Study Material

Depending on the business and a wide set of circumstances, there are 5

marketing philosophies (or concepts) that businesses can apply when
marketing their products:

1. The production concept

2. The product concept
3. The selling concept
4. The marketing concept
5. The societal marketing concept

1. The production concept

As the name suggests, this marketing philosophy is all about production.
This means that the businesses that utilize it create inexpensive and widely
available products, which is something their customers want.
A good example is Henry Ford and his famous cars.
Before him, cars were extremely expensive because they weren’t mass-
produced.
In fact, they were made by hand and would take ages to build. Ford
realized that everyone needed cars, not only the wealthy, and decided to
make them widely available.
Contrary to popular belief, he didn’t invent this concept, and both mass
production and assembly lines were used before him. In fact, one of his
engineers, named William ‘Pa’ Klann, introduced the idea to Ford after
visiting a slaughterhouse in Chicago and getting inspired by their so-called
‘disassembly line’.
Additionally, China was the first to utilize mass production to make metal
parts for tools, armor, and weapons, and then the concept got to Europe
and created the Industrial Revolution.
Furthermore, during the early 12th century, Venice started making ships
using something similar to the production line in the shipyard called the
Venetian Arsenal.
However, Ford and his Model T remain a good example of the marketing
philosophy of production and business knowing what their customers need
and making it available to them by mass producing it and making it widely
available. In 1908, the price of the Model T was around $825, and in 1912 it
was around $575.
How affordable is that?
Today, this marketing philosophy isn’t as used as it was in the
previous century.
Today’s brands are more focused on other marketing concepts, which
there will be a word about in the following paragraphs.

2. The product marketing

concept
Unlike the production marketing philosophy which is focused on mass-
producing inexpensive products, this concept favors high-quality
products and holds the belief that the consumers won’t mind the high price
because of the quality.
The businesses that utilize this marketing philosophy assume that the
customers prefer products that are of greater quality, so they spend a lot of
time working on their products, improving them and coming up with new
features.
They’re fully focused on their products, paying less attention to the
customer needs and markets, which can sometimes lead to bad product
sales.
A great example of the product marketing philosophy is Apple.
They’ve been working on their models for years and coming up with new
features, which convince their customers to stay.
Their products are expensive, but you don’t get just any kind of product:
you get the most cutting-edge technology.

3. The selling concept

While the production and product concepts are all about production, this
marketing philosophy is focused on the promotion of
products because it believes that the customers won’t buy the products if
they’re not being advertised to them.
The businesses that utilize this marketing philosophy believe that they can
sell any product with the use of advertising. What lead to the emergence of
this concept was the very Industrial Revolution. During it, there was a lot
demand, which leads to a lot of competition between businesses.
They became more efficient in production, which then led to overproduction
and a surplus of products. Companies needed to sell the extra stock
somehow, hence the emergence of the selling marketing philosophy.
Unsold products most often end up being put on sale and then promoted.
They started creating entire selling departments that had the aim of coaxing
customers into buying as many products as they could.
Nowadays, this marketing philosophy is still used a lot, and for a similar
reason, which is dead stock.
Dead stock presents products that a company is not able to sell and that
has to be stored, which costs the company money. The way they get rid of
it is by using the selling marketing philosophy, putting it on sale and
encouraging people to buy it.

4. Marketing concept
This concept is all about learning as much as you can about your
customers, and only then creating a product that you know they need.
Out of all the marketing philosophies, this one is probably used the
most in marketing nowadays.
This is probably because it is hard to sell anything nowadays without
knowing your target audience really well and appealing to them. Hence why
this marketing philosophy places a lot of importance on the customer and
their wants and needs.
Unlike the selling marketing concept, which doesn’t care about the needs of
the customer and the market, the marketing concept is all about that.
Arch Wilkinson Shaw, a famous American entrepreneur, said that the goal
of this marketing philosophy is to satisfy needs rather than to sell goods.
By being the first to come up with a product can give the company a huge
head start and enable them to establish themselves as the giant in that
market.
But this is not enough; they also need to constantly work on their products
and to keep learning about the ever-changing needs of their customers if
they don’t want their competitors to beat them.

5. The societal marketing

concept
This marketing philosophy is all about knowing your customers’ needs,
while also caring about the well-being of the society and the environment.
It sees businesses as parts of society and promotes their participation in
the solving of important issues, like pollution, world hunger, and illiteracy.
With all the pollution issues that we’ve had in the past few months and
climate change being in full swing, it is important that businesses show that
they care about these issues, because if they seem like they don’t care,
they might lose a lot of customers.
Therefore, many businesses today donate and participate in all sorts of
charities, as well as promote them.

The Body Shop promotes cruelty free cosmetics and advocates for the ban of animal testing
Throughout the years, we’ve seen an emergence of companies that market
their products as vegan and cruelty-free, as well as more and more
businesses addressing the importance of recycling and lowering the use of
plastic.

Conclusion
There are 5 philosophies or concepts in marketing: the production
concept, the product concept, the selling concept, the marketing concept,
and the societal marketing concept. Each with its characteristics and
uses.
The production concept is all about the mass production of products with
the goal of making them inexpensive and available to the consumers, while
the product philosophy focuses on the quality of the products.
The selling concept deals with the selling of dead stock, which presents the
products the company didn’t succeed in selling.
The marketing concept places the focus on the customer and their needs
and wants, while the societal marketing concept does the same while
speaking up about important issues, like pollution and animal testing.
As mentioned, they’re all used for different purposes and by different
businesses: the production philosophy is used when companies try to
expand, the product concept has found its use in the technology market,
the selling philosophy is used when there’s a lot of unsold products, and
the marketing and societal marketing concepts are used most frequently,
by all sorts of businesses and brands.
What is customer value?

Customer value is the satisfaction the customer experiences (or expects to

experience) by taking a given action relative to the cost of that action.

The given action is traditionally a purchase, but could be a sign-up, a vote or a visit,
while the cost refers to anything a customer must forfeit in order to receive the
desired benefit, such as money, data, time, knowledge.

Think about the following definition of marketing:

Marketing creates, communicates, and delivers value to customers.

Your internal chain of sourcing, operations, processes, sales, marketing, and

customer service all contribute to the creation of value. So do your support
operations such as HR and accounting. All of these components affect your
customers directly or indirectly in some way, informing their perception of you.

And this leads to the fundamental point: The results of your efforts to create value
are measured in the customers’ perception of that value.

Customers compare their perceived value of similar products when making a

decision.

Marketing Process: 5 Steps of Marketing

Process
Marketing is how companies create value for customers and build strong
customer relationships to capture value from customers in return. 5 step process
of the marketing framework wherein value is created for customers and
marketers capture value from customers in return.
1. Understanding The Marketplace And Customer Needs And Wants.
2. Designing A Customer-Driven Marketing Strategy.
3. Constructing an integrated marketing plan that delivers superior value.
4. Build Profitable Relationships.
5. Capturing Value From Customers.

Step 1: Understanding The Marketplace And

Customer Needs And Wants
It is important to understand customer needs, wants, and demands to build want-
satisfying market offerings and building value-laden customer relationships.
This increases long-term customer equity for the firm.

Needs – States of felt deprivation

They include the physical need for necessities like food, clothing, shelter,
warmth, safety, and individual needs for knowledge and self-expression. The
marketers cannot create these needs as they are a basic part of human markup.

Wants – The forms of human needs take as shaped by culture and

individual personality.
Wants are shaped by one’s society and are described in terms of objects that
will satisfy needs.

For example, an American in Dhaka needs food but wants McDonald’s.

Demands – Human wants that are backed by buying power.

Given their wants and resources, people demand products with benefits that add
to the most value and satisfaction.

Step 2: Designing A Customer-Driven Marketing

Strategy
Focus areas for designing a marketing strategy:

 Selecting customers to serve -defining the target market

 Deciding how to serve customers in the best way – choosing a value proposition
 Selecting customers to serve:
The company first decides who it will serve and divides the market into
segments of the customer. Then it goes after specific sections of the market or
its target market.

They target customers based on their level, timing, and nature of demand.

Choosing a value proposition

They decide how it will serve their customer. That is how it will differentiate
and position itself in the market. A brand’s value proposition is the set of values
and benefits that it promises to deliver its customers.

Companies need to design strong value propositions to give them the greatest
advantage in their target markets.

5 alternative concepts for designing a customer-driven marketing

strategy are;

1. Production concept: Consumers will favor products that are available and
highly affordable. Management should focus on improving production and
distribution efficiency.
2. Product concept: Consumers will favor products that offer the most quality,
performance, and innovative features. Focus on making continuous product
improvements.
3. Selling concept: Consumers will not buy enough of the firm’s products unless
it undertakes a large-scale selling and promotion effort. It is typically practiced
with unsought goods that the company needs to sell and generally results in
aggressive selling practices. The company sells what it makes rather than what
the market wants.
4. Marketing concept: Organizational goals are achieved by knowing the target
markets’ needs and wants and delivering the desired satisfactions better than
competitors do.
5. Societal concept: Marketing strategy should deliver value to customers in such
a way that improves both customers as wells as society’s well being and long-
run interests.
Step 3: Constructing an integrated marketing plan that delivers
superior value
The company’s marketing strategy outlines which customers the company will
serve and how it will create value. Then the marketer develops integrated
marketing plans that will the intended value to target customers.

It consists of the firm’s marketing mix (4Ps), the set of marketing tools the
firm uses to implement its marketing strategy.

The marketing program builds customer relationships by transforming the

marketing strategy into action.

For this, it needs to blend all of these marketing tools into a comprehensive,
integrated marketing program that communicates and delivers the customers’
expected value.

Step 4: Build Profitable Relationships

Customer relationship management is the overall process of building and
maintaining profitable customer relationships by delivering superior customer
value and satisfaction.

Customer relationship management aims to produce high customer equity, the

total combined customer lifetime values of all of its customers.

The key to building lasting relationships is the creation of superior customer

value and satisfaction.

Companies today want to acquire profitable relationships and build

relationships that will increase their share of the customer portion of the
customers purchasing that a company gets in its product categories.

Step 5: Capturing Value From Customers

Customer relationship management’s ultimate aim is to produce high Customer
equity – total combined lifetime values of all of the company’s current and
potential customers.

The more loyal to the company’s profitable customers, the higher are the
customer equity. Customer equity may even be a better way to measure its
performance than market share or current sales.
Marketers cannot create customer value and build customer relationships by
themselves. They need to work closely with other company departments and
with partners outside the firm.

In addition to being good at customer relationship management, they also need

to be good at partner relationship management.

Final Words Managing Marketing Process

The last step of the marketing process is arranging resources necessary to carry
out the marketing plan, putting the plan in action, and exerting control.

For the implementation of the marketing plan, the firm needs to build a
marketing organization.

This type of organization consists of many specialists responsible for carrying

out marketing research, advertising, product development, customer service,
etc.

Such an organization calls for setting up a department called the marketing

department headed up by a Vice-President/Director/GM. He usually performs
three types of tasks.

First, he coordinates activities performed by different personnel in the

marketing department.

Second, he must closely work with other ke How to use

Segmentation, Targeting and Positioning
(STP) to develop marketing strategies

Today, the STP marketing model (Segmentation, Targeting,

Positioning) is a familiar strategic approach in modern
marketing. It is one of the most commonly applied marketing
models in practice.

In our poll asking about the most popular marketing

model it is the second most popular, only beaten by the
venerable SWOT / TOWs matrix. This popularity is relatively
recent since previously, marketing approaches were based
more around products rather than customers. In the 1950s,
for example, the main marketing strategy was 'product
differentiation'.

The STP model is useful when creating marketing

communications plans since it helps marketers to prioritize
propositions and then develop and deliver personalized and
relevant messages to engage with different audiences.

This is an audience-focused rather than product-focused

approach to marketing communications which helps deliver
more relevant messages to commercially appealing
audiences. The diagram below shows how plans can have
the flow from Audience options > Audience selection >
Production positioning.
In addition, STP marketing focuses on commercial
effectiveness, selecting the most valuable segments for a
business and then developing a marketing mix and product
positioning strategy for each segment. STP is just one of
many strategic marketing tools included in our strategic
marketing training. Find out more about marketing solutions
to accelerate your growth.
Applying Segmentation, Targeting and
Positioning to digital communications
STP marketing is relevant to digital marketing too at a more
tactical communications level. For example, applying
marketing personas can help develop more relevant digital
communications as shown by these alternative tactical
email customer segmentation approaches.

This visual from Dave Chaffey of Smart Insights in his

book Digital Marketing: Strategy. Implementation and
practice shows how Segmentation, Targeting and
Positioning apply to digital marketing strategy.
 It reminds us how digital channels offer new options for
targeting audiences that weren't available previously, but
we need to reserve sufficient budget for. For example:

 Search intent as searchers type keywords when comparing

products they are interested in buying
 Interest-based targeting in Facebook, e.g. Prospecting for
those interested in Gardening, Gym membership or Golf
 Targeting through email personalization and on-site
personalization based on profile, behaviour (e.g. content
consumed)
There are also new opportunities to make a brand more
compelling through offering new types of value to
consumers based on a digital value proposition or what Jay
Baer has called Youtility. This can be via content or
interactive tools on websites or mobile apps.

How to use STP marketing?

Through segmentation, you can identify niches with specific
needs, mature markets to find new customers, deliver more
focused and effective marketing messages.

The needs of each segment are the same, so marketing

messages should be designed for each segment to
emphasise relevant benefits and features required rather
than one size fits all for all customer types. This approach is
more efficient, delivering the right mix to the same group of
people, rather than a scattergun approach.

You can segment your existing markets based on nearly any

variable, as long as it’s effective as the examples below
show:
Well-known ways to segment your
audience include:
1. Demographics
Breakdown by any combination: age, gender, income,
education, ethnicity, marital status, education, household
(or business), size, length of residence, type of residence or
even profession/occupation.

An example is Firefox who sell 'coolest things', aimed at

younger male audience. Though, Moshi Monsters, however,
is targeted to parents with fun, safe and educational space
for younger audience.

2. Psychographics
This refers to 'personality and emotions' based on behaviour,
linked to purchase choices, including attitudes, lifestyle,
hobbies, risk aversion, personality and leadership traits.
magazines read and TV. While demographics explain 'who'
your buyer is, psychographics inform you 'why' your
customer buys.

There are a few different ways you can gather data to help
form psychographic profiles for your typical customers.

1. Interviews: Talk to a few people that are broadly

representative of your target audience. In-depth
interviews let you gather useful qualitative data to really
understand what makes your customers tick. The problem
is they can be expensive and difficult to conduct, and the
small sample size means they may not always be
representative of the people you are trying to target.
2. Surveys: Surveys let you reach more people than
interviews, but it can be harder to get as insightful
answers.

3. Customer data: You may have data on what your

customers tend to purchase from you, such as data
coming from loyalty cards if an FMCG brand or from online
purchase history if you are an ecommerce business. You
can use this data to generate insights into what kind of
products your customers are interested in and what is
likely to make them purchase. For example, does
discounting vastly increase their propensity to purchase?
In which case they might be quite spontaneous.

An example is Virgin Holidays who use segmentation,

positioning, and targeting to promote their holidays to 6
different audiences.
3. Lifestyle
This refers to Hobbies, recreational pursuits, entertainment,
vacations, and other non-work time pursuits.

Companies such as on and off-line magazine will target

those with specific hobbies i.e. FourFourTwo for football
fans.

Some hobbies are large and well established, and thus

relatively easy to target, such as the football fan example.
However, some businesses have found great success
targeting very small niches very effectively. A great example
is the explosion in 'prepping' related businesses, which has
gone from a little heard of fringe activity to a billion dollar
industry in recent years. Apparently now 3.7 million
American's think of themselves as preppers or survivalists.
A great way to start researchign and targeting these kind of
niches is Reddit, where people create sub Reddits to share
information about a given interest or hobby.

4. Belief and values

Refers to Religious, political, nationalistic and cultural
beliefs and values.

The Islamic Bank of Britain offers Sharia-compliant banking

which meets specific religious requirements.

