UNIT 2 Market Segmentation LEARNING OBJECTIVES _ After studying this unit, one would be able to understand: * The concept of market segmentation, the levels and bases for segmentation. Segmentation of consumer markets, business markets and international markets Different types of market targeting, differentiation and product positioning strategies. Demand measurement and sales forecasting methods. Estimation of current and future demand, Various competitive strategies. INTRODUCTION ‘Market is a place in which different individuals or organization have different needs and wants and has the ability and desire to purchase the goods or services for satisfying their needs. As different customers have different wants and buying preferences, markets are segmented, In a market segment, all the buyers or consumers will have same purchase characteristics and wants and purchases the same product for satisfying their needs. This unit explains the process of market segmentation, the different alternatives used by a firm for selecting target markets, positioning strategies, targeting strategies and various types of forecasting methods. — ‘Sl PUBLISHERS AND STRIBUTORS PVT. LTD.f MARKETING MANAGEMENT 2.2 Fe egmentation _ sed Segme! 24 7, Customer Ba: mentation has three importan, 1 LEVELS AND BASES FOR Customer based Se ‘SEGMENTATION factors which are #8 OOS amers Qt. What is market segmentation? Explain the (i) Geographic 1oeatic and various levels and bases for segmentation. (ii) Psychographic varie OR (iii) Willingness of the burconsumers Explain the levels and bases for market | (i) Geographic Location oe i. the initia segmentation. Geographically based seer inn strategie, (Refer Only Topics: Levels for Market Segimentation, point of all ie nae sre ies the firm. to pla Bases for Market Segmentation) i ee oe. “The rural and urban segmentation Answer = Aprit-15, 03(@) : rer in consumer markets, The other is commonly used ly are met Market Segmentation bases for segmentation used commonly 10 oF Market segmentation is a process of classifying @ diverse market into identical and similar subunits. In market segments, all the customers have same needs and wants. The ‘main aim of the marketing mix is to help the marketers to change their marketing mixes for fulfilling the needs of one or more specific segments. Market segmentation helps the firm to design, price and deliver their products or services effectively for satisfying the target market. Levels of Market Segmentation ‘The following are the levels of market segmentation. Niche Marketing Aniche is a small group of customers trying to obtain different types of benefits. Marketers recognize niches by classifying a segment into subsegments. Niche markets are small and attract only one or two competi- tors. The marketers of these markets have complete knowledge about the needs of their customers. Local Marketing Local marketing is a type of target marketing in which the marketing programs are created according to the needs and wants of local customer groups. It is also called as gross root marketing in which the products or services are promoted by communicating its features and advantages and connecting it with distinct and interesting experiences. Customization In this level of market segmentation, operationally driven mass customization is integrated with custom- ized marketing for designing the products and services according to the needs and wants of the customers. Bases for Market Segmentation ‘The bases for market segmentation depends mainly on the creativity of the marketer. The bases for market segmen- tation is classified into three groups which are as follows. 1. Customer based segmentation 2. Product based segmentation 3, Competition based s¢gmentation. (iil) (ii) district and block markets. This sumes that the individuals in me needs, prefer. non-metro markets, ¢ of segmentation asst a erccific geographic area have sal fences and consumption patterns. Demographical Features Demographical features of the market is the other bases of market segmentation in which the markets are segmented on the basis of the factors like age, education, income, occupation, sex, family size and ‘marital status. Psychographic Variables Lifestyle and personality are the psychographie var- ables used in the market segmentation. Markets can be segmented by taking the personality and lifestyle differences of the consumers. Segmenting the mar- kets on the basis of psychrographic variables helps in making the brands leaders in the market. Willingness of the Buyer The other variables used for segmenting a market is the willingness of a buyer to purchase a product. There are different types of buyers at different stages of readiness/willingness at any given time such as unaware buyers, the buyers who are aware but do not want to buy, the buyers who are interested and are ready to buy and finally the buyers who purchases the product positively. Product Based Segmentation Uses of Product in Different Situations Be Product use situations is one ofthe product related “ n used by the marketers for segmenting ir markets. As different cust ke f the same product in v lee eee seeks to make the product sdamgyete markers Product adaptable/multitalented The knowledge about these situations helps th keene these situations helps the ma plan their Positioning strates fe hy Segmentation Based SS emtan on Benefits is i {ye orseementation, Products are segmented pts ite ‘benefits which the customers seatct is mosthy caine 2 Product. Benefits segmentation ieee are for products like watches as the cain Purchase watches for functional purposes: 8 8if, a jewelry item or as a accessory. SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD. eeUNIT:2 MARKET SEGMENTATION (ii) Consumption This type of segmentation is used for segmenting beverages (tea, coffee, soft drinks) liquor and ciga- rette markets. In consumption, on the basis of heavy users, moderate users and light users the products are (iv) Decision Making Criteria Decision making criteria is one of the basis for segmenting the market which a consumer uses for analyzing and purchasing a brand or product. According to a research, it was found that a consumer. makes decision on the basis of the following four parameters. (a) Price (6) Quality of product or service (©) Service given by the firm (@ Technology. 3. Competition Based Segmentation Loyalty of the customer towards a particular brand or product is an important indicator for finding out the competitive position of an organization. Itis also used for segmenting the market, developing a marketing strategy for each segment and promoting customer loyalty. On the basis of loyalty, there are three types of seg- ments which are as follows. () Hard Core Loyals The consumers who purchase the same brand again and again are called as hard core loyals. Some of the ‘examples of hard core loyals are newspaper readers, cigarette smokers and tea drinkers. (ii) Soft Core Loyals ‘The consumers who are loyal towards or rely on two or three brands in a product group are known as soft core loyals. ‘The marketers should pay attention towards such type of customers and encourage them so that they get transferred to hard core loyal segment. Switchers ‘The consumers who are not loyal towards particular brand or product are called as switchers. Such type of consumers keeps on changing their and brands for buying products of different varieties. The firms must determine the reasons for which they are losing their consumers to the competing brands. Thus, the above mentioned were the bases for seg- Menting a market. > Q2. Write about the process of market segmentation and explain the benefits of market segmentation. (iti) 2.3 ‘Answer Process of Market Segmentation Sometimes, marketers depends on the experience and judgement for making a decision about the segments which occur in a market and accordingly segments the markets. The marketers can also carry out a structured analysis with some ‘marketing research for recognizing segments and measuring their potential. This can be performed with a small budget. ‘The markets can be segmented in an efficient manner with the help of following steps. 1. Step 1: Recognizing Current and Potential Needs that Occur within a Market In the first step of market segmentation process, the marketer carefully analyses the market for finding out the needs which are satisfied by the current product, the needs which the current product fails to satisfy and the needs which are not yet identified. In this step, ‘the marketers interview or observes the customers or firms for finding out their behaviours, satisfaction levels and dissatisfaction levels. 2. Step 2: Recognizing Features which Differentiates between Segments Inthis second step of market segmentation process, the marketers concentrates on the features that customers have leading to common wants for differentiating them from other segments in the market which have different wants. In business organizations, it can he physical characteristics such as size or location and in customers it can be an attitude or behavioural pattern. On the basis of this step, potential marketing mixes for different segments are created and are further examined. 3. Step 3: Finding Out Size of Segments and its Efficiency This is the final step of market segmentation process in which the demand representating each segment and the strength of competition is estimated. These forecasts helps in finding out the segments which are capable of chasing. Thus, the above mentioned were the steps involved in the market segmentation process. Benefits of Market Segmentation The benefits of market segmentation are as follows. 1, As market segmentation is customer driven, ‘t is compatible with the marketing concept. In m «et segmentation, the needs and wants of the cust’ -rs in a submarket are firstly determined and \wen accordingly a marketing mix is designed for satisfying those wants. 2. Making the use of marketing programs to individual market segments helps the firm to carry out the marketing job effectively and make optimum utilization of its marketing resources. SIA PUBLISHERS AND DISTRIBUTORS PVT. LTD.3. Development of strong positions i segments, helps the medium s grow rapidly. For example: Oshkosh Truck Company in Wisconsin had developed strong positions in specialized market segments and has now become the largest producer of fire and rescure trucks for the airports in the world. 4. Large organizations having sufficient resources to deal in mass marketing and having expensive national advertising campaigns are neglecting mass market strategies. These organizations adopt market segmentation and consider it as an effective strategy for reaching the fragments. Market segmentation helps the small firms with limited resources to effectively compete in one or two small market segments. 6. Ifthe markets are not segmented then the customers become frustrated as they have to make complex decisions for a simple purchase when number of same products are available. 2.2 SEGMENTING CONSUMER MARKETS: ced organizations to Q3. On which basis consumer markets be segmented? Explain in brief. Answer : (Model Paper-II1, 03(a), Jan.-16, 03(a)) ‘Segmenting Consumer Markets Consumer markets are segmented with the help of two broad group of variables. Few researchers considered descriptive features such as geographic, demograpl and psychographic for segmenting the markets and other researches considered behavioural features for segmenting the markets. After creating segments, the researchers examine whether various features are related with each consumer response segment or not. ‘The variables which are used for segmenting consumer markets are as follows. 1. Geographic Demographic Psychographic and Behavioral segmentation. 4. Geographic Segmentation ‘The geographic segmentation markets are classified into various geographical units like regions, cities, countries and towns. The geographic segmentation is considered as vye~» important in India or different consumers have different preferences and purchase habits in different regions and States of the country. The geographical features of a market is also measurable and accessible. Regional Distribution of Population "As most of firms market their products in less number of geographic regions, they developra separate marketing mix for each region. The distributiot#“of population regionally AYE SIA PUBLISHERS ANBOISTRIBUTORS PVT: MARKETING MANAGEMENy stomers arketers as the cu 7 ¥ rntial to the marl is very esteaion will have Same value, attitudes and style particular ms gocur between regions dy t some differen : Laan cli mal customs and other factor to differen: ints theit markets based on the Most of the firms also se tee! size of the city and its POI make use of urban, Suburban-rural distribution. | ; i ' Demographic Seoeesied igo proups depending on in which the markets are case ese incon the variables like age, family size. padre gender, occupation, education, religion, race, nat : ity and social class. Demographic variables are very POPUAt Smong the marketers as it helps in differentiating customer groups sreaneeds, wants, usage rates, product and brand preferences atthe customers are also related with the demographic variables and are easily measured. 