MARKETING

Company Orientation to the Marketplace

1) Production and distribution  demand is higher than supply.

Production availability is what is important, everything that is produced will be sold.

What is production orientation?

A management philosophy, concept, focus or state of mind which emphasizes production techniques
and unit-cost reduction rather than the needs and wants of the target market; the orientation
assumes that consumers will favor those products that are the most readily available and at the
most affordable prices.

One notable production orientation example is fast food restaurant chains such as Burger King and
McDonald’s, which focus on making thousands of burgers a day at a cheap price.

2) Product  balance between supply and demand.

It is supposed that if the product has quality, it will be in demand, without the need of promotion.

What is product orientation in marketing terms?

Product orientation is defined as the orientation of the company’s sole focus on products alone.
Hence, a product-oriented company put in maximum effort on producing quality product and fixing
them at the right price so that consumer differentiates the company’s products and purchase it.

3) Sales  supply higher than demand.

What is Sales orientation? a sales approach where a company only focuses on convincing customers
to buy its products and services rather than taking into consideration the actual needs of customers.
Companies that use a sales orientation approach create products to make people buy them and not
create products that suffice the needs of customers.

4) Market  supply higher than demand.

Market-oriented businesses focus on analyzing the target audience to determine their needs and
design a product to fit those needs. This business model centers everything around what the
customer wants rather than on promotions. Market orientation revolves around customer
satisfaction and reacting to the demands of the customer.

5) Societal 

The societal marketing orientation is a business philosophy that holds that companies should market
their products and services in a way that is beneficial to society. This means that businesses should
take into account the social and environmental impact of their marketing activities, and make sure
that they are doing more good than harm.
Marketing mix

The four P (product, price, place, promotion?

Product.

Product differentiation and Positioning

Product differentiation is the key aspect or aspects that distinguish a company's products or services
from the competition. Successful product differentiation leads to brand loyalty and an increase in
sales.

Product positioning is how consumers perceive our product/brand in comparison with other brands
or according to some attributes/features.

Branding is the process where a business makes itself known to the public and differentiates itself
from competitors. Branding typically includes a phrase, design or idea that makes it easily
identifiable to the public.

Brand is a name, term, symbol or a combination of them, which is intender to identify the goods or
services of one seller or group of sellers and to differentiate them from those of competitors.

Trademark means that a brand or part of a brand that is given legal protection because it is capable
of exclusive appropriation. A trademark protects the seller’s exclusive rights to use the brand name
and /or brand mark.

Branding decisions:

Single brand - Multiple brands - Second brands - Private labels - Umbrella branding

Product life cycle

A product life cycle is the length of time from a product first being introduced to consumers until it is
removed from the market. A product’s life cycle is usually broken down into four stages:
introduction, growth, maturity, and decline.

Product life cycles are used by management and marketing professionals to help determine
advertising schedules, price points, expansion to new product markets, packaging redesigns, and
more. These strategic methods of supporting a product are known as product life cycle
management. They can also help determine when newer products are ready to push older ones
from the market.
BCG

Understanding the Boston Consulting Group (BCG) Matrix

The horizontal axis of the BCG Matrix represents the amount of market share of a product and its
strength in the particular market. By using relative market share, it helps measure a
company’s competitiveness.

The vertical axis of the BCG Matrix represents the growth rate of a product and its potential to grow
in a particular market.

In addition, there are four quadrants in the BCG Matrix:

1. Question marks: Products with high market growth but a low market share.

2. Stars: Products with high market growth and a high market share.

3. Dogs: Products with low market growth and a low market share.

4. Cash cows: Products with low market growth but a high market share.

The assumption in the matrix is that an increase in relative market share will result in increased cash
flow. A firm benefits from utilizing economies of scale and gains a cost advantage relative to
competitors. The market growth rate varies from industry to industry but usually shows a cut-off
point of 10% – growth rates higher than 10% are considered high, while growth rates lower than
10% are considered low.

The BCG Matrix: Question Marks

Products in the question marks quadrant are in a market that is growing quickly but where the
product(s) have a low market share. Question marks are the most managerially intensive products
and require extensive investment and resources to increase their market share. Investments in
question marks are typically funded by cash flows from the cash cow quadrant.

