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Table of Contents:
1. Marketing Concept…………………………………………………….3-12 2. Marketing and Strategic Planning Process…………………………….13-29 3. Marketing Environment………………………………………………..30-37 4. Market Research and Marketing Information System………………...38-50. 5. Demand Forecasting and Market Potential Analysis………………….51-58 6. Consumer Buying Process and Organisational Buying Behaviour……59-74 7. Market Segmentation, Target Market, Positioning and Differentiation.75-89 8. Product Decisions and Product Life Cycle…………………………...90-100 9. Distribution and Promotion Decisions……………………………...101-112 10. Personal Selling and Sales Management…………………………..113-119 11. Pricing Decisions…………………………………………………..120-124 12. New Product Development………………………………………..125-127
Marketing- The most crucial word in the world of business today, but it has been practiced in one form or the other since ages. Marketing is indeed a very ancient art. Marketing exists in any type of economic system and any stage of economic development.
Evolution of Marketing
Marketing as we all know it today began in the 1970s with the birth of the "marketing orientation". During the first stage of capitalism business had a production orientation. Business was concerned with production, manufacturing, and efficiency issues. By the mid 1950s a second stage emerged, the sales orientation stage. Business's prime concern was to sell what it produced. By the early 1970s a third stage, the marketing orientation stage emerged as businesses came to realize that consumer needs and wants drove the whole process. Marketing research became important. Businesses realized it was futile putting a lot of production and sales effort into products that people did not want. Some commentators claim that we are now on the verge of a fourth stage, one of a personal marketing orientation. They believe that the technology is available today to market to people on an individual basis (see personalized marketing, permission marketing, and mass customization). They feel it is no longer necessary to think in broad aggregated terms like market segments or target markets.
Concepts of Marketing:
Different firms do business with different orientations and perceptions which leads to the following marketing concepts: The Exchange Concept The Production Concept The Product Concept 3
The concept assumes that market success can be achieved via product excellence. Marketing is a much broader concept than exchange. The concept has an emphasis on social responsibility and suggests that for a company to only focus on exchange relationship with customers might not be in order to sustain long term success. This pays little attention to whether the product is really needed by the consumers. Goods are produced without taking into consideration the choices or tastes of your customers.). swap etc. new products and specially engineered products. improved products. The Marketing Concept: This involves focusing on customer needs before developing the product. every worker and manager will think customer and act customer. the company's requirements. The concept puts the consumer at both the beginning and the end of the business cycle. The Product Concept: This concept seeks to win the market through product attributes but fails to understand the consumer preferences.The Sales Concept The Marketing Concept The Societal Marketing Concept The Exchange Concept: Exchange is the oldest form of marketing. 4 . The Sales Concept: The concept believes that the company would not only focus on production but also aggressively promote and push the products through advertising and personal selling. The main focus is on product quality and differentiation. Rather. and society's long-term interests. marketing strategy should deliver value to customers in a way that maintains or improves both the consumer's and the society's well-being. Exchange takes into account only the pricing and distribution aspects of marketing but misses out on the most crucial idea of customer orientation and satisfaction. purchase. The main focus is to beat the competition with regards to sales. The Societal Marketing Concept: The societal marketing concept is an enlightened marketing that holds that a company should make good marketing decisions by considering consumers' wants. aligning all functions of the company to focus on those needs and realizing profits by successfully meeting customer needs over a long term. The Production Concept: This Management philosophy believes that buyers prefer goods and services which are cheap and widely available. It is the process of satisfying human wants via trade (barter. Every department.
planning. nor is it the sole domain of the marketing department. At its very core are the customer and his or her satisfaction. and at the same time. When customers have many choices. it is a philosophy or way of doing business. anticipating and satisfying customer requirements profitability’ If we look at this definition in more detail Marketing is a management responsibility and should not be solely left to junior members of staff. 5 . The Chartered Institute of Marketing define marketing as ‘The management process responsible for identifying. The implication of the marketing concept is very important for management. From top management to the lowest levels and across all departments of the organization. implementation of campaigns and a competent manager(s) with the appropriate skills to ensure success. Rather. wants. and satisfaction should always be foremost in every manager and employees' mind. The marketing concept recognizes that the company's knowledge and skill in designing products may not always be meeting the needs of customers.Customer vs. Marketing Concept and Philosophy The marketing concept and philosophy is one of the simplest ideas in marketing. the consumer may not have paid for the product or service. The customers' needs. it is adopted by the entire organization. these benefits will be provided and a transactional exchange will take place. "the customer is king". • A consumer – is the ultimate user of the product or service. Consumer • A customer – purchases and pays for a product or service. What is Marketing? The term marketing has changed and evolved over a period of time. The marketing era started to dominate around 1970. and it continues to the present. The marketing concept and philosophy states that the organization should strive to satisfy its customers' wants and needs while meeting the organization's goals. It also recognizes that even a good sales department cannot sell every product that does not meet consumers' needs. Marketing requires co-ordination. today marketing is based around providing continual benefits to the customer. it is also one of the most important marketing philosophies. It is not something that the marketing department administers. they will choose the one that best meets their needs. In simple terms.
It starts with understanding consumer needs and then catering to those needs. It should consistently increase the profits over the long run. It is clearly shown in the diagram given below: Identify and analyse Develop a marketing programme with a mix of To reach To provide output of Product planning Distribution system Price structure Promotional Programme Customers (market) Customers (market) Customer satisfaction 6 .a result of interaction of many activities. while at the same time ensuring that the satisfaction of these needs results in a healthy turnover for the organisation. It is an integrated process. clearly the greater the benefit provided the higher transactional value an organisation can charge. anticipated and exceeded. Philip Kotler defines marketing as ‘satisfying needs and wants through an exchange process’. competitor strategies analysed. Within this exchange transaction customers will only exchange what they value (money) if they feel that their needs are being fully satisfied. Marketing in the firms begins and ends with customers.Marketing objectives. Through effective use of market and marketing research an organisation should be able to identify the needs and wants of the customer and try to delivers benefits that will enhance or add to the customers lifestyle. goals and targets have to be monitored and met. Following are the important characteristics of Marketing: It is a total system of business strategies and activities which are consumer oriented.
During each of the phases described. clothing. Demand: When human wants are backed by purchasing power and willingness to buy they become demands. Wants: Wants are the forms human needs take as they are shaped by culture and individual personality characteristics. Needs may be physiological. 7 . a company has a mission.need for food. the company defines its product and market. Customer value: difference between the value the customer gains from buying and using a product and the cost of buying the product. services. Once the company has launched its product in the targeted markets. information. Next step is to start the overall marketing process. Market and competitor research is a crucial part of this process. . e. PR consists of different disciplines and each one addresses its own specific public(s).The potential customers must first be aware of and then comprehend the product. Depending on the public to be addresses. While human needs are limited. shelter and safety. After conducting a SWOT analysis. Only when potential customers are convinced that it is beneficial for them will they consider purchasing the product. the company interacts with different publics. or experiences offered to a market to satisfy a need or want. Marketing and sales are closely linked – only a joined effort will result revenues. sales and promotion process starts. Market: A set of actual and potential buyers of a product. How do companies handle marketing? It is important to realize that the ultimate goal of any company or organization is survival.Core Marketing Concepts: Needs: States of felt deprivation. The mission is often reflected in the company slogan and is part of its branding. Marketing Offers: Combinations of products.g. PR is the communication tool. Customer Satisfaction: Depends on how well the product’s performance lives up to the customer’s expectations. Pricing strategy is worked out. These are basic requirements of any individual. In order to stay in business. warmth. wants are unlimited. Formulating the mission statement is an important marketing task. Social needs are craving for belongingness and affection.
is the meaning of competitive advantage and a market-oriented culture provides a solid foundation for these value-creating capabilities. competitors. Specifically. and cross-functional coordination .customer orientation. But where competitive advantage was once based on structural characteristics such as market power. and other significant market influencers (such as regulators and suppliers) to use in building that value. this entails collecting and coordinating information on customers. Market orientation provides "a unifying focus for the efforts and projects of individuals. A business is market-oriented when its culture is systematically and entirely committed to the continuous creation of superior customer value. thereby leading to superior performance. a business must develop and sustain competitive advantage. economies of scale." A developing stream of empirical research has found a strong relationship between market orientation and several measures of business 8 . This.are long-term in vision and profit-driven. after all.Market Orientation: To achieve superior performance. or a broad product line. competitor focus. the emphasis today has shifted to capabilities that enable a business to consistently deliver superior value to its customers. The three major components of market orientation .
It involves a continuous improvement in business processes.39) The heart of a market orientation is its customer focus. Buyer value can be created at any point in the chain by making the buyer either more effective in its markets or more efficient in its operations. 1994." (Peter F. It is "the business seen from the point of view of its final result. sales growth. from the customer’s point of view. Drucker. InterFunctional Coordination Customer Orientation Competit or Focus Market Orientation Customer Orientation It is the set of beliefs in sales that says that customer needs and satisfaction are the priority of an organization. A market-oriented business understands the cost and revenue dynamics not only of its immediate target buyers but also of all markets beyond. p. It focuses on dynamic interactions between the organization and customers as well as competitors in the market and its internal stakeholders. To create superior value for buyers continuously requires that a seller understand a buyer's entire value chain. and new product success. that is.performance. not only as it is today but also as it evolves over time. customer retention. 9 . including profitability. for demand in the immediate and "upstream" markets is derived from the demand in the original "downstream" markets.
For example. learn the customer's needs. and be the customer representative on the factory floor. Some businesses even involve their customers in hiring.Therefore. Managers and employees throughout the business call on their customers or bring them into their own facilities in a constant search for new ways to satisfy their needs. a market-driven business develops a comprehensive understanding of its customers' business and how customers in the immediate and downstream markets perceive value. A salesperson can never adopt both attitudes in serving a customer. Customer orientation and sales orientation are two extremes in dealing with customers. sales orientation encourages opportunistic if these are necessary to make the sale. Sales-oriented salespeople tend to focus on immediate sales regardless of customer benefit. Customer orientation places an emphasis on listening to customers. possibly at the expense of immediate sales. Customer-oriented salespeople tend to exhibit behaviors that enhance long term customer satisfaction. Competitor Focus Creating superior customer value requires more than just focusing on customers. There are seven key behaviors that strongly indicate a customer orientation attitude: • • • • • • • Thinking and talking about clients a lot Continually assessing your customers’ perceptions Resolving priority issues in favor of the customer Giving in. training. and developing contact people as well as in making motivation and reward system decisions. The key questions are which competitors. they pay close attention to service. To maintain the relationships that are critical to delivering superior customer value. these businesses take great care to recruit and retain the best people available and provide them with regular training. Market-driven businesses continuously monitor their customer commitment by making improved customer satisfaction an ongoing objective. re-deploying resources and when they get in the way of service quality Employees of market-oriented businesses spend considerable time with their customers. adding value for the customer Making amends to customers for poor treatment Employing a "whatever it takes" policy to satisfy special needs Redesigning processes. possibly at the expense of long-term satisfaction. Because of the importance of employees in this effort. both before and after sales. compromising. and whether target customers 10 . Involving customers in these key areas forges strong customer loyalty. DuPont has developed a program called "Adopt a Customer" that encourages a blue-collar worker to visit a customer once a month. On the other hand. and what technologies.
branch office. Superior value requires that the seller identify and understand the principal competitors' short-term strengths and weaknesses and long-term capabilities and strategies. Complexity high • Building a house • Individual journey • Health care products/ services • Consulting Customer Driven Output • Interior decoration products Customer-Centric Output • Petrol • Commodity Seller Driven Output • Package tour • Standard software • Train journey • Fast Food Non limited • Meal in a restaurant • Repair Patch • Tailor made clothes • Individual colour of car • Haircut high Individuality non • Basic food • Individual music cd limited 11 . A seller should adopt a chess-game perspective of its current and principal potential competitors. must recognize their role in helping a firm achieve and sustain competitive advantage.perceive them as alternate satisfiers. Inter-functional Coordination The third of the three core components of a market orientation is the coordination of personnel and other resources from throughout the company to create value for buyers. regardless of their distance from the strategy formulation process. facility. it should continuously examine the competitive threats they pose. All employees. As Michael Porter (1985) explains: Every department. This is crucial information to a seller in developing its contingency competitive strategies. This means that any individual in any function in a seller firm can potentially contribute to value creation. Any point in the buyer's value chain is an opportunity for a seller to create value for the buyer firm. and other organizational unit has a role that must be defined and understood. Moreover. inferring these threats from intent and value-creation capabilities.
they need feedback on customer satisfaction. promotion and distribution for the product. Areas to research include how customers buy (which marketing channels are used) and what competitors are offering Product development Businesses must develop products and services that meet needs and wants sufficiently to attract target customers to wish and buy Marketing mix Having identified the target markets and developed relevant products. They also need to feed this back into product design and marketing mix as customer needs and the competitive environment changes Market monitoring 12 .and then (most importantly) retain them by building a relationship. In order to do this effectively. management must then determine the price. The choice of target markets will be influenced by the wealth consumers hold and the business' ability to serve them Management has to collect information on the current and Market research potential needs of customers in the markets they have chosen to supply. to communicate the offer and to make it accessible and convenient The objective in marketing is to first attract customers .Marketing Management in a Customer-Orientated Business The process of marketing management is about attracting and retaining customers by offering them desirable products that satisfy needs and meet wants. The marketing mix is tailored to offer value to customers. Marketing management in a customer-orientated business consists of five key tasks summarised in the table below: Marketing Task Identify markets Commentary target Management has to identify those customers with whom they want to trade.
13 . pace and timing of growth. That's why a business review or preparation of a strategic plan is a virtual necessity.Marketing and Strategic Planning Process Entrepreneurs and business managers are often so preoccupied with immediate issues that they lose sight of their ultimate objectives. This may not be a recipe for success. It can be viewed as a stream of decisions and actins that lead to effective strategies and which. help the firm achieve its growth objectives. Importance and scope Major concerns of Strategic Planning Future: Long term dynamics is its concern. in turn. Strategic planning is the management task concerned with the growth and future of a business enterprise. action. not day-to-day tasks. Growth: Direction. but without it a business is much more likely to fail. A sound strategic planning should: • • • • • • Provides the direction to the corporation and indicates how growth is to be achieved Enable long-term decisions concerning the firm Ensures optimum utilization of resources Prepares the firm to face the future Helps acquire relevant competitive advantages Nature.
values. objectives. mission. Corporate strategy is its concern. strategies. 14 . creating long term sustainable organizational capability is its concern. Strategy: Strategy is its concern. These are discussed below. Business portfolio: Product. Creating core competencies. goals and programs.market scope and postures.Environment: The fit between the business and its environment. not the operational activities. Key Steps towards a Strategic Plan The preparation of a strategic plan is a multi-step process covering vision. Integration: Integration of all the major functions and not just a particular function.
customers. Goals should be quantifiable. may be achieved. manufacture and market specific product lines for sale on the basis of certain features to meet the identified needs of specified customer groups via certain distribution channels in particular geographic areas". offerings and markets. including employees. or they can relate to primary matters in key functional areas. deadlines. The Vision The next step is to develop a realistic Vision for the business. Aside from presumably indicating a necessity to achieve regular profits. profitability.The Mission The nature of a business is often expressed in terms of its Mission which indicates the purposes of the business. objectives. develop. finances. or acquisition plans. The Strategies Next are the Strategies . employees. profitability. efficiency. for example. The Values The next element is to address the Values governing the operation of the business and its conduct or relationships with society at large. objectives should relate to the expectations and requirements of all the major stakeholders. suppliers. "to design. objectives etc. activities etc. utilization. and should reflect the underlying reasons for running the business. organic growth. time-scales. These objectives could cover growth. 15 . They can relate to factors like market (sizes and shares). local community and other stakeholders. products. These should cover resources. The Objectives The next key element is to explicitly state the business's Objectives in terms of the results it needs/wants to achieve in the medium/long term. realistic and achievable. size.the rules and guidelines by which the mission. This should be presented as a pen picture of the business in three or more year’s time in terms of its likely physical appearance. budgets and performance targets. They can cover the business as a whole including such matters as diversification. The Goals These are specific interim or ultimate time-based measurements to be achieved by implementing strategies in pursuit of the company's objectives. consistent. The Action Plans The final elements are the action plans which set out the implementation plans for the key strategies. technology.
Describe the actual strategies followed over the past few years in respect of products/services.performance. Critically examine each strategy statement by reference to activities and actions in key functional areas covering such matters as: o How has the company been managed? o How has the company been funded? o How has the company sought to increase sales and market share? o How have productivity/costs moved? SWOTs .distribution .processes.resources. Then judge these against actual performance along the following lines: Is the current vision being realized? How has the company's mission and objectives changed over the past say. values.services . objectives. management etc. mission.quality .features . They also provide benchmarks for a historic review.competitiveness. Finances .systems . 16 . These include: Sales .expertise .pricing . Management .resources . opportunities and threats) analysis can commence. Assessing Current Position The starting point must be to determine a company's existing (implicit or explicit) vision.range . programs and organization in key areas. operations.capacity . Most managers will find it exceedingly difficult to develop a future strategy for a business without knowing its current strategies and measuring their success to date. marketing. technology. Operations .promotion .Keys to Business Strategies Having built up a picture of the company's past aims and achievements. mission. Statements on vision. Products .marketing . the all-important SWOT (strengths. realistic goals or concise missions. This is much easier said than done because many businesses which are set up with the clear objective of making their owners wealthy often lack strategies. finance.support. objectives and strategies. Strengths & Weaknesses Strengths and weaknesses are essentially internal to the organization and relate to matters concerning resources. weaknesses. three years? Why have the changes occurred or why have no changes occurred? Identify primary reasons and categorize them as either internal or external.It goes without saying that the mission. strategies and goals are not just elements of future planning. objectives. values. strategies and goals must be inter-linked and consistent with each other.efficiency .
processes. strengths & weaknesses) New technologies which may be causing fundamental changes in products.R&D .SWOT analysis Definition: 17 .structures.productivity . shifting channels. Costs . relative attractiveness of segments) The marketplace which may be altering due to economic or social factors (Customers.purchasing. political & environmental factors) Competition which may be creating new threats or opportunities (Identities. cost savings etc.effort .resources.organization . international dimensions.direction . market shares. emergence/contraction of niches. growth patterns and maturity. a series of strategies or combinations of tactics will suggest themselves. etc. Threats & Opportunities The external threats and opportunities confronting a company can exist or develop in the following areas: The company's own industry where structural changes may be occurring (Size and segmentation.) Develop Business Strategies Once the SWOT review is complete. (Substitute products. alternative solutions. social/demographic issues. established patterns and relationships. These are discussed below: Strategy . economic factors.Finally Monitor/review/evaluate/update Strategic Plan document There are certain analytical tools used to find out the current status and position of an organisation or individual in relation to their external environment and current role. distribution channels. Use the SWOTs to help identify possible strategies as follows: Build on strengths Resolve weaknesses Exploit opportunities Avoid threats The resulting strategies can then be filtered and moulded to form the basis of a realistic strategic plan . performances. likely plans. aggressiveness. They can then be used as a basis for future planning and strategic management. as is more likely the case. Systems . the future strategy may be readily apparent or.