3, Psychographic Segmentation ‘The science in which psychology and demographics are used for understanding the consumer is called as psychographic. In this type of segmentation, buyers are classified into various groups depending on the psychological or personality traits, lifestyle or values. The values and lifestyles of the customers influences the product and brand selections made by them. Religion has a severe impact on the values and lifestyles of the consumers. The strict norms or rules which the consumers follow with regard to their good habits and dress codes are the best examples in this context, Hence, values, lifestyles and personality characteristics of the consumers acts as an important bases for segmenting consumer markets. 4, Behavioral Segmentation Behavioral segmentation is a type of segmentation in which the buyers are classified into groups depending on their knowledge, attitude, use and response towards 2 product occasions, benefits, status of user, usage rate, loyalty status, buyer readiness stage and attitude are the behavioural variables which many marketers use for segmenting consumer markets. Occasion segmentation helps the firms to expand the usage of ae Products In this segmentation buyers af¢ difereated on the basis ofthe occasions in which th ying and using the product. ee Hee make use of benefit segmentation fot sumer markets. In this segmentation. buyers are differentiated on the basi Y buyers are ai asis of the benefits theY imate, 80 ere ulation. They men eee Segments their markets into nonusers, €- 8, pot users, first time-users and regular users of # oduct and de i " rae sete OPS ifereht marketing strategy frst ‘Thus, the above mentioiéd * were ibles used for segmenting consuniértharkete FrUNIT-2 MARKET SEGMENTATION Q4. What is market segmentation? What different criteria are used for segmenting a market for consumer durables with suitable examples? Answer : Jan/Feb, 93(a) Market Segmentation For answer refer Unit-Il, Page No. 2.2, Q.No. 1, Topic: Market Segmentation. The goods which can be used by the customers for several purposes are termed as durable goods. According to the united nations system of national accounts, consumer durable goods are defined as the goods which “may be used for purposes of consumption repeatedly ‘er continuously over a period of an year or more... assuming a normal or average rate of physical usage”, The market segmentation done for consumer durable goods is based on certain criteria, For instance, in India, Titan conducted an in depth analysis of the watch market and segmented the market on the basis of income, age, sex, life style, geographic location etc. Criteries for Market Segmentation Titan divided the buyers of the watch in to the following three segments, The rich income segment The middle income segment and The lower income segment. Afier segmenting, the Titan examined the features which the buyers are searching in their watch by raising the following questions, (a) While purchasing a watch, does all the buyers have same expectations? (b) Do all the buyers seek for same experience in possessing a watch? or (©) Dothe buyers have different desires or motives? Titan conducted an indepth analysis of each segment and outlined different value needs by dividing the broad segments into many subsegments. 1. The Rich Income Segment In this segment, the buyers are not concerned about the price of the watch. In this segment, significant differences exists among the buyers based on the value which they try to obiain from the watch. Few buyers demands a fine fashion accessory which enhances the style of their dress. Some buyers demand for a gold watch and few wants to have a fine jewellery shaded watch with precious gems and stones, On the other hand, the men demands for a casual Watch that acts as a substitute for glitzy ornaments which they don’t wear. The other segments like younger womep, Younger men demands watches which suits their age group. Younger women wants to,buy a watch which is in the form ofa bracelet and younger men want to buy a watch which 's sporty and designer likg, Swiss brands. Children also demands for differentiated value. 1 2.5 ‘The boys demands fun and play in their watches and gitls desires for cute patterns and vibrant colours, 2. The Middle-income Segment There are less variations in the value needs of the buyers of this segment when compared to the rich income segment. The buyers of this segment are more concerned about the price of the watch and they want the prices to be very low and reasonable. They desire to buy a good watch with a reasonable price tag, nice design and some fashion. There are certain differences in the expectations of the buyers with regard to fashion and design. The women in this segment demands for beautiful designs and the men on the other hand demands for a durable product. 3, The Lower-income Segment In this segment, the buyers usually considers watch as a device for viewing the time and purchases it based on its price. This segment exhibit a wide range of uniformity in the value needs. ‘Thus, from the above points it can be seen that Titan mainly segmented the buyers of its watches based on their value needs and income. Q5. What is segmentation? What would your ‘segmentation strategy be for, () Credit carde? (il) Washing machines? Answer : (Model Paper-III, Q3(b), July-10, 03(a)) ‘Segmentation For answer refer Unit-II, Page No. 2.2, Q.No. 1, Topic: ‘Market Segmentation. () Credit Cards Consider an example of a segmentation strategy of ICICI credit cards. ICICI bank is the second largest bank of India with 614 branches and extension counters and 2200 ATM's. In India, itis the biggest private sector bank. It is regarded as one of the most important bank in India with regards to its market capitalization. The branding concept was firstly introduced by ICICI bank in the Indian banking industry. It is also the first bank which emphasizes on retail banking as one of the a growth driver. It has an extensive data center and provides data protection solutions, Marketing Strategy of ICICI Bank 1, ICICI bank modifies its marketing campaigns for fulfilling the needs of its target customers. 2. It develops differentiated products for different segments. 3. It makes use of,technology for monitoring the customer segments, ——— SIA PUBLISHERS AND, DISTRIBUTORS PVT. LTD.for Segmentation/Segmentation Strategy of ICICI Credit Cards ‘The credit cards or all the products of ICICI bank are segmented on the following basis, 1. (a) (b) Demographic Occupation On the basis of the different occupational segments such as doctors, lawyers, professionals etc., different products are segmented, Income On the basis of the income level of the customers different products are being segmented. Minimum balance acts as a barrier to income segment, Geographical ICICI bank mainly focuses on tier | and tier 2 cities for selling its products as these cities helps in extending their reach. Tier 1 cities have population of less than 1 million Example: Nasik, Bhopal, Amritsar, Raipur etc). Tier 2 cities have more than 1 million population, example: Delhi, Mumbai, Hyderabad, Kolkata, Chennai ete. Psychographic Age ICICI bank segments different products for diffe- rent age groups. For example: Students accounts for students, credit cards for adults etc. Washing Machines Consider an example of the segmentation strategy of LG washing machines. LG (Life’s Good) is a market leader in different segments such as color television, microwave ovens, frost- free refrigerators, washing machines and air conditioners mobile phones, personal computers and flat LCD plasma) are the various products manufactured by LG Electronics India Pvt Ltd. Market Segmentation Strategy of LG ‘The washing machines and all the products of LG are segmented on the following basis. Demographic On the basis of the income level and occupational segment of the customers, the products of LG are segmented. Geographic LG concentrates on tier | and tier 2 cities for selling its products as these cities helps in extending the reach, Psychographic On the basis of the life-styles and personality of the customers the products of LG are being segmented. Behavioural ‘On the basis of the value and the benefits derived from the products, the products are being segmented. it offers to its consumer demands life style pro designed for upper mi consumers who demé But now LG is also shi and wants to mass markets the SWOT Analysis: * + MARKETING MANAGEMENy [1G segments it markets onthe basis of products which fs, Itmainly targets the customers wh duets. The products of LG are usually ddle class and premium segmeny ‘ands quality products at best prices fling towards middle class segment, ir products. trengths of LG ‘e home appliances segment LG is the market In th leader. Itoffers number of products for accessing the middle class, upper middle class and high class consumers Ithas a very wide distribution network in the industry with 47 branches, 175 area offices and over 10,000 trade partners and is also now shifting to rural market Weaknesses of LG ‘The customers mainly compares the products of LG with its competitor Samsung with LG lagging. Opportunities to LG 4 With the increasing growth in home appliances market, LG has got ample opportunities to launch new products. ° LG has a control on the white goods market as it has the highest market share in the home appliance market. Threat to LG LG faces competitions from Indian brand and from new entrants. ‘ — LGhasprice war with Samsung, its closest competitor PEST (Political, Economic, Social and Technological) Analysis : Political Factor The following are some of the political factors of LG. High import duty. LG has its factories in tax incentive areas such as Greater Noida and Pune. LG can make use of various export promotion schemes of Indian Government such as Export Promotion Capital Goods schemes (EPCG) and Export Oriented Unit (EOU). Economic Factors Increase in the per capita income, growing GDP high disposable income and increase fn the spending power of the individuals are some of the economic factors which is being considered by LG. sai segments all its products. Thus, on the basis of SWOT and PEST analysis, LG SIA PUBLISHERS AND'DISTRIBUTORS PVT. TD, ———___——____(UNGE2) MARKET SEGMENTATION 2.3 BUSINESS MARKETS 2.7 these firms need @ strong personal selling effort by purchasing executives. It also requires excellent supporting materials when product exceeds the technical expertise of purchasing managers. The other buyers selects involvement of the individuals who are directly influenced by the purchase in the purchase process. Such type of buyers involve number of individuals in their decisions, conducts meetings for a long period of time ane. carry out internal communication. Criteria for Making Purchase Buyers wants quality products at low costs and on time delivery. These factors plays a very important role for segmenting business market. Transaction Conditions Some marketers make use of transaction conditions Q6. Differentiate market segmentation bases between consumer markets and business markets. Answer = ‘Segmenting Consumer Markets For answer refer Unit-ll, Page No. 2.4, Q.No. 3 Segmenting Business/Industrial Markets For segmenting business markets, marketers make use of some of the same variables which are used in segmenting consumer markets like geography, benefits desired and. usage rate. However, business marketers also makes use of other | 3. variables for segmenting business markets. ° Feb.-13, 03a) (iv) ‘The following are the bases for: ‘segmenting business markets. 1, Location of the customer 2. Type of customer and 3. Transaction conditions. 