a last link in business Marketing 1. Planning is long-run-oriented in today’s products and terms tomorrow’s markets and future growth 5. Views business as consumer producing process satisfying process 7. Planning is short-run-oriented in terms of today’s products and markets 5. . the sole purpose being generation of consumer satisfaction 9. Stresses needs of seller 6. Cost determines Price 10. Emphasis on consumer needs wants 2. Company Manufactures the product first 3. Consumer determine price. Company first determines customers needs and wants and then decides out how to deliver a product to satisfy these wants 3. Emphasis on staying with existing technology and reducing costs 8. Different departments work as in a highly separate water tight compartments 9. Management is sales volume oriented 4.
and disposing of the given marketing officering. using. Managers take into account all seven of these factors. Together these factors determine the way in which a corporation operates. that is not its main goal. in his Delivering profitable value. The Seven S model was born at a meeting of these four authors in 1978. and was taken up as a basic tool by the global management consultancy company McKinsey. func. Customer Expectation: It is formed on the basis of past buying experiences. if the company sets expectations too low. If marketers raise expectations too high. the buyer is likely to be disappointed. it is more than the core positioning of the offering.tional. It is a subjective exercise but very important for marketer’s point of view. to be sure of successful implementation of a strategy. obtaining . . Origin of the 7-S Framework. advice. and long warranty period. The value-delivery system includes all the experiences the customer will have on the way to obtaining and using the offering.Customer perceived value (CPV) is the difference b etween the pros p e c t i v e c u s t o m e r ’ s evaluation of all the benefits and all the costs of an offering and the perceived alternatives. backed by a superior value-de. other benefits include a long-lasting car. the buyer is likely to be disappointed. According to Michael Lanning. They had been investigating how Japanese industry had been so successful. good service.livery system. it won’t attract enough buyers ( although it will satisfy those who do buy) If marketers raise expectations too high. and advertisements. . It appeared also in "In Search of Excellence" by Peters and Waterman. Large or small. Volvo’s core positioning is“safety. and psychological benefits customers expect from a given market offering. Total customer value is the perceived monetary value of the bundle or economic.” but the buyer is promised more than just a safe car. a company must design a competitively superior value proposition aimed at a specific market segment. Total customer cost is the bundle of costs customers expect to incur in evaluating.11 The value proposition consists of the whole cluster of benefits the company promises to deliver. like thermometer for temperature. if the company sets expectations too low. However. However. Since then it is known as their 7-S model. the results may be lower profits. At around the same time that Tom Peters and Robert Waterman were exploring what made a company excellent. it won’t attract enough buyers ( although it will satisfy those who do buy) Delivering High Customer Value The key to generating high customer loyalty is to deliver high customer value. History The 7-S Framework was first mentioned in "The Art Of Japanese Management" by Richard Pascale and Anthony Athos in 1981. If the company increases customer satisfaction by lowering its price or increasing its services . For example. Although the customer-centered firm seeks to create high customer satisfaction. What is the 7-S Framework? Description The 7-S Framework of McKinsey is a management model that describes 7 factors to organize a company in an holistic and effective way. Measuring Satisfaction There are no meters to measure it.
4. to reach identified goals. Strengths of the 7-S Model. functional divisions (top-down). 5. The interconnecting center of McKinsey's model is: Shared Values. Skills Distinctive capabilities of personnel or of the organization as a whole. over time. Central beliefs and attitudes. information systems. 6. decentralized. Combines rational and hard elements with emotional and soft elements. Compare: Management Styles. Systems The procedures. Style Cultural style of the organization and how key managers behave in achieving the organization's goals. Benefits • • • • Diagnostic tool for understanding organizations that are ineffective. competition. 3. Environment. The Value Chain framework of Michael Porter is a model that helps to analyze specific activities through which firms can create value and competitive advantage. What does the organization stands for and what it believes in. a holding. Strategy Plans for the allocation of a firms scarce resources. Staff Numbers and types of personnel within the organization. promotion and performance appraisal systems. etc. recruiting. Value Chain Michael Porter of Harvard proposed the value chain as a tool for identifying ways to create more customer value. Compare: Strategic Intent 2. Guides organizational change. Shared Values (also called Superordinate Goals). Managers must act on all Ss in parallel and all Ss are interrelated. a network. 7. customers. a matrix. processes and routines that characterize how the work should be done: financial systems. .The meaning of the 7 S 1. Structure The way in which the organization's units relate to each other: centralized.
buildings. design. packaging. . Procurement of raw materials. retail management. installation. development (education). The activities required to get the finished product at the customers: warehousing. advertising. etc. testing and all other value-creating activities that transform the inputs into the final product. Support activities (Staff functions. repair services. inventory control. distribution management. finance. machines. planning management. quality management. public affairs. upgrading. including: channel selection. equipment maintenance. Includes machining. legal. Outbound Logistics. Firm Infrastructure. retention and compensation of employees and managers. or • by reconfiguring the value chain. 2. spare parts. redesign. including: customer support. Includes receiving. Technology Development. Creating a cost advantage based on the value chain A firm may create a cost advantage • by reducing the cost of individual value chain activities. Such as: Research and Development. Includes technology development to support the value chain activities. promotion. The activities associated with recruiting. • Operations. Human Resource Management. The activities associated with getting buyers to purchase the product. etc. Process automation. etc • • Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Operations Outbound Marketing Service Logistics Logistics and Sales . spare parts management. order fulfillment. storing. overhead) • • Procurement. servicing. etc. transportation. • 3. training. • Marketing and Sales. The activities that maintain and enhance the product's value. accounting. Includes general management. assembly.The activities of the Value Chain Primary activities (line function) 1. selling. transportation planning. Service. pricing. Inbound Logistics.
"Reconfiguration" means structural changes such as: a new production process.A cost advantage can be created by reducing the costs of the primary activities. which is responsible. • The Corporate Level. when and where they will be completed. The sales. 1. Learning. Customer Relationship Management The aim of customer relationship management (CRM) is to produce high customer equity. ( General Electric.time values of all of the firm’s customers. the higher the customer equity. Degree of vertical integration. A cost advantage also can be pursued by "Reconfiguring" the value chain. Customer equity is the total of the discounted life. Proactive marketing: The company works continuously with its large customers to help improve their performance.person also asks the customer for any product – or service – improvement suggestions and any specific disappointments. 5. and how they will be coordinated. Linkages among activities. 3. 2. new distribution channels. Geographic location. Timing of market entry. Once the value chain has been defined.). It provides the logic that integrates the perspectives of functional departments and operating units. or complains. it makes decisions on the amount of resources to be allocated to each division. union activity. Clearly. Porter identified 10 cost drivers related to value chain activities: 1. Economies of scale. 6. or a different sales approach. taxes. 3. but also by reducing the costs of the support activities. A marketing plan is carried out within the context of a firm’s broader strategic business plan. Capacity utilization. A strategic marketing plan outlines the actions necessary. comments. has stationed engineers at large utilities to help them produce more power. A firm develops a cost advantage by controlling these drivers better than its competitors do.sources. the more loyal the customers. Firm's policy of cost or differentiation. for example. and points them all in the same direction. etc. Basic marketing: The salesperson simply sells the product. 10. Recently there have been many companies that achieved a cost advantage by the clever use of Information Technology. strategic planning takes place at four levels. Interrelationships among business units. 8. as well as on which businesses to start or eliminate. Dfferent levels of customers who have strong profit potential. Institutional factors (regulation. 4. 4.corporate headquarters is responsible for designing a corporate strategic plan to guide the whole enterprise. Accountable marketing: The salesperson phones the customer to check whether the product is meeting expectations. Reactive marketing: The salesperson sells the product and encourages the customer to call if the or the has questions. In most large corporations. a cost analysis can be performed by assigning costs to the value chain activities. 7. 2. 9. Strategic Planning A strategic business plan describes the overall direction an organization will pursue within its environment and also guides the allocation of re. .
• Cash Cows are often the stars of yesterday and they are the foundation of a company. Cash Cows (low growth. Advertising. Because of the low growth. It was developed in the early 70s by the Boston Consulting Group. it is better for the company. high market share) • Stars are using large amounts of cash. The Product Level. The units in the marketing division would be Sales. • • BOSTON CONSULTING GROUP MODEL The BCG Matrix method is the most well-known portfolio management tool. • Watch out for expensive ‘rescue plans’. • Stars are frequently roughly in balance on net cash flow. etc. low market share) • Avoid and minimize the number of Dogs in a company. a company should have a portfolio of products that contains both high-growth products in need of cash inputs and low-growth products that generate a lot of cash.each business unit develops a strategic plan to carry that business unit into a profitable future. Therefore they should also generate large amounts of cash. The four segments of the BCG Matrix Placing products in the BCG matrix provides 4 categories in a portfolio of a company: Stars (high growth. Stars are leaders in the business. or if the product's market grows faster. For example the marketing division would formulate strategies as to how the various units within it would work. investments which are needed should be low. Public Relations.each division establishes a division plan covering the allocation of funds to each business unit within the division. . Promotions.each product line.• The Division Level. The Boston Consulting Group Matrix has 2 dimensions: market share and market growth. The Business Level. However if needed any attempt should be made to hold your market share in Stars. The basic idea behind it is: if a product has a bigger market share. Eg. The BCG Matrix can be used to determine what priorities should be given in the product portfolio of a business unit.ing plan for achieving its objectives in its product market. brand within the business unit develops a market. high market share) • Profits and cash generation should be high. Market Intelligence. because the rewards will be Cash Cows if market share is kept. Dogs (low growth. It is based on product life cycle theory. To ensure long-term value creation.
Cash Cows. Other uses and benefits of the BCG Matrix • If a company is able to use the experience curve to its advantage. Their management have an easy job.5% for an entire corporation. They can then try to get any possible cash from the Question Marks that were not selected. In this way they can never become Cash Cows. it should be able to manufacture and sell new products at a price that is low enough to get early market share leadership. The executives are often praised anyhow. Limitations of the BCG Matrix Some limitations of the Boston Consulting Group Matrix include: • • • • • • • • • • It neglects the effects of synergy between business units. There is no clear definition of what constitutes a "market". low market share) • Question Marks have the worst cash characteristics of all. As a result all Question Marks and Stars receive only mediocre investment funds. they are often allowed to reinvest substantial cash amounts in their mature businesses. The problems of getting data on the market share and market growth. or otherwise companies are advised to disinvest. Market growth is not the only indicator for attractiveness of a market. otherwise they must be liquidated. In such a scenario: • • • Cash Cows Business Units will reach their profit target easily. These are hopeless attempts to "turn the business around". Even worse. Either these SBUs should receive enough investment funds to enable them to achieve a real market dominance and become Cash Cows (or Stars). Question Marks will simply absorb great amounts of cash. or sell off.• Dogs must deliver cash. A business with a low market share can be profitable too. The BCG Matrix and one size fits all strategies The BCG Matrix method can help to understand a frequently made strategy mistake: having a one size fits all strategy approach. because of their low market share. • Either invest heavily. Question Marks and Dogs. Increase market share or deliver cash. such as a generic growth target (9 percent per year) or a generic return on capital of say 9. Dogs Business Units are fighting an impossible battle and. A high market share does not necessarily lead to profitability all the time. • BCG method is applicable to large companies that seek volume and experience effects. These inadequate invested sums of money are a waste of money. • The model is simple and easy to understand. because they have high cash demands and generate low returns. it is destined to be profitable. This may tempt management to emphasize a particular product. now and then investments are made. • BCG model is helpful for managers to evaluate balance in the firm’s current portfolio of Stars. Sometimes Dogs can earn even more cash as Cash Cows. Once it becomes a star. • If the market share remains unchanged. • It provides a base for management to decide and prepare for future actions. or to divest prematurely. The model neglects small competitors that have fast growing market shares . High market share is not the only success factor. or invest nothing and generate any cash that you can. The model uses only two dimensions – market share and growth rate. Question Marks (high growth. even worse.
If the enterprise falls in this zone the business is in a favorable position with relatively attractive growth opportunities. It holds that a company can appropriately rate its different businesses for the purpose of strategic planning on the basis of two main parameters – Market Attractiveness and Business Strength. The blocks with a Diagonal Zone consists of the three cells in the lower right corner. The nine cells are grouped into three zones: The block with the Lateral Zone consists of the three cells in the upper left corner. If additional factors are considered. the growth-share matrix can be seen as a special case of a multifactor portfolio matrix such as that pioneered by General Electric. This indicates a “green light” to invest in this product/service. MARKET ATTRACTIVENESS • Overall market size • Annual market growth rate • Historical profit margin • Competitive intensity • Technological requirements • Inflationary vulnerability • Energy requirements • Environmental impact • Socioal-political legal 2 .THE GENERAL ELECTRIC MODEL An SBU’s appropriate objective cannot be determined solely by its position in the growth-share matrix. A position in the yellow zone is viewed as having medium attractiveness. The suggested strategy is to seek to maintain share rather than growing or reducing share. The blocks with plain Zone consists of the three diagonal cells from the lower left to the upper right. The above two factors make excellent marketing sense for rating a business. Companies are successful to the extent that they enter attractive markets and possess the required business strengths to succeed in those markets. The model is based on the company’s seven businesses. General Electric Approach The model to analyze the SBUs has been give by General Electric and it is even known as Market attractiveness and Company strength matrix. The suggested strategy is that management should begin to make plans to exit the industry. the business will not produce outstanding results. yielding nine cells. Neither a strong company operating in an unattractive market nor a weak company operating in an attractive market will do very well. Both axes are divided into three segments. BUSINESS STRENGTH • Market share • Share growth • Product quality • Brand reputation • Distribution network • Promotional effectiveness • Productive capacity • Productive efficiency • Unit costs • Material supplies AND BUSINESS . If one of these factors is missing. A position in the red zone is not attractive. Organisation must therefore exercise caution when making additional investments in this product/service. FACTORS UNDERLYING MARKET ATTRACTIVENESS STRENGTH IN GE MULTIFACTOR PORTFOLIO MODEL 1 .
The major strengths of the approaches are that they allow a firm to do the following: . Marketing contributes to assessing each SBU’s sales and profit potential. cash cows. the objective might be to maintain the existing demand with fewer marketing dollars or to take cash out of the business and allow demand to fall. Management should also forecast each SBU’s expected position in the next three to five years given the current strategy. The diagonal cells stretching from the lower left to the upper right indicate SBUs that are medium in overall attractiveness. Evaluation of Strategic Planning Approaches Many firms assess alternative market opportunities. marketing’job is to carry out the plan efficiently and profitably. Rather. economic events. and dogs.• • R & D performance Mangerial personnel STRATEGIES The GE matrix is divided into nine cells. know which products are stars. and realize they can target broad or narrow customer bases. Thus. The three cells in the upper left corner indicate strong SBUs in which the company should invest or grow. question marks. recognize what factors affect performance. The three cells in the lower-right corner indicate SBUs that are low in overall attractiveness. new technologies. etc. the company’s objective is not always to build sales in each SBU. the task of marketing management is to manage demand or revenue to the target level negotiated with corporate management. understand their industries. but once the SBU’s objective and budget are set. Making this determination involves analyzing where each product is in its product life cycle as well as expected competitor strategies.
• They are often used by staff planners rather than line managers. The approaches have these weaknesses: • They may be difficult to implement. Current Products Current Markets New Products New Markets . • These techniques only aid planning. market development. See accompanying figure. • Compare performance with designated goals. They do not replace the need for managers to engage in hands-on decisions by studying each situation and basing marketing strategies on the unique aspects of their industry. • They may not adequately consider environmental factors. • Compute marketing and other resources needs. • Study competitors’ actions and trends.• Analyze each of its SBUs and products. firm. The Product/Market Opportunity Matrix The product/market opportunity matrix identifies four alternative marketing strategies to maintain and/or increase sales of business units and products: market penetration. • They may overvalue market share. • Focus on meaningful differential advantages. • They may not be applicable to all firms and situations. and SBUs. • Learn the opportunities to pursue and which threats to avoid. • Discover principles for improving performance. • They may be too simplistic and omit key factors. • Study various strategy effects. and diversification. prod.uct development. • They are arbitrary in defining SBUs and evaluative criteria.
2. But here the company should take care as this involves high risk and the firm might loose focus. Horizontal Diversification Strategy. It can enter new markets. a firm becomes involved with new products aimed at new markets.corporate management’s first course of action should be a review of whether any opportunities exist for improving its existing businesses’ performance. Later it will also review opportunities to develop new products for new markets(diversification strategy). appeal to segments it is not yet satisfying. the company goes for diversification. This can be either based on demographic or geographic or psycho. these new sources may still not deliver the desired sales volume. and competitive pricing. By examining these three intensive growth strategies. Finally if the company decides to acquire one or more competitors. They can be either completely new products or existing product extensions. Still. 3. In diversification. A company may acquire one or more of its suppliers to gain more control or generate more profits which would be called as backward integration.the company might search for new products that could appeal to current customers even though the new products are technologically unrelated to its current product line. It emphasizes new models. This is possible in three kinds: • Concentric Diversification Strategy-The company could seek new products that have technological or marketing synergies with existing product lines. In that case. and other minor innovations and markets them to loyal consumers. three strategies have been formulated to overcome this gap. INTEGRATIVE GROWTH – Often a business’s sales and profits can be increased through backward. forward or horizontal integration within the industry. Distribution and promotion orientations are different from those traditionally used by the firm. DIVERSIFICATION GROWTH – When good opportunities which are highly attractive are found to be outside the present business and the company has a mix of business strengths to be successful in them. better quality. that growth may not be enough. provided that the government does not bar this move(horizontal integration). even though the new product themselves may appeal to a different group of customers.graphic factors. a firm seeks to expand the sales of its present products in its present markets through more intensive distribution. INTENSIVE GROWTH. In that case company must consider diversification. a firm seeks greater sales of present products from new markets or new product uses. • . reposition products. 1. Next it considers whether it can find or develop new markets for its current products (market-development strategy). aggressive promotion. • • • While the corporations are faced with ever increasing strategic planning gap. The company first considers whether it could gain more market with its current products in their current markets(market penetration strategy).• In market penetration. management must also examine integrative growth opportunities. a firm develops new or modified products to appeal to present markets. Ansoff model propounded by Igor Ansoff is a useful framework for detecting new intensive growth opportunities called a “Product-Market Expansion Grid”. This can be done by either increasing the usage among the existing customers or switching of competitor’s customers or by adding non consumers in the consumer list. In product development. However. Then it considers whether it can develop new products of potential interest to its current markets(productdevelopment strategy). It might acquire some wholesalers or retailers. especially if they are highly profitable(forward integration). and use new distribution methods. The products may be new to the industry or to the company. In market development. management may discover several ways to grow.