For example. A threat could be a new competitor in an important existing market or a technological change that makes existing products potentially obsolete. an opportunity could be a developing distribution channel such as the Internet. Weaknesses. or changing consumer lifestyles that potentially increase demand for a company's products.two people rarely come-up with the same version of a SWOT analysis even when given the same information about the same business and its environment. Areas to Consider Some of the key areas to consider when identifying and evaluating Strengths. For example. Weaknesses. The Key Distinction . Accordingly. Opportunities and threats are external factors. Opportunities and Threats.Internal and External Issues Strengths and weaknesses are Internal factors. A weakness could be the lack of a new product.SWOT is an abbreviation for Strengths. Adding and weighting criteria to each factor increases the validity of the analysis. SWOT analysis is an important tool for auditing the overall strategic position of a business and its environment. It is worth pointing out that SWOT analysis can be very subjective . Opportunities and Threats are listed in the example SWOT analysis below: 18 . a strength could be your specialist marketing expertise. SWOT analysis is best used as a guide and not a prescription.
Some industries are more profitable than others. the travel industry).Porter’s five forces Model: Defining an industry An industry is a group of firms that market products which are close substitutes for each other (e. The most influential analytical model for assessing the nature of competition in an industry is Michael Porter's Five Forces Model. Why? The answer lies in understanding the dynamics of competitive structure in an industry. These five "competitive forces" are The threat of entry of new competitors (new The threat of The bargaining power of The bargaining power of . which is described below: Porter explains that there are five forces that determine industry attractiveness and long-run industry profitability. the car industry.g.The degree of rivalry between existing competitors Threat of New Entrants entrants) substitutes buyers suppliers 19 .
The industry is not a key supplying group for buyers to performance substitute substitutes scale requirements costs channels of 20 .The costs of switching to substitutes Bargaining Power of Suppliers Suppliers are the businesses that supply materials & other products into the industry. The cost of items bought from suppliers (e.New entrants to an industry can raise the level of competition. restaurants).The likelihood of retaliation from existing industry players. thereby reducing its attractiveness. highly valued products .Suppliers do not threaten to integrate forward into the buyer's industry .g.The industry is not a key customer group to the suppliers Bargaining Power of Buyers Buyers are the people / organisations who create demand in an industry.Products are standardised .Buyers do not threaten to integrate backwards into supply .There are undifferentiated. Threat of Substitutes The presence of substitute products can lower industry attractiveness and profitability because they limit price levels. The threat of new entrants largely depends on the barriers to entry.g.There are many buyers and few dominant suppliers .Buyers threaten to integrate backward into the industry . brand manufacturers threatening to set up their own retail outlets) . then in theory the company's industry is less attractive.There are few dominant buyers and many sellers in the industry . estate agency. components) can have a significant impact on a company's profitability. The bargaining power of buyers is greater when .g. The bargaining power of suppliers will be high when: . raw materials. Key barriers to entry include Economies of Capital / investment Customer switching Access to industry distribution . High entry barriers exist in some industries (e. The threat of substitute products depends on: Buyers' willingness The relative price and . If suppliers have high bargaining power over a company. shipbuilding) whereas other industries are very easy to enter (e.Suppliers threaten to integrate forward into the industry (e.g.
The structure of competition . industries where competitors can differentiate their products have less rivalry .rivalry is reduced where buyers have high switching costs . rivalry is less when an industry has a clear market leader.then competitors tend to exhibit greater rivalry. industries with high fixed costs encourage competitors to fill unused capacity by price cutting .when competitors are pursuing aggressive growth strategies.Exit barriers . coal) have greater rivalry. the degree of rivalry is less . Market decisions are also well made by considering and using the Porter's Five Forces.market share and market growth.for example.The structure of industry costs . rivalry is more intense where there are many small or equally sized competitors. It is based on the product life cycle theory. Analytical Models used in Appraising Business Portfolios The BCG Matrix: The BCG Matrix was created by the Boston Consulting Group (BCG) and it became on of the most well-known portfolio management decision making tools in the early 1970's. The basic premise in using the Matrix is that the higher the market share a product has. and it is used to prioritize the product portfolio in a company or department. Where competitors are "milking" profits in a mature industry.for example.Intensity of Rivalry The intensity of rivalry between competitors in an industry will depend on: .when barriers to leaving an industry are high (e.Degree of differentiation . It is useful to a company to achieve balance between the four categories of products a company produces. the cost of closing down factories) . steel. .i.Strategic objectives .e.g. the higher the growth rate and the faster the market for that product grows. there is a significant cost associated with the decision to buy a product from an alternative supplier .g.Switching costs . There are two dimensions . The BCG Matrix was created in order to alleviate the standard one-size fits all in their time. 21 .industries where products are commodities (e. rivalry is more intense.
Caution should be taken as high market share isn't the only consideration. but have high demands and low returns due to low market share.Liquidate. Efforts should be made to change market share. low growth) . while keeping profits high.a dog is typically always a dog. If this isn't possible.Invest further in these . but they are market leaders and should also generate lots of cash. High market share doesn't necessarily mean profit. Question marks (low market share. but high growth) . 22 . but the organization should try to maintain market share on this would because rewards are likely 4. Stars (high market share. 2. Avoid and reduce the number of these an organization maintains. high growth) . Occasionally. Keep an eye out for expensive revival strategies . Cash Cows (high market share. Profits and cash generation should be higher because of low growth. 3. low growth) . Dogs (low market share.These have poor cash inflow.they incur high costs. Stars may balance on net cash flow. if they are not delivering cash.Four segments in the BCG matrix: 1. this will likely turn into a dog as growth slows. Growth isn't necessarily the only valid measurement factor.Keep investments low. dogs can earn more cash than cash cows.
sales effectiveness. the GE Business Screen or GE Strategic Planning Grid) is to evaluate businesses along two composite dimensions: industry attractiveness and industry strength. customer and market knowledge. The industry attractiveness index consists of factors like relative market share. marks their competitive position. at the same time. Each SBU can be portrayed as a circle plotted on the matrix. amount of competition.The GE/McKinsey Matrix was developed in the 1970s by the management consulting firm McKinsey & Co. determining the value of each parameter in the criteria. competitiveness. the degree of seasonal and cyclical fluctuations in demand. allowing for greater precision.. price.k. this matrix is similar to the BCG Growth-Share Matrix in that it maps SBUs on a grid of the industry and. and industry cost structure. and 2) it consists of nine-cells rather than four. Industry attractiveness and SBU strength are calculated by first identifying the criteria for each. and multiplying that value by a weighting factor. The result is a quantitative measure of industry attractiveness and the SBU’s relative performance in that industry. as a tool to screen General Electric’s large portfolio of strategic business units (SBUs). The industry attractiveness index is made up of such factors as market size. The idea behind the matrix (a. product quality. industry profit margin. and geographic advantages.a. Conceptually. The GE/McKinsey Matrix improves on the BCG approach in two ways: 1) it utilizes more comprehensive axes (the BCG matrix uses market growth rate as a proxy for industry attractiveness and relative market share as a proxy for the strength of the business unit). market growth. with the information conveyed as follows: 23 .
Ansoff Growth Strategy Matrix Ansoff's growth strategy matrix remains a popular tool for analyzing growth. The white Zone consists of the three diagonal cells from the lower left to the upper right. For example. Market share is shown by using the circle as a pie chart. The Red Zone consists of the three cells in the lower right corner. The expected future position of the circles is indicated by an arrow. The tip of the arrow indicates the future position of the center point of the circle. and that the business unit is in an industry that is projected to become increasingly less attractive. • • There are strategy variations within these three groups.• • • Market size is represented by the size of the circle. Management must therefore exercise caution when making additional investments in this SBU. A harvest strategy should be used in the two cells just below the three-cell diagonal. The SBUs in the lower right cell shouldn’t receive any resources and should probably be divested or eliminated from a firm’s portfolio. within the Red Zone. The arrow in the upward right position indicates that the SBU is expected to lose strength relative to competitors. The suggested strategy is to protect or allocate resources on a selective basis rather than growing or reducing share. The sample diagram shows the relative position of an SBU with a market share of 65%. whereas it might perform a phased harvest of an average SBU in the same industry. it’s in a favorable position with relatively attractive growth opportunities. Both axes are divided into three segments. A position in the yellow zone is viewed as having medium attractiveness. This position indicates a "green light" to invest and grow this SBU. If the SBU falls in this zone. yielding nine cells. a firm would be inclined to quickly divest itself of a weak business in an unattractive industry. The nine cells are grouped into three zones: • The Grey Zone consists of the three cells in the upper left corner. These SBUs shouldn’t receive substantial new resources. 24 .
The company grows by innovating.') 25 . Here. the market penetration strategy entails the least risk. here. the company enters a related market or industry. increase revenue. In unrelated diversification. virgin geographies or other new opportunities. the company markets existing products to existing customers. Assuming that the more a business knows about its market. This quadrant involves marketing new products to existing customers.The matrix presents four main strategic choices. • Diversification. These customers could represent untapped verticals. • Market development. In this quadrant. There are two types of diversification: related and unrelated. the company markets new products to new customers. This quadrant entails the greatest risk. The products remain unchanged and no new customer segments are pursued. These quadrants represent varying degrees of risk. • Product development. ranging from an incremental strategy in which current products are sold to existing customers to a revolutionary strategy in which new products are sold to new customers. the company markets existing products to one or more new customer segments. • Market penetration. In related diversification. (In fact. consultants often refer to the diversification cell as the 'suicide cell. gradually replacing old products with new ones. instead. the company repositions the brand. the more likely it will be to succeed. while the diversification strategy entails the most. the company enters a market or industry in which it has no relevant experience. launches new promotions or otherwise tries to gain market share and accordingly.
in a highly diversified business. it makes sense to put formal marketing planning procedures in place throughout the organisation.Marketing planning . top level management will not have knowledge and expertise that matches subordinate management.the link with strategic planning Macdonald (1995) suggests that several stages have to be completed in order to arrive at a strategic marketing plan. 26 . In this situation. In an undiversified business. These are summarised in the diagram below: The extent to which each part of the above process needs to be carried out depends on the size and complexity of the business. By contrast. They do this by providing better value for the customer than the competition. it may not be necessary to formalise the marketing planning process. where senior management has a strong knowledge and detailed understanding of the overall business. Businesses that succeed do so by creating and keeping customers.
What are the key issues that should be addressed in marketing planning? The following questions lie at the heart of any marketing (or indeed strategic) planning process: • Where are we now? • How did we get there? • Where are we heading? • Where would we like to be? • How do we get there? • Are we on course? Why is marketing planning essential? 27 . human resource management and other business issues.Marketing management constantly have to assess which customers they are trying to reach and how they can design products and services that provide better value (“competitive advantage”). The objective of a strategic plan is to set the direction of a business and create its shape so that the products and services it provides meet the overall business objectives. It is concerned with marketing. Where does marketing planning fit in with the overall strategic planning of a business? Strategic planning as already discussed is concerned about the overall direction of the business. because it is the job of marketing management to understand and manage the links between the business and the “environment”. with hundreds of business units located around the globe. This process of adapting and decision-making is known as marketing planning. However. finance. producing a wide range of products. Sometimes this is quite a straightforward task. But it also involves decision-making about production and operations. The main problem with this process is that the “environment” in which businesses operate is constantly changing. in many small businesses there is only one geographical market and a limited number of products (perhaps only one product!). of course. For example. How can such management keep control of marketing decision-making in such a complex situation? This calls for well-organised marketing planning. Marketing has a key role to play in strategic planning. consider the challenge faced by marketing management in a multinational business. So a business must adapt to reflect changes in the environment and make decisions about how to change the marketing mix in order to succeed.
It makes sense to try to bring some order to this chaos by understanding the commercial environment and bringing some strategic sense to the process of marketing products and services. The ability of a business to achieve profitable sales is impacted by dozens of environmental factors. many of which are inter-connected. A marketing plan is useful to many people in a business. Objectives can be set at two levels: (1) Corporate level These are objectives that concern the business or organisation as a whole.g. specific objectives for marketing activities Examples of functional marketing objectives” might include: • We aim to build customer database of at least 250. It can help to: • Identify sources of competitive advantage • Gain commitment to a strategy • Get resources needed to invest in and build the business • Inform stakeholders in the business • Set objectives and strategies • Measure performance Marketing planning .000 households within the next 12 months • We aim to achieve a market share of 10% • We aim to achieve 75% customer awareness of our brand in our target markets Both corporate and functional objectives need to conform to the commonly used SMART criteria.Businesses operate in hostile and increasingly complex environment.setting marketing objectives Introduction Objectives set out what the business is trying to achieve. 28 . Examples of “corporate objectives might include: • We aim for a return on investment of at least 15% • We aim to achieve an operating profit of over Rupees 10 million on sales of at least Rupees 100 million • We aim to increase earnings per share by at least 10% every year for the foreseeable future (2) Functional level.e.
the objective should state exactly what is to be achieved.the objective should be realistic given the circumstances in which it is set and the resources available to the business. Relevant .objectives should be set with a time-frame in mind.an objective should be capable of measurement – so that it is possible to determine whether (or how far) it has been achieved Achievable .The SMART criteria are summarised below: Specific . Measurable .objectives should be relevant to the people responsible for achieving them Time Bound . 29 . These deadlines also need to be realistic.
The success of Marketing Management fully depends on the knowledge of marketing environment. A firm should know the current environment and upcoming trends in it to so that it can respond to the changes accordingly. It refers to all of the forces surrounding and affecting a firm’s ability to do and grow business successfully over a long period of time. Here. It also enables the firm to gauge the opportunities and threats ahead. the term. A detailed study of marketing environment helps in developing strategic response to the environment. many things that affect an organization are beyond a manager’s control. 30 . Although managers may be able to direct internal resources.Marketing Environment comes into picture.Marketing Environment Organizations do not operate in isolation.
The figure given below shows the different components of the marketing environment: Macro Environment Political factors Micro Environment Demographic Environment Economic factors Customers Internal Environment Man Machine Money Material Minutes Suppliers Technological factors Stakeholders Socio-cultural Environment Legal Environment Natural Environment 31 .The marketing environment consists of the macro environment. microenvironment and internal environment.
It includes suppliers that deal directly or indirectly. age distribution. micro describes the relationship between firms and the driving forces that control this relationship.Micro Environment.The macro environment refers to all forces that are part of the larger society and affect the microenvironment. consumers and customers.The microenvironment refers to the forces that are close to the company and affect its ability to serve its customers. and other local stakeholders. Macro environment. In this context. growth rate. and the company needs to be flexible to adapt. It is a more local relationship. and the firm may exercise a degree of influence. and the marketer needs to compensate for changes in culture. technology. policies. Globalization means that there is always the threat of substitute products and new entrants. economics and technology. This is a very important factor to study for marketers and helps to divide the population into market segments and target markets Socio-Cultural Environment: 32 . There may be aggressive competition and rivalry in a market. religious composition and literacy level.its size. A company does not generally influence any laws (although it is accepted that they could lobby or be part of a trade organization). Micro tends to suggest small.It includes all the factors that influence the firm but are not in its direct control. but this can be misleading. The macro environment is continuously changing. natural forces. Demographic Environment: No business can run without people. politics. The wider environment is also ever changing. economy. politics. culture and Govt. It broadly includes concepts such as demography. so it becomes important to study the population.
the culture. education etc. subsistence and industrialized. Industrial economies have markets that are diverse and carry many different types of goods. values and lifestyles of the people largely influence their consumption patterns and purchase decisions. cigarettes should not be marketed to younger children. price of important materials. credit availability and interest rates. It also includes the growth rate of the economy. its stability. Within this area are two different economies. tax rates.Consumer buying behavior is closely related to the socio-cultural setup.the type of government in the country. it is important to know the difference between the two and to focus your marketing campaign to reflect the values of a target audience. language. There are even restrictions for some products as to who the target market may be. and secondary beliefs. media. which tend to be easier to influence. this is a very 33 . As laws and regulations change often. As a marketer. energy scene etc. inflation rates... The political environment of a nation directly influences its economic status thus affecting the industrial growth. The political environment includes all laws. traditions. This refers to the purchasing power of potential customers and the ways in which people spend their money. and groups that influence or limit other organizations and individuals within a society. beliefs. Some products are regulated by both state and federal laws. Political Environment: This plays a very important role in case of a business/industrial firm. Political environment may include. occupation location of residence etc.It is important for marketers to be aware of the political scenario as it can be complex. In any society. Subsistence economies are based more in agriculture and consume their own industrial output. labour rates. Culture relates to religion. Each is important to the marketer because each has a highly different spending pattern as well as different distribution of wealth. In fact. which passed on from generation to generation and very difficult to change. The values can also be further categorized into core beliefs. for example. whereas social class is determined by income. There are also many restrictions on subliminal messages and monopolies. government agencies. the economic and political environments are closely knit and they have a major role in structuring the industrial setup. purchasing power etc. social and religious organizations etc. Economic Environment: It relates to the both the general economic conditions as well as segment wise economic conditions of the population with respect to – their disposable income.
but also its raw materials. The concern in this area is the increased pollution. the ability to create a company’s product gets much harder. This includes the natural resources that a company uses as inputs and affects their marketing activities. rather than becoming outdated and suffering the consequences financially. 34 . and operations as well as its customer segments. processes. The last concern. They must stay informed of trends so they can be part of the next big thing. employee protection. shortages of raw materials and increased governmental intervention.corporate affairs. As these markets develop it can create new markets and new uses for products. Business legislation is classified into categories like. pollution can go as far as negatively affecting a company’s reputation if they are known for damaging the environment. It also requires a company to stay ahead of others and update their own technology as it becomes outdated. Also. corporate protection etc. The technological environment is perhaps one of the fastest changing factors in the macroenvironment. ecology and availability of natural resources. Natural environment: This covers the aspects of climate. consumer protection. government intervention can make it increasingly harder for a company to fulfill their goals as requirements get more stringent. Legal Environment: Businesses should have a thorough understanding of the implications of all the legal provisions relating to their business. As raw materials become increasingly scarcer. Technological Environment: For a business firm. This includes all developments from antibiotics and surgery to nuclear missiles and chemical weapons to automobiles and credit cards.important aspect for a marketer to monitor. technology affects not only its final products.
the level of competition and the potential growth of the market. Evaluation of marketing opportunities: The assessment of marketing opportunities for companies is a research that supports various strategic business decisions of companies with an emphasis on the decisions in the marketing field. Earning profit out of a fad is more a matter of luck and good timing than anything else.Fad. economic. economic and political significance. They make an in depth study of the marketing environment to determine industry issues. the competition is low and when the market is rapidly increasing in size. political and technological change that are slow to form. they influence us for sometimearound seven to ten years or even longer. Mega trends are large social. and once in place. While analyzing a marketing opportunity. A trend tells about the shape of the future giving us many marketing opportunities. A proper analysis of marketing environment helps in understanding fads. Is the idea feasible in the marketplace? Is there demand? Can it be done? Are you able to pull together the persons and resources to pull it off before the window of opportunity closes? These questions must be considered and answered. Three exterior criteria that mostly affect the marketing opportunities of a company are the size of the market. short lived and without social. and ability to provide a solid return on investment. A trend is a direction or sequence of events that has some momentum and durability than fad. it should be ensured that the idea has a demonstrated need. The marketing opportunities of a company are greater when the demand is relatively high. needs and trends. A Fad is an event which is unpredictable. But all such opportunities do not ensure success and market research is necessary to analyze the actual potential. market 35 . Many marketing programs or new product launch are likely to be more successful if trends and mega trends are taken into consideration. The usual contents that are included in research of marketing opportunities for a company are as follows: • • • • • • • The size of the market for individual products/ services Assessment of demand in individual marketing segments The consuming habits in individual segments Relative sales potential Identification and assessment of the competition (also the market share) The role of distribution channels The trends of the market under study Companies exploring business ideas always have the customer and the market in mind. ready market. Trend and Megatrend Enterprising companies are always keen on understanding the unmet needs and wants of customers and manage to create solutions to them.
the more disadvantaged you will be. Below are two models that entrepreneurs use to evaluate their business ideas and plans. Do you have a proprietary advantage such as a patents or exclusive licenses on what you will be selling? Distribution Channel. large capital requirements. sell it to businesses. R R R R Discuss Exit Strategy (acquisition or IPO) Is it profitable? Will your revenues be higher than your expenses? Time to breakeven (how long before cash flow positive? How long until the company begins to have an aggregate net income) Investment Needed. sell it to wholesales. How much money will it take to start-up this venture. If there are many barriers to entry. the core economics. or sell it to retail stores. cost structure. which stands for Return. Return really is return on investment. This is called the RAMP model. A stands for advantages. and barriers to entry. market size. attainable market share. regulations. market capacity. growth rate. R. what each element will cost to source or manufacture) Barriers to entry (large competitors. patents. it will be difficult to enter a market.structure. The higher the barriers to entry. The RAMP Model (source: Business Idea and Opportunity evaluation. A A A 36 . exit strategy issues. opportunity costs. time to breakeven. If can develop a unique distribution channel this can surely be an advantage. Now let’s look at A. Let us study an easy model that we can use to evaluate marketing opportunities. A Look at cost structure (suppliers. Intellectual Property. How will you be selling your product? Will you sell it direct to the consumer via the Internet.Ryan Allis) Let’s start with the first letter.
