Marketing Management

By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
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SUMMARY by

Chapter

1

Understanding Marketing Management
Marketing is an essential art and science that is engaged in a vast number of activities by both persons and organizations. It has become an increasingly vital ingredient in the success of a business. Good marketing is the result of careful planning and execution. There are two sides to marketing – the formulated side and the creative side. It is important to lay the foundation in marketing concepts, tools, frameworks and issues of the formulated side while at the same time instil the real creativity and passion for marketing, as we shall come to see in this chapter.

Social Definition of Marketing
Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others.

Marketing is increasingly becoming an important function in all organizations to ensure that demand for a product or service persists along with customer retention.

Scope of Marketing
A good marketer must be able to answer the following questions:

What is Marketing?
The formal definition of marketing is, Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationship in ways that benefit the organization and its stakeholders.

What is Marketed?
Some of the common entities that are marketed are goods, services, events, experiences, persons, places, properties, organizations, information and ideas.

Chapter 1 - Understanding Marketing Management Who Markets?
A marketer is someone who seeks a response, attention, purchase, vote, donation etc

The five key functions of a marketing manager or CMO are:
• Strengthening the brand • Measuring marketing effectiveness • Driving new product development based on customer needs • Gathering meaningful customer insights • Utilizing new marketing technology

from another party called the prospect. Marketing managers are responsible for demand management. Eight demand states are possible: • • • • • • • • Negative demand Nonexistent demand Latent demand Declining demand Irregular demand Full demand Overfull demand Unwholesome demand

The key customer markets are consumer markets, business markets, global markets, non-profit and governmental markets.

Core Marketing Concepts:
• • • • • Needs - state of felt deprivation for basic items such as food and clothing and complex needs such as for belonging. i.e. I am hungry. Wants - form that a human need takes as shaped by culture and individual personality i.e. I want a hamburger, French fries, and a soft drink. Demands - human wants backed by buying power. i.e. I have money to buy this meal. Target Markets are the market segments identified by the marketer which present the greatest opportunity. Value Proposition is a set of benefits that companies offer to customers to satisfy their needs. The intangible value proposition is made physical by as offering. A brand is an offering from a known source. • Value reflects the sum of the perceived tangible intangible benefits and costs to customers. Satisfaction reflects a person’s judgements of a product’s perceived performance. • • To reach a target market a marketer uses different marketing channels like communication channels, distribution channels and service channels. Supply chain is a longer channel stretching from raw materials to components to final products that are carried to final buyers.

Chapter 1 - Understanding Marketing Management Company orientation towards Marketplaces:
The major marketing philosophies are: • The Production Concept o o Consumers favor products that are available and highly affordable. Improve production and distribution. Consumers favor products that offer the most quality, performance, and innovative features. • Selling Concept o • Consumers will buy products only if the company promotes/ sells these products. Marketing Concept o Focuses on needs/ wants of target markets & delivering satisfaction better than competitors. • • Societal Marketing Concept o o Focuses on needs/ wants of target markets & delivering superior value. Based on the development, design and implementation of marketing programs, processes and activities that recognize their breadth and interdependencies. • Relationship Marketing o Aims to build mutually satisfying long-term relationships with key constituents in order to earn and retain their business. Holistic Marketing Concept

New Marketing Realities:
Some of the major societal forces that marketers have to deal with today are network information technology, globalization, deregulation, privatization, heightened competition, industry convergence, consumer resistance, retail transformation and disintermediation.

Product Concept o

Marketing Management Tasks:
The following are the most important marketing management tasks: • • • • • • • • Developing Marketing Strategies and Plans Capturing Marketing Insights Connecting with Customers Building Strong Brands Shaping the Marketing Offerings Delivering Value Communicating Value Creating Long-Term Growth

Marketing Management
By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
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SUMMARY by

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• • • How does marketing affect customer value? How is strategic planning carried out at different levels of the organization? What does a marketing plan include?

Developing Marketing Strategies And Plans
In this chapter, mainly the following points have been discussed

Developing the right marketing strategy over time, through discipline and a creative

Supply Chain
Many companies today outsource less critical resources if they can obtain better quality or lower cost. Also, many companies partner with specific suppliers and distributors to create a superior value delivery network, also known as Supply Chain.

thought process can go a long way in the marketing management process. Firms must constantly strive to improve every aspect of their strategy and the plans to guide the marketing process.

The Value Delivery Process
In the new view of business processes, marketing is viewed at the beginning of the planning stage. A smart competitor must design and deliver products for well-defined micro-markets and cater to their specific wants, perceptions and preferences. The Value Creation and Delivery Sequence can be divided into two segments of marketing: Strategic Marketing and Tactical Marketing.

Core Competencies
Core Competency refers to areas of special technical and production expertise, whereas distinctive capability describes excellence in broader business processes. Market-driven organizations generally excel in three distinctive capabilities: market sensing, customer linking and channel bonding.

Developing Marketing Strategies And Plans A firm must coordinate all the department activities to conduct its core business processes. The marketing plan operates at two levels: strategic and tactical. merchandising.Chapter 2 . Corporate Headquarters All corporate headquarters undertake four planning activities • • • • Defining the corporate mission Establishing strategic business units Assigning resources to each Strategic Business Unit Assessing growth opportunities Innovation in marketing is critical. Strategic Planning Companies need to focus on the customer and organize to respond effectively to their changing needs. . sales channels and service. mutually satisfying relationships and co-prosperity among key stakeholders. from people new to the field and organization. through cross-functional teams • Market-sensing process New-offering realization process Customer Acquisition process Customer Relationship Management Process Fulfillment Management Process • • • • Holistic Marketing Holistic marketing orientation means. including product features. to gain an understanding and a new approach to marketing. It helps manage a superior value chain that delivers a high level of product quality. integrating the value exploration. Senior management should identify and encourage fresh ideas from a youth perspective. Value Chain The value chain is a tool which is used for identifying ways to create more customer value. • The strategic marketing plan lays out the target markets and the value proposition the firm will offer. promotion. The marketing plan is the central instrument for directing and coordinating the marketing effort. building customer loyalty and capturing customer lifetime value. • The tactical marketing plan specifies the marketing tactics. in addition to expanding customer share. service and speed. value creation and value delivery activities with the purpose of building long-term. based on an analysis of the best market opportunities. There are 9 strategically relevant activities – 5 primary and 4 support. to be known as master marketers. pricing.

Feedback and Control: The key to organizational health is willingness to examine the changing environment and adopt new goals and behaviors. 7. Goals must be consistent and realistic and could be a mix of various objectives. relevant and meaningful as possible. 4. Program Formulation: The unit must plan programs in accordance with its goals and strategy and thus work upon the various departments. long term view. . It is as short. 2. to strengthen them and integrate all of them together. A good mission statement focuses on limited number of goals. SWOT Analysis: The overall analysis of a company’s Strengths. 5. It consists of a Marketing Strategy. The Business Mission: Each business unit needs to define its specific mission within the broader company mission. Opportunities and Threats is called SWOT analysis. These tasks must be in line with the interests of the stakeholders as well. it is easy to develop separate strategies and assign appropriate funding. They are specific with respect to magnitude and time. By identifying the company’s SBUs. Technology Strategy and a Sourcing Strategy.Developing Marketing Strategies And Plans Mission Statement The best Mission Statement reflects a vision. links the company’s policies and values and gives a Strategic Business Unit A Strategic Business Unit is a single business (or a collection of similar businesses) that can be planned separately from the rest of the company. companies can use Market Opportunity Analysis. even large organizations which are subject to inertia can be changed through strong leadership. Implementation: Even a great marketing strategy can be sabotaged by a poor implementation. Strategy Formulation: Strategy is a game plan for achieving the goals. In the rapidly changing market environment. 6. To evaluate opportunities. an almost impossible dream that provides a direction for the company for the next 10 or 20 years.Chapter 2 . Goal Formulation: Developing specific goals for a short term is known as Goal Formulation. It is a way of monitoring the external and internal marketing environment. It must coordinate its tasks to implement its plan properly. Weaknesses. Business Unit Strategic Planning The Business Unit Strategic Planning process consists of the following steps 1. 3.

marketing intelligence activities and Market Research. • • • Use government sources (Census. sort. Abraham Koshy. MIS provides information on market happenings and changes in environment. Swiss eat most chocolates.Marketing Management By Philip. distributors and employees. up-to-date information about macro trends as well as micro trends particular to their business. Purposes of MIS have been noted below. This chapter deals with various modes of obtaining MIS (Marketing Information System) Consists of people. companies must possess comprehensive.g. It should be done ethically and legally. NSSO reports) or purchase data from outside suppliers (AC-Nielsen. analyze. talking with their retailers. Greeks eat most cheese. E. • • • Train the sales force for intelligence gathering by observing competitors activities and listening to customer comments. sophisticated and important customers for feedback. mystery shoppers to identify customer treatment and possible flaws.g. this information and also looks into the major macroeconomic forces that affect marketing decisions. Motivate retailers and distributors to pass intelligence. Use online forums. to gather. Kevin Lane Keller. timely and accurate information to marketers.tif SUMMARY by Chapter 3 Capturing Marketing insights and Spotting Market Trends To provide insight into an inspiration for marketing decision making. sites offering customer and expert reviews. etc) Create a panel of largest. It relies on internal company records. attending shareholder meetings. . equipment and procedures. MIS (Marketing Information System) MIS can provide data e. Network externally using competitor’s annual reports. Customer compliant sites. Mithileshwar Jha logo copy. evaluate and distribute needed.

