MARKETING MANAGEMENT Introduction Welcome to the wonderful world of marketing!

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

1990’s…………….??????????

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.

Emphasis on consumer needs wants 2. All departments of the business integrated manner. Different departments work as in a highly separate water tight compartments 9. on providing better costs value to the customer by adopting a superior technology 8. Emphasis on staying with existing technology and reducing costs 8. Management is profit oriented 4. Planning is short-run-oriented in terms of today’s products and markets 5. . Consumer determine price. Management is sales volume oriented 4. Marketing views the customer last link in business as the very purpose of the business Defining Customer Value and Satisfaction: of new products. Views business as consumer producing process satisfying process 7. Company first determines customers needs and wants and then decides out how to deliver a product to satisfy these wants 3. Planning is long-run-oriented in today’s products and terms tomorrow’s markets and future growth 5. Stresses needs of seller 6. Stresses needs and wants of buyers 6. Cost determines Price 10. price determines cost 10. Selling views customer as a last link in business Marketing 1. Views business as a good producing process 7. Company Manufactures the product first 3.Selling 1. the sole purpose being generation of consumer satisfaction 9. Emphasis on innovation on every existing technology and reducing every sphere. Emphasis is on the product 2.

and long warranty period. other benefits include a long-lasting car. It is a subjective exercise but very important for marketer’s point of view. it won’t attract enough buyers ( although it will satisfy those who do buy) If marketers raise expectations too high. Origin of the 7-S Framework. Large or small. the buyer is likely to be disappointed. Managers take into account all seven of these factors. The Seven S model was born at a meeting of these four authors in 1978. Total customer cost is the bundle of costs customers expect to incur in evaluating. According to Michael Lanning. like thermometer for temperature. if the company sets expectations too low. in his Delivering profitable value. It appeared also in "In Search of Excellence" by Peters and Waterman. For example. if the company sets expectations too low. Measuring Satisfaction There are no meters to measure it. . the buyer is likely to be disappointed. to be sure of successful implementation of a strategy. History The 7-S Framework was first mentioned in "The Art Of Japanese Management" by Richard Pascale and Anthony Athos in 1981.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. Volvo’s core positioning is“safety. func. 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. and psychological benefits customers expect from a given market offering. the results may be lower profits. backed by a superior value-de. However. The value-delivery system includes all the experiences the customer will have on the way to obtaining and using the offering. and was taken up as a basic tool by the global management consultancy company McKinsey. that is not its main goal. Total customer value is the perceived monetary value of the bundle or economic. However. using. and advertisements. If marketers raise expectations too high. Since then it is known as their 7-S model.11 The value proposition consists of the whole cluster of benefits the company promises to deliver.tional. 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.” but the buyer is promised more than just a safe car. If the company increases customer satisfaction by lowering its price or increasing its services . They had been investigating how Japanese industry had been so successful. At around the same time that Tom Peters and Robert Waterman were exploring what made a company excellent. obtaining . . Customer Expectation: It is formed on the basis of past buying experiences. it is more than the core positioning of the offering. Together these factors determine the way in which a corporation operates. good service. a company must design a competitively superior value proposition aimed at a specific market segment.livery system. Although the customer-centered firm seeks to create high customer satisfaction. and disposing of the given marketing officering. advice.

Structure The way in which the organization's units relate to each other: centralized. a matrix. Style Cultural style of the organization and how key managers behave in achieving the organization's goals. promotion and performance appraisal systems. Strengths of the 7-S Model. 6. to reach identified goals.The meaning of the 7 S 1. a holding. . over time. Environment. functional divisions (top-down). Strategy Plans for the allocation of a firms scarce resources. Benefits • • • • Diagnostic tool for understanding organizations that are ineffective. Shared Values (also called Superordinate Goals). Systems The procedures. The interconnecting center of McKinsey's model is: Shared Values. 3. 5. Guides organizational change. Managers must act on all Ss in parallel and all Ss are interrelated. Staff Numbers and types of personnel within the organization. What does the organization stands for and what it believes in. customers. Skills Distinctive capabilities of personnel or of the organization as a whole. Compare: Strategic Intent 2. information systems. processes and routines that characterize how the work should be done: financial systems. Compare: Management Styles. competition. a network. Value Chain Michael Porter of Harvard proposed the value chain as a tool for identifying ways to create more customer value. recruiting. etc. decentralized. 4. 7. Combines rational and hard elements with emotional and soft elements. Central beliefs and attitudes. 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.

legal. overhead) • • Procurement. including: channel selection. • Marketing and Sales. Includes receiving. assembly. Procurement of raw materials. Process automation. Inbound Logistics. Includes machining. Firm Infrastructure. advertising. planning management. distribution management. etc. pricing. 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. quality management. Includes technology development to support the value chain activities. Outbound Logistics. etc. The activities associated with getting buyers to purchase the product. spare parts. Such as: Research and Development. . • Operations. Technology Development. or • by reconfiguring the value chain. packaging. finance. training. retention and compensation of employees and managers. 2. The activities required to get the finished product at the customers: warehousing. public affairs. repair services. The activities that maintain and enhance the product's value. Support activities (Staff functions. promotion. including: customer support. Includes general management. Service. Human Resource Management. etc • • Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Operations Outbound Marketing Service Logistics Logistics and Sales . redesign. upgrading.The activities of the Value Chain Primary activities (line function) 1. equipment maintenance. servicing. inventory control. testing and all other value-creating activities that transform the inputs into the final product. transportation. The activities associated with recruiting. etc. buildings. selling. storing. development (education). machines. design. retail management. transportation planning. accounting. spare parts management. order fulfillment. installation. • 3.

3. "Reconfiguration" means structural changes such as: a new production process. ( General Electric. Proactive marketing: The company works continuously with its large customers to help improve their performance. The sales. 2. Linkages among activities. 3. and points them all in the same direction. the higher the customer equity. A firm develops a cost advantage by controlling these drivers better than its competitors do. a cost analysis can be performed by assigning costs to the value chain activities. Strategic Planning A strategic business plan describes the overall direction an organization will pursue within its environment and also guides the allocation of re. 4. Timing of market entry. Degree of vertical integration. A marketing plan is carried out within the context of a firm’s broader strategic business plan. has stationed engineers at large utilities to help them produce more power. Interrelationships among business units. Accountable marketing: The salesperson phones the customer to check whether the product is meeting expectations.person also asks the customer for any product – or service – improvement suggestions and any specific disappointments. or a different sales approach. A cost advantage also can be pursued by "Reconfiguring" the value chain. 4. Clearly. It provides the logic that integrates the perspectives of functional departments and operating units. which is responsible. 7. union activity.sources. and how they will be coordinated. 2. new distribution channels. Economies of scale. it makes decisions on the amount of resources to be allocated to each division. Firm's policy of cost or differentiation. 5. • The Corporate Level. A strategic marketing plan outlines the actions necessary. 8.corporate headquarters is responsible for designing a corporate strategic plan to guide the whole enterprise. as well as on which businesses to start or eliminate.). Reactive marketing: The salesperson sells the product and encourages the customer to call if the or the has questions. Basic marketing: The salesperson simply sells the product. Customer equity is the total of the discounted life. taxes.A cost advantage can be created by reducing the costs of the primary activities. In most large corporations. Geographic location. . comments.time values of all of the firm’s customers. but also by reducing the costs of the support activities. etc. Capacity utilization. 6. for example. the more loyal the customers. Learning. Institutional factors (regulation. 1. 9. when and where they will be completed. Recently there have been many companies that achieved a cost advantage by the clever use of Information Technology. or complains. Customer Relationship Management The aim of customer relationship management (CRM) is to produce high customer equity. Porter identified 10 cost drivers related to value chain activities: 1. Dfferent levels of customers who have strong profit potential. Once the value chain has been defined. strategic planning takes place at four levels. 10.

It is based on product life cycle theory. Because of the low growth. Advertising. investments which are needed should be low. • Stars are frequently roughly in balance on net cash flow. Public Relations. low market share) • Avoid and minimize the number of Dogs in a company. Market Intelligence. . 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. The Boston Consulting Group Matrix has 2 dimensions: market share and market growth. However if needed any attempt should be made to hold your market share in Stars. etc. • Watch out for expensive ‘rescue plans’. brand within the business unit develops a market. To ensure long-term value creation.ing plan for achieving its objectives in its product market.• The Division Level. • • BOSTON CONSULTING GROUP MODEL The BCG Matrix method is the most well-known portfolio management tool. or if the product's market grows faster. Therefore they should also generate large amounts of cash.each business unit develops a strategic plan to carry that business unit into a profitable future. it is better for the company. It was developed in the early 70s by the Boston Consulting Group. Stars are leaders in the business.each product line. Promotions. high market share) • Profits and cash generation should be high. The units in the marketing division would be Sales. 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. Cash Cows (low growth. because the rewards will be Cash Cows if market share is kept. For example the marketing division would formulate strategies as to how the various units within it would work.each division establishes a division plan covering the allocation of funds to each business unit within the division. The BCG Matrix can be used to determine what priorities should be given in the product portfolio of a business unit. • Cash Cows are often the stars of yesterday and they are the foundation of a company. Eg. high market share) • Stars are using large amounts of cash. The basic idea behind it is: if a product has a bigger market share. Dogs (low growth. The Business Level. The Product Level.

High market share is not the only success factor.• Dogs must deliver cash. it should be able to manufacture and sell new products at a price that is low enough to get early market share leadership. Either these SBUs should receive enough investment funds to enable them to achieve a real market dominance and become Cash Cows (or Stars). • BCG model is helpful for managers to evaluate balance in the firm’s current portfolio of Stars. There is no clear definition of what constitutes a "market". Even worse. • The model is simple and easy to understand. or sell off. In this way they can never become Cash Cows. Question Marks will simply absorb great amounts of cash.5% for an entire corporation. because they have high cash demands and generate low returns. A high market share does not necessarily lead to profitability all the time. or invest nothing and generate any cash that you can. now and then investments are made. Limitations of the BCG Matrix Some limitations of the Boston Consulting Group Matrix include: • • • • • • • • • • It neglects the effects of synergy between business units. The problems of getting data on the market share and market growth. Sometimes Dogs can earn even more cash as Cash Cows. A business with a low market share can be profitable too. As a result all Question Marks and Stars receive only mediocre investment funds. • It provides a base for management to decide and prepare for future actions. 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. Dogs Business Units are fighting an impossible battle and. such as a generic growth target (9 percent per year) or a generic return on capital of say 9. or otherwise companies are advised to disinvest. low market share) • Question Marks have the worst cash characteristics of all. • Either invest heavily. This may tempt management to emphasize a particular product. The executives are often praised anyhow. Question Marks (high growth. Market growth is not the only indicator for attractiveness of a market. Once it becomes a star. Cash Cows. Increase market share or deliver cash. The model uses only two dimensions – market share and growth rate. even worse. • If the market share remains unchanged. • BCG method is applicable to large companies that seek volume and experience effects. They can then try to get any possible cash from the Question Marks that were not selected. Their management have an easy job. because of their low market share. Question Marks and Dogs. it is destined to be profitable. otherwise they must be liquidated. Other uses and benefits of the BCG Matrix • If a company is able to use the experience curve to its advantage. These are hopeless attempts to "turn the business around". These inadequate invested sums of money are a waste of money. The model neglects small competitors that have fast growing market shares . In such a scenario: • • • Cash Cows Business Units will reach their profit target easily. they are often allowed to reinvest substantial cash amounts in their mature businesses. or to divest prematurely.

BUSINESS STRENGTH • Market share • Share growth • Product quality • Brand reputation • Distribution network • Promotional effectiveness • Productive capacity • Productive efficiency • Unit costs • Material supplies AND BUSINESS . A position in the yellow zone is viewed as having medium attractiveness. If additional factors are considered. 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. Organisation must therefore exercise caution when making additional investments in this product/service. the growth-share matrix can be seen as a special case of a multifactor portfolio matrix such as that pioneered by General Electric. If the enterprise falls in this zone the business is in a favorable position with relatively attractive growth opportunities. The blocks with a Diagonal Zone consists of the three cells in the lower right corner. 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 . Neither a strong company operating in an unattractive market nor a weak company operating in an attractive market will do very well. The blocks with plain Zone consists of the three diagonal cells from the lower left to the upper right. The suggested strategy is that management should begin to make plans to exit the industry. The nine cells are grouped into three zones: The block with the Lateral Zone consists of the three cells in the upper left corner. The suggested strategy is to seek to maintain share rather than growing or reducing share. FACTORS UNDERLYING MARKET ATTRACTIVENESS STRENGTH IN GE MULTIFACTOR PORTFOLIO MODEL 1 . yielding nine cells. 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. the business will not produce outstanding results. 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 GENERAL ELECTRIC MODEL An SBU’s appropriate objective cannot be determined solely by its position in the growth-share matrix. A position in the red zone is not attractive. The above two factors make excellent marketing sense for rating a business. If one of these factors is missing. Both axes are divided into three segments. This indicates a “green light” to invest in this product/service.

Marketing contributes to assessing each SBU’s sales and profit potential. The three cells in the upper left corner indicate strong SBUs in which the company should invest or grow. Management should also forecast each SBU’s expected position in the next three to five years given the current strategy. new technologies. economic events. marketing’job is to carry out the plan efficiently and profitably. recognize what factors affect performance. question marks. The major strengths of the approaches are that they allow a firm to do the following: . 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. Making this determination involves analyzing where each product is in its product life cycle as well as expected competitor strategies.• • R & D performance Mangerial personnel STRATEGIES The GE matrix is divided into nine cells. The three cells in the lower-right corner indicate SBUs that are low in overall attractiveness. Rather. and realize they can target broad or narrow customer bases. 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. Thus. The diagonal cells stretching from the lower left to the upper right indicate SBUs that are medium in overall attractiveness. but once the SBU’s objective and budget are set. etc. and dogs. understand their industries. Evaluation of Strategic Planning Approaches Many firms assess alternative market opportunities. cash cows. know which products are stars.

• Study competitors’ actions and trends.• Analyze each of its SBUs and products. • Focus on meaningful differential advantages. • They may be too simplistic and omit key factors. Current Products Current Markets New Products New Markets . The approaches have these weaknesses: • They may be difficult to implement. 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 are arbitrary in defining SBUs and evaluative criteria. and diversification.uct development. prod. market development. • Study various strategy effects. • They may not adequately consider environmental factors. firm. • Discover principles for improving performance. • Compare performance with designated goals. • They are often used by staff planners rather than line managers. 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. • Compute marketing and other resources needs. See accompanying figure. • They may not be applicable to all firms and situations. • These techniques only aid planning. • Learn the opportunities to pursue and which threats to avoid. • They may overvalue market share. and SBUs.

In that case. The products may be new to the industry or to the company. and competitive pricing. In market development. 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. and use new distribution methods. Horizontal Diversification Strategy. Still. 2. 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. a firm seeks greater sales of present products from new markets or new product uses. Distribution and promotion orientations are different from those traditionally used by the firm. • . INTEGRATIVE GROWTH – Often a business’s sales and profits can be increased through backward. Finally if the company decides to acquire one or more competitors. these new sources may still not deliver the desired sales volume. Ansoff model propounded by Igor Ansoff is a useful framework for detecting new intensive growth opportunities called a “Product-Market Expansion Grid”. management must also examine integrative growth opportunities. a firm seeks to expand the sales of its present products in its present markets through more intensive distribution. management may discover several ways to grow. aggressive promotion. In diversification. the company goes for diversification. forward or horizontal integration within the industry. better quality. and other minor innovations and markets them to loyal consumers. It might acquire some wholesalers or retailers.• In market penetration. It emphasizes new models. 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. INTENSIVE GROWTH. that growth may not be enough. In that case company must consider diversification. a firm becomes involved with new products aimed at new markets. Then it considers whether it can develop new products of potential interest to its current markets(productdevelopment strategy). even though the new product themselves may appeal to a different group of customers. By examining these three intensive growth strategies. a firm develops new or modified products to appeal to present markets. In product development. 1.graphic factors. • • • 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).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. Next it considers whether it can find or develop new markets for its current products (market-development strategy). Later it will also review opportunities to develop new products for new markets(diversification strategy). reposition products. But here the company should take care as this involves high risk and the firm might loose focus. 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. However. especially if they are highly profitable(forward integration). They can be either completely new products or existing product extensions. appeal to segments it is not yet satisfying. three strategies have been formulated to overcome this gap. 3.corporate management’s first course of action should be a review of whether any opportunities exist for improving its existing businesses’ performance. This can be either based on demographic or geographic or psycho. It can enter new markets. provided that the government does not bar this move(horizontal integration).