4. DOWNSIZING OLDER BUSINESSES. not fritter away energy and re. . Firms that succeed in cost leadership often have the following internal strengths: • • • Access to the capital required to make a significant investment in production assets. The cost leadership strategy usually targets a broad market. making optimal outsourcing and vertical integration decisions or avoiding some costs altogether. but must also carefully prune. products or markets. Differentiation—large market and unique strategy. Managers should focus on growth opportunities.sources trying to salvage hemorrhaging businesses. Cost leadership and differentiation strategies are alternatives for large firms. the firm may be able to sustain a competitive advantage based on cost leadership. gaining unique access to large source of lower cost materials. Some of the ways by which firms acquire cost advantages are by improving process efficiencies. this investment represents a barrier to entry that many firms may not overcome. If competing firms are unable to lower their costs by a similar amount. Competitive advantage (lower cost or differentiation). Skill in designing products for efficient manufacturing. The following three basic strategies are identified (see Figure): 1. Cost Leadership strategy: This generic strategy calls for being the low cost producer in an industry for a given level of quality. Cost leadership—broad market and low cost position. 2. a focus strategy is available to smaller firms.• Conglomerate Diversification Strategy – the company might seek new businesses that have no relationship to its current technology. Focus—narrow target segment and either low cost position or a unique strategy. The Porter Generic Strategy Model The Porter generic strategy model identifies two key planning concepts and the alternatives available for each: • • Competitive scope (broad or narrow target). High level of expertise in manufacturing process engineering. harvest or divest tired old businesses in order to release needed resources and reduce costs. The firm sells its products either at average industry prices to earn a profit higher than that of rivals or below the average industry prices to gain market share. 3.companies must not only develop new businesses.
If research is done this way. For example.• • Efficient distribution channel. Some risks of focus strategy include imitation and changes in the target segment. it may be fairly easy for a broad-market cost leader to adapte its product in order to compete directly. continuous basis. Additionally. firms pursuing a focus strategy have lower volumes and thus less bargaining power with their suppliers.ing a focus strategy and targeting various narrow markets may be able to achieve an even lower cost within their segments and as a group gain significant market share. Strong sales team with the ability to successfully communicate the perceives strengths of the product. MARKETING INFORMATION SYSTEM A marketing information system (MIS) is a set of procedures and methods designed to generate. Information should not be approached in an infrequent manner. the competition may be able to leapfrog the production capabilities. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product. Focus Strategy : This strategy focus on narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitutes do not exist. Finally. A firm using a focus strategy often enjoys a high degree of customer loyalty and this entrenched loyalty discourages other firms from competing directly. even the low cost strategy. analyze. There may be a lack of awareness of environmental changes and competitors’ actions. other firms may be able to lower their costs as well. several firms follow. Each generic strategy has its risks. Firms that succeed in differntiation strategy often have the following internal strengths: • • • • • Access to leading scientific research. Highly skilled and creative product development team. However. Corporate reputation for quality and innovation. and store anticipated marketing decision information on a regular. . The risks associated with differentiation strategy include imitation by competitors and changes in customer tastes. Additionally various firms pursuing focus strategies may be able to achieve even greater differntiation in their market segments. Opportunities may be missed. Because of their narrow market focus. Firms that succeed in a focus strategy are able to tailor a broad range of product development strengths to a relatively narrow market segment that they know very well. disseminate. The premise is that the needs of the group can be better serviced by focusing entirely on it. 2. thus eliminating the competitive advantage. As technology improves. Furthermore. other focusers may be able to carve out sub-segments that they can serve even better. iDifferentiation Strategy : This strategy calls for the development of a product or service that offers a unique attributes that are valued by the customers and customers perceive to be better than or different from the products of the competition. a firm could face these risks: 1.
An information system can be used operationally. A marketing information system (MIS) is a set of procedures and methods designed to generate. managerially. which contains three components. Actions may be reactionary rather than anticipatory. 8. Data warehousing involves the retention of all types of relevant company records. 4. Data collection may be difficult to analyze over several time periods. Marketing plans and decisions may not be properly reviewed. 3. Data collection may be disjointed. The total information needs of the marketing department can be specified and satisfied via a marketing intelligence network. analyze. 5. 3. Previous studies may not be stored in an easy to use format. managerially. An MIS offers many advantages: 1. . as well as the information collected through continuous monitoring and marketing research that is kept by the organization. A broad perspective. Time lags may result if a new study is required. 2. and strategically for several aspects of marketing. Marketing research is used to obtain information on particular marketing issues. Organized data collection. 2. and store anticipated marketing decision information on a regular. The storage of important data. Continuous monitoring is the procedure by which the changing environment is regularly viewed. An information system can be used operationally. 4. An avoidance of crises. 7. disseminate. 6. and strategically for several aspects of marketing.3. continuous basis. 1.
It must not be haphazard. and improve understanding of marketing as a process. analyzes.search into a specific market.e. Several points about marketing research need to be emphasized. refine. The ability to do a cost-benefit analysis. and evaluate marketing actions. but also areas such as research into new products. It involves a sequence of tasks: data gathering. competitors. markets. A firm’s decision to use marketing research does not mean it must engage in expensive projects (test marketing. ‘Market’ research is simply re. an impartial agency. MARKET RESEARCH Marketing research is the systematic gathering. 3. Mystery shopping 3. monitor marketing performance. or modes of distribution such as via the Internet. 8. An outside party or the firm itself may undertake such research. ‘Marketing’ research is much broader. and analysis. or a research specialist working for the firm. It may get enough data by analyzing internal reports or from informal meetings with customer service personnel. designs the methods for collecting information. Sources of Data . and analyzing of information about specific issues related to the marketing of goods. It is original and collected to solve the problem in hand. Obviously. 7. Projective techniques 5. 2. customer. 1.5. and public to the marketer through information . Here are a couple of definitions: Marketing research is the function that links the consumer. It may be applied to any aspect of marketing that requires information to aid decisionmaking. It is a very narrow concept. We consider some of them: 1. people. Coordinated marketing plans. Primary Research There are many was to conduct primary research. already exists since it has been collected for other purposes. Product tests 6. Speed in obtaining sufficient information to make decisions. marketing research into the elements of the marketing mix. places.information used to identify and define marketing opportunities and problems. recording.. and ideas. Market research and marketing research are often confused. Data amassed and kept over several time periods. also known as desk research. recording. services. It not only includes ‘market’ research. consumer attitude surveys). 4.Primary and Secondary There are two main sources of data .primary and secondary. Primary research is conducted from scratch. Data may be available from different sources: the firm itself. this is a very long and involved definition of marketing research. Research findings and their implications must be communicated to the appropriate decision maker(s) in the firm. and everything to do with the customers. Focus groups 4. Secondary research. Interviews 2. Diaries . 6. Marketing research is about researching the whole of a company’s marketing process This explanation is far more straightforward i. manages and implements the data collection process. 5. Marketing research specifies the information required to address these issues. and communicates the findings and their implications. generate. organizations.
The research will probe and develop points of interest.face. Other face-to-face interviews are more ‘in depth. Other important data is collected when visitors sign up for membership. or over the Internet. It is ideal for collecting data from a geographically dispersed sample. Visitors to sites can be asked to complete electronic questionnaires. Advantages of telephone interviews • Can be geographically spread • Can be set up and conducted relatively cheaply • Random samples can be selected • Cheaper than face-to-face interviews Disadvantages of telephone interviews • Respondents can simply hang up Interviews tend to be a lot shorter • Visual aids cannot be used • Researchers cannot behavior or body language • Face-to-face Interviews Face-to face interviews are conducted between a market researcher and a respondent. However responses will increase if an incentive is offered such as a free newsletter. • Telephone Interviews Telephone ownership is very common in developed countries. • The Internet The Internet can be used in a number of ways to collect primary data. face-to. Advantages of the Internet • Relatively inexpensive • Uses graphics and visual aids • Random samples can be selected • Visitors tend to be loyal to particular sites and are willing to give up time to complete the forms Disadvantages of the Internet • Only surveys current. The interviews tend to be very structured and tend to lack depth. Interviews can be telephone. Data is easily compared. Data is collected on a survey. Telephone interviews are cheaper to conduct than face-to-face interviews (on a per person basis). Advantages of face-to-face interviews • They allow more ‘depth’ • Physical prompts such as products and pictures can be used • Body language can emphasize responses • Respondents can be ‘observed’ at the same time Disadvantages of face-to-face interviews • Interviews can be expensive • It can take a long period of time to arrange and conduct. Interviews This is the technique most associated with marketing research. or free membership. Some surveys are very rigid or ‘structured’ and use closed questions. . not potential customers. • Some respondents will give biased responses when face-to-face with a researcher.’ and depend upon more open forms of questioning.7. Omnibus Studies 1.
cafes and restaurants. Often used in banking. the mail survey is the most appropriate way to gather primary data. • Can be very expensive in comparison to other methods 4. They collect data on customer service and the customer experience.• • Needs knowledge of software to set up questionnaires and methods of processing data May deter visitors from your website. Lists are collated. They are rare. Discussion. Observers will contemplate how the product is handled. or years). especially call centers. Mail surveys do not tend to generate more than a 5-10% response rate. However. Highly experienced researchers work with the focus group to gather in depth qualitative feedback. It demands a substantial commitment on the part of the respondent. opinion. a second mailing to prompt or remind respondents tends to improve response rates. and many other customer focused organizations.depends on very quick (subconscious) responses to words Psycho. the researcher has a reasonable picture of purchasing behavior.complete the ‘bubbles’ on a cartoon series Sentence or story completion Word association . or purchased. posing as real customers. • Mail Survey In many countries.Imagine that you are a product and describe what it is like to be operated. Projective techniques Projective techniques are borrowed from the field of psychology. travel. 3 Focus Groups Focus groups are made up from a number of selected respondents based together in the same room. 6 Diaries Diaries are used by a number of specially recruited consumers. However. warn. retailing. and so on.look for images in a series of inkblots Cartoons . . 2 Mystery Shopping Companies will set up mystery shopping campaigns on an organizations behalf. Findings are reported back to the commissioning organization. They are asked to complete a diary that lists and records their purchasing behavior of a period of time (weeks. 5 Product tests Product tests are often completed as part of the ‘test’ marketing process. months. and a pre-designed questionnaire is mailed to a sample of respondents. There are many issues surrounding the ethics of such an approach to research. Mail surveys are less popular with the advent of technologies. Groups tend to be made up from 10 to 18 participants. Potential customers are asked to visit the store and their purchase behavior is observed. There are many examples of such approaches including: Inkblot tests . by collecting a series of diaries with a number of entries.drama . such as the Internet and telephones. how much time the consumer spends with the product. Products are displayed in a mall of shopping center. mystery shoppers will enter. or used. They will generate highly subjective qualitative data. and beliefs are encouraged. Advantages of focus groups • Commissioning marketers often observe the group from behind a one-way screen • Visual aids and tangible products can be circulated and opinions taken • All participants and the research interact • Areas of specific interest can be covered in greater depth Disadvantages of focus groups • Highly experienced researchers are needed. and the research will probe into specific areas that are of interest to the company commission in the research. how the packing is read. Complex to organize.
data must be collected and analyzed. examining secondary data.e. analyzing information. and implementing findings. and primary data are not generated until secondary data are thoroughly reviewed. Each step is completed in order. making recommendations. THE MARKETING RESEARCH PROCESS The marketing research process consists of a series of activities: defining the issue or problem to be studied. The goal of marketing research is to provide the facts and direction that managers need to make their more important marketing decisions. it already exists. Figure below that presents the complete process. generating primary data (if necessary). and the following list is by no means conclusive: • Trade associations • National and local press Industry magazines • National/ international governments • Web sites • Informal contacts • Trade directories • Published company accounts • Business libraries • Professional institutes and organizations • Omnibus surveys • Previously gathered marketing research • Census data • Public records Managers need information in order to introduce products and services that create value in the mind of the customer. There are a number of such sources available to the marketer. An omnibus survey could include questions from companies in sectors as diverse as heath care and tobacco. The research is far cheaper. The organization will be one of many that simply want to a straightforward answer to a simple question. the attributes that create value cannot simply be deduced from common knowledge.7 Omnibus Studies An omnibus study is where an organization purchases a single or a few questions on a ‘hybrid’ interview (either face-to-face or by telephone). and commits less time and effort than conducting your own research. As such. For example. . But the perception of value is a subjective one. secondary data are not examined until a firm states the issue or problem to be studied. Secondary Research Secondary (or desk) research uses data that has been collected for other objectives than your own i. and what customers value this year may be quite different from what they value next year. Rather.
Access to hard-to-obtain data. Secondary data are those that have been gathered for purposes other than solving the current problem under investigation. B. 4. The decision problem faced by management must be translated into a market research problem in the form of questions that define the information that is required to make the decision and how this information can be obtained.1. small group discussions. Secondary data have these general advantages: 1. it is useful for the researcher to outline possible scenarios of the research results and then for the decision maker to formulate plans of action under each scenario. profit-and-loss statements. Internal secondary data are available within the company. ISSUE (PROBLEM) DEFINITION A. The corresponding research problem might be to assess whether the market would accept the new product . Source credibility. Secondary data have these general disadvantages: Lack of suitability. Obsolescence. Conclusive research. C. Conflicting results. 4. Undisclosed findings. 5. 6. 5. Issue (problem) definition is a statement of the topic to be looked into. sales figures. Unknown methodology.ten reports. and understanding underlying trends. is used after the problem definition is clarified. Sources A. The use of such scenarios can ensure that the purpose of the research is agreed upon before it commences. Speed. Advantages and Disadvantages A. They may be obtained . To ensure that the true decision problem is addressed. Exploratory research is undertaken when the researcher is uncertain about the precise topic to investigate or wants to informally study an issue. It is also called qualitative research and may involve in-depth probing. 3. They include budgets. B. prior research reports. Thus.The objective of the research should be defined clearly. 2. For example. 3. also called quantitative research. External secondary data are available from sources outside the company. Unknown reliability. 1. EXAMINATION OF SECONDARY DATA A. customer billings. 2. 2. Helpful for exploratory research. B. Diverse sources. the decision problem is translated into a research problem. inventory records. It is the structured collection and analysis of data pertaining to a specific issue or problem. These data should always be reviewed before primary data collection. B. and writ. a decision problem may be whether to launch a new product. 6. Low costs.
every member of the designated population has an equal or known chance of being selected. Limited perspective.from government and non-government sources. 3. B. There are three sources of non-government secondary data: a. Who or what should be studied? This is defined as the population. b. Advantages and Disadvantages A. sampling is usually employed. 5. Sampling enables the firm to analyze selected people or objects. Reliability determined. members of the population are chosen on . 2. 2. Who collects the data? Data can be collected by the firm itself or by an outside company. B. Primary data have these general disadvantages: Time consuming. Company limitations. 5. 3. GENERATION OF PRIMARY DATA A. 4. 1. Primary data consist of information gathered to address a specific issue or problem at hand.search) conduct periodic and ongoing studies and make results available to many clients for a fee. 3. It consists of these eight steps: 1. With a probability sample. Regular publications can be broad in scope (such as Business Week) or more specialized (such as the Journal of Advertising). a. IMS Health. and Burke Marketing Re. Currency. and other non-regular publications deal with special topics in depth and are compiled on the basis of interest by a target audience. Commercial research houses (such as A. For large and/or dispersed populations. 7. With a non-probability sample. Controlled and known methodology. B. Inability to gather certain types of information. 6. The way in which people or objects are selected must be decided. They are necessary if secondary data are insufficient for a proper marketing decision to be made. c. Research Design A. High costs. Precision.C. monographs. 4. 2. A research design outlines the procedures for collecting and analyzing data. Primary data have these general advantages: 1. 3. Books. What information should be collected? It can be exploratory or conclusive in nature. Only way to acquire information in some cases. Secrecy. Nielsen. 1. No conflicting data.
Data analysis consists of the following: 1.administered questionnaires. supplies. Data are collected. ANALYSIS OF DATA A. all others remain constant. 2. 8.trolled conditions. The semantic differential is a list of bipolar (opposite) adjective scales that provides an overall profile b. the location of data collection must be outlined. C. In addition. researcher time. The report must be written for the audience that reads it. How much will the study cost? Costs may include executive time. What technique of data collection should be used? a. An experiment is a type of research in which one or more factors are manipulated under con. interviewers. e.the basis of convenience or judgment. computer usage. postage or phone expenses. or by phone or mail. 4. When and where should information be collected? The day and time must be set. respondents’ incentives (if any). special equipment. B. Data Collection A. 7. printing. Observation is a research method whereby present behavior or the results of past behavior are observed and noted. It can be disguised or non disguised. With self. Tabulation—the calculation of summary data for each response category. It can be conducted in person. support staff time. . pre-testing. Responses or observations must be entered correctly. Benefits and costs must be compared. 2. RECOMMENDATIONS A. It may be human or mechanical. C. respondents write their answers. B. How will the data be collected? Data collection can be administered by research personnel or be self-administered. Just the factor under study is varied. With administered questionnaires. based on marketing research findings. Figure 4-11 shows recommendations flowing from completed research. Simulation is a computer-based method to test the potential effects of various marketing factors via a software program rather than real-world applications. Table 4-2 shows the best uses for each kind of primary data collection. Those engaged in data collection must be properly supervised and follow directions exactly. 6. Recommendations are suggestions for a firm’s future actions. c. d. interviewers record answers. How long will the data-collection period be? The total time frame is specified. Coding—the process by which each completed data form is numbered and response categories are labeled. 4. 5. A survey gathers information from respondents by communicating with them. Analysis—the evaluation of responses as they pertain to the specific issue or problem under investigation. 5. and marketing expenses (such as ads).
or cluster sample? 4. as well as efforts of the compa. why are sales falling in New Zealand? 2. Define the problem. 6. or analytic mistakes. 3. They have confidence that results are accurate. B.-based) account for $8 billion in yearly revenues. Make sure that you agree on the problem! If you gain approval. 9. Once the recommendations are passed on to the proper decision makers. For example.000 firms accounting for the rest. 7. stratified sample. Select a sampling method. Conduct the analysis of the data. The research report represents feedback to marketing managers. They have input into the research design. Scope of marketing research A. then move on to step seven. How will you collect the data that you will analyze to solve your problem? Do we conduct a telephone survey. Summary of the Marketing research Process – Marketing research is gathered using a systematic approach. Go back and speak to the managers or clients requesting the research. IMPLEMENTATION OF FINDINGS A. This is in addition to government. Make sure that you really ‘need’ to know something. tables. or do we arrange a focus group? The methods of data collection will be dis. the research report should be warehoused in the marketing intelligence network. Companies spend about $12 billion worldwide (40 percent in the United States) for data gathered by marketing research firms. Do we us a random sample. An example of one follows: 1. Marketing managers are most likely to implement research findings under these conditions: 1. data collection method.S. B. Watch out for errors in interpretation. 10. and diagrams that will communicate the results of the research. with more than 1. Check for errors. 8. the topical areas in which . Never conduct research for things that you would ‘like’ to know.D. 3. How will we analyze any data collected? What software will we use? What degree of accuracy is required? 5. who are responsible for using findings. Go ahead and collect the data. This will contain charts.cussed in more detail later. According to the American Marketing Association. Decide upon a budget and a timeframe. and hopefully lead to a solution to your problem.nies themselves. They have broad control over marketing decisions.Write your final report. 2. 6. The problem then becomes the focus of the research.and institutionsponsored research. The top 25-research firms (nearly half of which are U. It is not uncommon to find errors in sampling.