Timing. Is the team right for the business? Do you have knowledge in this area. Target market (who are you selling to? businesses? consumers? what demographics?) Analyze target market (who are you selling to? businesses? consumers? what demographics?) Pricing (what you they charge. it there a chance for the business to do very well. Is the market ready for your product? You may have a great idea for flying cars. what will be the price. Does the business concept fit the goals of the team to create a high potential or lifestyle business? P P P P 37 . M stands for Market. Will there be a high reward for the founders and investors if the company succeeds? The Team. Is there a big need for this product or service? Try to avoid ideas that sound cool but there is no real need for. but if consumers are not ready for your product you may not be able to turn your idea into a successful business.Now let’s look at M. Analyze market size M M M M M Finally let’s look at P. will there be a high enough markup). Goal Fit. Risk vs. Make sure your product or service fills and need or solves a problem. How risky is the opportunity? If it is very risky. P stands for potential. Reward.
in case of most of the business firms. economic and cultural factors. Today. executives rely upon their sales representatives and dealers. yet they must know who their customers are and what their expectations are. growing shortages of certain raw materials. it is much more significant for the firm’s marketing management because it is located at the interface between the firm and ever changing character of most markets a growing concern for environmental quality. and more and more.Market Research and Marketing information Systems Information is vital to Marketing Without Information. 38 . data about its own performance. how it could be made available and how many other customers would be attracted by the producer or a dealer. the management groups remain far from their customers-the individual who is the key to business success. Proper assessment of the market demand can be made and market risk can be reduced. at what time they want. information about its whole environment (including social. A complicated distribution system intervenes between managers and widely scattered customers. political. about its markets. companies of the 21st century will find it more difficult to grow or even survive in an environment that is getting fiercer and fiercer : Information for dealing with its customers. how many of them want a particular commodity. The managers must also have complete market intelligence and competitor knowledge for sound decision making. the ever increasing competition from other brands and substitute products . The complexity of management decision making has increased greatly during recent years. For most of such information. the volatility of international political relationships and rapid changing technology results in growing difficulties in making efficient marketing decisions . in how much quantity they want. but increasingly the final link in the communication channel through which the consumers communicate with the company is market research. 'MacroMarketing' in other words). It enables the manufacturer or producer or service provider to what the consumers want.
and changes in the marketplace). The key idea behind Marketing Research is: 1. Market research can be used to determine which portion of the population will purchase a product/service. market and environment: marketing research generates and gives company information to help companies make better marketing strategies and plans. competition. based on variables like age. location and income level. and expand into new markets. gender. it is the research on the manifold problem of marketing 2. the magnitude of marketing problem is also increasing. launch a new product or service. opportunities. A list of questions that can be answered through market research: What is the current status of the market? What are the ongoing trends? Who are the competitors and what are their strategies? What is the product feedback in the market? Which needs are important? Are the needs being met by the current products? What are the customer preferences and expectations? The steps in market research are as follows: 39 .With the increasing complexity of business activity. As a result the costs involved are also huge. Its purpose is to aid decision making in marketing 3. fine tune existing products and services. Market Research These terms often are used interchangeably. Marketing research is sort of a communication link between company and customers. Systematic gathering and analysis of information is what it does in achieving its mission. this is why management is turning more and more to rigorous market information as a way of reducing the uncertainties inherent in decision making. but technically there is a difference. Market research (compared to marketing research) is the part of marketing research that is about researching the market place (customer needs. Definition. It’s uses include to help create a business plan. competitors and the market.Market research is the process of systematically gathering. recording and analyzing data and information about customers. Marketing Research vs.
research approaches.solve a problem? Identify opportunity? Is additional background info necessary? What information is needed to make decision? How will information be utilized? Should research be conducted? Develop the research PlanThis is to efficiently gather information. It involves decisions on the data sources.Define the problem and research objectives Develop the research plan Collect the information Analyze the information Present the findings Make the decision Define the Problem and the research objectivesProblem should not be defined either too broadly or too narrowly. sampling plan and contact methods. research instruments. 1. Data sources: 40 . Following questions help in formulating a problem--What is purpose of study .
A "survey" can be anything from a short paper-and-pencil feedback form to an intensive one-on-one in-depth interview. It consists of a set of questions presented to respondents. concept.These are research techniques. Research Instruments: Questionnaires. Survey Research.Galvanometers. Information relates to a past period. 2. in which data is obtained from a relatively small group of respondents and not analyzed with statistical techniques. service. preferences and satisfaction.Primary data -Primary research entails the use of immediate data in determining the survival of the market. advertisement. interviews and focus groups.secondary research is a means to reprocess and reuse collected information as an indication for betterments of the service or product.The broad area of survey research encompasses any measurement procedures that involve asking questions of respondents to understand their knowledge. Qualitative measures. Experimental research. idea. Mechanical devices. beliefs. which shows that direct relationship between potential customers and the companies Secondary data. brain wave scanners etc.data that reveal the buying behavior of our customers and prospects. 3. Behavioral Data. are used. Contact Methods 41 .This calls for three decisions— a) Sampling unit: who is to be surveyed b) Sample Size: how many people should be surveyed c) Sampling Procedure: How should the respondents be chosen? 5. or packaging.It is a social research technique that involves the direct observation of phenomena in their natural setting Focus Group Research. 4. eye cameras. Questions are asked in an interactive group setting where participants are free to talk with other group members. The popular ways to collect primary data consist of surveys. Sampling Plan.It is a common instrument for collection of primary data.A focus group is a form of qualitative research in which a group of people are asked about their attitude towards a product. Research Approaches: Observational research.The general procedure is one or more independent variables are manipulated to determine their effect on a dependent variable.
It is the best way to reach people who would not give personal interviews or whose responses might be biased or distorted by the interviewers Telephone Interview.The collected data is then tabulated and frequency distributions are developed. Multiple methods Use of two or more methods increases the confidence in the results. Present the findings-the findings are presented to the management for making major marketing decisions. The response rate is typically higher than in the case of mailed questionnaires. Personal Interview. formulation of hypotheses. inviting people to answer some questions and possibly win a prize.This phase is the most error prone and most expensive. Depending upon the reliability of the findings. it is accepted or rejected. Interdependence of Researchers recognize that data are interpreted from models and data underlying models that guide the type of information sought. Healthy skepticism Researchers are alert to the problems caused by “marketing Scientific Method 2 3 4 5 6 42 . marketing research can give better results. Characteristics of Good Marketing Research 1 Effective research uses scientific method: careful observation. Make the decision. Value and cost of Cost of the information is determined by its value and value information is a qualitative term which depends on the reliability and validity of the findings. Online Interview. Analyze the Information. But it is more expensive and requires more planning and supervision.Research provides the required information to the managers.A company can include a questionnaire on its website and offer an incentive to answer the questionnaire or it can place a banner on a frequently visited site.It is the most versatile method.Mail Questionnaire. such as dress and body language. Collect the Information. prediction and testing Research creativity With more innovative ways to solve a problem. In some cases the respondents give dishonest answers and certain interviewers are also biased.It is the best method for gathering information quickly. The interviewers can ask more questions and record additional observations about the respondent. At times some of the respondents cannot be contacted again while some others are reluctant to cooperate. Different statistical techniques and decision models are used to get the findings.
3. Research on sales methods and policies Estimating or revising sale territories Estimating present and proposed sales methods Studying competitive pricing Analyzing salesman activities and effectiveness Setting sale quotas and developing salesman’s standards Studying distribution cost Establishing salesmen’s compensation plans 4. Misuse of marketing research can harm or annoy consumers. Areas of marketing research: 1.7 Ethical marketing myths”. Research on advertising Estimating advertising effectiveness Analyzing competitive advertising and selling practices Selecting advertising media Making motivational or qualitative studies Following diagram shows the scope of marketing research: 43 . Research on Products and servicesDetermining customer acceptance of proposed new products Making comparative studies of competitive products Evaluating new comparative products Determining current or new uses of current products Evaluating and market testing proposed new products or services Determining sources of customer dissatisfaction with products Making packaging and design studies 2. increasing resentment at what consumers regard as an invasion of their privacy or a disguised sales pitch. Research on markets Analyzing size of market for existing products Estimating demand for new product Sales forecasting and general business forecasting Determining characteristics of markets of products Analyzing sales potentials and relative profitability of territories. Studying trends in market size and composition.
Marketing Research Marketing Strategy Knowledge about nature and composition of customers. to prove “what went wrong” to anticipate competitive move 44 . To set up plan for keeping in touch with the behavior of these dominating factors and for measuring the results of any effort made to influence or control them. developing marketing mix. To discover what major underlying factors are dominating that situation and how these factors can be influenced or controlled.Product Research Advertising research Marketing research Market Research Sales Research Objectives of marketing Research: To determine present market situation and current trends in the market.
equipment and procedures to gather.Marketing Information Systems For any business to excel. the environmental factors monitored by the system and the types of marketing decision which the MIS seeks to underpin. marketing research system.a full fledged MIS should have these 45 . and control". evaluate and distribute needed. marketing intelligence system and marketing models. A marketing Information Systems consists of people. equipment. sort. The explanation of this model of an MIS begins with a description of each of its four main constituent parts: the internal reporting systems. as will shortly be seen. An MIS also provides methods for interpreting the information the MIS provides. Figure 9. analyze. evaluate. more than raw data or information suitable for the purposes of decision making. knowledge changes in the market place is very critical and it is the foremost responsibility of the marketers to keep a track of these changes. and distribute pertinent. timely and accurate information for use by marketing decision makers to improve their marketing planning. an MIS is more than a system of data collection or a set of information technologies: "A marketing information system is a continuing and interacting structure of people.with many in the industrialized countries being computerized and few in the developing countries being so . analyse. A marketing information system (MIS) is intended to bring together disparate items of data into a coherent body of information. Companies study their managers’ information needs and design marketing information systems to meet these needs. sort. implementation. as Kotler's1 definition says. and procedures to gather. timely and accurate information to marketing decision makers.1 illustrates the major components of an MIS. An MIS is. Moreover. It is suggested that while the MIS varies in its degree of sophistication .
do not see how it could help decision makers in other functional areas. by virtue of what he/she reads. That is. data is collected in a purposeful way to address a welldefined problem (or a problem which can be defined and solved within the course of the study). the manager may focus more on economic and business publications. information is usually categorized according to its nature so that there are. including:: Unfocused scanning The manager. financial. hears and watches exposes him/herself to information that may prove useful. A marketing intelligence system is a set of procedures and data sources used by marketing managers to extract information from the environment that they can use in their decision making. The other form of marketing research centres not around a specific marketing problem but is an attempt to continuously monitor the marketing environment. This scanning of the economic and business environment can be undertaken in a variety of ways. the methods (and technologies) of collection. this information often remains underutilized because it is compartmentalized. For instance. In the same way. Marketing research systems: Marketing research is a proactive search for information. decision makers can fail to appreciate how information from other functional areas might help them and therefore do not request it. comparing stockholding records with orders received helps an enterprise ascertain whether its stocks are in line with current demand patterns. Often the entrepreneurs. Whilst the behaviour is unfocused and the manager has no specific purpose in mind. Similarly. the manager is not in search of particular pieces of information that he/she is actively searching but does narrow the range of media that is scanned. or various personnel working in the functional departments holding these pieces of data. retrieving and processing data. stockholding and logistical data. market intelligence is not. In many cases. manpower. production. These are but a few of the internal records that can be used by marketing managers.components. marketing. broadcasts etc. Marketing intelligence systems: Whereas marketing research is focused. for example.. and pay less attention to political. stockholdings and sales invoices. However. 46 Semifocused scanning . it is not unintentional Again. Internal reporting systems: All enterprises which have been in operation for any period of time have a wealth of information. storing. That is. The internal records that are of immediate value to marketing decisions are: orders received. but even this small set of records is capable of generating a great deal of information. By comparing orders received with invoices an enterprise can establish the extent to which it is providing an acceptable level of customer service. either in the form of an individual entrepreneur or in the functional departments of larger businesses. the enterprise which commissions these studies does so to solve a perceived marketing problem.
Whilst this sort of activity may seem to share the characteristics of marketing research it is carried out by the manager him/herself rather than a professional researcher. it is a largely informal process of observing and conversing. To understand MIS better an example of development of management information system of an irrigation project is given below: IRRIGATION: Information is everything CMC has designed. The information will be required to address a specific issue. This is a purposeful search after information in some systematic way. retailers. Informal search This describes the situation where a fairly limited and unstructured attempt is made to obtain information for a specific purpose. customer complaints and requests and distributor problems. the marketing manager of a firm considering entering the business of importing frozen fish from a neighbouring country may make informal inquiries as to prices and demand levels of frozen and fresh fish. India 47 . such as collectors. For example. Nonetheless. with trade associations. the scope of the search is likely to be narrow in scope and far less intensive than marketing research Formal search In addition it involves management in talking to producers. traders and other middlemen to be proactive in conveying market intelligence back to them. Moreover.scientific or technological media. importers/exporters etc. Enterprises with vision will also encourage intermediaries. after-sales personnel and district/area managers to take cognizance of competitors' actions. international aid agencies. There would be little structure to this search with the manager making inquiries with traders he/she happens to encounter as well as with other ad hoc contacts in ministries. as well as to competitors. Some enterprises will approach marketing intelligence gathering in a more deliberate fashion and will train its sales force. developed and implemented a management information system (MIS) for this World Bank-funded project in Maharashtra. suppliers and customers.
are located in the Krishna river basin. Aurangabad.The product MIS: Management Information System A comprehensive system for the planning. headed by a superintending engineer and a command area development (CAD) circle.III (restructured) Background Out of the six selected irrigation projects. in turn. accurate and relevant information Improves data management and handling capacity Provides effective sharing of data and information amongst various management levels and with associated offices 48 .Upper Penganga. CADA circles and associated institutions like the directorate of irrigation research and development (DIRD). The remaining three . Government of Maharashtra The department controlling water resources in India's most industrialized state Project Development and establishment of management information systems (MIS) for six selected major irrigation projects under the World Bank-funded Maharashtra Composite Irrigation Project . The roles of the associated institutions have been specified by the state irrigation department. Majalgaon and Jayakwadi . the revenue department (resettlement and rehabilitation). A special analysis and evaluation cell (SAEC). and the chief engineer (specified projects). headed by a superintending engineer. Each of the six projects is administratively divided into two circles . design. coordinates and interacts with the different project circles. operation and maintenance of the schemes. monitoring. Each circle administratively controls four to five divisions. The system developed by CMC Provides quick.Kukadi. Pune. construction. and each division. operation and maintenance of irrigation schemes The client Irrigation Department. construction. design. Objective The primary objective of developing and establishing an MIS for the selected major irrigation schemes was to provide a comprehensive system facilitating planning. These six projects are administered by the chief engineer (specified projects). the public works department (PWD).are located in the Godavari river basin in the state of Maharashtra. monitoring. headed by an administrator. the quality control organization and the agriculture department. has four to five sub-divisions. three schemes . Bhima and Krishna .a project circle.
as well as implementation support for the system. development. design. MIS has the following modules: Construction Land acquisition Rehabilitation and resettlement Resource requirement planning Procurement monitoring Stores and inventory Asset management Schedule of rates Roads and bridges On-farm development works Quality control Construction monitoring and management Works accounts Operation and maintenance Plan of operation and management Drainage network monitoring maintenance management Resource requirement planning Coordination with water users' associations (WUAs) Command area agriculture Asset management Integrated agriculture development Maintenance management Project management Administration management Personnel administration System The system is based on a client-server configuration. The server is a Pentium machine with open SCO Unix as the operating system and open Ingres as the back-end. training of officials.0 (with Ingres router) as the front-end. operating in MS Windows. The clients are 486 PCs with Gupta SQL 5.Scope CMC handled the study. testing and installation of the management information system. 49 .
Finally the distinction between marketing research and marketing information systems is given in the table below: Sr. the joint secretary and the deputy secretary of the state irrigation department based in Mumbai. also helps in marketing problems solving problems when they arrive May be a post-mortem of what has already taken place or may relate to present situation for a future decision A part of marketing information system Always directed at the future aspects of marketing management 4 Objective 5 Orientation 6 Higher System An integral part of Marketing Information System of the organization 50 .No Parameter 1 Definition 2 Scope Marketing research Systematic collection. and analysis of data about problems relating to marketing of goods. recording. etc. Concerned with the problems in all area of marketing such as sales. services and ideas handles problems pertaining to a particular area Marketing Information System Includes a set of procedures and methods for the continuous analysis and presentation of information for decision making in the area of marketing. advertising. and is connected to the offices of the chief engineers (specified projects) in Pune and Aurangabad. cost of distribution.MIS covers the offices of the secretary. 3 Continuity Operates on specific A continuous process marketing problems and is over after the research study against possible Conceived with finding Cautions solutions for specific marketing problems and helps in preventing them.
planning production. Measures of Market Demand: There can be as many as ninety types of demand measures. It can be measured at six different product levels. Each demand is for a specific purpose.Demand Forecasting and Market Potential Analysis Understanding customer demand is key to any manufacturer to make and keep sufficient long-lead inventory so that customer orders can be correctly met. and scheduling short –run financing . Forecasts are never perfect but are valuable in better preparedness for the actual demand. The concept of matching supply with demand is straightforward. and three different time levels. Or it might make a long range forecast of regional demand for its major product line to provide a basis for considering market expansion. Of course. Thus a company might make a short – range forecast of the total demand for a particular products item to provide a basis for ordering raw materials . cancellations and unsatisfied customers who turn to your competitors. The different levels are shown in the diagram below: 51 . it's not that easy. Buying too much wastes time. Underestimating demand leads to backorders. money and space—and exposes you to potential losses from liquidating overstocks. five different space levels. Just strike the right balance between what your customers want and the inventory investment required to meet that demand.
