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By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
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
By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
• • • 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
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 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.
The marketing plan operates at two levels: strategic and tactical. from people new to the field and organization. mutually satisfying relationships and co-prosperity among key stakeholders. merchandising. building customer loyalty and capturing customer lifetime value. service and speed. pricing. based on an analysis of the best market opportunities. Value Chain The value chain is a tool which is used for identifying ways to create more customer value. There are 9 strategically relevant activities – 5 primary and 4 support. The marketing plan is the central instrument for directing and coordinating the marketing effort. 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. • The tactical marketing plan specifies the marketing tactics. including product features.Developing Marketing Strategies And Plans A firm must coordinate all the department activities to conduct its core business processes.Chapter 2 . Strategic Planning Companies need to focus on the customer and organize to respond effectively to their changing needs. in addition to expanding customer share. • The strategic marketing plan lays out the target markets and the value proposition the firm will offer. . to be known as master marketers. integrating the value exploration. 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. sales channels and service. Senior management should identify and encourage fresh ideas from a youth perspective. It helps manage a superior value chain that delivers a high level of product quality. value creation and value delivery activities with the purpose of building long-term. to gain an understanding and a new approach to marketing. promotion.
Opportunities and Threats is called SWOT analysis. Program Formulation: The unit must plan programs in accordance with its goals and strategy and thus work upon the various departments.Developing Marketing Strategies And Plans Mission Statement The best Mission Statement reflects a vision. 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. 7. Implementation: Even a great marketing strategy can be sabotaged by a poor implementation. it is easy to develop separate strategies and assign appropriate funding. 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. By identifying the company’s SBUs. long term view. To evaluate opportunities. Strategy Formulation: Strategy is a game plan for achieving the goals. Goals must be consistent and realistic and could be a mix of various objectives. In the rapidly changing market environment. These tasks must be in line with the interests of the stakeholders as well. . SWOT Analysis: The overall analysis of a company’s Strengths. The Business Mission: Each business unit needs to define its specific mission within the broader company mission. They are specific with respect to magnitude and time. 2. It is as short.Chapter 2 . to strengthen them and integrate all of them together. Weaknesses. It must coordinate its tasks to implement its plan properly. an almost impossible dream that provides a direction for the company for the next 10 or 20 years. even large organizations which are subject to inertia can be changed through strong leadership. A good mission statement focuses on limited number of goals. Technology Strategy and a Sourcing Strategy. 5. 3. Business Unit Strategic Planning The Business Unit Strategic Planning process consists of the following steps 1. It consists of a Marketing Strategy. 6. companies can use Market Opportunity Analysis. relevant and meaningful as possible. Feedback and Control: The key to organizational health is willingness to examine the changing environment and adopt new goals and behaviors. 4.
MIS (Marketing Information System) MIS can provide data e. Network externally using competitor’s annual reports. evaluate and distribute needed. Swiss eat most chocolates. Abraham Koshy. E. Motivate retailers and distributors to pass intelligence. This chapter deals with various modes of obtaining MIS (Marketing Information System) Consists of people. to gather. NSSO reports) or purchase data from outside suppliers (AC-Nielsen. equipment and procedures. sophisticated and important customers for feedback. Mithileshwar Jha logo copy. sort. It relies on internal company records. companies must possess comprehensive. etc) Create a panel of largest. Use online forums. up-to-date information about macro trends as well as micro trends particular to their business. It should be done ethically and legally. Greeks eat most cheese. • • • Train the sales force for intelligence gathering by observing competitors activities and listening to customer comments. this information and also looks into the major macroeconomic forces that affect marketing decisions. MIS provides information on market happenings and changes in environment. Customer compliant sites. • • • Use government sources (Census. . talking with their retailers.Marketing Management By Philip.g.g. marketing intelligence activities and Market Research.tif SUMMARY by Chapter 3 Capturing Marketing insights and Spotting Market Trends To provide insight into an inspiration for marketing decision making. Purposes of MIS have been noted below. attending shareholder meetings. analyze. mystery shoppers to identify customer treatment and possible flaws. sites offering customer and expert reviews. distributors and employees. Kevin Lane Keller. timely and accurate information to marketers.
Social-Cultural Society shapes beliefs. Analyzing the Macro Environment Fad – Unpredictable. Trend shows an increasing role of children on purchasing decisions e.15. shoes and other FMCG goods.7% of urban households have income up to Rs3000/month while only 2. inactive participants in market exchange). slow in formation but has lasting effect. demands. Purpose is to minimize number and duration of cycles. Categories of Indian consumers: Destitute ( less than Rs16.7% of World population in India. prices. brand preferences. Rich ( more than Rs 2.15 000. Consuming Class ( Rs 45. etc.000. have desire and willingness to buy but has limited cash).Separate databases are there for products.8 years. majority have money and are willing to pay).000/month. (Rs 22.8% males and 54. Aspirants ( Rs 16. credit availability.Chapter 3 .5% literacy between 25-34yrs age group. It affects dress codes. values.000 to Rs 45. India’s GDP is $1. reveals the future. Purpose is to analyze (mine) data using statistical methods and discover trends. 76% literacy between 15-24yrs age group.000 annually. food habits.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. Climbers.Capturing Marketing insights and Spotting Market Trends Internal Company Records • Order to Payment cycle . Database / Data warehousing / Data Mining . • • Sales Information System .Keeping constant track of sales.g. It can help in identifying trends.38% literate. without any economic or social significance Trend Sequence of events that have momentum and durability. 000 to Rs 2. computers. . bicycles. Megatrend – Large social and economic influence. 34% b/w 12 and 25yrs.000. 24% b/w 25 and 34 years Literacy level: 65.2 trillion.1% have income more than Rs 10.000 to Rs22. customers.16% females. salespersons and customers. 75. and requirements. savings. new entrants in consumption system). Trend shows increasing % of Consumers and Climbers while a decreasing % of Destitute and Aspirants. have money and own a variety of products). per capital income of $3100 Income distribution: 77. Major Macro Environmental Forces Demographic 16. wrist watches. Economic Purchasing Power depends on income. Male to Female ratio of 933:1000 Population Age mix : median age of 23. short-lived. 64.
recycling centers and focus on CNG initiatives. (c) Varying R & D Budget: e. control on clinical trial. Dr. Focus on Non-renewable sources like Jatropha oil. Greenhouse Effect. Technological Four major trends are (a) Accelerated Pace of Change: e. has lesser number of substitutes.Chapter 3 . Pollution Control Systems like landfills. Drugs and cosmetic act. Although majority feels necessity of environmental friendly products. and has other trends promoting it. 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. . aid vaccines. 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. Apple selling 23. contraceptive pills.g.g. Ozone layer and fossil fuel depletion. to protect consumers from unfair business practices. telecommunication.g. Political and Legal Two major trends are (a) Increase in business legislation: to protect companies from unfair competition. Increasing R & D in Pharmaceutical companies like Cipla. and Ranbaxy (d) Increasing regulation of technological change e.Capturing Marketing insights and Spotting Market Trends Natural Deterioration of environment is a significant concern e. Robotics. Developments in Bio-tech.g. Reddy’s.5 million in 2006 (b) Unlimited Opportunities for Innovation e. E. has functional value. Government concerns in this aspect are Euro-2 emissions norms and CNG.g. affecting the firm and integrating those in its strategic plans is fast gaining ground. 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. standard for drugs.g.