To turn the situation around. Yet. Customer satisfaction research is being sponsored much more than ever before. with many firms doing their own studies and others hiring outside specialists. Misportraying research findings in ads and other communications. companies tend to spend about 1 percent of revenue on marketing research. 2. brand awareness and preference. b. F. single-source data collection—whereby research firms track the activities of individual consumer households from the programs they watch on TV to the products they purchase at stores—is now possible. Planet Feedback enables consumers to send their feedback to companies quickly and effortlessly. spending for online marketing research has grown from $3. With more and more firms striving to expand their foreign endeavors. C. Due to unethical practices of some firms. False sponsor identification. and the complexities of international marketing research. On average. Here are examples of how the research is being used. Due to technological advances. 6. Over the last few years. 1. The extent of such research has more than doubled in recent years. Observational studies without informed consent. these practices need to be avoided: 1. 8. ethical considerations. 3. and the application of single-source data collection. Marketing Info offers The Marketplace. Five marketing research trends are the rapid increase in customer satisfaction studies. C. 4. G. a. product satisfaction. segmentation studies. and concept development and testing. In fact. international marketing research is taking on greater importance. designing and . a lot of Americans will not answer a survey. market-share analyses. Misrepresenting research projects. many potential respondents are “turned off” to participating in marketing research projects. using search engines.5 million in 1996 to $255 million in 2000. Many businesspeople start their research by checking out competitors’ Web sites. purchase intentions. Asking overly personal questions. B. 7. Firms deciding how to market to the hundreds of millions of consumers in Eastern Europe and Central Asia increasingly do market research there. Selling consumer demographic information for database use without consent. 5. an easy-to-use exchange for purchasers and providers of market research and related marketing services. and accessing online annual reports and trade publications. 2. c. the use of the Internet. Unrealized promises of anonymity. Selling or fund raising under the guise of research.companies are most likely to engage in or sponsor research efforts are industry/market characteristics and trends.
Many times. may be below Western standards. people have never been surveyed before. 2. Secondary data from government agencies and trade associations may be lacking. 4 Kodak is provided as an example of a company that had difficulty conducting market research in nine former Soviet republics.conducting research is hard. 1. . Communications systems. especially phone services. 3.
Marketers are always trying to spot “cultural shifts” which might point to new products that might be wanted by customers or to increased demand. It is measured as a combination of occupation. religions. the cultural shift towards greater concern about health and fitness has created opportunities (and now industries) servicing customers who wish to buy: • Low calorie foods • Health club memberships • Exercise equipment • Activity or health-related holidays etc. Sub-cultures can include nationalities. For example. wealth and other variables Social factors: A customer’s buying behavior is also influenced by social factors. In fact. Sometimes a sub-culture will create a substantial and distinctive market segment of its own. family.workers are examples of primary . ready meals and direct marketing service busi. Similarly the increased desire for “leisure time” has resulted in increased demand for convenience products and services such as microwave ovens. the decision to purchase and use certain products and services. or groups of people sharing the same geographical location.nesses such as telephone banking and insurance. differences in social class can create customer groups. neighbors. close friends. colleagues and co. personality and lifestyle. perception and wants from the family and other important groups. social class is not just determined by income. In a group. Cultural factors: Cultural factors have a significant impact on customer behavior. racial groups.Consumer Behavior Factors affecting consumer behavior Each of these factors is discussed in more detail in the following sections on buyer behavior. The groups with whom he interact directly or indirectly influence your purchase decisions and thus their study is of great importance to marketer to understand are: I) Primary and secondary groups: a primary group is one with which an individual interacts on a regular basis and whose opinion is of importance to him. is influenced not only by psychological factors. Each culture contains “sub-cultures” – groups of people with share values. several individuals may interact to influence the purchase decision. but also by the people around the customer with whom he interact and the various social groups to which you belong. the “youth culture” or “club culture” has quite distinct values and buying characteristics from the much older “gray generation” Similarly. For example. education. income. Growing up. In the UK’s socioeconomic classification scheme. The typical roles in such a group decision can be summarized as follows: Reference groups As a consumer. such as the groups to which the customer belongs and social status. Culture is the most basic cause of a person’s wants and behavior. children learn basic values. the official six social classes in the UK are widely used to profile and predict different customer behavior.
Direct reference groups. as I unit. Any of these groups can sever as a reference group for a consumer if it serves as a point of reference or comparison ion the formation of the values. Experts such as doctors. which exert a significant influence on consumer’s. It demonstrates to the prospective customer that demonstrates just like him uses and is satisfied with the product. Secondary groups are those with which an individual interacts only occasionally and does not consider their opinion very important. Indirect reference groups comprise those individuals or groups with whom an individual dews not have any direct face to face contact. whether small or large. informal and small groups exert the maximum influence on consumers and are of great interest for marketers. formal or reference group is a very wide one and includes both direct and indirect or group influences. social clubs and societies are other types of formal groups to which individuals may belong. attitudes and behavior. A symbolic group is one which an individual aspires to belong to. Soft drink (Thums up). accountants and authors are used for establishing the benefits of the product. TV stars. Different kinds of groups. Graviera) are advertised using celebrities from the sports and film fields. textiles ( Dinesh . purchase decisions and behavior can be classified into six categories. is an important of all these groups and we shall discuss it in detail. iv) Formal shopping groups. Another reference group appeal is that which uses the testimonials of a satisfied customer. vi) Work groups. c) The ‘common man’ Celebrities are well known people (in their specific field of activity) who are admired and their fans aspire to emulate their behavior. b) Experts. lawyer. III) Membership and symbolic groups: A membership group is one to which a person belongs or qualifies for membership. group situation with which potential customers can identify are used to promote products and services. as a unit. Hidden in this appeal is the subtle inducement to the customer to identify himself with the user the product in question. II) Formal and informal groups: Rotary. Family: The family is the most important of all these groups and we shall discuss it in detail. It is a source of major influence on the individual members’ buying behavior. A formal group has a highly defined structure. shaving cream (Palmolive). iii) Formal social groups. an informal group is loosely defined and may have no specified roles and goals. There are i) The family ii) Friendship groups. sportsman. such as film stars. Labor unions. Reference groups are used in advertising to appeal to different market segments. Meeting your neighbors over lunch once a month for friendly exchange of news is an instance of an informal group. The three types of reference groups appeals most commonly used are: a) Celebrities. In contrast. lions. Primary. The family.groups. politicians. All workers in a factory qualify for membership to the labor union. Jaycees are some of the well – known social groups in our society. toilet soaps (Lux) . which use the expert reference groups appeal for promotion. Colgate and Forhans tooth.pastes are examples of products. The family. v) Consumer action groups. Film stars and sports heroes are the most popular celebrities. A head clerk in an office may act as if he belongs to the top membership and symbolic groups influence consumer behaviors but membership groups have a more direct influence. We can identify two families which shape an . is an important consumer for many products which are purchased for consumption by all family members. specific roles and authority positions and specific goals. but is not likely to be received as a member.
one is the family of orientation that is the family in which you are born and consists of your parents. experience. Marketers are interested in finding out exactly the role played by individual members so that they can appropriately design their promotion strategy to suit these differing roles. The profession or the occupation a person is in again has an impact on the products they consume. the latter’s influence is extremely important. income. The status of a person is projected through various symbols like the dress. interest and opinions. where the children are likely to have more updated information about various brands and product attributes. The second type of family is the family of procreation consisting of the consumer’s spouse and children. Roles: An individual may participate in many groups. not with standing the terrible heat condition. same is the case with any consumer. Status: Each role that a person plays has status. His position within each group can be defined in terms of the activities he is expected to perform. beliefs and purchase behavior patterns. There is a method of measuring a consumer’s lifestyle. records. Marketers often define their target market in terms of the consumers present lifecycle stage. they can successfully market those products and services whose consumption is dictated by the group norms. Group norms: Are the norms of a group are the implicit rules of conduct and behavior that are expected of its member. In our country.individual’s consumption behavior . But with the emergence of the working-women. Traditionally. while the husband played a dominant role in the purchased of automobiles and life insurance. It is from parents that we imbibe most of our values. different member play different roles. the norm for office wear includes a full – sleeved shirt and tie. which is the relative prestige accorded by society. these lines of traditional role demarcation have been getting increasingly blurred. clothing and other household sundries. This method is called as the psychographics-which is . This is especially true in case of products such as television. for a holiday. Within the family. brothers and sisters. We need to know what a life-style is made of. It is a person’s mode of living as identified by his or her activities. However. For instance. at home you play the role of spouse and parent. and status.People buy and use products that reflect their status. rather than going to Mussoorie or Ooty. and when in your work situation you play that role. or both may have an equal voice. Husbands now have to shoulder a greater part of the household duties while women are asserting themselves in areas so far treated as the husband’s domain. Thus. Each of these roles influences your purchase decisions.S. their influence of the sub – conscious mind still continues to be great. etc. in different families may be made either by the husband or wife. personal computers. accessories and possessions. Status is often measured by the degree of influence an individual exerts in the behavior and attitude of others. attitudes. it has been the wife’s role to purchase food. Children are also beginning to exert their influence on the family’s purchase decisions. If marketers can identify the various groups to which potential consumers belong. The life cycle is an orderly series of stages in which consumer attitude and behavioural tendencies evolve and occur because of developing maturity. in certain multinational companies in India. Life Style: Our life styles are reflected in our personalities and self-concepts. Thus in different social positions you play different roles. Personal Factors: Age and Life cycle Stage:Like the social class the human life cycle can have a significant impact on consumer behaviour. Long after an individual has ceased to live with his parents. The concept of lifecycle as applied to marketing will be discussed in more details. stereo music systems. He may go to Europe or U. The managing director of a company may drive a Mercedes to communicate his status in society. the same decision. Occupation And Income: Today people are very concerned about their image and the status in the society which is a direct outcome of their material prosperity.A. You are probably a manager. where children continue to live with parents even after attain adulthood.
Self-confidence.Safety needs These are dealing with achieving of stability and of consistency in a chaotic world. Then based upon the combina tions of these dimensions. the wife cannot move to the next level. food. These feelings motivate us to alleviate them as soon as possible to establish homeostasis. defensiveness. adaptability.peoples activities. Love and belongingness have to wait until she is no longer in fear. We need the safety of a home and family. Motivation: Motivation involves the positive or negative needs. autonomy. . When these are not satisfied we may feel sickness. Personality: personality is the sum total of an individual’s enduring internal psychological traits that make him or her unique. dominance. discomfort. and emotional stability are selected personality traits. Each person has distinct motives for purchases. sleep.sure consumer lifestyles. interests and opinions. these change by situation and over time. These needs are mostly psychological in nature. Economic and emotional motives are possible. a marketer can generate motivation. if a family is dysfunctional caused by for example an abusive husband. goals. By appealing to motives (reasons for behavior). sex. I would like to cite one example which I have come across was the a company had organized this study to identify the market segments of their place for the television sets. sociability. Hierarchy of Needs . MASLOW’S HIERACHY OF NEEDS The Hierarchy of Needs model of Abraham Maslow 1. pain. etc. water. etc. which are difficult to describe measure lifestyle analysis has proven valuable in segmenting and targeting consumers according to their lifestyle classification. 2.the analysis technique used to mea. and desires that impel a person to or away from certain actions.Physiological needs These are the very basic needs such as air. we may think about other things. irritation. However. Many in our society cry out for law and order because they do not feel safe enough to go for a walk in their neighborhood. Because she is constantly concerned for her safety. Once they are alleviated. Unlike personality typologies. Hierarchy of Needs . consumers are classified.
5. • Motivation factors are needed in order to motivate an employee into higher performance. (Hofstede. We need to be needed. Humans have a desire to belong to groups: clubs. but without them there is dissatisfaction. • In 1968.The need for self-actualization This is "the desire to become more and more what one is. religious groups. These factors result from internal generators in employees. They can seek knowledge. Performing artists are appreciating applause. Disadvantages • Care should be taken not to stick too rigidly to this hierarchy: • In reality. The first is the self-esteem which is the result from competence or mastery of a task. (Graves) • Different people with different cultural backgrounds and in different situations may have different hierarchies of need. to become everything that one is capable of becoming. Satisfaction and psychological growth was a factor of motivation factors. We want to feel loved (non-sexual) by others.Self-Esteem needs There are two types of esteem needs. wanting admiration is related to the need for power. self-fulfillment. to be accepted by others. Hierarchy of Needs . etc. They are much less structured in the way they satisfy their needs. They do not cause higher levels of motivation. Typical Hygiene Factors • • • • • • • • • Working conditions Quality of supervision Salary Status Safety Company Job Company policies and administration Interpersonal relations . affiliation and power. gangs. Hierarchy of Needs . peace." People who have everything can maximize their potential. Limitations of the Hierarchy of Needs model. This is similar to the belongingness level. 4. Hierarchy of Needs . work groups. who identified needs for achievement. oneness with God. Maslow has himself added additional layers in his book: "Toward a Psychology of Being" The Two Factors Theory According to the Two Factor Theory of Frederick Herzberg people are influenced by two factors. people don't work necessarily one by one through these levels. however. The two Factors in the Theory • Hygiene factors are needed to ensure that an employee does not become dissatisfied. Second. Early) • Other researchers claim that other needs are also significant or even more significant. esthetic experiences. etc. family.Love and belongingness needs These are next on the ladder. Dissatisfaction was a result of hygiene factors. See McClelland. there's the attention and recognition that comes from others.3. Herzberg developed this motivation theory during his investigation of 200 accountants and engineers in the USA.
refrigerator. which are of immediate interest to the marketer. tastes and sensations that we feel are known as stimuli. and/or • job enrichment. ears. People are more likely to notice stimuli. organizes and interprets thes3e stimuli in his own individual manner based in his needs. sounds. brand name. A situation where the job is exciting and challenging. High Hygiene + Low Motivation: Employees have few complaints but are not highly motivated. its package. color. eyes. price and manufacture’s image. you are providing stimulus to your consumers through the physical shape. Your interest is to the stimuli so that you can highlight that particular stimulus of combination of stimuli. generally consumers tend to perceive the quality of performs on the basis of package. nose. These are selective exposure. the implication is that he has to carefully and accurately identifies his . The job is perceived as a paycheck. Selective exposure: you must have noticed that when you are on the look out for purchasing a specific product. Perception The second major psychological factor that influences consumer behavior is perception. • Herzberg suggests that often work can be arranged and should be arranged in the following ways: • job enlargement • job rotation. The different sights. be it camera. Low Hygiene + High Motivation: Employees are motivated but have a lot of complaints. Since each individual’s needs. motive and expectations are unique therefore each individual’s perception is unique.. For example. fragrance. This is because of your selective exposures. smells. For the marketer. size. feel. taste of your product. you suddenly seem to notice more than the usual number of advertisements pertaining to that specific product. All the time we are receding messages through our five organs viz. which evokes the most favorable perception in the maximum number of consumers. Perception helps to explain the phenomenon of why different individuals respond differently to the same stimulus under the same condition. values and expectations and this is known as perception.Typical Motivation Factors • • • • • • Achievement Recognition for achievement Responsibility for task Interesting job Advancement to higher level tasks Growth Combining the hygiene and motivation factors results in four scenario's • • • High Hygiene + High Motivation: The ideal situation where employees are highly motivated and have few complaints. However the salaries and work conditions are not OK. which relate to their immediate needs. mouth and skin.. advertisement and commercials. Low Hygiene + Low Motivation: The worst situation. selects. selective distortion and selective retention. Employees are not motivated and have lots of complaints. As a marketing manager. Perception can be described as “how we see the world around us”. There are three aspects of perception. Each person recognizes. television or any other high value product or services.
using the appropriate stimuli and cues and providing positive reinforcement. This is a very significant factor marketer. The motive is directed towards the stimulus object – a pressure cooker. Attitudes get settled into specific patterns and are difficult to change. and/or institutions. seeing it on display in a showwindow. Positive feedback about pressure cooker from a friend. The marketer must ensure that consumers have relevant and correct information about the brand to facilitate formation of a positive brand image. because it implies that consumers can be made to learn the desired behaviors through in interplay of motives. Suppose the housewife buys the pressure cooker and is satisfied with its performance. Starting from childhood. neutral. The housewife’s response to pressure cookers has been reinforced. Attitude is a person’s enduring feeling. and in the future may buy another one. people. which you have made. attitude develops over the time with each fresh knowledge input. but a five year old clamoring for chocolate or chewing gum is the result of learned behavior. A belief is a descriptive thought that a person has about something. Since you have already made your decision you would seek only that information which reinforces the correctness of your decision. a special introductory price offer are all examples of cues which influence a housewife’s response to the motive for buying a pressure cooker. Thus. A marketer can build up demand for his brand by associating it with strong motives. a marketer may find that his message is often not received in the intended manner but different consumers twist it in different ways. Much of an adult’s human behavior sis leaned behaviors. where and how the housewife responds. stimuli. This belief may be based on some real facts or it may merely be a notion or opinion that the person has. A housewife has the need is strong enough to propel her to take action it becomes a motive. issues. Selective retention: people forget much of the stimuli which they receive3 and only retain that information which reinforces their clause and decision. the process is known as selective distortion. was correct. Having identified the potential customers. evaluation and tendency towards a particular idea or object. responses and reinforcements. You are more likely to remember the positive feature of brand ‘A’ pressure cooker since they help reassure you that the decision. Selective Distortion: let us suppose you have decided to purchase a specific brand “A” of pressure cooker. which she sees and hears. experience and influence. the marketer has to ensure that the stimuli are interesting enough to attract and hold their attention. A newborn infant’s sucking at the feeding bottle is instinctive behavior. firms. A person may believe that a certain coking oil ‘X’ has the lowest fat content and is best for health. Beliefs & Attitudes Attitudes or opinions are positive.. Cues are minor stimuli that determine when. Learning Learning refers to the skill and knowledge gained from past experience that we apply to evaluate future decisions and situations. or negative feelings about goods. The stimuli are the various advertisements about the product. Success cannot normally be attained without positive consumer attitudes. If you hear some positive remarks made about brands ‘B’ you would tend to find some shortcoming or flaw in that brand so that you so not feel that you have made a wrong decision by buying brand ‘A’ when you attempt to fit information to suit your join ideas or personal meaning. Thus making the consumer ‘learn ‘ that the brand is good and worth patronizing. cues. and then the changes are that she would like to use it as often as possible. The beliefs constitute the brand image about the brand. It is easier to market product that fits in well with the existing patterns of attitudes rather than change the attitudes to fit a new product concept.potential customers since other customers are not at all likely to notice the stimuli. services. .