A strange but interesting example of religious demographics

influencing marketing that you might not have guessed is
that Mormons are really into 'multi-level marketing'. They're
far more likely to be engaged in the practice than any other
US group. Going the extra mile with demographic research
can lead to discovering new marketing opportunities and
thinking outside the box. For example, did you know the
average age of a Cadillac driver is 47.1 years old? But you
don't tend to see them in the car ads. An opportunity waiting
to be seized!
5. Life stages
Life stages is the Chronological benchmarking of people’s
lives at different stages.

An example is Saga holidays which are only available for

people aged 50+. They claim a large enough segment to
focus on this life stage.

6. Geography
Drill down by Country, region, area, metropolitan or rural
location, population density or even climate.

An example is Neiman Marcus, the upmarket department

store chain in the USA now delivers to the UK.

7. Behaviour
Refers to the nature of the purchase, brand loyalty, usage
level, benefits sought, distribution channels used, reaction
to marketing factors.

In a B2B environment, the benefits sought are often about

‘how soon can it be delivered?’ which includes the ‘last-
minute’ segment - the planning in advance segment.

An example is Parcelmonkey.co.uk who offer same day, next

day and international parcel deliveries.

8. Benefit
Benefit is the use and satisfaction gained by the consumer.

Smythson Stationery offer similar products to other

stationery companies, but their clients want the benefit of
their signature packaging: tissue-lined Nile Blue boxes and
tied with navy ribbon!
 Market targeting
The list below refers to what’s needed to evaluate the
potential and commercial attractiveness of each segment.

 Criteria size: The market must be large enough to justify

segmenting. If the market is small, it may make it smaller.
 Difference: Measurable differences must exist between
segments.
 Money: Anticipated profits must exceed the costs of
additional marketing plans and other changes.
 Accessible: Each segment must be accessible to your team
and the segment must be able to receive your marketing
messages
 Focus on different benefits: Different segments must need
different benefits.

Product positioning
Positioning maps are the last element of the STP process.
For this to work, you need two variables to illustrate the
market overview.

In the example here, I’ve taken some cars available in the

UK. This isn’t a detailed product position map, more of an
illustration. If there were no cars in one segment it could
indicate a market opportunity.
Expanding on the extremely basic example above, you can
unpack the market by mapping your competitors onto a
matrix based on key factors that determine purchase.
This chart is not meant to be any kind of accurate
representation of the car market, but rather just illustrate
how you could use a product positioning map to analyze
your own businesses current position in the market, and
identify opportunities. For example, as you can see in the
gap below, we've identified in a possible opportunity in the
market for low-priced family cars.
We're not saying this gap actually exists, I'm sure you could
think of cars that fit this category, as the car market is an
extremely developed and competitive market. However, it
does show how you can use the tool to identify gaps in your
own market.

An example of a company using STP

marketing?
Any time you suspect there are significant, measurable
differences in your market, you should consider STP.
Especially if you have to create a range of different
messages for different groups.
 A good example of segmentation is BT Plc, the UK’s largest
telecoms company. BT has adopted STP marketing for its
varied customer groups; ranging from individual consumers
to B2B services for its competitors:

What to watch for in segmentation,

positioning and targeting marketing
strategy
 Make sure the market is large enough to matter and
customers can be easily contacted.
 Apply market research to ensure your approach will add
value to the existing customer experience, above and
beyond competitors.
 As martech continues to become more sophisticated, to
support digital marketers' wants and needs, consider the
developments in relation to your product/service.

y personnel charged with other responsibilities, such as personnel, finance, etc.

Third, he must perform several operative and technical functions as selecting, training,
directing, motivating, and evaluating his department’s personnel for better performance by
each of them.

When the plan is implemented, management must make sure that everything is going fine. He
can ensure this by receiving feedback and taking corrective action if necessary, i.e.,
controlling.
Positioning is the concept of associating and developing a mental

position in the public consciousness about your brand and its

products and services. Since minds are so stuffed with information

it becomes important in choosing a unique position in the mind.

Let’s see how this works.

The mind works and understands things by comparing them to

other things. So, in order to fix something in the mind it is often

effective to inject a mental comparison between two things. Since

the mind already knows one of the things, it can more easily

understand the new thing.

Let’s take a look at some examples: Apple computers. What is the

idea you have about Apple? A progressive technology company

that delivers aesthetic high-tech products that are very cool? That’s

their position in relation to computers (an already understood

concept) and that’s effective PR.

Positioning Examples
Let’s get another example: Volvo automobiles. What position does

this carmaker have in your mind? Is it a position of safety? Exactly.

Remember those car crash commercials? Their position is safety;

the brand Volvo elicits the idea of safety — they’ve positioned

themselves within the concept of automobiles as the safest. That’s

effective PR.

Let’s take another brand: Listerine. What you think? In the realm of

mouthwash, Listerine is the one that kills germs? That’s their

position in the known territory of mouthwashes. That’s effective PR.

Many businesses who have been around a local community for a

long period of time develop a mental “position” with the consumers

in that area. They’re “reliable”, “cheap”, “good”, “trustworthy”, etc.

These kinds of positions develop over a long period of time and this

kind of PR happens almost incidentally. Their PR position

developed without an active PR campaign. Their PR was

established by their persistence in their community over a very long

period of time. Every community has such business mainstays. The

question is, is it really necessary to take 20 years to develop this

kind of a mental position? The answer is “no”.

Why not proactively develop your own position and image? What

position do you wish to occupy in the mind of your prospects? How

does this position relate to your competitors? What idea

distinguishes you from the others and which will communicate to

your audience?
Remember the Cola commercials? Remember 7-Up’s campaign —

the un-cola? That’s positioning. Instead of going head-to-head with

the leading cola companies, 7-Up established a unique position as

the un-cola which gave them a distinct advantage and virtually no

competition. This also made it easy for them to be memorable in the

minds of their audience. They occupy a distinct position.

Create Your Own Positioning

Start thinking about your own position and what it should be. Sort

that out. And work to establish a very simple, concise image. The

simpler the position the more memorable.

Once established promote that position. Take a zone and get that

message out broadly and prior to any direct marketing. Get your

idea firmly implanted into the minds of your audience. Try to use

free channels to get your message out on: newspapers, press

releases, social media, blogs, etc. and get that message out.

Now you can move in with your direct marketing message since you

already have a position in the minds of the audience you’re trying to

reach. You should have achieved some recognition already by a

carefully crafted campaign. This makes promotion and marketing

much more effective.

 Step By Step
 Create a unique, memorable position for your company in the
mind of your public.
 Get that message out on all fronts: press releases, charity work,
newspapers, third party endorsements, etc.
 Repeat the message frequently and actively build that mental
association
 Your direct marketing & advertising should promote your offering
while also flanking that position.
 Measure your results and survey your public as needed to correct
and/or adjust your position over time.
 Achieve in several years what would otherwise take 20 years to
do without an active PR campaign.

Competitive Strategy: Four Types of Competitive

Strategy
The competitive strategy consists of the business approaches and initiatives undertaken by a
company to attract customers and to deliver superior value to them through fulfilling their
expectations as well as to strengthen its market position.

This definition of Thompson and Strickland emphasizes on ‘approaches and initiatives’ of

managers in defining strategy. This means that competitive strategy is concerned with actions
that managers undertake to improve the market position of the company through satisfying
the customers.

Improving market position implies undertaking actions against competitors in the industry.

Thus, the concept of competitive strategy (as opposed to cooperative strategy) has a
competitor-orientation. The competitive strategy includes those approaches that prescribe
various ways to build sustainable competitive advantage.

Management’s action plan is the focus of the competitive strategy. management adopts an
action-plan to compete successfully with the competitors in the market. It also aims at
providing superior value to customers.
 The objective of competitive strategy is to win the customers’ hearts through satisfying their
needs and finally to attain competitive advantage as well as out-compete the competitors (or
rival companies.).

Four Types of Competitive Strategy: Michael Porter’s

Four Generic Strategies
Michael Porter has identified four types of competitive strategies that can be applied in any
business organization irrespective of the size and nature of products. Because of their
susceptibility to common use by all business enterprises, they are labeled as generic
strategies.

These are, in fact, basic types of competitive strategies.

In addition to these, there are also other strategies that a company can employ when deemed
necessary, such as strategic alliance, collaborative partnerships, merger, acquisition, vertical
integration, outsourcing strategies, etc.

4 competitive strategy are as follows:

1. Cost Leadership Strategy or Low-cost strategy.

2. Differentiation strategy.
3. Best-cost strategy.
4. Market-niche or focus strategy.

Competitive Advantage: Ultimate Goal of Competitive

Strategy
Competitive advantage is the special edge over the competitors. A question is often asked by
managers: “What is the duration of competitive advantage?”

How long it will be sustained primarily depends on;

i. barriers to imitation,
ii. the capability of competitors and
iii. the general dynamism of an industry’s environment.

‘Barriers to imitation’ create obstacles for the competitors to copy a company’s distinctive
competencies easily. Competitors will always try to imitate a company’s resources and
capabilities.

Evidence indicates that capabilities are more difficult to imitate than resources.
 Of the resources, tangible resources (e.g., plant and machinery equipment, buildings) are
easier to imitate than intangible resources (e.g., patents, goodwill, brand names, technological
know-how, marketing techniques).

There is, thus, a need to build up distinctive competence based on unique capabilities rather
than on tangible resources. This would help the company enjoy the distinctive competence
for a longer period.

The capability of competitors to imitate a company’s distinctive competency needs to be

given due consideration.

If the competitors are strongly committed to doing business in a particular way, they will not
suddenly imitate a company’s innovation.

In such a situation, its distinctive competency will be sustainable for longer.

The third factor of sustainability of distinctive competency – that is, industry dynamism – is
also an important determinant of competitive advantages.

Frequent product innovation makes an industry environment dynamic.

For example, the software industry, electronics industry, and PC industry are highly dynamic
because of the high rate of innovation. In such industries, competitive advantages are short-
lived.

How to sustain competitive advantage?

Since achieving and maintaining a competitive advantage is the primary aim of competitive
strategies, managers should undertake measures to sustain competitive advantage once they
are achieved.

Managers can build sustainable competitive advantage by adopting the following measures.

1. Focusing on building blocks of competitive advantages.

2. Developing distinctive competencies.
3. Creating an environment of organizational learning.
4. Instituting continuous improvement mechanism.
5. Instituting best practices.
6. Overcoming barriers to change.

A brief discussion of these issues follows;

Focusing on building blocks of competitive advantages

As stated earlier, a company has a sustained competitive advantage when it can maintain a
higher than industry average profit rate over several years.
 This becomes possible when the company emphasizes the four generic building blocks of
competitive advantage, such as;

a. efficiency,
b. quality,
c. innovation, and
d. customer responsiveness.

Because of its focus on these building blocks, Apple Computer Company enjoyed sustained
competitive advantage over a long period from 1987 to 1993.

These are called ‘generic’ because any organization can adopt them irrespective of its
products (or industry in which it operates its business).

Superior efficiency enables a company to lower its costs; superior quality allows it both to
lower costs and charges a higher price; superior customer responsiveness allows it to charge a
higher price, and superior innovation can lead to higher prices or lower unit costs.

Together these four building blocks help a company create more value than the competitors.

Thus, a company can enjoy a sustained competitive advantage.

Developing distinctive competencies

Managers have to develop distinctive competencies to sustain a competitive advantage.

When distinctive competencies are developed, they help in improving performance in all the
areas of four building blocks.

Distinctive competencies should be developed in all required areas – never in some areas at
the cost of other important areas. Companies need to be balanced in their pursuit of
distinctive competencies.

Creating an environment of organizational learning

Sustaining competitive advantage requires a congenial environment in the organization that
promotes learning within the organization (commonly known as organization learning).

Learning organizations can keep themselves at the top of all competitors because they are
always in search of knowledge.

In the process of seeking and disseminating knowledge, they learn from prior mistakes and
improve their work-processes over time.
Instituting continuous improvement mechanism
Continuous improvement of the quality of both products and services (in fact, of everything
that a company does) in sine qua non for sustaining competitive advantage over a longer
period.

Managers need to devise dynamic ways to improve quality continuously.

Some organizations have been successful in their endeavor to improve quality through
instituting total quality management (TQM) programs and business process reengineering.

Instituting best practices

The adoption of ‘industrial best practices’ helps in developing distinctive competencies and
thereby sustaining competitive advantage.

Organizations can benchmark (search out) the successful business-practices of other

competitors/companies in other industries and then adopt them after necessary fine-tuning.

Thus, they can build and maintain resources and capabilities – that are essential to achieve
excellence in efficiency, quality, innovation, and customer responsiveness.

Overcoming barriers to change

Companies fail to sustain a competitive advantage because they are unable to adapt to
changes in the organization.

They need to overcome the resistance to change so that they can maintain a competitive
advantage.

Companies can overcome the barriers to change through providing effective leadership,
necessary changes in organization structure, creating appropriate control systems and
involving employees in decision making.

Distinctive Competency An Essential Requirement for

Achieving Competitive Advantage
A business organization must have distinctive competency in one or more areas of its
activities to be competitive in the marketplace.

Distinctive competencies refer to those strengths of the organization that allow it to attain a
competitive advantage in the market.

These strengths are unique for the organization and they help it achieve superior efficiency,
quality, innovation, and customer responsiveness.
It can be argued that PepsiCo has distinctive competencies in the case of manufacturing
bottled drinking water – Aquafina.

Distinctive competencies have helped PepsiCo achieve lower costs and make product
differentiation better than its competitors.

Thus, distinctive competencies have helped attain distinctive advantages through the
achievement of superior efficiency and quality.

Unique organizational resources and capabilities constitute an organization’s distinctive

competencies.

However, the resources of the organization must be unique (i.e., no other companies have
these resources) to be regarded as distinctive competencies. The resources comprise physical,
human, financial, informational, and technological resources.

An organization’s capabilities are the skills necessary to exploit the resources for productive
use. Capabilities are intangible.

It may be noted that an organization may not need unique resources to establish a distinctive
competence as long as no other competitors possess such resources. An organization can
create distinctive competencies only when it simultaneously has unique resources and can use
those resources effectively.

Successful strategies often either build on a company’s existing competitive competencies or

help a company develop new ones.

Competitive Strategy Versus Business Strategy

Business strategy has a wider scope than a competitive strategy. The business strategy
encompasses all the actions and approaches for competing against the competitors and the
ways management addresses various strategic issues.

As Hill and Jones have remarked, the business strategy consists of plans of action that
strategic managers adopt to use a company’s resources and distinctive competencies to gain a
competitive advantage over its rivals in a market.

In doing business, companies confront a lot of strategic issues. Management has to address all
these issues effectively to survive in the marketplace.

Business strategy deals with these issues, in addition to ‘how to compete.’ The competitive
strategy, on the other hand, deals with “management’s action plan for competing successfully
and providing superior value to customers.”
What is it?

No matter how well costs are driven or held down, no product can be profitable
unless it sells. Therefore all products must satisfy customer needs and wants. As all
customers are different and seek different benefits from products, businesses would
ideally tailor their products to satisfy each customer's wants and needs. However,
for many businesses this is not achievable, so they need a way of classifying
products in a structure aligned to customer segments, as defined by their needs and
wants. The more flexibility a business has to configure products to different
customer segments at minimal cost, the more segments they can target with the
core product. Which is why it is vital to develop new products with flexibility as a key
feature. Philip Kotler, an economist, devised a model that recognises customers
have five levels of need, ranging from functional or core needs to emotional needs.
The model also recognises that products are merely a means to satisfy customers'
varying needs or wants. He distinguished three drivers of how customers attach
value to a product:

 Need: a lack of a basic requirement.

 Want: a specific requirement of products to satisfy a need.
 Demand: a set of wants plus the desire and ability to pay for the product.
Customers will choose a product based on their perceived value of it. Satisfaction is
the degree to which the actual use of a product matches the perceived value at the
time of the purchase. A customer is satisfied only if the actual value is the same or
exceeds the perceived value. Kotler attributed five levels to products:
The five product levels are:

1. Core benefit:
The fundamental need or want that consumers satisfy by consuming the product
or service. For example, the need to process digital images.