short-lived.5% literacy between 25-34yrs age group.000 to Rs 45. Database / Data warehousing / Data Mining . shoes and other FMCG goods.Customer places order for goods -> Sales team sends invoice to various departments -> Sales team back orders out of stock items -> Suppliers send goods and sales team pays suppliers -> Sales team delivers order and receives payment.000/month. credit availability. have money and own a variety of products). salespersons and customers. Purpose is to minimize number and duration of cycles. Social-Cultural Society shapes beliefs. Aspirants ( Rs 16. 76% literacy between 15-24yrs age group.000 annually. It can help in identifying trends.7% of urban households have income up to Rs3000/month while only 2. without any economic or social significance Trend Sequence of events that have momentum and durability. Consuming Class ( Rs 45. Megatrend – Large social and economic influence. demands. Male to Female ratio of 933:1000 Population Age mix : median age of 23.000 to Rs22. computers. food habits. majority have money and are willing to pay). have desire and willingness to buy but has limited cash). inactive participants in market exchange). Rich ( more than Rs 2. reveals the future. bicycles.g.15 000. wrist watches. Purpose is to analyze (mine) data using statistical methods and discover trends. 24% b/w 25 and 34 years Literacy level: 65. 34% b/w 12 and 25yrs.Separate databases are there for products.38% literate. customers.7% of World population in India. per capital income of $3100 Income distribution: 77. new entrants in consumption system). • • Sales Information System . etc. Economic Purchasing Power depends on income.000. Climbers. Major Macro Environmental Forces Demographic 16. 75.1% have income more than Rs 10. . and requirements.15. 000 to Rs 2.8% males and 54. slow in formation but has lasting effect.16% females. brand preferences.000. It affects dress codes. Trend shows increasing % of Consumers and Climbers while a decreasing % of Destitute and Aspirants. Analyzing the Macro Environment Fad – Unpredictable. India’s GDP is $1.Chapter 3 . savings.Keeping constant track of sales. values.8 years.2 trillion. (Rs 22. 64. prices.Capturing Marketing insights and Spotting Market Trends Internal Company Records • Order to Payment cycle .000. Categories of Indian consumers: Destitute ( less than Rs16. Trend shows an increasing role of children on purchasing decisions e.

g. telecommunication. Although majority feels necessity of environmental friendly products. has lesser number of substitutes. recycling centers and focus on CNG initiatives. Technological Four major trends are (a) Accelerated Pace of Change: e. Dr. contraceptive pills.5 million in 2006 (b) Unlimited Opportunities for Innovation e. and has other trends promoting it. affecting the firm and integrating those in its strategic plans is fast gaining ground.g. Focus on Non-renewable sources like Jatropha oil. Developments in Bio-tech. Greenhouse Effect. and Ranbaxy (d) Increasing regulation of technological change e. aid vaccines. .g.Capturing Marketing insights and Spotting Market Trends Natural Deterioration of environment is a significant concern e. Pollution Control Systems like landfills. Government concerns in this aspect are Euro-2 emissions norms and CNG.Chapter 3 . standard for drugs.g.g. control on clinical trial. E. (c) Varying R & D Budget: e. Drugs and cosmetic act. to protect society from unbridled business behavior and to charge businesses with social costs created by their products or processes (b) Growth of special interest groups and improvements like the Consumer Protection Act. to protect consumers from unfair business practices. Robotics. Increasing R & D in Pharmaceutical companies like Cipla. they do not buy because (a) Perception of green good being of inferior quality and (b) Perception that good does not contribute majorly to the environment. Apple selling 23. Corporate Environmentalism is recognizing the importance of environmental issues What is the difference between a Fad and a Trend? A fad becomes a trend when it affects a large number of people. Reddy’s. has functional value. Ozone layer and fossil fuel depletion.g. Political and Legal Two major trends are (a) Increase in business legislation: to protect companies from unfair competition.

analysis and reporting of data and findings relevant to a specific marketing situation facing the company. the decision alternative and the research objective Step 2 : Develop the research plan Step 3 : Collect the information Step 4 : Analyze the information Step 5 : Present the findings Step 6 : Make the decision .tif SUMMARY by Chapter 4 Why Marketing Research? Successful Marketing Managers need timely. accurate and actionable information about consumers. plan future activities and take strategic decisions leading to successful product launch or increase growth of a brand. Kevin Lane Keller.Marketing Management By Philip. collection. Conducting Marketing Research and Forecasting Demand What is Marketing Research? Systematic Design. What are the major steps of Marketing Research Process? Step 1 : Define the problem. Abraham Koshy. competition and their brands to assess past performance. Mithileshwar Jha logo copy.

•Sampling Plan: A plan addressing Sampling questions like whom all to survey. . They can be either open-ended or closed-ended. •Behavioral Data: Customer’s actual Behavioral purchases do not match their statements made in surveys always hence certain techniques help in exposing these discrepancies •Experimental Research: This captures Experimental cause and effect relationship in observed findings. ended closed •Qualitative Measures: Relatively Qualitative unstructured measurement approach for exploring consumer’s responses •Technological Devices: devices like skin Technological sensors brain wave scanners to capture consumer’s response. However technology has eased the problem to a great extent. Primary Data: Freshly gathered data for research only. informal interviews. Expensive to collect. the scope of market research and what all decisions are to be made on the basis of research. honesty and consistency of respondents. Online Interview. Contact Telephone Interview. time taking and most error prone phase of time-taking market research as it entirely depends on availability. stributions Step 5: The researcher presents finding relevant to the major marketing decisions facing management management. using tools from anthropology to provide deeper understanding of consumers. Step 4: This is the process to extract findings by tabulating the data and developing frequency distributions in hope of discovering additional findings. •Focus Group Research: A meeting of a Focus group of people who represent potential customers or important actors for research discussing issues relevant to research •Survey Research: Companies undertake Survey descriptive research to learn about people’s beliefs. preferences and satisfaction. •Contact Methods: Mail Questionnaire.Chapter 4 . how many people to survey. how should we select people for survey. Personal Interview. Research Tools •Questionnaires: A set of questions Questionnaires: soliciting responses that is of relevance to market situation.Conducting Marketing Research and Forecasting Step 1: Achieve clarity on the content. Step 3: Data collection is one of the most expensive. Step 2: Secondary Data: Already existing somewhere which was collected for some other purpose Primary Data c be collected through following: can Research Methods •Observational Research: Observing Observational consumers.

gather expert opinions. . solicit their sales force’s input. Penetrated market Set of consumers who are buying the company's product. area market potential industry sales and market share To estimate future demand companies’ survey buyer’s intentions solicit their sales force’s input. analze past sales or engage in market testing mathematical models. Target market The part of the qualified available market the company decides to pursue. area market potential industry sales and market share Future Demand • It is the demand that companies determine by surveying buyer’s intentions. To estimate current demand companies attempt to determine total market potential. advanced statistical techniques and computerized data collection procedures are essential to all types of demand and sales forecasting. Step 6: Market research is just a tool to provide insight to the managers.Chapter 4 . gather expert opinions. advanced statistical techniques and computerized data collection procedures • • Available market Set of consumers who have interest income and access to a particular offer. analyze past sales or engage in market testing mathematical models. Depending on their confidence in the findings. managers decide to use it Barriers to Marketing Research • • • • • Narrow approach to Marketing Research Uneven Caliber of researchers Poor framing of problem Late and occasionally erroneous findings Personality & presentational differences Measuring Marketing Productivity To assess the efficiency and effectiveness of marketing of marketing activities there are • Marketing metrics to assess marketing effects Marketing mix modeling to estimate casual relationships and measure how marketing activity affect outcomes Marketing Dashboard are a structured way to disseminate the insights gleaned from these two approaches within the organizations Types of Demand Market Demand • It is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program Company Demand • It is the company’s estimated share of the market demand at alternative levels of company marketing effort in a given time period Current Demand • It is the demand that companies attempt to determine by measuring total market potential.Conducting Marketing Research and Forecasting Types of Market Potential market Set of consumers who profess a sufficient level of interest in a market offer.

Mithileshwar Jha logo copy. Total Customer Cost It is the perceived bundle of costs customers expect to incur in evaluating. This chapter discusses the importance and various methods of creating customer value and sustaining customer loyalty. personnel and image involved. functional. energy.Marketing Management By Philip. and psychological benefits customers expect from a given market offering because of the products. services. organisations have started to adopt business models where the customer is at the top. may provide a better chance of outperforming competition. As customers have become more informed and educated than ever. Assess the quantitative importance of the different attributes and benefits. And at the cornerstone of this philosophy are strong customer relations. 2. Satisfaction and Loyalty In the face of increasing competition. obtaining. using. Total Customer Benefit It is the perceived monetary value of the bundle of economic. time. Abraham Koshy. Identify the major attributes and benefits that customers value. including monetary. companies today face their toughest test of survival. Customer Perceived Value: Customer Perceived Value: It is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering.tif SUMMARY by Chapter 5 Creating Customer Value. however. Very often. It follows the pattern below 1. Kevin Lane Keller. and the perceived alternatives. a customer value analysis is undertaken by managers to better understand the company’s strengths and weaknesses in comparison with competition. Moving from a product-to-sales philosophy to a holistic marketing philosophy. and disposing of the given market offering. and psychological costs. .