Re-evaluation of the . organization. Factors affecting the process are a consumer’s demographic. availability. The Internet has become a major source for consumer shopping information. and psychological characteristics. PROBLEM AWARENESS: During problem awareness. he or she will go on to the next step in the decision process. service. place. people. Seven useful sources are provided. or idea may solve a problem of shortage or unfulfilled desire. If the above elements are acceptable. other times. A stimulus can be any of the following: • Social. the performance of a specific service. INFORMATION SEARCH: Information search involves listing alternatives that will solve the problem at hand and a determination of the characteristics of each. Once the information search is completed. only a few steps are utilized At any point in the process.STEPS IN CONSUMER DECISION MAKING PROCESS The final consumer’s decision process is the way in which people gather and assess information and make choices among alternative goods. a consumer will make a purchase. A prospective consumer may be exposed to any or all of these types of stimuli. Sometimes. it may be ended. Buying one item may lead to the purchase of another. the amount of information sought also increases.The purchase act involves the exchange of money or a promise to pay for a product. organizations. places. • Commercial. STIMULUS: A stimulus is a cue or drive meant to motivate a person to act.As risk increases. It consists of the process itself and factors affecting the process. services. The decision process consists of six basic stages (the next six sections). If a person is sufficiently stimulated. PURCHASE . and so on. EVALUATION OF ALTERNATIVES: The alternatives are evaluated on the basis of the consumer’s criteria and the relative importance of these criteria. They are then ranked and a choice made. the consumer recognizes that the good. it must be determined whether the shortage or unfulfilled desire can be satisfied by any alternative. POST-PURCHASE BEHAVIOR: Frequently. Many consumers are hesitant to react to unfulfilled desires because there are risks and the benefits may be hard to judge. all six stages in the process are used. terms. person. Purchase decisions remaining at this stage center on the place of purchase. and ideas. or support in return of ownership of a specific good. social. Search can be internal and/or external . • Physical. the consumer engages in post-purchase behavior. • Noncommercial.
purchase occurs when the consumer rates the alternative selected against performance standards. Cognitive dissonance, doubt that a correct purchase decision has been made, can be reduced by follow-up calls, extended warranties, and post-purchase advertisements. MARKETING SEGMENTATION It is widely thought in marketing that than segmentation is an art, not a science. The key task is to find the variable, or variables that split the market into actionable segments There are two types of segmentation variables: (1) Needs (2) Profilers
The basic criteria for segmenting a market are customer needs. To find the needs of customers in a market, it is necessary to undertake market research. Profilers are the descriptive, measurable customer characteristics (such as location, age, nationality, gender, income) that can be used to inform a segmentation exercise. The most common profilers used in customer segmentation include the following: Profiler Examples A Demographic „ Age, sex, family size „ Income, occupation, education „ Religion, race, nationality B Geographic „ Region of the country „ Urban or rural C Behavioral „ Product usage - e.g. light, medium, heavy users „ Brand loyalty: none, medium, high „ Type of user (e.g. with meals, special occasions) D Psycho graphic „ Social class „ Lifestyle type „ Personality type
Market segmentation process There are several important reasons why businesses should attempt to segment their markets carefully. These are summarized below.
Better matching of customer needs - Customer needs differ. Creating separate offers for each segment makes sense and provides customers with a better solution
Enhanced profits for business - Customers have different disposable income. They are, there- fore, different in how sensitive they are to price. By segmenting markets, businesses can raise average prices and subsequently enhance profits Better opportunities for growth - Market segmentation can build sales. For example, customers can be encouraged to “trade-up” after being introduced to a particular product with an introductory, lower-priced product Retain more customers - Customer circumstances change, for example they grow older, form families, change jobs or get promoted, change their buying patterns. By marketing products that appeal to customers at different stages of their life (“life-cycle”), a business can retain customers who might otherwise switch to competing products and brands Target marketing communications - Businesses need to deliver their marketing message to a relevant customer audience. If the target market is too broad, there is a strong risk that (1) the key customers are missed and (2) the cost of communicating to customers becomes too high / un profit- able. By segmenting markets, the target customer can be reached more often and at lower cost Gain share of the market segment - Unless a business has a strong or leading share of a market, it is unlikely to be maximizing its profitability. Minor brands suffer from lack of scale economies in production and marketing, pressures from distributors and limited space on the shelves. Through careful segmentation and targeting, businesses can often achieve competitive production and marketing costs and become the preferred choice of customers and distributors. In other words, segmentation offers the opportunity for smaller firms to compete with bigger ones. BABSES OF SEGMENTATION Demographic segmentation It consists of dividing the market into groups based on variables such as age; gender family size, income, occupation, education, religion, race and nationality. demographic segmentation variables are amongst the most popular bases for segmenting customer groups. This is partly because customer wants are closely linked to variables such as income and age. Also, for practical reasons, there is often much more data available to help with the demographic segmentation process. The main demographic segmentation variables are summarized below: Age: Consumer needs and wants change with age although they may still wish to consumer the same types of product. So Marketers design, package and promote products differently to meet the wants of different age groups. Good examples include the marketing of toothpaste (contrast the branding of toothpaste for children and adults) and toys (with many age-based segments). Life-cycle stage A consumer stage in the life cycle is also an important variable. Young child: Leo toys, Barbie dolls (Again these can be segmented by gender basis for small girls and boys) Adolescent: Trendy products and services like Jeans, T-shirts, and Coffee shops Young Adults: Mobikes, music systems, mobile phones Old people: Investment instruments, health packages for old Gender: Gender segmentation is widely used in consumer marketing. The best examples include clothing, hairdressing, magazines and toiletries and cosmetics. You have footwear exclusively for males, females and kids. For example, you have ‘Action’ School shoes exclusively for school-going children. Soft perfumes for women and deodorants for men.
Kinetic scooters are targeted more at women. Magazines dedicated to women like Femina. Income: You might have noticed that income is another popular basis for segmentation. Many companies target affluent consumers with luxury goods and convenience services. Good examples include Mercedes, Pizza Hut Pizzas, Ebony and Parker pen. By contrast, many companies focus on marketing products that appeal directly to consumers with relatively low incomes. Examples include Nirma, and Reliance phones besides others. Market segmentation - geographic segmentation Geographic segmentation tries to divide markets into different geographical units. These units include, Regions: e.g. in India, you can talk of North India, West India, as regions or zones and Delhi, Mumbai, Chennai as metropolitan cities and Jaipur, Lucknow and Baroda as smaller cities. Countries: perhaps categorized by size, development or membership of geographic region City / Town size: e.g. population within ranges or above a certain level Population density: e.g. urban, suburban, rural, and semi-rural Climate: e.g. Northern, Southern Geographic segmentation is an important process - particularly for multi-national and global businesses and brands. Many such companies have regional and national marketing programmes that alter their products, advertising and promotion to meet the individual needs of geographic units. Market segmentation - behavioral segmentation Behavioral segmentation divides customers into groups based on the way they respond to, use or know of a product. Behavioral segments can group consumers in terms of: Occasions: When a product is consumed or purchased. For example, cereals have traditionally been marketed as a breakfast-related product. Kelloggs have always encouraged consumers to eat break- fast cereals on the “occasion” of getting up. More recently, they have tried to extend the consumption of cereals by promoting the product as an ideal, anytime snack food. In India, lots of home shopping takes place on the occasion of ‘Divali’. TV sets sales goes up during world cup cricket. Usage: Some markets can be segmented into light, medium and heavy user groups Loyalty: Loyal consumers - those who buy one brand all or most of the time - are valuable customers. Many companies try to segment their markets into those where loyal customers can be found and retained compared with segments where customers rarely display any product loyalty. The holiday market is an excellent example of this. The “mass-market” overseas tour operators such as SOTC, Thomson, JMC and First Choice have very low levels of customer loyalty - which means that customers need to be recruited again every year. Compare this with specialist, niche operators such as those specializing for Bangkok and Singapore only; customers who have traveled with the brand in each of the last 15-20 years. Benefits Sought: You may note that this is a different and an important form of behavioral segmentation. Benefit segmentation requires Marketers to understand and find the main benefits customers look for in a product. An excellent example is the toothpaste market where research has found four main “benefit segments” - economic; medicinal, cosmetic and taste. Market segmentation – Psycho graphic segmentation Lifestyle: Marketers are increasingly interested in the effect of consumer “lifestyles” on demand. Unfortunately, there are many different lifestyle categorization systems, many of them designed by advertising and marketing agencies as a way of winning new marketing clients and campaigns! A. Lifestyles are the ways in which people live and spend time and money.
B. You can target final consumers by segmenting by social class and stage in the family cycle. C. A heavy-usage segment is a consumer group that accounts for a large proportion of an item’s sales relative to the segment’s size. D. Benefit segmentation groups consumers into markets on the basis of different benefits sought from a product. some example here: • Citibank International Gold card is for the ‘affluent’ people who travel abroad frequently • Five Star Hotels are for the foreigners, top business and corporate class to whom comfort and convenience are the parameters of ‘value’ • Black and White TV still sells in upcountry areas, small hotels and small shops to lower middle class TARGETING THE MARKET IDENTIFYING POTENTIAL MARKET SEGMENT : A firm develops consumer profiles after establishing bases of segmentation .These profiles identify potential market segments by aggregating consumers with similar characteristics and needs, and separating them from consumers with different characteristics and needs. You can understand from the following sections how a variety of firms could identify potential market segments and develop consumer profiles. Undifferentiated Marketing (Mass Marketing) A. An undifferentiated marketing approach aims at a large, broad consumer market through one basic marketing plan. B. 1. 2. 3. 4. Use of this approach has declined in recent years due to the following: Growth of competition. Stimulated demand by appealing to specific segments. Improved marketing research that pinpoints desires of different segments. A reduction in total production and marketing costs because of segmentation.
C. A major objective of undifferentiated marketing is to maximize sales. D. For successful pure mass marketing, a large group of consumers must have a desire for the same product attributes or consumer demand must be so diffused that it would not be worthwhile for a firm to aim marketing plans at specific segments. 1. A firm sells items through all possible outlets. 2. Both total and long run profits should be considered. Concentrated Marketing A. A concentrated marketing approach aims at a narrow, specific consumer group through one specialized marketing plan catering to the needs of that segment. B. Concentrated marketing is popular for small firms for these reasons: 1. Mass production, mass distribution, and mass advertising are not necessary. 2. It can succeed with limited resources and abilities by concentrating efforts. C. If concentrated marketing is used, it is essential for a firm to do a better job than competitors in several areas. 1. The company needs to tailor its marketing program for its segment better than competitors. 2. Competitors’ strengths should be avoided and weaknesses exploited. D. The majority fallacy, appealing to a large segment that is laden with competition,
As perception differs from person to person.trated. A company must be careful to maintain product distinctiveness in each consumer segment and to guard its image. A distinct niche can be carved out for a particular brand. I. B. such as Time Inc. Total profits should rise as the number of segments serviced increases. 1. is different to my perception. etc. Differentiated marketing should enable the firm to achieve several objectives: 1. It appeals to two or more distinct market segments. because only one segment is sought. D. C. 2. so do the results of the positioning map e. Per unit profits can be maximized through market segmentation. Sales maximization. and encourages private labels. POSITIONING AND DIFFERENTIATION Positioning is defined as the act of designing the company’s offering and image to occupy distinctive place in the target market’s mind The main points that to be rememberd are: • Positioning is the final part of the SEGMENT . Differentiated marketing can be achieved without involvement in the majority fallacy. such as Hyundai. A firm must balance revenues obtained from selling to multiple segments against the costs. there will . Firms such as Maruti-Suzuki use differentiated marketing to attract all segments. but not all segments.should be avoided. the greater the opportunity for differentiated marketing. offers a degree of exclusivity. G. G. brands. value for money in terms of worth. Wholesalers and retailers usually find differentiated marketing to be desirable. 3.g. • Positioning is all about ‘perception’. Costs vary. A potentially profitable segment may be one ignored by other firms. F. Company resources and abilities must be able to produce and market two or more different sizes. Two or more sizable and distinct consumer groups are necessary. 2.. allows orders to be concen. Differentiated marketing combines the best attributes of undifferentiated marketing and concen trated marketing. E. Diversification. because it enables them to reach different consumers. The more clusters facing the firm. depending on modifications needed. Others. and Microsoft appeal to two or more segments. They have one or more major brands for the mass market and secondary brands geared toward specific segments. what you perceive as quality.TARGET . F. However. Total profits are not maximized.POSTION process • Positioning is undoubtedly one of the simplest and most useful tools to marketers. use both undifferentiated marketing and concentrated marketing approaches in their multiple-segmentation strategy. or products. Differentiated Marketing (Multiple Segmentation) A. Some companies. Recognition as a specialist. E. H. with a different marketing plan for each.
For this strategy. in the minds of the consumer. next step will be to position a product within that market.APPROACHES Positioning by attribute. Positioning with respect to use or application Here a destination is positioned based on the reasons for visiting it. or customer benefit.” Positioning with respect to a product class This technique is often used to associate a destination with experiences that are . send them to the peak. a luxury residen. feature. • After segmenting a market and then targeting a consumer.” Positioning according to the users or class of users In this case. However. How new and current items in the product mix are perceived. positions itself as the place “where people who run things can stop running. a major tourist site in Hong Kong: Fisher Island. Hong Kong appeals to the incentive travel market with the statement ‘When they’ve reached the top.” With this positioning statement Malaysia is appealing not only to the sense of value (more for the money) but also to its natural attractions.” referring to Victoria Peak.be similarities in certain cases. Thailand promotes the friendliness of its people with the statement “The world meets in the land of smiles. emphasis is placed on the benefits of the particular features or attributes of the destination. value offered to visitors can be effectively utilized as exemplified by Malaysia which claims “Malaysia gives more natural value. therefore re-emphasizing the importance of perception!! New Product—need to communicate benefits POSITIONING ERRORS POSITIONING TYPES. For example.tial development in Florida. Bermuda positions itself to the American meetings market with “Sometimes you have to leave the country to get any work done” which promises productive meetings in a relaxed environment. relative to competing offerings. It refers to a place that the product offering occupies in • consumers’ minds on important attributes. Mexico is positioned as “The meeting place for sun worshipers.” Positioning by Price Value International destinations are not usually positioned on the basis of price because lower prices may be perceived as connoting lower quality. positioning features the people who should visit the destination. Cancun.
Ritz-Carlton Hotels is a little more subtle when they say. quality. it can be differentiated by the dosage size. coating and action time. The strategic planning institute found a significantly positive correlation between relative product quality and return on investment. ‘After a day of competition. to bring out differences between destinations. the Principality of Monaco is positioned as “The fairy tale that does not end at midnight. and the shape of the product. product features. shape. which are very important they are basically there to support the basic functions of the product. image.” What is Differentiation? The task of positioning is to deliver a central idea about a company or an offering to the target market. the size.” or holding a convention in Thailand is “Smooth as silk where the sky’s the limit. This approach is not used frequently in international tourism destination marketing since it may involve negative statements about another country or region. As Disprin is essentially a commodity. For example. given the potential market. innovation and different service levels. Visa credit cards compete with American Express by showing examples of places from around the world that do not accept American Express and only Visa cards are accepted. which the product’s primary characteristics operate. Yet there are diminishing return to higher performance quality so marketers must choose a level suited to the target market and rival performance levels. Form: Companies can differentiate products on the basis of form.that is the physical structure. Positioning simplifies what one is thinking of the entity. Marketers have identified that the products are capable of higher differentiation than services such as automobile and furniture. location. promotion. in this the company is focusing on besting the competition and at the same time they are satisfying the consumers and gaining higher profits. The tools that are used to differentiate products include branding. Features: they are the characteristics. Marketers starts by asking recent buyers about additional features that would improve satisfaction. cost and price. Reliability: on reliability basis one is normally ready to pay a premium. TYPES OF DIFFERENTIATION Product differentiation In this the marketing mix variable are used to make unique product offer that stands out from the competitors. here’s one that’s close to heaven” for Israel. then determining which would be profitable to add. However. Differentiation goes beyond positioning to spin a complex web of differences characterizing that entity. However the extra price must not be excessive and the product must not be subjected to rapid technological obsolescence. Performance quality: is the level. Positioning vis-à-vis the competition This approach is used when it is necessary to meet the competition head-on. packaging. or “If your looking for an ideal meeting place.extraordinary and/ or unique. it is basically a . you deserve a hotel that has none. which is in terms of degree to which all of the produced units are identical and are able to meet the promised specification. For example. which can be in many forms like Disprin. Conformance quality: C onformance for quality. Differentiation is the process of adding a set of meaningful and valued differences to distinguish the company offering from competitors offerings. Example of any product. It is important for products such as vehicles and kitchen appliances to be durable. Consumers who perceive that a product is unique in servicing their needs often become brand loyal and are more willing to pay a premium price in order to gain the product benefits. Durability: D urability in the product me a n s expecting the product to be operating under natural or stressful conditions. it is regularly employed in product and services marketing. This strategy is aggressive. The problem with low conformance quality is that the product will disappoint some buyers.
a well-designed product is one that is pleasant to look at and easy to open. Customer training refers to how the customer’s employees are trained to use the vendor’s equipment properly and efficiently. For example. Design: as competition intensifies. which manufacturers major home appliances. strong style does not always means high performance. have an outstanding reputation for creating reliable appliances? Reparability: buyers prefer products that are easy to repair. Differentiation by installation is particularly important for companies that offer complex products such as computers. an important consideration for many products. May tag. this means the designer has to figure out how much to invest in form. called the Vitamin Institute. use. the key to competitive success may lie in adding valued services and improving their quality. For a company a well-designed product is one that is easy to manufacture and distribute. Godiva chocolate and Harley.without being late once in 18 years. durability. However. Maintenance and repair: describes the service program for helping customers keep purchasing products in good working order. has built an impressive reputation for shipping out its checks one day after receiving an order. To the company. covering speed. Most of the time.. Rite Aid has teamed with drugstore. the Rite aid drugstore chain’s communications program. . Delivery: it is related to how well the product or service is delivered to the customer. performance..com to offer even more health-related information. Ideal reparability would exist if users could fix the product them. Reparability is a measure of the ease of fixing a product when it malfunctions or fails. conformance. General Electric not only sells installs expensive X-rays equipment in hospitals.measure of the probability that a product will not malfunction or fail within a specified time period. Style has the advantage of creating distinctiveness that is difficult to copy. Installation: refers to the work done to make a product operational in its planned location. Aesthetics have played a key role in such brands as Absolute vodka. reliability. reparability and style. An automobile made with standard parts that are easily replaced has highly reparability. Buyers of heavy equipment expect good installation service. but also gives extensive training to users of this equipment. Baxter Healthcare has eased the ordering process by supplying hospitals with computer through which they send orders directly to Baxter. Customer consulting refers to data. Apple computers. The designer has to take all of these factors into account Service differentiation: When the physical product cannot be differentiated easily.Davidson motorcycle. Deluxe check printer.selves with little cost or time. cuistomers are normally willing to pay a premium for products that are attractively styled. accuracy and customer care. On the Web. design offers a potent way to differentiate and position a company’s products and services. repair and dispose of. provide customers with research so they can make more educated judgments and fell comfortable asking for help. consumers can now order and receive groceries without going to the supermarket business web-based service such as peapod and net grocer. Design is the integrating force that incorporates all of the qualities. The main service differentiators are: Ordering ease: refers to how easy it is for cusotmer to place an order with the company. Style: Style is look and feel of the product to the customer. information system and advising services that the seller offers to buyers. feature development. install. inc.