2. Generic product:
A version of the product containing only those attributes or characteristics
absolutely necessary for it to function. For example, the need to process digital
images could be satisfied by a generic, low-end, personal computer using free
image processing software or a processing laboratory.
3. Expected product:
The set of attributes or characteristics that buyers normally expect and agree to
when they purchase a product. For example, the computer is specified to deliver
fast image processing and has a high-resolution, accurate colour screen.

4. Augmented product:
The inclusion of additional features, benefits, attributes or related services that
serve to differentiate the product from its competitors. For example, the
computer comes pre-loaded with a high-end image processing software for no
extra cost or at a deeply discounted, incremental cost.

5. Potential product:
This includes all the augmentations and transformations a product might undergo
in the future. To ensure future customer loyalty, a business must aim to surprise
and delight customers in the future by continuing to augment products. For
example, the customer receives ongoing image processing software upgrades
with new and useful features.

What benefits does the model provide?

Kotler's Five Product Level model provides businesses with a proven method for
structuring their product portfolio to target various customer segments. This enables
them to analyse product and customer profitability (sales and costs) in a structured
way. By organising products according to this model, a business' sales processes can
be aligned to its customer needs and help focus other operational processes around
its customers – such as design and engineering, procurement, production planning,
costing and pricing, logistics, and sales and marketing.

Grouping products into product families that align with customer segments helps
modelling and planning sales, as well as production and new product planning.

Implementing Porter's Five Forces analysis? Questions to consider

 How do our customers view our products?

 How will they shop for our products?
 Can we structure our products into families that align with how our customers
value our products?
 How can the product structure be optimised along common components to make
cost and price structures logical and accessible?

Actions to take / Dos Actions to avoid / Don'ts

 Start with customers.  Don't attempt to shoehorn

 Analyse and segment customers by their needs customer segments into existing

and wants. products and structures.

 Align products into families that align to  Avoid too many customer
segments, leading to overly
 customer segments. complex product and cost/price
 Optimise product hierarchies along component structures.

and production process commonalities to help

with cost and price structure management.
 Strategically assess the profitability of products,
product families and customer segments.
 Report gaps and opportunities identified by the
product hierarchy.

Related and similar practices to consider

 Product Family Master Planning

Product life cycle

Product life cycle strategies
The product life cycle contains four distinct stages: introduction, growth, maturity and
decline. Each stage is associated with changes in the product's marketing position. You can
use various marketing strategies in each stage to try to prolong the life cycle of your products.

Product introduction strategies

Marketing strategies used in introduction stages include:

 rapid skimming - launching the product at a high price and high promotional level
 slow skimming - launching the product at a high price and low promotional level
 rapid penetration - launching the product at a low price with significant promotion
 slow penetration - launching the product at a low price and minimal promotion
During the introduction stage, you should aim to:

 establish a clear brand identity

 connect with the right partners to promote your product
 set up consumer tests, or provide samples or trials to key target markets
 price the product or service as high as you believe you can sell it, and to reflect the
quality level you are providing
You could also try to limit the product or service to a specific type of consumer - being
selective can boost demand. Read more about the introduction stage of a product life cycle.

Product growth strategies

Marketing strategies used in the growth stage mainly aim to increase profits. Some of the
common strategies to try are:

 improving product quality

  adding new product features or support services to grow your market share
 entering new markets segments
 keeping pricing as high as is reasonable to keep demand and profits high
 increasing distribution channels to cope with growing demand
 shifting marketing messages from product awareness to product preference
 skimming product prices if your profits are too low.
Growth stage is when you should see rapidly rising sales, profits and your market share. Your
strategies should seek to maximise these opportunities.

Product maturity strategies

When your sales peak, your product will enter the maturity stage. This often means that
your market will be saturated and you may find that you need to change your marketing
tactics to prolong the life cycle of your product. Common strategies that can help during this
stage fall under one of two categories:

 market modification - this includes entering new market segments, redefining target
markets, winning over competitor's customers, converting non-users
 product modification - for example, adjusting or improving your product's features,
quality, pricing and differentiating it from other products in the marking
Read more about the growth and maturity stage of a product life cycle.

Product decline strategies

During the end stages of your product, you will see declining sales and profits. This can be
caused by changes in consumer preferences, technological advances and alternatives on the
market. At this stage, you will have to decide what strategies to take. If you want to save
money, you can:

 reduce your promotional expenditure on the products

 reduce the number of distribution outlets that sell them
 implement price cuts to get the customers to buy the product
 fin another use for the product
 maintain the product and wait for competitors to withdraw from the market first
 harvest the product or service before discontinuing it
Another option is for your business to discontinue the product from your offering. You may
choose to:

 sell the brand to another business

 significantly reduce the price to get rid of all the inventory
Many businesses find that the best strategy is to modify their product in the maturity stage to
avoid entering the decline stage. Find out more about product life cycle - decline stage.

Packaging

• Packaging is the science, art and technology of enclosing or protecting products for
distribution, storage, sale, and use. Packaging also refers to the process of designing,
 evaluating, and producing packages. Packaging can be described as a coordinated
system of preparing goods for transport, warehousing, logistics, sale, and end use.
Packaging contains, protects, preserves, transports, informs, and sells. In many
countries it is fully integrated into government, business, institutional, industrial, and
personal use.
• Package labeling or labelling is any written, electronic, or graphic
communication on the package or on a separate but associated label.

The purposes of packaging and package labels

Packaging and package labeling have several objectives

 Physical protection – The objects enclosed in the package may require protection from,
among other things, mechanical shock, vibration, electrostatic discharge,
compression, temperature, etc.
 Barrier protection – A barrier to oxygen, water vapor, dust, etc., is often
required. Permeation is a critical factor in design. Some packages
contain desiccants or oxygen absorbers to help extend shelf life. Modified atmospheres or
controlled atmospheres are also maintained in some food packages. Keeping the contents
clean, fresh, sterile and safe for the duration of the intended shelf life is a primary function. A
barrier is also implemented in cases where segregation of two materials prior to end use is
required, as in the case of special paints, glues, medical fluids, etc.
 Containment or agglomeration – Small objects are typically grouped together in one
package for reasons of storage and selling efficiency. For example, a single box of 1000
marbles requires less physical handling than 1000 single marbles. Liquids, powders,
and granular materials need containment.
 Information transmission – Packages and labels communicate how to use,
transport, recycle, or dispose of the package or product.
With pharmaceuticals, food, medical, and chemicalproducts, some types of information
are required by government legislation. Some packages and labels also are used for track
and trace purposes. Most items include their serial and lot numbers on the packaging, and in
the case of food products, medicine, and some chemicals the packaging often contains
an expiry/best-before date, usually in a shorthand form. Packages may indicate their
construction material with a symbol.
 Marketing – Packaging and labels can be used by marketers to encourage potential buyers
to purchase a product. Package graphic design and physical design have been important
and constantly evolving phenomena for several decades. Marketing
communications and graphic design are applied to the surface of the package and often to
the point of sale display. Most packaging is designed to reflect the brand's message and
identity on the one hand while highlighting the respective product concept on the other hand.

Permanent, tamper evident voiding label with a dual number tab to help keep packaging secure with the
additional benefit of being able to track and trace parcels and packages
A single-serving shampoo packet

 Security – Packaging can play an important role in reducing the security risks of shipment.
Packages can be made with improved tamper resistance to deter manipulation and they can
also have tamper-evident features indicating that tampering has taken place. Packages can
be engineered to help reduce the risks of package pilferage or the theft and resale of
products: Some package constructions are more resistant to pilferage than other types, and
some have pilfer-indicating seals. Counterfeit consumer goods, unauthorized sales
(diversion), material substitution and tampering can all be minimized or prevented with such
anti-counterfeiting technologies. Packages may include authentication seals and use security
printing to help indicate that the package and contents are not counterfeit. Packages also
can include anti-theft devices such as dye-packs, RFID tags, or electronic article
surveillance tags that can be activated or detected by devices at exit points and require
specialized tools to deactivate. Using packaging in this way is a means of retail loss
prevention.
 Convenience – Packages can have features that add convenience in distribution, handling,
stacking, display, sale, opening, reclosing, using, dispensing, reusing, recycling, and ease
of disposal
 Portion control – Single serving or single dosage packaging has a precise amount of
contents to control usage. Bulk commodities (such as salt) can be divided into packages that
are a more suitable size for individual households. It also aids the control of inventory: selling
sealed one-liter bottles of milk, rather than having people bring their own bottles to fill
themselves.
 Branding/Positioning – Packaging and labels are increasingly used to go beyond
marketing to brand positioning, with the materials used and design chosen key to the
storytelling element of brand development. Due to the increasingly fragmented media
landscape in the digital age this aspect of packaging is of growing importance.

Packaging types
Various types of household packaging for foods
Packaging may be of several different types. For example, a transport package or distribution
package can be the shipping container used to ship, store, and handle the product or inner
packages. Some identify a consumer package as one which is directed toward a consumer or
household.
Packaging may be described in relation to the type of product being packaged: medical
device packaging, bulk chemical packaging, over-the-counter drugpackaging,
retail food packaging, military materiel packaging, pharmaceutical packaging, etc.
It is sometimes convenient to categorize packages by layer or function: primary, secondary, etc.

 Primary packaging is the material that first envelops the product and holds it. This usually is
the smallest unit of distribution or use and is the package which is in direct contact with the
contents.
 Secondary packaging is outside the primary packaging, and may be used to prevent
pilferage or to group primary packages together.
 Tertiary or transit packaging is used for bulk handling, warehouse storage
and transport shipping. The most common form is a palletized unit load that packs tightly
into containers.
These broad categories can be somewhat arbitrary. For example, depending on the use, a shrink
wrap can be primary packaging when applied directly to the product, secondary packaging when
used to combine smaller packages, or tertiary packaging when used to facilitate some types of
distribution, such as to affix a number of cartons on a pallet.
Packaging can also have categories based on the package form. For example, thermoform
packaging and flexible packaging describe broad usage areas

THE NEW PRODUCT DEVELOPMENT PROCESS

(NPD) – OBTAIN NEW PRODUCTS
In order to stay successful in the face of maturing products, companies have to obtain new ones
by a carefully executed new product development process. But they face a problem: although
they must develop new products, the odds weigh heavily against success. Of thousands of
products entering the process, only a handful reach the market. Therefore, it is of crucial
importance to understand consumers, markets, and competitors in order to develop products that
deliver superior value to customers. In other words, there is no way around a systematic,
customer-driven new product development process for finding and growing new products. We
will go into the eight major steps in the new product development process.
 The 8 steps in the New Product Development Process
1. Idea generation – The New Product Development Process
The new product development process starts with idea generation. Idea generation refers to the
systematic search for new-product ideas. Typically, a company generates hundreds of ideas,
 maybe even thousands, to find a handful of good ones in the end. Two sources of new ideas can
be identified:

 Internal idea sources: the company finds new ideas internally. That means R&D, but also
contributions from employees.
 External idea sources: the company finds new ideas externally. This refers to all kinds of external
sources, e.g. distributors and suppliers, but also competitors. The most important external source
are customers, because the new product development process should focus on creating
customer value.
2. Idea screening – The New Product Development Process
The next step in the new product development process is idea screening. Idea screening means
nothing else than filtering the ideas to pick out good ones. In other words, all ideas generated are
screened to spot good ones and drop poor ones as soon as possible. While the purpose of idea
generation was to create a large number of ideas, the purpose of the succeeding stages is to
reduce that number. The reason is that product development costs rise greatly in later stages.
Therefore, the company would like to go ahead only with those product ideas that will turn into
profitable products. Dropping the poor ideas as soon as possible is, consequently, of crucial
importance.

3. Concept development and Testing – The New Product

Development Process
To go on in the new product development process, attractive ideas must be developed into a
product concept. A product concept is a detailed version of the new-product idea stated in
meaningful consumer terms. You should distinguish

 A product idea à an idea for a possible product

 A product concept à a detailed version of the idea stated in meaningful consumer terms
 A product image à the way consumers perceive an actual or potential product.
Let’s investigate the two parts of this stage in more detail.

Concept development
Imagine a car manufacturer that has developed an all-electric car. The idea has passed the idea
screening and must now be developed into a concept. The marketer’s task is to develop this new
product into alternative product concepts. Then, the company can find out how attractive each
concept is to customers and choose the best one. Possible product concepts for this electric car
could be:

 Concept 1: an affordably priced mid-size car designed as a second family car to be used around
town for visiting friends and doing shopping.
 Concept 2: a mid-priced sporty compact car appealing to young singles and couples.
 Concept 3: a high-end midsize utility vehicle appealing to those who like the space SUVs provide
but also want an economical car.
As you can see, these concepts need to be quite precise in order to be meaningful. In the next
sub-stage, each concept is tested.

Concept testing
New product concepts, such as those given above, need to be tested with groups of target
consumers. The concepts can be presented to consumers either symbolically or physically. The
question is always: does the particular concept have strong consumer appeal? For some concept
tests, a word or picture description might be sufficient. However, to increase the reliability of the
test, a more concrete and physical presentation of the product concept may be needed. After
 exposing the concept to the group of target consumers, they will be asked to answer questions in
order to find out the consumer appeal and customer value of each concept.

4. Marketing strategy development – The New Product

Development Process
The next step in the new product development process is the marketing strategy development.
When a promising concept has been developed and tested, it is time to design an initial
marketing strategy for the new product based on the product concept for introducing this new
product to the market.

The marketing strategy statement consists of three parts and should be formulated carefully:

 A description of the target market, the planned value proposition, and the sales, market share
and profit goals for the first few years
 An outline of the product’s planned price, distribution and marketing budget for the first year
 The planned long-term sales, profit goals and the marketing mix strategy.
5. Business analysis – The New Product Development
Process
Once decided upon a product concept and marketing strategy, management can evaluate the
business attractiveness of the proposed new product. The fifth step in the new product
development process involves a review of the sales, costs and profit projections for the new
product to find out whether these factors satisfy the company’s objectives. If they do, the product
can be moved on to the product development stage.

In order to estimate sales, the company could look at the sales history of similar products and
conduct market surveys. Then, it should be able to estimate minimum and maximum sales to
assess the range of risk. When the sales forecast is prepared, the firm can estimate the expected
costs and profits for a product, including marketing, R&D, operations etc. All the sales and costs
figures together can eventually be used to analyse the new product’s financial attractiveness.

6. Product development – The New Product Development

Process
The new product development process goes on with the actual product development. Up to this
point, for many new product concepts, there may exist only a word description, a drawing or
perhaps a rough prototype. But if the product concept passes the business test, it must be
developed into a physical product to ensure that the product idea can be turned into a workable
market offering. The problem is, though, that at this stage, R&D and engineering costs cause a
huge jump in investment.

The R&D department will develop and test one or more physical versions of the product concept.
Developing a successful prototype, however, can take days, weeks, months or even years,
depending on the product and prototype methods.

Also, products often undergo tests to make sure they perform safely and effectively. This can be
done by the firm itself or outsourced.

In many cases, marketers involve actual customers in product testing. Consumers can evaluate
prototypes and work with pre-release products. Their experiences may be very useful in the
product development stage.

7. Test marketing – The New Product Development Process

The last stage before commercialisation in the new product development process is test
marketing. In this stage of the new product development process, the product and its proposed
 marketing programme are tested in realistic market settings. Therefore, test marketing gives the
marketer experience with marketing the product before going to the great expense of full
introduction. In fact, it allows the company to test the product and its entire marketing
programme, including targeting and positioning strategy, advertising, distributions, packaging etc.
before the full investment is made.

The amount of test marketing necessary varies with each new product. Especially when
introducing a new product requiring a large investment, when the risks are high, or when the firm
is not sure of the product or its marketing programme, a lot of test marketing may be carried out.

8. Commercialisation
Test marketing has given management the information needed to make the final decision: launch
or do not launch the new product. The final stage in the new product development process is
commercialisation. Commercialisation means nothing else than introducing a new product into
the market. At this point, the highest costs are incurred: the company may need to build or rent a
manufacturing facility. Large amounts may be spent on advertising, sales promotion and other
marketing efforts in the first year.