Set of consumers having interest. income and access to the market offer.The set of consumers who have sufficient level of interest in the market offer. In addition to this affordability of the consumer and accessibility of the product are important. Penetrated market.Set of consumers already buying company’s product. Different ways of segregating the market are as follows: Potential Market.Space level Region Territory Customer All sales World India Industry sales Product level Company Sales Product line sales Product form sales Product item sales Short run Medium run Time level Long run Fig-1 Ninety Types of Demand Measurement (6x5x3) Forecast depends upon the type of market being considered. Target market. 52 .Part of the qualified available market which company decides to pursue. Available market.
It can be defined as an aggregate of the demands of all potential customers (market participants) for a specific product over a specific period in a specific market under a specific marketing program. we have to visualize the level of market demand for a very high level industry marketing effort. Q2 Market Demand in specific period Market forecast.Base sale Q1 will happen irrespective of any marketing expenditure. the horizontal axis shows varying Industry expenditure in a given time period and the vertical axis indicates the resulting market demand . in a given period of time. first at an increasing rate and then at a decreasing rate. Qf Planned Expenditure Industry Marketing Expenditure Market minimum. For the latter. 53 .Market Demand. The upper limit of market demand is called the market potential..Q1 Fig: Marketing demand as a function of Industry marketing expenditure (assumes a particular marketing environment. In the diagram above. It is clear in the figure that with increasing expenditure the market demand increases.It can be defined as the limits approached by market demand as industry marketing effort goes to infinity for a given environment. Market Potential. not maximum market demand. Market Potential-The market forecast shows expected market demand.
It is the method of estimating the potential of a market by identifying the number of potential buyers in the market and the purchase requirements of 54 . even when company marketing expenditure increase considerably relative to competitors. which may be called the company forecast. it is called area market potential. Company Forecast: Its demand describes estimated company sales at alternative levels of company marketing efforts. Company’s Potential: Company’s sales potential is the limits approached by company demand as company marketing effort increases relative to competitors. company demand is the company’s share of market demand.Market Forecast. The choice level of sales. Company demand: . The market forecast shows the levels of market demand corresponding to the actual level of industry marketing expenditure in the given environment. It remains for management to choose one of the levels. The market forecast shows the levels of market demand corresponding to the actual. In most of the cases. is a function called the company demand function or sales – response function and is subject to all the determinants of market demand plus what ever influence company market share. if the company becomes a monopolist. Two major methods for calculating the same are given below: Market-Buildup Method. company’s sales potential is less than market potential.Only one of the many possible levels of industry marketing efforts will actually occur. The reason is that each competitor has a hard core of loyal buyers who are not very responsive to other companies. The total market potential is calculated by multiplying the number of buyers in the market by the quantity purchased by the average buyer. In symbols: Qi = siQ Where : Qi = Company I’s demand Si = Company I’s market share Q = total market demand Company demand . by the price of one unit of the product. the market potential. states etc. We are now ready to define company demand. cities. The two would be equal if the company achieved 100 percent of the market that is. Current Demand Estimation: Total market potential: It is the calculation of the greatest amount of potential sales of a particular product in that product industry in a specific time period. The absolute limits of company demand are of course. Total Market Potential = Potential number of buyers x Average quantity purchased by a buyer x The price Area Market Potential: When the market potential is calculated on the basis of territories like towns. like market demand. The market demand corresponding to the expected efforts is called the market forecast.
inventory control. and retail sales as a basis of determining a location’s attractiveness. and market tests. primary research like questionnaires or surveys. and a host of other business decisions. Forecasting future sales involves analysis on three distinct levels: the economy. This method identifies market factors that correlate with market potential and then combine them into a weighted index. how consumers actually act. to benchmark against specific competitors. An example of this method is the buying power index (BPI). which uses an area’s share of national population. Forecasting methods differ in complexity. Industry trade organizations will often publish data on total sales. When broad economic forecasts are completed. the industry. this information is then used to analyze industry prospects. Forecasting Future Demand An accurate sales forecast is crucial to business planning. The geographic area can be broadly or narrowly defined to include entire nations or simply small towns. and company or product market. Other measures of market potential and attractiveness are also employed. time series analysis. unemployment. net exports. surveys. personnel planning.each. It can have an impact on production schedules. The source of the data may be published sic coded data. correlation methods. Multiple-factor index method Companies making sales directly to the end consumer face the problem of having too many potential consumers to list effectively. consumer spending. specialized forecasting firms. effective buying income. interest rates. All forecasts are built on three types of information: what consumers say. While larger firms conduct their own forecasting. and futurist research firms. In this manner. or sales history. smaller companies can buy forecasts from marketing research firms. it is often necessary to estimate competitor sales. etc. Sales forecasts filter through the organization and have a large impact on daily operations. A 55 . This in turn is used to help estimate company performance. The macroeconomic forecast calls for projecting inflation. a company can measure its market share and sales growth against the industry as a whole. companies often employ marketing research firms. There are five main categories of forecasting techniques: executive judgment. The quality of a sales forecast can translate into gained or lost profits. Industry Sales and Market Share Marketing performance is often measured against standards set by competitors and the industry. The standard manner of determining regional attractiveness is the multiple or market-factor index method. In order to measure one’s performance. Markets that make sales to other businesses typically have more difficulty in obtaining accurate competitor sales estimates because distributors and customers are hesitant to provide such information. and level of scientific or arbitrary methodology. time requirements. and how consumers have acted in the past. However.
Test Marketing Market testing involves introducing a product or service in a limited capacity in order to gain knowledge about the larger population. one type of time series analysis that uses only historical data is exponential smoothing. or random factors to find patterns over time. customers must be able and willing to answer questions with reasonable accuracy. However. responses reflect intentions rather than actual buying behavior. In addition. there are serious problems as well. Most time-series analysis involves the use of seasonal. however. population growth. type of product. Executive Judgment This forecasting method is based solely upon the subjective judgment of one or more executives. This method provides information on actual purchases rather than intended or historical purchases. cyclical. Secondly. Time Series Analysis This type of forecasting technique uses historical sales data in order to find patterns over time. This is accomplished by examining historical sales and variable data to determine if a correlation exists. sales people.firm will decide on the appropriate method based on cost. These variables may include income. This method is inexpensive and expedient. and type of product that consumers desire. time. The basic premise is that these patterns will continue into the future. First. Finally. changing environmental factors greatly reduce accuracy and effectiveness. and other factors. Often this technique is more effective when there are a relatively small number of consumers. customer surveys typically require relatively large amounts of time and money 56 . While possibly effective in stable demand markets. trend. the data is more accurate because it reflects real purchasing decisions. the accuracy of this method is largely determined by the validity of that premise Correlation Methods The basic principle of this method is to find a relationship between sales and other variables. The lack of reliance on historical data enables firms to estimate sales for new products or existing products being introduced into new markets. forecast time span and purpose. availability of data. market characteristics. forecasts are made with added weight to recent experiences causing forecasts to be either overly optimistic or pessimistic Surveys Another manner of estimating future sales is to survey or interview customers. Therefore. or experts about their expectations for the future. etc. In addition. There are three main disadvantages of this type of forecasting method. Personal experience is a major factor in the decision process. inflation. Customer forecasting survey Information can be gained regarding the quantity.
much finer market level information can be reported and analyzed. Expert forecasting surveys This method simply outsources the forecasting duties to experts such as economists. management consultants. In addition. In addition. However. the sales force usually will work harder to meet their own projections. Data Gathering Data gathering has been improved through the use of Internet sales and Telecommunication technology. A related development is the ability to determine causal marketing and merchandising factors affecting sales. Much like the executive judgment method. sampling a portion of sales data will be replaced by a census-based reporting process. diversification of products and markets. Sales-force forecasting also has disadvantages. etc. advertising executives. The main short fall of this method is that sales people have incentives to underestimate sales potential in their territories so that their quotas will be easier to meet. sales force surveys depend upon experience and subjective estimates. While outsourcing is relatively inexpensive and expedient. With more detailed information on local factors. These improvements have dictated changes and trends of their own. demand for analysis tools will spark the development of automated expert systems at both ends of the information stream Data Analysis Database marketing involves the use of computer software to maintain detailed customer information for marketing research purposes. rising labor and media costs. with the development of better and faster communications technology. with an increase in data gathering efficiency. and the expanding 57 .Sales-force forecasting surveys This type of survey requires a company's sales force to estimate future sales in their territories. The advantage of this surveying technique is that the sales force is "closer" to the consumer and can gauge market trends and needs. Four main trends are expected to result from this technology. Technology improvements. one of the biggest recent advancements in data gathering has been the adoption of UPC scanner codes by the retailing community. In addition. These responses are then compiled to develop a forecast. Data can be gathered on the smallest market segments or compiled for analysis on larger geographic regions. Finally. experts have less incentive for performing well Developments and Trends in Sales Forecasting Technology has shaped and defined the direction of sales forecasting. salespeople can be either too optimistic or pessimistic based on recent experiences. No longer will only a portion of sales data be available for constructing sales forecasts. We see its effect in data gathering and in data analysis. An increase in the number of data points results in more accurate projections. First. The simultaneous tracking of the local marketing mix and media expenditures provides important information on affecting the demand curve on that micro level. micro managed marketing strategies become a reality.
etc. through advances in data gathering and analysis. No longer are the colossal corporations the only entities able to afford accurate forecasting techniques.) has dramatically increased the use of database marketing. has added to the new competitive global environment businesses must operate in today. Smaller more sophisticated competitors can often compete with larger corporations with the expansion of internet and distribution technology.use of electronic transactions (credit cards. The improved analytical software has resulted in a leveling of the playing field for sales forecasting. improved forecasting. 58 . In a small way.
What Influences Consumer Buying Process? The decision-making process for consumers is complex. it is important to understand that there are two categories of buyers.the individual buyer and the organizational buyer.Consumer Buying Process and Organizational Buying Behavior To understand the buyer and to create a customer out of him. It probably makes more sense to classify needs that are not a necessity as wants or desires. In fact. These are shown in the diagram below: 59 . But such knowledge is critical for marketers since having a strong understanding of buyer behavior will help shed light on what is important to the customer and also suggest the important influences on customer decision-making. is the purpose of buyer behavior study.. Some of these needs are basic and must be filled by everyone on the planet (e. in many countries where the standard of living is very high. Possibly the most challenging concept in marketing deals with understanding why buyers do what they do (or don’t do). marketers are well served to understand the key influences. However. a large portion of the population’s income is spent on wants and desires rather than on basic needs. shelter) while others are not required for basic survival and vary depending on the person. food. Consumer buying Process Why Consumers Buy? Customers make purchases in order to satisfy needs.g. There are many factors that can affect this process as a person works through the purchase decision. Before proceeding. The number of potential influences on consumer behavior is limitless. Understanding consumer purchase behavior involves not only understanding how decisions are made but also understanding the dynamics that influence purchases.
they are all interconnected and work together to form what is known as consumer behavior. Marketers have to struggle hard to attract consumer’s notice. though it does not mean it is an accurate reflection on what is real. someone talking to us.. what ends up being stored inside us doesn’t always get there in a direct manner. Instead. Often our mental makeup results from information that has been consciously or subconsciously filtered as we experience it. 60 .The influences are categorized into three major groups: Internal. External and Marketing For the most part the influences are not mutually exclusive.An average person is exposed to many brand communications in a short time span and most stimuli are screened out. Selective distortion-It is the tendency to interpret information in away that fit our preconceptions. reading a newspaper story) and then make sense out of it. Perceptual Filter Perception is how we see ourselves and the world we live in. perception is the way we filter stimuli (e. a process we refer to as a perceptual filter. To us this is our reality. People can emerge with different perceptions of the same thing because of three perpetual processes: Selective Attention. Thus. This is selective attention. However.g.
The argument is that marketers send out subliminal messages in ads and packages.g.People tend to retain information that supports their attitudes and beliefs. Once formed. Subliminal perception. Finally. Knowledge Knowledge is the sum of all information known by a person.. So marketers must be creative and use various means to deliver their message.g. Exposing consumers to a product can be very challenging considering the amount of competing product messages (ads) that are also trying to accomplish the same objective (i. attitude may be reflected in how an individual acts based on his or her beliefs. Additionally. It is the facts of the world as he/she knows it and the depth of knowledge is a function of the breadth of worldly experiences and the strength of an individual’s long-term memory. comparison advertisements). Thus.e. For marketers the most critical step is the one that occurs with awareness. getting the consumer to give positive meaning to the message they have retained requires the marketer make sure that consumers accurately interpret the facts about the product. advertising clutter). if a consumer has a negative attitude toward a particular issue it will take considerable effort to change what they believe to be true. it is likely that other factors influencing consumer behavior are in large part shaped by what is known about a product. Obviously what exists as knowledge to an individual depends on how an individual’s perceptual filter makes sense of the information it is exposed to. Thus. incentives) to encourage consumers to accept more information (or correct information) may affect other influencing factors. As we will see below. 61 . This can often happen due in part to competitive activity (e. Attitude In simple terms attitude refers to what a person feels or believes about something.. But clearly the existence of a perceptual filter suggests that getting to this stage is not easy.Selective retention. Once the message reaches consumer it must be interesting enough to capture their attention (e. Marketing Implications: Marketers may conduct research that will gauge consumers’ level of knowledge regarding their product. Consumers are not consciously aware of these messages but yet they affect their behavior. But attending to the message is not enough. Marketing Implications: Marketers spend large sums of money in an attempt to get customers to have a positive impression of their products. talk about the product’s benefits). developing methods (e. attitudes can be very difficult to change.g... Here marketers must continually monitor and respond if their message becomes distorted in ways that will negatively shape its meaning.
reacts). Personality An individual’s personality relates to perceived personal characteristics that are consistently exhibited. suggesting promotional strategies and even determining how best to distribute products. how one talks. but not all. advertising) in an effort to change the attitude. Lifestyle is often determined by how we spend our time and money. which may or may not be the same has how others view us. While one’s personality is often interpreted by those we interact with. In this way personality is the sum of sensory experiences others get from experiencing a person (i. Marketers have worked hard researching how consumers in their target markets live their lives since this information is key to developing products. The fact that lifestyle is so directly tied to marketing activity will be further examined as we discuss developing target market strategies. Marketing Implications: Products and services are purchased to support consumers’ lifestyles. In support of their roles. Alternatively. In most. cases the behavior one projects in a situation is similar to the behaviors a person exhibits in another situation.e. in fact. Using research techniques to identify how customers view themselves may give marketers insight into products and promotion options that are not readily apparent. For companies competing against strong rivals to whom loyal consumers exhibit a positive attitude.Marketing Implications: Marketers facing consumers who have a negative attitude toward their product must work to identify the key issues shaping a consumer’s attitude then adjust marketing decisions (e. These positions carry certain responsibilities yet it is important to understand that some of these responsibilities may. an important strategy is to work to see why consumers feel positive toward the competitor and then try to meet or beat the competitor on these issues.. the person has their own vision of their personality. called Self Concept. be perceived and not spelled out or even accepted by others. a company can try to locate customers who feel negatively toward the competitor and then increase awareness among this group. Marketing Implications: For marketers it is important to know that consumers make purchase decisions to support their self concept. Roles Roles represent the position we feel we hold or others feel we should hold when dealing in a group environment. In simple terms it is what we value out of life. Lifestyle This influencing factor relates to the way we live through the activities we engage in and interests we express.. consumers will make product choices 62 . especially when one acts in the presence of others.g.
Not all products have a 63 . Marketing Implications: Motivation is also closely tied to the concept of involvement. and perceived risk (e. from the most pressing to the least pressing after satisfying one important need.that may vary depending on which role they are assuming.. Motivation Motivation relates to our desire to achieve a certain outcome. Marketing Implications: Advertisers often show how the benefits of their products aid consumers as they perform certain roles. when it comes to making purchase decisions customers’ motivation could be affected by such issues as financial position (e... Do I need to make the purchase quickly?). which relates to how much effort the consumer will exert in making a decision. As illustration. Typically the underlying message of this promotional approach is to suggest that using the advertiser’s product will help raise one’s status in the eyes of others while using a competitor’s product may have a negative effect on status. Many internal factors we have already discussed can affect a customer’s desire to achieve a certain outcome but there are others.g. What happens if I make a bad decision?). Can I afford the purchase?).g. overall value (e. time constraints (e. a person who is responsible for selecting snack food for an office party his boss will attend may choose higher quality products than he would choose when selecting snacks for his family. For instance. Am I getting my money’s worth?).. he or she will try to fulfill the next level of need. Maslow’s theory of human motivation is given below. It says that human needs are arranged in a hierarchy.g.g. Highly motivated consumers will want to get mentally and physically involved in the purchase process.
high percentage of highly involved customers (e.g., milk) but marketers who market products and services that may lead to high level of consumer involvement should prepare options that will be attractive to this group. For instance, marketers should make it easy for consumers to learn about their product (e.g., information on website, free video preview) and, for some products, allow customers to experience the product (e.g., free trial) before committing to the purchase.
Consumer purchasing decisions are often affected by factors that are outside of their control but have direct or indirect impact on how we live and what we consume.
Culture represents the behavior, beliefs and, in many cases, the way we act learned by interacting or observing other members of society. In this way much of what we do is shared behavior, passed along from one member of society to another. Yet culture is a broad concept that, while of interest to marketers, is not nearly as important as understanding what occurs within smaller groups or sub-cultures to which we may also belong. Sub-cultures also have shared values but this occurs within smaller groups. For instance, sub-cultures exist where groups share similar values in terms of ethnicity, religious beliefs, geographic location, special interests and many others. Marketing Implications: As part of their efforts to convince customers to purchase their products, marketers often use cultural representations, especially in promotional appeals. The objective is to connect to consumers using cultural references that are easily understood and often embraced by the consumer. By doing so the marketer hopes the consumer feels more comfortable with or can relate better to the product since it corresponds with their cultural values. Additionally, smart marketers use strong research efforts in an attempt to identify differences in how subculture behaves. These efforts help pave the way for spotting trends within a sub-culture, which the marketer can capitalize on through new marketing tactics (e.g., new products, new sales channels, added value, etc.).
Other Group Membership
In addition to cultural influences, consumers belong to many other groups with which they share certain characteristics and which may influence purchase decisions. Often these groups contain opinion leaders or others who have major influence on what the customer purchases. Some of the basic groups we may belong to include: Social Class – represents the social standing one has within a society based on such factors as income level, education, occupation Family – one’s family situation can have a strong effect on how purchase decisions are made
Reference groups – most consumers simultaneously belong to many other groups with which they associate or, in some cases, feel the need to disassociate Marketing Implications: Identifying and understanding the groups consumers belong to is a key strategy for marketers. Doing so helps identify target markets, develop new products, and create appealing marketing promotions to which consumers can relate. In particular, marketers seek to locate group leaders and others to whom members of the group look for advice or direction. These opinion leaders, if well respected by the group, can be used to gain insight into group behavior and if these opinion leaders accept promotional opportunities could act as effective spokespeople for the marketer’s products.
A purchase decision can be strongly affected by the situation in which people find themselves. In general, a situation is the circumstances a person faces when making a purchase decision, such as the nature of their physical environment, their emotional state, or time constraints. Not all situations are controllable, in which case a consumer may not follow their normal process for making a purchase decision. For instance, if a person needs a product quickly and a store does not carry the brand they normally purchase, the customer may choose a competitor’s product. Marketing Implications: Marketers can take advantage of decisions made in uncontrollable situations in at least two ways. First, marketers can use promotional methods to reinforce a specific selection of products when the consumer is confronted with a particular situation. For example, automotive services can be purchased that promise to service vehicles if the user runs into problems anywhere and at anytime. Second, marketers can use marketing methods that attempt to convince consumers that a situation is less likely to occur if the marketer’s product is used. This can also be seen with auto products, where marketers explain that using their product will prevent unexpected damage to their vehicles.