An effective image establishes the product’s character and value proposition. it must be conveyed through every available communication vehicle and brand contact. The sales forces of such companies as General Electric. credibility. Cisco. courtesy. and when it enter bids on new contract work.” What does a buyer think? To a buyer. Caterpillar’s success in the construction –equipment industry is based partly on superior channel development. Setting the Price. More broadly. Something of value -usually purchasing power . price is the value placed on what is exchanged. Identity comprises the ways that a company aims to identify or position itself or its product. media and special events. Frito-Lay. For the image to work.Pricing Policy: A firm must set a price for the first time when it develops a new product. are better trained and performance more reliability than competitors dealers. it conveys this character in a distinctive way and it delivers emotional power beyond a mental image. Purchasing power depends on a buyer’s income. Channel differentiation Companies can achieve competitive advantage through the way they design their distribution channels’ coverage. Nike mainstream popularity turns off 12-to24-years-olds. Image is affected by many factors beyond the company’s control. price is the sum of all the values that consumers exchange for the benefits of having or using the product or service. credit. expertise and performance. and Northwestern Mutual life enjoy an excellent reputation. Image differentiation Customer will response differently to company and brand image. who prefers Airwalk and other alternative brands that convey amore extreme sports image. The McDonald’s people are courteous. responsiveness and communication. Singapore Airlines enjoys an excellent reputation in large part because of its fight attendants.Personnel differentiation Companies can gain a strong competitive advantage through having better-trained people. or the sum of the values that consumers exchange for the benefits of having or using the product or service. Its dealers are found in more locations. According to Kotler an organization goes through the following steps in setting its pricing policy: - . PRICING Price is the amount of money charged for a product or service. including logos. “One can define price as that which people have to forego in order to acquire a product or service.trained personnel exhibit six characteristics: competence.The amt of money charged for a product or service. For example. reliability. Well. and wealth.is exchanged for satisfaction or utility. Dell computers has also distinguished itself by developing and managing superior direct-marketing channels using telephone and internet sales. when it introduces its regular product into a new distribution channel or geographical area. the IBM people are professional and the Disney people are upbeat. whereas image is the way the public perceives the company or its products. PRICE.
as their major objective if they are plagued with overcapacity intense competition. maximum market skimming. the firm must learn how to add value or face extinction. Some companies want to maximize their market share. Many companies try to set a price that will maximize current profits. As long as prices cover variable costs and some fixed costs. Sony is a frequent practitioner of market skimming pricing. In the normal case. They believe that a higher sales volume will lead to lower unit costs and higher long-run profit. demand . The clearer a firm’s objectives. or product-quality leadership. Determining the demand . The following conditions favor setting a low price The market is highly price sensitive. the easier it is to set price. This strategy assumes that the firm has knowledge of its demand and cost functions. assuming the market is price sensitive. or changing consumer wants. Companies pursue survival. 2. They set the lowest price. Production and distribution costs fall with accumulated production experience. a low price discourages actual and potential competition Companies unveiling a new technology favor setting high prices to “skim” the market. cash flow or rate of return on investment. the firm needs to determine demand. the company stays in business. and a low price stimulates market growth. They estimate the demand and costs associated with alternative prices and choose the price that produces maximum current profit.Following the identification of objectives. maximum market share. in reality these are difficult to estimate.Selecting the pricing Objective The company first decides where it wants to position its marketing offering. A company can pursue any of five major objectives through pricing: survival. maximum current profit. Each price will lead to a different level of demand and therefore have a different impact on a company’s marketing objectives. Survival is a short-run objective: in the long run.
engineers and purchasing agents to reduce them. Determining price elasticity of demand. given its appeal and competitor’s prices. A company’s cost take two forms. it is equal to total costs divided by production. interest. If your product or service is inferior. Regardless of output. the level of demand may fall. then you will have to price close to the competitor or lose sales. They are also less price-sensitive when price is only a small part of the total cost of obtaining. Learn the price and quality of each competitor’s product or service by sending out comparison shoppers to price and compare. 5. They are called variable because their total varies with the number of units produced. prices and possible price reactions into account. These costs tend to be constant per unit produced. management needs to know how its costs vary with different levels of produc tion. competitors’ prices provide an in be. Estimating and analyzing demand curve iii. Company should also be aware that competitors might even change their prices in response to your price. Then they determine the price at which the product will sell. These c o s t s r e l a t e with pricing. Average cost is the cost per unit at the level of production. fixed and variable. The process of estimating demand therefore leads to i. Fixed costs (also known as overhead) are costs that do not vary with production or sales revenue. Acquire competitors’ price lists and buy competitors’ products and analyze them. While demand sets a ceiling and costs set a floor to pricing. Also ask customers how they perceive the price and quality of each competitor’s product or service. The Japanese use a method called target costing. the firm must take the competitor’s costs. TARGET COSTING . If your product or service is similar to a major competitor’s product or service. the lower the demand . However if the price is too high. To price intelligently. and this leaves the target cost they must achieve. 4.Demand sets a ceiling on the price the company can charge for its product. operating and servicing the product over its lifetime. 3. Selecting a pricing method - . Customers are most price-sensitive to products that cost a lot or are bought frequently? They are less price-sensitive to low –cost items or items they buy infrequently. prices and offers is also important factor in setting prices .and price are inversely related: the higher the price. the demand curve sometimes slopes upward.Costs change as a result of a concentrated effort by designers. .g. Variable costs vary directly with the level of production. Analyzing competitor ’s costs. A seller can charge a higher price than competitors and still get the business if the company can convince the customer that it offers the lowest total cost of ownership (TCO). They deduct the desired profit margin from this price. Estimating Price sensitivity of market ii.In the case of prestige goods. Total and variable costs for any given level of production.tween point you must consider in setting prices. They use market research to establish a new product’s desired functions. Perfume Company raised its price and sold more perfume rather than less! Some consumers take the higher price to signify a better product. Estimating Costs . salaries and so on. Within the range of possible prices determined by market demand and company costs. A company must pay bills each month for rent heat. E. prices and offers A nalyzing competitor’s costs. There are different costs of organization. you will not be able to charge as much as the competitor.
including psychological pricing. indicate the lowest price at which it is sensible to take business if the alternative is to let machinery. price will depend upon positioning. The way around this problem is to recognize that the pricing deci. strategy. if they are unused on a flight then the revenue is lost. The most usual process is the drawing up of detailed specifications for a product and putting the contract out for tender. Competition-based approach . . and for existing products price will be affected by strate. The firm might charge the same. In selecting that price. Competitive Bidding . or less than its major competitors. 6. Where the products offered by firms in a certain industry are very similar the public often finds difficulty in perceiving which firm meets there needs best. with the firms basing the price on what it thinks other firms will be bidding rather than on its own costs or demand.e. Like full cost pricing. Potential suppliers quote a price. promotion. In cases like this (for example in financial services and delivery services) the firm may attempt to differentiate on delivery or service quality in an attempt to justify a higher selling price. more. Direct (or marginal) Cost Pricing . strategic objectives. which is confidential to themselves and the buyer. the firm bases its price largely on competitors’ prices. The risk here is that other customers who paid the full price may find out about the discounted offer and complain.sion is dependent on other earlier decisions in the marketing planning process. Marketing Oriented Pricing Cost Oriented Pricing .There are three pricing methods that can be employed by a firm: 1. the company must consider additional factors. this method will include a profit margin in the final price. Cost Oriented Pricing 2.This involves the calculation of only those costs. Consider aircraft seats. firms bid for jobs. Marketing Oriented Pricing . aircraft seats or hotel rooms lie idle.Here the firm determines the direct and fixed costs for each unit of product. In sealed-bid pricing (i. The danger is that if price is viewed in isolation (as would be the case with full cost pricing) with no reference to other marketing decisions such as positioning. with less attention paid to its own costs or to demand. company –pricing policies. Two methods are normally used Full cost pricing .Going-Rate Pricing In going-rate pricing. the influence of other marketing –mix elements on price. These remaining seats may be offered at a discount so that some contribution is made to the flight expenses. The is an almost impossible prediction. Selecting the final Price . The process is illogical also because to arrive at a cost per unit the firm must anticipate how many products they are going to sell.Pricing methods narrow the range from which the company must select its final price. For new products. This method focuses upon the internal costs of the firm as opposed to the prospective customers’ willingness to pay. Indirect or fixed costs (plant. gain and risk pricing. All other things being equal the buyer will select the supplier that offers the lowest price.The price of a product should be set in line with the marketing strategy. The first problem with Full-cost pricing is that it leads to an increase in price as sales fall. Competitor Oriented Pricing 3.Many contracts are won or lost on the basis of competitive bidding. and the impact of price on other parties. only known to client and not to the other parties tendering for the service). Direct costs then. Direct cost approach is useful when pricing services for example.Companies often use cost oriented pricing methods when setting prices.gic objectives. which are likely to increase as output increases. machinery etc) will remain unaffected whether one unit or one thousand units are produced. distribution and product benefits.
Buyback arrangement: The seller sells a plant.counting provided that you are getting something specific that you want in return. For example. However. Counter trade may account for 15 to 25 percent of world trade and takes several forms: barter. buyback agreements.DIFFERENT PRICING STRATEGIES 1. Geographical pricing (cash. . Discounting is common in many industries . Price discounts and allowances . Offset: The seller receives full payment in cash but agrees to spend a substantial amount of the money in that country within a stated time period. For example. or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment. with no money and no third party involved Compensation deal: The seller receives some percentage of the payment in cash and the rest in products. This is not to say that there is anything particularly wrong with price dis. quantity and other discounts. Barter: The direct exchange of goods. This issue is critical when buyers lack sufficient hard currency to pay for their purchases. and offset. Chemical company built a plant for an Indian company and accepted partial payment in cash and the remainder in chemicals manufactured at the plant. should the company charge higher prices to distant customers to cover the higher shipping costs or a lower price to win additional business? Another issue is how to get paid. A US.Geographical pricing involves the’ company in deciding how to price its products to different. American compa nies are often forced _o engage in counter trade if they want the business. 2. companies get themselves embroiled in a complex structure of cash. discounting can be dangerous un. A British aircraft manufacturer sold planes to Brazil for 70 percent cash and the rest in coffee. PepsiCo sells its cola syrup to Russia for rubles and agrees to buy Russian vodka at a certain rate for sale in the United States. The trouble is that. Counter trade.less carefully controlled and conceived as part of your overall marketing strategy. all too often. equipment. compensation deals. Customers in different locations and countries. Many buyers want to offer other items in payment. Barter) . a practice known as counter trade. whilst getting absolutely nothing in return except a lower profit margin.The role of discount Offering discounts can be a useful tactic in response to aggressive competition by a competitor.in some it is so endemic as to render normal price lists practically meaningless.
But. the seller charges a separate price to each customer depending on the intensity of his or her demand. Promotional Pricing . competitors Copy them and they lose their effectiveness. In second-degree price discrimination. you should always ask yourself what your discounts are supposed to achieve. If they work.Clearly the role of discounts will vary from one type of business to another and not all of the com. whether they are effective. 3. they waste money that could have been put into other marketing tools. whatever business you are in. the interest rate) of a loan and more about whether they can afford the monthly payment. Manufacturers have tried to restrain intermediaries from loss leader pricing through lobbying for retail-price -maintenance laws.degree price discrimination. In third-degree price discrimination.Companies often adjust their basic price to accommodate differences in customers. the seller charges less to buyers who buy a larger volume. In general.. In part your ability to minimize discounts. but these laws have been revoked. products. If they do not work.age purchase of the manufacturers’ products within a specified time period. and how long they are expected to last. such as building up product quality and service or strengthening product image through advertising. Warranties and service contracts: Companies can promote sales by adding a free or low. In first. Low-interest financing: Instead of cutting its price. locations. the company can offer customers lowinterest financing. as in the following cases: . and so on. Automakers have even announced no-interest financing to attract Customers. Psychological discounting: This strategy involves setting an artificially high price and then offering the product at substantial savings Promotional-pricing strategies are often a zero-sum game. the seller charges different amounts to different classes of buyers.Companies can use several pricing techniques to stimulate early pur. or eliminate them altogether. Manufacturers of loss-leader brands typically object because this practice can dilute the brand image and bring complaints from retailers who charge the list price.tomers Cash rebates: Auto companies and other consumer-goods companies offer cash rebates to Encour. Consumers often worry less about the cost (i. keep standard discounts low to retain maximum flexibility and ensure that they are consistent with your overall marketing and pricing strategy. Rebates can help clear inventories without cutting the stated list price. stretch loans over longer periods and thus lower the monthly payments.ments above will apply to you. Longer payment terms: Sellers.chase: Loss-leader pricing: Supermarkets and department stores often drop the price on wellKnown brands to stimulate additional store traffic. Special-event pricing: Sellers will establish special prices in certain seasons to draw in more cus.e. Discriminatory pricing .cost warranty or service contract. This pays if the revenue on the additional sales compensates for the lower margins on the) boss-leader items. will depend on the non-price benefits of your product. especially mortgage banks and auto companies. Price discrimination occurs when a company sells a product or service at two or more prices that do not reflect a proportional difference in costs. 4.
However. Product-form pricing: Different versions of the product ‘are priced differently but not proportionately to their respective costs Image pricing: Some companies price the same product two different levels based on image differ. Time pricing: Prices are varied by season.ences at. competitors have increased their use of discrimina. Coca-Cola considered raising its vending machine soda prices on hot days using wireless technology.Customer-segment pricing: Different customer groups are charged different prices for the same product or service. Fifth. members in the lower. We can distinguish six situations involving product-mix pricing: product-line pricing. Sixth. Restaurants charge less to “early bird” customers.tomize offers and prices. 50. and lowering the price on cold days. Hotels charge less’ on weekends. Airlines are using yield pricing to capture as much revenue as possible. Airlines charge different fares to passengers on the same flight. sellers use well-established price . the cost of segmenting and policing the market must not exceed the extra revenue derived from price discrimination. senior citizen). New software applications. military. by-product pricing.ing class.cial users by time of day and weekend versus weekday. 5. For instance. Third. captive-product pricing. or hour. A theater varies its seat prices according to audience preferences for different locations. A perfume manufacturer can put the perfume in one bottle. Location pricing: The same product is priced differently at different locations even though the cost of offering at each location is the same. Computer technology is making it easier for sellers to practice discriminatory pricing. It can put the same perfume in another bottle with a different name and image and price it at Rs. day. Hotels and airlines use yield pricing. how-ever. museums often charge a lower admission fee to students and senior citizens. and price it at Rest. the day of the week (workday or weekend). Public utilities vary energy rates to commer. a fast-food restaurant.Price-setting logic must be modified when.nate between sellers by comparing prices instantaneously. In this case. Second.200. As a result of deregulation in several industries. the time of day (morning or night coach). the market must be segment able and the segments must show different intensities of demand. Must not be able to resell the product to the higherprice segment. by which they offer lower rates on unsold inventory just before it expires. certain conditions must exist. or a vending machine. Of status (youth. are also allowing buyers to discrimi. First.nation must not be illegal. the practice must not breed customer resentment and ill will. two-part pricing. the season. and so on. Product-mix pricing . the firm searches for a set of prices that maximizes profits on the total mix. the product is part of a product mix. Fourth. Channel pricing: Coca-Cola carries a different price depending on whether it is purchased ill a fine restaurant. depending on the seat.tory pricing. the person’s company. give it a name and image. optional-feature pricing. competitors must not be able to undersell the firm in the higher-price segment. Pricing is difficult because the various products have demand and cost interrelationships and are subject to different degrees of competition.price segment. they can use software that monitors customers’ movements over the Web and allows them to cus. Product line Pricing: Companies normally develop product lines rather than single products and introduce price steps. For example. and product-bundling pricing. For price discrimination to work. past business. the particular form of price discrimi. In many lines of trade. customers so disliked the idea that Coke abandoned it.
The options available to the organization for making changes in prices would generally include the following: Initiating price cuts Either the company starts with lower costs than its competitors or it initiates price cuts in the hope of gaining market share and lower costs. This explains why servers often press hard to get customers to order drinks. A successful price increase . Any income earned on the by-products will make it easier for the company to charge a lower price on its main product if competition forces it to do so. Optional-feature pricing ‘Many companies offer optional products. The automobile buyer can order electric window controls. light dimmers. they should be priced on their value. Pure bundling occurs when a firm only offers its products as a bundle. automobiles companies must decide which items to include in the price and which to offer as options. and services along with their main product.facturers of razors and cameras often price them low and set high markups on razor blades and film. A cellular service operator may give a cellular phone free if the person commits to buying two years of phone service. A men’s clothing store might carry men’s suits at three price levels: Rs800. By-product pricing . Because customers may not have planned to buy all the components.The production of certain goods. the profit can then be made on the usage fees. a firm can also initiate to increase the price.4500.meats. and other chemi. Initiating price increases Like price cuts .1500. In mixed bundling. Telephone users pay a minimum monthly fee plus charges for calls beyond the minimum number. Manu. Captive-product pricing . The key issues associated with initiating price changes are the circumstances that may lead a company to raise or lower prices.Some products requires the use of ancillary. the seller offers goods both individually and in bun-dles. respectively. Customers can often order liquor in addition to the meal. products. If the by-products have value to a customer group. Restaurants face a similar pricing problem. A theater company will price a season subscription at less than the cost of buying all the performances separately. or captive. Many restaurants price their liquor high and their food low. features. petroleum products. consisting of a fixed fee plus a variable usage fee. the seller normally charges less for the bundle than if the items were purchased separately. and estimating competitor reactions. An auto manufacturer might offer an option package at less than the cost of buying all the options separately. PRICE CHANGES Companies often face situations where they may need to cut or raise prices. The seller’s task is to establish perceivedquality differences that justify the price differences. The food revenue covers costs.points for the products in their line. and high-quality suits with the three price points. and an extended warranty.cals—often results in by-products. and the liquor produces the profit. Product-Bundling pricing . The service firm faces a problem sin1ilar to captive product pricing-namely. Pricing is a sticky problem. how much to charge for the basic service and how much for the variable usage. Other restaurants price their liquor low and food high to draw in a drinking crowd. the savings on the price bundle must be substantial enough to induce them to buy the bundle. The fixed fee should be low enough to induce purchase of the ser-vice. When offering a mixed bundle. and Rs. the tactics that can be used. defoggers. average-. Amusement parks charge an admission fee plus fees for rides over a certain minimum. Customers will associate low-.Service firms often engage in two-part pricing.Sellers often bundle products and features. Two-part pricing . Rs.