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 . analysis and reporting of data and findings relevant to a specific marketing situation facing the company. competition and their brands to assess past performance. What are the major steps of Marketing Research Process? Step 1 : Define the problem. Conducting Marketing Research and Forecasting Demand What is Marketing Research? Systematic Design. Abraham Koshy.tif SUMMARY by Chapter 4 Why Marketing Research? Successful Marketing Managers need timely. plan future activities and take strategic decisions leading to successful product launch or increase growth of a brand. accurate and actionable information about consumers. collection. Kevin Lane Keller.Marketing Management By Philip. Mithileshwar Jha logo copy.
how should we select people for survey. Online Interview. However technology has eased the problem to a great extent. Contact Telephone Interview. Step 4: This is the process to extract findings by tabulating the data and developing frequency distributions in hope of discovering additional findings. stributions Step 5: The researcher presents finding relevant to the major marketing decisions facing management management. Personal Interview. honesty and consistency of respondents. informal interviews. Expensive to collect. Step 3: Data collection is one of the most expensive. They can be either open-ended or closed-ended. .Chapter 4 . how many people to survey. the scope of market research and what all decisions are to be made on the basis of research. •Sampling Plan: A plan addressing Sampling questions like whom all to survey. preferences and satisfaction. Research Tools •Questionnaires: A set of questions Questionnaires: soliciting responses that is of relevance to market situation. time taking and most error prone phase of time-taking market research as it entirely depends on availability. 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.Conducting Marketing Research and Forecasting Step 1: Achieve clarity on the content. •Contact Methods: Mail Questionnaire. •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. •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. Primary Data: Freshly gathered data for research only. 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. using tools from anthropology to provide deeper understanding of consumers.
advanced statistical techniques and computerized data collection procedures • • Available market Set of consumers who have interest income and access to a particular offer. Depending on their confidence in the findings. To estimate current demand companies attempt to determine total market potential. analyze past sales or engage in market testing mathematical models. . advanced statistical techniques and computerized data collection procedures are essential to all types of demand and sales forecasting. 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. solicit their sales force’s input.Chapter 4 . analze past sales or engage in market testing mathematical models. area market potential industry sales and market share Future Demand • It is the demand that companies determine by surveying buyer’s intentions. area market potential industry sales and market share To estimate future demand companies’ survey buyer’s intentions solicit their sales force’s input. Step 6: Market research is just a tool to provide insight to the managers. Penetrated market Set of consumers who are buying the company's product. gather expert opinions. gather expert opinions.Conducting Marketing Research and Forecasting Types of Market Potential market Set of consumers who profess a sufficient level of interest in a market offer. Target market The part of the qualified available market the company decides to pursue.
Very often. and disposing of the given market offering. personnel and image involved. As customers have become more informed and educated than ever. energy. 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. a customer value analysis is undertaken by managers to better understand the company’s strengths and weaknesses in comparison with competition. 2. however. Total Customer Cost It is the perceived bundle of costs customers expect to incur in evaluating. functional. It follows the pattern below 1.Marketing Management By Philip. and psychological costs. Mithileshwar Jha logo copy. Abraham Koshy. services. Moving from a product-to-sales philosophy to a holistic marketing philosophy. obtaining. including monetary. may provide a better chance of outperforming competition.tif SUMMARY by Chapter 5 Creating Customer Value. and the perceived alternatives. Total Customer Benefit It is the perceived monetary value of the bundle of economic. time. . organisations have started to adopt business models where the customer is at the top. companies today face their toughest test of survival. This chapter discusses the importance and various methods of creating customer value and sustaining customer loyalty. using. Assess the quantitative importance of the different attributes and benefits. and psychological benefits customers expect from a given market offering because of the products. Satisfaction and Loyalty In the face of increasing competition. Kevin Lane Keller. Identify the major attributes and benefits that customers value. And at the cornerstone of this philosophy are strong customer relations.
CRM can be conducted using the following 4 steps – 1. Identify your prospects and customers. customer. The value of the customer base can be increased by improved by measures such as reducing the rate of customer defection. Monitor customer values over time as the economy. and features change. Measuring customer profitability lies in the concept of Customer Lifetime Value (CLV). 3. making low-profit customers more profitable or terminating them.Chapter 5 . increasing the longevity of the customer relationship. 5. services. 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. etc. technology. 4. Satisfaction is usually measured with the help of customer surveys. Differentiate customers in terms of their needs and their value to your company. 2. Interact with individual customers to improve your knowledge about their needs and to build stronger relationships.Creating Customer Value. selling and servicing that 150-20 Rule The 20% most profitable customers generate as much as 150% of the profits of the company. CLV calculations are generally used by marketers to develop a long-term perspective. Satisfaction and Loyalty Trends 3. Assess the company’s and competitors’ performances on the different customer values on each attribute and benefit. 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. the 20% least profitable customers lose 100% of the profits. . Customize products. The two major factors involved in customer satisfaction are complaint handling and product/service quality. CLV describes the net present value of the future stream of profits expected over the customer’s lifetime purchases. 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. 4. Assess how customers in a specific segment rate the company’s performance against a major competitor on an individual attribute or benefit basis. and messages to each customer.
3. Disadvantages of Datamining and CRM 1. predictive modelling. maintaining and using customer databases and other databases to contact. etc. Probability of error of CRM methods or assumptions made thereof. status of current contacts. from the customer database. etc. etc. Developing loyalty programs 3. past volumes. Creating institutional ties Database marketing It is the process of building. Building and maintaining a database requires huge amounts of investment in terms of computer hardware. buyers’ personal details. trends. It uses techniques such as cluster analysis.Chapter 5 . Interacting with customers 2. marketers can extract information about individuals. transact and build customer relationships. Customer Database It contains customers’ past purchases. competitive suppliers. past prices and profits. . Datamining Through datamining. Customer attitudes about privacy of personal data. Convincing employees to be customer oriented than using traditional methods. Personalising marketing 4. the company’s share of the buyer’s business. Satisfaction and Loyalty Trends Building Customer Loyalty It involves the following procedures – 1.Creating Customer Value. 2.