CLV describes the net present value of the future stream of profits expected over the customer’s lifetime purchases. the 20% least profitable customers lose 100% of the profits. Customize products. selling and servicing that 150-20 Rule The 20% most profitable customers generate as much as 150% of the profits of the company. services. The value of the customer base can be increased by improved by measures such as reducing the rate of customer defection. . Assess the company’s and competitors’ performances on the different customer values on each attribute and benefit. and messages to each customer.Chapter 5 . Satisfaction and Loyalty Trends 3. 4. Customer profitability A profitable customer is one that over time yields a revenue stream that is significantly greater than that company’s cost stream for attracting. and features change. Measuring customer profitability lies in the concept of Customer Lifetime Value (CLV). technology. Satisfaction is usually measured with the help of customer surveys. CRM can be conducted using the following 4 steps – 1. Assess how customers in a specific segment rate the company’s performance against a major competitor on an individual attribute or benefit basis. increasing the longevity of the customer relationship. Monitor customer values over time as the economy. Total Customer Satisfaction: It is the measure of a customer’s feelings of pleasure or disappointment that results from comparing a product’s perceived performance to their expectations. The two major factors involved in customer satisfaction are complaint handling and product/service quality. Interact with individual customers to improve your knowledge about their needs and to build stronger relationships. 3. etc. customer. Customer Relationship Management (CRM) It is the process of carefully managing detailed information about individual customers and all occasions where a customer encounters a brand/product to maximise customer loyalty. 2. Differentiate customers in terms of their needs and their value to your company. 4. making low-profit customers more profitable or terminating them. Identify your prospects and customers.Creating Customer Value. 5. CLV calculations are generally used by marketers to develop a long-term perspective.

Probability of error of CRM methods or assumptions made thereof. . Customer attitudes about privacy of personal data. etc. buyers’ personal details. the company’s share of the buyer’s business. Satisfaction and Loyalty Trends Building Customer Loyalty It involves the following procedures – 1. marketers can extract information about individuals.Creating Customer Value. from the customer database. maintaining and using customer databases and other databases to contact. It uses techniques such as cluster analysis. Datamining Through datamining. Convincing employees to be customer oriented than using traditional methods. etc. competitive suppliers. Developing loyalty programs 3. 3. status of current contacts. past prices and profits. Creating institutional ties Database marketing It is the process of building. trends.Chapter 5 . past volumes. etc. 2. Disadvantages of Datamining and CRM 1. Building and maintaining a database requires huge amounts of investment in terms of computer hardware. Interacting with customers 2. transact and build customer relationships. Customer Database It contains customers’ past purchases. Personalising marketing 4. predictive modelling.

Mithileshwar Jha logo copy. Kevin Lane Keller. E. Include nationalities. Each role carries a status.Marketing Management By Philip. Aspirational Groups: ones that a person hopes to join. neighbours. Family of procreation: spouse and children. family.Frames traditions. Culture . c. e. Members share similar tastes and behaviour. Factors affecting Consumer Buying Behaviour 1. racial groups and geographic regions. Reference Groups – Have direct or indirect influence on person’s attitude and behaviour. Roles and Status – Role consists of activities a person is expected to perform.Provides more specific identification and socialization.tif SUMMARY by Chapter 6 Analyzing Consumer Markets Since marketing starts from the customer. . b. Acquires orientation towards religion. preferences. b. it is of primary importance to understand the psyche of the customers and their buying motives.g. trade union groups. 2. values. politics and economics. c. Family – Family of orientation: parents and siblings. Cultural Factors a. More direct influence on buying behaviour. self worth and love. friends. Social Factors a.g. Marketers must be aware of the status symbol of each product. perceptions. Child learning from family & surroundings. Primary groups: regular interaction. Secondary groups: religious. professional. This chapter talks about the various behavioural patterns that govern the decision making process of a customer. sense of personal ambition. A marketer needs to understand these factors affecting the customer’s purchase decisions so as to design an appropriate marketing strategy. Abraham Koshy. Social Class – Homogeneous and enduring divisions in a society which are hierarchically ordered. Sub-culture . Dissociative groups: whose values or behaviour and individual rejects. religions.

Psychological Factors a. organize and interpret information inputs. Personality and Self Concept – Personality. savings. Problem Recogniton Information Search Evaluation of Alternatives Purchase Decision Postpurchase Behaviour The Buying Decision Process • • Problem Recognition . Consumers match brand personality with their ideal self concept instead of their actual self concept. . d. Maslow’s need hierarchy theory. Information Search . • Post purchase Behaviour . • • Evaluation of Alternatives . ego and super ego. b. d. assets. 2 intervening factors come into play.Attitudes of others and Unanticipated situational factors. Perception: Process by which we select. Age and Stage in the Life Cycle – Tastes are age related.Marketers must monitor postpurchase satisfaction.Customer recognises a need triggered by internal or external stimuli. Marketers can build demand by associating the product with positive drives. Herzberg’s two factor model. borrowing power etc affect consumption patterns. phoning friends etc. Lifestyle and Values 4.Analyzing Consumer Markets 3.Two levels of involvement – Heightened attention when person becomes more receptive to information about the product. Build brand knowledge and brand recall as node in memory. c. b. Occupation and Economic Circumstances – Economic Circumstances like spendable income. c. Memory – Short term and long term memory. looking for reading material. set of distinguishing characteristics that influence his/her buying behaviour. postpurchase actions. Purchase Decision . Learning – Induces changes in behaviour arising from experience. beliefs and expectancy value.Chapter 6 . Markets should also consider critical life events or transitions. At next level consumer may enter into active information search. Marketers need to identify circumstances that trigger needs. debts. perceptions are more important than reality. Personal Factors a. In marketing. Motivation: Freud’s theory of id. and postpurchase product uses. Marketers should understand that these factors provoke risk and should provide information to reduce it.Factors influencing a particular choice over the other include attitudes.Between purchase intention and purchase decision.

Complex Buying Behaviour: When a customer purchases something for the first time. Dissonance Reducing: In case of repeat purchase of same product. 3. Habitual: Buying the same thing out of habit and not out of loyalty. 4. Eg.Biscuits. . Maintain consistency in product and advertising. Distribution network should be excellent in this case. Marketer should keep introducing new products and display the product prominently. Variety Seeking: Consumers will keep switching varieties just out of boredom. 2.Chapter 6 .Analyzing Consumer Markets Trends Level of customer involvement Involvement High Low Differences in Brands Significant Complex Buying Behaviour Variety Seeking Insignificant Dissonance Reducing Habitual 1.

Product value analysis is an approach to cost reduction in which components are carefully studied to determine if they can be redesigned or standardized or made by cheaper methods of production. so business marketers must monitor the buying patterns of ultimate consumers. such as making money. suppliers have to customize offerings to meet the needs of individual customers. Blanket contract establishes a long-term relationship in which the supplier promises to resupply the buyer as needed at agreed-upon prices over a specified period. • Inelastic demand: Not much affected by price changes as producers cannot make quick production changes. and satisfying social or legal obligations. • • . evaluate. Abraham Koshy. • Geographically concentrated buyers Derived demand: Demand for business goods is derived from demand for consumer goods. Larger buyers: Buyers for a few large firms do most of the purchasing in many industries. Because the seller holds the stock. Close supplier customer relationship: Smaller customer base and importance of larger customers. Therefore to provide superior customer value to the business buyers this chapter familiarizes you with the underlying dynamics and process of business buying. Kevin Lane Keller. blanket contracts are sometimes called stockless purchase plans. reducing operating costs.tif SUMMARY by Chapter 7 Analyzing Business Markets and Buyer Behavior Business buyers purchase goods and services to achieve specific goals. Organizational buying is the decisionmaking process by which organizations establish the need for purchased products and services and identify. and choose among alternative brands and suppliers. Mithileshwar Jha logo copy.Marketing Management By Philip. The Business Market versus the Consumer Market • • • Fewer buyers: Business marketers normally deal with far fewer buyers than do consumer marketers.