Definition: The factors which precipitate the buyer's need and guide their final selection of the product perceived as best satisfying that need. While the context and perception of the buyer will mediate the information used and the interpretation put on it, all purchase decisions incorporate a mix of economic (price), technological (performance), and social and psychological (personal and emotional) factors. While one motive may dominate others, the availability of choice in the market place means that buyers will often be faced with two or more acceptable solutions to their purchase need, and so may appear to behave 'irrationally' in making their final selection, e.g. cite a minor feature 'I like the blue colour' on the basis for a major purchase like a motor car. Identifying and understanding buying motives is a key factor in the development of effective marketing strategies. There are two types of buyer motives: Product motives and Patronage motives.
Product Motive- Product motives are the impulses, desires and considerations which make people buy a specific product. On the basis of nature of satisfaction sought by the buyer product motive is classified as: Emotional Product Motives- Impulses that appeal to the buyer’s pride or ego, his urge to imitate others or his desire to be distinctive. Rational Product Motives- This involves a logical analysis of intended purchasethe purpose expected to be served by the product, the various alternatives available to the buyer, etc. Patronage motives- The impulses and influences which persuade a buyer to buy from particular shops explain patronage motives. These can also be emotional and rational. A buyer may buy from a specific shop without any reason (emotional) or may select a shop or may select a shop because he knows that it offers a wide selection (rational). Consumer Buying Process: Marketers must identify who makes the buying decision, the type of buying decision that is involved and the steps in the buying process. Many products involve a decision making unit consisting of more than one person. Buying Roles:
1. INITIATOR- First identifies the need to buy a particular product or service to solve an organisational problem. 2. INFLUENCER- Their views influence the buyers and deciders. 3. DECIDER- Ultimately approves all or any part of the entire buying decision -- whether to buy, what to buy, how to buy, and where to buy; 4. BUYER- Holds the formal authority to select the supplier and to arrange terms of condition; 66
Variety seeking buying behaviour is where the individual likes to shop around and experiment with different products 4. Habitual buying behaviour is where the individual buys a product out of habit e.g. because the purchase is expensive or infrequent. USER. GATEKEEPER. sugar or salt. Complex buying behaviour is where the individual purchases a high value brand and seeks a lot of information before the purchase is made. Types of Buying Behaviour There are four typical types of buying behaviour based on degree of buyer involvement in the purchase and the type of products (or brands) that intends to be purchased. HIGH INVOLVEMENT LOW INVOLVEMENT Significant differences between brands Complex buying behaviour Variety seeking buying behaviour Significant differences between brands Dissonance reducing buying behaviour Habitual buying behaviour 67 . to decision makers and influencers. 2. a daily newspaper.Consumes or uses the product or service.5.Controls information or access or both. 6. 1. Dissonance reducing buying behaviour is when buyer is highly involved with the purchase of the product. 3.
e. Search for Information When consumer is motivated to satisfy his or her need. dealers. Need/Want/Desire/Problem is Recognized In the first step the consumer tries to recognize the problem or need. consumer’s perceived desired condition). credit card not working). commercial sources (advertisements.g.e. Evaluate Options Consumers’ search efforts may result in a set of options from which a choice can be made.. Here the concepts involved are product attributes. Internet retailers have worked hard to prevent consumers from abandoning online purchase (i. or members of the consumer’s reference group take a negative view of the purchase (e. Marketers are good at identifying the circumstances that trigger the particular need or interest in consumers. He has to determine that for some reason he/she is not satisfied (i.g. a competitor offers an incentive at the point-ofpurchase (e. 2. friend is critical of purchase)..e. public sources (mass media). etc. store salesperson mentions a competitor’s offer). 4.). and evaluation procedure. display. It should be noted that there may be two levels to this stage.Consumer Buying Process: 1.e. product types) while at level two the consumer may be evaluating particular products (i. consumer’s perceived actual condition) and wants to improve his/her situation (i..e. The sources used to acquire this information may be as simple as remembering information from past experience (i. The “intended” purchase may be altered at the time of purchase for many reasons such as: the product is out-of-stock. 3. brand image. weightage for important attributes. and experimental sources (handling.. memory) or personal sources (family.. At level one the consumer may create a set of possible solutions to their needs (i. Purchase In many cases the solution chosen by the consumer is the same as the product whose evaluation is the highest. utility function. brands) within each solution. sales persons. For example. the customer lacks the necessary funds (e. The need can be triggered by internal and external stimuli. online shopping carts) by streamlining the checkout 68 ... this may change when it is actually time to make the purchase. neighbours).. he will undertake a search for information on possible solutions. However.. friends. examining.e. Marketers whose product is most desirable to the consumer must make sure that the transaction goes smoothly.g. and using the product).
Such evaluations are more likely to occur in cases of expensive or highly important purchases. marketers need to be receptive and even encourage consumer contact.These buyers are those who purchase items on behalf of their business or organization. Organizational market can be classified as follows: Industrial/Organizational Markets Producer o manufacturers .buy or handle merchandise or services for sale to final consumers Government o federal 69 . such as offering incentives to store personnel to “talk up” their product at the checkout line. 5. last chance marketing efforts may be worth exploring. Customer service centers and follow-up market research are useful tools in helping to address purchasers’ concerns. Organizational Buyers. Organizational Buying behaviourOrganizational buying behaviour is the decision making process by which formal organizations establish the need for purchased products and services and identify. This understanding allows the marketer to develop a significant and effective marketing programme for the target market. For marketers whose product is not the consumer’s selected product. and other wholesalers o retailers . evaluate and choose among alternative brands and suppliers.produce intangible products Reseller o wholesalers . If the product performs below the consumer’s expectation then he/she will reevaluate satisfaction with the decision. which at its extreme may result in the consumer returning the product while in less extreme situations the consumer will retain the purchased item but may take a negative view of the product. After-Purchase Evaluation Once the consumer has made the purchase they are faced with an evaluation of the decision. users. To help ease the concerns consumers have with their purchase evaluation.produce tangible products for resale to other consumers o service producers . retailers.buy or handle merchandise for resale to organizations. The marketer’s job is to understand the buyer’s behaviour at each stage and influences are operating.process.
General Manager. Material Manager). maintenance). purchase. may appear to play different buying roles over the entire buying decision exercise. 2 It is a formal activity which follows the procedures laid down in an organization: Irrespective of the rupee value of technical complexities of products and services. and educational institutions) would involve many persons. graduates etc. Further. government. These persons may be from different functions (production. persons in a buying situation. MBA. may have different backgrounds (engineers. design. Further.) may have different hierarchical levels within the organisation (Managing Director. 70 . hospitals. buying activities have to conform to the formal process and procedures of an organisation. 1 Organisational buying is a multiperson buying activity: A large number of buying situations in organisations (manufacturing.o state o county o local Institutional o charitable o educational o community o other non-business The Phases of the Buying Decision Process Organisational Buying Behaviour: Some Typical Characteristics With the help of earlier discussions. all buying decisions are finally converted into formal contracts between buyers and suppliers. we are now ready to identify some typical characteristics of organisational buying behaviour.
often requires selling to several entities within the buying center. Organizations often employ people who are professional purchasing agents. purchasing agents are specialists are professional specialists at finding what their employer needs. 5 The uniqueness of organisations: In spite of the above common characteristics. however. Differences in Organizational Transactions Buying specialists are often used. This is because it involves human beings in the buying decisions. raw materials. This leads to greater time lag between the application of the market effort and obtaining of the buying response. capabilities and so on. Making a sale to an organization. If problems in quality or delivery are experienced with a supplier. Often use multiple buying responsibility. More likely to require exact specifications. organisational buying cannot be devoid of the emotional (or irrational) aspects. resources. the organisation buying decisions take typically longer time. It is therefore important to consider each organisation as a separate segment at the selling level.3 Longer time lag between efforts and results: Due to multiperson and a formal activity. It is often desirable to have a long term relationship with more than one supplier. Often use multiple suppliers. A household purchaser might select a particular model of desktop computer for no other reason than it has a pleasing 71 . standard products and components. A household purchaser is often the sole decision maker. 4 Rational but also emotional activity: In spite of a formal activity following a rational criteria of evaluation. These differences would be due to the nature of buying problems. Just as sales agents are professional specialists at finding organizations that need the products that their employer produces. even if a second supplier has higher prices for otherwise similar terms and conditions. no two organisations would be similar in their buying behaviour and decisions. objectives. These human considerations are likely to play vital role in situations of almost similar alternatives like buying of commodities. production can still be maintained if the second supplier can be used to replace the first.
As a household consumer. These are things that represent personal expression. you would probably prefer to own your own car. More frequently employ competitive bidding and negotiation. An organizational purchaser is more likely to set specifications regarding processor speed. delivery. say. You might prefer to lease public warehouse space to provide the flexibility to change locations when the market demands. three bids for a service or to negotiate various terms and conditions associated with product specifications. furniture.color. Household consumers are more likely to accept as final a price that is placed on a product in a retail setting or to accept a price that is given to us by a service provider. Your objectives as a business manager. and home. and such before taking bids on price. memory. As a business manager. 72 . and wealth. status. etc. and price. to lease trucks so that you can leave the problems of maintenance and disposition to someone else. however. are very different. Often lease equipment and space. hard drive size. your employer is more likely to require that you accept.
These may lead to conflicts. empathy and persuasiveness of the members of the buying centre. The Interpersonal Factors: Organisational buying is a multi-person activity. This is usually true for new buying 73 . political. ii) Persuasion: Attempt is made to influence the opinions of dissenting members by asking them to reduce the importance of the criteria they are using in favour of better overall achievements of organisational objectives. technical. There are four ways which organisations use for conflict resolutions: i) Problem Solving Approach: It involves information acquisition and deliberation for more time. systems and technology. The situation becomes more complex due to different statuses. Failure to recognise the influences may lead to wasteful efforts Organisational Factors: Organisations may differ from each other due to objectives. It is important to recognise the influence of such organisational factors on the buying behaviour. legal or regulatory. iii) Bargaining: A more typical situation in which a conflict arises is due to fundamental differences in buying goals and objectives. technological. values. infrastructural and cultural factors. Environmental factors interact with each other to produce information. An industrial marketer should be aware of the environmental factors which may affect the buyer behaviour and correspondingly fine tune its marketing strategy.Figure 3: Major Influences on Organizational Buying Behaviour Environmental Factors: These factors include economical. norms and general business conditions. organisational structure. procedures. authority.
and perceptions of how best to achieve both personal and organisational goals. Each member of the buying centre has a unique personality. ‘Politicking’ and ‘bargaining’ are considered as non-rational methods. The Individual Factors: In spite of the environmental. In this a single party is allowed to decide autonomously in the spec situation in return for some favour or promise of reciprocity in future decisions. it must be recognised that ultimately individuals. a particular set of learned experience.situations. 74 . organisational and interpersonal factors. iv) Politicking: When the earlier three fail. the parties may resort to tactics which may be unhealthy and lead to casting of aspersions on the dissenting members. conflict is resolved not by changing the differences in relative importance of the buying goals or objectives of the individuals involved. and not organisations. a specified organisational function to perform. Both `problem solving' and `persuasion' are rational methods. but by the process of bargaining. In such a situation. take buying decisions.
every segment can be addressed with an individually targeted marketing mix.Market segmentation is the segmentation of markets into homogenous groups of customers. A key factor in competitive success is focusing on little differences that give a marketing edge and are important to customers. Target Market. communication. 75 . family life cycle. Thus. Market SegmentationDefinition. each of them reacting differently to promotion. Market segments should be formed in such a way that differences between buyers within each segment are as small as possible. Positioning and Differentiation Market Segments Marketing opportunities increase when customer groups with varying needs and wants are recognized. desire for relaxation or time pressures. gender. demographic characteristics. geographic factors. location.Market Segmentation. pricing and other variables of the marketing mix. It may prove more profitable to develop smaller market segments into a target segment. Market segmentation matches consumer differences with potential or actual buying behavior. Markets can be segmented or targeted on a variety of factors including age.
Market segmentation is the first step in the three phase segmentation strategy.When it comes to marketing strategies. They are the basis for determining any particular marketing mix. are an important element of each marketing strategy. Physical Evidence). however. it is possible to develop premium segments in which customers accept a higher price level. businesses and customers. in the minds of target consumers. Higher Profits. Market segmentation and the identification of target markets.It is possible to satisfy a variety of customer needs with a limited product range by using different forms. and desirable place relative to competitive products. Place. So the second step is target marketing. Price. exclusive points of sale. The third step is market positioning. which is process of evaluating each market segment’s attractiveness and selecting one or more segments to enter. Such segments could be distinguished from the mass market by features like additional services. 76 . A segment-orientated marketing approach generally offers a range of advantages for both. Furthermore. which involves arranging for a product to occupy a clear. Better serving customers needs and wants. most people spontaneously think about the 4P (Product. the marketer must select one or more segments to target. Promotion) – maybe extended by three more Ps for marketing services (People. After segmenting the market into homogeneous clusters. Processes. distinctive. product variations and the like.It is often difficult to increase prices for the whole market. incentives and promotional activities. Literature suggests the following steps: Why Market Segmentation? Segmentation is the basis for developing targeted and effective marketing plans. Nevertheless. bundles. analysis of market segments enables decisions about intensity of marketing activities in particular segments.
Opportunities for Growth- Targeted marketing plans for particular segments allow to individually approach customer groups that otherwise would look out for specialized niche players. By segmenting markets, organizations can create their own ‘niche products’ and thus attract additional customer groups. Sustainable customer relationships in all phases of customer life cycle- Customers change their preferences and patterns of behavior over time. Organizations that serve different segments along a customer’s life cycle can guide their customers from stage to stage by always offering them a special solution for their particular needs. Targeted communication- It is necessary to communicate in a segment-specific way even if product features and brand identity are identical in all market segments. Such a targeted communications allows stressing those criteria that are most relevant for each particular segment (e.g. price vs. reliability vs. prestige). Stimulating Innovation- An undifferentiated marketing strategy that targets at all customers in the total market necessarily reduces customers’ preferences to the smallest common basis. Segmentation provides information about smaller units in the total market that share particular needs. Only the identification of these needs enables a planned development of new or improved products that better meet the wishes of these customer groups. Higher Market Shares- In contrast to an undifferentiated marketing strategy, segmentation supports the development of niche strategies. Thus marketing activities can be targeted at highly attractive market segments in the beginning. Market leadership in selected segments improves the competitive position of the whole organization in its relationship with suppliers, channel partners and customers. It strengthens the brand and ensures profitability. On that basis, organizations have better chances to increase their market shares in the overall market.
Market preference patternHomogeneous Preferences- It’s a market where all the consumers have roughly the same preferences. The market shows no natural segments. Diffused Preferences- Consumer preferences may be scattered throughput the space, indicating that consumers vary greatly in their preferences. Clustered Preferences- The market might reveal distinct preference clusters called natural market segments.
Levels of Market Segmentation:
1. Mass Marketing- It refers to the treatment of market as a homogeneous group and offering the same marketing mix to all customers. Mass marketing allows economies of scale to be realized through mass production, mass distribution, and mass communication. 2. Niche marketing-A niche market is a focused, targetable portion of a market. By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. You can think of a niche market as a narrowly defined group of potential customers. 3. Segment marketing- Here different products are developed for one or more market segments. Market is divided into segments and then different marketing mix is developed for each segment. 4. Micro-marketing- Micromarketing can be defined as tailoring products and programs or services to the needs and wants of individuals and groups, including local marketing and individual marketing. The term local marketing refers to tailoring brands and promotions to the needs and want of local groups, such as cities and neighborhoods. Individual marketing is tailoring the product or service to one individual, also known as "one-to-one marketing".
Levels of Market Segmentation Levels of Market Segmentation
Mass Marketing Mass Marketing Same product to all consumers Same product to all consumers (no segmentation) (no segmentation) Segment Marketing Segment Marketing Different products to one or more segments Different products to one or more segments (some segmentation) (some segmentation) Niche Marketing Different products to subgroups within segments ( more segmentation) Micromarketing Micromarketing Products to suit the tastes of individuals or locations Products to suit the tastes of individuals or locations (complete segmentation) (complete segmentation)
Effective Segmentation: Kotler mentions five criteria for an effective segmentation:
Measurable: It has to be possible to determine the values of the variables used for segmentation with justifiable efforts. This is important especially for demographic and geographic variables. For an organization with direct sales (without intermediaries), the own customer database could deliver valuable information on buying behavior (frequency, volume, product groups, mode of payment etc).
Relevant: The size and profit potential of a market segment have to be large enough to economically justify separate marketing activities for this segment. Accessible: The segment has to be accessible and servable for the organization. That means, for instance, that there are target-group specific advertising media, as magazines or websites the target audience likes to use. Distinguishable: The market segments have to be that diverse that they show different reactions to different marketing mixes. Feasible: It has to be possible to approach each segment with a particular marketing program and to draw advantages from that. Criteria for Market 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- 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.
(2) Profilers- 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:
Geographic • Region of the country • Urban or rural Demographic • Age, sex, family size • Income, occupation, education • Religion, race, nationality Psychographic • Social class • Lifestyle type • Personality type Behavioural
• Product usage - e.g. light, medium, heavy users • Brand loyalty: none, medium, high • Type of user (e.g. with meals, special occasions)
Concentrated Marketing Segment 1 Segment 1 Segment 2 Segment 2 Segment 3 Segment 3 80 . Differentiated Marketing Segment 1 Segment 1 Segment 2 Segment 2 Segment 3 Segment 3 Company Company Marketing Marketing Mix Mix C.The beauty of target marketing is that it makes the promotion. Undifferentiated Marketing Market Market Company Company Marketing Mix 1 Marketing Mix 1 Company Company Marketing Mix 2 Marketing Mix 2 Company Company Marketing Mix 3 Marketing Mix 3 B.Similarly Major segmentation variables for Business markets are the following: Intermediary or final consumer Type of corporation (public or private sector) Size of corporation Geographical location Intensity of product use Organization of purchasing function Centralized or decentralized Purchasing policies. pricing and distribution of products and/or services easier and more cost-effective. Market Coverage strategies: Market Targeting Market Targeting Market Coverage Strategies Market Coverage Strategies Company Company Marketing Marketing Mix Mix A. rules and criteria Identification of Target Market Target Marketing involves breaking a market into segments and then concentrating the marketing efforts on one or a few key segments.