Sub-culture . Social Class – Homogeneous and enduring divisions in a society which are hierarchically ordered. values. Roles and Status – Role consists of activities a person is expected to perform. friends. c. professional. Culture . Secondary groups: religious. Cultural Factors a. family. Reference Groups – Have direct or indirect influence on person’s attitude and behaviour. Members share similar tastes and behaviour. . Dissociative groups: whose values or behaviour and individual rejects. Family of procreation: spouse and children. religions. Child learning from family & surroundings. E.tif SUMMARY by Chapter 6 Analyzing Consumer Markets Since marketing starts from the customer. Include nationalities. This chapter talks about the various behavioural patterns that govern the decision making process of a customer. Marketers must be aware of the status symbol of each product. Primary groups: regular interaction. b. b.g. Mithileshwar Jha logo copy. racial groups and geographic regions.Marketing Management By Philip.Frames traditions. preferences. Family – Family of orientation: parents and siblings. sense of personal ambition. self worth and love. it is of primary importance to understand the psyche of the customers and their buying motives. Kevin Lane Keller. 2. A marketer needs to understand these factors affecting the customer’s purchase decisions so as to design an appropriate marketing strategy. neighbours. Acquires orientation towards religion. Social Factors a. Abraham Koshy.Provides more specific identification and socialization. Each role carries a status. perceptions. Aspirational Groups: ones that a person hopes to join. trade union groups. More direct influence on buying behaviour. c. politics and economics. e. Factors affecting Consumer Buying Behaviour 1.g.
. Marketers can build demand by associating the product with positive drives. At next level consumer may enter into active information search. In marketing. Memory – Short term and long term memory. Personal Factors a.Factors influencing a particular choice over the other include attitudes. savings. borrowing power etc affect consumption patterns. Problem Recogniton Information Search Evaluation of Alternatives Purchase Decision Postpurchase Behaviour The Buying Decision Process • • Problem Recognition . Herzberg’s two factor model. Motivation: Freud’s theory of id. Age and Stage in the Life Cycle – Tastes are age related. Occupation and Economic Circumstances – Economic Circumstances like spendable income. d. • • Evaluation of Alternatives . phoning friends etc. d. Maslow’s need hierarchy theory. set of distinguishing characteristics that influence his/her buying behaviour. c. Consumers match brand personality with their ideal self concept instead of their actual self concept. Build brand knowledge and brand recall as node in memory.Chapter 6 . Marketers need to identify circumstances that trigger needs. Personality and Self Concept – Personality.Analyzing Consumer Markets 3.Customer recognises a need triggered by internal or external stimuli. Perception: Process by which we select. ego and super ego.Two levels of involvement – Heightened attention when person becomes more receptive to information about the product. Marketers should understand that these factors provoke risk and should provide information to reduce it. debts. • Post purchase Behaviour . beliefs and expectancy value. assets. 2 intervening factors come into play. Markets should also consider critical life events or transitions. b. perceptions are more important than reality. organize and interpret information inputs. Purchase Decision . postpurchase actions.Attitudes of others and Unanticipated situational factors. Learning – Induces changes in behaviour arising from experience.Marketers must monitor postpurchase satisfaction. Information Search .Between purchase intention and purchase decision. c. and postpurchase product uses. b. Psychological Factors a. Lifestyle and Values 4. looking for reading material.
Habitual: Buying the same thing out of habit and not out of loyalty. Distribution network should be excellent in this case. 3. Dissonance Reducing: In case of repeat purchase of same product. Eg.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. 4. Marketer should keep introducing new products and display the product prominently. Complex Buying Behaviour: When a customer purchases something for the first time. .Biscuits. Maintain consistency in product and advertising. 2. Variety Seeking: Consumers will keep switching varieties just out of boredom.Chapter 6 .
reducing operating costs. so business marketers must monitor the buying patterns of ultimate consumers. Because the seller holds the stock. • Geographically concentrated buyers Derived demand: Demand for business goods is derived from demand for consumer goods.Marketing Management By Philip. Mithileshwar Jha logo copy. • • . and choose among alternative brands and suppliers. Therefore to provide superior customer value to the business buyers this chapter familiarizes you with the underlying dynamics and process of business buying. and satisfying social or legal obligations. Organizational buying is the decisionmaking process by which organizations establish the need for purchased products and services and identify. blanket contracts are sometimes called stockless purchase plans. 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. suppliers have to customize offerings to meet the needs of individual customers. Close supplier customer relationship: Smaller customer base and importance of larger customers. • Inelastic demand: Not much affected by price changes as producers cannot make quick production changes. The Business Market versus the Consumer Market • • • Fewer buyers: Business marketers normally deal with far fewer buyers than do consumer marketers.tif SUMMARY by Chapter 7 Analyzing Business Markets and Buyer Behavior Business buyers purchase goods and services to achieve specific goals. evaluate. such as making money. Abraham Koshy. 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. Larger buyers: Buyers for a few large firms do most of the purchasing in many industries. Kevin Lane Keller.
prices. Leasing: Many industrial buyers lease rather than buy heavy equipment to conserve capital. purchasing companies moving towards internet purchasing.g. Major Influences on Business Buying Environmental Factors Attention to numerous economic factors. delivery requirements. technical. and gain tax advantages. office building. Influencers: People who influence the buying decision. 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. 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. to gain more purchasing clout and savings.. New task: situation in which a purchaser buys a product or service for the first time (e. • • Direct purchasing: Business buyers often buy directly from manufacturers rather than intermediaries Reciprocity: Business buyers often select suppliers who also buy from them. and consumer spending. and the sales cycle can take years.Analyzing Business Markets and Buyer Behavior • Fluctuating demand: Demand for business products is more volatile than consumer products. • • • Three types of Business Buying Situations: Straight rebuy: situation in which the purchasing department reorders on a routine basis (e.g. or other terms. users initiate the buying proposal and help define product requirements. and involving more responsibility • • • • • Centralized purchasing: recentralized their purchasing. • 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. office supplies. and competitive developments. including technical personnel. bulk chemicals). investment. often. politicalregulatory.. including interest rates and levels of production. Approvers: People who authorize the proposed actions of deciders or buyers.Chapter 7 . receive better service. get the latest products. team-oriented. Deciders: Those who decide on product requirements or on suppliers. new security system). • • • 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. Purchasing-performance evaluation & incentive systems and buyers’ professional • . Business buyers also monitor technological.