Some factors should be considered before the product is commercialized:

 Introduction timing. For instance, if the economy is down, it might be wise to wait until the
following year to launch the product. However, if competitors are ready to introduce their own
products, the company should push to introduce the new product sooner.
 Introduction place. Where to launch the new product? Should it be launched in a single location,
a region, the national market, or the international market? Normally, companies don’t have the
confidence, capital and capacity to launch new products into full national or international
distribution from the start. Instead, they usually develop a planned market rollout over time.

Pricing Objectives: Top 5 Objectives

of Pricing
Pricing can be defined as the process of determining an appropriate
price for the product, or it is an act of setting price for the product.
Pricing involves a number of decisions related to setting price of
product. Pricing policies are aimed at achieving various objectives.
Company has several objectives to be achieved by the sound pricing
policies and strategies. Pricing decisions are based on the objectives
to be achieved. Objectives are related to sales volume, profitability,
market shares, or competition. Objectives of pricing can be
classified in five groups as shown in figure 1.
1. Profits-related Objectives:
Profit has remained a dominant objective of business activities.

Company’s pricing policies and strategies are aimed at

following profits-related objectives:
i. Maximum Current Profit:
One of the objectives of pricing is to maximize current profits. This
objective is aimed at making as much money as possible. Company
tries to set its price in a way that more current profits can be earned.
However, company cannot set its price beyond the limit. But, it
concentrates on maximum profits.
ii. Target Return on Investment:
Most companies want to earn reasonable rate of return on
investment.

Target return may be:

(1) fixed percentage of sales,

(2) return on investment, or

(3) a fixed rupee amount.

Company sets its pricing policies and strategies in a way that sales
revenue ultimately yields average return on total investment. For
example, company decides to earn 20% return on total investment
of 3 crore rupees. It must set price of product in a way that it can
earn 60 lakh rupees.

2. Sales-related Objectives:
The main sales-related objectives of pricing may include:
i. Sales Growth:
Company’s objective is to increase sales volume. It sets its price in
such a way that more and more sales can be achieved. It is assumed
that sales growth has direct positive impact on the profits. So,
pricing decisions are taken in way that sales volume can be raised.
Setting price, altering in price, and modifying pricing policies are
targeted to improve sales.

ii. Target Market Share:

A company aims its pricing policies at achieving or maintaining the
target market share. Pricing decisions are taken in such a manner
that enables the company to achieve targeted market share. Market
share is a specific volume of sales determined in light of total sales
in an industry. For example, company may try to achieve 25%
market shares in the relevant industry.

iii. Increase in Market Share:

Sometimes, price and pricing are taken as the tool to increase its
market share. When company assumes that its market share is
below than expected, it can raise it by appropriate pricing; pricing is
aimed at improving market share.

3. Competition-related Objectives:
Competition is a powerful factor affecting marketing performance.
Every company tries to react to the competitors by appropriate
business strategies.

With reference to price, following competition-related

objectives may be priorized:
i. To Face Competition:
Pricing is primarily concerns with facing competition. Today’s
market is characterized by the severe competition. Company sets
and modifies its pricing policies so as to respond the competitors
strongly. Many companies use price as a powerful means to react to
level and intensity of competition.

ii. To Keep Competitors Away:

To prevent the entry of competitors can be one of the main
objectives of pricing. The phase ‘prevention is better than cure’ is
equally applicable here. If competitors are kept away, no need to
fight with them. To achieve the objective, a company keeps its price
as low as possible to minimize profit attractiveness of products. In
some cases, a company reacts offensively to prevent entry of
competitors by selling product even at a loss.
iii. To Achieve Quality Leadership by Pricing:
Pricing is also aimed at achieving the quality leadership. The quality
leadership is the image in mind of buyers that high price is related
to high quality product. In order to create a positive image that
company’s product is standard or superior than offered by the close
competitors; the company designs its pricing policies accordingly.

iv. To Remove Competitors from the Market:

The pricing policies and practices are directed to remove the
competitors away from the market. This can be done by forgoing the
current profits – by keeping price as low as possible – in order to
maximize the future profits by charging a high price after removing
competitors from the market. Price competition can remove weak
competitors.

4. Customer-related Objectives:
Customers are in center of every marketing decision.

Company wants to achieve following objectives by the

suitable pricing policies and practices:
i. To Win Confidence of Customers:
Customers are the target to serve. Company sets and practices its
pricing policies to win the confidence of the target market.
Company, by appropriate pricing policies, can establish, maintain
or even strengthen the confidence of customers that price charged
for the product is reasonable one. Customers are made feel that they
are not being cheated.

ii. To Satisfy Customers:

To satisfy customers is the prime objective of the entire range of
marketing efforts. And, pricing is no exception. Company sets,
adjusts, and readjusts its pricing to satisfy its target customers. In
short, a company should design pricing in such a way that results
into maximum consumer satisfaction.

5. Other Objectives:
Over and above the objectives discussed so far, there are certain
objectives that company wants to achieve by pricing.

They are as under:

i. Market Penetration:
This objective concerns with entering the deep into the market to
attract maximum number of customers. This objective calls for
charging the lowest possible price to win price-sensitive buyers.

ii. Promoting a New Product:

To promote a new product successfully, the company sets low price
for its products in the initial stage to encourage for trial and repeat
buying. The sound pricing can help the company introduce a new
product successfully.

iii. Maintaining Image and Reputation in the Market:

Company’s effective pricing policies have positive impact on its
image and reputation in the market. Company, by charging
reasonable price, stabilizing price, or keeping fixed price can create
a good image and reputation in the mind of the target customers.

iv. To Skim the Cream from the Market:

This objective concerns with skimming maximum profit in initial
stage of product life cycle. Because a product is new, offering new
and superior advantages, the company can charge relatively high
price. Some segments will buy product even at a premium price.
v. Price Stability:
Company with stable price is ranked high in the market. Company
formulates pricing policies and strategies to eliminate seasonal and
cyclical fluctuations. Stability in price has a good impression on the
buyers. Frequent changes in pricing affect adversely the prestige of
company.

vi. Survival and Growth:

Finally, pricing is aimed at survival and growth of company’s
business activities and operations. It is a fundamental pricing
objective. Pricing policies are set in a way that company’s existence
is not threatened.

Concept of Price of a Product – Defined:

In a modern money using economy, price refers to the exchange
value of a commodity or service, in terms of money.

In the primitive barter economy, the exchange value of a commodity

would be expressed, in terms of another commodity.

According to F.E. Clark, “The price of an article or service is

its market value, expressed in terms of money.”
However, a buyer does not buy a physical product alone; he/she
also acquires certain services and benefits along with the product
e.g. free home delivery, repair facilities, credit facilities; warranty/
guarantee etc. Therefore, price is the amount of money which is
needed to acquire a product and its accompanying services and
benefits.

Salient features of price:

Following salient features of price might be observed:
(i) Price is the only element of marketing-mix that generates
revenue for the firm; other elements of marketing-mix viz. product,
place (i.e. channels or distribution) and promotion – give rise to
costs.

(ii) Price is the most flexible element; as it can be adjusted quickly.

Other elements viz. product, place and promotion are less flexible to
adjust.

(iii) Price is a silent information provider. It helps the customer

judge product benefits. In fact, higher prices are taken as an
indicator of higher product quality; specially when the product is
new and it is difficult to measure product benefits objectively.

Major Determinants of Price of a Product:

While pricing a product, the important factors to be
considered are usually the following:
(1) Cost of Production:
The price of the product must be so fixed as to recover the full cost
of production from the price charged; otherwise all production
activities will have to be stopped, in the long-run.

(2) Profit-Margin Desired:

The price of the product should include a reasonable (or targeted)
margin of profits; to ensure profitable selling.

(3) Competitors’ Pricing:

In the present-day competitive marketing world, no businessman
could ignore the pricing policies adopted by competitors; while
doing the pricing his own product. In any case, the price of the
product to be charged by a manufacturer must not be substantially
different from the prices charged by competitors for similar types of
products.

(4) Government’s Policy of Price-Control:

Where, in particular cases, the Government has fixed maximum
retail prices; the pricing policy followed by a manufacturer must
have to be in tune with governmental regulations, in that regard.

(5) Consumers’ Buying Capacity:

Since under the modern marketing concept, a product is made
according to the needs and preferences of target consumers; the
pricing of the product must be done in a manner so as to suit the
pocket of the target consumers. In case otherwise, the product may
not appeal to them; and selling the product may become a ‘big’
problem.

(6) Product-Life Cycle Stage:

While pricing a product, the manufacturer must pay attention to the
particular stage of the product-life cycle; which a product is passing
through. For example, price of the product must be kept low during
introductory stage; it could be slightly raised at the growth stage
and finally at the saturation point, the price must be again lowered.

(7) Demand-Supply Conditions:

Whether the price of the product should be high or low; would
much depend on the demand- supply conditions relevant to the
product in question. If demand is more than supply; even a high
price might work well. On the contrary, when demand is less than
supply, only a low price could attract the consumers.
 Sales promotion

Sales promotion is a marketing strategy where the product is

promoted using short-term attractive initiatives to stimulate its demand
and increase its sales.

This strategy is usually brought to use in the following cases –

 To introduce new products,

 To sell out existing inventories,
 To attract more customers, and
 To lift sales temporarily.
American Marketing Association defines sales promotion as –

Media and nonmedia marketing pressure applied for a

predetermined, limited period of time in order to stimulate trial,
increase consumer demand, or improve product availability.
mportance Of Sales Promotion
Sales promotion is a handy technique to fulfil the short term sales
goals by persuading potential customers to buy the product. It is an
important promotional strategy to –

 Spread information about the brand to new customers or new

market
 Stabilize sales volume and fulfil short-term sales goals
 Stimulate demand for a short term by making the product look
like a great deal.
Objectives Of Sales Promotion
The answer to the question what is sales promotion? also gives a hint
to sales promotion objectives, the main objective being lifting the
sales temporarily.

Other objectives include but are not limited to –

To Create Market For New Products

It is sometimes hard to establish demand for a new product in a
market of similar products. In such cases, the company opt for
increasing some sales by using sales promotion strategies
like penetration pricing, offers, discounts, and scarcity principle.

To Remain Competitive
Companies use temporary sales promotion techniques to compete
with competitor’s short term marketing strategies.

To Gain Dealers Trust

Sales promotion techniques increase the sales of the products. This
increases dealers’ income and results in them preferring the brand
more.

To Take Products To New Markets

New markets are often hard to enter. Sales promotion increases
traction and makes more customers try the new product.

Increase Brand Awareness

It includes attractive incentives which help increase brand awareness, which eventually leads
to more sales.
Woo Existing Customers
Sales promotion is also used to tackle the poaching strategies of competitors and keep
existing customers with the brand.

Sales Promotion Strategies

Sales promotion strategies can be divided into three broad types. These are –

 Pull Strategy – The pull strategy attempts to get the customers to ‘pull’ the products
from the company. It involves making use of marketing communication and
initiatives like seasonal discounts, financial schemes, etc.
 Push Strategy – The push strategy attempts to push the product away from the
company to the customers. It involves convincing the intermediary channels to push
the product from the distribution channels to the final consumers using promotional
and personal selling efforts. This strategy involves making use of tactics developed
especially for resellers, merchants, dealers, distributors, and agents.
 Hybrid Strategy – A hybrid sales promotion strategy makes use of both the pull and
push strategy to sell the product with the least resistance possible. It involves
attracting the customers using special coupons and also providing incentives to the
merchants to sell the brand’s products.

Types Of Sales Promotions

Sales promotion can be broadly divided into two types according to whom the promotion is
targeted to. These are –

Consumer Sales Promotion

When the sales promotion strategies are targeted to the end consumers, it is referred to as
consumer sales promotion. An example would be offering 20% off on certain products to the
customers. The main motive of consumer-oriented promotion is to increase sales directly by
attracting new customers and wooing existing ones.

Sales Promotion Techniques Targeted To Consumers

Sales promotion tools used for consumer-oriented promotion are –

 Free Samples: Distributing free samples increases brand awareness and triggers
the psychology of ownership where the person chooses the promoted product if he
liked the sample.
 Free Gifts – Offering free gifts attract customers as they get more while paying for
less.
  Discounts/Discount Coupons – Discount coupons are a great method of increasing
sales for the short term. People go for discount coupons as they let them buy the
products they couldn’t afford otherwise.
 Exchange Schemes – Exchange schemes attract many customers as they get some
value even for their old product.
 Finance Schemes – Finance schemes like no-cost EMI, low-interest EMI, etc. makes
it easier for customers to purchase expensive products.
 Shipping Schemes – Sometimes huge shipping costs discourage the customers from
buying products. Such short term shipping schemes remove friction.
 Bundle Discounts – These deals are a great way to reduce unsold inventory. It
includes selling bundled products at a price lesser than when those number of
products are bought separately.
 Bulk Purchase Deals – This is a great sales promotion tactic to reduce unsold
inventory. It includes providing discount to customers who buy in bulk.
Trade Sales Promotion
When the promotion activities are strategized keeping in mind the dealers, distributors, or
agents, it is called trade sales promotion. In this type of sales promotion, offers are provided
within the trade channels with an aim to woo retailers, wholesalers, agents, or distributors.
This is done to get more shelf space as compared to competitors, motivate the dealers to sell
more of the brand’s products and to increase the sales indirectly.

Also Read: Marketing Management Philosophies - 5 Marketing Concepts

Sales Promotion Techniques Targeted To Traders

 Point Of Purchase Displays – This includes providing free point of purchase (POP)
display units to the retailers to increase their sales.
 Trade Shows – Trade shows are a great sales promotion strategy where the business
promotes its product to thousands of traders in the trade show. Trade shows also
witness huge discounts as compared to when bought usually.
 Push Money – Also known as spiffs, this technique includes extra payments to
traders to motivate them to meet specified goals. For example, giving them a $50
bonus per unit for selling product A and $30 for selling product B for a specified time
period.
 Deal Loaders – These are the gifts provided to the traders (wholesalers and retailers)
for ordering a certain quantity of product.
 Trade Deals – These are special concessions provided to the merchants to encourage
them to promote a specific product and increase its sales for a limited time period.
 Buying Allowances – Special discounts provided to the sellers when they order a
specified number of products.

Sales Promotion Examples

A product can be promoted for a limited time using innumerable tactics. Here are a few
examples of sales promotion tactics that exist –
Black Friday Sale
Black Friday sale is a seasonal sale which occurs only once a year. It involves huge discounts
and special offers which are limited to a day. As a result, it increases the sales manifold.

Buy One Get One

Buy One Get One (BOGO) is a popular type of sales promotion where two products are
offered at a price of one. This works great to promote a new product or clear the inventory at
the end of the season.

Referral Bonuses
Referral marketing is a great sales promotion strategy where the company pushes its own
customers to bring in new customers. This is done by providing them with special discounts,
offers, cashback, or actual monetary benefits.

PUBLICITY
In marketing, publicity is the public visibility or awareness for
any product, service or organization (company, charity, etc.). It may also refer to the
movement of information from its source to the general public, often (but not always) via
the media. The subjects of publicity include people of public interest, goods and services,
organizations, and works of art or entertainment.

A publicist is someone that carries out publicity, while public relations (PR) is the strategic
management function that helps an organization establish and maintain communication with
the public. This can be done internally, without the use of popular media.

Types of Publicity
Your business can pursue several types of publicity, including:

1. Social media: Platforms such as Facebook, Instagram, TikTok,

and Twitterallow you to connect with your potential customers. A strong social
media presence keeps your brand in your followers' minds. Rather than trying
to make a single post that goes viral, focus on building an interested audience
slowly and steadily by offering posts that educate, entertain, or both.
2. Product placement: Send free products or offer free services to public
figures, bloggers, or other media personalities. Your products may end up
being featured in their blogs, social media posts, or other public content.
3. Partnerships: Working with other brands or businesses can allow you to get
your brand in front of a wider audience and generate publicity. Approach
 potential partners about collaborations, product swaps, or offering your
products and services as a free bonus to some of their customers.
4. Promotional swag: Branded items such as calendars, pens, notepads, tote
bags, and phone cases can put your brand name and logo in front of a wide
audience. However, you have no guarantee that your target audience will be
the one seeing this swag. Think of swag as a fun bonus for customers, rather
than a guaranteed way to generate publicity, and budget accordingly.