1. Location of the Customer Marketers usually segments business markets geographically and concentrates on the geographical location of the industries. For example: The organizations which process natural resources are located near the source for reducing the shipping costs. Other firms focuses on geographical location for locating their industries near the industry pioneers. International markets are also segmented geographically. 2. Type of Customer (i) Industry ‘The firms which are selling their products to business customers in different industries will segment their markets depending on the industry. (ii) Size The size of the business customers can be determined with the help of the factors like sales volume, number of employees, production facilities and number of sales offices. Most of the sellers classifies their potential market into large and small accounts with the help of separate distribution channels for reaching each segment. The sales force of the seller can directly reach the large volume accounts but for reaching smaller amounts they make use of middle/men or depends on internet or telemarketing. (il) Organisational Structure Organisations tries to sells their products in number of ways, Some depends mainly on their purchasing departments for controlling the inflow of information, decreasing the number of possible alternatives and conducting negotiations. The selling made to TT for segmenting their business markets. The sellers have to change their marketing efforts for managing various buying situations, usage rates, order size, purchasing methods or service requirements. There are three transaction conditions. (i) Buying Situation On the basis of the buying situation, the marketers segments their business markets. (ii) Usage Rate For some products, marketers divide their markets between heavy users, light users, and nonusers. Heavy users are very important for the firms as they purchase large volume of their products. For chasing heavy users most of the firms have focussed on light users and avoided compelition. Purchase Method Consumers buy the products in different ways such as by leasing, financing or by purchasing wholly. The prices of the products are either stated, negotiated or are kept in a sealed bid. The governmental agencies buys their products depending on the sealed bids. For competing or surviving in a sealed bid market, it is very important for the sellers to have low costs for which itis very essential to have knowledge about the industry and what the other firms would bid. Thus, segmentation helps in determining the opportunities which occur in a market. 2.4 INTERNATIONAL MARKETS Q7. Write about features and benefits of International Marke! Answer : (Model Paper-I, Q5(a), Jan.-16, Q3(6)) International marketing is very important in the modern era, Even though, the international marketing is being carried out on a gaily basis, its significance is not understood and remains unappreciated by the csutomers. SIA PUBLISHERS AND; DISTRIBUTORS PVT. LTD.2.8 Features of International Markets = The important features of International Markets are as follows, wa In International Markets, Intet jonal Marketing research is very important as it helps in gathering information about different customers, dealers and competitors (ii) International Marketers must know about the WTO and UNCTAD forum rules and its regulations. Gi) International marketing needs to be conducted on a large scale and on wholesale basis in order to get benefits with respect to transportation and handling operators, iv) Most of the MNCs run the business more efficiently and economically as it has world wide contacts which dominates the International Marketing. (v) In International Marketing, the suppliers have competition with supplier of the exporter’s country, local producers of importing country and exporter’s of competing nations. (vi) The NAFTA (North American Free Trade-Area) and EU (European Union) are most powerful blocs formed by some countries for their mutual benefits, economic development and to reduce trade barriers among them. Benefits of International Markets The following are the benefits or importance of international marketing. 4. Endurance Every country does not posses the infrastructure, size, resources and opportunities similar to that of America. Therefore, for surviving in global markets, countries are required to maintain trade relationships with other countries. A country like India rich in natural resources and treasure of biodiversity even needs to trade with other countries for oil and other armaments necessary for its survival. The best example is Hong Kong, which gains access to the food and water after forming trade relationship with China. Similarly, most of the European countries are required to trade with other countries to survive. 2. Progress of Overseas Markets ‘The developing countries having poor economy and facing serious marketing problems still provide an excellent marketing opportunities to other country for growth and development. The best example for this is India. The United States found the biggest market for consumer and engineering products in India. A study carried out by the conference board on 1500 companies found that US manufacturers having subsidaries operating in overseas market excelled in performance when compared to their counterparts. The potential of international | market cannot be overlooked by’the American market. B MARKETING MANAGEMEy, “Sales Promotion .ess of most ofthe firms included fy, ¢ large firms are capah, of forcigs markets. Most of the bh ora c de rvevenues from the foreign customers. The Ipy One re the best examples of such fms. Such rp, i Matcived to make more sales abroad than in thei hop, country. “The total busin Diversification tations in factors such as recession and oth, seasonal factors have an impact on the demand of th produets in the international markets. These may lead y Ructuations in sales. The risks associated with the compan, ‘can be efficiently handled by maintaining transactions jy foreign market having different demands. For example, there is a decrease in the demand for woolen clothes in summe but all countries do not have a summer season at the same 4, The vari time, 5, __ Inflation and Wholesale Price Index Earning foreign exchange through the export is the best method of controlling inflation. Imports also increase the reserve capacity of the local economy and are therefore foundto be beneficial. In the absence of imported products alternatives, consumers have to depend on the products of local firms as result they are willing to pay high prices for processing such products. Such conditions increases the inflation rate and also the profits. In such situations, the labour demand high wages which further worsen the situation. The import restrictions lid by US on import of Japanese automobiles in 1980's helped in saving, 46,200 production jobs but at a cost of $160 thousand per job per year. 6. _ Employment and Placements The depression and unemployment in 1930 was the result of tariff barriers and trade restrictions in certaia countries. By prohibiting the tariff barriers and trade restrictions, there is an increase in world’s GNP and ‘employment level. The liberalization of the economic policy in 1991 led to the inflow of foreign direct investment into the country resulting in the generation of more employment opportunities. 7. Standard of Living ‘The foreign trade helps in improving the standatd of living of citizens, Absence of trade forces the citizet* to pay high price for even the small quantity of product thereby leading to product shortages, Daily products such coffee and tea may be unavailable overnight. Trade enables industries to develop and gain access to new raw materia Ialso increases the rate of competition and also forces tt firms to improve their efficigney levels. ‘SIA PUBLISHERS AND DISTRIBUTORS PYT. &TD. SeUNIT-2) MARKET SEGMENTATION 8. Marketing Process 2.9 International marketing is just an advancement of domestic marketing. The addition of world multinational is the only difference between domestic and international marketing process. The development of information technology has provided easy access to international markets The e ae coterpises having parent enterprises and their affiliates operating in foreign countries are known as the ‘ransnational corporations”. The parent enterprise exercises control over-all its foreign affiliates also holds a considerable portion in the capital stake of the equity of the foreign affiliates. Q8. Briefly explain the process of segmentation for international markets. Answer : Segmenting International Markets . Intemational market segmentation needs more dimensions than segmentation done on business markets or consumer markets. Firstly, marketers are required to segment either by country or by region focussing on the demographic, behavioral and cultural characteristic which leads the marketers to find their submarkets. After segmenting into submarkets the firm may aim at business markets or consumer markets and similar approaches are applied. Segmenting countries is done based on socio-economic, political and cultural factors. According to marketers the country segmentation is done on limited basis. The following process is applied for country segmentation. 1. Criteria Development Defining the criteria. These criteria are defined using product and firms features and characteristics. Preliminary Screening The countries that meet the company’s criteria are taken into consideration and others are retained. 3. Micro Segmentation ‘Segmentation done in country based on distinctive needs of customers makes micro segments. Micro segmentation can be done domestically first and then consolidating these segments with other micro segments across countries or directly can come up with cross-border segments. When segmenting international markets, companies consider factors like speed of adoption by countries, time of sales peak and also speed to adoption by customers. 2.5 MARKET TARGETING Q9. What is market targeting? What are the steps involved in market targeting. ee pies Involved In market targeting. OR Discuss the steps involved in market targeting. (Refer Only Topic: Steps of Target Marketing) Answer : June-14, 03(a) Market Targeting ‘After recognizing the market segment opportunities, a firm shculd decide the markets to be targeted. A group of people or organisations for which a firm develops, executes and maintsins a marketing mix for fulfilling the needs ofthat group and for having a mutually satisfying exchanges is called as target market. A single marketing mix will not attract all the market segments as most of the markets have customers with different lifestyles, backgrounds and income levels. Marketers combines number of variable for determining small and better defined target groups. ‘Steps of Target Marketing Generally, target marketing consists ofthe following steps, 1. Segregating the market into segments, along with their marketing potential. 2 Analyzing the relatiyg.yorth of each segment in terms of sales, profit, growth ete, 3. Evaluating the segritit‘on the basis of their attractiveness and its compatibility, withthe firm's resources, a SIA PUBLISHERS AND DISTRIBUTORS)PVT. LTD.ES MARKETING MANAGEMENT 2.10 need to be selected. 