Reduction of discounts: The company instructs its sales force not to offer its normal cash and quantity discounts.struction and bridge building. The firm’s sales force and advertising decisions depend on how much training and motivation dealers need. The company’s pricing depends on whether it uses mass-merchandisers or high. such as industrial construction and heavy equipment. ration supplies to its customers. For example. Companies often raise their prices by more than cost increase. Company -owned outlets. When an automaker signs up independent dealers to sell its automobiles. Rising costs un. This pricing is prevalent in industries with long production lead times. We define a value network as follows: A value network is a system of partnerships and alliances that a firm creates to source. The circumstances provoking price increases are generally as follows: Cost inflation: A major circumstance provoking price increases is cost inflation.crease that takes place before delivery. Over demand: when a company cannot supply all of its customers. Escalator clauses are found in contracts for major industrial projects. The channels chosen intimately affect all the other marketing decisions. An escalator clause bases price increases on some specified price index. a 1% increase will increase profits by 33% if sales volume is unaffected. They can be shifted among channel members. the automaker cannot buy them out the next day and replace them with. They can often be performed better through specialization. and deliver its offerings Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption! Marketing-channel decisions are among the most critical decisions facing management. such as free delivery or installation. it can raise its prices.can raise profits considerably. In addition. DISTRIBUTION Distribution as follows :A channel of distribution comprises a set of institutions which perform all of the activities utilised to move a product and its title from production to consumption. Unbundling: The Company maintains its price but removes or prices separately one or more ele. the company’s channel decisions involve relatively long-term commitments to other firms. Distribution Channel Function: All channel functions have three things in common: • • • They use up scarce resources. Escalator clauses: The company requires paying today’s price and all or part of any inflation in.quality boutiques. price controls. The price can be increased in the following ways: Methods of dealing with over demand: Delayed quotation pricing: The company does not set a final price until the product is finished or delivered. augment.ments that were part of the former offer. in anticipation of further inflation and govt. or both. . in a practice called anticipatory pricing. if the company’s profit margin is 3% of sales.matched by productivity gains squeeze profit margins and lead companies to regular rounds of price increases. like aircraft con.
such as building materials. several market segments that desire differing service output levels can be identified. Perishable products require more direct marketing. Effective planning requires determining which market segments to serve and the best channels to use in each case. repairs) provided by the channel. the greater the work provided by the channel. Bulky products. Evaluating major channel alternatives 1. cus. Analyzing customer needs 2. Analyze Customers’ Desired Service Output Levels It is imperative to understand that in designing the marketing channel. Identifying major channel alternatives 4. delivery.tomers prefer a greater assortment because more choices increase the chance of finding what they need. Service backup: The add-on services (credit.vided by the-marketing channel. Identify Major Channel Alternatives Companies can choose from a wide variety of channels for reaching customers-from . the marketer must understand the service output levels de. 2.DITRIBUTION CHANNEL FUCTION DAIGRAM CHANNEL DESIGN DECISIONS: Following four steps help design a channel system :1. such as custom-built machinery and specialized business forms. customers normally prefer fast delivery channels. Establish Objectives and Constraints Channel objectives should be stated in terms of targeted service out.sired by target customers. 3. Products requiring installation or maintenance services. Normally. installation. Establishing channel objectives 3. channel institutions should arrange their functional tasks to minimize total channel costs with respect to desired levels of service outputs Usually. Channels produce five service outputs Lot size : The number of units the channel permits a typical customer to purchase on one occasion.ping distance and the amount of handling. Channel objectives vary with product characteristics.put levels under competitive conditions. Spatial convenience : The degree to which the marketing channel makes it easy for customers to purchase the product Product variety: The assortment breadth pro. Waiting time : The average time customers of that channel wait for receipt of the goods. Non standardized products. The greater the service backup. are sold directly by company sales representatives. require channels that minimize the ship.
Exclusive distribution 2. but they are expensive. 2. When this does not hap. 1. The aim is to build a “partnership” feeling and joint distribution programming. telemarketing. Each channel has unique strengths as well as weaknesses. 3. image parameters particularly) Economic criteria—sales versus costs Control and adaptive criteria—degree of intermediary commitment Channel Management Decision: Channel management calls for selecting particular middlemen and motivating them with a cost. 5. Each channel hopefully reaches a different segment of buyers and delivers the right products to each at the least cost.sales forces to agents. dealers.pen. Selecting Channel Members Training Channel Members Motivating Channel Members Evaluating Channel Members Modifying Channel Arrangements . 1. Conditions of sale 3. Intensive distribution the terms and responsibilities of each channel member. Selective distribution 4. The problem is further complicated by the fact that most companies now use a mix of channels. direct mail. and 1. • the number of intermediaries needed. and the Internet.effective trade relations mix. Distributors can create sales. 4. Distributors’ territorial rights 4. but it cannot handle complex products. The Internet is much less expensive. there is usually channel conflict and excessive cost. but the company loses direct contact with customers. Sales forces can handle complex products and trans.actions. Evaluate the Major Alternatives (time. distributors. Price policy 2. Exclusive dealing 3. A channel alternative is described by three elements • The types of available business intermediaries. cost.
channel offering is tailored to provide superior value to these intermediaries Producers vary in their ability to attract intermediaries .1. re motivated. growth and profit record solvency. or terminated. They can exercise the following types of power Coercive power Reward power Legitimate power Expert power Referent power More sophisticated companies try to form partnerships and can evolve into long-term distribution programming. and reputation 2.vice. . customer delivery time treatment of damaged and lost goods. or unpleasant.cause they will be viewed as the company by end users . Consider the negative impression you would get of McDonald’s. market research programs. It needs-to determine intermediaries’ needs and construct a channel positioning such that its. Selecting Channel Members Companies need to select their channel members carefully. cooperativeness. and other capability-building programs to improve intermediaries’ performance. One manufacturer that was compensating a distributor for holding inventories found that the inventories were actual held in a public warehouse at its expense. and cooperation in promotional and training programs. Training channel members Companies need to plan and implement careful training programs for their intermediaries. be. or Hyundai if one or more of their outlets or dealers consistently appeared dirty. Evaluating channel members Producers must periodically evaluate intermediaries’ performance against such standards as sales-quota attainment. Selecting channel members would therefore involve evaluate experience. inefficient. Motivating channel members A. retrained. 3.pany should provide training programs. Company needs to view its intermediaries in the same way it views its end users. 3. average inventory levels. A producer will occasionally discover that it is paying too much to particular intermediaries for what they are actually doing. Under performers need to be counseled. Producers should set up functional discounts in which they pay specified amounts for the trade channel’s performance of each agreed-upon ser. They prepare the channel member employees to perform more effectively and efficiently The com. number of lines carried. the channels are the company. . To customers.
wholesalers. bargaining power. VMS s arose as. wholesalers. B. Administered VMS 3. Conventional Marketing System A channel consisting of one or more independent producers. One channel member owns the others. Channel Dynamics: A. treatment of damaged and lost goods. and retailers each a separate business seeking to maximize its own profits even at the expense of profits for the system as a whole . Vertical marketing system comprises of 1. and the product moves into later stage in the product life cycle. consumer buying patterns change. Corporate VMS 2. Modification becomes necessary when the „ „ „ „ „ distribution channel is not working as planned. and retailers act as a unified system. A. cooperation in promotional and training programs 4. innovative distribution channels emerge. the mar.place .They are evaluated on the following parameters sales quota attainment. Therefore the system will require periodic modi. VMS achieve economies through size. result of strong channel members’ attempts to control channel behavior and eliminate the conflict that results when independent members pursue their own objectives. Contractual VMS . has contracts with them. customer delivery time. average inventory levels.fication to meet new conditions in the market. Modifying channel arrangements A producer must periodically review and modify its channel arrangement.ket expands new competition arises. and elimination of duplicated ser-vices. or has so much power that they all cooperate. Vertical Marketing System A distribution channel structure in which producers.
Organizational approach 1. i. Multi channel marketing—single firm uses two or more marketing channels to reach one or more customer segments—advantages: increased coverage. Corporate VMS A vertical marketing system that combines successive stages of production and distribution under single ownership—channel leadership is established through common ownership. Contractual VMS could have the following forms a Wholesaler-sponsored voluntary chains b. strivers. Franchise organizations d. Contractual VMS A vertical marketing system in which independent firms at different levels of production and distribution join together through contracts to obtain more economies or sales impact than they could achieve alone. Can be permanent or temporary D. Administered VMS A vertical marketing system that coordinates successive stages of production and distribution. non business use. Multi channel Marketing Systems A distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments. Relative prices 4. and developing new means) iii. Amount of service 2. customized selling ii. but through the size and power of one of the par. marketing resources or other variables to take on the venture alone iii. complementers. Product lines 3. Planning channel architecture (companies thinking through their channel architecture— which are efficient and not. 1. ii. Retailer cooperatives c. Horizontal Marketing Systems A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity. Types of Retailing. transients. outside innovators) What is Retailing? Retailing includes all the activities involved in selling goods or services directly to final consumers for personal.ties. Amount of service A Self-service retailers Customers are willing to self-serve to save money .sources or programs. iii.i. Each firm lacks the capital. lower cost. not through common ownership or contractual ties. i. technology. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing. Manufacturer-sponsored retailer franchise or manufacturer-sponsored wholesaler franchise C. Two or more unrelated firms put together re. ii. Roles of individual firms in a multi channel system: (insiders.
B Discount stores Limited-service retailers Most department stores C Full-service retailers Salespeople assist customers in every aspect of shopping experience High-end department stores Specialty stores 3. Organizational approach A Corporate chain stores Commonly owned / controlled B Voluntary chains Wholesaler-sponsored groups of independent retailers C Retailer cooperatives Groups of independent retailers who buy in bulk D Franchise organizations Based on something unique E Merchandising conglomerates Diversified retailing lines and forms under central ownership . and services F. Relative prices A Discount stores Low margins are offset by high volume B Off-price retailers C Independent off-price retailers D Factory outlets E Warehouse clubs 4. Product lines A Specialty stores Narrow product lines with deep assortments B Department stores Wide variety of product lines C. Supermarkets D. nonfood. Superstores Food. Category killers Giant specialty stores 3. Convenience stores Limited line E.
adjustments and returns. Promotion Retailers use a wide range of promotion tools to generate traffic and purchases. fitting rooms . Until the target market is defined and profiled . engraving. retailing too is concerned with defining its target market.installations. They will run storewide sales. the retailer cannot make consistent decisions on product assortment . Service mix. repairs etc. The retailer’s product assortment must match the target market’s shopping expectations. Most retailers will put low prices on some items to serve as traffic builders or loss leaders. trade ins. They will plan marks down on slower –moving merchandise . store décor. Service mix and Store’s atmosphere The retailers must also decide on the service mix to offer customers Pre-purchase services. restaurants .breadth and depth . alterations and tailoring . The challenge is to develop a product-different ion strategy. check cashing . Ancillary services –general information . 5. parking . 2. The store can adopt the following options :Feature exclusive national brands that are not available at competing retailers Feature blockbuster distinctive merchandise events Feature surprise or ever-changing merchandise Feature the latest or newest merchandise first Offer merchandise customizing services Offer a highly targeted assortment 3. shopping hours. window and interior display . Retailers must also pay attention to pricing tactics. and service levels. The retailer has to decide on product assortment. . fashion shows. Post purchase include – shipping and delivery .gift wrapping . advertising messages and media. 4.Retail Marketing decisions Various marketing decisions affecting the retail business :Target marketing and positioning Product assortment. price. Product assortment. Promotion methods include :Ads Special sales Money saving coupons Sample distribution etc. advertising. Price Prices are a key positioning factor and must be decided in relation to the target market. Target Marketing and Positioning Like other marketing activities.accepting telephone and mail orders. All retailers would like to achieve high volumes and high gross margins. store’s atmosphere Price Promotion Place (location) 1. the product and service assortment mix and competition.
a community shopping center TRENDS IN RETAILING the trends in retail business and the main developments retailers and manufacturers need to take into account in planning competitive strategies 1.comes of the middle class households.039. organised retail trade in India was worth Rs11. Growing investment in technology 5 . the country is also dotted with low-cost kiosks and pushcarts. Total retail sales area in India was estimated at 328 million sq m in 2001. owner-managed shops. you ought to be in retailing.228. the retail sector is the second largest employer after agriculture.ing the boom times altogether. How. However.4 sq m per outlet.food sales were worth Rs4189. In 2001.’ In India. Organized retailing represent a small fraction of the Indian retail market. chemist shops. Growth of intertype competition. Food sales constitute a high proportion of total retail sales. it could still add up to say the sizeable number.5 billion. Retailers can locate their stores in the central business district. worth approximately Rs7. discount stores. While the middle class may not be as big as expected. department stores and even changing the traditional looks of book.7 billion. More so.6.2 million re. supermarkets. This trend towards larger outlets is leading to a rise in average retail space. There has been a boom in retail trade in India owing to a gradual increase in the disposable in. New retail forms and combinations 2 . The retailing sector in India is highly fragmented and predominantly consists of small independent. The concept of retailing chain stores is at a very nascent stage in India. space and rentals are proving to be the largest constraints to development of large formats in metropolitan cities. There are some 12 million retail outlets in India. Place Location is often described as the most successful strategy for retailing. Selling an experience. and are spreading all over India at a rapid pace.2 billion in 2001 while non. Or you’re miss. More and more players are coming into the retail business in India to introduce new formats like malls. There are no hypermarkets in the country as yet.ever. there were an estimated 11. a regional shopping center . Global presence of major retailers 6.stores. Retail Infrastructure In 2001. since retailers are aiming the prime . not just goods Retailing in India: Are you game for it!!!!! They say ‘If you aren’t in IT or entertainment. especially in south India. and furnishing stores. The share was 62. 3 . However. these modern formats are showing robust growth as several retail chains have established a base in metropolitan cities. with an average selling space of 29. the non-food retailing sector registered faster year-on-year growth than food sales.tail outlets in the country. Besides. a billion people in overall population leads to very large numbers.7% in 2001. Growth of giant retail 4 .
Spencer & Co Ltd another large retail group in the country. with interests in supermarkets. with a mar. is the second largest fascia in the country with retail sales of Rs2. It has also acquired the Crossword chain of book.keting arrangement with Lotto and Nike as well.endowed malls and shopping centres. Another strong retailer is Subhiksha. The real estate development group has converted its retailing operation into an Indian success story. ready-to-cook. well. The anchor is expected to attract a variety of con. Each mall typically has an anchor. Key Developments in Retailing 100% foreign direct investment (FDI) in the re. The stores retail mainly Bata products. Rising incomes has led to increasing demand for better quality products while lack of time has led a demand for convenience and service. . families are experiencing growth in income and dearth of time. Health & Glow. whose discounters and chemists/druggist chain is very popular in South India. with further growth of organised retailing. and a retail turnover of Rs6 billion in 2001. which are spacious. Shopping malls is set to one of the most visible faces of the Indian retail scene by the end of 2002. The turnover from private labels by major retail chains was estimated at around Rs 1200 million in 2001.mous with footwear in middleclass India.sumers and hence is the key to increasing foot traffic. The proportion of sales through organised retailing is estimated to increase to around 6% by 2010. They have big label stores as well as in. in both food and non-food segments. The mid 1990s marked the arrival of new. According to estimates apart from the metropolitan and larger cities. in order to protect the interests of the small retailers.stores. as many as 50 new malls will be coming up by 2005 in the smaller cities as well. There is also a strong trend in favour of onestop shops like supermarkets and department stores. However. Foodworld is operated by Foodworld Supermar. Shoppers Stop.3 billion by 2006. which is adding to the family income but making lifestyles extremely busy.house eateries and entertainment zones. Competitive Environment Bata India Ltd is one of the largest retailer. There is a strong lobby of small traders that has been vocal on the issue of not permitting FDI into retail. The K Raheja-run department store chain. in. each retail business at the time of writing was run as a separate entity. ready-to-eat food has been on the rise. In urban India. especially in the metropolitan and large cities in India. More and more women are also turning to corporate jobs.7 billion in 2001. airy and equipped with modern amenities.kets Ltd. music stores and the beauty and health chain. With almost a monopolistic presence in the organised footwear market until the 1980s. The trend to market private labels by a specific retail chain is catching on in India as it helps to improve margins. The demand for frozen. The lobby is based on the premise that modern retail will impact the livelihood of millions of small family-run businesses. The number of large mega-malls is expected to increase significantly as India is now experiencing a “mall boom”. Retail Forecasts The retail business is expected to reach Rs19. with 1600 footwear stores spread across the country. while Health & Glow by RPG Group.stant.locations.069.tailing sector is not permitted yet. Bata is synony. which occupies a sizeable percentage of the total usable area.
General-merchandise wholesalers carry several merchandise lines. promotion.Specialty wholesalers carry only part of a line (2) Industrial distributors sell to manufacturers rather than to retailers and provide several services—carrying stock. Merchant Wholesalers: Independently owned businesses that take title to the merchandise they handle.There is already a strong trend in favour of large format retail outlets. Target Market Product Assortment and Services . Full-Service Wholesalers: Carry stock. Following are the functions performed by wholesalers. pricing. and provide management assistance. adapt marketing concepts and streamline their costs of doing business. but at the same time. distributors. Wholesalers who fail to carry adequate assortments and inventory and provide satisfactory ser. Selling and promoting Buying and assortment building Bulk breaking Warehousing Transportation Financing Risk bearing Market information Management services and counseling Types of Wholesaling.riod. and providing delivery. . product assortment and services. maintain a sales force. offering credit. the retailers will have to increasingly develop shopping as an experience and at the same time. In such a scenario. They are called jobbers.vice are likely to be bypassed by manufacturers. Customers are also looking for ambience and convenience in shopping. on the other hand. in both food and nonfood sectors. In the future. make deliveries. 1. What is Wholesaling? Wholesaling includes all the activities involved in selling goods or services to those who are buying for the purpose of resale or for business use. Progressive wholesalers. There are two types of full-service wholesalers (1) Wholesale merchants sell primarily to retailers and provide a full range of service . as people are showing preference for one-stop shops. with more dual income families. Wholesaler Marketing Decisions Wholesalers also must make decisions on their target market. the consumer ability to spend will increase. . This would continue more strongly in the forecast pe. and place. or mill supply houses and fall into two categories: full service and limited service.General-line wholesalers carry one or two lines. offer credit. the more successful ones will be those that provide faster service. it is predicted that the time available for shopping will go down.