Buyers: People who have formal authority to select the supplier and arrange the purchase • Gatekeepers: People who have the power to prevent sellers or information from reaching members of the buying center • • • Modified rebuy: situation in which the buyer wants to modify product specifications. office building. New task: situation in which a purchaser buys a product or service for the first time (e. and competitive developments. politicalregulatory. or other terms. receive better service. delivery requirements.g.g. • • • Three types of Business Buying Situations: Straight rebuy: situation in which the purchasing department reorders on a routine basis (e. • • • The Buying Center (Decision-making unit of a buying organization) Seven roles in the purchase decision process: Initiators: People who request that something be purchased Users: use the product or service. get the latest products.Chapter 7 . purchasing companies moving towards internet purchasing. users initiate the buying proposal and help define product requirements.. Major Influences on Business Buying Environmental Factors Attention to numerous economic factors.. often.Analyzing Business Markets and Buyer Behavior • Fluctuating demand: Demand for business products is more volatile than consumer products. and gain tax advantages. prices. technical. bulk chemicals). Leasing: Many industrial buyers lease rather than buy heavy equipment to conserve capital. to gain more purchasing clout and savings. Deciders: Those who decide on product requirements or on suppliers. and consumer spending. including interest rates and levels of production. new security system). • Professional purchasing: Organizational purchasing policies and constraints are followed Multiple buying influences: More people typically influence buying decisions Multiple sales calls: Multiple sales calls to win most business orders. Decentralized purchasing of small-ticket items Long-term contracts: Buyers are increasingly initiating long-term contracts Internet purchasing: Low transaction and personnel costs reduce time between order and delivery. Influencers: People who influence the buying decision. Purchasing-performance evaluation & incentive systems and buyers’ professional • . and involving more responsibility • • • • • Centralized purchasing: recentralized their purchasing. Organizational Factors Business marketers need to be aware of the following organizational trends in purchasing: • Purchasing department upgrading: Strategically positioned and highly Cross-functional roles: strategic. team-oriented. investment. office supplies. including technical personnel. Approvers: People who authorize the proposed actions of deciders or buyers. Business buyers also monitor technological. and the sales cycle can take years. • • Direct purchasing: Business buyers often buy directly from manufacturers rather than intermediaries Reciprocity: Business buyers often select suppliers who also buy from them.

authority. toward risk. Three methods . Individual Factors Each buyer carries personal motivations. the buyer will end up with a short list of qualified suppliers Stage 5: Proposal Solicitation The buyer invites qualified suppliers to submit proposals. the buyer will invite a few suppliers to make formal personality. By getting in early and influencing buyer specifications. job position. and preferences. buyers are moving toward blanket contracts rather than periodic purchase orders. the cultural factors that The buyer periodically reviews the performance of the chosen supplier(s). After evaluating the proposals. the delivery schedule. and stable production schedules. and persuasiveness. Or the buyer may rate the supplier on several criteria using a weighted score method. stricter quality control. Cultural Factors Marketers carefully study the culture and customs of each region to better understand can affect buyers and the buying organization. Stage 2: General Need Description The buyer has to determine the needed item’s general characteristics and the required quantity. perceptions. telemarketing. Or the buyer might aggregate the cost of poor supplier performance to come up with adjusted costs of purchase. development frequent and reliable supply delivery. sees a supplier’s ad. Externally. a supplier can significantly increase its chances of being chosen. 8 stages of PURCHASING PROCESS Stage 1: Problem Recognition Someone in the company recognizes a problem or need that can be met by acquiring a good or service. The buyer’s computer automatically sends an order to the seller when stock is needed. listing the technical specifications. developing a new product. When the item is complex or expensive. Stage 6: Supplier Selection The buying center specifies desired supplier attributes (such as product reliability and service reliability) and indicate their relative. Stage 3: Product Specification Company assigns a product value analysis (PVA) to engineering team. Stage 7: Order-Routine Specification The buyer negotiates the final order. Stage 8: Performance Review are used. status. and calling on prospects. the buyer will require a detailed written proposal from each qualified supplier. occur when a buyer gets new ideas at a trade show. or is contacted by a sales representative offering a better product. business marketers can assist buyers by describing how their products would meet such needs. the quantity needed. and so on. need for new equipment and materials or to obtain lower prices or better quality. and the supplier arranges delivery and billing according to the blanket contract. Stage 4: Supplier Search The supplier should get listed in online catalogs or services develop communications to reach buyers. The buyer may contact the end users and ask for their evaluations. empathy. computerized purchasing. income. and culture.Chapter 7 . A blanket contract may be established. Major Influences on Business Buying: Interpersonal Factors Buying centers usually include several participants with differing interests. and build a good reputation in the marketplace. After evaluating each company. effective Internet communications. suppliers locating closer to customers. education. as influenced by the buyer’s age. Internally.Analyzing Business Markets and Buyer Behavior • Lean production: incorporates just-in-time (JIT) production. In the case of MRO items. Business marketers can stimulate problem recognition by direct mail. including price. attitudes presentations. In this stage.

Market Segmentation 2. disclose and also can fine-tune the marketing program to fine better reflect competitors marketing. It explains different levels of Market Segmentation. Segment Marketing offers key benefits over Mass Marketing as the company can offer better design. Segmentation. Target Marketing 3. B. .tif SUMMARY by Chapter 8 Identifying Market Segments and Targets This chapter deals with one of the quintessential concepts of Marketing: STP i. positioning 1. or wants who might require separate products or marketing mixes. Target and Positioning. For e.e. the liquid detergent from Godrej is a fabric washing egments. Abraham Koshy. Segment marketing Dividing a market into distinct groups with distinct needs. product for woolen clothes. targeting and segmentation. Marketers usually define niches by dividing segments into sub segments. marketing: characteristics. Ezee. bases for Segmenting Consumer Markets. mass distribution and mass promotion of one product for all buyers Steps in market segmentation. Mithileshwar Jha logo copy.g. Mass Marketing: The seller engages in mass production. price.Marketing Management By Philip. Kevin Lane Keller. choosing target Markets & finally analyses the various requirement for effective segmentation. Niche Marketing A niche is a more narrowly defined customer group seeking a Marketing: distinctive mix of benefits. Market Positioning •Identify bases for segmenting the market Identify •Develop segment profiles Develop •Develop measure of segment attractiveness Develop •Select target segments Select •Develop positioning for target segments Develop •Develop a marketing mix for each segment Develop Levels of Market Segmentation: Micromarketing A.

Activities.authoritarian . Many Banks in Kerala have special ‘NRI Branches’ to cater to the needs of customers whose relatives remit money from cater abroad. family life cycle. semi urban areas B. Classification is oriented. Asian design Paints retailers facilitate customers to mix and match colors of their choice from a catalogue. • • Lifestyle: Culture-oriented.” customized marketing” or “one one marketing”. occupation. Demographic variables are easy to measure and are directly associated with customer needs and wants FAMILY LIFE CYCLE STAGES Stage1: Bachelorhood Stage2: Honeymooners •Single. Customerization empowers “one-to-one customers to design the product and service offering to their choice.g. education. Local Marketing: Target marketing that involves marketing programs tailored to the needs and wants of local customer groups in trading areas. family size. Psychographic Segmentation: Here buyers are divided into different groups on the basis of psychological/personality traits.Focus of expenditure on self Single. or response to a product.1 •Full Nest-II.youngest child under 6 II. Bases for Segmenting Consumer Markets A. attitude toward. regions. gregarious . Interests and Opinions. income. urban .Chapter 8 . done on three parameters: AIO-Activities. religion etc. neighborhoods and even individual stores is called as Local Marketing.g. Personality: Compulsive.focus on building Young home and relation •Full Nest-I.1 child less than 6 yrs old I. neighborhoods etc • • • Region: South India.Identifying Market Segments and Targets C. cities. Metro cities etc Class-I Rural. E. states. Western Region.ambitious D. For e. Demographic Segmentation: The market is divided on the basis of variables such as age. sports oriented. North. gender.youngest •Full Nest-III: all adult children III: •Children not living with parents Children •Empty Nest1 :Working •Empty Nest2: Not Working Empty •One spouse dies •SS-I: Working •SS-II: Not Working Stage3: Parenthood Stage4:Post Stage4:Post-ParentHood Stage5: Solitary Survivor(SS) C. East City: Class cities. outdoor oriented. Geographic Segmentation: Division of the Market into different geographical Units such as nations. class-II cities. Behavioral segmentation: Buyers are divided on the basis of their knowledge of.Focus •Young married couple without kids. lifestyles or values. use of. The behavioral variables are as follows: . Individual Marketing: This is the ultimate level of marketing that leads to “segments of one”. D.

absolute Readiness Stage: Unaware.g. aware. E. buy Attitude towards Product: Enthusiastic. P = Product M = Market . there may be little or no synergy between the segme segments Product Specialization: The firm makes a certain product that it sells to several different market segments. positive. Each objectively Specialization: attractive and appropriate. desirous. Coca Cola (non alcoholic beverage segment). Microsoft (non-alcoholic (Software Market) etc. Market Specialization: The firm concentrates on serving many needs of a particular customer. Heavy Loyalty Status: None. intending to med.Chapter 8 . indifferent. informed. Medium. interested. strong. medium. negative. hostile Requirements for Effective Segmentation Evaluating and Selecting Market Segments Five patterns of target market selection that can be followed are: • • • • • Single Segment Concentration: Concentrated Marketing where the firm gains a Concentration: strong knowledge of segments needs and acquires a strong market presence Selective Specialization: a firm selects a number of segments. Full Market Coverage: The firm attempts to serve all customer groups with all a products they may need.Identifying Market Segments and Targets • • • • Usage Rate: Light.