Cost leadership—broad market and low cost position. this investment represents a barrier to entry that many firms may not overcome. Differentiation—large market and unique strategy. 3. gaining unique access to large source of lower cost materials. 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. 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). a focus strategy is available to smaller firms. but must also carefully prune. 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. harvest or divest tired old businesses in order to release needed resources and reduce costs. If competing firms are unable to lower their costs by a similar amount. DOWNSIZING OLDER BUSINESSES. products or markets. Managers should focus on growth opportunities. Cost leadership and differentiation strategies are alternatives for large firms. The following three basic strategies are identified (see Figure): 1. not fritter away energy and re.sources trying to salvage hemorrhaging businesses. Cost Leadership strategy: This generic strategy calls for being the low cost producer in an industry for a given level of quality. 2. Skill in designing products for efficient manufacturing. The cost leadership strategy usually targets a broad market. . Competitive advantage (lower cost or differentiation). 4. the firm may be able to sustain a competitive advantage based on cost leadership. High level of expertise in manufacturing process engineering. Some of the ways by which firms acquire cost advantages are by improving process efficiencies.• Conglomerate Diversification Strategy – the company might seek new businesses that have no relationship to its current technology.companies must not only develop new businesses. making optimal outsourcing and vertical integration decisions or avoiding some costs altogether. Focus—narrow target segment and either low cost position or a unique strategy.

Additionally. The risks associated with differentiation strategy include imitation by competitors and changes in customer tastes. Highly skilled and creative product development team. Information should not be approached in an infrequent manner. Furthermore. firms pursuing a focus strategy have lower volumes and thus less bargaining power with their suppliers. Additionally various firms pursuing focus strategies may be able to achieve even greater differntiation in their market segments. 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. other firms may be able to lower their costs as well. it may be fairly easy for a broad-market cost leader to adapte its product in order to compete directly. Because of their narrow market focus. Corporate reputation for quality and innovation. However. There may be a lack of awareness of environmental changes and competitors’ actions. 2. the competition may be able to leapfrog the production capabilities. A firm using a focus strategy often enjoys a high degree of customer loyalty and this entrenched loyalty discourages other firms from competing directly.• • Efficient distribution channel. Firms that succeed in differntiation strategy often have the following internal strengths: • • • • • Access to leading scientific research. The premise is that the needs of the group can be better serviced by focusing entirely on it. 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. other focusers may be able to carve out sub-segments that they can serve even better. Opportunities may be missed. Some risks of focus strategy include imitation and changes in the target segment. MARKETING INFORMATION SYSTEM A marketing information system (MIS) is a set of procedures and methods designed to generate. firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitutes do not exist. several firms follow. . continuous basis. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product. Finally. If research is done this way. analyze. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. Each generic strategy has its risks. even the low cost strategy.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. For example. As technology improves. and store anticipated marketing decision information on a regular. Strong sales team with the ability to successfully communicate the perceives strengths of the product. Focus Strategy : This strategy focus on narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. a firm could face these risks: 1. thus eliminating the competitive advantage. disseminate.

analyze. Time lags may result if a new study is required. . and store anticipated marketing decision information on a regular. 1. 3. The storage of important data. 3. 8. 2. 5. 6. which contains three components. disseminate. 7. Data warehousing involves the retention of all types of relevant company records. and strategically for several aspects of marketing. managerially.3. A marketing information system (MIS) is a set of procedures and methods designed to generate. as well as the information collected through continuous monitoring and marketing research that is kept by the organization. continuous basis. 4. Marketing research is used to obtain information on particular marketing issues. Data collection may be disjointed. An information system can be used operationally. and strategically for several aspects of marketing. Marketing plans and decisions may not be properly reviewed. An MIS offers many advantages: 1.An information system can be used operationally. Data collection may be difficult to analyze over several time periods. Previous studies may not be stored in an easy to use format. The total information needs of the marketing department can be specified and satisfied via a marketing intelligence network. Actions may be reactionary rather than anticipatory. An avoidance of crises. Organized data collection. 4. 2. A broad perspective. managerially. Continuous monitoring is the procedure by which the changing environment is regularly viewed.

It may be applied to any aspect of marketing that requires information to aid decisionmaking. Marketing research specifies the information required to address these issues. 8. and analysis. An outside party or the firm itself may undertake such research. 2. monitor marketing performance. Several points about marketing research need to be emphasized. Projective techniques 5. Primary research is conducted from scratch. designs the methods for collecting information. refine. services. Product tests 6. MARKET RESEARCH Marketing research is the systematic gathering. Market research and marketing research are often confused. and public to the marketer through information . already exists since it has been collected for other purposes. Focus groups 4. organizations. and improve understanding of marketing as a process. 6. and everything to do with the customers. or a research specialist working for the firm. It not only includes ‘market’ research. The ability to do a cost-benefit analysis. It involves a sequence of tasks: data gathering. recording. an impartial agency. recording. Primary Research There are many was to conduct primary research. Data amassed and kept over several time periods.primary and secondary. generate. 5. Coordinated marketing plans. and communicates the findings and their implications.5. this is a very long and involved definition of marketing research. manages and implements the data collection process. and ideas. It is original and collected to solve the problem in hand. It may get enough data by analyzing internal reports or from informal meetings with customer service personnel. consumer attitude surveys). Mystery shopping 3.information used to identify and define marketing opportunities and problems. Interviews 2. 4.search into a specific market. Secondary research. analyzes. ‘Marketing’ research is much broader. marketing research into the elements of the marketing mix. Sources of Data .Primary and Secondary There are two main sources of data . ‘Market’ research is simply re. Here are a couple of definitions: Marketing research is the function that links the consumer. Speed in obtaining sufficient information to make decisions.. or modes of distribution such as via the Internet. places. Diaries . Data may be available from different sources: the firm itself. It must not be haphazard. and evaluate marketing actions. 7. Marketing research is about researching the whole of a company’s marketing process This explanation is far more straightforward i. We consider some of them: 1. markets. 3. but also areas such as research into new products. people. 1. Research findings and their implications must be communicated to the appropriate decision maker(s) in the firm. Obviously. customer.e. It is a very narrow concept. A firm’s decision to use marketing research does not mean it must engage in expensive projects (test marketing. competitors. also known as desk research. and analyzing of information about specific issues related to the marketing of goods.

• The Internet The Internet can be used in a number of ways to collect primary data. The interviews tend to be very structured and tend to lack depth. The research will probe and develop points of interest. It is ideal for collecting data from a geographically dispersed sample. 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. 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. or free membership. Telephone interviews are cheaper to conduct than face-to-face interviews (on a per person basis). Some surveys are very rigid or ‘structured’ and use closed questions. Data is collected on a survey. Omnibus Studies 1.face. Interviews This is the technique most associated with marketing research. Visitors to sites can be asked to complete electronic questionnaires. not potential customers. Other face-to-face interviews are more ‘in depth.’ and depend upon more open forms of questioning. Other important data is collected when visitors sign up for membership. 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. face-to. Interviews can be telephone. . or over the Internet. Data is easily compared.7. However responses will increase if an incentive is offered such as a free newsletter. • Telephone Interviews Telephone ownership is very common in developed countries. • Some respondents will give biased responses when face-to-face with a researcher.

or years). • Mail Survey In many countries. Observers will contemplate how the product is handled. Products are displayed in a mall of shopping center. the mail survey is the most appropriate way to gather primary data. Potential customers are asked to visit the store and their purchase behavior is observed. the researcher has a reasonable picture of purchasing behavior. 6 Diaries Diaries are used by a number of specially recruited consumers. . such as the Internet and telephones. There are many issues surrounding the ethics of such an approach to research. They are rare. Projective techniques Projective techniques are borrowed from the field of psychology. There are many examples of such approaches including: Inkblot tests . how the packing is read.depends on very quick (subconscious) responses to words Psycho. especially call centers. and so on. opinion. Complex to organize. 3 Focus Groups Focus groups are made up from a number of selected respondents based together in the same room. and beliefs are encouraged. retailing. Groups tend to be made up from 10 to 18 participants. mystery shoppers will enter. 2 Mystery Shopping Companies will set up mystery shopping campaigns on an organizations behalf.look for images in a series of inkblots Cartoons . 5 Product tests Product tests are often completed as part of the ‘test’ marketing process. how much time the consumer spends with the product. Lists are collated. or purchased.• • Needs knowledge of software to set up questionnaires and methods of processing data May deter visitors from your website.drama . warn. Findings are reported back to the commissioning organization. or used. However. and many other customer focused organizations. They will generate highly subjective qualitative data. • Can be very expensive in comparison to other methods 4. months. Mail surveys are less popular with the advent of technologies. travel. However. Often used in banking. and a pre-designed questionnaire is mailed to a sample of respondents. Highly experienced researchers work with the focus group to gather in depth qualitative feedback. posing as real customers.Imagine that you are a product and describe what it is like to be operated. by collecting a series of diaries with a number of entries. and the research will probe into specific areas that are of interest to the company commission in the research.complete the ‘bubbles’ on a cartoon series Sentence or story completion Word association . Mail surveys do not tend to generate more than a 5-10% response rate. Discussion. They collect data on customer service and the customer experience. cafes and restaurants. 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. It demands a substantial commitment on the part of the respondent. a second mailing to prompt or remind respondents tends to improve response rates. They are asked to complete a diary that lists and records their purchasing behavior of a period of time (weeks.

analyzing information. examining secondary data. the attributes that create value cannot simply be deduced from common knowledge. and primary data are not generated until secondary data are thoroughly reviewed. But the perception of value is a subjective one. Rather. Each step is completed in order. . it already exists. For example. Secondary Research Secondary (or desk) research uses data that has been collected for other objectives than your own i. generating primary data (if necessary). As such. THE MARKETING RESEARCH PROCESS The marketing research process consists of a series of activities: defining the issue or problem to be studied. and what customers value this year may be quite different from what they value next year. An omnibus survey could include questions from companies in sectors as diverse as heath care and tobacco. The goal of marketing research is to provide the facts and direction that managers need to make their more important marketing decisions.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. and implementing findings. making recommendations.e. 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. The research is far cheaper. There are a number of such sources available to the marketer. The organization will be one of many that simply want to a straightforward answer to a simple question. secondary data are not examined until a firm states the issue or problem to be studied. Figure below that presents the complete process. data must be collected and analyzed.

Thus. Access to hard-to-obtain data. They may be obtained . EXAMINATION OF SECONDARY DATA A. Undisclosed findings. 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. The use of such scenarios can ensure that the purpose of the research is agreed upon before it commences.The objective of the research should be defined clearly. customer billings. 4. B. Diverse sources. also called quantitative research. inventory records. 6. They include budgets. It is also called qualitative research and may involve in-depth probing.ten reports. 2. Helpful for exploratory research. a decision problem may be whether to launch a new product. the decision problem is translated into a research problem. B. 2. ISSUE (PROBLEM) DEFINITION A. Unknown methodology. Secondary data are those that have been gathered for purposes other than solving the current problem under investigation. Conclusive research. sales figures. 5. and writ. prior research reports. To ensure that the true decision problem is addressed. 6. Exploratory research is undertaken when the researcher is uncertain about the precise topic to investigate or wants to informally study an issue. 2. Sources A. Secondary data have these general disadvantages: Lack of suitability. It is the structured collection and analysis of data pertaining to a specific issue or problem. 3. and understanding underlying trends. Internal secondary data are available within the company. Source credibility. External secondary data are available from sources outside the company. 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. 5. Issue (problem) definition is a statement of the topic to be looked into. profit-and-loss statements. B. 1. C. For example. Unknown reliability. B. These data should always be reviewed before primary data collection. Low costs. Obsolescence. Conflicting results. small group discussions. 4. Advantages and Disadvantages A. 3. Secondary data have these general advantages: 1. Speed. The corresponding research problem might be to assess whether the market would accept the new product . is used after the problem definition is clarified.

Nielsen. B. Company limitations. Who or what should be studied? This is defined as the population. sampling is usually employed. a. Controlled and known methodology. High costs. GENERATION OF PRIMARY DATA A. and other non-regular publications deal with special topics in depth and are compiled on the basis of interest by a target audience. 3. Inability to gather certain types of information. 5. 4. Commercial research houses (such as A. It consists of these eight steps: 1. 2. Books. 2. With a non-probability sample. With a probability sample. 3. Primary data have these general disadvantages: Time consuming. 6. 4. 3. There are three sources of non-government secondary data: a. Only way to acquire information in some cases. The way in which people or objects are selected must be decided. 5. Advantages and Disadvantages A. B. Primary data consist of information gathered to address a specific issue or problem at hand. Precision. Research Design A. What information should be collected? It can be exploratory or conclusive in nature. b.search) conduct periodic and ongoing studies and make results available to many clients for a fee. They are necessary if secondary data are insufficient for a proper marketing decision to be made. 1. c. monographs. Secrecy. 7. and Burke Marketing Re. 2. Sampling enables the firm to analyze selected people or objects. 1. B. Currency.C. Regular publications can be broad in scope (such as Business Week) or more specialized (such as the Journal of Advertising). No conflicting data. 3. members of the population are chosen on .from government and non-government sources. For large and/or dispersed populations. A research design outlines the procedures for collecting and analyzing data. IMS Health. every member of the designated population has an equal or known chance of being selected. Who collects the data? Data can be collected by the firm itself or by an outside company. Limited perspective. Primary data have these general advantages: 1. Reliability determined.

Figure 4-11 shows recommendations flowing from completed research. Data are collected. How will the data be collected? Data collection can be administered by research personnel or be self-administered. The semantic differential is a list of bipolar (opposite) adjective scales that provides an overall profile b. It can be conducted in person. all others remain constant. interviewers record answers. How much will the study cost? Costs may include executive time. Coding—the process by which each completed data form is numbered and response categories are labeled. 6. B. and marketing expenses (such as ads). It may be human or mechanical.administered questionnaires. Those engaged in data collection must be properly supervised and follow directions exactly. C. d. computer usage. Table 4-2 shows the best uses for each kind of primary data collection. Tabulation—the calculation of summary data for each response category. A survey gathers information from respondents by communicating with them.the basis of convenience or judgment. Data Collection A. Just the factor under study is varied. respondents write their answers. Benefits and costs must be compared. RECOMMENDATIONS A. 4.trolled conditions. An experiment is a type of research in which one or more factors are manipulated under con. 8. . ANALYSIS OF DATA A. With self. Simulation is a computer-based method to test the potential effects of various marketing factors via a software program rather than real-world applications. the location of data collection must be outlined. special equipment. supplies. Data analysis consists of the following: 1. C. B. pre-testing. 2. researcher time. 5. interviewers. 4. When and where should information be collected? The day and time must be set. printing. Recommendations are suggestions for a firm’s future actions. In addition. How long will the data-collection period be? The total time frame is specified. based on marketing research findings. Observation is a research method whereby present behavior or the results of past behavior are observed and noted. 2. c. Analysis—the evaluation of responses as they pertain to the specific issue or problem under investigation. It can be disguised or non disguised. postage or phone expenses. respondents’ incentives (if any). or by phone or mail. With administered questionnaires. support staff time. The report must be written for the audience that reads it. e. 5. 7. What technique of data collection should be used? a. Responses or observations must be entered correctly.