development frequent and reliable supply delivery. By getting in early and influencing buyer specifications. occur when a buyer gets new ideas at a trade show. Stage 3: Product Specification Company assigns a product value analysis (PVA) to engineering team. suppliers locating closer to customers. Or the buyer may rate the supplier on several criteria using a weighted score method. In the case of MRO items. Stage 2: General Need Description The buyer has to determine the needed item’s general characteristics and the required quantity. the cultural factors that The buyer periodically reviews the performance of the chosen supplier(s). and stable production schedules. Major Influences on Business Buying: Interpersonal Factors Buying centers usually include several participants with differing interests. The buyer may contact the end users and ask for their evaluations. Individual Factors Each buyer carries personal motivations. When the item is complex or expensive. and so on. income. status. and culture. and build a good reputation in the marketplace. Cultural Factors Marketers carefully study the culture and customs of each region to better understand can affect buyers and the buying organization. stricter quality control.Analyzing Business Markets and Buyer Behavior • Lean production: incorporates just-in-time (JIT) production.Chapter 7 . listing the technical specifications. effective Internet communications. developing a new product. Three methods . telemarketing. the buyer will invite a few suppliers to make formal personality. need for new equipment and materials or to obtain lower prices or better quality. Or the buyer might aggregate the cost of poor supplier performance to come up with adjusted costs of purchase. empathy. Business marketers can stimulate problem recognition by direct mail. including price. authority. as influenced by the buyer’s age. and persuasiveness. the buyer will require a detailed written proposal from each qualified supplier. Stage 8: Performance Review are used. Internally. education. toward risk. the delivery schedule. In this stage. buyers are moving toward blanket contracts rather than periodic purchase orders. sees a supplier’s ad. attitudes presentations. Stage 7: Order-Routine Specification The buyer negotiates the final order. The buyer’s computer automatically sends an order to the seller when stock is needed. After evaluating the proposals. and the supplier arranges delivery and billing according to the blanket contract. computerized purchasing. a supplier can significantly increase its chances of being chosen. business marketers can assist buyers by describing how their products would meet such needs. perceptions. After evaluating each company. and preferences. Stage 6: Supplier Selection The buying center specifies desired supplier attributes (such as product reliability and service reliability) and indicate their relative. Stage 4: Supplier Search The supplier should get listed in online catalogs or services develop communications to reach buyers. or is contacted by a sales representative offering a better product. the quantity needed. and calling on prospects. A blanket contract may be established. 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 will end up with a short list of qualified suppliers Stage 5: Proposal Solicitation The buyer invites qualified suppliers to submit proposals. Externally. job position.
tif SUMMARY by Chapter 8 Identifying Market Segments and Targets This chapter deals with one of the quintessential concepts of Marketing: STP i. mass distribution and mass promotion of one product for all buyers Steps in market segmentation. product for woolen clothes. 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. Market Segmentation 2. marketing: characteristics. disclose and also can fine-tune the marketing program to fine better reflect competitors marketing. targeting and segmentation. the liquid detergent from Godrej is a fabric washing egments. Mass Marketing: The seller engages in mass production. Segment Marketing offers key benefits over Mass Marketing as the company can offer better design. Mithileshwar Jha logo copy. Abraham Koshy.e. Target and Positioning. Target Marketing 3. 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. . bases for Segmenting Consumer Markets. or wants who might require separate products or marketing mixes. price. It explains different levels of Market Segmentation.g. positioning 1. B. Segment marketing Dividing a market into distinct groups with distinct needs. Ezee. Marketers usually define niches by dividing segments into sub segments. Kevin Lane Keller.Marketing Management By Philip. Segmentation. For e.
or response to a product. neighborhoods etc • • • Region: South India. Classification is oriented. semi urban areas B.Chapter 8 .1 •Full Nest-II. Demographic Segmentation: The market is divided on the basis of variables such as age. outdoor oriented. attitude toward. Activities. sports oriented. Customerization empowers “one-to-one customers to design the product and service offering to their choice.youngest child under 6 II. done on three parameters: AIO-Activities. Many Banks in Kerala have special ‘NRI Branches’ to cater to the needs of customers whose relatives remit money from cater abroad. income. regions.1 child less than 6 yrs old I. Metro cities etc Class-I Rural. states.” customized marketing” or “one one marketing”. use of. E.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. class-II cities. neighborhoods and even individual stores is called as Local Marketing. Psychographic Segmentation: Here buyers are divided into different groups on the basis of psychological/personality traits.Identifying Market Segments and Targets C. family life cycle. religion etc. For e.Focus of expenditure on self Single. D. education. Western Region. East City: Class cities. gender. • • Lifestyle: Culture-oriented. urban . Geographic Segmentation: Division of the Market into different geographical Units such as nations. Behavioral segmentation: Buyers are divided on the basis of their knowledge of. The behavioral variables are as follows: . cities. Local Marketing: Target marketing that involves marketing programs tailored to the needs and wants of local customer groups in trading areas. Demographic variables are easy to measure and are directly associated with customer needs and wants FAMILY LIFE CYCLE STAGES Stage1: Bachelorhood Stage2: Honeymooners •Single. Personality: Compulsive.ambitious D.g.Focus •Young married couple without kids. family size. Asian design Paints retailers facilitate customers to mix and match colors of their choice from a catalogue. North. Bases for Segmenting Consumer Markets A.g. Individual Marketing: This is the ultimate level of marketing that leads to “segments of one”.authoritarian .focus on building Young home and relation •Full Nest-I. lifestyles or values. occupation. Interests and Opinions. gregarious .
medium. Full Market Coverage: The firm attempts to serve all customer groups with all a products they may need. aware. intending to med. Microsoft (non-alcoholic (Software Market) etc. informed.Identifying Market Segments and Targets • • • • Usage Rate: Light. E. buy Attitude towards Product: Enthusiastic. interested. negative.Chapter 8 . P = Product M = Market . indifferent. absolute Readiness Stage: Unaware. Each objectively Specialization: attractive and appropriate. Coca Cola (non alcoholic beverage segment). Heavy Loyalty Status: None. positive.g. Market Specialization: The firm concentrates on serving many needs of a particular customer. 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. Medium. 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. desirous. strong.