4. 2. Competitive Forces (Michael Porter’s 5 forces) 1. shifting the battleground to its costumers which often lowers costs and can manipulate prices and costs in different parts of the value chain. or aggressive competitors. 5.tif SUMMARY by Chapter 9 Dealing with Competition Building strong brands requires a keen understanding of competition. leapfrogging Benchmarking is the art of learning from companies that perform certain tasks better than other companies. 3. Abraham Koshy. By mapping the buyer's steps in obtaining and using the product a company's direct and indirect competitors can be identified.A segment is unattractive when there are actual or potential substitutes for the product.segment is unattractive if it contains numerous. Threat of suppliers' growing bargaining power .segment's attractiveness varies with the height of its entry and exit barriers. Mobility. And Exit Barriers Cost Structure Degree Of Vertical Integration Degree Of Globalization territory. Vertical Integration is to integrate backward or forward i. The market concept of competition reveals a broader set of actual and potential competitors. Kevin Lane Keller. The most attractive segment has high entry barriers and low exit barriers. To effectively devise and implement the best possible brand positioning strategies. Threat of intense segment rivalry . Identifying Competitors • • • • Entry. The challenger patiently researches and develops the next technology and launches an attack. Threat of substitute products .A segment is unattractive if the company's suppliers are able to raise prices or reduce quantity supplied. Threat of new entrants . strong. Marketing Concept According to marketing approach. with suppliers and Technological is a bypass strategy practiced in high-tech industries. competitors are companies that satisfy the same customer need.Marketing Management By Philip. Markets have become too competitive to just focus on the consumer alone.e.A segment is unattractive if buyers possess strong or growing bargaining power. Mithileshwar Jha logo copy. . where it has Industry Concept • Number Of Sellers And Degree Of Differentiation an advantage. companies must pay attention to their competitors. Threat of buyers' growing bargaining power .

current management. • Contraction Defense: giving up weaker territories and reassigning resources to stronger territories. A company can launch a preemptive defense in several ways • Counteroffensive Defense: the leader can meet the attacker frontally or hit its flank or launch a pincer movement. and financial situation. Defending Market Share The most constructive response is continuous innovation. and cost cutting. "Name the first company that comes to mind in this industry. • Mobile Defense: In mobile defense. distribution effectiveness.Dealing with Competition Analyzing Competitors Strategies: What strategies a company uses to enter/survive in the market? Objectives: What are the objectives of the competitor’s and what drives its behavior? Factors shaping a competitor’s objectives include size. The leader leads the industry in developing new product and customer services. • Preemptive Defense: A more aggressive maneuver is to attack before the enemy starts its offense. • Three Important Variables for analyzing competitors • Share of market .The percentage of customers who named the competitor in responding to the statement. Competitive Strategies for Market Leaders Expanding the Total Market New customers: Potential new users maybe divided into three groups: • Those who might use it but do not (market-penetration strategy) • Those who have never used it (new-market segment strategy) • Those who live elsewhere (geographical-expansion strategy) More usage: Two ways of increasing usage • Increasing the level or quantity of consumption: through packaging or product design or by increasing the availability of product • Increasing the frequency of consumption: identifying completely new and different ways to use the brand and communicate the advantages of using the brand more frequently Close versus Distant: Most companies compete with competitors who resemble them the most "Good" versus "Bad": should support its good competitors (Play by the rules) and attack its bad competitors. "Name the company from which you would prefer to buy the product. history. . the leader stretches its domain over new territories that can serve as future centers for defense and offense through market broadening and market diversification. • Share of mind . Strengths and Weaknesses: A company needs to gather information on each competitor's strengths and weaknesses. Selecting Competitors: Strong versus Weak: Weak require fewer resources per share point gained. • Position Defense: It involves occupying the most desirable market space in the minds of the consumers • Flank Defense: the market leader should also erect outposts to protect a weak front or possibly serve as an invasion base for counterattack.The competitor's share of the target market.The percentage of customers who named the competitor in responding to the statement." • Share of heart . An effective counterattack is to invade the attacker's main territory so that it will have to pull back to defend the territory.Trends • • Chapter 9 ." Companies that make steady gains in mind share and heart share will inevitably make gains in market share and profitability. It keeps increasing its competitive strength and value to customers. The firm should also compete with strong competitors to keep up with the best.

emulates the leader's products. This is a high-risk but potentially high-payoff strategy It can attack firms of its own size that are not doing the job and are underfinanced It can attack small local and regional firms Choosing a General Attack Strategy • Frontal Attack: The attacker matches its opponent's product. Lower price goods. and leapfrogging into new technologies to supplant existing products. • Geographic specialist: The firm sells only in a certain locality. Intensive advertising promotion Competitive Strategies for Market-Nicher • The nicher achieves high margin. name. medium-sized. improved services. with slight variations. and then rushing in to fill the gaps and develop them into strong segments. Here are some possible niche roles: differentiation in • End-user specialist: The firm specializes in serving one type of end-use customer. Value-priced goods and services. world. and protecting niches. • Imitator . It must keep its manufacturing costs low and its product quality and services high. Manufacturing-cost reduction. • Encirclement Attack: The encirclement involves launching a grand offensive on several fronts. • Product-feature specialist: The firm specializes in producing a certain type of Adapter . intense promotional blitzes. and packaging. region. price. intermittent attacks to harass and demoralize the opponent and eventually secure permanent footholds (selective price cuts.Chapter 9 . Because niches can weaken. Product innovation. • Guerrilla Warfare: Small. or area of the or location.copies Expanding Market Share A company should consider four factors before pursuing increased market share: • The possibility of provoking antitrust action • Economic cost • Pursuing the wrong marketing-mix strategy • The effect of increased market share on actual and perceived quality Competitive Strategies for Market Challengers Defining the Strategic Objective and Opponent(S) A market challenger must decide whom to attack: It can attack the market leader. Four broad strategies can be distinguished: • Counterfeiter duplicates the leader's product and package and sells it • Cloner . advertising. or large customers. whereas the mass marketer achieves high volume. the firm must continually create new ones therefore multiple niching is leader but maintains preferable to single niching. . Distribution innovation. and distribution • Flank Attack: Identifying shifts in market segments geographic areas that are causing gaps to develop.or high-quality ends of the market adapts or improves • Channel specialist: The firm specializes in serving only one channel of distribution them. advertising. terms of packaging. expanding niches. pricing.Dealing with Competition Competitive Strategies for Market Follower: A market follower must know how to hold current customers and win a fair share of new customers. Make sense when the challenger commands superior resources • Bypass Attack: It means bypassing the enemy and attacking easier markets to broaden one's resource base. Nichers some things from the have three tasks: creating niches.takes the product or product feature leader's products and • Quality-price specialist: The firm operates at the low. Product proliferation. Prestige goods. The key idea in successful nichemanship is specialization. • Customer-size specialist: The firm concentrates on selling to small. diversifying into new geographical markets. and occasional legal action) Few more specific strategies: Price discount. Three lines of approach: diversifying into unrelated products.

beliefs and so on that become associated with the brand The differential response is reflected in perceptions. Brand Equity Added value endowed on products and services. This chapter talks about the concepts of brand and how branding works. their brand knowledge and their likely response to marketing activity. sign. term. • negative depending on how consumers respond. Abraham Koshy. Brand Knowledge consists of all thoughts.tif SUMMARY by Chapter 10 Creating Brand Equity It is important for the marketer to create a strong brand and maintain customer loyalty. The true and future value depends on customers. . preferences and behaviour related to all aspects of the marketing of the brand Marketer must build a strong brand that ensures that the consumers have the right experiences. feel and symbol or design. Mithileshwar Jha logo copy. knowledge has on customer response to the marketing of a brand. Kevin Lane Keller. experiences. feelings. or a act with respect to a brand.Marketing Management By Philip. Customer based brand equity – differential effect brand combination of them. Brand Promise Marketer’s vision of what the brand must be and do for the consumers. We will understand what brand equity is. Reflected in way consumers think. It has three key ingredients – • • Brand equity arises from differences in customer response Differences in response are a result of consumer’s knowledge of the brand. Brand: A name. images. how it is built and measured as well as the decisions involved in branding strategy. Maybe positive or intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.

Energy) JetBlue Ikea TiVo Redbull Declining Leaders Kodak AAA Tide New/Undeveloped Blackberry Sephora SAP Brtish Airways Eroded/Commoditized Centrum Entertainment Weekly Wells Fargo Budget Rent-A-Car Brand Structure (Esteem & Knowledge) (E There are the five key components of the model – 1. Energized Brand Strength (Differentiation. adaptable and protective (‘defensive’). Differentiation – degree to which a brand is seen as different from others 2. Knowledge – how familiar and intimate customers are with the brand Brand Resonance Model Creation of significant brand equity requires reaching the top or pinnacle of the brand pyramid. which occurs only if the right building blocks are put into place. Relevance – breadth of brand’s appeal 4.Creating Brand Equity Trends Brand Equity Models Brand Asset Valuator It provides comparative measures of the brand equity of thousands of brands across hundreds of different categories. Esteem – how well the brand is regarded and respected 5. Resonance Judgement Feelings Performance Imagery Salience . Energy – brand’s sense of momentum 3. Brand element choice criteria includes 6 main parameters – first three being memorable. Relevance. Most strong brands employ multiple brand elements. Up and coming/Niche Leaders Google USA Pringles Nike Brand Element: Those trademark able devices that identify and differentiate the brand.Chapter 10 . meaningful and likable (‘brand building’) and last three being transferable.