4. Making a decision to choos: Whether the whole market or only a few segment tomer needs are not completely satisfied. Analyzing the market for segments, where the ct Evaluating the firm’s resources, in order to match them with the marketing requirements of the target market ial and are in syne with the organization, ceds to evaluate all the segments on the aay Finally, selecting the target markets which hold the profit and growth potent brand. Prior to the selection of the target market, the marketing manager m basis of five important criterias as follows (i) Segment size (ii) Segment worthiness (ii) Segment measurability (iv) Segment attractiveness (vy) Segment accessibility. “These five criterias are the basis which help in the potential profitability of a segment. Response ela the best method of calculating profitability. In order to calculate the response elasticity tw« secondly must be considered the returns (in form of sal the help of a graph. sticity is one of oo factors are required firstly the past marketing expenditure and les) from it over a period of time. This can also be explained with y Segment P Segment Q Sales A A Marketing Expenditure “The marketing expenditure is taken/plotted on the x-axis and the sales (in response to marketing), is taken/ploted oon the y-axis, The above graph clearly indicates that, segment ‘P” is more profitable than segment ‘Q” or segment ‘R’ The fim records the sales of B, and B, at different time periods by spending 4, and 4, amount (as marketing expenditure) Response elasticity (Ra) can be calculated using the formula, _ (&=8)/8) Ra=YA,-Ayl Ay ‘After calculating the response elasticity for each segment, the firm must select that particular segment which characterized by a highest response elasticity. Example BMW company uses technology, to reach its target market on its website (www.bmwfilms.com). It has uploaded action movies of short durations which show some of the best features of the BMW car like, speed, styl safety Downloading these movies require a large broadband internet connection and so on. Thus, it can be concluded that BMW's target market (customers) consist of highly computer savvy, and middle and high income group. Therefore, it is important for the organizations, to select the right target market for their success. Q10. Compare and contraat'undifferentiated, differentiated, concentrated and micro-marketing targeting ‘strategies. Which strategy Is best? SIA PUBLISHERS ANBYOISTRIBUTORS PVT. LTD, ——_________"(UNITE2) MARKET SEGMENTATION 241 Answer = san eh ‘Undifferentiated ~~ Micro-marketing ‘Strategy ‘Strategy Strategy —— —| 1. Meaning | In anunditfromiatd | tn adferentted | tn aconcantrted || Miromarkoing stratogys strategy marketing the fms. | marketing, smacketing, Fis whore nthe products and marketing programs neglect the bases of | fims decides to docide to target are customized for matching it with thet Segmentation and ‘target many market ‘one or few sagmants: ‘and preferences of particular individuc targets the market | segments and ‘of market due to locations, Micro-marketing consists of with me prodict | develops separte | limitation of resources. |] local marketing and individual marketing. products for each segment inPLC Local Marketing | Individual Marketing | Local marketing deals with | Individual marketing | creating brands and deals with creating | promotions as por the reeds. brands and programs as | local consumer groups. | per the neds ofthe | individual customers |2. Scope The fis target the | The fmm segmants | The fms fully targets || The fms target local The ims target the whole market on the | the market and 4 sal (ice) segment || market ike specific individuals under | bases ofthe conenon | targets athe markets | of market stores, neighborhood individual marketing. | | needs and warts stores and few cites. | tt i aso known a5 | one-to-one marketing or customized marketing. '. Functions | Mass marketing, mss] Differentiated maketing,| Niche marketing Local marketing Individual marketing istbution and mass | distribution and advertisements | advertisement ‘4 Advantages | Buids superior brand | Creates more sales | Halpsin bung strong || Helps the fms in satisfying | Helps in developing ine | merits | image in the minds of | than the fms which | market pasion and is || the retailers by creating fie- | tuned customized the customers. | ae operating in highly profable a it |} tuned customized products for] products for individuals. undiferentited market. | attracts oly one or two|| focal markets Competitors. 5. Limitations nis fic to develop It nereases tho costs | It imohes highsisk || twereass the manufacturing] It reeases the costs product which | ivoledin carving | it argerig companies || and marketing coststy | manufacturing cue satisfies the needs [out abusess. Form: ‘into compatton. || decreasing economies of | tothe invohement of the customers. | ating different marking scale andcreates logistics | customers for plans for different problems. ‘customizing their market segmerts needs products, sinticant effort Coke and Popsi | Prociar and Gamble | Wal Mont Cit Bank Del computers 2.5.1 Evaluating Market Segments Q11. How are the market segments evaluated and selected in market targeting? Answer : Evaluating and Selecting Market Segments As most of the attractive segments does not matches with the long run objectives of the firm or do not have the needed capabilities for offering superior value, itis very essential for a firm to consider two important factors while evaluating and selecting market segments. These factors are as follows. 1. Attractiveness of the segment and 2. Objectives and resources of the firm, After evaluating or analyzing various segments of the markets, the firm should examine five patterns for selecting target market which are as follows. 1, Focusing on Single Segment By focusing on single segment, a firm can obtain knowledge about the needs of a segment and can attain a strong market position. A firm can also obtain the benefits of operating economics by specializing in production, distribution and promotion and eatns high return on its investment, The firms seeks to work in super segments instead of in isolated segments, Super segmients are the segments which shares some similarities. - —_—— SIA PUBLISHERS.AND. DISTRIBUTORS)PYT. LTD.2.12 2. Selective Specialization A firm chooses number of segments which are equally important and attractive. All these segments has the Potentiality of a money maker and helps the firm to spread its risk in multiple segments. 3. Product Specialization In this pattern of target market selection, a firm Produces a specific product and sells it to various market segments. This helps the firms to sell their products to different customer groups and earns a strong reputation in the specific product area. 4. Market Specialization In this pattern of tanget market selection a firm focuses on serving number of needs of a particular customer group. This helps a firm to cam a strong reputation in serving, this customer group and to act as a medium for additional products which the customer groups can use. 5. Full Market Coverage In this pattern of target market selection, the firm sells the products needed by all the customer groups. These firms serves the whole market in two ways, (i) Undifferentiated marketing (ii) Differentiated marketing. In undifferentiated marketing, the firm does not considers the differences of segment and serves the whole market with one product offer. It will develop a product and marketing program which attracts large number of buyers and depends on mass distribution and advertising. In differentiated marketing, a firm carry out its operations in many market segments and develops different products for all the segments. Managing Multiple Segments Multiple segments can be managed effectively by appointing segment managers who are given adequate authority and responsibility for designing the business of the segments. These managers should work collaboratively with other groups in the firm. Differentiated Marketing Costs Differentiated marketing leads to more sales when compared to undifferentiated marketing. But, it also increases the business costs such as product modification costs, manufacturing costs, administrative costs, inventory costs and promotion costs Other Considerations ‘The other factors which should be considered while evaluating and selecting market segments are as follows. 1. Segment by segment invasion plans 2. Modernizing segmentation schemes 3. Ethical choice of market targets. = MARKETING MANAGEMENT 7, Segment by Segment Invasion Plans In segment by segment invasion plans, a firm enters one segment at a time. The use of these plans does not provide knowledge to the competitors about the segments which the firm will enter next. ‘The invasion plan of a firm is obstructed when it faces, blocked markets. So, for entering into blocked markets, the firm should make use of mega-marketing approach, In megamarketing, economic, psychological, political and public relations skills are coordinated strategically for gaining the cooperation of all the parties to enter in a given market. 2. Modernizing Segmentation Schemes [As segments keeps on changing, it is very essential for a marketer to do market segmentation analysis regularly New segments should be detected by studying the hierarchy of attributes which the consumers analyzes while selecting a brand when they uses phased decision strategies. This process of detecting new segments is called as market partitioning. The hierarchy of attribute helps in disclosing the segments of customers. The customers who firstly decides the price are price dominant, those who firstly decides on the type of product are type dominant and those who firstly decide on the brand of the product are brand dominant. The customers who are price or type or brand dominant will form a segment and the customers who are service or type dominant will form another segment. All the segments have different demographics, psychographic and media-graphics. 3. _ Ethical Choice of Market Targets Sometimes marketing targeting gives rise to public controversies/disagreement. When a marketer takes unjust advantage of unsafe groups like children or disadvantaged groups like poor individuals and encourages harmful products then the public becomes frustrated worried So, the marketers should carry out marketing in a socially responsible way which serves firms interest as well as the interests of those targeted. 2.5.2 Selecting Market Segments Q12. What are the different strategies followed by the target markets? Explain the guidelines in selection of target market. Answer Targeting/Target Market Strategies ‘After segmenting a market, the management of a firm should choose one or more segments as its target markets: It can follow any one strategy out of the following three strategies. 1. Market aggregation strategy 2. Single segment strategy, 3. Multiple segment strategies. SIA PUBIASHERS AND DISTRIBUTORS PVT. LTD, ———________—__—_————{UNIT-2 MARKET SEGMENTATION 1. Market Aggregation Strategy Ina market a; regation strategy, the seller considers its whole market as a single segment, It is also called as mass market strategy or an undifferentiated market strategy. In this strategy, the total members of the markets are same and have the same product demand. All the customer are ready to make small compromises for obtaining the benefits of the product. In such type of cases, the whole market isthe target of the firm. So, the management creates a single marketing mix for reaching maximum customers in the whole market Asingle product is offered by the firm for its mass audience with one pricing structure and one distribution system, A single promotional program is used for the whole market Afirm selects an aggregation strategy after analyzing a market and had found that most of the customers in the whole market will respond same towards one marketing mix. This strategy is mostly suitable for the firms which are marketing undifferentiated and staple products like salt or sugar. A market aggregation strategy helps the firm to minimize its cost and produce, distribute and promote its products effectively. 2. — Single Segment Strategy Ina single segment strategy, a seller selects one seg- ‘ment from the total market as the target market. It is also called as concentration strategy. In this strategy, one mar- keting mix is designed for reaching this single segment. A single segment strategy helps a seller to enter one market and am a reputation of expert or specialist in this market. The companies which chase single segments are considered as niche marketers and their targeted segments are considered as niche markets. A firm can make use of single segment strategy with its limited resources. 3. Multiple Segment Strategy In a multiple segment strategy, two or more different groups of customers are considered as target markets. A dis- tinct marketing mix is designed for reaching all the targeted segments. In this strategy, a seller regularly designs various forms of basic product for each segment. A multiple segment strategy leads to greater sales Volume when compared to a single segment strategy. This strategy is mostly suitable for a firm having seasonal demand, Guidelines in Selecting a Target Market A target market can be selected with the help of following four guidelines. 1. A target market must be consistent with the image and objectives of the firm. 2. The market opportunities of the target market should match with the resources of the organization. 3. Forsurviving in a market, the firm should earn profit. A firm should try to enter the markets which helps in producing suffi¢ient sales volume at a low cost for earning profit. »! 2.13 4. A firm should enter a market in which there are very less competitors or weak competitors. It must not enter a market which is already over loaded with the ‘competitors. Thus, with the help of these guidelines a target market should be selected. 