Internet The Internet has a geographically disperse market. foodstuffs).g. Agents can be very expensive to train. Scottish Salmon direct from an Inverness fishery. Retailers often have a strong ‘brand’ them. The retailer will give the final selling price to the product. electrical wholesalers. and many others. the Internet. They take ownership or ‘title’ to goods whereas agents do not (see below). Channel Intermediaries . Retailers will often offer credit to the customer e. Modelo.seas distributors. a ‘stockist agent’ will hold consignment stock (i. There is a paradigm shift in commerce and consumption which benefits distribution via the Internet. They provide storage facilities. A wholesaler will often take on the some of the marketing responsibilities.e.g. Channel Intermediaries .Price Decision Promotion Decision Place Decision Types of Channel Intermediaries And Their Functions There are many types of intermediaries such as wholesalers.ages for resale by a retailer. They sell on to a wholesaler that will store it and eventually resell to a retailer. Products and services are promoted and merchandised by the retailer. They buy from producers and resell to retailers. but the title will remain with the producer. This approach is used where goods need to get into a market soon after the order is placed e. 1.osed to many products. cheese manufacturers seldom wait for their product to mature. They are difficult to keep control of due to the physical distances involved.Retailers Retailers will have a much stronger personal relationship with the consumer.Agents Agents are mainly used in international markets. For example. will store the stock. and Alisuper. The main modes of distribution will be looked at in more detail. The retailer will hold several other brands and products.g. Channel Intermediaries . direct marketing (from manufacturer to user without an intermediary). 4. 3.tact cost between the producer and consumer e.g.g. They are difficult to motivate. retailers. and Jumbo in Portugal. over. . or travel agents. customer service costs. 2. agents. An agent will typically secure an order for a producer and will take a commission. or sales force costs. They do not tend to take title to the goods. The main benefit of the Internet is that niche products reach a wider audience e.selves e. Wholesalers offer reduce the physical con.Wholesalers They break down ‘bulk’ into smaller pack. A consumer will expect to be ex. This means that capital is not tied up in goods. There are low barriers low barriers to entry as set up costs are low. Many produce their own brochures and use their own telesales operations. Channel Intermediaries . Ross and Wall-Mart in the USA. However.
forming and persuading one or more of the audiences to accept an organisation’s prod. Definition: Promotion is communication about an organization and its products that is intended to inform. or remind target market members. The target audience is a critical influence on the communicator’s decisions on what to say. To monitor the responses. and feedback.rectly or indirectly facilitate exchanges by in. affective.PROMOTION. . and to whom to say it. read articles. individuals. Four represent major communication function – encoding. Two represent the major parties in a communication – sender and receiver. 2. some. For example.rent users.one interested in purchasing a new computer would talk to others. They must encode their messages so that the target audience can decode them. response. how to say it. The more the sender’s field of experience overlaps with that of the receiver. deciders. or the general public. The model emphasizes the key factors in effective communication. cur.ucts. persuade. where to say it.munication). or influencers. This understanding will help them allocate communications dollars more efficiently. when to say it. A promotion mix (sometimes called a marketing communications mix) is the particular combination of promotional methods a firm uses to reach a target market. the more effective the message is likely to be. Determine the communication objectives . or behavioral response. THE COMMUNICATION PROCESS: The whole marketing mix must be integrated to deliver a consistent message and strategic positioning.The marketer can be seeking a cognitive. groups. or organisations to di. look for information on the Internet. Marketers also need to understand the fundamental elements of effective communications. particular publics. see television ads. Figure above shows a communication model with nine elements. Identify the target audience -The process must start with a clear target audience in mind: potential buyers of the company’s products. Promotion’s role is to communicate with individuals. Marketers need to assess which experiences and impressions will have the most influence at each stage of the buying process. The last element in the system is noise (random and competing messages that may interfere with the intended com. groups. deconding. Developing an Effective Communications 1. That is. The starting point is an audit of all the potential interactions target customers may have with the product and the company. the marketer might want to put something into the consumer’s mind. Senders must know what audiences they want to reach and what responses they want to get. Two represent the major communication tools – message and media. and observe computers in a store.INTEGRATED MARKETING COMMUNICATION Marketing communications which is one of the four major elements of the company’s marketing mix. They must transmit the message through media that reach the target audience and develop feedback channels.
the communicator moves to developing an effective message. The “sound” of an announcer promoting a used automobile has to be different from one promoting a new Cadillac. theme. and moral. Pharmaceutical companies what doctors to testify about product benefits because doctors have high credibility. dress.) how to say it logically ( message structure ). texture. all these elements plus body language ( nonverbal clues) have to be planned. Anti drug crusaders will use ex-drug addicts because they have higher credibility for students than teachers do. or unique selling proposition ( USP). how to say it symbolically ( message format). . Presenters have to pay attention to facial expressions.3. the message should gain attention. the communicator has to decide on headline. For a radio message. management searches for an appeal. and who should say it (message source). If the message is carried by the product or its packaging. and color. Ideally. the communicator has to pay attention to color. idea. posture. and elicit action Formulating the message will require solving four problems: what to say ( message content. If the message is to be carried on television or in person. Message content: In determining message content. In a print ad. the communicator has to choose words. Message structure Effectiveness depends on structure as well as content Message format The message format needs to be strong. copy. and shape Message source Message delivered by attractive or popular sources achieve higher attention and recall. and vocalizations. gestures. There are three types of appeals: rational. emotional. Design the message . Hold interest. and hairstyle. This is why advertisers often use celebrities . arouse desire. illustration. size.What is important is the spokesperson’s credibility.Having defined the desired response. voice qualities. scent.
special interest magazines. These include placing ads in medical journals. 5. direct mail. B. 4. trustworthiness. passing out free samples. public relations and publicity. quick. What Is Integrated Marketing Communications? A. sales force. The industry has had to expand its battery of communication channels. Here is how one company touches several bases. Deciding on the marketing communications mix . once said. such as cable TV. C. D. the department. and even telemarketing. John Wanamaker. and direct marketing. .The communicator must select efficient channels to carry the message.One of the most difficult marketing decisions is determining how much to spend on promotion.Companies must allocate the pro. sending direct mail ( including audio and videotapes ). pharmaceutical company salespeople can rarely wrest more than five minutes’ time from a busy physician. The concept of integrated marketing communications has been increasingly accepted for a number of reasons. attractive. A major goal of integrated marketing communications is to send a consistent message to customers.motion budget over the give promotional tools – advertising. Establish the total marketing communication budget . but I don’t know which half. For example. Integrated marketing communications is the coordination of promotion efforts to ensure the maximum informational persuasive impact on customers. and likability. Their presentation must be crisp.” 6.store magnate. This approach fosters long-term customer relationships and the efficient use of promotional resources. and convincing. Mass media advertising is used less today because of its high costs and less predictable audience sizes. Database marketing is also allowing marketers to be more precise in targeting individual customers.ness. Marketers can now take advantage of more precisely targeted promotional tools. Select the communication channels . sales promotion. “ know that half of my advertising is wasted.What factors underlie source credibility? The three most often identified are expertise. CD ROMS. and voice broadcasts. This makes pharmaceutical sales calling extremely expensive. the Internet.
consumer packaged-goods firms tend to overspend on advertising as a form of insurance against not spending enough. Informative advertising aims to create awareness and knowledge of new products or new features of existing products. Reminder advertising aims to stimulate re.pensive. or services by an identified sponsor.chase Coca-Cola Reinforcement advertising aims to convince current purchasers that they made the right choice. preference. Deciding on the advertising budget . conviction. persuade. remind. however. which makes an explicit comparison of the attributes of two or more brands. 1. and the Phoenicians painted pictures promoting their wares on large rocks along parade routes. setting advertising objectives. is a far cry from these early efforts.Any paid form of non personal presentation and promotion of ideas. Automobile ads often depict satisfied customers enjoying special features of their new car. Setting the advertising objectives .. Some persuasive advertising uses comparative advertising. four-color Coca-Cola ads in magazines are intended to remind people to pur. Modern advertising. and purchase of a product or service. setting the advertising budget. Archaeologists working in the countries around the Mediterranean Sea have dug up signs announcing various events and offers.Some critics charge that large. Advertising can be traced back to the very beginnings of recorded history. DEVELOPINGADVERTISEMENT PROGRAM Marketers must make four important decisions when developing an advertising program. Advertising objectives can be classified according to whether their aim is to in.Define Advertising Advertising.” Comparative advertising works best when it elicits cognitive and affective motivations simultaneously. and evaluating advertising campaigns.uct image building and tend to under spend There are five specific factors to consider when setting the advertising budget: .The advertising objectives must flow from prior decisions on target market. Persuasive advertising aims to create liking.peat purchase of products and services. market positioning. goods. The Romans painted walls to announce gladiator fights. and that industrial companies underestimate the power of company and prod.form. Ex. developing advertising strategy (message decisions and media decisions). or reinforce. and marketing mix. 2.
a brand must advertise more heavily to be heard. Advertising frequency: The number of repetitions needed to put across the brand’s mes. such as detergents. 3. 2. selecting specific media vehicles. Then the results of these decisions need to be evaluated 5. Choosing the advertising message: Message generation: advertising people have proposed different theories for creating an effective message. . Deciding on media and measuring effectiveness After choosing the message.quire heavy advertising to establish a differential image. Evaluating advertising effectiveness . and deciding on geographical media allocation. beer. Established brands usually are supported with lower advertising budgets as a ratio to sales.1. Most marketers work hard to communicate openly and honestly with consumers.sage to consumers has an important impact on the advertising budget. but often more important. Even simple cluster from advertisements not directly competitive to the brand creates a need for heavier advertising. 5. 3. To build share by increasing mar. Some ads aim for rational positioning and other for emotional positioning. exclusive.New products typically receive large advertising budgets to build awareness and to gain consumer trial. and vodka.ness. abuses occur. Still. and public policy makers have developed a substantial body of laws and regulations to govern advertising. Yet the amount of fundamental research on effectiveness is appallingly small. it is less expensive to reach consumers of a widely used brand than to reach consumers of lowshare brands. Market share and consumer base . and impact. soft drinks ) re. 4. deciding on media timing. Message execution can be decisive for highly similar products. the advertiser’s next task is to choose media to carry it.per-impression basis.Good planning and control of advertising depend on measures of advertising effectiveness. and believability Message execution The message’s impact depends not only on what is said. Competition and cluster . Newspaper advertising accounts for almost one-fourth of all advertising expenditures. DIFFERENTADVERTISING MEDIA The advertising media are the various forms of communication through which advertising reaches its audience.High. coffee.In a market with a large number of competitions and high advertising spending. 4. on how it is said. cigarettes. Message evaluation and selection a good ad normally focuses on one core selling proposition. The steps here are deciding on desired reach. Stage in the product life cycle . Advertising is also important when a brand can offer unique physical benefits or features. choosing among major media types. Dik Twedt suggested that messages be rated on desirability. Product substitutability: Brands in a commodity class ( cigarettes. frequency. Newspapers.ket size requires larger expenditures.market-share brands usually require less advertising expenditure as a percentage of sales to maintain share. On a cost. Social responsibility review advertisers and their agencies must be sure their “creative” advertising does not overstep social and legal norms.
because most outdoor advertising is directed at a mobile audience. A direct-mail campaign may fail if the mailing list is outdated and the mailing does not reach the right people. The advertising revenues of magazines have been climbing. and it is fairly inexpensive. Direct mail is the most selective medium: Mailing lists are available (or can be compiled) to reach almost any target audience. Magazine advertisements have a longer life span. III. posters. Magazine advertising is more prestigious than newspaper advertising. A number of magazines like Time and Cosmopolitan publish regional editions. The effectiveness of direct-mail advertising can be measured because the advertiser has a record of who received the advertisement and can track who responds. Advertisers can reach very specific market segments through ads in special-interest magazines. the message must be limited to a few words. Sign and billboard advertising allow the marketer to focus on a particular geographic area. II.boards. Color reproduction is usually poor.pared to other media. However. Ads are usually read once and then discarded. Outdoor Advertising. IV. Outdoor advertising consists of short promotional messages on bill. and signs. which provide advertisers with geographic flexibility. Direct Mail. . Direct-mail advertising is promotional material mailed directly to individuals. and it provides highquality color reproduction. The medium is especially suitable for products that lend themselves to pictorial display. Marketers cannot target specific markets through newspaper ads.. Some organizations are using direct e-mail. The major disadvantages of magazine advertising are high cost and lack of timeliness. Magazines. It is also timely.Newspaper advertising is used extensively by retailers because it is relatively inexpensive com. There are some drawbacks to newspaper advertising It has a short life span. advertising dollars are not wasted in reaching people who are outside the market area. Because it provides only local coverage.
A national advertiser may buy network time. among other things. or 60-second commercial during or between programs.V. the advertiser is seeking a specified advertising objective and response from the target audience – for example. Sponsorship (or co-branded) ads integrate a company’s brand with editorial comment. The Internet is the newest advertising medium and is growing in popularity. Actual rates depend on geographic coverage. the number of commercials contracted for. they contain only a corporate or brand name. Keyword ads. and Evaluatiing Effectivness (i) Deciding on reach. VI. and impact Media selection is finding the most cost-effective media to deliver the desired number and type of exposures to the target audience. Television. Infomercial. link a specific ad to text or subject matter that an information seeker may enter. Presumably. Advertisers may sponsor an entire show. a target level of product trial. radio advertising offers selectivity. FM. Radio can be less expensive than other media. the time period specified. they may select their audience by choosing the day of the week and the time of day when their ads will be shown. and whether the station broadcasts on AM. DECIDING ON MEDIA AND MEASURING EFFECTIVENESS The steps here are Deciding on desired reach. or both. Interstitial ads (in-your-face ads) pop up to display a product ad when viewers click on a web site. television advertising has a short life. Radio. on level . 20-. An infomercial is a program-length (usually a half-hour) televised commercial message resembling an entertainment or consumer affairs programs. To an extent. on radio advertising Like magazine ad vertising. Internet. and perhaps like newspaper ads. Advertisers 8 percent of total expenditures. Unlike magazine advertising. which means that its message usually will be broadcast by hundreds of local affiliated stations. Button ads are small squarish ads appearing at the bottom of a web page. Television advertising rates are based on the number of people expected to be watching when a commercial is aired. frequency. and impact. Deciding on media timing. Banner ads are rectangular graphics appearing at the top of most consumer web sites. frequency . Television ranks number one in total revenue. Both national and local firms may buy local time on a single station that covers a particular geographic selling area. The rate of product trial will depend. or they may buy spot time for a single 10-. Choosing among major media types selecting specific media vehicles. Even small retailers are able to afford radio advertisements. featured primarily on Internet search engines. VII. Television advertising is the primary medium for larger firms whose objective is to reach national or regional markets. 30-. Thereare five types of Internet advertisements.
(iii) Selecting specific vehicles The media planner must search for the most costeffective vehicles within each chosen media type. This resulted in increased non seasonal consumption of its brand. Women’s dresses are best shown in color magazines . radio and television are the most effective media for reaching teenagers. Many advertising agencies use a computer program to select the initial media and then make further improvements based on subjective factors. A message announcing a major sale tomorrow will require radio. Frequency (F): The number of times within the specified time period that an average person or household is exposed to the message Impact (I ): The qualitative value of an exposure through a given medium (thus a food ad in Good Housekeeping would have a higher impact than in the Police Gazette). or newspaper. What counts is the cost-per-thousand exposures. (If the vehicle has pass-on readership. believability.drink manufacturer put more money into off-season advertising.In choosing media. explanation. (ii) Choosing among major media types The media planner has to know the capacity of the major media types to deliver reach. and impact: Reach : The number of different persons or households exposed to a particular media schedule at least once during a specified time period. Suppose 70 percent of a product’s sales occur between June and September. Media planners make their choice among media categories by considering the following variables: Target-audience media habits: For example .of brand awareness. Cost: Television is very expensive. TV. (iv) Deciding on media timing. to oppose the seasonal pattern. while not hurting seasonal consumption. or to be constant throughout the year. visualization. Media planners are increasingly using more sophisticated measures of effectiveness and employing them in mathematical models to arrive at the best media mix. and color. Yet some year ago. whereas newspaper advertising is relatively inexpensive. then the audience is larger than circulation) Effective audience: The number of people with target audience characteristics exposed to the vehicle. Other soft drink manufactures started to do the same. and the result was a more balanced consumption patters. . Product characteristics: Media types have different potentials for demonstration. A message containing a great deal of technical data might require specialized magazines or mailings. frequency. Message Characteristics: Timeliness and information content will influence media choice. frequency. the advertiser faced both a macroscheduling and a micro scheduling problem involves scheduling the advertising in relation to seasons and the business cycle. Effective ad-exposed audience: The number of people with target audience characteristics who actually saw the ad. Most firms pursue a seasonal policy. a soft. The firm can vary its advertising expenditures to following the seasonal pattern. and Polaroid cameras are best demonstrated on television. Audience: The number of people exposed to the vehicle. and impact. The effect of exposures on audience awareness depends on the exposures’ reach. The advertiser who decides to buy 30 seconds of Audience size has several possible measures: Circulation: The number of physical units carrying the advertising.
newsletters.pany magazines. and handling or heading off unfavorable rumors. • Corporate identity material such as logos. and events. Press relations: Presenting news and information about the organiza. and news releases. 2 . and dealers. Simply speaking . 5 . Product publicity: Sponsoring efforts to publicize specific products. public relations would mean . Public relations (PR) involves a variety of programs designed to promote or protect a company’s image or its individual products. 3 . festival. signs. building up a good corporate image. and stationery are also public relations tools. stories. A public is any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives.tion in the most positive light. Sponsoring special events is an effective way for an organization to increase brand recognition and receive media coverage with relatively little investment.building good relations with the company’s various publics by obtaining favorable publicity. or play. PR Tools: In brief one can summarize the tools as follows :• Public relations professionals prepare written materials such as brochures. sports competition. Counseling: Advertising management about public issues and com.mote or defeat legislation and regulation. stories. building up a good “corporate image. com. but it must also relate to a large number of interested publics. Not only must the company relate constructively to customers. and events. business cards.” and handling or heading off unfavorable rumors. Corporate communication: Promoting understanding of the organiza. Public Relations perform the following five functions: 1 .tion through internal and external communications. Public relations departments may perform any or all of the following functions Public relations Building good relations with the company’s various publics by obtaining favorable publicity.pany positions and image during good times and crises. 4. . • Event sponsorship is a public relations tool in which a company pays for all or part of a special event such as a concert.public relations. a. annual reports. Lobbying: Dealing with legislators and government officials to pro.PUBLIC RELATIONS Another major mass-promotion tool is. suppliers.
• • • Advertising and personal selling Sales promotion can be directed at: The ultimate consumer (a “pull strategy” encouraging purchase) The distribution channel (a “push strategy” encouraging the channels to stock the product). sales promotion is about “action”.ments and receive supplementary textual materials and photographs • The specific types of public relations tools chosen depend on several factors. whereas advertising and personal selling offer reasons to buy a product or service. Response of media personnel c. Captioned photograph–a picture accompanied by a brief explanation d . or both. A consumer sales promotion method attracts consumers to particular retail stores and motivates them to purchase certain new or established products. its products. Significance of the news item Sales promotion Short-term incentives to encourage the purchase or sale of a product or service. • Some public relations tools are associated specifically with publicity.000 words) prepared by an organization for inclusion in a particular publication c. Public relations personnel sometimes organize events. This is usually known as “selling into the trade” Sales Promotion Methods. Feature article–a piece (of up to 3. Composition of the target audience b.. sales promotion offers reasons to buy now. . to create news about a company. It is about stimulating customers to buy a product. such as grand openings. Publicity-based public relations tools include: a . a. A number of factors enter into marketing decisions about which and how many sales promotion methods to use.niques either for consumer sales or for trade sales. Most sales promotional methods can be classified as promotion tech.b. Publicity is communication in news story form about an organization. Press conference–a meeting at which invited media personnel hear important news announce. Sales promotion consists of short-term incentives to encourage purchase or sales of a product or service. Sales promotion is commonly referred to as “Below the Line” promotion. 2. News release–a typed page of about 300 words provided by an organization to the media as a form of publicity b . A trade sales promotion method encourages wholesalers and retailers to stock and actively promote a manufacturer’s products. 1. It is not designed to be informative – a role which advertising is much better suited to. 3 . You would agree that more than any other element of the promotional mix.