Attracting customers seeking variety who may otherwise have switched to another brand 3. merchandising and physical distribution Customer Equity Sum of lifetime values of all customers. Brand Valuation – Job of estimating the total financial value of the brand. The aim of Customer Relationship Management (CRM) is to produce high customer equity. Reinforcing requires innovation and relevance throughout the marketing program. Devising a Brand Strategy When a firm introduces a new product it has 3 choices – • • • Develop new brand elements for the new product Apply some of the existing brand elements (Product is called brand extension) Use a combination of new and existing brand elements (Maybe called a sub brand) Brand Portfolios Marketers need multiple brands to cater to multiple markets. The reasons for diversifying the brand portfolio 1. Brand equity reinforced by marketing actions that consistently convey the meaning of the brand in terms of what it represents and how it makes the products superior. Increasing internal competition within the firm 4. sales. Yielding economies of scale in advertising. • • Brand Audit – consumer focussed series of procedures to assess the health of the brand. Increasing shelf presence and retailer dependence in the store 2. . Brand Performance – how well the product or service meets customers’ functional needs Brand Imagery .Creating Brand Equity Trends Brand Salience – how often and how easily customers think of the brand under various purchase or consumption situations. uncover its sources of brand equity and suggest ways to improve and leverage its equity.• • • • Chapter 10 .describes the extrinsic properties of the product or service. also the way in which brand attempts to meet customers’ psychological or social needs Brand Judgements – focus on customers’ own personal opinions and evaluations Brand Feelings – customers’ emotional responses and reactions with respect to the brand Brand Resonance – nature of the relationship customers have with the brand and the extent to which they feel they’re “in sync” with it Brand Reinforcement Brand needs to be managed so its value does not depreciate.

Marketing Management By Philip. positively evaluate and believe they could not find to the same extent Points of Parity (POP): They are associations that are not unique to the brand but in fact maybe shared with other brands.tif SUMMARY by Chapter 11 Crafting the Brand Positioning This chapter illustrates how a firm can choose an effective positioning in the market and differentiate its brand. It has two forms: • • Category Points of Parity: Associations customers view as essential to a legitimate and credible offering within a certain product or service category. Abraham Koshy. Competitive Points of Parity: Associations designed to negate a competitor’s pointsof-difference. Choosing POPs and PODs POPs: They are driven by the needs of category membership (to create category POPs) and the necessity of negating competitors’ PODs (to create competitive PODs) PODs: The following two criteria are considered while choosing POP’s Desirability Criteria Relevance Distinctiveness Believability Deliverability Criteria Feasibility Communicability Sustainability . Identifying the target market. 1. It describes the various strategies a firm can employ at each stage of a products life cycle and finally shows the implications of Market evolution for marketing Positioning: Positioning is the act of designing the company’s offering and image to occupy a distinctive place in the minds of the target market. Positioning requires determining on a frame of reference based on the following factors: strategies. 2. Attributes or benefits consumers strongly associate with a brand. Kevin Lane Keller. Mithileshwar Jha logo copy. Analyzing the competition. Developing and Communicating a Positioning Strategy Category Membership: products or set of products with which the brand competes and which function as close substitutes. Points of Difference (POD): in another brand.

Marlboro’s “macho cowboy” image. sustainable competitive advantages are: • • Leverageable Advantage: is one that a company can use as a springboard to new advantages Customer Advantage: is an advantage that a customer sees in the company’s offering Dimensions to differentiate Market Offerings • • • Personnel differentiation: Better trained employees E. Channel Differentiation: more effectively and efficiently designed channels. E. smartly dresses flight attendants of Kingfisher Airlines.g. coverage.Chapter 11 . expertise and performance.Crafting the Brand Positioning Establishing category membership The typical approach to positioning is to inform consumers about a brands category membership before stating its points of difference.g. Image differentiation: Companies can craft powerful compelling images.g. BMW through a well crafted marketing program straddled ‘Luxury’ and ‘Performance’ as both POD and POP. Differentiating Strategies Competitive Advantages It is a company’s ability to perform in 1 or more ways that competitors can’t match. Product Lifestyle Marketing Strategies Most product life-cycle curves are portrayed as bell shaped curves. Initial advertising often concentrates on create brand awareness and subsequent advertising attempts to craft the Brand Image. Two Straddle Positing: It is a common positioning technique used when a company tries to straddle between two frames of reference. A company’s positioning and differentiation strategy must change as the product. . market and competitors change over the product life cycle (PLC). E.

Chapter 11 . Objectives and Strategies Introduction Characteristics Sales Low Sales High Cost per customer Negative Innovators Growth Rapidly rising sales Maturity Peak Sales Decline Declining Sales Low cost per customer Declining Profits Laggards Maturity: When the Costs Profits Average Cost per Low cost per customer customer Rising Profits Early Adopters High Profits Middle majority competitors cover all Customers major segments of Marketing the market maturity stage occurs. market splits into finer segments and market segmentation occurs. • Advertising Distribution Price Strategies Objectives Create product awareness and trial Offer a basic product Maximize market Maximize profit while defending share market share Reduce expenditure and milk the brand and as market growth Product Offer product Diversify brands Phase out weak extensions. Competitors invade each others profits slows down. Single Niche Strategy: Design a product to meet preferences of 1 segment of the market 2. Mass Market Strategy: Design a product for the middle of the Market • • 1. warranty Charge cost-plus Price to penetrate Price to match or Cut price market best competitors’ Build selective distribution Build product awareness among early adopters Build Intensive distribution Build awareness and interest in mass market Build more intensive distribution Stress brand differences and benefits Go selective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyals Reduce to minimum level Sales Promotion Use heavy sales Reduce to take Increase to promotion to advantage of encourage brand heavy consumer switching entice trial demand Market Evolution Emergence: Before a market materializes it exists as a latent market. This is often followed by market consolidation caused by the emergence of a new attribute that has greater appeal. and items models products service. Maturity Decline: Eventually demand for the current products will begin to decrease because either: Society’s total need level declines New Technology replaces the old . Mature markets swing between fragmentation and consolidation. 2. Here the entrepreneur has three options: 1.Crafting the Brand Positioning Trends Summary of Product Lifecycle Characteristics. Multiple-Niche Strategy: Launch 2 or more products simultaneously to capture 2 or more parts of the market 3.

4 types1. Chocolates Emergency goods: purchased when need is urgent e.g. desk. higher margins. persons. product lines.g. machines. brand positioning and competition take place at this level. closet. dresser. properties. 3. Augmented product: attributes that exceed buyer expectations. E. Nondurable goods: tangible goods that are normally consumed in a day or two. immediately.g. • Consumer goods classification: done on the basis of shopping habits. This chapter deals with various product strategies for making coordinated decisions on product mixes. In developed countries. places. towel etc Expected product: attributes that buyers normally expect along with their product. adaptability. Mithileshwar Jha logo copy. services. Durable goods: tangible goods that survive many uses. and advertised heavily to induce trial. including physical goods. E. brands. E. more seller guarantees. labeling and warranties and guarantees.g. packaging. charged a small markup. Clothes. soft drinks. Hotel guest buys rest and sleep Basic Product: e. Convenience goods: purchased frequently. while in developing countries it takes place at ‘expected product’ level. repairs. thus should be made available in many locations.g. Kevin Lane Keller. Product Levels Marketers need to address 5 product levels: Product: Anything that can be offered to a market to satisfy a need or want. supplier credibility.: soaps. Haircuts. • Potential product: it encompasses all the augmentations and transformations the product or offering might undergo in the future.Marketing Management By Philip. Require more personal selling. 2. Services: intangible. Require more quality control. with minimum effort Staples: purchased on regular basis Impulse goods: purchased w/o planning e. events. experiences.tif SUMMARY by Chapter 12 Setting Product Strategy Product is the first and the most important element of a marketing mix. • • • • Core Benefit: The benefit a customer really buys. hotel room includes bed.g. Umbrellas . They are purchased frequently. variable. Product classification • Durability and tangibility 1. bathroom.g. Abraham Koshy. perishable products. E.

men’s suits etc. Features: they supplement the basic function of the product. Capital items: long lasting goods that facilitate developing or managing the finish Installation: includes buildings and heavy equipments.g. Iro tires. Differentiation .g. They includethat personal selling important than advertising. • production process1. BMW through a well crafted marketing program straddled ‘Luxury’ and ‘Performance’ as both POD and POP. Creates distinctiveness that is difficult to copy. E. they don’t require comparison. and Natural products. Lubricants. These enter the final product w/o change.Chapter 12 . Management consulting.g. high.g. Paint. broom. Insurance. E. Sales force mo 3. and superior. and component parts (e. Raw materials: 2 kinds. which are limited in supp Manufactured materials and parts: 2 kinds. price etc Homogeneous: similar in quality but different in price. the extra price must not be excessive and the product must not be subject to rapid technological obsolescence Reliability: probability that a product will not fail within a specified time period. E Industrial goods classification: done on the basis of relative cost and how they enter t Straddle Positing: It is a common positioning technique used when a company tries to straddle between two frames of reference. physical structure. Cars. average.g. Require advertising and personal selling. Air conditioner maintenance. Heterogeneous: similar in price but different in product features.Farm products. Moto 2. Performance quality: it is the level at which a product’s primary characteristics operate. Supplies: short term goods that facilitate developing or managing finished produc 4. Mass customization is the ability of a company to meet each customer’s requirements. Business services: short term services that facilitate developing or managing finish Product Differentiation Form: this includes size. Business advisory services. E.g. advertising. Specialty goods: they have unique characteristics for which consumers can spend mo 4. The level must be appropriate to the target segment and not necessarily the best. They includeMaintenance and repair services. which are seasonal and require spec marketing apart from advertising. reference books. Operating supplies. E.) products. Reparability: the ease of fixing a product when it malfunctions or fails Style: the product’s look and feel. writing paper.Setting Product Strategy 2. products. 4 performance levels. Materials and parts: those that enter the manufacturer’s product completely. These are usually fabricated further). shape. Company must compare customer value v/s company cost for each potential feature. Advertising less importa Equipment: includes portable factory tools and equipments. Shopping goods: goods that consumer compares based on suitability.component materials (e. Unsought goods: those that consumers do not know about or think of buying. They includeMaintenance and repair items. Conformance quality: the degree to which all produced units is identical and meets the promised specifications. 3.g. cement. However. Durability: buyers generally pay more for more durable products.g.low. E. E. Customization: requires gathering and using information about consumers. pencils.

