Marketing Management - I

Module 2
Market, Customer & Environment
 Market
O Where two parties engage in the exchange of
rights of goods/services
O Process in which the prices of goods/services are
discovered
O Emerges more or less spontaneously or
constructed deliberately by human interaction
O Facilitates trade
O Enables the distribution and allocation of
resources in a society

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 Types of Markets
O Based on physicality
O Retail markets
O Internet – e-commerce
O Based on regularity
O Markets/malls
O Haats
O Ad-hoc auctions
O Garage sales
O Based on products
O Final goods – consumer markets
O Intermediate goods – business markets

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 Types of Markets Contd.
O Based on resources
O Labour
O Foreign exchange
O Share
O Commodities
O Real estate
O Others
O Artificial markets – created by some other agency or out
of legislation
O Illegal markets

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 Consumer Market
O End-user
O Individuals and/or households
O Potential/active buyers of products or
services
O Consumer products – directly fulfill the
desires of consumers; not intended to be
used in the manufacture of other
products/services

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 Business Market

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 Business Market
O Manufacturers, intermediaries, wholesalers
O Business customers -
O Business-to-business (B2B)
O Geographical proximity
O Derived demand
O Buying centre-based purchasing

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 The Customer

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 Core Concepts

O Need: necessity to meet a

requirement
O Basic to luxury
O Want: specific objects to
satisfy the need
O Demand: want + ability to
pay

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 Customer Value
Brand
Functional benefits Other benefits
benefits

Other
Purchase price CPV
costs

O Customer Perceived Value (CPV) = Perceived

benefits – Perceived costs
O Perception matters – needs management

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 Managing CPV
O Increase benefits
O Add new features
O Improve accessibility
O Reduce costs
O Reduce price
O Increase efficiency
O Combination of both the above

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 Enhancing CPV
O Honda’s Acura
O Through local market
research
O ‘Complete product
design’ – all-new
vehicles starting from
market and technology
research
O Design styling

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 Customer Satisfaction
Post-purchase evaluation of product/service quality
based on pre-purchase expectations
Expectations

Disconfirmation Satisfaction

Perceived
quality

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 Managing Satisfaction
O ‘Under-promise and over-deliver’
O Monitor expectations, perceptions, and
quality
O Benefits
O Loyalty
O Champions
O Cost reduction – warranty claims, complaints
O Larger share-of-wallet (SoW)

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 Marketing Satisfaction

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 Customer Lifetime Value
O Present value of all profits expected to be
earned in the future from a customer
O Focus on a longer term
O Information needed to calculate CLV
O Customer purchase per year
O Profit earned on purchases
O Costs to service customer
O Customer retention rate
O Discount rate

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 CLV Calculation
𝑛
𝑡
𝐷(𝑅𝑡 − 𝐶𝑡 )/ 1 + 𝑟
𝑡=1

O t = year
O n = length of customer relationship
O D = customer retention rate
O Rt = Revenues earned from customer in year t
O Ct = Cost of servicing customer in year t
O r = discount rate

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 Relationship
O Developing and enhancing long-term, mutually
beneficial relationships with customers
O Transaction vs. relationship
O Customer experience
O Note:
O Bringing a new customer into the fold is 6-7
times costlier than retaining existing customers
O Small increases in customer retention rate will
enhance profits

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 Relationship Marketing
O Orientation on part of the firm to develop
relationships
O Commitment
O Elements
O Trust
O Communication
O Personalisation
O Customisation

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 Loyalty Programmes
O Future rewards
O Frequent flyer miles –
Jet Privilege
O Points – Crossword
bookstore
O Fuel – Indianoil
O Cash discounts on
purchases
O Pantaloons Green Card
O Coalition programmes
O Payback

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 The Environment

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 Market Environment
O Forces that influence the ability of a business to
create value, attract and serve customers
O Controllable and/or uncontrollable