What is Direct Marketing?

Direct marketing is a promotional method that involves presenting information
about your company, product, or service to your target customer without the use of
an advertising middleman. It is a targeted form of marketing that presents
information of potential interest to a consumer that has been determined to be a
likely buyer.

For example, subscribers to teen magazines might be presented with Facebook ads
for acne medication which, based on their age, they are likely to need. Or members
of the United States Equestrian Federation might all receive an email promotion
offering special pricing on horse gear. Current residents of Wilmington, Delaware
might receive a flyer announcing the arrival of Wegmans supermarket to their area.
Conversely, people in Wilmington, Ohio would not.

Forms of Direct Marketing

Common forms of direct marketing include:

 Brochures
 Catalogs
 Fliers
 Newsletters
 Post cards
 Coupons
 Emails
 Targeted online display ads
 Phone calls
 Text messages
 The Goal
While some marketing techniques aim to increase awareness or to educate markets
about a company’s products or services, direct marketing’s sole goal is to persuade
the recipient to take action. While getting a sale is the ultimate goal, some
customers will not be ready to buy on-the-spot. But they might:

 Visit a website
 Call for more information
 Return a postcard requesting a quote
 Enter their name and email address
 Make a purchase

Reasons it’s Successful

Unlike mass advertising, which is presented to everyone, direct marketing is
presented only to people who are suspected to have an interest or need in your
company’s product, based on information gathered about them.

For example, graduates of Princeton University might be sent an email announcing

a new cashmere sweater now available for sale with the school’s logo on it. Only
students, graduates, and their parents are likely to be interested in owning such a
piece of clothing, so by limiting who receives the announcement, the manufacturer
saves money on distribution costs and increases the odds of reaching people who
might make a purchase.

Other reasons direct marketing is more successful are:

 You can make the message personal, making the recipient feel it is meant just for
them
 It is more cost-effective to market to buyers who have been identified as likely to
buy
 For that reason it also has a higher return on investment, since the likelihood of
making a sale to a targeted customer list is higher to begin with.
 It is measurable. Direct marketing uses a number of built-in ways to track the
success of each campaign, allowing you to improve with each mail or email
cycle.
Integrated Marketing Communications (IMC) is a strategic, collaborative, and promotional
marketing function where a targeted audience receives consistent and persuasive brand
messaging through various marketing channels in an integrated way to move buyer's through
the decision making process. At the most basic level, integrated marketing communications
helps to ensure that marketers are using all of the available channels to them to amplify a
marketing campaign and/or brand messaging to reach their target audience, or buyer persona.
To help you develop your integrated marketing communications strategy, consider using
these four steps to create and implement a cohesive and integrated marketing strategy and
jumpstart your success.

1. Identify Different Marketing Communication Methods

As part of your integrated marketing strategy, it's imperative to determine the
various marketing communication methods you want to leverage as part of your
plan. Consider your target audience and how they like to receive information,
gather facts, and perform research on the problem they are trying to solve. From
there, determine what channels are most relevant for your specific campaign. Some
examples include:
Content Marketing: Make your content available online through blog content, video
marketing, premium content (behind a landing page to capture information), pop-ups, and
dynamic website content to help your potential buyers connect and learn more about you
even before they start the decision-making process.
Email Marketing: Use email to re-engage your existing audience through unique and helpful
content. Always consider your existing contacts and how you can re-engage them through
content. It's not always about generating new leads, but oftentimes your most impactful
marketing efforts come from delivering the right content at the right time to your existing
subscribers. Here is a helpful case study about how you can drive growth and see tremendous
impact through email marketing.
Social Media Marketing: Social media opens the door to building relationships, developing
brand awareness, and generating website traffic. When combined with email marketing and
content marketing, digital marketing campaigns utilizing social media can truly bring
exceptional results by connecting with your target audience on a platform they are already
spending time on regularly. Here is another helpful case study about driving lead generation
and content results through social media.

Download the Content Marketing Workbook

2. Develop a Marketing Communication Plan
Once you have determined the marketing channels that are going to resonate with your
audience, it's time to develop a comprehensive plan to execute on your marketing initiatives.
To do this, you need to focus on three primary items:
Audience: Determine the buyer persona for each of your marketing methods. For example, if
one of your personas are baby boomers, consider email marketing and Facebook. If your
other persona is millennials, consider texting and Instagram. Your persona is going to define
what channels you use to engage with them, not the other way around.
Content: Define the content that will speak to your audience the most effectively. For
example, if you are trying to generate new contacts for your database, you may want to have
a top-of-the-funnel offer such as subscribing to a newsletter, or downloading a checklist on
your site. Pro Tip: You can even have this as a pop-up form that displays when people are
exiting your site. This gives you one last way to connect with them. You would be surprised
how well these work. I have seen conversion up to 17% on pop-up forms. If you are trying to
drive
re-engagement in your database to convert existing leads into opportunities, consider
delivering them case studies, video testimonials, and more. This will aid them in their
decision-making process.
Cadence: It's important to understand how often people like to receive information. You can
get this data from a variety of marketing automation platforms. For example, in HubSpot we
can see how often people read emails, engage on the website, and even on social media. We
can use that information to ensure we are sending content frequently enough, but not too
frequently that it becomes overwhelming for the prospect. If you see that for a specific
product or service you offer, the general sales cycle is around 90 days, you want your email
cadence to align with that timeframe. Use the data available to you to make the best decision
based on your audience and how often they engage with your brand.

3. Understand the Customer Decision-Making Process

Understand what makes customers decide to buy a product or service, and then discover why
they would decide to buy from you. The important thing here is understanding the problem
you are solving for them, and how to help them in that decision journey. You will notice that
some customers use an extended decision-making process, but others use low levels of
involvement to make limited, nominal, or spontaneous decisions. It all depends on your
business and what you sell. If it's a consumer item that is a low price point, your timeframe
will be shorter. If you are selling B2B software, it's likely longer due to the number of people
involved. Most customer decisions follow a basic pattern while involved in a particular
situation that could result in a sale. This is called the Decision-Making Process, and the
following is an example that outlines the process.
 They recognize a problem.
 They search for information.
 They identify products and services that can solve the problem.
 They choose which alternative they will buy.
 They assess the after-the-sale experience.
Companies that understand the complex nature of consumer behavior and decision-making
can enhance the effectiveness of their marketing communications by tailoring their message
to the decision process of their audience.

4. Implement Your Marketing Communication Plan

Now it's time to implement your plan and see the results. Here are some steps to
help you do just that.
Calendar: Make sure that you are using a calendar to know what content is being
sent at what time to prospects, and on what channel. This will help you organize
your campaign assets and communicate with your prospects at the right place and
time in their decision-making journey.
Automation Software: In order to do this at scale, you are going to need some type of
marketing automation software that aligns with your CRM so you can see the full sales
process. By using software to help you implement your program, you can most effectively
reach your audience and present an integrated, seamless, and consistent message to them on a
variety of channels with ease. If you need help evaluating software solutions, simply click
here to schedule a complimentary MarTech evaluation.

Analyze: To help make your marketing communication strategy comprehensive and results-
driven, continue to monitor the needs of your prospects, focusing on the capabilities of your
product or service that solve their problem, and generating audience excitement. You can do
this through monitoring engagement with your campaigns, email open rates and click rates,
social interactions, requests to speak with sales, and ultimately the closed deals. Here is a
helpful blog article about inbound marketing analytics to get you started.

Stay on Top of Trends: Always stay ahead of the curve to find new ways to make your
marketing communication strategy different from your competitors, so your communication
efforts contribute to the value of your brand. There are constantly new tools and tactics
introduced to the marketing industry. Make sure you know what may add value to your
integrated marketing communications strategy so you can test new tools and strategies that
may align with your target audience.

What Is a Distribution Channel?

A distribution channel is a chain of businesses or intermediaries through which a good or
service passes until it reaches the final buyer or the end consumer. Distribution channels can
include wholesalers, retailers, distributors, and even the Internet.

Distribution channels are part of the downstream process, answering the question "How do
we get our product to the consumer?" This is in contrast to the upstream process, also known
as the supply chain, which answers the question "Who are our suppliers?"
A distribution channel, also known as placement, is part of a company's marketing strategy,
which also includes the product, promotion, and price.

Understanding Distribution Channels

A distribution channel is a path by which all goods and services must travel to arrive at the
intended consumer. Conversely, it also describes the pathway payments make from the end
consumer to the original vendor. Distribution channels can be short or long, and depend on
the number of intermediaries required to deliver a product or service.

Goods and services sometimes make their way to consumers through multiple channels—a
combination of short and long. Increasing the number of ways a consumer is able to find a
good can increase sales. But it can also create a complex system that sometimes
makes distribution management difficult. Longer distribution channels can also mean less
profit each intermediary charges a manufacturer for its service.

Direct and Indirect Channels

Channels are broken into two different forms—direct and indirect. A direct channel allows
the consumer to make purchases from the manufacturer while an indirect channel allows the
consumer to buy the goods from a wholesaler or retailer. Indirect channels are typical for
goods that are sold in traditional brick-and-mortar stores.

Generally, if there are more intermediaries involved in the distribution channel, the price for a
good may increase. Conversely, a direct or short channel may mean lower costs for
consumers because they are buying directly from the manufacturer.

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1:39
Distribution Channel
Types of Distribution Channels
While a distribution channel may seem endless at times, there are three main types
of channels, all of which include the combination of a producer, wholesaler, retailer,
and end consumer.

The first channel is the longest because it includes all four: producer, wholesaler,
retailer, and consumer. The wine and adult beverage industry is a perfect example of
this long distribution channel. In this industry—thanks to laws born out of prohibition
—a winery cannot sell directly to a retailer. It operates in the three-tier system,
meaning the law requires the winery to first sell its product to a wholesaler who then
sells to a retailer. The retailer then sells the product to the end consumer.

The second channel cuts out the wholesaler—where the producer sells directly to a
retailer who sells the product to the end consumer. This means the second channel
contains only one intermediary. Dell, for example, is large enough to sell its products
directly to reputable retailers such as Best Buy.

The third and final channel is a direct-to-consumer model where the producer sells
its product directly to the end consumer. Amazon, which uses its own platform to sell
Kindles to its customers, is an example of a direct model. This is the shortest
distribution channel possible, cutting out both the wholesaler and the retailer.

KEY TAKEAWAYS

 A distribution channel represents a chain of businesses or intermediaries

through which the final buyer purchases a good or service.
 Distribution channels include wholesalers, retailers, distributors, and the
Internet.
 In a direct distribution channel, the manufacturer sells directly to the
consumer. Indirect channels involve multiple intermediaries before the product
ends up in the hands of the consumer.
Choosing the Right Distribution Channel
Not all distribution channels work for all products, so it's important for companies to
choose the right one. The channel should align with the firm's overall mission and
strategic vision including its sales goals.

The method of distribution should add value to the consumer. Do consumers want to
speak to a salesperson? Will they want to handle the product before they make a
purchase? Or do they want to purchase it online with no hassles? Answering these
questions can help companies determine which channel they choose.

Secondly, the company should consider how quickly it wants its product(s) to reach
the buyer. Certain products are best served by a direct distribution channel such as
meat or produce, while others may benefit from an indirect channel.

If a company chooses multiple distribution channels, such as selling products online

and through a retailer, the channels should not conflict with one another. Companies
should strategize so one channel doesn't overpower the other.

Frequently Asked Questions

What is a distribution channel?
The term “distribution channel” refers to the methods used by a company to deliver
its products or services to the end consumer. It often involves a network of
intermediary businesses such as manufacturers, wholesalers, and retailers.
Selecting and monitoring distribution channels is a key component of managing
supply chains.

What is the difference between direct and indirect distribution channels?

Direct distribution channels are those that allow the manufacturer or service provider
to deal directly with its end customer. For example, a company that manufactures
clothes and sells them directly to its customers using an e-commerce platform would
be utilizing a direct distribution channel. By contrast, if that same company were to
 rely on a network of wholesalers and retailers to sell its products, then it would be
using an indirect distribution channel.

What are the three types of distribution channels?

The three types of distribution channels are wholesalers, retailers, and direct-to-
consumer sales. Wholesalers are intermediary businesses that purchase bulk
quantities of product from a manufacturer and then resell them to either retailers or—
on some occasions—to the end consumers themselves. Retailers are generally the
customers of the wholesalers and offer high-touch customer service to the end
customers. Lastly, direct-to-consumer sales occur when the manufacturer sells
directly to the end customer, such as when the sale is made directly through an e-
commerce platform.

Role of Distribution Channels in Business

The target for any business is to bring their product or

service to the market and make it available for consumers
by creating a distribution path or channel. The link between
producers and the end consumer is normally intermediaries,
such as wholesalers, retailers, or brokers. The
intermediaries can be natural persons or businesses.
Distribution channels affect the prices of goods and their
positioning in their respective markets.

Distributions, ideally, should be set up in a way that limits

the number of stops for the product or service before it
reaches the end consumer. A distribution channel must be
efficient and effective. It means that transportation and
other logistical requirements need to be used at maximum
capacity and at the lowest rates possible.
Types of Distribution Channels

Distribution channels can either be direct or indirect. The

indirect channels can be divided up into different levels.

1. Direct distribution channels

The direct distribution channel does not make use of any

intermediaries. The manufacturer or producer sells directly
to the end consumer. The direct form of distribution is
typically used by producers or manufacturers of niche and
expensive goods and items that are perishable. An example
is a baker.

2. Indirect distribution channels

The indirect distribution channel makes use of

intermediaries in order to bring a product to market. The
three types of indirect channels are:

One-level channel

The one-level channel entails a product coming from a

producer to a retailer and then to the end buyer. The
retailers buy the product from the manufacturer and sell it to
the end buyers. The one-level channel is ideal for
manufacturers of furniture, clothing items, toys, etc.
Two-level channel

The two-level channel follows the following process:

Wholesalers generally make bulk purchases, buy from the

producer, and divide the goods into smaller packages to sell
to retailers. The retailers then sell the goods to the end
buyers. The two-level channel is suitable for more affordable
and long-lasting goods with a larger target market.

Three-level channel

The three-level channel is similar to the two-level channel,

except the goods flow from the producer to an agent and
then to a wholesaler. Agents assist with selling the goods
and getting the goods delivered to the market promptly.

The agents normally receive a commission and are

allocated the task of product distribution in a particular
area. The three-level channel is suitable for goods that are
in high demand and with a target market that stretches
across a country.
The Internet as the Modern-Day Distribution Channel

With e-commerce growing tremendously over the past

couple of decades, manufacturers and producers are now
able to use online marketplaces to sell their goods. The
internet is also ideal for service providers. Examples of
online market places are Amazon, AliExpress, eBay, and
Alibaba. Other internet intermediaries can be delivery
services, such as Uber.

Making the Right Choice

Distribution channels may vary depending on a particular

manufacturer’s product type and their sales targets. It is
why it is pivotal to choose the right distribution channel.

The following factors must be looked at into detail by a

company in order to determine which distribution method
would be ideal for it to maximize profit generation via sales,
value addition, and consumer reach:

 Market characteristics
 Product characteristics
 Competitor characteristics
 Company characteristics
DESIGNING THE MARKETING CHANNEL Chapter Objectives
Channel design refers to those decisions involving the development of new marketing
channels where none had existed before or to the modification of existing channels. Channel
design is a seven-step process of which six steps are covered in this chapter and the seventh
or final step is covered in Chapter 7.

Learning objectives

1. 1) Understand the definition of channel design and the key distinguishing points
associated with it.
2. 2) Realize that channel design is a complex process.
3. 3) Know the sequence of the channel design paradigm and understand the

underlying logic of the sequence.