Frequent-user incentives are programs developed to reward customers who engage in repeat (frequent) purchases. Rebating is a relatively low-cost promotional method. and in shelf dispensers in the store. Most point-of-purchase displays are prepared and set up by manufacturers and wholesalers. They can easily be copied by competitors. A premium is a gift that a producer offers the customer in return for using its product.chasing specified quantities of a product.You must be familiar with many of the following sales promotion methods:• Rebates. Frequent-user incentives build customer loyalty. either with or without an additional purchase of the product. and easily administered. magazines. Direct communications with care. • Samples. Direct marketing is the use of consumer-direct (CD) channels to reach and deliver goods .fully targeted individual consumers to obtain an immediate response. online. direct mail. A rebate is a return of part of the purchase price of a product. analysis and tracking of customer behavior to develop a relational marketing strategies Direct marketing Direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships. • Cooperative Advertising. They are made available to customers through newspapers. Cooperative advertising is an arrangement whereby a manufac. Samples may be offered via online coupons. Some trade shows are organized exclusively for dealers–to permit manufacturers and wholesal. - - - - - Direct Marketing Direct marketing has been defined by the Institute of Direct Marketing as: The planned recording. It may actually hold merchandise or inform customers of what the product offers and encourage them to buy it. direct mail. • Coupons. A buying allowance is a temporary price reduction to resellers for pur. A sample is a free product given to customers to encourage trial.ers to show their latest lines to retailers. • Premiums. • Trade Shows.chase of items in large quantities. A buying allowance may serve as an incentive to resellers to handle new products. Others are promotions designed to stimulate consumer awareness and interest. or in stores. stimulate pur. An airline’s frequent-flyer program is one example of a frequent-user incentive.turer agrees to pay a certain amount of the retailer’s media costs for advertising the manufacturer’s product. • Frequent-User Incentives. Buying allowances are simple. Samples are the most expensive sales promotion technique. A trade show is an industry wide exhibit at which many sellers display their products. A point-of-purchase display is promotional material placed within a retail store. • Point-of-Purchase Displays. These coupons may be worth anywhere from a few cents to a few dollars. A coupon reduces the retail price of a particular product by a stated amount at the time of purchase. • Buying Allowances. straightforward. Coupons may also offer free merchandise. Usually the rebate is offered by the producer to consumers who send in a coupon along with a specific proof of purchase.
and ser. cookware and healthfood. LB Publishers and Distributors Pvt Ltd and DK Family Learning The Indian Direct Selling Association is an association of companies engaged in the business of direct selling in India. Nestle. and direct selling majors such as Amway. • • • • Amway is the largest player in India with annual sales exceeding Rs5bn Other major players are Avon Beauty Products (I) Pvt Ltd. Mass-market penetration is now catching up within the Rs 1. 90% of goods sold by the direct sellers in India are sourced from goods manufactured within the country. direct selling is growing at a fast pace. Tupperware and Avon now seem to be following the path charted by FMCG giants such as Hindustan Lever.1. household products. personal products. Britannia. All major players in India are affiliated to IDSA. Total sales through direct selling route in 2002 was Rs. Dabur. Tupperware India Pvt Ltd. Godrej and Tata Tea. DIRECT MARKETING BENEFITS . Marico.723. registering a 54% yoy growth.800-crore direct selling industry as well. • Most of the Direct Selling companies operating in India today are in the field of cosmetics.vices to customers without using marketing middlemen.7 crore. Oriflame India Pvt Ltd. Direct Marketing in India: • In India. Lotus Learning Pvt Ltd. • India was the fastest growing market in 2000 in terms of revenues from direct selling.
Even a brand that has achieved acceptance in other markets will require introduction in new markets. Almost every company as had spectacular failures. . to a particular product form (roll-ons and sprays) or to a particular brand Introduction Stage In this stage company is basically launching a new product (from brand or category) that is the reason that it is called the introductory stage. ‘The PLC concept can be applied to a product category (perfumes). and the composition of the market. Introducing new product is always a risky venture.PRODUCT LIFE CYCLE “The product life cycle (PLC) depicts a products sales history through 4 stages: (1) Introduction 2) Growth (3) Maturity and (4) Decline One thing should be clear that adjustment and changes must be made in the product’s marketing mix as it moves through its life cycle because of changes in the competitive environment. buyer behavior. even for a skillful marketer. A new product category requires a longer introductory period because primary demand (demand for the product category as opposed to the demand for a specific brand) must be stimulated.
Industry sales peak and decline as the size of potential markets begins to shrink and wholesaler and retailer support dwindles because of declining profit margins. the company can capture a dominant position. Product managers has to play a very important role at this stage infact he should do more to extend the lives of their mature products rather than allowing it to coast into decline. the market expands. It is during this stage that marketers are focusing effort on extending the lives of their existing brands. Most of the times it will find that the sales are repeat sales to earlier buyers. At this point of time company need to add new dealers and distributors. new pack sizes may need to be introduced. Rivals copy product features of successful brands and they become more alike. promotion. and brands exist in the maturity stage. Competition intensifies and industry profits begin to decline at the end of the growth stage. it gives up current profit and hopes to make it up in the next stage.Growth Stage At a growth stage where the company has successfully launched its product. By spending a lot of money on product development. Maturity Stage At this stage company will find greater number of competitors. Middlemen often intro. In doing so h owever. . which makes the competition even tougher. attracting competitors who copy and improve on the features of the new product. but total industry sales are still rising. New product forms and brands enter. There is little growth potential for the product. As new customers are attracted. the most successful ones are actually evolving to meet changing consumer needs.duce their own brands. as new customers enter the market and old customers make repeat purchases. product and marketing mix. the sales have begun to increase rapidly in this stage.tures still exist. This is the stage of peak profits. Thus price competition develops along with heavy promotions of whatever unique brand fea. They should consider modifying the market. competitive product forms. In this phase. and distribution. the company faces a trade-off between high market share and high current profit. company will find decline in industry profits accelerates further. In this stage you will find that many products may appear unchanged.
stages while product categories last longer. companies need to pay attention to their dying products. For these reasons. and advertising changes. It is basically because of Competitions that the product forms and brands enter into the decline stage. Brands with strong acceptance by some customer segments may continue to produce profits.. Or it may decide to ‘re-position the product in the hope of moving it back to the growth phase in a new avatar . Sales and profits decline rapidly and competitors become more cost conscious. Thus Sanifresh is still a leading toilet cleaner though its powdered form is less popular than liquids.agement may decide to maintain its brand without changes in the hope that some competitors will leave the market. At times man. There are hidden costs in terms of management time. Product forms and brands typically enter into decline.Decline Stage Now the company reaches to the final stage of the life cycle. sales force attention. frequent inventory re-adjustments.
the product is doomed D failure. But if innovators and early adopters do not adopt. Late majority . Innovators rep. Early majority – they are people who are careful consumers who tend to avoid risk. The five categories of adopters (1) Innovators (2) Early adopters.those who avoid change and may not adopt a new product until traditional alternatives no longer are available.somewhat skeptical consumers who acquire a product only after it has become commonplace. (3) Early majority (4) Late majority and (5) Laggards. Laggards represent about 16% of consumers. The early majority represents 34% of consumers.well-informed risk-takers who are willing to try an unproven product. early adopters then begin to purchase the product.5% of consumers. . A new product that has been adopted by innovators and early adopters still has 84% of its potential customers in the ton-adopter category.dations from others who have experience with the product. The adoption process is the series of stages a prospective buyer goes through in deciding to buy and make regular use of the product. the early majority adopts the product once it has been proven by the early adopters. Innovators . The adoption process affects the length of a products life cycle. Laggards . They rely on recommen. Early adopters tend to be educated opinion leaders and represent about 13.resent the first 2.5% to adopt the product. The late majority represents about 34% of consumers.The Adoption & Diffusion Process – The PLC concept is related to the adoption and diffusion processes.based on the positive response of innovators. Early adopters .
distributors and suppliers. customers. The company can watch competitors’ ads. As opposed to a product idea that is an idea for a product that the company can see itself marketing to customers. press releases and write-ups in the press about their activities. Companies like 3M and Toyota have put in special incentive programs or their employees to come up with workable ideas. Companies also buy competitors information and pay for industrial espionage. is helpful at this stage to have a checklist that can be used to rate each idea based on the factors required for successfully launching the product in the marketplace and their relative importance. One of Pillsbury’s four cake mix lines and several variations of another came directly from Bake-Off win. consumers are asked to respond to it by answering a set of questions designed to help the company decide which concept has the strongest appeal. After being exposed to the concept. Idea Screening: -The purpose of idea generation is to create a large pool of ideas. About 30% of new product ideas come from analysis of competitors’ products. shows and seminars. these need to be tested with con. It. the management can obtain an overall rating of the company’s ability to launch the product successfully. Once the concepts are developed.New Product Development Process – Figure will show the complete process of new product development lets discuss them one by one. which is the consumers’ perception of an actual or potential product. Resellers and others who are close to the market. Finally.An attractive idea has to be developed into a Product concept. This is different again from a product image. can often pass on information about new develop. however. Against these. The Major sources of new product ideas include internal sources.cient. government reports. New Product Development starts with idea generation A company has to generate many ideas in order to find one that is worth pursuing.ments. Concept Development and Testing . Almost 55% of all new product ideas come from internal sources according to one study.ners’ recipes. a word or a picture may be suffi.sumers either symbolically or physically. For some concept tests. management can assess how well the idea fits with the company’s marketing skills and experience and other capabilities. advertising agencies and new product consultants. and companies can benefit by finding these products and putting them on the market like Pillsbury gets promising new products from its annual Bake-off. market research firms. Companies have different methods for doing this from product review committees to formal market research. Almost 28% of new product ideas come from watching and listening to customers. Customers: even create new products on their own. a product concept is a detailed version of the idea stated in meaningful consumer terms. a physical presentation will increase the reliability of the concept test. The purpose of this stage is to pare these down to those that are genuinely worth pursuing. The company . Other sources are trade magazines. competitors.
If they do. costs and profits to find out whether they satisfy a company’s objectives.egy statement consists of three parts: the first part describes the target market. . the planned product positioning and the sales. the product can move to the product development stage. it can evaluate the attractiveness of the business proposal. The third part of the marketing strategy statement describes the planned long-run sales. market share and profit goals for the first few years. The second part outlines the product’s planned price.This is the next step in new product development. Business analysis involves the review of projected sales. and marketing budget for the first year. Business Analysis . and the marketing mix strategy. profit goals.can then project these findings to the full market to estimate sales volume.Once the management has decided on the marketing strategy. distribution. Marketing Strategy Development . The strat.
Four classes of consumer products are (1) Convenience products (2) Shop.Product Development .ping products (3) Specialty products. The company will have to decide on the timing of the launch (seasonality) and the location (whether regional.If the product passes the functional tests. This helps marketers in making generalizations to guide development of their marketing mixes. Test marketing gives the marketer an opportunity to tweak the marketing mix before the going into the expense of a product launch. This step calls for a large investment. They are widely available at many outlets. R&D or engineering develops the product concept into a physical product. national or international). Functional tests are then conducted under laboratory and field conditions to ascertain whether the product performs safely and effectively. toffee.introducing the product to the market-it will face high costs for manufacturing and advertising and promotion. It will show whether the product idea can be developed into a full. Costs of test marketing can be enormous and it can also allow competitors to launch a “me. they must be tested. Classification of Products The most common basis for classifying consumer products is based on buyer behavior. or blades and matchboxes. and (4) Unsought products. The classification is based on differences in the buying behavior of the people who buy the prod. It gives you a brief description of consumer goods. The amount of test marketing varies with the type of product. See Figure 10. First. Three subclasses are: . Hence.too” product or even sabotage the testing so that the marketer gets skewed results.1.ucts (it is basically how you perceive and buy the products) not on the differences in the products themselves. at times. When the prototypes are ready. These are bought frequently but consumers rarely shop actively for them because they are low value items whose price and quality do not justify active involvement. This depends a lot on the ability of the company to bear risk and the reach of its distribution network. management may decide to do away with this stage and proceed straight to the next one: If the company goes ahead with commercialization . the next step is test marketing: the stage at which the product and the marketing program are introduced to a more realistic market settings.fledged workable product. They are basically low-priced. The system works because many consumers behave alike in buying a given type of product. nationally advertised items like cigarettes.Here. R&D will develop prototypes that will satisfy and excite customers and that can be produced quickly and at budgeted costs. Test Marketing .
. and so on. Marketers try to create specialty status for their products with advertising phrases like “accept no substitutes”. cost and effort to compare because they perceive a higher risk in buying these products. One might set up service centers to differentiate its product from rivals. A retailer might advertise that the Color TV’s price includes 6 months or free interest financing.standardized.Heterogeneous Shopping Products they are product that are considered to be unlike or non. They build customer loyalty when consumers consider their brands to be specialty products. The decision to buy these products is programmed after the first time when the consumer puts them on his list of regular items. they probably will lease it.Ban glasses. 1. Staple Products: this includes milk. Price often is secondary to style and quality when price comparisons are difficult to make. jewellery. Consumers who want to stretch their disposable incomes are more likely to consider a product as a homogeneous shopping product than as a convenience product. Shoppers spend more time. distance from stations and so on. bread. 2. eggs. Mitsubishi Lancers. “‘insist on the real thing”. This is why impulse products are located where they can be easily noticed. Leica Cameras and Johnny Walker Scotch Whisky are examples. The desire to buy staple products may cause the consumer to go shopping. cars.Impulse Products: Purchases of Impulse products are absolutely unplanned exposure to the product triggers the want. style. There is no Comparison Shopping. Just suppose you want to buy a colour television. Shopping Shopping Products These products involve price and quality comparisons.Homogeneous Shopping Products: they are products. toffees and chocolates (placed at a child’s eye-level) are examples of impulse products. Just suppose a couple is searching for a flat may spend a lot of time comparing decor. For these products consumers have strong convictions as to brand. furniture and apartments is tough because quality and style vary within each product class. you are aware that most of the brands are very similar then you will limit your shopping effort to price comparisons. Ray. Once they find the right one. or type. Example of this would be hotels permit shops vending toothbrushes and shaving blades set up in their lobbies to cater to travelers who have forgotten theirs at home. butter which are bought routinely because the family regularly consumes them. Specialty Special Products In this case you as a consumers will make a special effort to buy specialty products. If the rent is reasonable compared to the alternatives. The desire to buy impulse is a result of the shopping trip. Consumers shop for the best price quality combination. Consumers will go out of their way to locate and buy these products because they perceive quality and other benefits in owning them. Lawyers and Accountants who enjoy a large following are selling specialty products. Shopping products can be homogeneous or heterogeneous. price becomes important. 2. But most of the time you will find that the manufacturers may also stress upon on the differences on the basis of design and try to distinguish between the physical product and its product related services.1. 3. Often a consumer pays more than if this need had been anticipated. floor plans.Emergency Products: Purchases of emergency products result from urgent and compelling needs. which are considered to be alike. Thus sellers tend to engage in price competition. Doctors. Stardust and Savvy magazines. But specialty product can be less intensively distributed than a convenience or shopping product because buyers will search to find it. Using price to compare clothing.
There are two types: regularly unsought products and new unsought products. guarantee a certain level of quality and allow for self-expres. „ Product item—a single product „ Product line—all items of the same type „ Product mix—total group of products that an organization markets It is basically a group of products that are related because of customer. The marketer’s task here is to inform target consumers of the products existence and stimulate demand for it. Lux. Like Life Insurance. Rin. a lawyer’s services in contesting a will. i. Rexona. a wreath and a doctor’s services in an emergency are regularly unsought products. i.e. Rin Solarox. Chicago). • Brand mark-elements of the brand that cannot not be spoken. A brand differentiates these products from those of competitors” (American Marketing Association. Oral polio vaccine was once a new unsought product. and Surf Ultra are part of Lever’s detergents line and Le Sancy. But heavy promotion and acceptance of the product practically eradicated polio. sign. Marketers face a tough challenge in persuading consumers to buy their new unsought products. growing. Surf.symbol . maturing and declining productst. BRANDING .e. Lifebuoy. words and numbers. 7UP. including letters. marketing and or production considerations. • Brand name is that part that can be spoken. term. symbol or special design or some combination of these elements that is intended to identify the goods or services of one seller or a group of sellers. A brand is defined: “As a name. although they may eventually purchase them. When we are discussing about a typical large multi-product firm’s product mix includes new. PRODUCT AND PRODUCT MIX Any organization is marketing more than one product then it has a product mix. Brand names simplify shopping.Unsought Unsought Products They are products which are present in the market but the potential buyers do not know that such product exist or there can be a possibility that the buyer don’t want it. Wheel. are part of its soaps line. These are basically existing products but the consumers do not want to buy this product now.sion. Rin detergent powder.
Sometimes a brand may take on the personality of an actual person. Coke is an icon of American culture. which govern a producer. legal and medical advice.e. entertainment and fulfillment of other psychological and emotional needs such as education. A change in condition may occur and production of the service may or may not be closely associated with a physical product. Culture: A brand also represents a certain culture.515 new in that year. Charlie Chaplin and Cherry Blossom. These users correspond to the values. fair price and so on. are reflected by the brand. “services are those separately identifiable. what would come to our mind? Like Videocon suggests a lion. marketing. • Trade name-The full legal name of the organization. culture and personality of the brand. SERVICE MAREKTING A service is an activity which has some element of intangibility associated with it. and that are not necessarily tied to the sale of a product or another service. Pillsbury Doughboy • Trade mark-legal designation that the owner has exclusive rights to the brand or part of a brand. Had the brand been an animal or an object or a person. We expect a Mercedes to be driven by an executive or a top-class businessman.. Then there are services which are provided by professionals but consumed for reasons not of business. Ronald McDonald. Because of the imagery associated with the brands they actually have the power to enhance or limit a consumer’s perceived image or selfimage.e. e. I. Ford. 56. which involves some interaction with customer or with property in their possession.g. computer-programming. Attributes of Brand Values: The values. We know what a Garden Woman is. rather for leisure. US Patent & Trademark Office had 680. fine arts. thus Tata stand for quality. We know that Sunny is for teenagers. not the name for a specific product. MRF suggests a muscle man and Rin suggests a lighting flash. recreation. banking. etc.000 trademarks registered. There are the business and professional services such as advertising. It includes a wide variety of services. insurance. and does not result in a transfer of ownership.sentially intangible activities which provide want-satisfaction. es.” . User: The brand suggests its own target audience.. e. W. research.• Trade Character i.g. while Shilpa Bindis are typically Indian. Personality: A brand projects a personality.J Stanton “Services as fulfilling certain wants and states that.1990.
Characteristics of services.The most basic and universally cited. stored. the beautician has to be available to perform the massage Perishability . Intangibility actually presents several marketing challenges: Services cannot be inventoried. touched or seen in the same way as goods.turned. unsold seats in a cinema hall represent service capacity. an hour of a lawyer’s time. A car mechanic who has no cars to repair today. or spare berths on a train. difference between goods and services is intangibility. resold. Services cannot be felt. . A plumber has to be physically present to provide the service. Teaching is an intangible service. Inseparability . but little demand in July. For example. A person who possesses a particular skill provides Service. and new service concepts can therefore easily be copied by competitors. Services cannot be patented legally. Because services are perform In most cases services cannot be separated from the person or firm providing it. there is tremendous demand for resort accommodations in XYZ in February.It basically refers to the fact that services cannot be saved. which is lost forever. 1. A seat on an airplane or in a restaurant. or re. tasted. and therefore fluctuations in demand are often difficult to manage. Yet resort owners have the same number of rooms to sell Yetround. or telephone line capacity not used cannot be reclaimed and used or resold at a later time.
Apart from the fact that service is not fully utilised represents a total loss. There is a peak demand time for buses in morning and evening (office hours). the other dimension of this. . or even re-turned if the consumer is unhappy. certain train routes are always more heavily booked than others. This is in contrast to goods that can be stored in inventory or resold another day.
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