6.cussed in more detail later. 6. IMPLEMENTATION OF FINDINGS A. Never conduct research for things that you would ‘like’ to know. Make sure that you really ‘need’ to know something. Select a sampling method. the research report should be warehoused in the marketing intelligence network. 7. Conduct the analysis of the data. or analytic mistakes.-based) account for $8 billion in yearly revenues. They have confidence that results are accurate. and hopefully lead to a solution to your problem. Check for errors. They have broad control over marketing decisions. 10. Do we us a random sample. How will you collect the data that you will analyze to solve your problem? Do we conduct a telephone survey. According to the American Marketing Association.D. Go ahead and collect the data. An example of one follows: 1. Scope of marketing research A. then move on to step seven.and institutionsponsored research. 9. Marketing managers are most likely to implement research findings under these conditions: 1. or cluster sample? 4. who are responsible for using findings. data collection method. stratified sample. with more than 1. 8. How will we analyze any data collected? What software will we use? What degree of accuracy is required? 5. Decide upon a budget and a timeframe. Companies spend about $12 billion worldwide (40 percent in the United States) for data gathered by marketing research firms. Once the recommendations are passed on to the proper decision makers. B. and diagrams that will communicate the results of the research. 3. Make sure that you agree on the problem! If you gain approval. 3.nies themselves. the topical areas in which . why are sales falling in New Zealand? 2. B. For example. It is not uncommon to find errors in sampling.S. This will contain charts. Summary of the Marketing research Process – Marketing research is gathered using a systematic approach.000 firms accounting for the rest. Define the problem. 2. as well as efforts of the compa. The problem then becomes the focus of the research. They have input into the research design.Write your final report. This is in addition to government. Watch out for errors in interpretation. The top 25-research firms (nearly half of which are U. tables. or do we arrange a focus group? The methods of data collection will be dis. The research report represents feedback to marketing managers. Go back and speak to the managers or clients requesting the research.

market-share analyses. Due to technological advances. 8. Five marketing research trends are the rapid increase in customer satisfaction studies. international marketing research is taking on greater importance. 2. c. ethical considerations. To turn the situation around. Selling or fund raising under the guise of research. companies tend to spend about 1 percent of revenue on marketing research. b. using search engines. Customer satisfaction research is being sponsored much more than ever before. C. Yet. and accessing online annual reports and trade publications. and concept development and testing. Unrealized promises of anonymity. 6. B. Misrepresenting research projects.companies are most likely to engage in or sponsor research efforts are industry/market characteristics and trends. G. many potential respondents are “turned off” to participating in marketing research projects. With more and more firms striving to expand their foreign endeavors. and the application of single-source data collection. the use of the Internet. with many firms doing their own studies and others hiring outside specialists. purchase intentions.5 million in 1996 to $255 million in 2000. The extent of such research has more than doubled in recent years. a lot of Americans will not answer a survey. Over the last few years. 5. On average. False sponsor identification. Many businesspeople start their research by checking out competitors’ Web sites. 2. these practices need to be avoided: 1. 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. In fact. Misportraying research findings in ads and other communications. designing and . Due to unethical practices of some firms. Marketing Info offers The Marketplace. 3. 7. 4. Asking overly personal questions. Observational studies without informed consent. and the complexities of international marketing research. brand awareness and preference. Firms deciding how to market to the hundreds of millions of consumers in Eastern Europe and Central Asia increasingly do market research there. product satisfaction. F. an easy-to-use exchange for purchasers and providers of market research and related marketing services. Planet Feedback enables consumers to send their feedback to companies quickly and effortlessly. C. a. segmentation studies. 1. Selling consumer demographic information for database use without consent. Here are examples of how the research is being used. spending for online marketing research has grown from $3.

Secondary data from government agencies and trade associations may be lacking. may be below Western standards. Many times. 3. 4 Kodak is provided as an example of a company that had difficulty conducting market research in nine former Soviet republics. especially phone services. 1. Communications systems. people have never been surveyed before.conducting research is hard. . 2.

income. Marketers are always trying to spot “cultural shifts” which might point to new products that might be wanted by customers or to increased demand. social class is not just determined by income. For example. the official six social classes in the UK are widely used to profile and predict different customer behavior. Growing up. education. is influenced not only by psychological factors. For example. It is measured as a combination of occupation. several individuals may interact to influence the purchase decision. wealth and other variables Social factors: A customer’s buying behavior is also influenced by social factors. In a group. 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.Consumer Behavior Factors affecting consumer behavior Each of these factors is discussed in more detail in the following sections on buyer behavior. the “youth culture” or “club culture” has quite distinct values and buying characteristics from the much older “gray generation” Similarly.workers are examples of primary . The typical roles in such a group decision can be summarized as follows: Reference groups As a consumer. Each culture contains “sub-cultures” – groups of people with share values. Sometimes a sub-culture will create a substantial and distinctive market segment of its own. differences in social class can create customer groups. colleagues and co. close friends.nesses such as telephone banking and insurance. but also by the people around the customer with whom he interact and the various social groups to which you belong. 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. personality and lifestyle. family. 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. In the UK’s socioeconomic classification scheme. racial groups. children learn basic values. Sub-cultures can include nationalities. In fact. or groups of people sharing the same geographical location. religions. Culture is the most basic cause of a person’s wants and behavior. such as the groups to which the customer belongs and social status. neighbors. perception and wants from the family and other important groups. ready meals and direct marketing service busi. Cultural factors: Cultural factors have a significant impact on customer behavior.

Labor unions. such as film stars. II) Formal and informal groups: Rotary. TV stars. Meeting your neighbors over lunch once a month for friendly exchange of news is an instance of an informal group. textiles ( Dinesh . an informal group is loosely defined and may have no specified roles and goals. 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.groups. is an important of all these groups and we shall discuss it in detail. Jaycees are some of the well – known social groups in our society. iii) Formal social groups. The family. A symbolic group is one which an individual aspires to belong to. informal and small groups exert the maximum influence on consumers and are of great interest for marketers. The family. 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. Soft drink (Thums up). Graviera) are advertised using celebrities from the sports and film fields. as I unit. politicians. lawyer. Another reference group appeal is that which uses the testimonials of a satisfied customer. Experts such as doctors. Indirect reference groups comprise those individuals or groups with whom an individual dews not have any direct face to face contact. It is a source of major influence on the individual members’ buying behavior. b) Experts. accountants and authors are used for establishing the benefits of the product. Film stars and sports heroes are the most popular celebrities. as a unit. All workers in a factory qualify for membership to the labor union. Direct reference groups. Colgate and Forhans tooth. attitudes and behavior. v) Consumer action groups. is an important consumer for many products which are purchased for consumption by all family members. III) Membership and symbolic groups: A membership group is one to which a person belongs or qualifies for membership. Different kinds of groups. We can identify two families which shape an . sportsman. The three types of reference groups appeals most commonly used are: a) Celebrities. whether small or large.pastes are examples of products. Secondary groups are those with which an individual interacts only occasionally and does not consider their opinion very important. formal or reference group is a very wide one and includes both direct and indirect or group influences. Reference groups are used in advertising to appeal to different market segments. There are i) The family ii) Friendship groups. 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. In contrast. which exert a significant influence on consumer’s. Hidden in this appeal is the subtle inducement to the customer to identify himself with the user the product in question. Primary. iv) Formal shopping groups. vi) Work groups. purchase decisions and behavior can be classified into six categories. lions. shaving cream (Palmolive). group situation with which potential customers can identify are used to promote products and services. A formal group has a highly defined structure. which use the expert reference groups appeal for promotion. but is not likely to be received as a member. It demonstrates to the prospective customer that demonstrates just like him uses and is satisfied with the product. specific roles and authority positions and specific goals. toilet soaps (Lux) . social clubs and societies are other types of formal groups to which individuals may belong. Family: The family is the most important of all these groups and we shall discuss it in detail.

personal computers. rather than going to Mussoorie or Ooty. 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. experience. In our country. However. He may go to Europe or U. interest and opinions.S. while the husband played a dominant role in the purchased of automobiles and life insurance. Children are also beginning to exert their influence on the family’s purchase decisions. Group norms: Are the norms of a group are the implicit rules of conduct and behavior that are expected of its member. records. Roles: An individual may participate in many groups. Marketers often define their target market in terms of the consumers present lifecycle stage. The managing director of a company may drive a Mercedes to communicate his status in society. the same decision. Thus. which is the relative prestige accorded by society. not with standing the terrible heat condition. Long after an individual has ceased to live with his parents. Personal Factors: Age and Life cycle Stage:Like the social class the human life cycle can have a significant impact on consumer behaviour. and when in your work situation you play that role. clothing and other household sundries.People buy and use products that reflect their status. The profession or the occupation a person is in again has an impact on the products they consume. There is a method of measuring a consumer’s lifestyle. It is a person’s mode of living as identified by his or her activities. Status: Each role that a person plays has status. Life Style: Our life styles are reflected in our personalities and self-concepts. The life cycle is an orderly series of stages in which consumer attitude and behavioural tendencies evolve and occur because of developing maturity. stereo music systems. brothers and sisters. beliefs and purchase behavior patterns. This method is called as the psychographics-which is . where the children are likely to have more updated information about various brands and product attributes. 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. But with the emergence of the working-women. etc. they can successfully market those products and services whose consumption is dictated by the group norms. or both may have an equal voice. It is from parents that we imbibe most of our values. in certain multinational companies in India. different member play different roles. same is the case with any consumer. Status is often measured by the degree of influence an individual exerts in the behavior and attitude of others. The concept of lifecycle as applied to marketing will be discussed in more details. the norm for office wear includes a full – sleeved shirt and tie. accessories and possessions. If marketers can identify the various groups to which potential consumers belong. where children continue to live with parents even after attain adulthood. at home you play the role of spouse and parent. for a holiday. Within the family. For instance. The status of a person is projected through various symbols like the dress. in different families may be made either by the husband or wife. The second type of family is the family of procreation consisting of the consumer’s spouse and children. We need to know what a life-style is made of. income. it has been the wife’s role to purchase food. Traditionally.A. these lines of traditional role demarcation have been getting increasingly blurred.individual’s consumption behavior . Thus in different social positions you play different roles. You are probably a manager. His position within each group can be defined in terms of the activities he is expected to perform. attitudes. Each of these roles influences your purchase decisions. and status. This is especially true in case of products such as television. their influence of the sub – conscious mind still continues to be great.one is the family of orientation that is the family in which you are born and consists of your parents. the latter’s influence is extremely important. 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.

pain. 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. sleep. 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. discomfort. water. autonomy. Then based upon the combina tions of these dimensions. When these are not satisfied we may feel sickness. Motivation: Motivation involves the positive or negative needs. Unlike personality typologies. and emotional stability are selected personality traits. etc. MASLOW’S HIERACHY OF NEEDS The Hierarchy of Needs model of Abraham Maslow 1. a marketer can generate motivation. We need the safety of a home and family. Once they are alleviated. Hierarchy of Needs . irritation. interests and opinions. consumers are classified. the wife cannot move to the next level.Safety needs These are dealing with achieving of stability and of consistency in a chaotic world. Hierarchy of Needs . these change by situation and over time. defensiveness. etc. However. Because she is constantly concerned for her safety. adaptability. By appealing to motives (reasons for behavior). we may think about other things. Personality: personality is the sum total of an individual’s enduring internal psychological traits that make him or her unique. Love and belongingness have to wait until she is no longer in fear. dominance. These feelings motivate us to alleviate them as soon as possible to establish homeostasis. 2. These needs are mostly psychological in nature.peoples activities. which are difficult to describe measure lifestyle analysis has proven valuable in segmenting and targeting consumers according to their lifestyle classification.Physiological needs These are the very basic needs such as air. if a family is dysfunctional caused by for example an abusive husband. Economic and emotional motives are possible. food. Self-confidence. Each person has distinct motives for purchases. goals. sociability. sex. .the analysis technique used to mea. and desires that impel a person to or away from certain actions.sure consumer lifestyles.

We want to feel loved (non-sexual) by others. Hierarchy of Needs . however. Performing artists are appreciating applause. family. gangs.Love and belongingness needs These are next on the ladder. to be accepted by others. Second. 4. work groups.Self-Esteem needs There are two types of esteem needs. affiliation and power. • Motivation factors are needed in order to motivate an employee into higher performance. religious groups. wanting admiration is related to the need for power. Typical Hygiene Factors • • • • • • • • • Working conditions Quality of supervision Salary Status Safety Company Job Company policies and administration Interpersonal relations . Dissatisfaction was a result of hygiene factors. Hierarchy of Needs . They do not cause higher levels of motivation. to become everything that one is capable of becoming. oneness with God. (Graves) • Different people with different cultural backgrounds and in different situations may have different hierarchies of need. Herzberg developed this motivation theory during his investigation of 200 accountants and engineers in the USA.3. Early) • Other researchers claim that other needs are also significant or even more significant. esthetic experiences. self-fulfillment. See McClelland. The first is the self-esteem which is the result from competence or mastery of a task. This is similar to the belongingness level. etc. Satisfaction and psychological growth was a factor of motivation factors. These factors result from internal generators in employees. The two Factors in the Theory • Hygiene factors are needed to ensure that an employee does not become dissatisfied. etc. 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. 5. (Hofstede.The need for self-actualization This is "the desire to become more and more what one is. there's the attention and recognition that comes from others. Humans have a desire to belong to groups: clubs. people don't work necessarily one by one through these levels. • In 1968. They are much less structured in the way they satisfy their needs. Disadvantages • Care should be taken not to stick too rigidly to this hierarchy: • In reality. Limitations of the Hierarchy of Needs model. peace. Hierarchy of Needs . but without them there is dissatisfaction. They can seek knowledge." People who have everything can maximize their potential. who identified needs for achievement. We need to be needed.

generally consumers tend to perceive the quality of performs on the basis of package. For example. Low Hygiene + Low Motivation: The worst situation. Since each individual’s needs. feel. selective distortion and selective retention. Selective exposure: you must have noticed that when you are on the look out for purchasing a specific product. which relate to their immediate needs. The different sights. fragrance. mouth and skin. Perception can be described as “how we see the world around us”. you suddenly seem to notice more than the usual number of advertisements pertaining to that specific product. the implication is that he has to carefully and accurately identifies his . television or any other high value product or services. its package. organizes and interprets thes3e stimuli in his own individual manner based in his needs. taste of your product. Employees are not motivated and have lots of complaints. ears. All the time we are receding messages through our five organs viz. High Hygiene + Low Motivation: Employees have few complaints but are not highly motivated.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. brand name. you are providing stimulus to your consumers through the physical shape. Perception The second major psychological factor that influences consumer behavior is perception. advertisement and commercials. price and manufacture’s image. eyes. which evokes the most favorable perception in the maximum number of consumers.. Each person recognizes. However the salaries and work conditions are not OK. nose. tastes and sensations that we feel are known as stimuli. motive and expectations are unique therefore each individual’s perception is unique. For the marketer. These are selective exposure. be it camera. There are three aspects of perception.. Perception helps to explain the phenomenon of why different individuals respond differently to the same stimulus under the same condition. color. sounds. size. As a marketing manager. and/or • job enrichment. refrigerator. A situation where the job is exciting and challenging. This is because of your selective exposures. selects. smells. People are more likely to notice stimuli. Your interest is to the stimuli so that you can highlight that particular stimulus of combination of stimuli. which are of immediate interest to the marketer. The job is perceived as a paycheck. • Herzberg suggests that often work can be arranged and should be arranged in the following ways: • job enlargement • job rotation. values and expectations and this is known as perception. Low Hygiene + High Motivation: Employees are motivated but have a lot of complaints.

which she sees and hears. and/or institutions. You are more likely to remember the positive feature of brand ‘A’ pressure cooker since they help reassure you that the decision. The stimuli are the various advertisements about the product. Beliefs & Attitudes Attitudes or opinions are positive. was correct. neutral. Selective Distortion: let us suppose you have decided to purchase a specific brand “A” of pressure cooker.potential customers since other customers are not at all likely to notice the stimuli. Much of an adult’s human behavior sis leaned behaviors. . Positive feedback about pressure cooker from a friend. Success cannot normally be attained without positive consumer attitudes. a marketer may find that his message is often not received in the intended manner but different consumers twist it in different ways. Cues are minor stimuli that determine when. which you have made. but a five year old clamoring for chocolate or chewing gum is the result of learned behavior. The motive is directed towards the stimulus object – a pressure cooker. Thus making the consumer ‘learn ‘ that the brand is good and worth patronizing. a special introductory price offer are all examples of cues which influence a housewife’s response to the motive for buying a pressure cooker. and then the changes are that she would like to use it as often as possible.. Starting from childhood. firms. Selective retention: people forget much of the stimuli which they receive3 and only retain that information which reinforces their clause and decision. the marketer has to ensure that the stimuli are interesting enough to attract and hold their attention. 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. using the appropriate stimuli and cues and providing positive reinforcement. This is a very significant factor marketer. Learning Learning refers to the skill and knowledge gained from past experience that we apply to evaluate future decisions and situations. issues. responses and reinforcements. evaluation and tendency towards a particular idea or object. Attitude is a person’s enduring feeling. the process is known as selective distortion. where and how the housewife responds. stimuli. seeing it on display in a showwindow. The beliefs constitute the brand image about the brand. A belief is a descriptive thought that a person has about something. Suppose the housewife buys the pressure cooker and is satisfied with its performance. Attitudes get settled into specific patterns and are difficult to change. This belief may be based on some real facts or it may merely be a notion or opinion that the person has. 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. attitude develops over the time with each fresh knowledge input. and in the future may buy another one. Since you have already made your decision you would seek only that information which reinforces the correctness of your decision. services. A marketer can build up demand for his brand by associating it with strong motives. cues. The housewife’s response to pressure cookers has been reinforced. A newborn infant’s sucking at the feeding bottle is instinctive behavior. 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. experience and influence. or negative feelings about goods. Thus. A housewife has the need is strong enough to propel her to take action it becomes a motive. Having identified the potential customers. people. A person may believe that a certain coking oil ‘X’ has the lowest fat content and is best for health.