Market Environment
Internal External

Micro Macro

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 Micro-environment
O Outside the internal environment
O Close enough to influence the ability of the
business to serve customers
O Elements
O Customers
O Suppliers
O Channels
O Advertising and/or MR agencies
O Competitors

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 Porter’s 5 Forces Model
Customer
bargaining
power

Threat of Competitive Threat of

new rivalry within
industry substitutes
entrants

Supplier
bargaining Caveat?
power

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 Macro-environment
O Forces essentially uncontrollable
O Influence the micro-environment
O Scanned by the PESTLE model
O Political factors
O Economic factors
O Socio-cultural factors
O Technological factors
O Legal factors
O Environmental factors

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 Impact of Macro-environment
O CSE report of 2009
O Presence of lead in
paints manufactured by
Indian companies
O Launch of lead-free
paints

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 Political Factors
O Political system – democracy vis-à-vis state
control
O Stability of the government
O Outlook of ruling parties towards
O Business
O MNCs
O Ease of investment, settling up business, and
exit

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 Economic Factors
O Inflation
O Recession
O Exchange rate
O Growth rate of the economy
O Income levels
O Consumer spending
O Unemployment
O Financial markets

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 Socio-cultural Factors
O Demographics
O Age distribution
O Sex ratio
O Education and literacy
O Community
O Skill level
O Rural-urban migration

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 Socio-cultural Factors
O Cultural factors
O Language
O Culture
O Food habits
O Entertainment and media
O Value system
O Interaction with brands
O Crowdsourcing

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 Technological Factors
O Current level of technology
O Comfort with technology
O E-commerce
O Diffusion of innovations
O ‘Reverse engineering’
O Government policies
O Stem-cell research
O GM foods

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 Legal Factors
O Unfair competitive practices
O Product standards certification
O IPR
O Taxation
O Advertising regulations
O Consumer protection
O Business ethics

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 Environmental Factors
O Pollution
O Water
O Air
O Noise
O Ground-water depletion
O Top-soil erosion
O Environmental pressure groups

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 Coke sucks

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 Internal vs. External
O Internal environment
O Internal marketing – implementation and
communication of organisational policies and
practices to employees and internal stakeholders
O External environment
O External marketing - implementation of marketing
practices directed outside the firm to create value
and form productive customer relationships

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 Internal Marketing - CISCO

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 Internal Marketing – European
Engineering MNC
Dear colleagues,
The numbers for the first quarter were released this week – the first set of results for our new
Infrastructure & Cities Sector.
The overall message is that we have unfortunately not fully delivered on expectations in the first quarter.
New Orders, revenue, and profit all came in below prior year Q1 figures. Our profit is below our targeted
margin range.
We will have to intensify our focus and optimize our cost structure over the coming quarters. Of
importance will be enhanced operational excellence and in particular diligent project execution. Our order
backlog at the end of the first quarter was €25 billion and we had a respectable book-to-bill ratio of 1.15.
However, what counts is that we execute on our commitments flawlessly and turn the backlog into
profitable revenue. In that regard, there is clear room for improvement.

New orders
We did book some exciting orders which we can all be proud of. Two great examples are the Grid order
worth almost €20 million in the Indian state of Maharashtra, and the order for 40 new trams from The
Hague worth €100 million. I could mention many other examples.

Profitable growth
Looking forward, I see growth levers and thus new business opportunities particularly in the expansion of
our cross-Division vertical market offerings and in IT- and software-based solutions.

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 External Marketing
O Lobbying
O Managing government policies
O Regulatory agencies
O PR
O Managing information flow with public to create
favourable opinions
O Build a strong corporate ‘image’

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 Market Intelligence
O Gathering, processing, assessing, and making
available market information
O Facilitates marketing function to perform
efficiently and effectively
O Can assist strategic planning and policy
development
O First element in achieving market orientation

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 Thank You!

IIM Ranchi PGP 2020-22