Single Marketing Mix consists of: 1 Pricing strategy 1 Promotional program aimed at everybody 1 Type of product with little/no variation 1 Distribution system aimed at entire market The elements of the marketing mix do not change for different consumers. different marketing plan for each segment. Advantages include: It allows a firm to specialize can focus all energies on satisfying one group's needs A firm with limited resources can compete with larger organizations. and total production and marketing costs can be reduced by segmentation. Can achieve same market coverage as with mass marketing. attracting a large portion of one section while controlling costs. May have trouble expanding into new markets (especially up-market). Not so popular now due to competition. Concentrated Marketing Concentration is on a single market segment with one marketing mix. Advantages include: Shift excess production capacity. Model T. Small shift in the population or consumer tastes can greatly effect the firm. all elements are developed for all consumers. Homogeneous market. Examples include-ROLEX. Henry Ford. or demand is so diffused it is not worthwhile to differentiate.Undifferentiated Marketing (Total Market Approach) Single marketing mix for the entire market. Examples include Staple foods-sugar and salt and farm produce. All consumers have similar needs for a specific kind of product. it is efficiency. Major objective is to maximize sales. This approach combines the best attributes of undifferentiated marketing and concentrated marketing. Anyone wear one. Organization must be able to develop and maintain a single marketing mix. Objective is not to maximize sales. all in black. Disadvantages include: Puts all eggs in one basket. Popular when large scale production began. 81 . improved marketing research capabilities. Differentiated Marketing Two or more segments are sought with a marketing mix for each segment.
Less risk. it may find it profitable to pursue a larger market segment. More resources and increased marketing costs through selling through different channels and promoting more brands. for example. On the other hand. test marketing. if the firm can develop a competitive advantage. 82 . The impact of applicable micro-environmental and macro-environmental variables on the market segment should be considered. Disadvantages include: Demands a greater number of production processes. using different packaging etc. Must be careful to maintain the product distinctiveness in each consumer group and guard its overall image. Note that larger segments are not necessarily the most profitable to target since they likely will have more competition.Price differentials among different brands can be maintained Consumers in each segment may be willing to pay a premium for the tailor-made product. not relying on one market. and capabilities. and statistical demand analysis are useful for determining sales potential. Attractiveness of a Market Segment The following are some examples of aspects that should be considered when evaluating the attractiveness of a market segment: Size of the segment (number of customers and/or number of units) Growth rate of the segment Competition in the segment Brand loyalty of existing customers in the segment Attainable market share given promotional budget and competitors' expenditures Required market share to break even Sales potential for the firm in the segment Expected profit margins in the segment Market research and analysis is instrumental in obtaining this information. It may be more profitable to serve one or more smaller segments that have little competition. Two important factors to consider when selecting a target market segment are the attractiveness of the segment and the fit between the segment and the firm's objectives. buyer intentions. via patent protection. salesforce estimates. For example. resources.
or by a differentiated strategy in which a separate marketing mix is offered to each segment. Another strategy whose use is increasing is individual marketing. Once it gains a foothold.in many cases only the promotional message or distribution channels vary.Suitability of Market Segments to the Firm Market segments also should be evaluated according to how they fit the firm's objectives. and the more attractive the market segment. the greater the profit potential to the firm. individual marketing is becoming more viable thanks to advances in technology. and capabilities. A singlesegment approach often is the strategy of choice for smaller companies with limited resources. resources. Target Market Strategies There are several different target-market strategies that may be followed. Product specialization. 83 .Also known as a concentrated strategy.This is a multiple-segment strategy. capital investment required to serve the segment The better the firm's fit to a market segment. Targeting strategies usually can be categorized as one of the following: • Single-segment strategy . it can expand by pursuing a product specialization strategy. • • • • A firm that is seeking to enter a market and grow should first target the most attractive segment that matches its capabilities. This coverage can be achieved by means of either a mass market strategy in which a single undifferentiated marketing mix is offered to the entire market. Full market coverage . Some aspects of fit include: Whether the firm can offer superior value to the customers in the segment The impact of serving the segment on the firm's image Access to distribution channels required to serve the segment The firm's resources vs.The firm specializes in a particular product and tailors it to different market segments.The firm specializes in serving a particular market segment and offers that segment an array of different products. Different marketing mixes are offered to different segments. Market specialization. While in the past impractical. tailoring the product for different segments. or by pursuing a market specialization strategy and offering new products to its existing market segment. also known as a differentiated strategy. Selective specialization.The firm attempts to serve the entire market. The product itself may or may not be different . One market segment (not the entire market) is served with one marketing mix. in which the marketing mix is tailored on an individual consumer basis.
The end result of a positioning strategy is a distinct value proposition. Clarity.The brand’s position is build over a period of time in a customer’s mind. Qualities of a Successful Position: Relevance. Brand positioning involves implanting the brand’s unique benefits and differences in the customer’s mind.There is a need to integrate all forms of communication to bring coherence to the brand’s position.Single Segment S1 S2 S3 P 1 Selective Specialization S1 S2 S3 P 1 Product Specialization S1 S2 S3 P 1 Market Specialization S1 S2 S3 P 1 Full Market Coverage S1 S2 S3 P 1 P 2 P 2 P 2 P 2 P 2 P 3 P 3 P 3 P 3 P 3 Positioning for Competitive advantages: Definition. which have a higher value for the target customers.If a brand’s position lack distictiveness. it will be forced to compete on the basis of price or promotion and may not build brand equity in the long run. It is a consumer driven strategy where the objective is to occupy a unique place in the minds of the customers and maximize its potential benefit for the firm. it should take commitment to stay committed to the position in the face of competitor’s threat to ensure the long term position of the brand in the market. A product’s position is the definition that a consumer gives to the product on important attributes.a reason for which the customer would buy the product or brand. They take long period of time to get dominant market share.Once a position is adopted.The brand’s position should have clarity so that it will be easy to communicate and quick to comprehend.Position should focus on important consumer benefits.It is the act of developing the company’s offerings and image to occupy a distinct place in the minds of the target market. Distinctiveness. Coherence. 84 . Commitment. Durability.
Product Attributes Benefits Product Classes Positioning Strategies Usage Occasions Away from a Competitor Users Against a Competito r Figure: Positioning Strategies Product Differentiation- 85 . Against a Competitor: Positioned directly against a competitor. Positioning Strategies .Courage. Away from a Competitor: Positioned away from competitor. It is much easier to have a generic positioning but it does not build a strong position.There are seven positioning strategies that can be pursued depending upon the following seven parameters: Product Attributes: What are the specific product attributes? Benefits: What are the benefits to the customers? Usage Occasions: When / how can the product be used? Users: Identify a class of users. Product Classes: Compared to different classes of products.Adopting a strong position requires clarity of vision and courage for the brand managers.
Place 86 . Marketing or product differentiation is the process of describing the differences between products or services. Differences in quality which are usually accompanied by differences in price Differences in functional features or design Ignorance of buyers regarding the essential characteristics and qualities of goods they are purchasing Sales promotion activities of sellers and. Price 3. they can be merely a difference in packaging or an advertising theme. The brand differences are usually minor. Product 2. 1. Sometimes differentiation does not involve changing the product at all. or the resulting list of differences.In marketing. The objective of differentiation is to develop a position that potential customers see as unique. Differentiation is a source of competitive advantage. product differentiation (also known simply as "differentiation") is the process of distinguishing the differences of a product or offering from others." Traditionally the marketing mix consisted of just 4 Ps or element:. The major sources of product differentiation are as follows. It may be as simple as packaging the good in a creative method. This involves differentiating it from competitors' products as well as one's own product offerings.g. hence causes of differentiation may be functional aspects of the product or service. in particular. how it is distributed and marketed. to make it more attractive to a particular target market. Successful product differentiation creates a competitive advantage for the seller. Consumers often call the marketing mix "the offering. but creating a new advertising campaign or other sales promotions instead. advertising Differences in availability (e. Differentiation is due to buyers perceiving a difference. Product differentiation can be achieved in many ways. as customers view these products as unique or superior. timing and location). Differentiation is effective only if it is valued by buyers. or as elaborate as incorporating new functional features. Marketing Mix Marketing mix is a combination of marketing tools and activities that an organization engages so as to best meet the needs of its targeted market and the company objectives. or who buys it. This is done in order to demonstrate the unique aspects of your product and create a sense of value.
Physical evidence – It is the ability and environment in which the service is delivered. Promotion. The three extra Ps are: 1. These 3 extra Ps are particularly relevant to this new extended service mix. Getting the mix of these elements right enables the organisation to meet its marketing objectives and to satisfy the requirements of customers. and the intangible experience of existing customers and the ability of the business to relay that customer satisfaction to potential customers. and because the service sector of the economy has come to dominate economic activity in this country. It includes both tangible goods that help to communicate and perform the service. In addition to the traditional four Ps it is now customary to add some more Ps to the mix to give us Seven Ps. The additional Ps have been added because today marketing is far more customer oriented than ever before.4. 87 .
but is also relevant to any form of business where meeting the needs of customers is given priority Creating a successful marketing mix that will increase results often takes experimenting and market research. mechanism and flow of activities by which services are consumed (customer management processes) are an essential element of the marketing strategy. branding.2. usefulness. 1. technology. management and consumers often add significant value to the total product or service offering. physical evidence. Who is the product aimed at? What benefit will they expect? How do they plan to position the product within the market? What differential advantage will the product offer over their competitors? We must remember that Marketing is fundamentally about providing the correct bundle of benefits to the end user. style. Processes – procedures. features. 2. product. employees. The 7 Ps . People – All people those are directly or indirectly involved in the consumption of a service are an important part of an extended marketing mix. 3. Pricing Strategies 88 . place. The combining and coordination of these elements will be more effective than depending on one. form. packaging. All the elements should confirm to the same message Product strategies When an organisation introduces a product into a market they must ask themselves a number of questions. The key is to not always depend on "one" mix always explore other avenues. 3.price. Product Decisions When placing a product within a market many factors and decisions have to be taken into consideration. and processes comprise the modern marketing mix that is particularly relevant in service industry. All the elements should be well coordinated so that the prospective consumer is not sent mixed messages that can cause confusion. 4. These include: Product design. warranties etc. hence the saying ‘Marketing is not about providing products or services it is essentially about providing changing benefits to the changing needs and demands of the customer’. people. Knowledge workers. promotion. quality.
Pricing a product too high or too low could mean a loss of sales for the organisation. An organisation’s promotional strategy can consist of advertising. Indirect distribution involves distributing the product by the use of an intermediary. Efficient and effective distribution is important if the organisation is to meet its overall marketing objectives. public relations. Direct distribution involves distributing direct from a manufacturer to the consumer e. Promotional strategies: A successful product or service means nothing unless the benefit of such a service can be communicated clearly to the target market. 89 . Pricing should take into account the following factors: Fixed and variable costs. It costs to produce and design a product. it costs to distribute a product and costs to promote it. Competition Company objectives Proposed positioning strategies. The organisation must distribute the product to the user at the right place at the right time.Pricing is one of the most important elements of the marketing mix. Pricing is difficult and must reflect supply and demand relationship. Price must support these elements of the mix. Target group and willingness to pay.g. Place strategies Refer to how an organisation will distribute the product or service they are offering to the end user. Two types of channel of distribution methods are available. as it is the only mix. which generates a turnover for the organisation. for example Dell Computers. Clearly direct distribution gives a manufacturer complete control over his product. The remaining 3p’s are the variable cost for the organisation. personal selling and direct mail. sales promotion.
organizations attempt to provide solutions to a target market’s problems. Customers will choose a product based on their perceived value of it. 4.The fundamental need or want that consumers satisfy by consuming the product or service. Core Benefit. 3. 90 .Version of the product containing only those attributes or characteristics absolutely necessary for it to function. Augmented Product-Inclusion of additional features. 5. Generic Product. 2. Kotler defined five levels of a product: 1. attributes or related services that serve to differentiate the product from its competitors. Potential Product.All the augmentations and transformations a product might undergo in the future. As already stressed.Product Life Cycle Marketing starts with the product since it is what an organization has to offer its target market. Satisfaction is the degree to which the actual use of a product matches the perceived value at the time of the purchase. the product is important because it is how organizations generate revenue. These solutions include tangible or intangible (or both) product offerings marketed by an organization. It is the “thing” that profit oriented companies sell in order to realize profits and satisfy stakeholders and what non-profit organizations use to generate funds needed to sustain themselves. benefits.The set of attributes or characteristics that buyers normally expect and agree to when they purchase a product. Without a well-developed product strategy that includes input from the target market. Expected Product. A customer is satisfied only if the actual value is the same or exceeds the perceived value. In addition to satisfying the target market’s needs.Product Decisions. a marketing organization will not have longterm success.
3. Item or Product variant.A group of items within a product line that share one of several possible forms of the product. 5. 6. Product Class. Product Type. or some other attribute. price.Core benefit Basic Product Expected product Augmented Product Potential Product The Product Hierarchy-Product hierarchy stretches from basic needs to particular item that satisfies those needs.All the product classes that can satisfy a core need with reasonable effectiveness. Product Classifications- 91 .A distinct unit within a brand or product line distinguishable by size.The core need that underlines the existence of a product family. 2. Need Family.A group of products within the product family recognized as having a certain functional coherence. 4. The hierarchy consists of six levels: 1. appearance.A group of products within a product class that are closely related because they perform a similar function. Product Line. Product family.
In order to make high profits marketers must sell in large volume.. • Specialty Products – These are products that tend to carry a high price tag relative to convenience and shopping products. Consumer Products and Industrial Products. The target markets are generally very small and outlets selling the products are very limited to the point of being exclusive. These products have unique characteristics or brand identification. in many cases consumers know in advance which product they prefer and will not shop to compare products. perceived to improve purchaser’s image). electronic products. But they may shop at retailers that provide the best value. expensive champagne. i. and household furnishings. most products intended for consumer use can be further categorized by how frequently and where they are purchased. cleaning products. products are classified in at least two additional ways: Emergency Products – These are products a customer seeks due to sudden events and for which pre-purchase planning is not considered. In addition to the three main categories above. marketers often are more selective when choosing distribution outlets to sell their products. Unsought Products – These are products whose purchase is unplanned by the consumer but occur as a result of marketer’s actions.g.Products are classified into two categories depending upon the type of consumers who use them. • Convenience Products – These are products that appeal to a very large market segment. such as raising their perceived status level within their social group.. and personal care products. • Shopping Products – These are products consumers purchase and consume on a less frequent schedule compared to convenience products. From the marketer’s perspective the low price of convenience products means that profit per unit sold is very low. They are generally consumed regularly and purchased frequently.g. personal services. In fact. Consequently. whatever works to fix a problem) or personal fulfillment (e. Such purchase decisions are made when the 92 . Examples include highend luxury automobiles. pricing per item tends to be relatively low and consumers often see little value in shopping around since additional effort yields minimal savings. the target market is much smaller than that of convenience goods. Consequently.e. Often the decision is one of convenience (e. marketers attempt to distribute these products in mass through as many retail outlets as possible. Consumption may occur at about the same rate as shopping products but consumers are much more selective. Because of the high purchase volume. Consumers are willing to spend more time locating these products since they are relatively more expensive than convenience products and because these may possess additional psychological benefits for the purchaser. Because consumers are purchasing less frequently and are willing to shop to locate these products. In addition to categorizing by type of offering. Examples include many clothing products. and celebrity hair care experts. Examples include most household items such as food.
These promotional activities often lead customers to engage in impulse purchasing Categories of Business Products Materials and parts: These are goods that enter the manufacturer’s product completely. Heavy equipments like earth movers. Raw Materials are products obtained through mining. trucks.A broad group of products. They need to be replenished at different period of time. shades. They can be classified as component materials like iron.. manufactured materials and component parts.Business services can be classified as maintenance services and advisory services. Installations include building. and cloth from yarn. Maintenance supplies include painting. repair and operating products. Capital items: These are long lasting goods that facilitate developing or managing the finished goods. pig iron to steel. Product Lines. Supplies and business services: These are short term goods and services that facilitate managing or developing the finished product supplies. They are of two types namely raw materials. In some cases the processing refines original raw materials while in other cases the process combines different raw materials to create something new..Specific version of a product that has a separate designation in the seller’s list. Manufactured materials are products created through the processing of basic raw materials. However large groups of Industries may have diversified products within core competency. harvesting. They include two groups: Installations and equipment. which are meant for essentially similar uses and posses reasonably similar physical characteristics. printed integrated circuits. drillers etc. that are key ingredients in the production of higher-order products. Product Decisions: Product Item. 93 .customer is exposed to promotional activity. consumables for computer. increase market share and increase the turnover for more profitability. The component materials are further fabricated like from alumina to aluminium. zinc and component parts like motors. Normally the product mix is within the synergy of other products for a medium size organization. Godrej and Reliance in India are some of the examples. steel. They can be maintenance. fishing. such as a salesperson’s persuasion or purchase incentives like special discounts offered to certain online shoppers. nailing and operating supplies include writing papers. etc. Product mix and its constituents: Product mix is a combination of products manufactured or traded by the same business house to reinforce their presence in the market. etc.
length and consistency.One of the realities of business is that most firms deal with multi-products . Depth. Fig: Constituents of Product Mix Depth ProductLine1 1-a 1-b 1-c 1-d 1-e w i d t h ProductLine2 2-a 2-b ProductLine3 3-a 4-a 3-b 3-c ProductLine4 Product Mix Items = 11 Number of Lines = 4 Average Depth = 3 Width. channels of distribution etc. The constituents of a product mix include dimensions of width.number of different product lines found within the company. 94 . Consistency. depth.Refers to the average number of items offered by the company within each product line. Length.Refers to the total number of items produced by the company in all the product lines.refers to how closely related are the various product lines in terms of consumer behavior. production requirements.This helps a firm diffuse its risk across different product groups/Also it enables the firm to appeal to a much larger group of customers or to different needs of the same customer group.
Psychological Benefits Are benefits the customer perceives to receive. For marketers functional benefits are often the result of materials. design and production decisions. 95 . speed. and happiness. design. ease-of-use. risk reduction. These benefits address needs such as status within a group. In markets where competition is fierce and where customers may select from among many competitive products. packaging. It is particularly important in helping position the product in the minds of the product’s target market. when using the product though these may be difficult to measure and may vary from customer to customer. durability. and product support services. sense of independence. Branding. How the product is built can lead to benefits such as effectiveness. the most important features are those associated with the consumable product since they are the main reason a customer makes a purchase. labeling. branding. In most cases. and style. Benefits of consumable product features can be divided into two groupsfunctional and psychological. and cost savings to name just few. These features are called functional because they result in a benefit the user directly associates with the consumable product.The benefits offered by a product are delivered by product attributes such as quality.Branding involves decisions that establish an identity for a product with the goal of distinguishing it from competitors’ offerings. In addition to determining the type of features to include in a product. Functional Benefits Are benefits derived from features that are part the consumable product. creating an identity through branding is essential. Product Attributes. the marketer faces several other decisions related to features. A strong brand offers many advantages for marketers including: Brands provide multiple sensory stimuli to enhance customer recognition.There are three types of product decisionsIndividual product decisions Product line decisions Product mix decisions Individual Product Decisions Important decisions involved are related to product attributes.
The product line is too long if the marketer can increase profits by dropping items. Such branding may allow companies to introduce new products more easily since the brand is already recognized within the market. Line Pruning. weight and volume are very important in packaging. Label can also promote the product through attractive graphics. place of manufacture. to satisfy dealers. Firms that establish a successful brand can extend the brand by adding new products under the same “family” brand. the company may go for the following two methods: Product Line Stretching. PackagingPackaging serves many purposes. to save costs and maximize efficiencies in production. Strong brands can lead to financial advantages through the concept of Brand Equity in which the brand itself becomes valuable. downward or both ways. Well-developed and promoted brands make product positioning efforts more effective. It protects the product from damage which could be incurred in handling and transportation and also has a promotional aspect. For this.Addition of new items within the existing range of product line. date. Size. describing the product. unit type. It is usually done to get extra profits. Product Line Filling. contents. creating consumer confidence and making the sale. A company can stretch its line upward. It performs many sales tasks like attracting attention.a conscious decision is taken to reduce the number of items in the line.Customers who are frequent and enthusiastic purchasers of a particular brand are likely to become brand loyal. Label identifies the product or band. use excess capacity and plugging holes to keep out competitors. Labelling Labelling can vary from simple tags attached to the products to complex graphics that are part of the package.When a company lengthens its product line beyond its present range. describes several things about the product like manufacturer’s name. distribution and promotion. It also acts as an important marketing tool under competitive market conditions. using instructions and safety precautions. It can be very expensive. 96 . Product Line decisionsThe important product line decisions include product line length. The product line is short if the company can increase profits by adding new items.