4. Kevin Lane Keller. To effectively devise and implement the best possible brand positioning strategies. 3. The market concept of competition reveals a broader set of actual and potential competitors. Mobility.A segment is unattractive when there are actual or potential substitutes for the product. The challenger patiently researches and develops the next technology and launches an attack. . Threat of substitute products . strong. or aggressive competitors.A segment is unattractive if the company's suppliers are able to raise prices or reduce quantity supplied.segment is unattractive if it contains numerous. leapfrogging Benchmarking is the art of learning from companies that perform certain tasks better than other companies. 5. 2. Threat of intense segment rivalry . Threat of buyers' growing bargaining power . Threat of new entrants . By mapping the buyer's steps in obtaining and using the product a company's direct and indirect competitors can be identified. Threat of suppliers' growing bargaining power . Markets have become too competitive to just focus on the consumer alone. shifting the battleground to its costumers which often lowers costs and can manipulate prices and costs in different parts of the value chain. Competitive Forces (Michael Porter’s 5 forces) 1. Mithileshwar Jha logo copy. companies must pay attention to their competitors. Abraham Koshy. with suppliers and Technological is a bypass strategy practiced in high-tech industries. Identifying Competitors • • • • Entry.A segment is unattractive if buyers possess strong or growing bargaining power. The most attractive segment has high entry barriers and low exit barriers. Marketing Concept According to marketing approach. Vertical Integration is to integrate backward or forward i. competitors are companies that satisfy the same customer need.e.Marketing Management By Philip. where it has Industry Concept • Number Of Sellers And Degree Of Differentiation an advantage.segment's attractiveness varies with the height of its entry and exit barriers. And Exit Barriers Cost Structure Degree Of Vertical Integration Degree Of Globalization territory.tif SUMMARY by Chapter 9 Dealing with Competition Building strong brands requires a keen understanding of competition.
• Share of mind . and cost cutting.The percentage of customers who named the competitor in responding to the statement. 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.The percentage of customers who named the competitor in responding to the statement. and financial situation. • Three Important Variables for analyzing competitors • Share of market . • 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. It keeps increasing its competitive strength and value to customers. • Contraction Defense: giving up weaker territories and reassigning resources to stronger territories. ." Companies that make steady gains in mind share and heart share will inevitably make gains in market share and profitability. 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.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. Strengths and Weaknesses: A company needs to gather information on each competitor's strengths and weaknesses. • Mobile Defense: In mobile defense. Selecting Competitors: Strong versus Weak: Weak require fewer resources per share point gained. An effective counterattack is to invade the attacker's main territory so that it will have to pull back to defend the territory. history.Trends • • Chapter 9 . "Name the first company that comes to mind in this industry. distribution effectiveness." • Share of heart . • Preemptive Defense: A more aggressive maneuver is to attack before the enemy starts its offense.The competitor's share of the target market. The firm should also compete with strong competitors to keep up with the best. Defending Market Share The most constructive response is continuous innovation. The leader leads the industry in developing new product and customer services. the leader stretches its domain over new territories that can serve as future centers for defense and offense through market broadening and market diversification. "Name the company from which you would prefer to buy the product. current management.
Value-priced goods and services. advertising. Nichers some things from the have three tasks: creating niches. and leapfrogging into new technologies to supplant existing products. Prestige goods. medium-sized. with slight variations. .takes the product or product feature leader's products and • Quality-price specialist: The firm operates at the low. Product proliferation.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. diversifying into new geographical markets. and distribution • Flank Attack: Identifying shifts in market segments geographic areas that are causing gaps to develop. • Geographic specialist: The firm sells only in a certain locality. price. name. The key idea in successful nichemanship is specialization. Here are some possible niche roles: differentiation in • End-user specialist: The firm specializes in serving one type of end-use customer. intense promotional blitzes. advertising. 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. world. • Customer-size specialist: The firm concentrates on selling to small. • Imitator . improved services. 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. • Product-feature specialist: The firm specializes in producing a certain type of Adapter . terms of packaging. Because niches can weaken. intermittent attacks to harass and demoralize the opponent and eventually secure permanent footholds (selective price cuts. Distribution innovation.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. and then rushing in to fill the gaps and develop them into strong segments. • Guerrilla Warfare: Small.Chapter 9 . and packaging. Four broad strategies can be distinguished: • Counterfeiter duplicates the leader's product and package and sells it • Cloner . the firm must continually create new ones therefore multiple niching is leader but maintains preferable to single niching. whereas the mass marketer achieves high volume. Manufacturing-cost reduction. region.emulates the leader's products. Lower price goods. and protecting niches. Three lines of approach: diversifying into unrelated products. • Encirclement Attack: The encirclement involves launching a grand offensive on several fronts. or large customers. Product innovation.or high-quality ends of the market adapts or improves • Channel specialist: The firm specializes in serving only one channel of distribution them. pricing. or area of the or location. expanding niches. Intensive advertising promotion Competitive Strategies for Market-Nicher • The nicher achieves high margin. It must keep its manufacturing costs low and its product quality and services high. and occasional legal action) Few more specific strategies: Price discount.
. Reflected in way consumers think. beliefs and so on that become associated with the brand The differential response is reflected in perceptions. Brand Knowledge consists of all thoughts. 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. Brand Equity Added value endowed on products and services. feelings.Marketing Management By Philip.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. term. feel and symbol or design. or a act with respect to a brand. Kevin Lane Keller. • negative depending on how consumers respond. Brand Promise Marketer’s vision of what the brand must be and do for the consumers. images. 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. Brand: A name. their brand knowledge and their likely response to marketing activity. Customer based brand equity – differential effect brand combination of them. knowledge has on customer response to the marketing of a brand. experiences. how it is built and measured as well as the decisions involved in branding strategy. sign. 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. This chapter talks about the concepts of brand and how branding works. Mithileshwar Jha logo copy. Abraham Koshy. We will understand what brand equity is.
Resonance Judgement Feelings Performance Imagery Salience . Esteem – how well the brand is regarded and respected 5. Up and coming/Niche Leaders Google USA Pringles Nike Brand Element: Those trademark able devices that identify and differentiate the brand. Energy – brand’s sense of momentum 3. Differentiation – degree to which a brand is seen as different from others 2. 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. Relevance. 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.Chapter 10 . Most strong brands employ multiple brand elements. adaptable and protective (‘defensive’). Brand element choice criteria includes 6 main parameters – first three being memorable. 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. which occurs only if the right building blocks are put into place. Energized Brand Strength (Differentiation. meaningful and likable (‘brand building’) and last three being transferable.
Brand Performance – how well the product or service meets customers’ functional needs Brand Imagery .describes the extrinsic properties of the product or service. The reasons for diversifying the brand portfolio 1. Increasing internal competition within the firm 4. merchandising and physical distribution Customer Equity Sum of lifetime values of all customers. uncover its sources of brand equity and suggest ways to improve and leverage its equity. 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. 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. Brand Valuation – Job of estimating the total financial value of the brand. Reinforcing requires innovation and relevance throughout the marketing program. The aim of Customer Relationship Management (CRM) is to produce high customer equity. 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. • • Brand Audit – consumer focussed series of procedures to assess the health of the brand.Creating Brand Equity Trends Brand Salience – how often and how easily customers think of the brand under various purchase or consumption situations. Attracting customers seeking variety who may otherwise have switched to another brand 3.• • • • Chapter 10 . . Increasing shelf presence and retailer dependence in the store 2. sales. Yielding economies of scale in advertising.