• Noncommercial. or support in return of ownership of a specific good. organization. Seven useful sources are provided. the consumer engages in post-purchase behavior. and so on. service. 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. • Commercial. it may be ended. POST-PURCHASE BEHAVIOR: Frequently. The Internet has become a major source for consumer shopping information. terms. PURCHASE . and ideas. A prospective consumer may be exposed to any or all of these types of stimuli. • Physical. The decision process consists of six basic stages (the next six sections).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. or idea may solve a problem of shortage or unfulfilled desire. places. the consumer recognizes that the good. Sometimes. he or she will go on to the next step in the decision process. the amount of information sought also increases. place. Many consumers are hesitant to react to unfulfilled desires because there are risks and the benefits may be hard to judge. services.The purchase act involves the exchange of money or a promise to pay for a product. only a few steps are utilized At any point in the process. people. Buying one item may lead to the purchase of another. Factors affecting the process are a consumer’s demographic. Search can be internal and/or external . Purchase decisions remaining at this stage center on the place of purchase. It consists of the process itself and factors affecting the process. STIMULUS: A stimulus is a cue or drive meant to motivate a person to act. Re-evaluation of the . organizations. Once the information search is completed. it must be determined whether the shortage or unfulfilled desire can be satisfied by any alternative. INFORMATION SEARCH: Information search involves listing alternatives that will solve the problem at hand and a determination of the characteristics of each. If the above elements are acceptable. all six stages in the process are used. social. PROBLEM AWARENESS: During problem awareness. availability. a consumer will make a purchase. the performance of a specific service. If a person is sufficiently stimulated. other times. person. and psychological characteristics. A stimulus can be any of the following: • Social.As risk increases.

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,

depending on modifications needed. They have one or more major brands for the mass market and secondary brands geared toward specific segments. use both undifferentiated marketing and concentrated marketing approaches in their multiple-segmentation strategy. Differentiated marketing combines the best attributes of undifferentiated marketing and concen trated marketing. H. Recognition as a specialist. Others. the greater the opportunity for differentiated marketing. allows orders to be concen. so do the results of the positioning map e. offers a degree of exclusivity.should be avoided. Costs vary. F. Differentiated Marketing (Multiple Segmentation) A. brands. what you perceive as quality.g. • Positioning is all about ‘perception’. It appeals to two or more distinct market segments. 2. A company must be careful to maintain product distinctiveness in each consumer segment and to guard its image. Some companies. or products. such as Time Inc. Sales maximization. with a different marketing plan for each. E.trated. there will . Per unit profits can be maximized through market segmentation. Company resources and abilities must be able to produce and market two or more different sizes. is different to my perception. A firm must balance revenues obtained from selling to multiple segments against the costs. 2. 1. Total profits should rise as the number of segments serviced increases. because it enables them to reach different consumers. value for money in terms of worth.POSTION process • Positioning is undoubtedly one of the simplest and most useful tools to marketers. Total profits are not maximized. G. and Microsoft appeal to two or more segments. etc. such as Hyundai. As perception differs from person to person. 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 . B. The more clusters facing the firm. However. G. E. A distinct niche can be carved out for a particular brand. Differentiated marketing should enable the firm to achieve several objectives: 1. Firms such as Maruti-Suzuki use differentiated marketing to attract all segments. because only one segment is sought. and encourages private labels. Diversification. I. but not all segments. Two or more sizable and distinct consumer groups are necessary. C. F.. 3. D. Differentiated marketing can be achieved without involvement in the majority fallacy. Wholesalers and retailers usually find differentiated marketing to be desirable. A potentially profitable segment may be one ignored by other firms.TARGET .

For this strategy. emphasis is placed on the benefits of the particular features or attributes of the destination. • After segmenting a market and then targeting a consumer. or customer benefit.” referring to Victoria Peak. Mexico is positioned as “The meeting place for sun worshipers. send them to the peak. Thailand promotes the friendliness of its people with the statement “The world meets in the land of smiles.be similarities in certain cases. in the minds of the consumer.” Positioning according to the users or class of users In this case. Cancun. relative to competing offerings. How new and current items in the product mix are perceived. It refers to a place that the product offering occupies in • consumers’ minds on important attributes. positioning features the people who should visit the destination. Hong Kong appeals to the incentive travel market with the statement ‘When they’ve reached the top. 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. feature. a major tourist site in Hong Kong: Fisher Island. Positioning with respect to use or application Here a destination is positioned based on the reasons for visiting it. positions itself as the place “where people who run things can stop running. value offered to visitors can be effectively utilized as exemplified by Malaysia which claims “Malaysia gives more natural value.APPROACHES Positioning by attribute.” Positioning with respect to a product class This technique is often used to associate a destination with experiences that are .” With this positioning statement Malaysia is appealing not only to the sense of value (more for the money) but also to its natural attractions. therefore re-emphasizing the importance of perception!! New Product—need to communicate benefits POSITIONING ERRORS POSITIONING TYPES. For example.” 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. a luxury residen. However. next step will be to position a product within that market.tial development in Florida.

Marketers starts by asking recent buyers about additional features that would improve satisfaction. Differentiation is the process of adding a set of meaningful and valued differences to distinguish the company offering from competitors offerings. quality. This approach is not used frequently in international tourism destination marketing since it may involve negative statements about another country or region. Durability: D urability in the product me a n s expecting the product to be operating under natural or stressful conditions. given the potential market. Conformance quality: C onformance for quality. packaging. product features. you deserve a hotel that has none. Differentiation goes beyond positioning to spin a complex web of differences characterizing that entity. Reliability: on reliability basis one is normally ready to pay a premium. Ritz-Carlton Hotels is a little more subtle when they say. image. the Principality of Monaco is positioned as “The fairy tale that does not end at midnight. coating and action time. Marketers have identified that the products are capable of higher differentiation than services such as automobile and furniture. Form: Companies can differentiate products on the basis of form. 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. it can be differentiated by the dosage size. location. However the extra price must not be excessive and the product must not be subjected to rapid technological obsolescence. 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. Example of any product. which are very important they are basically there to support the basic functions of the product. it is basically a . it is regularly employed in product and services marketing. However. here’s one that’s close to heaven” for Israel. cost and price. It is important for products such as vehicles and kitchen appliances to be durable. The tools that are used to differentiate products include branding. which is in terms of degree to which all of the produced units are identical and are able to meet the promised specification. which the product’s primary characteristics operate. Positioning simplifies what one is thinking of the entity. The problem with low conformance quality is that the product will disappoint some buyers. The strategic planning institute found a significantly positive correlation between relative product quality and return on investment. or “If your looking for an ideal meeting place. For example. shape. As Disprin is essentially a commodity. innovation and different service levels. to bring out differences between destinations.extraordinary and/ or unique. Performance quality: is the level. For example.” What is Differentiation? The task of positioning is to deliver a central idea about a company or an offering to the target market. which can be in many forms like Disprin. Yet there are diminishing return to higher performance quality so marketers must choose a level suited to the target market and rival performance levels. and the shape of the product. ‘After a day of competition.that is the physical structure. in this the company is focusing on besting the competition and at the same time they are satisfying the consumers and gaining higher profits. then determining which would be profitable to add. This strategy is aggressive. the size. TYPES OF DIFFERENTIATION Product differentiation In this the marketing mix variable are used to make unique product offer that stands out from the competitors. Features: they are the characteristics.” or holding a convention in Thailand is “Smooth as silk where the sky’s the limit. promotion. Positioning vis-à-vis the competition This approach is used when it is necessary to meet the competition head-on.

Buyers of heavy equipment expect good installation service. reliability. install. Style: Style is look and feel of the product to the customer. called the Vitamin Institute. Apple computers. design offers a potent way to differentiate and position a company’s products and services. Reparability is a measure of the ease of fixing a product when it malfunctions or fails. covering speed. Godiva chocolate and Harley. the key to competitive success may lie in adding valued services and improving their quality. an important consideration for many products.without being late once in 18 years. Ideal reparability would exist if users could fix the product them. Deluxe check printer. but also gives extensive training to users of this equipment. accuracy and customer care. For example. performance. Delivery: it is related to how well the product or service is delivered to the customer. conformance.selves with little cost or time. a well-designed product is one that is pleasant to look at and easy to open. However. Customer training refers to how the customer’s employees are trained to use the vendor’s equipment properly and efficiently. has built an impressive reputation for shipping out its checks one day after receiving an order. information system and advising services that the seller offers to buyers. Design is the integrating force that incorporates all of the qualities. On the Web. inc.. use. Baxter Healthcare has eased the ordering process by supplying hospitals with computer through which they send orders directly to Baxter. Style has the advantage of creating distinctiveness that is difficult to copy.Davidson motorcycle. Most of the time. Rite Aid has teamed with drugstore.com to offer even more health-related information. To the company. Design: as competition intensifies. Aesthetics have played a key role in such brands as Absolute vodka. For a company a well-designed product is one that is easy to manufacture and distribute. consumers can now order and receive groceries without going to the supermarket business web-based service such as peapod and net grocer. An automobile made with standard parts that are easily replaced has highly reparability. The designer has to take all of these factors into account Service differentiation: When the physical product cannot be differentiated easily. have an outstanding reputation for creating reliable appliances? Reparability: buyers prefer products that are easy to repair. General Electric not only sells installs expensive X-rays equipment in hospitals. Differentiation by installation is particularly important for companies that offer complex products such as computers. . Customer consulting refers to data. cuistomers are normally willing to pay a premium for products that are attractively styled. repair and dispose of.measure of the probability that a product will not malfunction or fail within a specified time period. which manufacturers major home appliances. May tag. this means the designer has to figure out how much to invest in form.. Maintenance and repair: describes the service program for helping customers keep purchasing products in good working order. The main service differentiators are: Ordering ease: refers to how easy it is for cusotmer to place an order with the company. provide customers with research so they can make more educated judgments and fell comfortable asking for help. reparability and style. strong style does not always means high performance. the Rite aid drugstore chain’s communications program. Installation: refers to the work done to make a product operational in its planned location. durability. feature development.

Identity comprises the ways that a company aims to identify or position itself or its product. Nike mainstream popularity turns off 12-to24-years-olds.Personnel differentiation Companies can gain a strong competitive advantage through having better-trained people. it must be conveyed through every available communication vehicle and brand contact.The amt of money charged for a product or service.Pricing Policy: A firm must set a price for the first time when it develops a new product. PRICING Price is the amount of money charged for a product or service. are better trained and performance more reliability than competitors dealers. and Northwestern Mutual life enjoy an excellent reputation. Dell computers has also distinguished itself by developing and managing superior direct-marketing channels using telephone and internet sales. courtesy. it conveys this character in a distinctive way and it delivers emotional power beyond a mental image. Caterpillar’s success in the construction –equipment industry is based partly on superior channel development. price is the value placed on what is exchanged. credit. and when it enter bids on new contract work. For the image to work. An effective image establishes the product’s character and value proposition. Something of value -usually purchasing power .” What does a buyer think? To a buyer. and wealth. reliability. PRICE. or the sum of the values that consumers exchange for the benefits of having or using the product or service. According to Kotler an organization goes through the following steps in setting its pricing policy: - . when it introduces its regular product into a new distribution channel or geographical area. expertise and performance. responsiveness and communication. Purchasing power depends on a buyer’s income. More broadly. Frito-Lay. Its dealers are found in more locations. whereas image is the way the public perceives the company or its products. Setting the Price. The McDonald’s people are courteous. including logos. “One can define price as that which people have to forego in order to acquire a product or service. For example.is exchanged for satisfaction or utility. who prefers Airwalk and other alternative brands that convey amore extreme sports image. Singapore Airlines enjoys an excellent reputation in large part because of its fight attendants. the IBM people are professional and the Disney people are upbeat. Well. The sales forces of such companies as General Electric. price is the sum of all the values that consumers exchange for the benefits of having or using the product or service. Image is affected by many factors beyond the company’s control. Channel differentiation Companies can achieve competitive advantage through the way they design their distribution channels’ coverage. Image differentiation Customer will response differently to company and brand image. credibility.trained personnel exhibit six characteristics: competence. media and special events. Cisco.

They estimate the demand and costs associated with alternative prices and choose the price that produces maximum current profit. the company stays in business. assuming the market is price sensitive. cash flow or rate of return on investment. A company can pursue any of five major objectives through pricing: survival. or changing consumer wants. In the normal case. Survival is a short-run objective: in the long run. maximum market skimming. the firm needs to determine demand. 2. Many companies try to set a price that will maximize current profits. Sony is a frequent practitioner of market skimming pricing. Some companies want to maximize their market share. maximum current profit. the firm must learn how to add value or face extinction. This strategy assumes that the firm has knowledge of its demand and cost functions. They set the lowest price. Companies pursue survival. the easier it is to set price. or product-quality leadership. demand . Production and distribution costs fall with accumulated production experience. as their major objective if they are plagued with overcapacity intense competition. in reality these are difficult to estimate. Each price will lead to a different level of demand and therefore have a different impact on a company’s marketing objectives.Following the identification of objectives. Determining the demand . and a low price stimulates market growth. a low price discourages actual and potential competition Companies unveiling a new technology favor setting high prices to “skim” the market.Selecting the pricing Objective The company first decides where it wants to position its marketing offering. The clearer a firm’s objectives. They believe that a higher sales volume will lead to lower unit costs and higher long-run profit. As long as prices cover variable costs and some fixed costs. The following conditions favor setting a low price The market is highly price sensitive. maximum market share.