In the best-case scenario, a firm would ideally want to turn question marks into stars (as indicated by
A). If question marks do not succeed in becoming a market leader, they end up becoming dogs when
market growth declines.

The BCG Matrix: Dogs

Products in the dogs quadrant are in a market that is growing slowly and where the product(s) have
a low market share. Products in the dogs quadrant are typically able to sustain themselves and
provide cash flows, but the products will never reach the stars quadrant. Firms typically phase out
products in the dogs quadrant (as indicated by B) unless the products are complementary to existing
products or are used for a competitive purpose.

The BCG Matrix: Stars

Products in the star quadrant are in a market that is growing quickly and one where the product(s)
have a high market share. Products in the stars quadrant are market-leading products and require
significant investment to retain their market position, boost growth, and maintain a competitive
advantage.
Stars consume a significant amount of cash but also generate large cash flows. As the market
matures and the products remain successful, stars will migrate to become cash cows. Stars are a
company’s prized possession and are top-of-mind in a firm’s product portfolio.

The BCG Matrix: Cash Cows

Products in the cash cows quadrant are in a market that is growing slowly and where the product(s)
have a high market share. Products in the cash cows quadrant are thought of as products that are
leaders in the marketplace. The products already have a significant amount of investments in them
and do not require significant further investments to maintain their position.

Cash flows generated by cash cows are high and are generally used to finance stars and question
marks. Products in the cash cows quadrant are “milked” and firms invest as little cash as possible
while reaping the profits generated from the products.

New Product Planning Process (7 Phases)

The new product planning is the function of the top management personnel and specialists drawn
from sales and marketing, research and development, manufacturing and finance.

This group considers and plans new and improved products in different phases, as given below:

1. Idea generation (Idea Formulation)

2. Screening of ideas (Evaluation)

3. Concept Testing

4. Business analysis

5. Product development

6. Test marketing

7. Commercialization (Market Introduction)

1. Idea Generation:

The focus in this first stage is on searching for new product ideas. Few ideas generated at this stage
are good enough to be commercially successful. New product ideas come from a variety of sources.
An important source of new product ideas is customers. Fundamentally, customer needs and wants
seem to be the most fertile and logical place to start looking for new product ideas. This is equally
important for both consumers and industrial customers.

Product planning starts with the creation of product ideas. The continuous search for new scientific
knowledge provides the clues for meaningful idea formation.

2. Screening the Ideas: (Evaluation):

It means critical evaluation of product ideas generated. After collecting the product ideas, the next
stage is screening of these ideas. The main object of screening is to abandon further consideration of
those ideas which are inconsistent with the product policy of the firm. The product ideas are
expected to be favourable and will give room for consumer satisfaction, profitability, a good market
share, firm’s image.
3. Concept Testing:

After the new product idea passes the screening stage, it is subjected to ‘concept testing’. Concept
testing is different from test marketing, which takes place at a later stage. What is tested at this
stage is the ‘product concept’ itself-whether the prospective consumers understand the product
idea, whether they are receptive towards the idea, whether they actually need such a product and
whether they will try out such a product if it is made available to them.

In fact, in addition to the specific advantage of getting the consumers’ response to the product idea,
this exercise incidentally helps the company to bring the product concept into clearer focus. Concept
testing helps the company to choose the best among the alternative product concepts. Consumers
are called upon to offer their comments on the precise written description of the product concept,
viz, the attributes and expected benefits.

4. Business Analysis (Market Analysis):

This stage is of special importance in the new product development process, because several vital
decisions regarding the project are taken based on the analysis done at this stage. Estimates of sales,
costs and profits are important components of business analysis and forecasts of market penetration
and market potential are essential.

More precise estimates of environmental and competitive changes that may influence the product’s
life cycle or its replacement or repeat sales are also needed to develop and launch a product? A
complete cost appraisal is necessary besides judging the profitability of the project.

Market analysis involves a projection of future demand, financial commitment and return. Financial
specialists analyze the situation by applying break-even analysis, risk analysis. Business analysis will
prove the economic prospects of the new product.