2.6 DIFFERENTIATION Write about the various differenti strategies. Answer Differentiation Strategies Brands can be differentiated in number of ways. Differentiation is mainly associated with the product and service aspects. For example: Himalaya Health Care products differentiates its products on the basis of natural, ayurvedic ingredients it uses and depends on ancient Indian traditional and modern scientific methods. The following are the various differentiation strategies 1. Product Differentiation Based on the various product or service characteristics such as type of product, its features, performance, imperishability, style, reliability, repairability, design, delivery, installation, customer training, maintenance, customer consulting and repair, the brands can be differentiated. Apart from these characteristics, a brand can also be positioned or high/best quality product. The firms offering high quality products will earn more profits as the products having high quality will be permitted to charge high price. This will help the firms to obtain the benefits of repeated purchase, customer loyalty and positive word of mouth Quality of a product rely mainly on the performance ofthe product. It is communicated with the help of marketing elements or physical signs. A high price denotes high/best quality of product. The image of the quality is also influenced by packaging, distribution, advertising and promotion. 2. Personnel Differentiation A firm can attain competitive advantage over its rivals by having experienced and well trained employees. For example: Singapore Airlines have attentive and responsible flight attendants which have helped it to earn excellent reputation. Experienced and well trained employees have six attributes i.e., competency, courtesy, credibility, reliability, responsiveness and good communication skills, Retailers mainly make use of their front line employees for differentiating and positioning their brand. 3. Channel Differentiation ‘The firms can attain competitive advantage over their revels by building their distribution channels according to the coverage, expertise and performance, |) 13. —— 5A PUBLISHERS AND DISTRIBUTORSIPVT. LTD.2.14 For example: In computers Dell ~ Avon, differentiated themselves by desi direct marketing channels, 4. Image Differentiation The brand and company images are responded differently by the consumers, The identity and image of the product must be differentiated. Identity is how the firm wants to position its product and image is what the public perecives about the firm or its products. An effective identity builds the character and value proposition of the Product, communicates this character in a different way and influences the mental image of the buyers. The firm should communicate the identity of its product with the help of communication channels and brand contact. It must be circulated in advertisements, annual reports, brochures, catalogs, packaging, business cards and company stationery. nd in cosmetics 'ing high quality 2.7 PRODUCT POSITIONING Q14. What is product positioning? What are the dif- ferent steps involved in developing a position- ing strategy? Answer = Product Positioning After identifying potential segments and selecting target markets, the marketers should decide the position which it must pursue. A position is the place which the firm’s product, brand or organization have in the minds of the current and future customers. Eminent personalities Al Ries and Jack Trout defined positioning as “what you do to the mind of the prospect”. It is the place which the product finds in a consumer’s mind from his perception of offer rather than the product itself. While positioning a product, itis very essential for a marketer to communicate the benefits which the customers ofthe target market wants to obtain. For making the dicisions easily, the individuals develop mental positions for products, brands and organisations. These positions depends on the single attribute or limited experience as the customers want to spend more time as well as efforts in the process. Steps Involved in Positioning Strategy ‘The following are the steps involved in a positioning, strategy. 4. Step 1: Selecting Concept of Positioning For positioning a product or an organization, itis very essential for a marketer to find out what is important to the target market. After this, a positioning research is done by the marketers for examining how important are the competing products or stores to the target market members. The results of this study is depicted in a perceptual map which helps in detecting the brand or organization corresponding to the alternatives on the dimensions of interest. ‘SIA PUBIASHERS AND DISTRIBUTORS PVT. MARKETING MANAGEMENT 2. Si ; Outlining Characteristics which Effectively Communicates Position A position can be conveyed/communicated with the help of brand name, slogans, product appearance, the place/ location where the productis sold, appearance of employees and other attributes of a product. But few attributes/features are more effective when compared to others so it should hot be ignored. Marketers has very less/limited resources so they should make effective decisions with respect to communicating the desired positioning concept. 3. Step 3: Organizing Elements of Marketing Mix for Communicating Uniform Position Though one or two features of a product acts as main position communicators, it is very essential to complement all the marketing mix components with the planned position, (One of the important reason for the failure of a product is incompatible positioning as it makes the consumer confused. ‘The positions should be monitored and modified frequently as with the passage of time, a position may deteriorate and becomes unattractive to the needs or references of the market. Q15. Whatis product positioning? What positioning strategies would be right for FMCG products? Feb.-10, 03(a) Answer : Product Positioning For answer refer Unit-II, Page No. 2.14, QNo. 14. Fast Moving Consumer Goods Fast moving consumer goods are the nondurable products which are sold rapidly at less prices. The profits obtained through these products are very small so they are sold in large quantities for earning higher profits. Soft drinks, toiletries, grocery items, chips, ice creams are some of the example of FMCG (nondurable products). Some of the fast moving consumer goods have very short shelf life due to high demand of consumers or due to the deterioration of the product quickly. These products include meat, fruits, vegetables, dairy products and baked goods. Proctor and Gamble, Dabur India Limited, Godrej consumer products, Marico Limited are some of the examples of ‘companies which manufactures FMCGs. FMCG is classified into three types of goods. Staple Goods The goods which are purchased frequently ot regularly are called as staples. The consumers buys these goods again when the stock is finished. Examples of staples are soaps, tooth paste, pulses, rice, wheat, etc. 2. Impulse Goods ‘The goods which the buyers purchase without thinking or planning are called as impulse goods. The external stimuli of the consumers prompt them to purchase these products. Examples of impufie goods are cold drinks, ice creams, chocolates, ete, ‘! vt Ta.{UNIT:2) MARKET SEGMENTATION 3. Emergency Goods The goods which the consumers purchase when the need emerges are called as emergency goods, The marketers makes use of an effective distribution channel for these goods as the sales is not same throughout the year and the product must be available when the need arise of emergency goods are umbrellas, pullovers ete. Positioning Strategies Positioning strategies can be formulated in number of ways based on the attributes, application, types of consumers involved, features of product class, These attributes makes use of different approaches for formulating positioning strategies but has the same purpose of developing a positive image in the minds of the customers, Examples The following are the seven approaches used for positioning FMCG produets, 1. Use of Product Attributes as Positioning Strategy This strategy concentrates mainly on the product attributes or customer benefits. Sometimes two or more Product attributes is used at the same time for positioning the product. For example ') _ Intooth paste market, toothpaste concentrates mainly on two product attributes i., freshness and cavity fighter. (i) Inmotor bikes, the Hero Cycles Ltd. positions its bike by focussing on durability and style. 2. Pricing as Positioning Strategy Price-quality approach is one of the important and common approach used in product positioning. There are many product classes whose brands seeks to offer more With respect to services features or performance. The firms offering such products sets very high prices for the products 10 cover their higher costs 2s well as to allow the buyers to persuade that the product is of high quality. For example If « person goes to a shop for buying a pair of shoes, ‘ie will find that shoes of different prices ranging from Rs. 400 to Rs, 2500. But by looking at the shoes of 400, then Petson think it is not of good quality. This is because many “ustomers think that a $ if a product is costly, then it is of 00d quality and itis product is cheap then itis of low quality 3. Positioning Strategy Based on Use or Applications Positioning by use denotes a second or third position {or the brand. This type of positioning is mainly carried out intentionally for expanding the market of the brand. If new ‘ers are introduced to the product then it will instinctively “*pand the market of the brand. 2.15 For example: Bru Coffee was positioned as winter product and was advertised only in winter season. But now it had introduced cold coffee and positioned it for the summer months also. 4. Positioning Strategy Based on Product Process In his positioning approach, the product is influenced by its users or class of users. The image of the product is affected by the model or personality of the product. The attributes and image of the model or personality as a product user represents the image of the product. Introduction of designer labels on jeans has created a fashionable image of jeans, 5. Positioning Strategy Based on Product Class Sometimes, for few products, positioning should be done according to the product class. For instance: Freeze dried coffee should be positioned with regard to regular and instant coffee 6. Positioning Strategy Based on Cultural Symbols Nowadays in many advertisements, the advertises makes use of established cultural symbols for distinguishing their brands from their competitors. The most important task of the advertisers is to determine the symbols which are significant to people and is not used by other competitors and connect their brands with that symbol For example: Maharaja is used as the logo of Air India. This logo signifies Indian tradition and depicts the way they welcome the guest and provide them royal treatment. This type of positioning strategy is mainly used for publicizing trademarks, 7. _ Positioning Strategy Based on Com-petitors. In this positioning approach, an implicit or explicit frame of reference of the competitors are taken for Positioning the brand or product. Sometimes, the firm uses the same positioning strategies of the competitors or uses new strategy by considering competitive strategy as its base. Example: Horlicks and Complan. When Horlicks entered in the market it concentrated ‘mainly on providing energy and strength but when Complan Gntered in the market it focused on increasing the height of the kids. Seeing this Holicks also changed its focus from Providing energy and strength to increasing the height of kids. This positioning strategy was adopted duc ta competition. Q16. Explain the product positioning strategies in respect of tollet soaps in India. Answer + Jan/Feb-18, Q3(a) Positioning strategies ditfer trom product to product Examples of toilet soaps and their positioning strategies arc explained below. — SIA PUBLisHers ano OISTRIBUTORSiAVT, LTD. =) 2.16 1. Lux Lux is the most popular toilet soap brand of Hindustan Lever Ltd (HLL). It is positioned as the “Beauty seeret of cine-stars”. This soap is available in different sensuous colours and fragrances. 2 Liril In mid 70’s, Hindustan Lever Ltd (HLL) launched “Liril”. It is positioned as the “freshness” soap in the Indian market. 3. Pears Pears is the strong toilet soap brand launched by Hindustan Lever Ltd (HLL). Itis one among the oldest soaps. Its positioned on ‘skin care’. 