4. 4) Recognize a variety of situations that might call for a channel design decision.
5. 5) Be familiar with the concept of distribution objectives and the need for

congruency with marketing and corporate objectives and strategies.

6. 6) Be able to specify distribution tasks.

7. 7) Recognize the three dimensions of channel structure and the strategic significance

of each dimension.

8. 8) Delineate and define the six basic categories of variables affecting channel

structure.

9. 9) Understand the concept of a heuristic in terms of its benefits and limitations in

 channel design.

10. 10) Recognize the limitations of the channel manager’s ability to choose an optimal

channel structure in the strictest sense.

11. 11) Be familiar with the major approaches for choosing a channel structure.
12. 12) Have an appreciation for the value of judgmental-heuristic approaches for

choosing channel structures in the real world.

Chapter Topics

1. 1) What is Channel Design?

2. 2) Who Engages in Channel Design?
3. 3) A Paradigm of the Channel Design Decision
4. 4) Phase 1: Recognizing the Need for a Channel Design Decision
5. 5) Phase 2: Setting and Coordinating Distribution Objectives
6. 6) Phase 3: Specifying the Distribution Tasks
7. 7) Phase 4: Developing Possible Alternative Channel Structures
8. 8) Phase 5: Evaluating the Variables Affecting Channel Structure
9. 9) Phase 6: Choosing the “Best” Channel Structure

6-1

Designing the Marketing Channel

Chapter Outline

What is Channel Design?

Key Term and Definition

Channel design: Those decisions involving the development of new marketing channels
where none had existed before, or the modification of existing channels.

Channel design is presented as a decision faced by the marketer, and it includes either setting
up channels from scratch or modifying existing channels. This is sometimes referred to as
reengineering the channel and in practice is more common than setting up channels from
scratch.

The term design implies that the marketer is consciously and actively allocating the
distribution tasks to develop an efficient channel, and the term selection means the actual
selection of channel members.

Finally, channel design has a strategic connotation, as it will be used as a strategic tool for
gaining a differential advantage.

Who Engages in Channel Design?

Producers and manufacturers, wholesalers, and retailers all face channel design decisions.
Producers and manufacturers “look down” the channel. Retailers “look up” the channel while
wholesaler intermediaries face channel design from both perspectives. In this chapter, we will
be concerned only from the perspective of producers and manufacturers.

A Paradigm of the Channel Design Decision

The channel design decision can be broken down into seven phases or steps. These are:

1. Recognizing the need for a channel design decision

2. Setting and coordinating distribution objectives
3. Specifying the distribution tasks
4. Developing possible alternative channel structures
5. Evaluating the variable affecting channel structure
6. Choosing the “best” channel structure
7. Selecting the channel members

6-2

Phase 1: Recognizing the Need for a Channel Design Decision

Many situations can indicate the need for a channel design decision. Among them are:

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Developing a new product or product line

Aiming an existing product to a new target market
Making a major change in some other component of the marketing mix Establishing a new
firm
Adapting to changing intermediary policies
Dealing with changes in availability of particular kinds of intermediaries Opening up new
geographic marketing areas
Facing the occurrence of major environmental changes
Meeting the challenge of conflict or other behavioral problems Reviewing and evaluating

Phase 2: Setting and Coordinating Distribution Objectives

In order to set distribution objectives that are well coordinated with other marketing and firm
objectives and strategies, the channel manager needs to perform three tasks:

1. Become familiar with the objectives and strategies in the other marketing mix areas
and any other relevant objectives and strategies of the firm.
2. Set distribution objectives and state them explicitly.
3. Check to see if the distribution objectives set are congruent with marketing and

the other general objectives and strategies of the firm.

1) Become Familiar with Objectives and Strategies

Whoever is responsible for setting distribution objectives should also make an effort to learn
which existing objectives and strategies in the firm may impinge of the distribution
objectives. In practice, often the same individual(s) who set(s) objectives for other
components of the marketing mix will do so for distribution.

2) Setting Explicit Distribution Objectives

Distribution objectives are essentially statements describing the part that distribution in
expected to play in achieving the firm’s overall marketing objectives.

3) Checking for Congruency

A congruency check verifies that the distribution objectives do not conflict with the other
areas of the marketing mix.

6-3

Marketing Channels 7e

Designing the Marketing Channel

Phase 3: Specifying the Distribution Tasks

The job of the channel manager in outlining distribution functions or tasks is a much more
specific and situationally dependent one. The kinds of tasks required to meet specific
distribution objectives must be precisely stated.

In specifying distribution tasks, it is especially important not to underestimate what is

involved in making products and services conveniently available to final consumers.

Phase 4: Developing Possible Alternative Channel Structures

The channel manager should consider alternative ways of allocating distribution objectives to
achieve their distribution tasks. Often, the channel manager will choose more than one
channel structure in order to reach the target markets effectively and efficiently.

Whether single – or multiple – channel structures are chosen, the allocation alternatives
(possible channel structures) should be evaluated in terms of the following three dimensions:
(1) number of levels in the channel, (2) intensity at the various levels, (3) type of
intermediaries at each level.

1) Number of Levels

The number of levels in a channel can range from two levels – which is the most direct – up
to five levels and occasionally even higher.

2) Intensity at the Various Levels

Intensity refers to the number of intermediaries at each level of the marketing channel.
  Intensive: sometimes called saturation means that as many outlets as possible are
used

at each level of the channel.

 Selective: means that not all possible intermediaries are used, but rather those
included in the channel have been carefully chosen.
 Exclusive: a way of referring to a very highly selective pattern of distribution.

The intensity of distribution dimension is a very important aspect of channel structure

because it is often a key factor in the firm’s basic marketing strategy and will reflect
the firm’s overall corporate objectives and strategies.

3) Types of Intermediaries

The third dimension of channel structure deals with the particular types of
intermediaries to be used (if any) at the various levels of the channel.

The channel manager should not overlook new types of intermediaries that are
emerging such as Internet companies.

6-4

4) Number of Possible Channel Structure Alternatives

Given that the channel manager should consider all three structural dimensions (level,
intensity, and type of intermediaries) in developing channel structures, there are, in theory, a
high number of possibilities.

Fortunately, in practice, the number of feasible alternatives for each dimension is often
limited due to industry or the number of current channel members.

Phase 5: Evaluating the Variables Affecting Channel Structure

Having laid out alternative channel structures, the channel manager should then evaluate a
number of variables to determine how they are likely to influence various channel structures.

These six basic categories are most important:

1. Market variables
2. Product variables
3. Company variables
4. Intermediary variables
5. Environmental variables
6. Behavioral variables

1) Market Variables

Market variables are the most fundamental variables to consider when designing a marketing
channel.
Four basic subcategories of market variables are particularly important in influencing channel
structure. They are (A) market geography, (B) market size, (C) market density, and (D)
market behavior.

A) Market Geography

Market geography refers to the geographical size of the markets and their physical location
and distance from the producer and manufacturer.

A popular heuristic (rule of thumb) for relating market geography to channel design is: “The
greater the distance between the manufacturer and its markets, the higher the probability that
the use of intermediaries will be less expensive than direct distribution.”

B) Market Size

The number of customers making up a market (consumer or industrial) determines the market
size.

6-5

Marketing Channels 7e

Designing the Marketing Channel

From a channel design standpoint, the larger the number of individual customers, the larger
the market size.

A heuristic about market size relative to channel structure is:

“If the market is large, the use of intermediaries is more likely to be needed because of the
high transaction costs of serving large numbers of individual customers. Conversely, if the
market is small, a firm is more likely to be able to avoid the use of intermediaries.”

C) Market Density

The number of buying units per unit of land area determines the density of the market. In
general, the less dense the market, the more difficult and expensive is distribution.

A heuristic for market density and channel structure is as follows:

“The less dense the market, the more likely it is that intermediaries will be used. Stated
conversely, the greater the density of the market, the higher the likelihood of eliminating
intermediaries.”

D) Market Behavior

Market behavior refers to the following four types of buying behaviors:

1. 1) How customers buy

2. 2) When customers buy
3. 3) Where customers buy
4. 4) Who does the buying
Each of these patterns of buying behavior may have a significant effect on channel structure.

2) Product Variables

Product variables such as bulk and weight, perishability, unit value, degree of standardization
(custom-made versus standardized), technical versus nontechnical, and newness affect
alternative channel structures.

A) Bulk and Weight

Heavy and bulky products have very high handling and shipping costs relative to their value.
Therefore, a producer should attempt to minimize these costs by shipping only in large lots to
the fewest possible points.

Consequently, the channel structure should be as short as possible usually from producer to
user.

B) Perishability

Products subject to rapid physical deterioration and those of rapid fashion obsolescence
require rapid movement from production to consumption.

6-6

The following heuristic is appropriate in these situations:

“ When products are highly perishable, channel structures should be designed to provide for
rapid delivery from producers to consumers.”

C) Unit Value

The lower the unit value of the product, the longer the channel should be. This is because low
unit value leaves a small margin for distribution costs.

When the unit value is high relative to its size and weight, direct distribution is feasible
because the handling and transportation costs are low relative to the product’s value.

D) Degree of Standardization

Custom-made products should go from producer to consumer while more standardized

products allow opportunity to lengthen the channel.

E) Technical versus Nontechnical

In the industrial market, a highly technical product will generally be distributed through a
direct channel. This is because the manufacturer may need sales and service people capable
of communicating the product’s technical features to the user.

In the consumer market, relatively technical products are usually distributed through short
channels for the same reasons.
F) Newness

New products, both industrial and consumer, require extensive and aggressive promotion in
the introductory stage to build demand. Usually, the longer the channel of distribution the
more difficult it is to achieve this kind of promotional effort from all channel members.

Therefore, a shorter channel is generally viewed as an advantage for new products as a

carefully selected group of intermediaries is more likely to provide aggressive promotion.

3) Company Variables

The most important company variables affecting channel design are (A) size, (B) financial
capacity, (C) managerial expertise, and (D) objectives and strategies.

A) Size

In general, the range of options for different channel structures is a positive function of a
firm’s size. Larger firms have more options available to them than smaller firms do.

B) Financial Capacity

Generally, the greater the capital available to a company, the lower its dependence on
intermediaries.

6-7

Marketing Channels 7e

Designing the Marketing Channel

C) Managerial Expertise

For firms lacking in the managerial skills necessary to perform distribution tasks, channel
design must of necessity include the services of intermediaries who have this expertise. Over
time, as the firm’s management gains experience, it may be feasible to change the structure to
reduce the amount of reliance on intermediaries.

D) Objectives and Strategies

The firm’s marketing and general objectives and strategies, such as the desire to exercise a
high degree of control over the product, may limit the use of intermediaries.

Strategies emphasizing aggressive promotion and rapid reaction to changing markets will
constrain the types of channel structures available to those firms employing such strategies.

4) Intermediary Variables

The key intermediary variables related to channel structure are (A) availability, (B) costs, and
(C) the services offered.
A) Availability

The availability (number of and competencies of) adequate intermediaries will influence
channel structure.

B) Cost

The cost of using intermediaries is always a consideration in choosing a channel structure. If

the cost of using intermediaries is too high for the services performed, then the channel
structure is likely to minimize the use of intermediaries.

C) Services

This involves evaluating the services offered by particular intermediaries to see which ones
can perform them most effectively at the lowest cost.

5) Environmental Variables

Economic, sociocultural, competitive, technological, and legal environmental forces can have
a significant impact on channel structure.

6) Behavioral Variables

The channel manager should review the behavioral variables discussed in Chapter 4.
Moreover, by keeping in mind the power bases available, the channel manager ensures a
realistic basis for influencing the channel members.

6-8

Phase 6: Choosing the “Best” Channel Structure

In theory, the channel manager should choose an optimal structure that would offer the
desired level of effectiveness in performing the distribution tasks at the lowest possible cost.
In reality, choosing an optimal structure is not possible.

Why? First, as we pointed out in the section on Phase 4, management is not capable of
knowing all of the possible alternatives available to them.

Second, even it were possible to specify all possible channel structures, precise methods do
not exist for calculating the exact payoffs associated with each alternative.

Some pioneering attempts at developing methods that are more exacting do appear in
literature and we will discuss these in brief.

A) “Characteristics of Goods and Parallel Systems” Approach

First laid out in the 1950s by Aspinwall, the main emphasis for choosing a channel structure
should be based upon product variables. Each product characteristic is identified with a
particular color on the spectrum. These variables are:
 1. Replacement rate
2. Gross margin
3. Adjustment
4. Time of consumption
5. Searching time

Using Aspinwall’s Approach

This approach offers the channel manager a neat way of describing and relating a number of
heuristics about how product characteristics might affect channel structure.

The major problem with this method is that it puts too much emphasis on product
characteristics as the determinant of channel structure.

B) Financial Approach

Lambert offers another approach, which argues that the most important variables for
choosing a channel structure are financial. Basically, this decision involves comparing
estimated earnings on capital resulting from alternative channel structures in light of the cost
of capital to determine the most profitable channel.

Using the Financial Approach

By viewing the channel as a long-term investment that must more than cover the cost of
capital invested in it and provide a better return than other alternative uses for capital, the
criteria for choosing a channel structure is more rigorous.

The major problem with Lambert’s approach lies in the difficulty of making it operational in
a channel decision-making context.

C) Transaction Cost Analysis (TCA) Approach

Based on the work of Williamson, TCA addresses the choice of marketing channel structure
only in the most general case situation of choosing between the manufacturer performing all
of the distribution tasks itself through vertical integration versus using independent
intermediaries to perform some or most of the distribution tasks. It is based upon
opportunistic behaviors of channel members.

The main focus of TCA is on the cost of conducting the transactions necessary for a firm to
accomplish its distribution tasks.

In order for transactions to take place, transaction-specific assets are needed. These are the set
of unique assets, both tangible and intangible, required to perform the distribution tasks.

Using the TCA approach

TCA has some substantial limitations from the standpoint of managerial usefulness.
First, it deals only with the most general channel structure dichotomy of vertical integration
versus use of independent channel members.

Second, the assumption of opportunistic behavior may not be an accurate reflection of

behavior in marketing channels.

Third, no real distinction is made between long-term and short-term issues in channel
structure relationships.

Fourth, the concept of asset specificity (transaction-specific assets) is very difficult to

operationalize.

Finally, TCA is one-dimensional, overly simplistic and neglects other relevant variables in
channel choice.

D) Management Science Approaches

It would certainly be desirable if the channel manager could take all possible channel
structures, along with all the relevant variables, and “plug” these into a set of equations,
which would then yield the optimal channel structure.

The work of Balderston and Hoggatt, Artle and Berglund, Alderson and Green, Baligh,
Rangan, Moorthy, Menezes, Maier, and Atwong and Rosenbloom have pioneered some
quantitative work in this area.

Using Management Science Approaches

These approaches still need much more development before they are likely to find
widespread application to channel choice.

E) Judgmental-Heuristic Approaches

These approaches rely heavily on managerial judgment and heuristics for decisions. Some
attempt to formalize the decision-making process whereas others attempt to incorporate cost
and revenue data.

Straight Qualitative Judgment Approach

The qualitative approach is the crudest but, in practice, the most commonly used approach for
choosing channel structures. The various alternative channel structures that have been
generated are evaluated by management in terms of decision factors that are thought to be
important. These factors may include short- and long-run cost and profit considerations,
channel control issues, long-term growth potential, and many others.

Weighted Factor Score Approach

A more refined version of the straight qualitative approach to choosing among channel
alternatives is the weighted factor approach suggested by Kotler.

This approach forces management to structure and quantify its judgments in choosing a
channel alternative and consists of four basic steps:
 1. The decision factors must be stated explicitly.
2. Weights are assigned to each of the decision factors to reflect relative importance

precisely in percentage terms.

3. Each channel alternative is rated on each decision factor, on a scale of 1 to 10.

4. The overall weighted factor score (total score) is computed for each channel

alternative by multiplying the factor weight (A) by the factor score (B).