5. Product Development:

The idea on paper is converted into product. The product is shaped corresponding to the needs and
desire of the buyers. Product development is the introduction of new products in, the present
markets. New or improved products are offered by the firm to the market so as to give better
satisfaction to the present customers. Laboratory tests technical evaluations are made strictly.

6. Test Marketing:

By test marketing, we mean, what is likely to happen, by trial-and-error method when a product is
introduced commercially into the market. These tests are planned and conducted in selected
geographical areas, by marketing the new products. The reactions of consumers are watched.

It facilitates to uncover the product fault, if any, which might have escaped the attention in the
development stage. By this, future difficulties and problems are removed. This type of pre-testing is
essential for a product before it is mass produced and marketed. Sometimes, at this stage,
management may take decision to accept or reject the idea of marketing products.
7. Commercialization (Market Introduction):

This is the final stage of product planning. At this stage, production starts, marketing programme
begins to operate and products flow to the market for sale. It has to compete with the existing
products to secure maximum share in the market-sales and profits. When a product is born, it enters
into the markets; and like human beings, has a life span-product life cycle.

What Is Price?

Price is the value or money customers give up in exchange for a particular offering that would serve
to satisfy their needs and wants.

In simple terms, a price is the measure of the value a customer exchanges to purchase an offering.

Prices serve as an economic mechanism using which offerings can be distributed among customers
in the marketplace.

They also act as indicators of the extent to which an offering is demanded and also the extent to
which it is supplied or available.

The price of a product is the overall value of the offering, including the value of all raw materials and
service that went into making an offering. The price of service considers all elements involved in the
making of the service what it is.

What Is Price Sensitivity? Demand elestacity

Price sensitivity is the degree to which the price of a product affects consumers' purchasing
behaviors. Generally speaking, it's how demand changes with the change in the cost of products.

In economics, price sensitivity is commonly measured using the price elasticity of demand, or the
measure of the change in demand based on its price change. For example, some consumers are not
willing to pay a few extra cents per gallon for gasoline, especially if a lower-priced station is nearby.

When companies and product manufacturers study and analyze price sensitivity, they can make
sound decisions about products and services.

Price competition is a form of competition by which a product or service can compete with
other products or services in the market only on the aspect of pricing. The competition or rivalry
between the products is related exclusively to the pricing of the products.

It may be related to different types of pricing, like retail price or customer price. The primary aim of
price competition is to differentiate the products against competitors and to achieve an increase in
sales.

The price competition is carried out in case of similar or identical products or services, and it is
considered as a push to increase the sale of the product.
Market penetration and Market skimming price

Company pricing strategy refers to the way a company sets the prices of its products and services.
There are a number of different pricing strategies that companies can use, and the right strategy will
depend on factors such as the company’s goals, the products or services being offered, and the
characteristics of the target market. Some common pricing strategies include penetration pricing,
skimming, and value-based pricing.

Penetration pricing involves setting low prices in order to attract customers and gain market
share. Skimming price involves setting high prices in order to maximize profits from the sale. Value-
based pricing involves setting prices based on the perceived value of the product or service. The
right pricing strategy can help a company to achieve its desired objectives.

Each pricing strategy has its own advantages and disadvantages. Market penetration pricing can help
you quickly gain market share, but it may result in lower profits. Market skimming pricing can
generate high profits, but it may limit your customer base. Ultimately, the best pricing strategy for
your business will depend on your specific goals and objectives.

Yeld management

Yield management is a variable pricing strategy, based on understanding, anticipating and

influencing consumer behavior in order to maximize revenue or profits from a fixed, time-limited
resource (such as airline seats or hotel room reservations or advertising inventory). As a specific,
inventory-focused branch of revenue management, yield management involves strategic control of
inventory to sell the right product to the right customer at the right time for the right price. This
process can result in price discrimination, in which customers consuming identical goods or services
are charged different prices.

What is product line pricing?

Product line pricing involves the separation of goods and services into cost categories in order to
create various perceived quality levels in the minds of consumers. You might also hear product line
pricing referred to as price lining, but they refer to the same practice.

The goal of product line pricing is to maximize profits by positioning new products with the highest
number of features or with the most cutting-edge individual features at the highest price point. At
the same time, you’ll be keeping a base product (i.e., one with fewer or older features with lower
performance expectations) on sale as a lower-priced alternative. Example: iPhone

What Is Cross Elasticity of Demand?