Each stage is often linked with changes in the flows of raw materials. Product development is the incubation stage of the product life cycle. Product Life cycle: The product life cycle is defined as the period that starts with the initial product design (research and development) and ends with the withdrawal of the product from the marketplace. decline. and obsolescence. The life cycle concept may apply to a brand or to a category of product.Product Mix decisions. four main stages compose a product's life cycle: 97 . including research. Conventionally.depending upon whether it wants to have a strong reputation in a single field or in several fields. maturity. It is characterized by specific stages. As the product progresses through its life cycle. There are no sales and the firm prepares to introduce the product. These provide the basis for defining the company’s product strategies. The company can lengthen its product line to become competitive and strong. or it can add more versions of each product and thus its product mix. Its duration may be as short as a few months for a fad item or a century or more for product categories such as the gasoline-powered automobile. changes in the marketing mix usually are required in order to adjust to the evolving challenges and opportunities. introduction. The company can increase its business in four ways. thus widening its product mix.or less. development.The product mix dimensions are already discussed above. Finally the company can persue more product lie consistency. It can add new product lines. parts and distribution to markets.
The product starts to be exported to other markets and substantial efforts are made to improve its distribution since competition mainly takes place more on the innovative capabilities of the product than on its price. relatively undifferentiated. 98 . sales will be low until customers become aware of the product and its benefits. The introductory promotion also is intended to convince potential resellers to carry the product. Sales increase as more customers become aware of the product and its benefits and additional market segments are targeted. During the introductory stage the firm is likely to incur additional costs associated with the initial distribution of the product. Price . there may be price competition and/or increased promotional costs in order to convince consumers that the firm's product is better than that of the competition. sales will increase further as more retailers become interested in carrying it. In some cases a penetration pricing strategy is used and introductory prices are set low to gain market share rapidly. The marketing team may expand the distribution at this point.Introduction. When the product is introduced. Promotion . Samples or trial incentives may be directed toward early adopters. the primary goal is to establish a market and build primary demand for the product class. Distribution . During the growth stage.Promotion is aimed at building brand awareness. Some firms may announce their product before it is introduced. When competitors enter the market. Once the product has been proven a success and customers begin asking for it. Growth: If the new product is successful. often during the later part of the growth stage.one or few products. Advertising costs typically are high during this stage in order to rapidly increase customer awareness of the product and to target the early adopters. The marketing mix may be modified as follows: Product . improvement of product quality. slowly eroding the market share of the innovative firm. from the time it is initially conceptualized to the point it is introduced on the market. These higher costs coupled with a low sales volume usually make the introduction stage a period of negative profits.Generally high. assuming a skim pricing strategy for a high profit margin as the early adopters buy the product and the firm seeks to recoup development costs quickly. The growth stage is a period of rapid revenue growth. The following are some of the marketing mix implications of the introduction stage: Product .New product features and packaging options. the goal is to gain consumer preference and increase sales. sales will start to grow and new competitors will enter the market. During the introduction stage. This stage mainly concerns the development of a new product. The corporation having an innovative idea first will often have a period of monopoly until competitors start to copy and/or improve the product (unless a patent is involved as it is the case in industries such as pharmaceuticals).Distribution is selective and scattered as the firm commences implementation of the distribution plan. but such announcements also alert competitors and remove the element of surprise.
Distribution .Possible price reductions in response to competition while avoiding a price war. advertising expenditures will be reduced. The firm places effort into encouraging competitors' customers to switch. Incentives to get competitors' customers to switch. While sales continue to increase into this stage. or customer tastes change. The competing products may be very similar at this point. Maturity. At this stage. The maturity stage is the most profitable. reducing marketing support and coasting along until no more profit can be made. the product has been standardized. c) Discontinue the product when no more profit can be made or there is a successor product.Price . Promotion . Promotion . Decline: Eventually sales begin to decline as the market becomes saturated.New distribution channels and incentives to resellers in order to avoid losing shelf space. and converting non-users into customers. the profitability may be maintained longer. the primary goal is to maintain market share and extend the product life cycle. During the maturity stage.Maintained at a high level if demand is high. they do so at a slower pace. Competition increasingly takes place over cost.Emphasis on differentiation and building of brand loyalty.Distribution becomes more intensive. b) Harvest it. Trade discounts are minimal if resellers show a strong interest in the product. Reduce costs and find new uses for the product. or reduced to capture additional customers. Unit costs may increase with the declining production volumes and eventually no more profit can be made. Sales promotions may be offered to encourage retailers to give the product more shelf space over competing products. During the decline phase.Increased advertising to build brand preference. the product becomes technologically obsolete. If the product developes brand loyalty. increasing usage per customer. the firm generally has three options: a) Maintain the product in hopes that competitors will exit. 99 . Price . increasing the difficulty of differentiating the product. is widely available on the market and its distribution is well established. Marketing mix decisions may include: Product .Modifications are made and features are added in order to differentiate the product from competing products that may have been introduced. Competition may result in decreased market share and/or prices. Because brand awareness is strong. Distribution .
The marketing mix may be modified as follows: Product .Prices may be lowered to liquidate inventory of discontinued products.The number of products in the product line may be reduced. surviving products to make them look new again.Distribution becomes more selective. Promotion . Prices may be maintained for continued products serving a niche market. Rejuvenate Price . Channels that no longer are profitable are phased out.Expenditures are lower and aimed at reinforcing the brand image for continued products 100 . Distribution .
Distribution channels in different countries are dissimilar in terms of the retail system. allows customers to gain access and purchase a marketer’s product. These players are wholesale distributors and retailers. However. time consuming. The bottom line is a marketer’s distribution system must be both effective (i. channel length and channel accessibility. Characteristics of customers.Distribution and Promotion Decisions The previous chapter on Product Decisions indicate that product decisions may be the most important of all marketing decisions since these lead directly to the reasons (i. In a normal situation..e. standardize transactions and provide customer service.e.. intermediaries and the environment influence the mode of channels. product. Distribution decisions focus on establishing a system that. as we will see. Distribution Decisions: Marketing channels are created to facilitate the exchange process. achieving these goals takes considerable effort. a distribution system consists of two levels of players between the manufacturer and the consumer. in the right amount.. But having a strong product does little good if customers are not able to easily and conveniently obtain it. offer benefits that satisfy needs) why customers decide to make a purchase. marketers may find that getting to the point at which a customer can acquire a product is complicated. 101 . and expensive. at its basic level. in the right condition) and efficient (i.e. The characteristics of customers include number of customers. With this in mind we turn to the second major marketing decision area – distribution. delivers a good or service to the right place. Yet. alleviate discrepancies. delivers at the right time and for the right cost).
geographical distribution, income, and shopping habits. Product attributes include degree of standardization, perishable nature of the product, bulk, service requirements and unit price. The mode of channel is also affected by a variety of economic, social and political factors. Generally, local markets in less developed countries are regulated or dominated by networks of local intermediaries. Internationally operating companies have to partner with these distributors to gain access to their unique expertise and knowledge. Channel innovation depends on many factors like level of economic development of the country in which the firm is operating, local demographic/geographic factors, social norms, government actions and competitive pressures. A properly designed distribution channel will help a company achieve a sustainable competitive advantage. Channel structure varies depending on the customer. In order to facilitate an effective and efficient distribution system many decisions must be made including (but certainly not limited to): Assessing the best distribution channels for getting products to customers Market coverage (inclusive, selective, or exclusive distribution) Determining whether a reseller network is needed to assist in the distribution process Arranging a reliable ordering system that allows customers to place orders Creating a delivery system for transporting the product to the customer For tangible and digital goods, establishing facilities for product storage Decision regarding the Reverse logistics. Functions of Channels: Channels of distribution play an important role in marketing. Effective and well managed channels provide sound competitive advantages to companies. Members of marketing channels perform many functions: Provide market information Acts as a promotion tool Reduce the number of contacts needed to reach the consumers Meet small size consumer requirement Supply assortment of various products Conduct price negotiations with buyers Carries out some part of physical distribution. Absorb most of business risk Distribution Strategies
Depending on the type of product being distributed there are three common distribution strategies available: 1. Intensive distribution: Used commonly to distribute low priced or impulse purchase products e.g. chocolates, soft drinks. 2. Exclusive distribution: Involves limiting distribution to a single outlet. The product is usually highly priced, and requires the intermediary to place much detail in its sell. An example of would be the sale of vehicles through exclusive dealers. 3. Selective Distribution: A small number of retail outlets are chosen to distribute the product. Selective distribution is common with products such as computers, televisions household appliances, where consumers are willing to shop around and where manufacturers want a large geographical spread. If a manufacturer decides to adopt an exclusive or selective strategy they should select an intermediary which has experience of handling similar products, credible and is known by the target audience. There are many types of distribution channels. The most important ones are wholesalers, agents, retailers, the Internet and overseas distributors and direct sales. A description of each is given below. Wholesalers- These usually buy products from producers in large quantities and sell these to retailers. They take ownership or title of goods. Most of the times they provide storage facilities and sometimes take some of the product marketing responsibilities. The wholesaler provides minimum contact between the producer and the customer. Agents- They are used mostly in international markets. They will typically secure orders for products and take commissions from the producer. Agents usually do not tie capital to goods but sometimes they can stockpile products in cases when products need to get into a market as soon as they are produced. They are very expensive to train and keeping them under control is a difficult task due to the distances involved. Also they are difficult to be motivated due to the nature of their payment. Retailers- Retailers have a strong relationship with the customers. They will hold a lot of different products and brands in stock and they will usually offer credit or discounts to the customers. All products are promoted and merchandised by them. Also the retailers will have the final say on price. The Internet- E-commerce is a distribution channel that is growing steadily in the past years. The Internet offers a large dispersed market to producers. Set up costs can be low and all the e-commerce technology is easily attainable. Also in recent years there is a shift in commerce and consumption habits that benefits distribution through the Internet.
Direct sales- Direct sales involve the supply of customers directly from the producer's factory. The marketing or sales in-house department looks after all contacts. It is obvious that every business must take care of their distribution channel by making sure there is no shortage in inventory and controlling the distribution channel member. It is also important to consider the market penetration to make sure that the customer can actually purchase your products.
breaking bulk etc. control and adaptive criteria.After the various alternatives are evaluated.Channel Design ProcessThe different steps involved in the process are as follows: Determine the channel objectives. Assessing competitors’ channel design. 105 . Evaluating legal aspects and the distribution environment-The distribution environment in the country or territory has to be reckoned while deciding on the channel design. Final selection of the best design. Assessing company resources and matching channel design to it.Channel decision is influenced by availability of resources in the company. promotion. Matching channel design to product attributes.The strength and weaknesses of competitors’ channels have to be assessed in order to get an edge over them. the company chooses the best among them. contact.Different products have different channel requirements depending upon the product attributes.It may include effective coverage of target market.Functions can be like providing information. Each alternative needs to be evaluated against economic. effective and cost effective distribution. making products available nearest to the consumption point etc. Identify functions.
There are many factors affecting the distribution decisions. Market Factors 2. Product Factors 3. Producer/ Manufacture Factor Market Factors-Analyzing and understanding the target market is the first step in selecting marketing channels. Sales Promotion. Public Relations. Product related factors are as follows: Life Cycle Product Complexity Product Value Product size and weight Consumer Perceptions Other Factors Product/ Manufacturer FactorCompany Objective Company Resources Desire for Control Breadth of Product Life Promotion Decisions Another one of the 4P's is 'promotion'. 106 . This includes all of the tools available to the marketer for 'marketing communication'. They can be categorized into: 1. You can 'integrate' different aspects of the promotions mix to deliver a unique campaign. Advertising.Even products that end up at the same retail location may need different intermediaries earlier in the channel. The elements of the promotions mix are: Personal Selling. Direct Marketing. This depends on: Customer Preferences Organizational customers Geography Competitors Product Factors.
contests.From the above figure it can be said that Marketing Communications Mix is the specific mix of advertising. 107 . It is considered as the most expensive of the promotional tools Sales promotion . one must always define the total budget first (generally defined in the Marketing and/or Business Plan) and then decide upon the best way to leverage the different elements of the mix to maximize the return on investment. Personal interaction allows for feedback and adjustments. sales promotion. personal selling. or services by an identified sponsor is called advertising. consumers perceive advertised goods as more legitimate. Most effective tool for building buyers’ preferences. It is an impersonal. and actions. often with high frequency and low cost per exposure.Short-term incentives to encourage the purchase or sale of a product or service. This is more relationship-oriented. goods. Advertisement dramatizes company/brand. Personal selling . convictions. builds brand image and may stimulate shortterm sales. It makes use of a variety of formats: premiums. Buyers are more attentive. Advertising . etc. geographically dispersed audiences.Personal presentation by the firm’s sales force for the purpose of making sales and building customer relationships. it is important to consider the relative strengths and weaknesses of each component of the mix. Further.. coupons. and direct marketing a company uses to pursue its advertising and marketing objectives. It may be targeted at the trade or ultimate consumer. Though overall costs are high. This offers strong purchase incentives. The elements of the promotions mix are integrated to form a coherent campaign. public relations. one-way communication and expensive. When deciding how to properly utilize the marketing communications mix to meet the marketing objectives.Any paid form of nonpersonal presentation and promotion of ideas. It should reach large.
dramatizes offers. Well-suited to highly-targeted marketing efforts Similar to distribution decisions. and events. online marketing.. news features. Direct marketing .. boosts sagging sales and stimulates quick response. pre-introduction publicity 108 . Customized. Relatively inexpensive.Direct communications with carefully targeted individual consumers to obtain an immediate response and cultivate lasting customer relationships. Often the most under used element in the promotional mix. while deciding upon your unique marketing communications mix. Reaches many prospects missed via other forms of promotion. Many forms: Telephone marketing. etc. events and sponsorships. Very believable. Four distinctive characteristics: Nonpublic. Public relations . building up a good "corporate image". stories. Dramatizes company or product. we should consider the following factors: Type of product Nature of market Stage of product in its life cycle Budget availability Company policy Here are some general guideline as to how and when to emphasize different parts of the mix according to the stages of a typical product life cycle: Product Life Cycle Pre-Introduction: Light advertising. etc. direct mail. Immediate. Highly credible. Many forms: news stories. But it is short-lived and is not effective at building long-term brand preferences. Interactive.Building good relationships with the company’s various publics by obtaining favorable publicity. and handling or heading off unfavorable rumors.
branding and brand marketing. sales promotion. Interaction Type: Personal vs. which are your target audience Determination of communication objectives. Demand Creation: Quick vs. Selection of media channel Deciding the total communication budget Deciding on the communication mix.A good message gets a customer's attention.Introduction: Heavy use of advertising. Two-Way 5. personal selling. Designing the communication message. Non-Paid 3. public relations for awareness. arouses desire.Identify the target audience. personal selling for distribution Maturity: Advertising decreases. 109 . Message Control 7. but you may consider adding a goal here that directly relates to this communications plan and segment. sales promotion for trial Growth: Advertising. While these characteristics are widely understood as being important in evaluating the effectiveness of each type of promotion. Message Flow: One-Way vs. as new promotional methods emerge the criteria for evaluating promotional methods will likely change. Promotional mix can be characterised on the basis of: 1. Targeted 2. public relations. as listed above. holds interest. A message must have content. reminder & persuasion Decline: Advertising and public relations decrease. Effective Cost of Promotion Developing an integrated marketing communication program involves eight steps: Identification of target Audience. Payment Model: Paid vs.Select the communication tools. structure.Determine the communication goals. Message Credibility 8. and a format. Your strategic market goals have been identified. and obtains action. Non-Personal 4. In this plan you determined the customer segments. personal selling for distribution Characteristics of Different Promotions There are seven characteristics on which each promotional option can be judged. limited sales promotion. In fact. they are by no means the only criteria used for evaluation. Lagging 6. Intended Audience: Mass vs.
Promotion Mix Strategies. especially personal selling and trade promotion toward channel members to induce them to carry the product in large quantities and to promote it to the final consumers.Push and Pull. advertising and sales promotion Manufacturer’s personal selling and trade promotion Manufacturer Retailers and Wholesalers Consumers Push Strategy Manufacturer Demand Retailers and Wholesalers Demand Consumers Consumer advertising and sales promotion Pull Strategy 110 . the manufacturer directs all marketing activities. especially advertising and consumer promotion. Managing integrated marketing communication process.Evaluate the results.A push strategy involves pushing the product through distribution channels to final consumers. consumer’s demand pulls the product through the channels. Thus under a pull strategy.Measurement of communication results. Using a pull strategy. Channel’s personal selling. The manufacturer direcyts all activities . toward the final consumers to induce them to buy the product. Did the message have the intended impact on the target audience? Measure the behavior of the target audience.
customer characteristics dictate how promotion is determined. For the consumer market. Marketers with large promotional budgets may be able to spread spending among all promotion options while marketers with limited funds must be more selective on the promotion techniques they use. Each type of promotion offers different advantages in terms of helping the marketer reach their objectives.Factors Affecting Promotional Choice With four promotional methods to choose from how does the marketer determine which ones to use? The selection can be complicated by company and marketing decision issues. • Distribution –Marketing organizations selling through channel partners can reach the final customer either directly using a pull promotion strategy or indirectly using a push promotional strategy. products falling into the convenience and shopping goods categories are likely to use mass market promotional approaches while higher-end specialty goods are likely to use personalized selling. location and type of target markets affect how the marketer communicates with customers. it may be very expensive to utilize a sales force versus using advertising. such as offering the software in a free downloadable form. the use of sales promotion. may yield better results than promoting through Internet advertising. For instance. some companies follow the approach that all promotion should be done through salespeople while other companies prefer to focus attention on product development and hope word-ofmouth communication by satisfied customers helps to create interest in their product. • Product – Different products require different promotional approaches. For instance. For instance. Characteristics such as size. • Availability of Resources – The amount of money and other resources that can be directed to promotion affects the marketer’s choice of promotional methods. • Company Philosophy – Some companies follow a philosophy that dictates where most promotional spending occurs. if the objective of a software manufacturer is to get customers to try a product. for a small marketer serving business markets with customers widely dispersed. Company Issues: • Promotional Objective – As we discussed. 111 . • Target Market – As one might expect. • Price – The higher the price of a product the more likely a marketer will need to engage in personalized promotion compared to lower priced products that can be marketed using mass promotion. there are several different objectives a marketer may pursue with their promotional strategy.
case. free-samples. point-of-purchase display. Types: Consumer Promotions . sweepstakes. co-operative advertising.Sales Promotion . merchandise. financial allowance.rebates. coupons. deals. quantity discounts.A mass communication technique that offers short-term incentives to encourage purchase or sales of a product or service. promotions given to channel intermediaries 112 . any sales promotions that reaches consumers directly. contests. Trade Promotions .trade allowances.
g..Personal Selling and Sales management Whether a company is in retailing or manufacturing.g. It involves the use of a sales force to support a push strategy (encouraging intermediaries to buy the product) or a pull strategy (where the role of the sales force may be limited to supporting retailers and providing aftersales service). 113 .. However. in all probability at some point they will need to rely on personal contact with customers. For instance.g. getting a customer to purchase a product is not always the objective of personal selling. those involved in a purchase decision) that results in both parties obtaining value. sells goods or services. is a large multi-national or a local startup. salesperson) uses skills and techniques for building personal relationships with another party (e. selling may be used for the purpose of simply delivering information. Because selling involves personal contact. though newer technologies allow contact to take place over the Internet including using video conferencing or text messaging (e. And. Personal selling is a promotional method in which one party (e. While there certainly are some salespeople that fit these descriptions. Personal selling is one of the oldest forms of promotion. they will need to promote using personal selling. In fact. money spent to support the selling function far exceeds spending on advertising. personal selling holds a key role in the promotional activities of a large number of organizations. today the most successful salespeople are those who work hard to understand their customers’ needs with the ultimate goal of ensuring that customer’s needs are satisfied at a high level.. in the business market where one company sells products to another company. In other words. online chat). more importantly. In most cases the “value” for the salesperson is realized through the financial rewards of the sale while the customer’s “value” is realized from the benefits obtained by consuming the product. this promotional method often occurs through face-to-face meetings or via a telephone conversation. is out to make a profit or is a non-profit.
with existing and potential customers about the product range (3) Selling . Role of a Salesperson: Kotler describes six main activities of a salesperson: (1) Prospecting .trying to find new customers (2) Communicating . Personal selling followed by personal service helps build long term relations between the business and the customer.contact with the customer.providing support and service to the customer in the period up to delivery and also post-sale (5) Information gathering . the time lag between introducing a product through the media and actually selling it is reduced. and sales support. It is a powerful and effective tool in convincing the customer about the product. Selling Roles: Below we discuss the four major types of selling roles: order getters.Important Aspects of Personal Selling: It enhances the customer’s confidence in the seller It promotes long term business relations through personal intimacy It provides a human touch to business transactions It helps facilitate the seller to understand each customer’s needs and preferences more clearly It helps satisfy a customer by modifying the product as per the customer’s choice and preference.in times of product shortage. the sales force may have the power to decide how available stocks are allocated. It helps keep up the competition in the market. It should be noted that these roles are not mutually exclusive and that a salesperson can perform more than one and possibly all activities 114 . order takers. It provides prospective customers with a better understanding of the product and an interactive opportunity to liaise with the sales personnel. Through personal selling. order influencers. based on product customization as per customer’s preferences.obtaining information about the market to feedback into the marketing planning process (6) Allocating . answering questions and trying to close the sale (4) Servicing .