Positioning requires determining on a frame of reference based on the following factors: strategies. 1. 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 . 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. 2. 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. Mithileshwar Jha logo copy.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. Analyzing the competition. Abraham Koshy. Kevin Lane Keller. 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. Identifying the target market. Attributes or benefits consumers strongly associate with a brand. Competitive Points of Parity: Associations designed to negate a competitor’s pointsof-difference.Marketing Management By Philip.
g. E. Marlboro’s “macho cowboy” image.g. Initial advertising often concentrates on create brand awareness and subsequent advertising attempts to craft the Brand 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. Differentiating Strategies Competitive Advantages It is a company’s ability to perform in 1 or more ways that competitors can’t match. E.Chapter 11 . market and competitors change over the product life cycle (PLC). A company’s positioning and differentiation strategy must change as the product.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. Image differentiation: Companies can craft powerful compelling images. Channel Differentiation: more effectively and efficiently designed channels. coverage. . Product Lifestyle Marketing Strategies Most product life-cycle curves are portrayed as bell shaped curves. expertise and performance. BMW through a well crafted marketing program straddled ‘Luxury’ and ‘Performance’ as both POD and POP. smartly dresses flight attendants of Kingfisher Airlines.g. Two Straddle Positing: It is a common positioning technique used when a company tries to straddle between two frames of reference.
and items models products service.Chapter 11 . Here the entrepreneur has three options: 1. Competitors invade each others profits slows down. Single Niche Strategy: Design a product to meet preferences of 1 segment of the market 2. • 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. Multiple-Niche Strategy: Launch 2 or more products simultaneously to capture 2 or more parts of the market 3. 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. 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 . 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. 2. Mature markets swing between fragmentation and consolidation. This is often followed by market consolidation caused by the emergence of a new attribute that has greater appeal. market splits into finer segments and market segmentation occurs. Mass Market Strategy: Design a product for the middle of the Market • • 1.Crafting the Brand Positioning Trends Summary of Product Lifecycle Characteristics.
immediately. thus should be made available in many locations. brand positioning and competition take place at this level. • Consumer goods classification: done on the basis of shopping habits. In developed countries. bathroom. dresser. E.g. 2. Product classification • Durability and tangibility 1.g. Durable goods: tangible goods that survive many uses. Clothes. labeling and warranties and guarantees. towel etc Expected product: attributes that buyers normally expect along with their product.tif SUMMARY by Chapter 12 Setting Product Strategy Product is the first and the most important element of a marketing mix. This chapter deals with various product strategies for making coordinated decisions on product mixes. 4 types1. They are purchased frequently. supplier credibility.g. product lines. places. persons.g. with minimum effort Staples: purchased on regular basis Impulse goods: purchased w/o planning e. hotel room includes bed. Kevin Lane Keller. higher margins.g. experiences. E. E. Mithileshwar Jha logo copy.: soaps. Services: intangible.g.g. while in developing countries it takes place at ‘expected product’ level. packaging. machines. Umbrellas . closet. Require more quality control. events. Haircuts. services. Require more personal selling. including physical goods. 3. Product Levels Marketers need to address 5 product levels: Product: Anything that can be offered to a market to satisfy a need or want. Augmented product: attributes that exceed buyer expectations. desk. • • • • Core Benefit: The benefit a customer really buys. and advertised heavily to induce trial. Convenience goods: purchased frequently. charged a small markup. Nondurable goods: tangible goods that are normally consumed in a day or two. adaptability. variable. • Potential product: it encompasses all the augmentations and transformations the product or offering might undergo in the future. Abraham Koshy. properties. Hotel guest buys rest and sleep Basic Product: e. repairs. E. Chocolates Emergency goods: purchased when need is urgent e.Marketing Management By Philip. soft drinks. brands. perishable products. more seller guarantees.
g. average. Paint. Air conditioner maintenance. Mass customization is the ability of a company to meet each customer’s requirements.g. However. and Natural products. Heterogeneous: similar in price but different in product features. writing paper. Raw materials: 2 kinds. Durability: buyers generally pay more for more durable products.g. Reparability: the ease of fixing a product when it malfunctions or fails Style: the product’s look and feel. Creates distinctiveness that is difficult to copy. 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. Customization: requires gathering and using information about consumers. E. Iro tires. Shopping goods: goods that consumer compares based on suitability. Business services: short term services that facilitate developing or managing finish Product Differentiation Form: this includes size. price etc Homogeneous: similar in quality but different in price. Advertising less importa Equipment: includes portable factory tools and equipments. Company must compare customer value v/s company cost for each potential feature. The level must be appropriate to the target segment and not necessarily the best. and component parts (e. Differentiation . E.component materials (e. high. They includeMaintenance and repair services. E. BMW through a well crafted marketing program straddled ‘Luxury’ and ‘Performance’ as both POD and POP. pencils. Specialty goods: they have unique characteristics for which consumers can spend mo 4.g. Sales force mo 3. E. Business advisory services. These are usually fabricated further).) products. Materials and parts: those that enter the manufacturer’s product completely. 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. Cars. Capital items: long lasting goods that facilitate developing or managing the finish Installation: includes buildings and heavy equipments. These enter the final product w/o change. E. 4 performance levels. They includethat personal selling important than advertising. Conformance quality: the degree to which all produced units is identical and meets the promised specifications. shape. physical structure. 3.g. E. and superior. Management consulting.g. reference books. Moto 2.Farm products. Lubricants. Insurance.g.Setting Product Strategy 2.low. men’s suits etc.Chapter 12 . advertising. Supplies: short term goods that facilitate developing or managing finished produc 4. Unsought goods: those that consumers do not know about or think of buying. cement. Features: they supplement the basic function of the product. • production process1. They includeMaintenance and repair items.g. broom. which are seasonal and require spec marketing apart from advertising. they don’t require comparison. products. which are limited in supp Manufactured materials and parts: 2 kinds. Operating supplies. Require advertising and personal selling. Performance quality: it is the level at which a product’s primary characteristics operate.