4. Hamam Hamam is the biggest soap of TOMCO’s company. Hamam was positioned as the “family soap”. TOMCO's other soaps are Ria, Jai and Moti. 5. Mysore Sandal Mysore sandal is the strong toilet soap brand in the South India. It was launched by Karnataka Soars and Detergents Ltd. Mysore sandal was positioned on “sandalwood fragrance”. 6. Margo Calcutta chemical works introduced “Margo” as a toilet soap. It was positioned on the neem leaves”. 7. Dettol Reckitt and Coleman India Ltd launched “Detto!” soap in the year 1981. Dettol was positioned as the “Love and care soap”. Dettol brand is popular as an antiseptic liquid. Dettol germkill toilet soap is positioned as “100% bath”. 8. Lifebuoy The first biggest toilet soap brand “Lifebuoy” wes launched in 1895 by Hindustan Lever Ltd. (HLL). Previously lifebuoy was positioned as “Health protection for my family and me". Lifebuoy provides number of health benefits through Lifebuoy Gold and Lifebuoy Plus. ‘Germ protection” is a positioning strategy adopted by lifebuoy. 9. Breeze HLL’s medium priced brand is “Breeze”. This toilet soap was positioned on “Beauty”. It targets the women in the advertisement saying “beauty at an affordable price", look and feel beautiful. 40, Rexona HILL offered a toilet soap “Rexona”, It was positioned on “smooth-skin”. 41. Cinthol Cinthol is the strongest brand of Godrej. This brand competes with HLL’s toilet soap ‘Liril’, The positioning strategy of cinthol is “freshness”, Cinthol is available in different variants such as Cinthol lime fresh, Cinthol Deodorant soap and Cinthol Deodorant and complexion soap. MARKETING MANAGEMENT 12. Evita Godrej launched many toilet soaps with different positioning strategies. It introduced “Evita” as a toilet soap and positioned it as “skin care”. 13. Crowning Glory Crowning glory is one of the brands of Godrej. This toilet soap was positioned as “a body as well as a hair soap”, 14, Limelite Limelite is also the brand of Godrej. It was positioned ‘as a“woman soap”. The other similar brands of Godrej are Fresca, Vigil and Marvel. However, these brands could not succeed in Indian market. The companies must not choose the positioning strategy which is close to the positioning strategy of competitors brand, because the customers may get confused with the competitor brands. @17. What are the major concerns and positioning? sues in ‘Answer : Major Concerns in Positioning ‘The major concerns in positioning are, 4. No Product Gan Appeal to Everyone As different people have different likes, dislikes, needs, wants and perceptions, the necessity for positioning products that would meet the needs of a particular market segment arises. The positioning of a product is done by lighting one or more attributes of a product which satisfies the needs of target customers. Recognising these attributes or values and using them creatively for introducing 1a product is the core of product positioning. A product is positioned solely for a high class segment of a market, for ‘men, for children, for fun-loving youth, against competing brand ete. 2. Positioning Involves Planning Product in a Fixed Area Postponing is a process of placing the product in the minds of the target customers. A product incurs heavy losses when a positioning decision is taken inaccurately. It requires lots of time and immense effort for repossessing a wrong positioned product. The difference which takes place between the position planned by a marketer and the position allotted by the customers is one problem of positioning. So the marketing insight organisations should determine the consumer’s perception of the position and if there is a difference from what is planned by them, the it then gap should be modified. 3. Positioning Links Product Offering with Target Market ‘The selection of target market helps in clarifying for whom the product is planned and marketing mix denotes how the product, price, place and promotion (4 Ps) are assigned ip the offer to the target market, Positioning of a product helps in connecting the produet offer with the target market, SIA PUBLISHERS AND DISTRIBUTORS PVT. up. ———$_$__ —UNIT-2 MARKET SEGMENTATION 4, Minds of Customers are Regarded as a Geometric Perceptual Space In positioning, the minds of the customers are considered as a geometric perceptual space in which various product categories and brands occupy specific positions These positions keep on changes and are replaced by new products/brands. A marketer can position its product in the minds of the propositioi ustomers with the help of various routes/ A product can be positioned by putting the brand against the frame of reference viewed by customer. 5. Positioning Should be Monitored and Adjusted ‘The marketer should monitor the performance of the brand and check whether the positioning is performing effectively or not, This examination is done in the market and only brand performance can determine whether the Positioning is right or wrong, Sometimes, the firm will plan a particular positioning but the marketer may understand it differently and also sometimes the assumptions of the firm in brand positioning may go wrong. These pitfalls can be ‘overcome by continuous evaluation. 6. Value Added Product Positioning For successful positioning of the product, it should have attribute/feature which have identifiable, meaningful and compelling value proposition. A value proposition is Ps IP po the benefits and satisfaction statement which the product is offering. In positioning, the marketer should firstly outline the value proposition of the product, and then the product should be appealed to target customers. The marketers make use of advertising for communicating the value proposition to the customers. Issues in Product and Brand Positioning Before entering the market, it is very essential for a marketer to perform product positioning. The marketers should firstly decide the product category positioning and then the new entrant position against competing brands in the selected product category should be analysed and fixed. Brand positioning and product positioning has different issues which are as follows. (i) Issues in Product Positioning The place where the new offer is going to compete and as what? % The product funetion or customer need which the product is trying to fulfill The other product categories which serves this need or the substitute products which serves the same needs of the customers. Where the real gap occurs and where the new offer is needed by the market? The competencies of the firm for competing with other firms. —— 2.17 (i) Issues in Brand Positioning + The brands which are competing in the selected product category. The unique or distinct strengths of different brands. The positioning which the brands have in the evaluation and perception of the consumers. The occurrence of wide gap in expectations and performance. The type of a product or new function or new features which attract the consumers. Will the new brand maintain the required distinction, and take the position and fullfil that need? G18. As amarketing manager, propose and formulate Segmentation. Targeting and Positioning (STP) strategy for a five star hotel targeted at business people. Answer t Feb/March-12, 03(a) Segmentation, targeting and positioning strategy is a step-by-step process of acquiring the potential customers and making an effective impact of product or service on the customers, STP Strategy for a Five Star Hotel Targeted at Business People Segmentation 1. Organizational Aspects (a) Organization Size The size of the organization i.., five star hotel should be large enough in order to render their best services to their elite customers. (b) Geographical Location The hotel must be centrally located with the pleasant environment and it must be easily reachable. Customers of that particular ‘geographical location must be targeted. (©) Sector The organization is associated with the hospitality industry which basically aims at attracting high class customers for its five star hotel. Buyer Aspects (a) Choice Criteria Business people would prefer pleasant, spacious and friendly environment. Their needs can be large and well equipped conference halls, ‘banquet hall and good suits or rooms for them or their guests. Therefore, the hotel should provide the facilities according to their choice and on the basis of this sector the customers are being segmented. The group of elite and high class people such as corporate dignitaries, politicians, celebrities, etc., can be selected as a target for a five star hotel. 5 SIA PUBLISHERS'AND DISTRIBUTORS PVT. LTD.18 (b) Purchase Situ: Itincludes those factors which can influence or demotivate the customer to purchase the service or not. Targeting 1. Distinct Unique set of consumers are being targeted for the appropriate product or service 2. Accessible The targeted customers should be available withn the reach. Measurable The targeted group should be measurable with respect to the demographi Profitable ‘The business must eam with the targeted group, which is being selected. The target group for the five star hotel includes corporate heads, CEOs, successful entrepreneurs, senators and men of power. Positioning 1. Product Features ‘The features of the product or service should be according to the needs of the customers. The product features must be dominated greatly by the customization process. 2. Quality Customers should be provided with the quality product or service. 3. Use ‘The service or product must be useful to the customer. 4. Benefit ‘The service or product should be advantageous and must be beneficial in nature. ‘The five star hotel should position itself in high end luxury hotel chain providing splendid experience and a taste of royalty in modem times. Q19. Explain segmentati with suitable examp! irgeting and positioning Answer : May/June-12, 03(a) ‘Segmentation For answer refer Unit-II, Page No. 2.2, Q.No. | Topic: Market Segmentation. Market Targeting For answer refer Unit-Ui, Page No. 2.9, Q.No. 9, Topic: Market Targeting Afier segmenting the market, the firms should select its marketing strategies. Generally, there are three strategies which are as follows, 4, Standardization SIA PUBLISHERS AND DISTRIBUTORS PVT LTD. MARKETING MANAGEMENT In this strategy, the firm offers the same product to various market segments. It adopts similar form te Amunication, pricing and distribution strategies. The cotrdrinks such as coke and pepsi serves the classical xamples for targeting. These firms retain the same flavour, Savertising and packaging across the segments in. various geographical areas. The main advantage of using this strategy is the economies of seale which a firm obtains in tase production and marketing. In this regard, Levitt urges the eae for standardized products for the world market as cnctomer needs are becoming homogenized globally because of the developments in transportation and communication, ‘According to Levitt, a standardized global product helps a firm to become competitive in the world market. 2. _ Differentiation In this strategy, the firm differentiates its products to meet the needs and expectations of various segments The suitable example for differentiation is airline, which differentiates its products into three classes namely - first class, business class and economy class. These classes are targeted at a particular segment in which the needs are different from the other. 3. Focus Focus is a combination of standardization and differentiation. In this context, core strategy stays the same but differentiation is made for considering the specific customer group requirements. The Maruti 800 (or) Esteem for instance has few basic features and provides specific benefits to its buyers Buta buyer who is looking for more features such as power steering and music system can secure similar attributes at an additional price, Maruti in this manner is able to focus its entire strategy on economy and premium segments. This strategy facilitates the firm to take the advantage of the economies of scale, higher market penetration and higher market share. Hence, the marketer should select a suitable strategy for attaining higher market penetration in each of his market segments For answer refer Unit-II, Page No. 2.8, Q.No. 20. 2.8 POSITIONING STRATEGIES Q20. What is product positioning? Explain positioning strategies followed by mobile phone companies. (Model Paper-1, 03(b), Jan.