Returns: they are of two types1. E. information and advice services that seller offers to buyers. Product line: a group of products within a class that perform similar function. Faster CPU o Specialties: lower sales volume. E. Product system: compatible manner. Need family: the core need that underlies the existence of a product family. Product type: a group of items within a line that share of possible forms of the product.Chapter 12 . Becomes a selling point when the target market is technologically novice. Term life insurance. Installation: work done to make a product operational in its planned location. less promotion. those seeking higher profitability have shorter product lines. or errors of seller or customer and can be eliminated with proper strategies. Customer training: training customer’s employees to use vendor’s equipment efficiently and properly. high margins.g. are marketed through same channels. . other costs increase and thus some non performing items are eliminated. E.Setting Product Strategy Services Differentiation Ordering ease: ease of placing an order Delivery: includes speed. Security.g. Basic computers. Depth: how many variants are offered of each product in the line? Consistency: how closely related the various product lines are in end use. Product line length: Companies seeking higher market share have longer product lines. Installation. Length: the total no. difficulties. Product class: a group of products within a family that have functional coherence 4. no promotions. Excess manufacturing forces production of newer items. Life insurance.g. • Market Profile: product line managers must review how the line is positioned against competitor’s lines. 6. delivery. E. o Convenience items: peripherals selling in high volumes. a group of diverse but related items that function in a Product Mix It is the set of all products and items a particular seller offers for sale.g. ICICI prudential term life insurance. Product family: product classes that satisfy a core need. Customer consulting: data. • • • • Product Hierarchy 1. price. highly promoted. of items in the mix. appearance. 5. Item: a distinct unit within a brand or product line distinguishable by size. 2. higher margins. carry cases.g. Controllable: result from problems. etc.g. Product line Product line analysis: based on – • Sales and Profit: a company can classify its products based on the margins. Uncontrollable: can’t be eliminated by the company in the short run.g. E. They lengthen over time. E. E. o Core products: basic products that have a high sales volume but with low margins as they are essentially undifferentiated commodities. and care throughout the process. Savings and income 3. Width: how many product lines the company carries. However. 2. Maintenance and repairs: helps customers keep products in working order.g. o Staples: lower sales volume. accuracy. are sold to same customers. E. Software.

These modes are stripped of several features that buyers usually end up buying. tour operators bundle stay and travel. Product Bundling Pricing 1. profit can be maximized from variable fees. but may be lured by the saving. and then introduced Sonata for low end and Edge. they need to identify the weak items. Two-Part Pricing: fixed fee+ variable usage fee. E.g. Unilever found only 400 of its 1600 items generated 90% of company’s profits. counterfeiting and substitutions can erode sales.g. E.Setting Product Strategy Line stretching: occurs when companies try to go beyond their current range offered. Manufacturers of razors price them low and set high markups on razor blades. Piecemeal allows company to gauge the effect of change on consumers. . 2. but allows competitors to copy and pose greater challenge. Improvements must not occur too early (as they will affect sales of current product) and too late (as competitors would get more time). Optional Feature Pricing: e. Titan started as mid level watch. Companies stretch in the following ways• Down Market Stretch: introducing lower-priced line than the one being offered. Customers may not plan to buy all components. It can be risky as the price may not be less enough for competitors or some customers may shift the cheaper version. If producer can sell these to the customer. higher margins. Line modernization. Automobile cos.g. Companies also need to optimize their brand portfolio. Product-Mix Pricing: searching for a set of prices that maximizes profits on the total mix. The company may choose between featuring their most selling items and promoting their weak items from time to time. Xylus for high end. Mixed bundling: products offered individually as well as in bundles. • • Up-Marker Stretch: entering high end of market for better growth.g. Featuring and Pruning: product lines need to change with the times. and weed them away. Note: a high end model of a low end brand is preferred over a low end model of a high end brand. Production of petroleum products produces several by products. • • • • Captive Product Pricing: e.g.g. E. Auto manufacturers. Their task is to establish perceived quality differences that justify price differences. • • Product Line Pricing: companies develop product lines and introduce price steps.g. Helps in establishing market dominance. For this. By-Product Pricing: e. he can price the main product lower. Two way Stretch: middle level companies entering both high end and low end markets. If price is too high. Advertise entry level models at low prices to attract more customers. Pure bundling: products offered only as bundles. Fixed fee should be low to encourage more sales. E. Can be done piecemeal or all at once.Chapter 12 . Line filling: lengthening product line by introducing more items in the present range.

Factors leading to growing use of packaging: • • • • • • • • • • • • • Self service Consumer affluence Company and brand image: package leads to instant recognition of brand Innovation opportunity: packaging can be used to target different segments. describe the product and promote the product (through attractive graphics).Chapter 12 . IBM and Motorola) and retail co-branding (2 retail establishments using the same location to optimize space and profits). However. both brands must have brand equity. joint venture co-branding (Indian oil and Citibank cobranded credit cards). so an unsatisfactory performance will be damaging for the partner company as well. . Packages may include 3 levels of materials. multiple sponsor co-branding ( Taligent. They are especially helpful when the company is not well known or when product quality is superior to that of competitors. the packaging needs to be tested: Labeling: labels identify the product. Warranties and Guarantees: returned to the manufacturer for replacement. Products under warranties can be Guarantees reduce the buyer’s perceived risk. consumer expectations with the level of involvement are high. goals and capabilities. repair. warranties are formal statements of expected product performance by the manufacturer. Ingredient Branding: special case of cobranding. Ingredient brands create preference for their products so that a host product which does not have that ingredient. For co-branding to succeed. and must fit in terms of values. a one time alliance of Apple. parts that are contained products. It includes same company co-branding (Gillette launched Mach 3 Turbo with its shaving gel). Packaging: activities of designing and producing containers for a product. grade the product. It created brand equity for materials. Package is the buyer’s first encounter with the product.Setting Product Strategy Co-Branding: 2 or more brands are combined into a joined product or are marketed together in some fashion. Identify the brand Convey descriptive and persuasive information Facilitate product transportation and protection Assist at-home storage Aid product consumption Engineering tests: ensure that package stands up under normal circumstances Visual tests: ensure that script is legible and colors harmonious Dealer tests: dealers should find package attractive and easy to handle Consumer test: buyers must respond favorably within other branded Packaging needs to achieve the following objectives: customers do not but After designing. components. It allows products to be convincingly positioned and generating greater sales as 2 well known images are combined.

Service companies can choose among different processes to deliver their service. Cell Phones & cars •The offering contains equal parts goods and services.g The Computers. personnel & physical cues to judge quality.g Airplane travel alog with its services •The Offering consists of only a service. They are highly loyal to service providers who satisfy them & because switching costs are high. E. consumer inertia can make it challenging to entice a customer away from a competitor. Services needs client presence & may meet a personal or business need.tif SUMMARY by Chapter 13 3 Designing and Managing Services Today as product companies find it harder and harder to distinguish their physical products. E. they turn to service differentiation.Marketing Management By Philip. Mithileshwar Jha logo copy.g psycotherapy The Tangible Goods with accompanying services Hybrid Major service with accompanying minor goods and services Pure Service .toothpaste •The offering accompanied by one or more services E. Service providers find significant profitability in delivering superior services.E. Categories of services mix Pure Tangible Goods • No services accompany the product.Its production may or may not be tied to physical product Categories of services mix. Abraham Koshy. E. they rely heavily on price. How do we define and classify services and how do they differ from goods • A service is any act or performance one party can offer to another that is essentially intangible and does not result in the ownership of anything .g The restaurants •The offering consists of major service along with The additional services or supporting goods. Service marketing is different from goods marketing as service consumer relies on word of mouth. Kevin Lane Keller.g Soap. • • • Services can be equipment based or people based & they differ in their objectives and ownership.