E. • • • • Product Hierarchy 1. Returns: they are of two types1. E.Chapter 12 . E. o Core products: basic products that have a high sales volume but with low margins as they are essentially undifferentiated commodities. Installation. are sold to same customers. Security. delivery.g.g. o Staples: lower sales volume. . Installation: work done to make a product operational in its planned location. price. 2. carry cases.g. They lengthen over time. Customer consulting: data. 6. E. Life insurance. E. Product line length: Companies seeking higher market share have longer product lines. Length: the total no. Uncontrollable: can’t be eliminated by the company in the short run. o Convenience items: peripherals selling in high volumes. accuracy. Product family: product classes that satisfy a core need. information and advice services that seller offers to buyers. Product line Product line analysis: based on – • Sales and Profit: a company can classify its products based on the margins. 5. or errors of seller or customer and can be eliminated with proper strategies. Savings and income 3. 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. Item: a distinct unit within a brand or product line distinguishable by size. other costs increase and thus some non performing items are eliminated. highly promoted. appearance. Customer training: training customer’s employees to use vendor’s equipment efficiently and properly. Depth: how many variants are offered of each product in the line? Consistency: how closely related the various product lines are in end use. Basic computers. etc. Maintenance and repairs: helps customers keep products in working order. Product system: compatible manner.g. high margins. and care throughout the process. Controllable: result from problems. those seeking higher profitability have shorter product lines. Term life insurance. Product class: a group of products within a family that have functional coherence 4. Faster CPU o Specialties: lower sales volume.g. Becomes a selling point when the target market is technologically novice.Setting Product Strategy Services Differentiation Ordering ease: ease of placing an order Delivery: includes speed. E. of items in the mix. E. 2. Product line: a group of products within a class that perform similar function. Software. no promotions. ICICI prudential term life insurance. difficulties. Need family: the core need that underlies the existence of a product family. However. E. higher margins. less promotion.g. are marketed through same channels.g. Product type: a group of items within a line that share of possible forms of the product. Width: how many product lines the company carries. • Market Profile: product line managers must review how the line is positioned against competitor’s lines. Excess manufacturing forces production of newer items.g.
and then introduced Sonata for low end and Edge. The company may choose between featuring their most selling items and promoting their weak items from time to time. E. Fixed fee should be low to encourage more sales. Companies stretch in the following ways• Down Market Stretch: introducing lower-priced line than the one being offered. . Xylus for high end. Advertise entry level models at low prices to attract more customers. E. counterfeiting and substitutions can erode sales. • • • • Captive Product Pricing: e. It can be risky as the price may not be less enough for competitors or some customers may shift the cheaper version. Optional Feature Pricing: e. he can price the main product lower.Setting Product Strategy Line stretching: occurs when companies try to go beyond their current range offered.g. Two way Stretch: middle level companies entering both high end and low end markets. If producer can sell these to the customer. profit can be maximized from variable fees. Helps in establishing market dominance. By-Product Pricing: e. E. Product Bundling Pricing 1. they need to identify the weak items. Improvements must not occur too early (as they will affect sales of current product) and too late (as competitors would get more time).g.g. • • Product Line Pricing: companies develop product lines and introduce price steps. but allows competitors to copy and pose greater challenge. 2. Line filling: lengthening product line by introducing more items in the present range. Line modernization. Production of petroleum products produces several by products.g. Two-Part Pricing: fixed fee+ variable usage fee. Unilever found only 400 of its 1600 items generated 90% of company’s profits. Titan started as mid level watch. Mixed bundling: products offered individually as well as in bundles. Piecemeal allows company to gauge the effect of change on consumers. For this. If price is too high. Customers may not plan to buy all components.g. • • Up-Marker Stretch: entering high end of market for better growth. higher margins. Can be done piecemeal or all at once. but may be lured by the saving. Pure bundling: products offered only as bundles. E. Automobile cos.g. Manufacturers of razors price them low and set high markups on razor blades. These modes are stripped of several features that buyers usually end up buying.Chapter 12 . Companies also need to optimize their brand portfolio. Featuring and Pruning: product lines need to change with the times. Their task is to establish perceived quality differences that justify price differences. tour operators bundle stay and travel. Note: a high end model of a low end brand is preferred over a low end model of a high end brand. Auto manufacturers. Product-Mix Pricing: searching for a set of prices that maximizes profits on the total mix.g. and weed them away.
so an unsatisfactory performance will be damaging for the partner company as well. Ingredient brands create preference for their products so that a host product which does not have that ingredient. a one time alliance of Apple. . However. consumer expectations with the level of involvement are high. It allows products to be convincingly positioned and generating greater sales as 2 well known images are combined.Setting Product Strategy Co-Branding: 2 or more brands are combined into a joined product or are marketed together in some fashion.Chapter 12 . They are especially helpful when the company is not well known or when product quality is superior to that of competitors. grade the product. the packaging needs to be tested: Labeling: labels identify the product. goals and capabilities. repair. parts that are contained products. both brands must have brand equity. 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. Packages may include 3 levels of materials. and must fit in terms of values. Ingredient Branding: special case of cobranding. Warranties and Guarantees: returned to the manufacturer for replacement. Package is the buyer’s first encounter with the product. joint venture co-branding (Indian oil and Citibank cobranded credit cards). It created brand equity for materials. warranties are formal statements of expected product performance by the manufacturer. Packaging: activities of designing and producing containers for a product. describe the product and promote the product (through attractive graphics). multiple sponsor co-branding ( Taligent. It includes same company co-branding (Gillette launched Mach 3 Turbo with its shaving gel). Products under warranties can be Guarantees reduce the buyer’s perceived risk. components. 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. For co-branding to succeed. IBM and Motorola) and retail co-branding (2 retail establishments using the same location to optimize space and profits).
E. Categories of services mix Pure Tangible Goods • No services accompany the product. Service marketing is different from goods marketing as service consumer relies on word of mouth. Services needs client presence & may meet a personal or business need.E. Abraham Koshy. personnel & physical cues to judge quality. E.g psycotherapy The Tangible Goods with accompanying services Hybrid Major service with accompanying minor goods and services Pure Service . Mithileshwar Jha logo copy.g Soap.toothpaste •The offering accompanied by one or more services E. Service companies can choose among different processes to deliver their service. Kevin Lane Keller. • • • Services can be equipment based or people based & they differ in their objectives and ownership. They are highly loyal to service providers who satisfy them & because switching costs are high.g The Computers. E. consumer inertia can make it challenging to entice a customer away from a competitor. they rely heavily on price. Service providers find significant profitability in delivering superior services.Its production may or may not be tied to physical product Categories of services mix.Marketing Management By Philip. they turn to service differentiation.g Airplane travel alog with its services •The Offering consists of only a service. Cell Phones & cars •The offering contains equal parts goods and services. 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 .tif SUMMARY by Chapter 13 3 Designing and Managing Services Today as product companies find it harder and harder to distinguish their physical products.g The restaurants •The offering consists of major service along with The additional services or supporting goods.
distribut ion.Chapter 13 .Increased Time consumer participation.Designing and Managing Services Holistic Marketing for Services External Marketing •It describes the normal It work of preparing. information programs and building brand personality Devising Branding Stratgey Create a brand hierarchy and brand portfolio that permits positioning. •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.Peak Time efficiency. targeting of different market segments Provide Post-Sales support Sales Identify what is most valuable to customer and include repair & maintainence services .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.Stratgies that marketers must use : •Demand Side .Nonpeak Demand.symbols.shared services.Complementary Services.Differential Pricing.and promoting the service to customers. Inseparability • Services are typically produced and consumed simultaneously .slogans to build brand awareness Establishing Image Dimensions desgin marketing communication. Internal Marketing •It describes the training and motivating employees to serve the customers well.pricing.Part-Time employees .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.Facilities for future expansion Variability Perishability Developing Brand Strategies for services Chosing Brand Elements Focus on logos.Reservation Systems •Supply Side .