. Total and variable costs for any given level of production. There are different costs of organization. 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). management needs to know how its costs vary with different levels of produc tion. They are also less price-sensitive when price is only a small part of the total cost of obtaining. They use market research to establish a new product’s desired functions. While demand sets a ceiling and costs set a floor to pricing. The process of estimating demand therefore leads to i. prices and possible price reactions into account. TARGET COSTING . Estimating Price sensitivity of market ii. The Japanese use a method called target costing. Perfume Company raised its price and sold more perfume rather than less! Some consumers take the higher price to signify a better product. it is equal to total costs divided by production. Fixed costs (also known as overhead) are costs that do not vary with production or sales revenue. Estimating and analyzing demand curve iii. the level of demand may fall.g.Costs change as a result of a concentrated effort by designers. engineers and purchasing agents to reduce them. If your product or service is similar to a major competitor’s product or service. 3. competitors’ prices provide an in be.and price are inversely related: the higher the price. Variable costs vary directly with the level of production. They are called variable because their total varies with the number of units produced. 5. Average cost is the cost per unit at the level of production. Selecting a pricing method - . you will not be able to charge as much as the competitor. and this leaves the target cost they must achieve.In the case of prestige goods. A company’s cost take two forms. To price intelligently. 4. Acquire competitors’ price lists and buy competitors’ products and analyze them. Learn the price and quality of each competitor’s product or service by sending out comparison shoppers to price and compare. the demand curve sometimes slopes upward. fixed and variable. 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. Regardless of output. If your product or service is inferior. operating and servicing the product over its lifetime. then you will have to price close to the competitor or lose sales. These c o s t s r e l a t e with pricing. given its appeal and competitor’s prices. Then they determine the price at which the product will sell. Estimating Costs . interest. Within the range of possible prices determined by market demand and company costs. Also ask customers how they perceive the price and quality of each competitor’s product or service. prices and offers is also important factor in setting prices . Company should also be aware that competitors might even change their prices in response to your price. E. These costs tend to be constant per unit produced. prices and offers A nalyzing competitor’s costs. Determining price elasticity of demand. the firm must take the competitor’s costs. the lower the demand . salaries and so on. They deduct the desired profit margin from this price. A company must pay bills each month for rent heat.tween point you must consider in setting prices. Analyzing competitor ’s costs.Demand sets a ceiling on the price the company can charge for its product. However if the price is too high.

which are likely to increase as output increases. firms bid for jobs.sion is dependent on other earlier decisions in the marketing planning process. The way around this problem is to recognize that the pricing deci. gain and risk pricing. Marketing Oriented Pricing .Companies often use cost oriented pricing methods when setting prices. the company must consider additional factors. In selecting that price. promotion. All other things being equal the buyer will select the supplier that offers the lowest price. distribution and product benefits.There are three pricing methods that can be employed by a firm: 1.Many contracts are won or lost on the basis of competitive bidding.e. Like full cost pricing. only known to client and not to the other parties tendering for the service). 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. Indirect or fixed costs (plant. company –pricing policies. and the impact of price on other parties. Competition-based approach . strategy. Direct cost approach is useful when pricing services for example. 6. the influence of other marketing –mix elements on price. if they are unused on a flight then the revenue is lost. 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. Marketing Oriented Pricing Cost Oriented Pricing . strategic objectives. aircraft seats or hotel rooms lie idle.Here the firm determines the direct and fixed costs for each unit of product. The most usual process is the drawing up of detailed specifications for a product and putting the contract out for tender.Going-Rate Pricing In going-rate pricing.Pricing methods narrow the range from which the company must select its final price.gic objectives. machinery etc) will remain unaffected whether one unit or one thousand units are produced. with the firms basing the price on what it thinks other firms will be bidding rather than on its own costs or demand. including psychological pricing. 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. the firm bases its price largely on competitors’ prices. Cost Oriented Pricing 2. Two methods are normally used Full cost pricing . 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. more. In sealed-bid pricing (i. Direct costs then. This method focuses upon the internal costs of the firm as opposed to the prospective customers’ willingness to pay. Direct (or marginal) Cost Pricing . The is an almost impossible prediction.This involves the calculation of only those costs. The first problem with Full-cost pricing is that it leads to an increase in price as sales fall. price will depend upon positioning. For new products. indicate the lowest price at which it is sensible to take business if the alternative is to let machinery. Consider aircraft seats. The risk here is that other customers who paid the full price may find out about the discounted offer and complain.The price of a product should be set in line with the marketing strategy. Selecting the final Price . this method will include a profit margin in the final price. which is confidential to themselves and the buyer. and for existing products price will be affected by strate. . Competitor Oriented Pricing 3. These remaining seats may be offered at a discount so that some contribution is made to the flight expenses. with less attention paid to its own costs or to demand. Potential suppliers quote a price. or less than its major competitors. The firm might charge the same. Competitive Bidding .

Discounting is common in many industries . Counter trade. a practice known as counter trade. American compa nies are often forced _o engage in counter trade if they want the business. Chemical company built a plant for an Indian company and accepted partial payment in cash and the remainder in chemicals manufactured at the plant. For example. and offset. This is not to say that there is anything particularly wrong with price dis. A US. However. 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. discounting can be dangerous un.counting provided that you are getting something specific that you want in return. Price discounts and allowances . 2.The role of discount Offering discounts can be a useful tactic in response to aggressive competition by a competitor. Counter trade may account for 15 to 25 percent of world trade and takes several forms: barter. The trouble is that.DIFFERENT PRICING STRATEGIES 1. 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. Barter) . Barter: The direct exchange of goods. 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. Geographical pricing (cash. buyback agreements. 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. or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment. . companies get themselves embroiled in a complex structure of cash. For example. equipment. compensation deals. whilst getting absolutely nothing in return except a lower profit margin. Buyback arrangement: The seller sells a plant. This issue is critical when buyers lack sufficient hard currency to pay for their purchases. quantity and other discounts.in some it is so endemic as to render normal price lists practically meaningless.Geographical pricing involves the’ company in deciding how to price its products to different.less carefully controlled and conceived as part of your overall marketing strategy. Many buyers want to offer other items in payment. all too often. Customers in different locations and countries.

Discriminatory pricing . such as building up product quality and service or strengthening product image through advertising.Companies can use several pricing techniques to stimulate early pur. whatever business you are in. 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. 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. Automakers have even announced no-interest financing to attract Customers. and how long they are expected to last. Special-event pricing: Sellers will establish special prices in certain seasons to draw in more cus. If they work. In second-degree price discrimination. Low-interest financing: Instead of cutting its price. the seller charges different amounts to different classes of buyers. Consumers often worry less about the cost (i. Longer payment terms: Sellers. you should always ask yourself what your discounts are supposed to achieve. especially mortgage banks and auto companies.cost warranty or service contract.Clearly the role of discounts will vary from one type of business to another and not all of the com. In first. as in the following cases: .age purchase of the manufacturers’ products within a specified time period. Manufacturers have tried to restrain intermediaries from loss leader pricing through lobbying for retail-price -maintenance laws. and so on. In part your ability to minimize discounts. the seller charges less to buyers who buy a larger volume. If they do not work. products. 3. In general.ments above will apply to you. the company can offer customers lowinterest financing. will depend on the non-price benefits of your product. 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. Warranties and service contracts: Companies can promote sales by adding a free or low. the seller charges a separate price to each customer depending on the intensity of his or her demand. or eliminate them altogether. the interest rate) of a loan and more about whether they can afford the monthly payment. Promotional Pricing . Rebates can help clear inventories without cutting the stated list price.e. locations.degree price discrimination. This pays if the revenue on the additional sales compensates for the lower margins on the) boss-leader items. keep standard discounts low to retain maximum flexibility and ensure that they are consistent with your overall marketing and pricing strategy.Companies often adjust their basic price to accommodate differences in customers.tomers Cash rebates: Auto companies and other consumer-goods companies offer cash rebates to Encour.. stretch loans over longer periods and thus lower the monthly payments. 4. But. competitors Copy them and they lose their effectiveness. they waste money that could have been put into other marketing tools.chase: Loss-leader pricing: Supermarkets and department stores often drop the price on wellKnown brands to stimulate additional store traffic. but these laws have been revoked. whether they are effective. In third-degree price discrimination.

Fourth. they can use software that monitors customers’ movements over the Web and allows them to cus. the day of the week (workday or weekend). or hour. depending on the seat. captive-product pricing. and so on.200. New software applications. Channel pricing: Coca-Cola carries a different price depending on whether it is purchased ill a fine restaurant. Hotels charge less’ on weekends.tomize offers and prices.price segment. by-product pricing. We can distinguish six situations involving product-mix pricing: product-line pricing.nate between sellers by comparing prices instantaneously. Must not be able to resell the product to the higherprice segment. Airlines charge different fares to passengers on the same flight. It can put the same perfume in another bottle with a different name and image and price it at Rs. A perfume manufacturer can put the perfume in one bottle. the firm searches for a set of prices that maximizes profits on the total mix. Pricing is difficult because the various products have demand and cost interrelationships and are subject to different degrees of competition. how-ever. certain conditions must exist.cial users by time of day and weekend versus weekday. or a vending machine. customers so disliked the idea that Coke abandoned it. by which they offer lower rates on unsold inventory just before it expires. Third. the market must be segment able and the segments must show different intensities of demand. senior citizen). sellers use well-established price . a fast-food restaurant. and price it at Rest. Product-mix pricing . the particular form of price discrimi. 5. are also allowing buyers to discrimi. military. past business. the cost of segmenting and policing the market must not exceed the extra revenue derived from price discrimination. day. In many lines of trade. the time of day (morning or night coach). Time pricing: Prices are varied by season. For price discrimination to work. Airlines are using yield pricing to capture as much revenue as possible.tory pricing. A theater varies its seat prices according to audience preferences for different locations. Of status (youth. Product line Pricing: Companies normally develop product lines rather than single products and introduce price steps.ing class. Hotels and airlines use yield pricing. the product is part of a product mix. and product-bundling pricing. For instance. Restaurants charge less to “early bird” customers. give it a name and image. museums often charge a lower admission fee to students and senior citizens. Fifth. For example. In this case. Sixth. Public utilities vary energy rates to commer. 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. competitors must not be able to undersell the firm in the higher-price segment. and lowering the price on cold days. As a result of deregulation in several industries.nation must not be illegal.Price-setting logic must be modified when. However. the season. First. two-part pricing. Coca-Cola considered raising its vending machine soda prices on hot days using wireless technology. the person’s company. members in the lower. the practice must not breed customer resentment and ill will. competitors have increased their use of discrimina.ences at. Second. optional-feature pricing. 50.Customer-segment pricing: Different customer groups are charged different prices for the same product or service. 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.

light dimmers. Optional-feature pricing ‘Many companies offer optional products. Pure bundling occurs when a firm only offers its products as a bundle. A cellular service operator may give a cellular phone free if the person commits to buying two years of phone service. Restaurants face a similar pricing problem. Initiating price increases Like price cuts . the seller normally charges less for the bundle than if the items were purchased separately. Captive-product pricing . The automobile buyer can order electric window controls.Service firms often engage in two-part pricing. petroleum products. Other restaurants price their liquor low and food high to draw in a drinking crowd. This explains why servers often press hard to get customers to order drinks. 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. If the by-products have value to a customer group.cals—often results in by-products. average-. automobiles companies must decide which items to include in the price and which to offer as options. the profit can then be made on the usage fees. or captive. A successful price increase .Sellers often bundle products and features. and Rs. and services along with their main product. Because customers may not have planned to buy all the components. respectively. An auto manufacturer might offer an option package at less than the cost of buying all the options separately.1500. The food revenue covers costs.4500.points for the products in their line. the tactics that can be used. Two-part pricing .meats. consisting of a fixed fee plus a variable usage fee. In mixed bundling. and estimating competitor reactions. a firm can also initiate to increase the price. Rs. and the liquor produces the profit. Customers can often order liquor in addition to the meal. Many restaurants price their liquor high and their food low. defoggers. By-product pricing . products.facturers of razors and cameras often price them low and set high markups on razor blades and film. and high-quality suits with the three price points. they should be priced on their value. A theater company will price a season subscription at less than the cost of buying all the performances separately. Amusement parks charge an admission fee plus fees for rides over a certain minimum. Telephone users pay a minimum monthly fee plus charges for calls beyond the minimum number. The service firm faces a problem sin1ilar to captive product pricing-namely.Some products requires the use of ancillary. and other chemi. The seller’s task is to establish perceivedquality differences that justify the price differences. Product-Bundling pricing . The key issues associated with initiating price changes are the circumstances that may lead a company to raise or lower prices. Customers will associate low-. the seller offers goods both individually and in bun-dles. the savings on the price bundle must be substantial enough to induce them to buy the bundle. Pricing is a sticky problem. The fixed fee should be low enough to induce purchase of the ser-vice. Manu. A men’s clothing store might carry men’s suits at three price levels: Rs800. When offering a mixed bundle.The production of certain goods. PRICE CHANGES Companies often face situations where they may need to cut or raise prices. 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. and an extended warranty. how much to charge for the basic service and how much for the variable usage. features.

struction and bridge building. Escalator clauses: The company requires paying today’s price and all or part of any inflation in. ration supplies to its customers. In addition. it can raise its prices. 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. Company -owned outlets. Rising costs un.crease that takes place before delivery.can raise profits considerably. like aircraft con. They can be shifted among channel members. They can often be performed better through specialization. such as free delivery or installation.matched by productivity gains squeeze profit margins and lead companies to regular rounds of price increases. price controls. The circumstances provoking price increases are generally as follows: Cost inflation: A major circumstance provoking price increases is cost inflation. For example.quality boutiques. When an automaker signs up independent dealers to sell its automobiles. Unbundling: The Company maintains its price but removes or prices separately one or more ele. We define a value network as follows: A value network is a system of partnerships and alliances that a firm creates to source. such as industrial construction and heavy equipment. 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. Companies often raise their prices by more than cost increase.ments that were part of the former offer. if the company’s profit margin is 3% of sales. The channels chosen intimately affect all the other marketing decisions. a 1% increase will increase profits by 33% if sales volume is unaffected. the automaker cannot buy them out the next day and replace them with. or both. Reduction of discounts: The company instructs its sales force not to offer its normal cash and quantity discounts. Escalator clauses are found in contracts for major industrial projects. in a practice called anticipatory pricing. This pricing is prevalent in industries with long production lead times. The firm’s sales force and advertising decisions depend on how much training and motivation dealers need. the company’s channel decisions involve relatively long-term commitments to other firms. An escalator clause bases price increases on some specified price index. Distribution Channel Function: All channel functions have three things in common: • • • They use up scarce resources. in anticipation of further inflation and govt. 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. . augment. The company’s pricing depends on whether it uses mass-merchandisers or high. Over demand: when a company cannot supply all of its customers.

sired by target customers.put levels under competitive conditions.DITRIBUTION CHANNEL FUCTION DAIGRAM CHANNEL DESIGN DECISIONS: Following four steps help design a channel system :1. channel institutions should arrange their functional tasks to minimize total channel costs with respect to desired levels of service outputs Usually. Analyze Customers’ Desired Service Output Levels It is imperative to understand that in designing the marketing channel. 2. Non standardized products. Spatial convenience : The degree to which the marketing channel makes it easy for customers to purchase the product Product variety: The assortment breadth pro. Bulky products.tomers prefer a greater assortment because more choices increase the chance of finding what they need. Establish Objectives and Constraints Channel objectives should be stated in terms of targeted service out. 3. several market segments that desire differing service output levels can be identified. Service backup: The add-on services (credit. Products requiring installation or maintenance services. installation. Channel objectives vary with product characteristics.ping distance and the amount of handling. delivery. cus. are sold directly by company sales representatives. The greater the service backup. Effective planning requires determining which market segments to serve and the best channels to use in each case. such as custom-built machinery and specialized business forms. the marketer must understand the service output levels de. the greater the work provided by the channel. Waiting time : The average time customers of that channel wait for receipt of the goods. Channels produce five service outputs Lot size : The number of units the channel permits a typical customer to purchase on one occasion. customers normally prefer fast delivery channels.vided by the-marketing channel. Evaluating major channel alternatives 1. require channels that minimize the ship. repairs) provided by the channel. Identify Major Channel Alternatives Companies can choose from a wide variety of channels for reaching customers-from . Establishing channel objectives 3. Perishable products require more direct marketing. such as building materials. Analyzing customer needs 2. Identifying major channel alternatives 4. Normally.

distributors. Intensive distribution the terms and responsibilities of each channel member. telemarketing. but it cannot handle complex products. When this does not hap.actions. Price policy 2. A channel alternative is described by three elements • The types of available business intermediaries. Each channel has unique strengths as well as weaknesses.effective trade relations mix. The aim is to build a “partnership” feeling and joint distribution programming. and the Internet. 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. The problem is further complicated by the fact that most companies now use a mix of channels. 1. The Internet is much less expensive. Conditions of sale 3. direct mail. 1. there is usually channel conflict and excessive cost. and 1.pen. Exclusive dealing 3. 5. 4. 3. 2. Sales forces can handle complex products and trans.sales forces to agents. Selective distribution 4. Distributors can create sales. Distributors’ territorial rights 4. cost. Evaluate the Major Alternatives (time. Exclusive distribution 2. Each channel hopefully reaches a different segment of buyers and delivers the right products to each at the least cost. Selecting Channel Members Training Channel Members Motivating Channel Members Evaluating Channel Members Modifying Channel Arrangements . • the number of intermediaries needed. but they are expensive. dealers. but the company loses direct contact with customers.