Nonpeak Demand.Increased Time consumer participation.distribut ion.shared services.Complementary Services. Internal Marketing •It describes the training and motivating employees to serve the customers well.pricing. targeting of different market segments Provide Post-Sales support Sales Identify what is most valuable to customer and include repair & maintainence services .symbols. •Invest In Good Hiring •Standardize the service-performance process performance •MonitorCustomer Satisfaction process •Services cannot be stored hence there is always a mismatch between Services demand & supply.Designing and Managing Services Holistic Marketing for Services External Marketing •It describes the normal It work of preparing.and promoting the service to customers.Thus service providers must learn to work in larger groups to provide services to customers •Services are variable and buyers are aware of this variability and often Services talk to others about quality before selecting a services.Differential Pricing.Facilities for future expansion Variability Perishability Developing Brand Strategies for services Chosing Brand Elements Focus on logos.Part-Time employees .Engage every employee in the organization to practise marketing Interactive Marketing •It describes the employee skills in serving the client Distinctive Characteristics of Services Intangibility • Services are intangible Service marketers must be able to transform intangible services into concrete benefits. Inseparability • Services are typically produced and consumed simultaneously .slogans to build brand awareness Establishing Image Dimensions desgin marketing communication.Reservation Systems •Supply Side . information programs and building brand personality Devising Branding Stratgey Create a brand hierarchy and brand portfolio that permits positioning.Peak Time efficiency.Chapter 13 .Stratgies that marketers must use : •Demand Side .

g ATMs •Helping customers to use these facilities MONITORIN G SYSTEMS •Auditing service performanc e of own & competitor s SATISFYING EMPLOYEES & CUSTOMERS •Instilling a possitive attitude about customer satisfaction in employees .Chapter 13 .Xer ox •Both financial & service performanc e monitored by top manageme nt HIGH STANDARDS •Setting high service standards •developing reliable.resi lient & innovative customer Intefrace systems SELFSERVICE TEHNOLOGI ES •replacing person to person interaction s with self service technologie s e.Designing and Managing Services Trends Best Practices of Service Quality Management STRATEGIC COMPONE NT •Top companies are customer obsessed •They have clear sense of target customer and their need TOP MANAGEM ENT COMMITME NT •Thorough commitme nt to service e.g Marriot.

This is usually achieved by following a six-step process as follows . Although non-price factors have recently risen in importance. profitability.Marketing Management By Philip. the recent emergence of low-cost airlines providing tickets only for the amount of taxes levied on a ticket is an example how firms have been successful with free offerings. etc. discounts. price is the only component in the marketing mix that provides revenue and not costs. Buyers can : • Get instant price comparisons from thousands of vendors: Websites like pricescan. And this is still the case with large segments of markets across the world. Kevin Lane Keller. Also. Mithileshwar Jha logo copy. Abraham Koshy.tif SUMMARY by Chapter 14 Developing Pricing Strategies and Programs Traditionally. • Get products free: The open source software movement has eroded margins for almost any major software player. Also. Sellers can : • Monitor customer behaviour and customize offers: Firms use software to analyse pricing requests with pricing factors such as past sales data. price has been the major determinant of a buyers’ choice. pricing remains an important factor in determining sales and Pricing Environment: Many firms are nowadays following the low-price trend and have seen success in converting the acquired customers to more expensive products by combining unique product formulations and engaging marketing campaigns. or venture into a new market with an existing product. to reduce processing time of these requests greatly. • Offer certain customers special prices: Certain customers are offered lower prices by firms in order to capture a certain market segment on ensure the loyalty of existing customers further. Also. volume-aggregating sites collate orders from many customers and press the supplier for a deeper discount.com offer data about products like prices and reviews from hundreds of merchants. Setting the price Firms set a price when they introduce a new product.com. • Name their prices: The consumer can state his desired price for a product and find the seller willing to meet this price on sites like priceline.

e. Many sellers believe setting a price of Rs. quality and vice versa. costs determine the floor. etc. • Target Costing: Other than production scale and experience. Maximum current profit: Many firms try to set a price that maximises their current profits and delivers a high return on investment. the costs involved begin to decline. • Maximum market skimming: Companies offering new technologies often set high prices initially in order to gain high profits from various segments of the market early on. Statistical Analysis. the demand curve can be analysed to determine the market’s probable purchase quantity at various prices. Step 1: Selecting the Pricing Objective – The firm first decides where it wants to position its market offering. lead to a great reduction in demand. This decline in cost with production experience is called experience curve. Hence. Fixed costs include salaries. shipping costs. engineers. firms believe that a higher sales volume will lead to lower unit costs and higher long-run profits and thereby maximise their market share. or elastic. packaging costs. costs also change a result of concentrated efforts by designers. companies must decide on a level of production which will more or less guarantee no losses on the cost of production. suggesting that the actual price of the product is much higher or by pointing to a competitor’s high price. intense competition. • Price cues: Consumer perceptions of prices are also affected by the manner in which prices are displayed. Variable costs include processing costs. Hence. smoother flow of materials. • Accumulated Production: As firms gain experience in production of a good. The factors entailing this are • Price Sensitivity: The relation between price and demand. Price Experiments. They examine each cost component and try to find ways to reduce the costs involved in each of these. This helps a firm to maximise its profits. Step 2: Determining Demand – Each price leads to a different level of demand and therefore has a different impact on a company’s marketing objectives. purchase agents etc. . which do not depend upon quantity produced. etc. increasing prices would as an indicator of quality. Many consumers use price • Price Elasticity: Marketers need to know how responsive. • Types of Costs and Levels of Production: Costs are classified as Fixed costs and Variable costs. The five major pricing objectives are • • • Survival: Companies pursue survival if they are plagued with over-capacity. • Product-Quality Leadership: Many firms aspire to be the product-quality leader in the market.Developing Pricing Strategies and Programs Consumer psychology and pricing: • Reference prices: Consumers often employ reference prices. marketers prefer inelastic markets where price changes do not perceived to be of higher elicit great shifts in demand. electricity bills. to a change in price. i. etc. or changing consumer wants.Chapter 14 . Maximum market share: Here. while decreasing prices would lead to increase High-price cars are in demand. Step 3: Estimating Costs – While demand sets a ceiling on the range of price a firm can charge for its product. Putting ‘Sale’ signs near the price display have also been known to be effective. Sellers manipulate this by product positioning. etc. • Estimating Demand Curves: Most companies use the following methods to estimate • Price-Quality inferences: demand curves: Market Surveys. If the price elasticity is high. the demand would be. This is due to various factors such as workers finding shortcuts. which depend upon quantity produced.2999 puts a product into the 2000 range instead of the 3000 range as perceived by the consumer. comparing an observed price to an internal reference price or a posted ‘regular retail price’.

A firm must analyse the value offered by a competitor to a customer in terms of prices. Step 5: Selecting Pricing Methods – There are six major pricing methods: • • • Mark-up Pricing: The most elementary pricing method is to add a standard mark-up to the producer’s cost. the seller has the option of offering to absorb part to price cuts/raises by competitors by considering various factors like the product’s stage in the life cycle. A major factor leading to these price increases is over demand. etc. warranty quality. customer support. The basic aim here is to attract a value-conscious customer base by reengineering the company to become a low-cost producer without sacrificing quality. its importance in the company portfolio. competitors. Sealed-bid Auctions: Here. government should also be taken into account by the management. etc. • Value Pricing: Here. the firm determines the price that would yield its target return on investment. addons. firms base their prices largely on competitors’ prices. the seller announces a high price and then goes on lowering the price until a bidder accepts it. potential suppliers submit their bids without knowledge of other bids made and the best bid is selected. Impact of price on other parties: The final price’s effect on other parties such as distributors. charging nearly the same as major competitors in the market do. Company Pricing Policies: The final price must be compliant with the company’s pricing policies. cost. post-sale services. • • Going-rate Pricing: Here. Target-return Pricing: In target-return pricing. dealers.Developing Pricing Strategies and Programs Step 4: Analyzing Competitors – The introduction of any change in price. high quality products are assigned a fairly low price. • Responding to competitors’ price changes: Firms respond • Gain-and-Risk-sharing Pricing: Buyers may resist accepting a supplier’s proposal because of a high perceived level of risk. the channel deliverables. responding to price changes: • Initiating price cuts: Companies sometimes initiate price cuts in order to dominate the market through lower prices. the company selects the final price by taking into account factors as listed below: • • Impact of other marketing activities: The final price must take into account the brand’s quality and advertising relative to the competition. • • • • • or all of the risk if the promised value is not delivered. and thereby modify its own price in order to be competitive in the market. where the company cannot supply all its customers and hence raises its prices. the seller puts up an item and the bidders raise the price until the top price is reached. Perceived-value Pricing: Perceived-value pricing is made up of several factors like the buyer’s image of the product. • Initiating price increases: Companies initiate price increase to increase their profits by taking into account the feasibility of the price rise. a buyer announces his desire for a product and sellers compete to offer him the lowest price. Hence. offers given by Trends any seller can elicit a response in the market. Step 6: Selecting the Final Price – After the pricing methods have narrowed the range of the price. supplier’s reputation. Dutch Auctions (Descending bids): Here. Or. etc.Initiating and Chapter 14 . Adapting the Price Geographical Pricing Price Discounts and Allowances Promotional Pricing Differentiated Pricing . Auction-type Pricing: There are three types in this pricing method – English Auctions (Ascending bids): Here.

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