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.Xer ox •Both financial & service performanc e monitored by top manageme nt HIGH STANDARDS •Setting high service standards •developing reliable.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 .g Marriot.resi lient & innovative customer Intefrace systems SELFSERVICE TEHNOLOGI ES •replacing person to person interaction s with self service technologie s e.Chapter 13 .
volume-aggregating sites collate orders from many customers and press the supplier for a deeper discount. or venture into a new market with an existing product. etc. • 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. Also. to reduce processing time of these requests greatly.Marketing Management By Philip. Mithileshwar Jha logo copy. Buyers can : • Get instant price comparisons from thousands of vendors: Websites like pricescan.tif SUMMARY by Chapter 14 Developing Pricing Strategies and Programs Traditionally. profitability. price is the only component in the marketing mix that provides revenue and not costs. 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. This is usually achieved by following a six-step process as follows . discounts. And this is still the case with large segments of markets across the world. Also. • Get products free: The open source software movement has eroded margins for almost any major software player. Sellers can : • Monitor customer behaviour and customize offers: Firms use software to analyse pricing requests with pricing factors such as past sales data.com offer data about products like prices and reviews from hundreds of merchants. Also. price has been the major determinant of a buyers’ choice.com. Setting the price Firms set a price when they introduce a new product. Abraham Koshy. • 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. Kevin Lane Keller. 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. Although non-price factors have recently risen in importance.
Step 3: Estimating Costs – While demand sets a ceiling on the range of price a firm can charge for its product. Price Experiments. . shipping costs. increasing prices would as an indicator of quality. costs also change a result of concentrated efforts by designers. the demand would be.2999 puts a product into the 2000 range instead of the 3000 range as perceived by the consumer.Chapter 14 . smoother flow of materials. etc. • 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. to a change in price. 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. This is due to various factors such as workers finding shortcuts. lead to a great reduction in demand. while decreasing prices would lead to increase High-price cars are in demand. which depend upon quantity produced. Many sellers believe setting a price of Rs. Sellers manipulate this by product positioning. engineers. which do not depend upon quantity produced. the demand curve can be analysed to determine the market’s probable purchase quantity at various prices. companies must decide on a level of production which will more or less guarantee no losses on the cost of production. i. • Price cues: Consumer perceptions of prices are also affected by the manner in which prices are displayed. comparing an observed price to an internal reference price or a posted ‘regular retail price’. Hence. the costs involved begin to decline. Maximum current profit: Many firms try to set a price that maximises their current profits and delivers a high return on investment. etc. They examine each cost component and try to find ways to reduce the costs involved in each of these. costs determine the floor. intense competition. packaging costs.e. quality and vice versa. The five major pricing objectives are • • • Survival: Companies pursue survival if they are plagued with over-capacity. Fixed costs include salaries. Putting ‘Sale’ signs near the price display have also been known to be effective. Step 1: Selecting the Pricing Objective – The firm first decides where it wants to position its market offering. • Types of Costs and Levels of Production: Costs are classified as Fixed costs and Variable costs. • Target Costing: Other than production scale and experience. Maximum market share: Here. etc. or elastic. • Product-Quality Leadership: Many firms aspire to be the product-quality leader in the market. This decline in cost with production experience is called experience curve. This helps a firm to maximise its profits. electricity bills. Many consumers use price • Price Elasticity: Marketers need to know how responsive. etc. purchase agents etc. • Estimating Demand Curves: Most companies use the following methods to estimate • Price-Quality inferences: demand curves: Market Surveys. Hence. • Accumulated Production: As firms gain experience in production of a good. or changing consumer wants. Statistical Analysis. marketers prefer inelastic markets where price changes do not perceived to be of higher elicit great shifts in demand. firms believe that a higher sales volume will lead to lower unit costs and higher long-run profits and thereby maximise their market share. suggesting that the actual price of the product is much higher or by pointing to a competitor’s high price.Developing Pricing Strategies and Programs Consumer psychology and pricing: • Reference prices: Consumers often employ reference prices. Variable costs include processing costs. The factors entailing this are • Price Sensitivity: The relation between price and demand. If the price elasticity is high.
the firm determines the price that would yield its target return on investment. and thereby modify its own price in order to be competitive in the market. supplier’s reputation. government should also be taken into account by the management. Or. A firm must analyse the value offered by a competitor to a customer in terms of prices. its importance in the company portfolio. charging nearly the same as major competitors in the market do. responding to price changes: • Initiating price cuts: Companies sometimes initiate price cuts in order to dominate the market through lower prices. Dutch Auctions (Descending bids): Here.Developing Pricing Strategies and Programs Step 4: Analyzing Competitors – The introduction of any change in price. where the company cannot supply all its customers and hence raises its prices. Auction-type Pricing: There are three types in this pricing method – English Auctions (Ascending bids): Here. customer support. Impact of price on other parties: The final price’s effect on other parties such as distributors. Adapting the Price Geographical Pricing Price Discounts and Allowances Promotional Pricing Differentiated Pricing . the seller announces a high price and then goes on lowering the price until a bidder accepts it. firms base their prices largely on competitors’ prices. A major factor leading to these price increases is over demand. • Initiating price increases: Companies initiate price increase to increase their profits by taking into account the feasibility of the price rise. post-sale services. potential suppliers submit their bids without knowledge of other bids made and the best bid is selected. 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. Step 6: Selecting the Final Price – After the pricing methods have narrowed the range of the price. warranty quality. a buyer announces his desire for a product and sellers compete to offer him the lowest price. • • • • • or all of the risk if the promised value is not delivered. high quality products are assigned a fairly low price. 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. Perceived-value Pricing: Perceived-value pricing is made up of several factors like the buyer’s image of the product. Sealed-bid Auctions: Here. addons. Target-return Pricing: In target-return pricing. • 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. Company Pricing Policies: The final price must be compliant with the company’s pricing policies. etc. the seller puts up an item and the bidders raise the price until the top price is reached. competitors. etc. 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. • Value Pricing: Here. offers given by Trends any seller can elicit a response in the market. cost. • • Going-rate Pricing: Here.Initiating and Chapter 14 . etc. 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. Hence. dealers. the channel deliverables.