-14, 03(a)) OR “Positioning is not what you do to a product, positioning is what you do to the mind of the prospect”. Discuss the criteria in developing a positioning strategy for mobile phone companies. —UNIT-2: MARKET SEGMENTATION Answer + Positioning of a product me: company is viewed by the exis in comparison to competitors words, it can be understood as is placed in the minds of the customers according to their Perception of the offer. Every company must decide the eriteria on which it will base its positioning stratexy. 1n Fecent years, the mobile phone industry has been developing rapidly in India because ofthe changing dynamics ofthe market in India. This inerease in the growth of the cell Phone industry is due tothe liberal policies followed by the telecom sector and also due to the price reduction strategy which is chosen by the cellular phone service providers, Today the cost of the cell phone service and the cost of mobile handset is very low which has also increased the growth of mobile phone companies at entry level. Today the mobile-phone companies offer their products with features like imtegrated digital camera, FM radio, MMS facility and speaker phones and the price for such products also ranges from Rs. 5000 to 8000. Among all the mobile phones, the mobile phones with speakers, FM radio and music phones are increasingly becoming popular, Segmentation of Products of Mobile Phone Companies The market of mobile phone companies can be segmented on the basis of following criteria, 1. Niche Users The products of price range of less than Rs, 3500 are offered to the low social class people of the urban market. The product will be in low cost and easy to use 2. Middle Class Users Middle class users include students, working people, young housewives. The products of price range of Rs, 3500 to Rs. 5000 and Rs. 5000 to 10,000 are offered to this class of users. 3. Luxurious Users These users includes, the executives, celebrities, trend conscious people. The products of price range of Rs. 10,000 to Rs. 25000 are offered to this class of users. Positioning Strategy Based on Users and their Expectation ‘On the basis of the users and their expectations, the mobile phone companies position their products, 1. Rural or Low Income Urban Group For the low income group, the product is positioned with low price and basic features. These basic features includes larger in size, easy to hold and operate. These products also has some resale value, 2. Students For students the mobile phone companies offers popular and medium priced handsets with some special features in it. These handsets will be small and comfortable to use. Dec-8, 03(b) "ans how a product of a ng and potential customers in the same market. In other how the particular product 2.19 Young Housewives For young housewives the mobile phone companies offers the handsets which are easy to. hold and operate, These handsets will be of different colours, and different shapes. 4. Working People For working people, the mobile phone companies offers the handsets with special features as the working people mostly prefers the fashionable and latest handsets. These handsets are small in size and are in sleek design which the working people gives more preference. Executives For executives, the mobile phone companies offers the handsets with fashionable features and looks. The executives mostly prefers newly launched mobile with high brand value. Positioning by Product Benefits (Basic phones will have minimum features of a phone plus sms, alarm and facility of date. (ii) Basic multimedia handsets will have MMS, FM radio, speakers, polyphonic ring tones and VGA digital cameras. High end multimedia handsets will have high resolution cameras, music players, blue-tooth, tri- band and high resolution games. The customers will select the mobile phones on the basis of, Company name. (iii) * Brand image. Distribution coverage. Range of product. % — After-sales service. * Technology used. Type of battery. + Quality of the product which is decided on the basis of size, weight and aesthetics of the product. + Price of the product, % Resale value of the product. Major Players ‘The major players in mobile phones in the Indian market are, Nokia * Samsung Motorola Sony Ericson * LG ‘emen’s, Philips, Blackberry, Alcatel, BenQ. Nokia is world leader in mobile communication industry and it adopts localized manufacturing as their Product positioning strategy. ——_—_—_______— 5A PUBLISHERS AND DISTRIBUTORS PVT. LTD.2.20 —_ Q21. How are positioning strategies developed and communicated? MARKETING MANAGEMENT yp Comp neludes those attribute competitive points of parity i eo stitor’s point of difference. If the but think that the eae tiation which isdeveloped as competitor's point of Answer : It is very essential for the firms to position their products effectively in the market as ineffective positioning leads to confusion in the markets. For effective positioning of products, the positioning strategies must be developed and communicated in an effective manner. The positioning, strategies can be developed and communicated by finding out frame of reference through identification of target market and competition and by determining the perfect points of parity and points of difference associations brand. 1. Competitive Frame of Reference For specifying a competitive frame of reference for a brand positioning, the firm should firstly find out its category membership. A category membership includes products ot set of products used by the brand for competing. In a ‘competitive analysis, number of factors are analysed such as the resources, abilities and intentions/motives of other firms in selecting those markets where customers are served profitably. The target market decisions acts as an important determinant of competitive frame of reference. For effective determination of competitive frame of reference, the firms should have knowledge about the consumer behaviour and the factors which the consumers use while selecting the brands, 2. Points of Parity and Difference ‘After fixing competitive frame of reference through specifying customer target market and nature of competition, the marketers should outline suitable points of difference and points of parity associations. Points of Difference Points of difference includes those qualities or benefits with which the buyers relate with a brand and evaluates it positively. These features helps in differentiating the products from competitive brands. The compelling, distinct and complimentary brand associations of points of difference depends mainly on specific quality or benefits of a product. These associations plays a very important role in competitive brand positioning but itis a challenge for the firms to create such brand associations as their points of difference. Points of Parity Points of parity includes those attributes or associations which are shared among various brands. These attributes or associations are of two types ~ category points of parity and competitive points of parity. Category points of parity are those associations or attributes which according to consumers are very important for the authorized and believable offering within a specific product or service category. In shor, these'féatures indicates the required conditions for selecting @ brdrfd, ‘SIAj PUBLISHERS AND DISTRIBUTORS PVT. LTD: rand associs vierence is sirong and the brand can develop other strong, favourable and distinct association as a part ofits point of flterence, then the brand must be in a superior competitive position. 3. Building Category Membership It is very essent.al for the marketers to inform the category membershio of the brand to the consumers, This approach helps in underlying the brand’s point of difference through which the customers scan know the ‘actual membership of the brand, Before outlining the point of difference of brand, the consumes should be informed about the brand’s membership. They should have knowledge about the product and its functions before making a decision of its dominating nature against the brands it competes The category membership of brand can be communicated with the help of three primary methods which are ~ by announcing or rublicizing the category benefits of the product, by comparing the product with the other perfect models and by using product descriptors. 4, Selecting Points of Difference and Parity Points of parity are selected on the basis of the needs of category membership and need for nullifying the ‘competitors point of difference. While selecting the points of difference, two important points should be considered i., whether the customers think that the point of difference is desirable or not and whether the firm has the ability to deliver according to the point of difference or not. The points of difference has three important consumer desirability crit which are — relevance, uniqueness and credibility. The target costumers should think that the points of difference are relevant, unique, distinct, superior, believable and credible. The points of difference also has three important deliverability criteria which are — feasibility, communicability and sustainability. ‘The marketers should decide the levels at which the points of differences should be attached to the brand. The features or attributes of brands are at the lowest level, the benefits of the brands ate at the next level and the values of the brand are at the highest level. 5. Developing Points of Difference and Parity ___ As most of the features or benefits of points of difference and points of parity have negative relationship, itis very difficult to develop a strong and competitive brand positioning. Individual features and benefits have both Positive as well as negative aspects. The customers tries t0 maximise attributes as well as the benefits of the products. So, the marketers should create theit product or service which performs effectively on both the aspects/dimensions.UNIT-2, MARKET SEGMENTATION There are number of methods for solving the problem of negatively correlated points of difference and points of parity which are as follows. (i) Present Attributes or Benefits Separately The negative relationship between features and benefits of the product can be dealt by initiating two different marketing campaigns each directed towards various features or benefits of brand. These campaigns can be performed at a particular point of time. (i) Controlling Equity of Other Entity Brands may connect themselves to any type of entity which has adequate amount of equity for building a feature or benefit as points of difference and points of parity. The branded constituents helps in developing believability about a particular feature of a brand in the minds of the consumers. Redefining Relationship The negative correlation among the features and benefits of a product can be dealt by persuading the customers that the relationship between them is positive. This can be done by producing various view points to the customers and making them realize that some important considerations are ignored by them. (iii) 2.9 DEMAND MEASUREMENT AND SALES FORECASTING METHODS Q22. Explain the demand measurement and the methods of sales forecasting. Answer : Feb/March-12, 03(6) Measurement/Forecasting Market Demand Demand forecasting determines the sales of a product during an expected future period. Forecasting is performed for making different types of predictions. Example A forecast can be done for whole industry or for firms’s product line or for an individual brand. For understanding the forecast, itis very essential to clarify what it describes. Basic Terms of Forecasting 1. Market Share ‘The portion of total sales of a product during a specified period in a particular market which is occupied bya single firm is called as market share. This term is commonly Used in business asa performance measure, The market share may be applicable to whole industries, industry segments or specific geographic areas. It can also be used in the past, Present or future periods. 2, Market Factor ‘A market factor is a factor which occurs in a market, that is measurable and isiassociated with the product demand. 