Distribution Costing Approach

Under this approach, estimates of costs and revenues for different channel alternatives are
made, and the figures are compared to see how each alternative compares to another.

Regardless of how elaborate or detailed the analysis, the basic theme of this approach stresses
managerial judgment and estimations about what the costs and revenues of various channel
structure alternatives are likely to be.

Using Judgmental-Heuristic Approaches

Regardless of which judgmental-heuristic approach is used, large doses of judgment,
estimation, and even “guesstimation” are virtually unavoidable.

This is not to say that the so-called judgmental-heuristic approaches are totally subjective.
Coupled with good empirical data, highly satisfactory (though not optimal) channel choice
decisions may be made using these approaches.

Judgmental-heuristic approaches also enable the channel manager to readily incorporate

nonfinancial criteria into channel choices. Such nonfinancial criteria as goodwill or the
degree of control over the channel members may be of real importance to a firm.

Distribution Channels: Concept, Functions and Types

The goods are produced at one place but the customers are scattered over a wide geographical
area. Thus, it is very difficult for a producer to distribute his products all over the country.
Therefore, he takes the help of some intermediaries to distribute his goods. For example,
Maruti cars are manufactured at Gurgaon but are available all over the country with the help
of intermediaries.

Channel of distribution refers to those people, institutions or merchants who help in the
distribution of goods and services. Philips Kotler defines channel of distribution as “a set of
independent organisations involved in the process of making a product or service available
for use or consumption”.

Channels of distribution bring economy of effort. They help to cover a vast geographical area
and also bring efficiency in distribution including transportation and warehousing. Retailers,
Wholesalers are the common channels of distribution.
Channels of distribution provide convenience to customer, who can get various items at one
store. If there were no channels of distribution, customer would have faced a lot of
difficulties.
Consider following two diagrams:
A Customer wants to purchase toothpaste, salt and wheat.

Functions of Distribution Channels:

Following are the main functions performed by the distribution channels:
1. Sorting:
Middlemen obtain the supplies of goods from various suppliers and sort them out into similar
groups on the basis of size, quality etc.
2. Accumulation:
In order to ensure a continuous supply of goods, middlemen maintain a large volume of
stock.

3. Allocation:
It involves packing of the sorted goods into small marketable lots like 1Kg, 500 gms, 250
gms etc.

4. Assorting:
Middlemen obtain a variety of goods from different manufacturers and provide them to the
customers in the combination desired by them. For example, rice from Dehradun & Punjab.

5. Product Promotion:
Sales promotional activities are mostly performed by the producer but sometimes middlemen
also participate in these activities like special displays, discounts etc.

6. Negotiation:
Middlemen negotiate the price, quality, guarantee and other related matters about a product
with the producer as well as customer.

7. Risk Taking:
Middlemen have to bear the risk of distribution like risk from damage or spoilage of goods
etc. when the goods are transported from one place to another or when they are stored in the
god-owns.

Types of Distribution Channels:

Broadly, Channel of distribution is of two types viz., (1) Direct Channel (2) Indirect Channel.

1. Direct Channel or Zero Level Channels:

When the producer or the manufacturer directly sells the goods to the customers without
involving any middlemen, it is known as direct channel or zero level channel. It is the
simplest and the shortest mode of distribution. Selling through post, internet or door to door
selling etc. are the examples of this channel. For example, Mc Donalds, Bata, Mail order etc.

Methods of Direct Channel are:

(a) Door to door selling

(b) Internet selling

(c) Mail order selling

(d) Company owned retail outlets

(e) Telemarketing

2. Indirect Channels:
When a manufacturer or a producer employs one or more middlemen to distribute goods, it is
known as indirect channel.

Following are the main forms of indirect channels:

(a) Manufacturer-Retailer-Consumer (One Level Channel):
This channel involves the use of one middleman i.e. retailer who in turn sells them to the
ultimate customers. It is usually adopted for speciality goods. For example Tata sells its cars
through company approved retailers.

Manufacturer→ Retailer→ Consumer

(b) Manufacturer-Wholesaler-Retailer-Customer (Two level channels):
Under this channel, wholesaler and retailer act as a link between the manufacturer and the
customer. This is the most commonly used channel for distributing goods like soap, rice,
wheat, clothes etc.

Manufacturer→ Wholesaler→ Retailer→ Customer

(c) Manufacturer-Agent-Wholesaler-Retailer-Consumer (Three level channels):
This level comprises of three middlemen i.e. agent, wholesaler and the retailer. The
manufacturers supply the goods to their agents who in turn supply them to wholesalers and
retailers. This level is usually used when a manufacturer deal in limited products and yet
wants to cover a wide market.

Manufacturer → Agent → Wholesaler → Retailer → Consumer

Factors Determining Choice of Channels of Distribution:
Following are the main factors which help in determining the channels of distribution:
1. Product Related Factors:
Following are the important product related considerations in deciding on channels of
distribution:
(a) Nature of Product:
In case of industrial goods like CT scan machine, short channels like zero level channel or
first level channel should be preferred because they are usually technical, expensive, made to
order and purchased by few buyers. Consumer goods Ike LCD, refrigerator can be distributed
through long channels as they are less expensive, not technical and frequently purchased.

(b) Perishable and Non- Perishable Products:

Perishable products like fruits or vegetables are distributed through short channels while non
perishable products like soaps, oils, sugar, salt etc. require longer channels.

(c) Value of Product:

In case of products having low unit value such as groceries, long channels are preferred while
those with high unit value such as diamond jewellery short channels are used.

(d) Product Complexity:

Short channels are preferred for technically complex goods like industrial or engineering
products like machinery, generators like torches while non complex or simple ones can be
distributed through long channels.

2. Company Characteristics:
Following are the main Company Characteristics offering choice of channel of
distribution:
(a) Financial Strength:
The companies having huge funds at their disposal go for direct distribution. Those without
such funds go for indirect channels.

(b) Control:
Short channels are used if management wants greater control on the channel members
otherwise a company can go in for longer channels.

3. Competitive Factors:
Policies and channels selected by the competitors also affect the choice of channels. A
company has to decide whether to adopt the same channel as that of its competitor or choose
another one. For example, if Nokia has selected a particular channel say Big Bazaars for sale
of their hand sets, other firms like Samsung and LG have also selected similar channels.

4. Market Factors:
Following are the important market factors affecting choice of channel of distribution:
(a) Size of Market:
If the number of customers is small like in case of industrial goods, short channels are
preferred while if the number of customers is high as in case of convenience goods, long
channels are used.

(b) Geographical Concentration:

Generally, long channels are used if the consumers are widely spread while if they are
concentrated in a small place, short channels can be used.

(c) Quantity Purchased:

Long channels are used in case the size of order is small while in case of large orders, direct
channel may be used.

5. Environmental Factor:
Economic factors such as economic conditions and legal regulations also play a vital role in
selecting channels of distribution. For example, in a depressed economy, generally shorter
channels are selected for distribution.
Distribution channel strategy and features of effective channel design

A Paradigm of the Channel Design Decision

The channel design decision can be broken down into seven phases or steps. These are:

1. Recognizing the need for a channel design decision

2. Setting and coordinating distribution objectives
3. Specifying the distribution tasks
4. Developing possible alternative channel structures
5. Evaluating the variable affecting channel structure
6. Choosing the “best” channel structure
7. Selecting the channel members

Phase 1: Recognizing the Need for a Channel Design Decision

Many situations can indicate the need for a channel design decision. Among them are:

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Developing a new product or product line

Aiming an existing product to a new target market
Making a major change in some other component of the marketing mix Establishing a new
firm
Adapting to changing intermediary policies
Dealing with changes in availability of particular kinds of intermediaries Opening up new
geographic marketing areas
Facing the occurrence of major environmental changes
Meeting the challenge of conflict or other behavioral problems Reviewing and evaluating

Phase 2: Setting and Coordinating Distribution Objectives

In order to set distribution objectives that are well coordinated with other marketing and firm
objectives and strategies, the channel manager needs to perform three tasks:

1. Become familiar with the objectives and strategies in the other marketing mix areas
and any other relevant objectives and strategies of the firm.
2. Set distribution objectives and state them explicitly.
3. Check to see if the distribution objectives set are congruent with marketing and

the other general objectives and strategies of the firm.

1) Become Familiar with Objectives and Strategies

Whoever is responsible for setting distribution objectives should also make an effort to learn
which existing objectives and strategies in the firm may impinge of the distribution
objectives. In practice, often the same individual(s) who set(s) objectives for other
components of the marketing mix will do so for distribution.

2) Setting Explicit Distribution Objectives

Distribution objectives are essentially statements describing the part that distribution in
expected to play in achieving the firm’s overall marketing objectives.

3) Checking for Congruency

A congruency check verifies that the distribution objectives do not conflict with the other
areas of the marketing mix.

Phase 3: Specifying the Distribution Tasks

The job of the channel manager in outlining distribution functions or tasks is a much more
specific and situationally dependent one. The kinds of tasks required to meet specific
distribution objectives must be precisely stated.

In specifying distribution tasks, it is especially important not to underestimate what is

involved in making products and services conveniently available to final consumers.

Phase 4: Developing Possible Alternative Channel Structures

The channel manager should consider alternative ways of allocating distribution objectives to
achieve their distribution tasks. Often, the channel manager will choose more than one
channel structure in order to reach the target markets effectively and efficiently.

Whether single – or multiple – channel structures are chosen, the allocation alternatives
(possible channel structures) should be evaluated in terms of the following three dimensions:
(1) number of levels in the channel, (2) intensity at the various levels, (3) type of
intermediaries at each level.

1) Number of Levels

The number of levels in a channel can range from two levels – which is the most direct – up
to five levels and occasionally even higher.

2) Intensity at the Various Levels

Intensity refers to the number of intermediaries at each level of the marketing channel.

  Intensive: sometimes called saturation means that as many outlets as possible are
used

at each level of the channel.

  Selective: means that not all possible intermediaries are used, but rather those
included in the channel have been carefully chosen.
  Exclusive: a way of referring to a very highly selective pattern of distribution.
 The intensity of distribution dimension is a very important aspect of channel structure
because it is often a key factor in the firm’s basic marketing strategy and will reflect
the firm’s overall corporate objectives and strategies.

3) Types of Intermediaries

The third dimension of channel structure deals with the particular types of
intermediaries to be used (if any) at the various levels of the channel.

The channel manager should not overlook new types of intermediaries that are
emerging such as Internet companies.

4) Number of Possible Channel Structure Alternatives

Given that the channel manager should consider all three structural dimensions (level,
intensity, and type of intermediaries) in developing channel structures, there are, in theory, a
high number of possibilities.

Fortunately, in practice, the number of feasible alternatives for each dimension is often
limited due to industry or the number of current channel members.

Phase 5: Evaluating the Variables Affecting Channel Structure

Having laid out alternative channel structures, the channel manager should then evaluate a
number of variables to determine how they are likely to influence various channel structures.

These six basic categories are most important:

1. Market variables
2. Product variables
3. Company variables
4. Intermediary variables
5. Environmental variables
6. Behavioral variables

1) Market Variables

Market variables are the most fundamental variables to consider when designing a marketing
channel.

Four basic subcategories of market variables are particularly important in influencing channel
structure. They are (A) market geography, (B) market size, (C) market density, and (D)
market behavior.

A) Market Geography

Market geography refers to the geographical size of the markets and their physical location
and distance from the producer and manufacturer.
A popular heuristic (rule of thumb) for relating market geography to channel design is: “The
greater the distance between the manufacturer and its markets, the higher the probability that
the use of intermediaries will be less expensive than direct distribution.”

B) Market Size

The number of customers making up a market (consumer or industrial) determines the market
size.

From a channel design standpoint, the larger the number of individual customers, the larger
the market size.

A heuristic about market size relative to channel structure is:

“If the market is large, the use of intermediaries is more likely to be needed because of the
high transaction costs of serving large numbers of individual customers. Conversely, if the
market is small, a firm is more likely to be able to avoid the use of intermediaries.”

C) Market Density

The number of buying units per unit of land area determines the density of the market. In
general, the less dense the market, the more difficult and expensive is distribution.

A heuristic for market density and channel structure is as follows:

“The less dense the market, the more likely it is that intermediaries will be used. Stated
conversely, the greater the density of the market, the higher the likelihood of eliminating
intermediaries.”

D) Market Behavior

Market behavior refers to the following four types of buying behaviors:

1. 1) How customers buy

2. 2) When customers buy
3. 3) Where customers buy
4. 4) Who does the buying

Each of these patterns of buying behavior may have a significant effect on channel structure.

2) Product Variables

Product variables such as bulk and weight, perishability, unit value, degree of standardization
(custom-made versus standardized), technical versus nontechnical, and newness affect
alternative channel structures.

A) Bulk and Weight

Heavy and bulky products have very high handling and shipping costs relative to their value.
Therefore, a producer should attempt to minimize these costs by shipping only in large lots to
the fewest possible points.
Consequently, the channel structure should be as short as possible usually from producer to
user.

B) Perishability

Products subject to rapid physical deterioration and those of rapid fashion obsolescence
require rapid movement from production to consumption.

The following heuristic is appropriate in these situations:

“ When products are highly perishable, channel structures should be designed to provide for
rapid delivery from producers to consumers.”

C) Unit Value

The lower the unit value of the product, the longer the channel should be. This is because low
unit value leaves a small margin for distribution costs.

When the unit value is high relative to its size and weight, direct distribution is feasible
because the handling and transportation costs are low relative to the product’s value.

D) Degree of Standardization

Custom-made products should go from producer to consumer while more standardized

products allow opportunity to lengthen the channel.

E) Technical versus Nontechnical

In the industrial market, a highly technical product will generally be distributed through a
direct channel. This is because the manufacturer may need sales and service people capable
of communicating the product’s technical features to the user.

In the consumer market, relatively technical products are usually distributed through short
channels for the same reasons.

F) Newness

New products, both industrial and consumer, require extensive and aggressive promotion in
the introductory stage to build demand. Usually, the longer the channel of distribution the
more difficult it is to achieve this kind of promotional effort from all channel members.

Therefore, a shorter channel is generally viewed as an advantage for new products as a

carefully selected group of intermediaries is more likely to provide aggressive promotion.

3) Company Variables

The most important company variables affecting channel design are (A) size, (B) financial
capacity, (C) managerial expertise, and (D) objectives and strategies.

A) Size
In general, the range of options for different channel structures is a positive function of a
firm’s size. Larger firms have more options available to them than smaller firms do.

B) Financial Capacity

Generally, the greater the capital available to a company, the lower its dependence on
intermediaries.

C) Managerial Expertise

For firms lacking in the managerial skills necessary to perform distribution tasks, channel
design must of necessity include the services of intermediaries who have this expertise. Over
time, as the firm’s management gains experience, it may be feasible to change the structure to
reduce the amount of reliance on intermediaries.

D) Objectives and Strategies

The firm’s marketing and general objectives and strategies, such as the desire to exercise a
high degree of control over the product, may limit the use of intermediaries.

Strategies emphasizing aggressive promotion and rapid reaction to changing markets will
constrain the types of channel structures available to those firms employing such strategies.

4) Intermediary Variables

The key intermediary variables related to channel structure are (A) availability, (B) costs, and
(C) the services offered.

A) Availability

The availability (number of and competencies of) adequate intermediaries will influence
channel structure.

B) Cost

The cost of using intermediaries is always a consideration in choosing a channel structure. If

the cost of using intermediaries is too high for the services performed, then the channel
structure is likely to minimize the use of intermediaries.

C) Services

This involves evaluating the services offered by particular intermediaries to see which ones
can perform them most effectively at the lowest cost.

5) Environmental Variables

Economic, sociocultural, competitive, technological, and legal environmental forces can have
a significant impact on channel structure.

6) Behavioral Variables
The channel manager should review the behavioral variables discussed in Chapter 4.
Moreover, by keeping in mind the power bases available, the channel manager ensures a
realistic basis for influencing the channel members.

Phase 6: Choosing the “Best” Channel Structure

In theory, the channel manager should choose an optimal structure that would offer the
desired level of effectiveness in performing the distribution tasks at the lowest possible cost.
In reality, choosing an optimal structure is not possible.