Producers should set up functional discounts in which they pay specified amounts for the trade channel’s performance of each agreed-upon ser. growth and profit record solvency. 3.pany should provide training programs. and reputation 2. channel offering is tailored to provide superior value to these intermediaries Producers vary in their ability to attract intermediaries . cooperativeness. retrained. Selecting channel members would therefore involve evaluate experience. or terminated. To customers. inefficient. or unpleasant. Under performers need to be counseled. Company needs to view its intermediaries in the same way it views its end users. Selecting Channel Members Companies need to select their channel members carefully. re motivated.1. . 3. market research programs. or Hyundai if one or more of their outlets or dealers consistently appeared dirty. Motivating channel members A. be. and other capability-building programs to improve intermediaries’ performance. number of lines carried. A producer will occasionally discover that it is paying too much to particular intermediaries for what they are actually doing.vice. .cause they will be viewed as the company by end users . One manufacturer that was compensating a distributor for holding inventories found that the inventories were actual held in a public warehouse at its expense. Training channel members Companies need to plan and implement careful training programs for their intermediaries. average inventory levels. the channels are the company. They prepare the channel member employees to perform more effectively and efficiently The com. and cooperation in promotional and training programs. Consider the negative impression you would get of McDonald’s. It needs-to determine intermediaries’ needs and construct a channel positioning such that its. customer delivery time treatment of damaged and lost goods. Evaluating channel members Producers must periodically evaluate intermediaries’ performance against such standards as sales-quota attainment. 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.

place . B. Administered VMS 3. Channel Dynamics: A. cooperation in promotional and training programs 4. has contracts with them. Contractual VMS . and elimination of duplicated ser-vices. or has so much power that they all cooperate. Conventional Marketing System A channel consisting of one or more independent producers. Corporate VMS 2. Modifying channel arrangements A producer must periodically review and modify its channel arrangement. average inventory levels. customer delivery time. VMS s arose as. treatment of damaged and lost goods. Therefore the system will require periodic modi. Vertical marketing system comprises of 1. the mar.ket expands new competition arises. innovative distribution channels emerge. and retailers act as a unified system. One channel member owns the others.fication to meet new conditions in the market. and the product moves into later stage in the product life cycle. and retailers each a separate business seeking to maximize its own profits even at the expense of profits for the system as a whole . A. Vertical Marketing System A distribution channel structure in which producers.They are evaluated on the following parameters sales quota attainment. result of strong channel members’ attempts to control channel behavior and eliminate the conflict that results when independent members pursue their own objectives. consumer buying patterns change. bargaining power. wholesalers. wholesalers. VMS achieve economies through size. Modification becomes necessary when the „ „ „ „ „ distribution channel is not working as planned.

lower cost. Planning channel architecture (companies thinking through their channel architecture— which are efficient and not. customized selling ii. Can be permanent or temporary D. technology.i. transients. Product lines 3. 1. and developing new means) iii. Roles of individual firms in a multi channel system: (insiders. iii. not through common ownership or contractual ties. Types of Retailing. ii. but through the size and power of one of the par. Multi channel marketing—single firm uses two or more marketing channels to reach one or more customer segments—advantages: increased coverage. Organizational approach 1. marketing resources or other variables to take on the venture alone iii. Retailer cooperatives c. 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. Corporate VMS A vertical marketing system that combines successive stages of production and distribution under single ownership—channel leadership is established through common ownership. Amount of service 2. Amount of service A Self-service retailers Customers are willing to self-serve to save money . non business use. Manufacturer-sponsored retailer franchise or manufacturer-sponsored wholesaler franchise C. ii. complementers.ties. Horizontal Marketing Systems A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity. Administered VMS A vertical marketing system that coordinates successive stages of production and distribution. Contractual VMS could have the following forms a Wholesaler-sponsored voluntary chains b. Relative prices 4. 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. outside innovators) What is Retailing? Retailing includes all the activities involved in selling goods or services directly to final consumers for personal. i. strivers. Two or more unrelated firms put together re. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing.sources or programs. i. Franchise organizations d. Each firm lacks the capital.

Convenience stores Limited line E. Category killers Giant specialty stores 3.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. nonfood. and services F. Product lines A Specialty stores Narrow product lines with deep assortments B Department stores Wide variety of product lines C. 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. 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 . Superstores Food. Supermarkets D.

Product assortment. the retailer cannot make consistent decisions on product assortment . fitting rooms . Retailers must also pay attention to pricing tactics. advertising. They will plan marks down on slower –moving merchandise .installations. price. Service mix and Store’s atmosphere The retailers must also decide on the service mix to offer customers Pre-purchase services. All retailers would like to achieve high volumes and high gross margins. The retailer has to decide on product assortment. parking . check cashing . Target Marketing and Positioning Like other marketing activities. Until the target market is defined and profiled . advertising messages and media. They will run storewide sales. the product and service assortment mix and competition. fashion shows. window and interior display . and service levels. shopping hours. Ancillary services –general information . restaurants . Promotion Retailers use a wide range of promotion tools to generate traffic and purchases. Price Prices are a key positioning factor and must be decided in relation to the target market. retailing too is concerned with defining its target market. store décor. engraving. .gift wrapping .Retail Marketing decisions Various marketing decisions affecting the retail business :Target marketing and positioning Product assortment. 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.accepting telephone and mail orders. adjustments and returns. Most retailers will put low prices on some items to serve as traffic builders or loss leaders. Service mix. 5. trade ins. 4. repairs etc. Promotion methods include :Ads Special sales Money saving coupons Sample distribution etc. The retailer’s product assortment must match the target market’s shopping expectations. alterations and tailoring . The challenge is to develop a product-different ion strategy.breadth and depth . Post purchase include – shipping and delivery . 2. store’s atmosphere Price Promotion Place (location) 1.

7% in 2001.ing the boom times altogether. discount stores.2 billion in 2001 while non. More so.ever. it could still add up to say the sizeable number. The retailing sector in India is highly fragmented and predominantly consists of small independent. with an average selling space of 29. The share was 62. This trend towards larger outlets is leading to a rise in average retail space. Retail Infrastructure In 2001.tail outlets in the country. More and more players are coming into the retail business in India to introduce new formats like malls.4 sq m per outlet. not just goods Retailing in India: Are you game for it!!!!! They say ‘If you aren’t in IT or entertainment. Place Location is often described as the most successful strategy for retailing. However. Total retail sales area in India was estimated at 328 million sq m in 2001. department stores and even changing the traditional looks of book.7 billion. How.2 million re. Growing investment in technology 5 . There has been a boom in retail trade in India owing to a gradual increase in the disposable in. there were an estimated 11. 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. the country is also dotted with low-cost kiosks and pushcarts. Or you’re miss. owner-managed shops. However. Selling an experience.comes of the middle class households.’ In India.228. these modern formats are showing robust growth as several retail chains have established a base in metropolitan cities.food sales were worth Rs4189. chemist shops. 3 . There are no hypermarkets in the country as yet. a regional shopping center . While the middle class may not be as big as expected. Organized retailing represent a small fraction of the Indian retail market. especially in south India. Growth of giant retail 4 . In 2001.039. space and rentals are proving to be the largest constraints to development of large formats in metropolitan cities. since retailers are aiming the prime . Besides. Global presence of major retailers 6. and furnishing stores. you ought to be in retailing. There are some 12 million retail outlets in India. supermarkets. Retailers can locate their stores in the central business district. a billion people in overall population leads to very large numbers. New retail forms and combinations 2 .5 billion. Growth of intertype competition. The concept of retailing chain stores is at a very nascent stage in India. organised retail trade in India was worth Rs11. and are spreading all over India at a rapid pace. worth approximately Rs7. Food sales constitute a high proportion of total retail sales. the non-food retailing sector registered faster year-on-year growth than food sales.6.stores. the retail sector is the second largest employer after agriculture.

Shoppers Stop. The anchor is expected to attract a variety of con. There is also a strong trend in favour of onestop shops like supermarkets and department stores.tailing sector is not permitted yet.locations. whose discounters and chemists/druggist chain is very popular in South India. which occupies a sizeable percentage of the total usable area.mous with footwear in middleclass India. music stores and the beauty and health chain. as many as 50 new malls will be coming up by 2005 in the smaller cities as well. families are experiencing growth in income and dearth of time. in. is the second largest fascia in the country with retail sales of Rs2. in both food and non-food segments. Shopping malls is set to one of the most visible faces of the Indian retail scene by the end of 2002. More and more women are also turning to corporate jobs. The real estate development group has converted its retailing operation into an Indian success story. while Health & Glow by RPG Group. in order to protect the interests of the small retailers.3 billion by 2006.stores. ready-to-cook. The turnover from private labels by major retail chains was estimated at around Rs 1200 million in 2001. and a retail turnover of Rs6 billion in 2001. Each mall typically has an anchor. Competitive Environment Bata India Ltd is one of the largest retailer. The number of large mega-malls is expected to increase significantly as India is now experiencing a “mall boom”. each retail business at the time of writing was run as a separate entity.stant. In urban India. airy and equipped with modern amenities. Health & Glow.endowed malls and shopping centres. with a mar. The K Raheja-run department store chain. with interests in supermarkets. with 1600 footwear stores spread across the country. The stores retail mainly Bata products.sumers and hence is the key to increasing foot traffic. The lobby is based on the premise that modern retail will impact the livelihood of millions of small family-run businesses. well. The mid 1990s marked the arrival of new. with further growth of organised retailing. Foodworld is operated by Foodworld Supermar. Key Developments in Retailing 100% foreign direct investment (FDI) in the re. . which are spacious. Rising incomes has led to increasing demand for better quality products while lack of time has led a demand for convenience and service. The trend to market private labels by a specific retail chain is catching on in India as it helps to improve margins. Retail Forecasts The retail business is expected to reach Rs19.069. With almost a monopolistic presence in the organised footwear market until the 1980s. According to estimates apart from the metropolitan and larger cities.keting arrangement with Lotto and Nike as well. They have big label stores as well as in. Another strong retailer is Subhiksha. However. ready-to-eat food has been on the rise. The proportion of sales through organised retailing is estimated to increase to around 6% by 2010.7 billion in 2001. which is adding to the family income but making lifestyles extremely busy. especially in the metropolitan and large cities in India. Bata is synony.house eateries and entertainment zones. It has also acquired the Crossword chain of book. There is a strong lobby of small traders that has been vocal on the issue of not permitting FDI into retail.kets Ltd. Spencer & Co Ltd another large retail group in the country. The demand for frozen.

the consumer ability to spend will increase. and providing delivery. offering credit. offer credit.riod. Following are the functions performed by wholesalers. promotion. it is predicted that the time available for shopping will go down. or mill supply houses and fall into two categories: full service and limited service. in both food and nonfood sectors. 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. . maintain a sales force. Merchant Wholesalers: Independently owned businesses that take title to the merchandise they handle. Target Market Product Assortment and Services . the more successful ones will be those that provide faster service.Specialty wholesalers carry only part of a line (2) Industrial distributors sell to manufacturers rather than to retailers and provide several services—carrying stock.General-line wholesalers carry one or two lines.There is already a strong trend in favour of large format retail outlets.vice are likely to be bypassed by manufacturers. and place. They are called jobbers. There are two types of full-service wholesalers (1) Wholesale merchants sell primarily to retailers and provide a full range of service . the retailers will have to increasingly develop shopping as an experience and at the same time. make deliveries. as people are showing preference for one-stop shops. Wholesalers who fail to carry adequate assortments and inventory and provide satisfactory ser. product assortment and services. Customers are also looking for ambience and convenience in shopping. 1. Full-Service Wholesalers: Carry stock. and provide management assistance. In such a scenario. on the other hand. but at the same time. In the future. pricing. Wholesaler Marketing Decisions Wholesalers also must make decisions on their target market. Progressive wholesalers.General-merchandise wholesalers carry several merchandise lines. with more dual income families. . adapt marketing concepts and streamline their costs of doing business. Selling and promoting Buying and assortment building Bulk breaking Warehousing Transportation Financing Risk bearing Market information Management services and counseling Types of Wholesaling. distributors. This would continue more strongly in the forecast pe.

foodstuffs).Internet The Internet has a geographically disperse market. They buy from producers and resell to retailers.osed to many products.Price Decision Promotion Decision Place Decision Types of Channel Intermediaries And Their Functions There are many types of intermediaries such as wholesalers. .g. electrical wholesalers.seas distributors. They provide storage facilities. or travel agents. There are low barriers low barriers to entry as set up costs are low. There is a paradigm shift in commerce and consumption which benefits distribution via the Internet. The main modes of distribution will be looked at in more detail. They are difficult to keep control of due to the physical distances involved. will store the stock. However. This means that capital is not tied up in goods. and Jumbo in Portugal. and Alisuper. Retailers often have a strong ‘brand’ them. over. retailers. 1. The retailer will hold several other brands and products. Channel Intermediaries . the Internet.Agents Agents are mainly used in international markets. 3.Retailers Retailers will have a much stronger personal relationship with the consumer. Products and services are promoted and merchandised by the retailer.ages for resale by a retailer. A consumer will expect to be ex. The retailer will give the final selling price to the product. agents. For example. 4. A wholesaler will often take on the some of the marketing responsibilities.Wholesalers They break down ‘bulk’ into smaller pack. Many produce their own brochures and use their own telesales operations. The main benefit of the Internet is that niche products reach a wider audience e. customer service costs.tact cost between the producer and consumer e. a ‘stockist agent’ will hold consignment stock (i. Ross and Wall-Mart in the USA. An agent will typically secure an order for a producer and will take a commission. Channel Intermediaries . direct marketing (from manufacturer to user without an intermediary). cheese manufacturers seldom wait for their product to mature. They take ownership or ‘title’ to goods whereas agents do not (see below).g.g. They sell on to a wholesaler that will store it and eventually resell to a retailer. Modelo. Agents can be very expensive to train. Wholesalers offer reduce the physical con.e. Retailers will often offer credit to the customer e. or sales force costs. This approach is used where goods need to get into a market soon after the order is placed e. They are difficult to motivate. 2. and many others. They do not tend to take title to the goods.selves e. Channel Intermediaries .g. Scottish Salmon direct from an Inverness fishery. Channel Intermediaries .g. but the title will remain with the producer.

groups. individuals.INTEGRATED MARKETING COMMUNICATION Marketing communications which is one of the four major elements of the company’s marketing mix. Marketers also need to understand the fundamental elements of effective communications. the marketer might want to put something into the consumer’s mind. Marketers need to assess which experiences and impressions will have the most influence at each stage of the buying process. Determine the communication objectives . and observe computers in a store.The marketer can be seeking a cognitive. Promotion’s role is to communicate with individuals. THE COMMUNICATION PROCESS: The whole marketing mix must be integrated to deliver a consistent message and strategic positioning. where to say it. To monitor the responses. affective. cur. 2. particular publics. They must transmit the message through media that reach the target audience and develop feedback channels. read articles. deconding. and to whom to say it. The last element in the system is noise (random and competing messages that may interfere with the intended com. how to say it. or the general public. 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. This understanding will help them allocate communications dollars more efficiently. That is. They must encode their messages so that the target audience can decode them. look for information on the Internet. persuade. deciders. The model emphasizes the key factors in effective communication.rectly or indirectly facilitate exchanges by in. For example. Developing an Effective Communications 1. The target audience is a critical influence on the communicator’s decisions on what to say. Four represent major communication function – encoding. The starting point is an audit of all the potential interactions target customers may have with the product and the company. Two represent the major communication tools – message and media. .rent users. Senders must know what audiences they want to reach and what responses they want to get. when to say it. and feedback.ucts. Definition: Promotion is communication about an organization and its products that is intended to inform. see television ads. some. or influencers. or organisations to di. The more the sender’s field of experience overlaps with that of the receiver. response. or behavioral response.one interested in purchasing a new computer would talk to others. A promotion mix (sometimes called a marketing communications mix) is the particular combination of promotional methods a firm uses to reach a target market. Two represent the major parties in a communication – sender and receiver.forming and persuading one or more of the audiences to accept an organisation’s prod.PROMOTION. groups. the more effective the message is likely to be. or remind target market members.munication).