The cross elasticity of demand is an economic concept that measures the responsiveness in the
quantity demanded of one good when the price for another good changes. Also called cross-price
elasticity of demand, this measurement is calculated by taking the percentage change in the quantity
demanded of one good and dividing it by the percentage change in the price of the other good.

 The cross elasticity of demand is an economic concept that measures the responsiveness in
the quantity demanded of one good when the price for another good changes.

 The cross elasticity of demand for substitute goods is always positive because the demand
for one good increases when the price for the substitute good increases.

 Alternatively, the cross elasticity of demand for complementary goods is negative.

What is loss leader pricing strategy?

Loss leader pricing strategy serves two purposes; first is to attract new customers, and the second is
to finish the inventory or additional products. New businesses and companies follow the loss leader
pricing strategy when they enter the market. The purpose is to attract price-conscious customers
and make a customer base in the market.

The idea behind loss leader pricing is that the profits from additional purchases that consumers will
make while in the store will more than cover the store’s loss on the heavily discounted product.

What is dumping?

Dumping is when foreign firms dump products at artificially low prices in the European market. This
could be because countries unfairly subsidise products or companies have overproduced and are
now selling the products at reduced prices in other markets.

Why is it a bad thing?

Dumping is a form of unfair competition as products are being sold at a price that does not
accurately reflects their cost. It is very difficult for European companies to compete with this and in
the worst cases can lead to firms closing and workers losing their job.

Promotion mix is a specific combination of promotional methods used for one product or a family
products, it is a set of different marketing approaches that marketers develop to optimize
promotional efforts, reach a broader audience and reduce costs. The marketer’s task is to find the
right promotion mix for a particular brand.

Why using a Promotion mix is important?

 Improves the effectiveness of promotional campaigns. Promotion is a crucial part of any

business, so companies develop a promotion mix, putting all efforts to make promotions at
the right place, at the right time, and to the right audience. It helps one get the most out of
their marketing resources by optimizing their budget and saving time.

 Helps segment the audience. To develop a compelling promotion mix, a company needs to
identify its target audience. Potential subscribers may include various groups of people who
have something in common, for example, age, gender, preferences, etc., and they all require
an individual approach. A promotion mix is a key method for delivering a relevant promotion
message via the most suitable channel for each segment.

 Improves communication with clients. Companies develop a promotion mix trying to speak

their consumers’ language. If prepared correctly, it helps build trust between the brand and
its customers. This is a crucial factor in lead nurturing and customer retention. For
example, automated email campaigns help achieve these goals by responding to people’s
actions instantly.

 Informs subscribers. Some promotions, on Instagram for example, aim to show the product
from the best angle, and others, like SMS, emphasize the advantages of local services. When
using a promotion mix, companies define the best ways to educate people about the
products and services they provide.
Advertising

Any paid form of non-personal communication through mass media.Most expansive form of
promotion. Low cost per impact but if media is not very selective we impact a lot of non-potential
customers. Advertising is the less selective of all promotion tools.

Effects: measuring advertising effectiveness in terms of sales is practically impossible due to the
difficulty of isolating the influence or other factors. Advertising effectiveness is measured in terms of
achieving communications objectives, advertising reduces demand elasticity but if competitors react
can increase elasticity.

Public relations

a set of activities carried out by organizations with the generic aim of obtaining, maintaining or
recovering acceptance, trust and support.

Target group:

Internal: employees, shareholders, suppliers External: customers, media, opinion leaders and society
with the aim of creating a positive image

Sales promotions

activities aimed to increase sales oh the short term. Incentives to buy product o increase effort to
discount the product. Target groups:

 consumers (price offers, additional product, gift

 sales force (extra commissions, bonuses, trips)
 distribution channel (quantity discounts, free advertising, bonuses)

Personal selling

the process of using personal communication in an exchange situation to inform customers and
persuade them to purchase products or services.

It’s recommended when:

 High value transactions

 Product is of a technical nature
 Product requires demonstrations
 Product must be adapted to the specific needs of the buyer
 The purchase may be subject to negotiation

In general, in B2B market.