Technical Salespersons Offer technical assistance to current customers. They are required for high priced. Order influencers call on retailers and persuade them to carry the product.• Order Takers Seek repeat sales. Do not require extensive sales effort. provide information. Generate customer leads. Spend much time helping customers. answer phone calls. to promote the product. Use laptop computers to improve tracking of inventory and orders etc. Assist producers' customers in selling to their own customers. o Field Order Takers travel to customers. Primarily business to business products. sometimes called creative selling. persuading customers and closing sales. make certain that customers have sufficient product quantities where and when they need it. o Order Getters Sell to new customers and increase sales to present customers. especially retail stores. o Elements of the Personal Selling Process The personal selling process consists of the following steps: 1) Prospecting 115 . Order Influencers Distribute information regarding new goods or services. Pharmaceuticals may go to doctors’ offices and persuade them to carry their products. Low compensation is given to such salespeople and little training is required. restocks them. Usually trained engineers etc. High turnover of personnel is witnessed. o Service Salespeople interacts with customers after sale is complete. describes attributes and leaves materials. sales person in a retail store. Trade Salespeople May perform order taking function as well. complex and/or new products. Arrange displays. It is a high pressure job and requires expensive and time consuming training. Support Personnel Facilitate the selling function. They restock the shelves and set up displays. These are of two types: Inside Order Takers receive orders by mail/phone. does not close sales.
2) Pre-approach Before engaging in the actual personal selling process. Uncovering 116 . Sales professionals should strive to let the prospect do most of the talking during the presentation and address the needs of the prospect as fully as possible by showing that he or she truly understands and cares about the needs of the prospect. establishes rapport that sets the foundation of the relationship. sales professionals try to understand the prospect's current needs. and set call objectives. During the Pre-approach phase of the personal selling process. directories and a wide variety of other sources. 3) Approach The approach is the actual contact the sales professional has with the prospect. it often signals that they need and want to hear more in order to make a fully-informed decision.Prospecting refers to identifying and developing a list of potential clients. referrals. 5) Overcoming Objections Professional sales people seek out prospects' objections in order to try to address and overcome them. review account histories (if any). provides an introduction. company sales records and in-house databases. The sales professional also develops a preliminary overall strategy for the sales process during this phase. This is the point of the selling process where the sales professional meets and greets the prospect. sales professionals first analyze all the information they have available to them about a prospect to understand as much about the prospect as possible. If objections are not uncovered and identified. Prospecting activities should be structured so that they identify only potential clients who fit the profile and are able. current use of brands and feelings about all available brands. commercially-available databases or mail lists. A highly customized presentation is the key component of this step. plan/create a sales presentation to address the identified and likely concerns of the prospect. 4) Making the Presentation During the presentation portion of the selling process. as well as identify key decision makers. then sales professionals cannot effectively manage them. When prospects offer objections. prospects are often allowed to hold and/or inspect the product and the sales professional may also actually demonstrate the product. the sales professional tells that product "story" in a way that speaks directly to the identified needs and wants of the prospect. assess product needs. keeping in mind that the strategy may have to be refined as he or she learns more about the prospect. willing and authorized to buy the product or service. and asks open-ended questions to learn more about the prospect and his or her needs. At this point in the process. website registrations. public records. Audio visual presentations and/or slide presentations may be incorporated at this stage and this is usually when sales brochures or booklets are presented to the prospect. Sales people can seek the names of prospects from a variety of sources including trade shows.
asking clarifying questions. In addition to the basic pay package. it may be a good opportunity to identify new objections and continue selling. it is in the best interest of everyone involved for the sales person to follow-up with the prospect to make sure the product was received in the proper condition. travel and subsistence costs. mobile phone etc). If the prospect gives an answer other than "yes". proper training delivered. and that the entire process was acceptable to the customer. installed properly. Sales people are expensive. a sales person can only call on one customer at a time. Advantages of personal selling as a means of promotion: Personal selling is a face-to-face activity. and overcoming objections is a critical part of training for professional sellers and is a skill area that must be continually developed because there will always be objections. at the right time. a business needs to provide incentives to achieve sales (typically this is based on commission and/or bonus arrangements) and the equipment to make sales calls (car.objections. customers therefore obtain a relatively high degree of personal attention The sales message can be customized to meet the needs of the customer The two-way nature of the sales process allows the sales team to respond directly and promptly to customer questions and concerns Personal selling is a good way of getting across large amounts of technical or other complex product information The face-to-face sales meeting gives the sales force chance to demonstrate the product Frequent meetings between sales force and customer provide an opportunity to build good long-term relationships Main disadvantages of using personal selling: The main disadvantage of personal selling is the cost of employing a sales force. In addition. Too many sales professions are either weak or too aggressive when it comes to closing. This is a critical step in creating customer satisfaction and building long-term relationships with customers. 7) Follow-up Follow-up is an often overlooked but important part of the selling process. After an order is received. If you are closing a sale. Sales Management: 117 . be sure to ask for the order. 6) Closing the Sale Technically "closing" a sale happens when products or services are delivered to the customer's satisfaction and payment is received. This is not a costeffective way of reaching a large audience.
and (4) Controlling and evaluating the results. implementation. budgeting. Good sales managers usually exhibit the characteristics of: organization.A company can go for a territorial sales force structure. including recruiting. supervising. and control of sales force activities. implementation.Sales management refers to the administration of the personal selling component of an organization's marketing program. assigning. and organizing a program to achieve those goals. (3) Implementing the program. The size is decided based on the workload approach. (2) Planning. According to Committee of the AMA (American Marketing Assosiation) Sales management means “the planning. mentoring skills. as well as recruiting. equipping. Sales Force ManagementSales force management is defined as the analysis. selecting. and evaluating members of the sales force. and control of personal selling. 118 . trustworthiness. training. the sales manager will likely view these responsibilities as an ongoing process necessary to adapt to both internal and external changes. and somebody who is respected by others. The fundamental role of the sales manager is to develop and administer a selling program that effectively contributes to the achievement of the goals of the overall organization. Even when a sales force is already in place. The major steps are as follows: Developing sales force strategy and structure. routing. ambition. paying and motivating as these tasks apply to the personal salesforce. It includes the planning. enthusiasm. their primary responsibilities are: (1) Setting goals for a sales-force. a good personal sales record. and control of sales programs. product sales force structure. customer sales force structure or a mix of the three. planning. motivating. direction. Sales force size is important because it is both productive and expensive.” THE ROLE OF SALES MANAGEMENT Although the role of sales management professionals is multidisciplinary. product knowledge. Managing the sales process is typically the job of the Sales Manager.
control. personality traits. Compensating sales persons. and sales meetings. 119 . achievement is a quantifiable means of evaluating sales persons. The traits to look for in selection are enthusiasm. initiative and self confidence. travel expenses. campus recruitment etc. market situation. production process.In order to keep the sales force active. Selection procedure includes sales aptitude tests. variable commission. time management. competition. Evaluating sales persons.It is done through sales reports. its products. Recruitment is done through advertising in newspapers. customer surveys. and buyer’s habits. guidance.Training includes imparting knowledge about the company. personal observations.Careful selection will help to increase sales force productivity. enthusiastic. interpersonal skills. reward schemes. employment exchanges. pricing.. and motivation of the sales force to help them perform well on the job.Recruiting and selecting sales persons. persistence. analytical skills. fringe benefits. reporting etc. etc.This involves direction. Training sales persons. Target vs. Compensation covers normally a fixed salary. Supervising sales persons. and motivated a good compensation plan is necessary. experience etc. Presentation skills. commitment. call reports. expense reports.
. price refers to what must be given up to obtain benefits. such as final customers. two farmers may exchange cattle for crops.To sellers in a transaction. is an important factor in determining profit. Assured minimum return on investment 120 . the expected life cycle and competitors’ actions.Pricing Decisions Pricing is one of the most difficult decisions faced by organisations. as we will discuss below. time to learn to use the product). For marketing organizations price also serves as a marketing tool and is a key element in marketing promotions. thus. Objectives of PricingProfit maximization in short run and profit optimization in long run. money) in exchange for acquiring access to a good or service. the decision maker must also factor in the organisation’s strategic objectives and a range of environmental factors.g. price reflects the revenue generated for each product sold and. But financial consideration is not always what the buyer gives up.. most retailers highlight product pricing in their advertising campaigns. such as market demand. For example. What is Price? • Buyers’ View – For those making a purchase.g. • Sellers’ View . In most cases what is given up is financial consideration (e. As well as a detailed knowledge of the costs involved in producing a product or delivering a service. Sometimes in a barter situation a buyer may acquire a product by giving up their own product. buyers may also give up other things to acquire the benefits of a product that are not direct financial payments (e. For instance. Also.
its profit.A company may seek objectives like market leadership.Cost forms the base level for price decisions. Liquidation of accumulated inventory of products. So any decision made for any other variable in the marketing mix could affect or influence pricing decisions. 121 . price can be changed very rapidly.Pricing decision must be coordinated with other variables of the marketing mix like product design. growth and future. The flexibility of pricing decisions is particularly important in times when the marketer seeks to quickly stimulate demand or respond to competitor price actions • Setting the Right Price – Pricing decisions made hastily without sufficient research. and strategic evaluation can lead to the marketing organization losing revenue. promotion and distribution. • Most Flexible Marketing Mix Variable – For marketers price is the most adjustable of all marketing decisions. Improving cash flow through faster sales.Often times customers’ perception of a product is formed as soon as they learn the price. current profit maximization. such as when a product is first seen when walking down the aisle of a store. survival or product quality leadership. Marketing mix strategy. Price is also the most important determinant of the profitability of any company or business. Factors Affecting Pricing Decision The final price for a product may be influenced by many factors which can be categorized into two main groups: Internal factorsMarketing objectives. • Important Part of Sales Promotion – Many a times price adjustments are part of sales promotions that lower price for a short term to stimulate interest in the product. A company has to consider fixed. Make entry into new markets and market penetration in existing markets. Costs. Maintain price leadership or price parity with competitors. Importance of Pricing: Of all the elements of marketing mix. Any mistake in pricing will adversely affect the company. average or high price.Ensure a specified targeted sales volume. price is the only one which generates revenue. variable and total costs while making price decisions. and accordingly set a low. analysis. • Trigger of First Impression . Unlike product and distribution decisions.
Marketers will undoubtedly look to market competitors for indications of how price should be set. government regulations etc. particularly when Internet search tools are used. But one major disadvantage is that it does not take into consideration the target market’s demand for the product. the advantage is not sustainable. Other Environmental Factors. For many marketers of consumer products researching competitive pricing is relatively easy. When it comes to adjusting price. . and marginal cost pricing. Price analysis can be somewhat more complicated for products sold to the business market since final price may be affected by a number of factors including if competitors allow customers to negotiate their final price. The price demand relationship varies with the nature of the markets.Organizational considerations. This could present major problems if the product is operating in a highly competitive market where competitors frequently alter their prices. target rate of return pricing. the price is increased. consumer perceptions. Skimming pricing: The organisation sets an initial high price and then slowly lowers the price to make the product available to a wider market. The high price tends 122 .Marketers must continually use market research and their own judgment to determine whether marketing decisions need to be adjusted. impact of pricing on wholesalers and retailers. Pricing Strategies: Cost Pricing Under cost pricing the marketer primarily looks at production costs as the key factor in determining the initial price. Demand Based Pricing Penetration pricing: Where the organisation sets a low price to increase sales and market share. However. pure competition.In different companies pricing decisions are handled differently and by different people. Competition. monopolistic competition.While making pricing decisions company has to consider the economic condition. Once this is achieved. This method offers the advantage of being easy to implement as long as costs are known. Commonly used methods are mark up pricing or cost plus pricing. oligopolistic competition etc.e. External FactorsThe market and demand. the marketer must understand what effect a change in price is likely to have on target market demand for a product. The objective is to skim profits of the market layer by layer. i.
Discount pricing is pricing below competitor’s price level. This approach is used where a substantial competitive advantage exists. The buyers look for the best possible price consistent with the minimum assured quality specifications. Premium pricing uses a high price where there is uniqueness about the product or service. Differentiation is at times done on the basis of purchase volume. Product Line Pricing Pricing different products within the same product range at different price points. The three alternatives in this method are premium pricing. Loss Leader Pricing An important type of pricing program used primarily by retailers is the loss leader. An example would be a video manufacturer offering different video recorders with different features at different prices. in different market segments. Parity pricing is matching the price of competitors. Price differentiation is made occasionally. The greater the features and the benefit obtained the greater the consumer will pay. Differentiated Pricing Different prices are charged for the same product by the company. Tender Pricing This option is more applicable to business markets where institutional customers normally call for competitive bidding through sealed tenders or quotations. Competition oriented pricing Here a given competitor’s price will serve as a benchmark. Under this method a product is intentionally sold at or below the cost the retailer pays to acquire the product from suppliers. This form of price discrimination assists the company in maximising turnover and profits. Psychological Pricing This approach is used when the marketer wants the consumer to respond on an emotional. Value Pricing This approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales. The idea is that offering such a low price will entice a high 123 . discount pricing or parity pricing. rather than rational basis. based on customer class rather than geographic marketing territory. and the price inevitably falls due to increased supply.to attract new competitors into the market.
The expectation is that customers will easily make up for the profit lost on the loss leader item by purchasing other items that are not following loss leader pricing. Premium pricing: The price set is high to reflect the exclusiveness of the product. This strategy is used commonly within the car industry. Geographical Pricing Geographical pricing is evident where there are variations in price in different parts of the world. This also serves to move old stock. An example of products using this strategy would be Harrods.level of customer traffic to visit a retailer’s store or website. or where shipping costs increase price. first class airline services. For example rarity value. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free). Promotional Pricing Pricing to promote a product is a very common application. Optional pricing: The organisation sells optional extras along with the product to maximise its turnover. Product Bundle Pricing Here sellers combine several products in the same package. porsche etc. 124 . Videos and CDs are often sold using the bundle approach.
The key to successful market research for new product development comes from an understanding of what customers value and not simply from asking them to submit their own solutions. New product development research is not always about looking at the product in isolation. Any new product launch is inherently risky as it is a venture into the unknown. New Product Development Process: Steps to Develop New Products and Services The product development process involves eight stages: 1. All companies need to find out what their customers/potential customers want in order to meet any gaps in the market. Marketing Strategy 125 . the advertising and the pricing strategy are all integral parts of the research. asking your customers to take the role of R&D personnel to find out what they want will not always lead to success. Concept Development 4. B2B International has shown that thorough. However. the product. well planned research can accurately pinpoint the richest areas of opportunity and therefore prioritise the most promising areas of new product development. Idea Generation 2. Growth and profits suffer without aggressive product development introducing new products and services into the market. the packaging. Idea Screening 3.New Product Development New product development is a company's lifeblood.
Business Analysis 6. the target market and the competition and making some rough guesses as to market size. product price. Idea generating techniques like attribute listing. Product Development 7. problem analysis. distribution strategy. The first part describes the size. New product objectives should be clear. Test Marketing 8. the sales. Commercialization Idea Generation: Top management should define the products and markets to emphasize. The marketing strategy statement has three parts. structure and behaviour of the target market. Each concept requires concept positioning so that its real competition would be understood. 126 . brainstorming etc.5. The company must avoid permitting a poor idea to move into development and commercialisation. the planned product positioning. Business Analysis: This involves the evaluation of business attractiveness of the proposal. Concept Development and Testing: A ‘product concept’ is an elaborated version of the idea expressed in meaningful consumer terms. The management must review the sales. Marketing Strategy Development: The product manager has to develop a preliminary marketing strategy for introducing the product into the market. help in generating better ideas. manufacturing costs and rate of return. The concepts have to be tested with an appropriate group of target consumers. The third part describes the planned long run sales and profit goals and marketing mix strategy over time. The second part outlines the product’s planned price. cost and profit projections to determine whether they satisfy the company’s objectives. Idea Screening: The second stage is of idea pruning. when compared to existing brands or substitutes. and marketing budget for the first year. Idea rating is done by describing the product. the market share and profit goals sought in the first few years. development time and costs.
For launching the product. the major decisions include when. Evaluation 4. Adoption 127 . Interest 3. This stage checks whether the product idea can be translated into a technically and commercially viable product. Trial 5. Test Marketing: If the management is satisfied with the product’s functional performance. packing and a preliminary marketing programme. it moves to the R&D to be developed in to a physical product. Awareness 2. where.Product Development: If the product concept passes the business test. The basic purpose is to learn how consumers and dealers react to handling. using and repurchasing the actual product and how large the market is. Commercialisation: Test marketing gives the management enough information whether to launch the product or not. how and to whom. to be tested in more authentic consumer settings. The consumer adoption process: The process has five stages: 1. the product is ready to be dressed up with a brand name.
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