The “sound” of an announcer promoting a used automobile has to be different from one promoting a new Cadillac. scent. 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. idea. There are three types of appeals: rational. .) how to say it logically ( message structure ). Message structure Effectiveness depends on structure as well as content Message format The message format needs to be strong.What is important is the spokesperson’s credibility. the communicator has to decide on headline. and hairstyle. how to say it symbolically ( message format). Pharmaceutical companies what doctors to testify about product benefits because doctors have high credibility. or unique selling proposition ( USP). size.Having defined the desired response. copy. If the message is to be carried on television or in person. This is why advertisers often use celebrities . the message should gain attention. theme. Design the message . texture. If the message is carried by the product or its packaging. gestures. and who should say it (message source). the communicator moves to developing an effective message.3. and elicit action Formulating the message will require solving four problems: what to say ( message content. the communicator has to choose words. posture. arouse desire. and shape Message source Message delivered by attractive or popular sources achieve higher attention and recall. emotional. For a radio message. Presenters have to pay attention to facial expressions. and moral. Hold interest. and color. In a print ad. and vocalizations. dress. management searches for an appeal. voice qualities. Message content: In determining message content. the communicator has to pay attention to color. illustration. Ideally.

B. Integrated marketing communications is the coordination of promotion efforts to ensure the maximum informational persuasive impact on customers. Their presentation must be crisp. Select the communication channels . sales force. These include placing ads in medical journals.What factors underlie source credibility? The three most often identified are expertise. quick. sending direct mail ( including audio and videotapes ). pharmaceutical company salespeople can rarely wrest more than five minutes’ time from a busy physician. A major goal of integrated marketing communications is to send a consistent message to customers. trustworthiness.” 6. Establish the total marketing communication budget .ness.One of the most difficult marketing decisions is determining how much to spend on promotion. and even telemarketing. John Wanamaker.The communicator must select efficient channels to carry the message. What Is Integrated Marketing Communications? A. but I don’t know which half. special interest magazines. “ know that half of my advertising is wasted. CD ROMS. and voice broadcasts. passing out free samples. the Internet.store magnate. Database marketing is also allowing marketers to be more precise in targeting individual customers. D. public relations and publicity. Marketers can now take advantage of more precisely targeted promotional tools. The concept of integrated marketing communications has been increasingly accepted for a number of reasons. sales promotion. once said. and direct marketing. the department. such as cable TV. The industry has had to expand its battery of communication channels. 5. 4. and convincing. Deciding on the marketing communications mix . attractive.Companies must allocate the pro. For example.motion budget over the give promotional tools – advertising. This makes pharmaceutical sales calling extremely expensive. C. Here is how one company touches several bases. . and likability. direct mail. Mass media advertising is used less today because of its high costs and less predictable audience sizes. This approach fosters long-term customer relationships and the efficient use of promotional resources.

goods. and the Phoenicians painted pictures promoting their wares on large rocks along parade routes. setting advertising objectives. persuade. conviction.. or services by an identified sponsor. Automobile ads often depict satisfied customers enjoying special features of their new car. The Romans painted walls to announce gladiator fights. Reminder advertising aims to stimulate re.Some critics charge that large.Any paid form of non personal presentation and promotion of ideas. Archaeologists working in the countries around the Mediterranean Sea have dug up signs announcing various events and offers. Advertising objectives can be classified according to whether their aim is to in. market positioning. is a far cry from these early efforts. however. Setting the advertising objectives . preference. developing advertising strategy (message decisions and media decisions).peat purchase of products and services.chase Coca-Cola Reinforcement advertising aims to convince current purchasers that they made the right choice.uct image building and tend to under spend There are five specific factors to consider when setting the advertising budget: . remind. Deciding on the advertising budget . and purchase of a product or service. which makes an explicit comparison of the attributes of two or more brands. 1. or reinforce. 2. four-color Coca-Cola ads in magazines are intended to remind people to pur. Modern advertising. and evaluating advertising campaigns. Persuasive advertising aims to create liking. Some persuasive advertising uses comparative advertising. and that industrial companies underestimate the power of company and prod. Informative advertising aims to create awareness and knowledge of new products or new features of existing products.pensive. consumer packaged-goods firms tend to overspend on advertising as a form of insurance against not spending enough. 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. and marketing mix.” Comparative advertising works best when it elicits cognitive and affective motivations simultaneously.The advertising objectives must flow from prior decisions on target market.Define Advertising Advertising. setting the advertising budget.form. Ex.

Most marketers work hard to communicate openly and honestly with consumers.sage to consumers has an important impact on the advertising budget. Advertising is also important when a brand can offer unique physical benefits or features. Newspaper advertising accounts for almost one-fourth of all advertising expenditures. Message execution can be decisive for highly similar products.Good planning and control of advertising depend on measures of advertising effectiveness. DIFFERENTADVERTISING MEDIA The advertising media are the various forms of communication through which advertising reaches its audience. exclusive. such as detergents. it is less expensive to reach consumers of a widely used brand than to reach consumers of lowshare brands. 4.quire heavy advertising to establish a differential image.1. a brand must advertise more heavily to be heard. 3. Stage in the product life cycle . selecting specific media vehicles. Established brands usually are supported with lower advertising budgets as a ratio to sales. choosing among major media types. Yet the amount of fundamental research on effectiveness is appallingly small. To build share by increasing mar. soft drinks ) re. Newspapers. 5. 4. Choosing the advertising message: Message generation: advertising people have proposed different theories for creating an effective message. beer. 3. Market share and consumer base .per-impression basis. Even simple cluster from advertisements not directly competitive to the brand creates a need for heavier advertising. Product substitutability: Brands in a commodity class ( cigarettes.In a market with a large number of competitions and high advertising spending. and deciding on geographical media allocation. Message evaluation and selection a good ad normally focuses on one core selling proposition. abuses occur.High. and impact. Competition and cluster . coffee. On a cost. on how it is said. Social responsibility review advertisers and their agencies must be sure their “creative” advertising does not overstep social and legal norms. Advertising frequency: The number of repetitions needed to put across the brand’s mes. Evaluating advertising effectiveness . . Dik Twedt suggested that messages be rated on desirability. but often more important. and believability Message execution The message’s impact depends not only on what is said. frequency. The steps here are deciding on desired reach. Then the results of these decisions need to be evaluated 5. Still. and public policy makers have developed a substantial body of laws and regulations to govern advertising. deciding on media timing. cigarettes.New products typically receive large advertising budgets to build awareness and to gain consumer trial. Some ads aim for rational positioning and other for emotional positioning. Deciding on media and measuring effectiveness After choosing the message. and vodka. 2.market-share brands usually require less advertising expenditure as a percentage of sales to maintain share. the advertiser’s next task is to choose media to carry it.ket size requires larger expenditures.ness.

IV. and it is fairly inexpensive. The major disadvantages of magazine advertising are high cost and lack of timeliness. III. . 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. Magazines. Direct-mail advertising is promotional material mailed directly to individuals. There are some drawbacks to newspaper advertising It has a short life span. Marketers cannot target specific markets through newspaper ads. A number of magazines like Time and Cosmopolitan publish regional editions. Outdoor Advertising. Advertisers can reach very specific market segments through ads in special-interest magazines. Sign and billboard advertising allow the marketer to focus on a particular geographic area. Magazine advertisements have a longer life span. Direct Mail.Newspaper advertising is used extensively by retailers because it is relatively inexpensive com. Some organizations are using direct e-mail. and it provides highquality color reproduction. Ads are usually read once and then discarded. It is also timely. II. Because it provides only local coverage.pared to other media. A direct-mail campaign may fail if the mailing list is outdated and the mailing does not reach the right people. the message must be limited to a few words. Magazine advertising is more prestigious than newspaper advertising. Direct mail is the most selective medium: Mailing lists are available (or can be compiled) to reach almost any target audience. Color reproduction is usually poor. However. because most outdoor advertising is directed at a mobile audience. The medium is especially suitable for products that lend themselves to pictorial display. The advertising revenues of magazines have been climbing. which provide advertisers with geographic flexibility.. advertising dollars are not wasted in reaching people who are outside the market area.boards. Outdoor advertising consists of short promotional messages on bill. posters. and signs.

frequency . The rate of product trial will depend. Deciding on media timing. Sponsorship (or co-branded) ads integrate a company’s brand with editorial comment. the time period specified. and impact. Advertisers 8 percent of total expenditures. television advertising has a short life. Choosing among major media types selecting specific media vehicles. 30-. Even small retailers are able to afford radio advertisements. VII. The Internet is the newest advertising medium and is growing in popularity. An infomercial is a program-length (usually a half-hour) televised commercial message resembling an entertainment or consumer affairs programs. A national advertiser may buy network time. DECIDING ON MEDIA AND MEASURING EFFECTIVENESS The steps here are Deciding on desired reach.V. Television advertising rates are based on the number of people expected to be watching when a commercial is aired. and impact Media selection is finding the most cost-effective media to deliver the desired number and type of exposures to the target audience. or both. and perhaps like newspaper ads. they may select their audience by choosing the day of the week and the time of day when their ads will be shown. Both national and local firms may buy local time on a single station that covers a particular geographic selling area. Button ads are small squarish ads appearing at the bottom of a web page. Radio. link a specific ad to text or subject matter that an information seeker may enter. Television. Presumably. and Evaluatiing Effectivness (i) Deciding on reach. on radio advertising Like magazine ad vertising. Television ranks number one in total revenue. Radio can be less expensive than other media. 20-. featured primarily on Internet search engines. Infomercial. Television advertising is the primary medium for larger firms whose objective is to reach national or regional markets. Unlike magazine advertising. frequency. which means that its message usually will be broadcast by hundreds of local affiliated stations. Keyword ads. Interstitial ads (in-your-face ads) pop up to display a product ad when viewers click on a web site. Advertisers may sponsor an entire show. the advertiser is seeking a specified advertising objective and response from the target audience – for example. or they may buy spot time for a single 10-. the number of commercials contracted for. and whether the station broadcasts on AM. FM. or 60-second commercial during or between programs. a target level of product trial. Internet. among other things. To an extent. Actual rates depend on geographic coverage. VI. on level . Banner ads are rectangular graphics appearing at the top of most consumer web sites. they contain only a corporate or brand name. radio advertising offers selectivity. Thereare five types of Internet advertisements.

Women’s dresses are best shown in color magazines . and the result was a more balanced consumption patters. whereas newspaper advertising is relatively inexpensive. Suppose 70 percent of a product’s sales occur between June and September. The firm can vary its advertising expenditures to following the seasonal pattern. Media planners make their choice among media categories by considering the following variables: Target-audience media habits: For example . Effective ad-exposed audience: The number of people with target audience characteristics who actually saw the ad. (If the vehicle has pass-on readership. and Polaroid cameras are best demonstrated on television. A message containing a great deal of technical data might require specialized magazines or mailings. and impact. Most firms pursue a seasonal policy.In choosing media. visualization. explanation. Product characteristics: Media types have different potentials for demonstration. (iv) Deciding on media timing. believability. . This resulted in increased non seasonal consumption of its brand. Message Characteristics: Timeliness and information content will influence media choice. and impact: Reach : The number of different persons or households exposed to a particular media schedule at least once during a specified time period. and color. Other soft drink manufactures started to do the same. frequency. (ii) Choosing among major media types The media planner has to know the capacity of the major media types to deliver reach. Cost: Television is very expensive. (iii) Selecting specific vehicles The media planner must search for the most costeffective vehicles within each chosen media type. then the audience is larger than circulation) Effective audience: The number of people with target audience characteristics exposed to the vehicle.drink manufacturer put more money into off-season advertising. frequency. to oppose the seasonal pattern. or newspaper. What counts is the cost-per-thousand exposures.of brand awareness. Yet some year ago. A message announcing a major sale tomorrow will require radio. or to be constant throughout the year. Audience: The number of people exposed to the vehicle. The effect of exposures on audience awareness depends on the exposures’ reach. 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). The advertiser who decides to buy 30 seconds of Audience size has several possible measures: Circulation: The number of physical units carrying the advertising. a soft. while not hurting seasonal consumption. Many advertising agencies use a computer program to select the initial media and then make further improvements based on subjective factors. TV. radio and television are the most effective media for reaching teenagers. Media planners are increasingly using more sophisticated measures of effectiveness and employing them in mathematical models to arrive at the best media mix. the advertiser faced both a macroscheduling and a micro scheduling problem involves scheduling the advertising in relation to seasons and the business cycle.

newsletters. and stationery are also public relations tools. 5 .” and handling or heading off unfavorable rumors. Simply speaking . Corporate communication: Promoting understanding of the organiza. and news releases. PR Tools: In brief one can summarize the tools as follows :• Public relations professionals prepare written materials such as brochures. • Event sponsorship is a public relations tool in which a company pays for all or part of a special event such as a concert. Product publicity: Sponsoring efforts to publicize specific products. business cards. Counseling: Advertising management about public issues and com. 3 .pany positions and image during good times and crises. suppliers. Public Relations perform the following five functions: 1 . • Corporate identity material such as logos. annual reports. a. and events.tion through internal and external communications. building up a good corporate image. Press relations: Presenting news and information about the organiza. com. 2 .tion in the most positive light. public relations would mean . and events. building up a good “corporate image. sports competition. festival. Not only must the company relate constructively to customers. stories. and dealers.public relations.pany magazines.building good relations with the company’s various publics by obtaining favorable publicity. Public relations (PR) involves a variety of programs designed to promote or protect a company’s image or its individual products. but it must also relate to a large number of interested publics. or play. Sponsoring special events is an effective way for an organization to increase brand recognition and receive media coverage with relatively little investment. 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.mote or defeat legislation and regulation. . signs.PUBLIC RELATIONS Another major mass-promotion tool is. Lobbying: Dealing with legislators and government officials to pro. and handling or heading off unfavorable rumors. A public is any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives. stories. 4.

You would agree that more than any other element of the promotional mix. News release–a typed page of about 300 words provided by an organization to the media as a form of publicity b . Publicity-based public relations tools include: a .b. 1. Sales promotion is commonly referred to as “Below the Line” promotion. Feature article–a piece (of up to 3. Significance of the news item Sales promotion Short-term incentives to encourage the purchase or sale of a product or service. to create news about a company. Most sales promotional methods can be classified as promotion tech. Response of media personnel c. whereas advertising and personal selling offer reasons to buy a product or service. Composition of the target audience b. such as grand openings. • • • 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). A trade sales promotion method encourages wholesalers and retailers to stock and actively promote a manufacturer’s products.ments and receive supplementary textual materials and photographs • The specific types of public relations tools chosen depend on several factors. A consumer sales promotion method attracts consumers to particular retail stores and motivates them to purchase certain new or established products. a. It is not designed to be informative – a role which advertising is much better suited to. 3 . or both. . It is about stimulating customers to buy a product..000 words) prepared by an organization for inclusion in a particular publication c. Publicity is communication in news story form about an organization. Captioned photograph–a picture accompanied by a brief explanation d . Sales promotion consists of short-term incentives to encourage purchase or sales of a product or service. sales promotion is about “action”. sales promotion offers reasons to buy now. its products. Press conference–a meeting at which invited media personnel hear important news announce. 2.niques either for consumer sales or for trade sales. A number of factors enter into marketing decisions about which and how many sales promotion methods to use. This is usually known as “selling into the trade” Sales Promotion Methods. Public relations personnel sometimes organize events. • Some public relations tools are associated specifically with publicity.

direct mail. • Samples. either with or without an additional purchase of the product.chase of items in large quantities. A premium is a gift that a producer offers the customer in return for using its product. Some trade shows are organized exclusively for dealers–to permit manufacturers and wholesal. • Cooperative Advertising. direct mail. Usually the rebate is offered by the producer to consumers who send in a coupon along with a specific proof of purchase. Frequent-user incentives build customer loyalty. • Coupons. • Buying Allowances. They are made available to customers through newspapers. A trade show is an industry wide exhibit at which many sellers display their products. online. Most point-of-purchase displays are prepared and set up by manufacturers and wholesalers. Cooperative advertising is an arrangement whereby a manufac. • Frequent-User Incentives. • Trade Shows. Others are promotions designed to stimulate consumer awareness and interest. or in stores. 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. magazines. A rebate is a return of part of the purchase price of a product.ers to show their latest lines to retailers. A sample is a free product given to customers to encourage trial. straightforward. These coupons may be worth anywhere from a few cents to a few dollars. Buying allowances are simple.turer agrees to pay a certain amount of the retailer’s media costs for advertising the manufacturer’s product. • Premiums.chasing specified quantities of a product. It may actually hold merchandise or inform customers of what the product offers and encourage them to buy it. A point-of-purchase display is promotional material placed within a retail store.fully targeted individual consumers to obtain an immediate response. - - - - - Direct Marketing Direct marketing has been defined by the Institute of Direct Marketing as: The planned recording. Direct communications with care. Coupons may also offer free merchandise. and easily administered. Rebating is a relatively low-cost promotional method. An airline’s frequent-flyer program is one example of a frequent-user incentive. • Point-of-Purchase Displays. Samples are the most expensive sales promotion technique. stimulate pur. A coupon reduces the retail price of a particular product by a stated amount at the time of purchase. A buying allowance is a temporary price reduction to resellers for pur. and in shelf dispensers in the store. A buying allowance may serve as an incentive to resellers to handle new products.You must be familiar with many of the following sales promotion methods:• Rebates. Samples may be offered via online coupons. Direct marketing is the use of consumer-direct (CD) channels to reach and deliver goods . Frequent-user incentives are programs developed to reward customers who engage in repeat (frequent) purchases. They can easily be copied by competitors.

cookware and healthfood. Nestle. registering a 54% yoy growth. Direct Marketing in India: • In India. Tupperware and Avon now seem to be following the path charted by FMCG giants such as Hindustan Lever. • Most of the Direct Selling companies operating in India today are in the field of cosmetics. personal products. Mass-market penetration is now catching up within the Rs 1. 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. Oriflame India Pvt Ltd.vices to customers without using marketing middlemen.and ser. Marico.1. Godrej and Tata Tea. All major players in India are affiliated to IDSA. Britannia. Total sales through direct selling route in 2002 was Rs. direct selling is growing at a fast pace. 90% of goods sold by the direct sellers in India are sourced from goods manufactured within the country. DIRECT MARKETING BENEFITS . Lotus Learning Pvt Ltd. Dabur. Tupperware India Pvt Ltd. and direct selling majors such as Amway. • India was the fastest growing market in 2000 in terms of revenues from direct selling. • • • • Amway is the largest player in India with annual sales exceeding Rs5bn Other major players are Avon Beauty Products (I) Pvt Ltd.723.7 crore.800-crore direct selling industry as well. household products.