2.21 Market Potential, Sales Potential and Sales Forecast Market potential is the combined sales volume which the organisations selling a product during a specific period oftime in a certain market will desire to attain under perfect conditions. Sales potential is the part of market potential which a particular company will desire to attain under perfect conditions. ‘The word ‘potential’ deals with maximum sales level which assumes that, (i) Marketing plans are executed in an effective manner, and (ii) All the future customers have the desire and ability to buy. As only some industries or organisations will be able to attain their full potential, it must not be the final result of ‘demand forecasting and must be an intermediate step. A sales forecast is a measure of probable sales for a single company’s brand of a product during a specified period in a certain market. Market potential and sales forecast are determined with the help of general factors and market assumptions but a sales forecast is done based on a particular marketing plan for a product. A sales forecast is done effectively only after estimating the market and sales potential. Sales forecast involves a one year period. After doing sales forecast, the firm decides about the money to be spent on different activities such as advertising and personal selling. On the basis of the sales forecast, the firm plans the needed amount of working capital, plant utilization, warehousing facilities, scheduling production, hiring production workers and purchasing raw materials. Methods of Sales Forecasting For answer refer Unit-II, Page No. 2.21, Q.No. 23. ferent sales forecasting Jan JFeb-15, 03(6) 23. Explain the methods. OR \~ Write in detail about various sales forecasting methods. June-14, 03(6) OR Whatare the methods of demand forecasting? Explain them in brief. May/June-12, 03(b) OR What are the quantitative and qualitative methods far sales forecasting? PuaNAEssceeceeseeeees ene ———e SIA PUBLISHERSiAND DISTRIBUTORS-PYTLTD.a22 MARKETING MANAGEMENy - July-1h, Ber, Answer : Tools for Estimating Future Market Demand/Sales Forecasting y are 2s follow There are two types of methods/tools which are used For estimating future market demand. Tey a7 1, Qualitative methods/tools, and Quantitative methods/tools. Qualitative tools Quantitative tools y y y 1 Suney of Composite of Delphi Short term buyer's saks force _technique/expert’s forecasting intention opinion opinion ' Y Time series Correlation analysis Figure Tools for estimating future market demand/sales forecasting. 1. Qualitative Methods Qualitative methods mainly deal with opinion surveys. The commonly used qualitative methods are as follows. (i) Survey of buyer's intention (i) Composite of sales force opinion (iii) Delphi technique. (i) Survey of Buyer's Intention In this method, the buyers are surveyed for analysing their intentions towards purchasing a product. This method helps in determining the market demand for consumer durable products or a new product and also measures the product demand at various marketing effort levels. Example The use of this method helps in studying the change in price and its impact on consumer demand. A seven point scale is taken for measuring the purchase intention of the buyers. The response of this survey determines the purchase probability for a particular product and accordingly an index of purchase probability is developed. The survey of buyer’s intention method is also suitable for industrial marketing (ii) Composite of Sales Force Opinion Under this method, the sales personnel are asked to determine the sales of a particular product in their area. Thes? estimates are grouped for obtaining a national level sales forecast, Many companies do not rely on this method 2 the sales personnel may disclose incorrect or wrong sales figure for gaining the attention of top management. (iii) Delphi Technique Under this method, an expert panel is asked to determine the market demand for a particular product and state thei assumptions about the future market environment. The experts work from their office. So, they are not influenced by others. This method helps in determining the demand for a new product or technology. An expert opinion poll is also done in delphi technique in which the experts of the industry.are interviewed by the firm, These experts include dealers, large buyers, trade associations and marketing consultants. The panel members als? share their ideas for arriving at a final conelusion. 0 SIA PUBLISHERS AND DISTRIBUTORS PVT ITDUNIT:2, MARKET SEGMENTATION 2 wi (ii) (a) Quantitative Methods The quantitative methods are classified into two types. (i) Short term forecasting (ii) Long term forecasting, Short Term Forecasting ‘The forecast done fora period less than or equal to one year is called as short term forecast. The short term forecasting tools are used along with the extrapolation techniques such as exponential smoothing, time series decomposition and many other models. Among all the ‘techniques, the exponential smoothing technique is used commonly. It is a type of moving average which denotes a weighted sum of all part numbers in the time series with the placement of most heavy weight on the latest information. In this method, the value of the smoothing constant (ct) is determined and used for smoothing the raw sales data. The exponential smoothing method is represented as follows. €,=a4,+(l-aje, -1 Where, €, ~ Smoothed sales in period r —Smoothing constant with a value between Oand 1 A, —Actual sales in period r €, ~1 —Smoothed sales in period r — 1 Itis a challenge to estimate the o: value and the main principle used for estimating o. values than when the changes in the time series is slow, the 0: value will be small and when the changes in the time series are rapid then the ot value will be high. But, usually, the a value is determined by using many values and retrospective tests of the relative error function. Long Term Forecasting ‘The forecast which is done for along period term of is called as long term forecast. The methods used in long term forecast are, (a) Time series analysis (6) Correlation ‘Among these methods, time series analysis and correlation are commonly used by the decision makers. Time Series Analysis Time series analysis is a method in which the previous sales data of an industry is decomposed into time series and the sales for the next time period is determined. Additive and multiplicative approaches are used for decomposing time series. ‘Trend, cyclicality seasohality and erratic factors are.a sales funetion over a time period. 2.23 (b) Correlation Method A product is sold with the help ofa number of variable such as price, advertising, expenditure, distribution, personal disposable income etc. The relationship between these variables is shown with the help of the following equation, $= (4 4y A, A) Where, S- Sales in volume or monetary times Ay, yA, ... A, ~ Independent demand variables. Thus, the above mentioned are the qualitative and ‘quantitative methods of sales forecasting, The cost and value of these estimations helps in decision making. Q24, What is the need for demand forecasting? Explain various forecasting methods for estimating current demand. Answer : Need for Demand Forecasting 1. Planning Production Activities ‘Demand forecasting is essential before starting any production activity. Production of goods is dependent on accurate demand forecasting, 2. Forecasting Sal Sales forecasting is dependent on the demand forecasting. Advertising pattern of the firm should be based on sales forecasting. 3. Control of Business ‘The business firm may have to prepare the budget of cost and revenue occurring in future. The future accurate estimation of cost and revenues is based on the demand forecasting. 4, Inventory Control The business form can have a better control on raw materials, semi-finished goods, finished goods, spare pars etc, for future requirements of the firm with the help of demand forecasting. Long Term Investment Programmes The growth rate and long term investment planning of the firm can be estimated with the help of demand forecasting. 6. Maintain Stability Production and employment growth rates can be stable through demand forecasting. 7. Helpful to Planners and Policy Makers Demand forecasting can be greatly used by planners and policy-makers in making optimum allocation of scarce resources. SIA PUBLISHERSIAND DISTRIBUTORSIEVT: LTD.2.24 Forecasting Methods for Estimating Current Demand The current market demand can be estimated with the help of any of the following methods 1 Market potential estimation 2 Te 3. Industry sales and market shares 1. Market Potential Estimation This is the first step in estimating market demand The size or amount of market available to firms is called as market potential. It denotes the maximum sales which the firms can attain in a particular area at a particular time and under prevailing market conditions. The market potential can bbe estimated by determining the total number of buyers and ‘multiplying them with their product volume and price. This estimation can be done mathematically using the formula, ‘tory market potential X=m=Ver Where X — Total market potential available to the firms. mm ~ Potential number of buyers. ¥ ~ Average quantity purchased by the buyer. + — Price paid by the buyers. ‘The chain ratio method is the other method used for estimating market demand. In this method, a base number is muluphied by mazry adjusting percentages. 2. Territory Market Potential Estimation ‘Usually, the firm has to carry out the task of deciding the amount of resources deployed in various markets. But if adequate quantitative information is not available then the decisions are taken randomly and leads to problems of sales personne! and desler motivation. So, for overcoming these problems, territory market potential estimation is done. () Determining Current and Potential Consumers In this method, the current and potential customers ‘of the product or service of the firm in a particular area, the everage units they buy or are willing to buy, competitor's customers and the average units they are willing 10 buy are determined. This method is also called as market buildup method. The use of this method helps in recognising primary trends such as migration of population from one area to other based on their economic activity. (ii) Multiple Factor Index It is one of the methods used for estimating the current market demand. This method is mainly used for consumer goods where it is very difficult to estimate the buyers. In tis method, the firm analyses three parameters which are proportion of population, purchasing power of consumers and retail activity and accordingly develops an index of market potential in that area. t | (ill) MARKETING MANAGEMENy Brand Development Index This is one of the methods of estimating currem market demand given by Kottler. The brang development index is the index which shows the brand sales to category sales in a particular area, 3. Industry Sales and Market Shares ‘This method depends mainly on determining the sale, ofan industry and market share of the competition and the firm. If an industry is an organised industry then the data ;: casily obtained from the relative industry association ang various other sources such as CMIE (Centre for Monitoring Indian Economy) or CII (Confederation of Indian Industry, The data for media or consumer goods is obtained from group researches such as Al Nielson, ORG-MARG, KSA ‘Technopak ete @25. Explain how demand measurement and sales forecasting methods help the manager in drawing marketing planning? Answer : Sune-07, 0316) Sales forecasting is very important for the manufacturing firms as their production depends mainly on the expectation of future demand. Depending on the accurate sales forecast and market demand, the manufactures changes his production and his productive capacity of the plant Sales forecasts affects all the organisational activities like production, distribution, advertising and changes in methods of marketing goods etc. The firm must evaluate its sales forecasts regularly for attaining its overall organisational objectives. “A good sales forecast is undoubtedly the most important single planning tool”. John D. Luth The following points help us to know the significance of sales forecasting. (i) Sales forecasting helps in taking effective management decisions. (ii) It helps in determining the future needs of the business. iii) [helps the firm to attain the overall organisational objective (iv) Its regarded as the basis of planning. sful (v) Sales forecasting acts as a basis for suce: business. Role of Demand Measurementand Sales Forecasting in Marketing Planning les forecasting is needed for planning production ‘and financial activities. It also helps in planning the quantity required for purchasing/manufacturing and the amount spent ‘on promotional activities. A firm should forecast the market or sales potential and then develop its own sales forecast. 1¢ following points help us to know the role of sales forecasting and demand measurement in marketing planning: | SIA PUBLISHERS AND DISTRIBUTORS PVT. re} ———