. 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. 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. Even a brand that has achieved acceptance in other markets will require introduction in new markets. Introducing new product is always a risky venture. buyer behavior. even for a skillful marketer.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. ‘The PLC concept can be applied to a product category (perfumes). and the composition of the market. Almost every company as had spectacular failures.

Rivals copy product features of successful brands and they become more alike. the market expands. They should consider modifying the market. the most successful ones are actually evolving to meet changing consumer needs. which makes the competition even tougher. Most of the times it will find that the sales are repeat sales to earlier buyers. but total industry sales are still rising. product and marketing mix. and distribution. In doing so h owever. By spending a lot of money on product development. attracting competitors who copy and improve on the features of the new product. This is the stage of peak profits. As new customers are attracted. 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. company will find decline in industry profits accelerates further.duce their own brands. competitive product forms. the company can capture a dominant position. New product forms and brands enter. as new customers enter the market and old customers make repeat purchases. In this stage you will find that many products may appear unchanged. In this phase. At this point of time company need to add new dealers and distributors. new pack sizes may need to be introduced. it gives up current profit and hopes to make it up in the next stage. Middlemen often intro. Thus price competition develops along with heavy promotions of whatever unique brand fea. the sales have begun to increase rapidly in this stage. . Maturity Stage At this stage company will find greater number of competitors. It is during this stage that marketers are focusing effort on extending the lives of their existing brands. Competition intensifies and industry profits begin to decline at the end of the growth stage. There is little growth potential for the product. 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. promotion. and brands exist in the maturity stage.tures still exist. the company faces a trade-off between high market share and high current profit.Growth Stage At a growth stage where the company has successfully launched its product.

Product forms and brands typically enter into decline. Sales and profits decline rapidly and competitors become more cost conscious. companies need to pay attention to their dying products. sales force attention. stages while product categories last longer.Decline Stage Now the company reaches to the final stage of the life cycle.agement may decide to maintain its brand without changes in the hope that some competitors will leave the market. Or it may decide to ‘re-position the product in the hope of moving it back to the growth phase in a new avatar . Thus Sanifresh is still a leading toilet cleaner though its powdered form is less popular than liquids. frequent inventory re-adjustments. At times man. It is basically because of Competitions that the product forms and brands enter into the decline stage. and advertising changes.. Brands with strong acceptance by some customer segments may continue to produce profits. There are hidden costs in terms of management time. For these reasons.

resent the first 2. 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. Early adopters tend to be educated opinion leaders and represent about 13. Early majority – they are people who are careful consumers who tend to avoid risk. Early adopters . But if innovators and early adopters do not adopt.well-informed risk-takers who are willing to try an unproven product.dations from others who have experience with the product.somewhat skeptical consumers who acquire a product only after it has become commonplace. early adopters then begin to purchase the product. the early majority adopts the product once it has been proven by the early adopters. . The late majority represents about 34% of consumers. Late majority . The adoption process affects the length of a products life cycle. Innovators rep.5% to adopt the product. They rely on recommen. (3) Early majority (4) Late majority and (5) Laggards.The Adoption & Diffusion Process – The PLC concept is related to the adoption and diffusion processes. Innovators . Laggards represent about 16% of consumers. Laggards .5% of consumers. the product is doomed D failure.based on the positive response of innovators. 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 represents 34% 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.

these need to be tested with con.ners’ recipes. competitors. a word or a picture may be suffi. Almost 55% of all new product ideas come from internal sources according to one study. The Major sources of new product ideas include internal sources. For some concept tests. customers. Idea Screening: -The purpose of idea generation is to create a large pool of ideas.New Product Development Process – Figure will show the complete process of new product development lets discuss them one by one. The company . Companies like 3M and Toyota have put in special incentive programs or their employees to come up with workable ideas. 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. government reports. As opposed to a product idea that is an idea for a product that the company can see itself marketing to customers. management can assess how well the idea fits with the company’s marketing skills and experience and other capabilities. the management can obtain an overall rating of the company’s ability to launch the product successfully. The company can watch competitors’ ads. press releases and write-ups in the press about their activities. a physical presentation will increase the reliability of the concept test.sumers either symbolically or physically. It. advertising agencies and new product consultants. Concept Development and Testing . New Product Development starts with idea generation A company has to generate many ideas in order to find one that is worth pursuing. shows and seminars. can often pass on information about new develop.cient. market research firms.An attractive idea has to be developed into a Product concept. Companies also buy competitors information and pay for industrial espionage. Other sources are trade magazines. a product concept is a detailed version of the idea stated in meaningful consumer terms. 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. 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. Resellers and others who are close to the market. The purpose of this stage is to pare these down to those that are genuinely worth pursuing. This is different again from a product image. Finally. About 30% of new product ideas come from analysis of competitors’ products.ments. Once the concepts are developed. After being exposed to the concept. Against these. Customers: even create new products on their own. Companies have different methods for doing this from product review committees to formal market research. One of Pillsbury’s four cake mix lines and several variations of another came directly from Bake-Off win. however. distributors and suppliers. which is the consumers’ perception of an actual or potential product. Almost 28% of new product ideas come from watching and listening to customers.

Once the management has decided on the marketing strategy.can then project these findings to the full market to estimate sales volume. and the marketing mix strategy. Business analysis involves the review of projected sales. costs and profits to find out whether they satisfy a company’s objectives. the planned product positioning and the sales. distribution. profit goals. market share and profit goals for the first few years. . The third part of the marketing strategy statement describes the planned long-run sales. the product can move to the product development stage. and marketing budget for the first year. Marketing Strategy Development .This is the next step in new product development. Business Analysis . The strat.egy statement consists of three parts: the first part describes the target market. it can evaluate the attractiveness of the business proposal. The second part outlines the product’s planned price. If they do.

ping products (3) Specialty products. Costs of test marketing can be enormous and it can also allow competitors to launch a “me. R&D or engineering develops the product concept into a physical product. The classification is based on differences in the buying behavior of the people who buy the prod. the next step is test marketing: the stage at which the product and the marketing program are introduced to a more realistic market settings. The amount of test marketing varies with the type of product.too” product or even sabotage the testing so that the marketer gets skewed results.1. at times. This depends a lot on the ability of the company to bear risk and the reach of its distribution network.introducing the product to the market-it will face high costs for manufacturing and advertising and promotion. See Figure 10. Three subclasses are: . and (4) Unsought products. Test Marketing . Test marketing gives the marketer an opportunity to tweak the marketing mix before the going into the expense of a product launch. nationally advertised items like cigarettes. Hence. This step calls for a large investment.If the product passes the functional tests. they must be tested. They are widely available at many outlets. 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. The company will have to decide on the timing of the launch (seasonality) and the location (whether regional.Product Development . toffee. They are basically low-priced. Classification of Products The most common basis for classifying consumer products is based on buyer behavior. management may decide to do away with this stage and proceed straight to the next one: If the company goes ahead with commercialization . First.Here. Four classes of consumer products are (1) Convenience products (2) Shop. Functional tests are then conducted under laboratory and field conditions to ascertain whether the product performs safely and effectively. It will show whether the product idea can be developed into a full. The system works because many consumers behave alike in buying a given type of product. or blades and matchboxes. It gives you a brief description of consumer goods.ucts (it is basically how you perceive and buy the products) not on the differences in the products themselves. national or international). When the prototypes are ready. This helps marketers in making generalizations to guide development of their marketing mixes.fledged workable product. R&D will develop prototypes that will satisfy and excite customers and that can be produced quickly and at budgeted costs.

But specialty product can be less intensively distributed than a convenience or shopping product because buyers will search to find it. The desire to buy impulse is a result of the shopping trip. The desire to buy staple products may cause the consumer to go shopping. “‘insist on the real thing”. Lawyers and Accountants who enjoy a large following are selling specialty products.Emergency Products: Purchases of emergency products result from urgent and compelling needs. Doctors. style. Thus sellers tend to engage in price competition. eggs. 2. you are aware that most of the brands are very similar then you will limit your shopping effort to price comparisons. A retailer might advertise that the Color TV’s price includes 6 months or free interest financing. cars. which are considered to be alike. and so on. One might set up service centers to differentiate its product from rivals.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. Often a consumer pays more than if this need had been anticipated. Shoppers spend more time. they probably will lease it. or type.Impulse Products: Purchases of Impulse products are absolutely unplanned exposure to the product triggers the want. 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. Consumers will go out of their way to locate and buy these products because they perceive quality and other benefits in owning them.standardized. cost and effort to compare because they perceive a higher risk in buying these products. 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. Just suppose you want to buy a colour television. Once they find the right one. Stardust and Savvy magazines. bread. Ray. Consumers shop for the best price quality combination. 1.1. toffees and chocolates (placed at a child’s eye-level) are examples of impulse products. Shopping products can be homogeneous or heterogeneous. jewellery. Specialty Special Products In this case you as a consumers will make a special effort to buy specialty products. For these products consumers have strong convictions as to brand. floor plans. distance from stations and so on. Mitsubishi Lancers. Price often is secondary to style and quality when price comparisons are difficult to make. price becomes important. 3. Using price to compare clothing.Homogeneous Shopping Products: they are products. There is no Comparison Shopping. Leica Cameras and Johnny Walker Scotch Whisky are examples. furniture and apartments is tough because quality and style vary within each product class. 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. Marketers try to create specialty status for their products with advertising phrases like “accept no substitutes”. This is why impulse products are located where they can be easily noticed. butter which are bought routinely because the family regularly consumes them. Shopping Shopping Products These products involve price and quality comparisons.Ban glasses. Staple Products: this includes milk. 2. . The decision to buy these products is programmed after the first time when the consumer puts them on his list of regular items. Just suppose a couple is searching for a flat may spend a lot of time comparing decor. If the rent is reasonable compared to the alternatives.

i. But heavy promotion and acceptance of the product practically eradicated polio. 7UP. Marketers face a tough challenge in persuading consumers to buy their new unsought products. Rin detergent powder. maturing and declining productst.e. A brand is defined: “As a name. • Brand mark-elements of the brand that cannot not be spoken. growing. and Surf Ultra are part of Lever’s detergents line and Le Sancy. The marketer’s task here is to inform target consumers of the products existence and stimulate demand for it. Lux.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. Lifebuoy.e. BRANDING . a wreath and a doctor’s services in an emergency are regularly unsought products. „ 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. term. There are two types: regularly unsought products and new unsought products. 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 differentiates these products from those of competitors” (American Marketing Association. • Brand name is that part that can be spoken. These are basically existing products but the consumers do not want to buy this product now. Brand names simplify shopping. Rin. are part of its soaps line. i. Rin Solarox.symbol . although they may eventually purchase them. guarantee a certain level of quality and allow for self-expres. marketing and or production considerations. Rexona. words and numbers. Oral polio vaccine was once a new unsought product. sign. Like Life Insurance. a lawyer’s services in contesting a will. When we are discussing about a typical large multi-product firm’s product mix includes new. Wheel.sion. Chicago). PRODUCT AND PRODUCT MIX Any organization is marketing more than one product then it has a product mix. including letters. Surf.

56. W. research. what would come to our mind? Like Videocon suggests a lion..g. es.” . Ronald McDonald. • Trade name-The full legal name of the organization.• Trade Character i. Had the brand been an animal or an object or a person. not the name for a specific product. etc. e. Because of the imagery associated with the brands they actually have the power to enhance or limit a consumer’s perceived image or selfimage. recreation. Charlie Chaplin and Cherry Blossom.515 new in that year. insurance. entertainment and fulfillment of other psychological and emotional needs such as education. I. Coke is an icon of American culture. US Patent & Trademark Office had 680. which govern a producer. Then there are services which are provided by professionals but consumed for reasons not of business. It includes a wide variety of services. legal and medical advice. Ford. thus Tata stand for quality.sentially intangible activities which provide want-satisfaction. Attributes of Brand Values: The values. SERVICE MAREKTING A service is an activity which has some element of intangibility associated with it. We know that Sunny is for teenagers. We expect a Mercedes to be driven by an executive or a top-class businessman.e. Culture: A brand also represents a certain culture. computer-programming. banking. fair price and so on. We know what a Garden Woman is. and that are not necessarily tied to the sale of a product or another service. “services are those separately identifiable. MRF suggests a muscle man and Rin suggests a lighting flash. Personality: A brand projects a personality.g. are reflected by the brand.e.1990. There are the business and professional services such as advertising. fine arts. Pillsbury Doughboy • Trade mark-legal designation that the owner has exclusive rights to the brand or part of a brand. e. User: The brand suggests its own target audience. and does not result in a transfer of ownership.. Sometimes a brand may take on the personality of an actual person. rather for leisure. while Shilpa Bindis are typically Indian. A change in condition may occur and production of the service may or may not be closely associated with a physical product. culture and personality of the brand.J Stanton “Services as fulfilling certain wants and states that.000 trademarks registered. These users correspond to the values. which involves some interaction with customer or with property in their possession. marketing.

Yet resort owners have the same number of rooms to sell Yetround. which is lost forever. .turned. an hour of a lawyer’s time. Services cannot be patented legally. Because services are perform In most cases services cannot be separated from the person or firm providing it. Services cannot be felt.The most basic and universally cited. unsold seats in a cinema hall represent service capacity. or re. A person who possesses a particular skill provides Service. or spare berths on a train. resold. or telephone line capacity not used cannot be reclaimed and used or resold at a later time. Inseparability . and therefore fluctuations in demand are often difficult to manage. Intangibility actually presents several marketing challenges: Services cannot be inventoried. stored. For example. difference between goods and services is intangibility. A plumber has to be physically present to provide the service. Teaching is an intangible service. 1. but little demand in July. and new service concepts can therefore easily be copied by competitors.Characteristics of services. A car mechanic who has no cars to repair today. there is tremendous demand for resort accommodations in XYZ in February.It basically refers to the fact that services cannot be saved. tasted. A seat on an airplane or in a restaurant. the beautician has to be available to perform the massage Perishability . touched or seen in the same way as goods.

Apart from the fact that service is not fully utilised represents a total loss. the other dimension of this. This is in contrast to goods that can be stored in inventory or resold another day. . or even re-turned if the consumer is unhappy. certain train routes are always more heavily booked than others. There is a peak demand time for buses in morning and evening (office hours).

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