Why? First, as we pointed out in the section on Phase 4, management is not capable of
knowing all of the possible alternatives available to them.

Second, even it were possible to specify all possible channel structures, precise methods do
not exist for calculating the exact payoffs associated with each alternative.

Some pioneering attempts at developing methods that are more exacting do appear in
literature and we will discuss these in brief.

A) “Characteristics of Goods and Parallel Systems” Approach

First laid out in the 1950s by Aspinwall, the main emphasis for choosing a channel structure
should be based upon product variables. Each product characteristic is identified with a
particular color on the spectrum. These variables are:

1. Replacement rate
2. Gross margin
3. Adjustment
4. Time of consumption
5. Searching time

 Using Aspinwall’s Approach

This approach offers the channel manager a neat way of describing and relating a number of
heuristics about how product characteristics might affect channel structure.

The major problem with this method is that it puts too much emphasis on product
characteristics as the determinant of channel structure.

B) Financial Approach

Lambert offers another approach, which argues that the most important variables for
choosing a channel structure are financial. Basically, this decision involves comparing
estimated earnings on capital resulting from alternative channel structures in light of the cost
of capital to determine the most profitable channel.

 Using the Financial Approach

By viewing the channel as a long-term investment that must more than cover the cost of
capital invested in it and provide a better return than other alternative uses for capital, the
criteria for choosing a channel structure is more rigorous.
The major problem with Lambert’s approach lies in the difficulty of making it operational in
a channel decision-making context.

C) Transaction Cost Analysis (TCA) Approach

Based on the work of Williamson, TCA addresses the choice of marketing channel structure
only in the most general case situation of choosing between the manufacturer performing all
of the distribution tasks itself through vertical integration versus using independent
intermediaries to perform some or most of the distribution tasks. It is based upon
opportunistic behaviors of channel members.

The main focus of TCA is on the cost of conducting the transactions necessary for a firm to
accomplish its distribution tasks.

In order for transactions to take place, transaction-specific assets are needed. These are the set
of unique assets, both tangible and intangible, required to perform the distribution tasks.

 Using the TCA approach

TCA has some substantial limitations from the standpoint of managerial usefulness.

First, it deals only with the most general channel structure dichotomy of vertical integration
versus use of independent channel members.

Second, the assumption of opportunistic behavior may not be an accurate reflection of

behavior in marketing channels.

Third, no real distinction is made between long-term and short-term issues in channel
structure relationships.

Fourth, the concept of asset specificity (transaction-specific assets) is very difficult to

operationalize.

Finally, TCA is one-dimensional, overly simplistic and neglects other relevant variables in
channel choice.

D) Management Science Approaches

It would certainly be desirable if the channel manager could take all possible channel
structures, along with all the relevant variables, and “plug” these into a set of equations,
which would then yield the optimal channel structure.

The work of Balderston and Hoggatt, Artle and Berglund, Alderson and Green, Baligh,
Rangan, Moorthy, Menezes, Maier, and Atwong and Rosenbloom have pioneered some
quantitative work in this area.

 Using Management Science Approaches

These approaches still need much more development before they are likely to find
widespread application to channel choice.

E) Judgmental-Heuristic Approaches
These approaches rely heavily on managerial judgment and heuristics for decisions. Some
attempt to formalize the decision-making process whereas others attempt to incorporate cost
and revenue data.

 Straight Qualitative Judgment Approach

The qualitative approach is the crudest but, in practice, the most commonly used approach for
choosing channel structures. The various alternative channel structures that have been
generated are evaluated by management in terms of decision factors that are thought to be
important. These factors may include short- and long-run cost and profit considerations,
channel control issues, long-term growth potential, and many others.

 Weighted Factor Score Approach

A more refined version of the straight qualitative approach to choosing among channel
alternatives is the weighted factor approach suggested by Kotler.

This approach forces management to structure and quantify its judgments in choosing a
channel alternative and consists of four basic steps:

1. The decision factors must be stated explicitly.

2. Weights are assigned to each of the decision factors to reflect relative importance

precisely in percentage terms.

3. Each channel alternative is rated on each decision factor, on a scale of 1 to 10.

4. The overall weighted factor score (total score) is computed for each channel

alternative by multiplying the factor weight (A) by the factor score (B).

 Distribution Costing Approach

Under this approach, estimates of costs and revenues for different channel alternatives are
made, and the figures are compared to see how each alternative compares to another.

Regardless of how elaborate or detailed the analysis, the basic theme of this approach stresses
managerial judgment and estimations about what the costs and revenues of various channel
structure alternatives are likely to be.

 Using Judgmental-Heuristic Approaches

Regardless of which judgmental-heuristic approach is used, large doses of judgment,
estimation, and even “guesstimation” are virtually unavoidable.

This is not to say that the so-called judgmental-heuristic approaches are totally subjective.
Coupled with good empirical data, highly satisfactory (though not optimal) channel choice
decisions may be made using these approaches.

Judgmental-heuristic approaches also enable the channel manager to readily incorporate

nonfinancial criteria into channel choices. Such nonfinancial criteria as goodwill or the
degree of control over the channel members may be of real importance to a firm.
Channel Conflict: Concept and stages

Channel conflict occurs when manufacturers (brands) disintermediate their channel partners,
such as distributors, retailers, dealers, and sales representatives, by selling their products
directly to consumers through general marketing methods and/or over the Internet.

Type of channel conflicts

There are two types of channel conflicts.
Vertical channel conflicts
Vertical conflict occurs when a manufacturer's action disrupts the supply chain. For example,
a manufacturer who normally distributes its products through retail would cause a vertical
channel conflict if they start doing direct mail and advertise directly to consumers.
Horizontal channel conflicts
Horizontal conflict occurs among firms at the same level of the channel. For example, two
franchises who open two restaurants across the street from each other would be in a
horizontal conflict or when one firm in a distribution channel offers lower prices than the
members of the distribution channel and therefore attract more customers.
So what do the manufacturers have to do?
Resource dependence theory emphasizes the need for organizations to formulate strategies to
enhance their power positions and reduce their environmental dependence in order to achieve
sustainable competitiveness. The findings of a research about power-dependence and reseller
influence on SME's continued use of online direct sales channels (ODSCs) illustrate that, to
reduce the negative impact of power-dependence imbalance, SMEs should strive to reshape
and strengthen their power-dependence position relative to their resellers.For instance, SMEs
can strengthen their power-dependence position by providing differentiated service support to
better cater to resellers’ needs and by reinforcing their unique values to create mutual
dependence between an SME and its resellers. SMEs may also strive to improve their power-
dependence position through the improvement of their power among other suppliers of the
resellers. Research on power imbalance and power use suggests that a reseller’s tolerance
level toward a supplier is greatly determined by the supplier’s relative power position relative
to the reseller’s alternative suppliers On the other hand recent studies have shown that we
have to use retailers in order to provide a integrated journey for customer to decision, because
at the evaluate stage of Consumer Decision Journey, consumers didn’t start with search
engines; rather, they went directly to Amazon.com and other retail sites that, with their rich
and expanding array of product-comparison information, consumer and expert ratings, and
visuals, were becoming the most important influencers.

conflict management

Types of Channel conflict

▪ Vertical Channel Conflict: This type of conflict arises between the different levels in the
same channel.
▪ E.g.The conflict between the manufacturer and the wholesaler regarding price, quantity,
marketing activities, etc.
▪ Horizontal Channel Conflict: This type of conflict arises between the same level in the
same channel.
▪ E.g. The conflict between two retailers of the same manufacturer faces disparity in terms of
sales target, area coverage, promotional schemes, etc.
▪ Multichannel Conflict: This type of conflict arises between the different market channels
participating in the common sale for the same brand.
▪ E.g. If a manufacturer uses two market channels, first is the official website through which
the products and services are sold. The second channel is the traditional channel i.e.
through wholesaler and retailer. If the product is available at a much lower price on a
website than is available with the retailer, the multichannel conflict arises.
Causes of Channel conflict
Following are some of the causes that give birth to the channel conflict:
 Goal incompatibility: Different partners in the channel of distribution have different
goals that may or may not coincide with each other and thus result in conflict. E.g.
The manufacturer wants to achieve the larger market share by adopting the market
penetration strategy i.e. offering a product at low price and making the profits in the
long run, whereas the dealer wants to sell the product at a high cost i.e. market
skimming strategy and earn huge profits in the short run.
Ambiguous Roles: The channel partners may not have a clear picture of their role i.e.
what they are supposed to do, which market to cater, what pricing strategy is to be
adopted, etc. E.g. The manufacturer may sell its products through its direct sales force
in the same area where the authorized dealer is supposed to sell; this may result in the
conflict.
Different Perceptions: The channel partners may have different perceptions about the
market conditions that hampers the business as a whole thereby leading to the
conflict. E.g. The manufacturer is optimistic about the change in the price of the
product whereas the dealer feels the negative impact of price change on the
customers.
Manufacturer dominating the Intermediaries: The intermediaries such as the
wholesaler, distributor, retailer, etc. carry the process of distribution of goods and
services for the manufacturer. And if the manufacturer makes any change in the price,
product, marketing activity the same has to be implemented with an immediate effect
thereby reflecting the huge dependence of intermediaries on the manufacturer. E.g. If
the manufacturer changes the promotional scheme of a product with the intention to
cut the cost, the retailer may find it difficult to sell the product without any
promotional scheme and hence the conflict arises.
Lack of Communication: This is one of the major reasons that lead to the conflict
among the channel partners. If any partner is not communicated about any changes on
time will hamper the distribution process and will result in disparity. E.g. If retailer
urgently requires the stock and the wholesaler didn’t inform him about the availability
of time may lead to the conflict between the two.
Managing the Channel Conflict
In order to overcome the destructive channel conflict some solutions are listed below:

Subordinate Goals: The channel partners must decide a single goal in terms of either
increased market share, survival, profit maximization, high quality, customer
satisfaction, etc. with the intention to avoid conflicts.
Exchanging employees: one of the best ways to escape channel conflict is to swap
employees between different levels i.e. two or more persons can shift to a dealer level
from the manufacturer level and from wholesale level to the retailer level on a
temporary basis. By doing so, everyone understands the role and operations of each
other thereby reducing the role ambiguities.
Trade associations: Another way to overcome the channel conflict is to form the
association between the channel partners. This can be done through joint membership
among the intermediaries. Every channel partner works as one entity and works
unanimously.
Co-optation: Under this, any leader or an expert in another organization is included in
the advisory committee, board of directors, or grievance redressal committees to
reduce the conflicts through their expert opinions.
Diplomacy, Mediation and Arbitration: when the conflict becomes critical then
partners have to resort to one of these methods. In Diplomacy, the partners in the
conflict send one person from each side to resolve the conflict.In Mediation, the third
person is involved who tries to resolve the conflict through his skills of conciliation.In
Arbitration, when both the parties agree to present their arguments to the arbitrator
and agree to his decision.
Legal resource: When the conflict becomes crucial and cannot be resolved through
any above mentioned ways, the channel partners may decide to file a lawsuit.
Thus, it is a fundamental responsibility of every organization to maintain harmonious
relations with its channel partners as the conflict between these may result in huge losses for
each involved in the channel including the manufacturing company.
Motivating and Evaluating Channel Members Identifying, reaching and motivating key
influencers may be the difference between effective and ineffective channels strategies. The
importance of influencers in the purchase decision process arises from positive impact

▪ they have when they support a company’s products or services. A key influencer is
defined as:
▪ “Any party(ies) which exerts significant influence over the purchase decision”
▪ Key influencers may be directly involved in the purchasing decision or indirectly
influence the decision. Key influencers should be included in marketing channels
strategies.
▪ It is important to note that key influencers are not always members of a company’s
distribution channels. Their influence over a purchase is the reason they are important.
Key influencers can impact the purchase decision of channel members when
considering a purchase from a supplier and can also influence end customers when
considering which channel member to buy from and the brand selected.
▪

Identifying Key Influencers

Some examples of key influencers in marketing channels strategies...

Industry
Key Influencers Include:

 Financial Services  Accountants, Trade Unions

 Consumer Services and Entertainment  Family and Friends

  Specifiers, Consultants, Builders and
 Construction and Building Products
Architects

 Automotive Retail  Supplier and Channel Members eg fitters

 Heavy Machinery  Supplier (or Agent)

 Automotive Smash Repair  Insurance Companies

 Computers  Consultants

 Decorative Paints & Hardware  Retailers and Store Staff

The examples above illustrate the influencer may be overt as in the building products industry
or more subtle as in consumer services and entertainment industries.

To more clearly identify key influencers and determine the best strategy to reach them it is
necessary to:

▪  Talk to end customers and channel partners

▪  Analyse business sources

▪  Review sales by channel and market segment

▪  Perform a marketing channels audit

Why Are Key Influencers Important? Companies often don’t recognise influencers’
importance or are unable to determine how to effectively reach them. The risks of neglecting
influencers are expensive and the rewards from reaching them are significant.

Rewards of Reaching and Motivating Key

Risks of Failing to Reach or Neglecting Key
Influencers
Influencers

More lead referrals, new and repeat Potential loss of customers to suppliers who
customers successfully reach key influencers
Improved sales and market share Stagnant or declining sales and market share

Greater market power and channel member Alienation of key influencers and reduced
loyalty loyalty

Sustainable competitive advantage which

A disadvantage in the marketplace
differentiates from competitors

Endorsements which enhance image and

reputation A deteriorating image and reputation

Reaching Key Influencers

Problems and ObstaclesA company may face several issues when trying to reach its key
influencers:

▪ Reluctance by a company to change its traditional business methods

▪ The cost and logistics of dealing with all the industry’s key influencers

▪ Key influencers don’t want to be too closely associated with a single supplier

▪ Key influencers are already aligned with a competitor

▪ A company is unable to differentiate itself as the best choice for key influencers

▪ Key influencers do not respond to a supplier’s approach

▪ The supplier does not understand the key influencer’s needs

How to motivate key influencers

By positively motivating key influencers companies will resolve many of the issues outlined
above and ensure influencers’ commitment to their products or services. Tools which will
help suppliers reach key influencers include:

 Training

 Product and technical information

▪  Advertising and promotional support

▪  Technical support and giveaways

▪  Exclusive deals

▪  Excellent customer service

▪  Sponsorships

▪  Recognition

▪  Pricing, margins and discounts

▪  Regular communication

▪ Some key influencers require independence from suppliers but will respond to service
and support motivators who meet their own business and professional needs. An
example of this is in the computer industry where consultants are a key influencer.
The consultant will identify the needs of a client and specify the system/s capable of
fulfilling those needs. As consultants their reputations are at stake when preparing
specifications and therefore need to have confidence in the products and suppliers
they are recommending. The motivators in this case are excellent communication,
technical information and training.
▪ Other Key Influencers do not require the same degree of independence from
suppliers. e.g. building products. Effective motivators may include exclusive deals,
advertising support and product and technical information.
▪ Three important steps are involved to include key influencers in a company’s channel
strategy. These steps are:
▪

Rural Marketing
Definition: The Rural Marketing refers to the activities undertaken by the marketers to
encourage the people, living in rural areas to convert their purchasing power into an effective
demand for the goods and services and making these available in the rural areas, with the
intention to improve their standard of living and achieving the company’s objective, as a
whole.
 The Rural Marketing is a two-way process, i.e.,

 Urban to Rural: FMCG Goods, Agricultural fertilizers, automobiles, etc. are offered by the
urban market to the rural market.
 Rural to Urban: The agricultural supplies viz. Fruits, vegetables, flowers, milk, etc. is
offered from the rural market to the urban market.

Potential of Rural Marketing

The marketers are following the strategy to “Go Rural” because of the following attractions
in the rural market:

1. Large Population: Still, the majority of the population in India resides in Villages and
therefore, the marketers find more potential in the rural areas and direct their efforts to
penetrate the rural market.
2. Increased Income: The income and the purchasing power of the rural people have increased.
With the use of modern agricultural equipment and technology, the farmers can produce more
and can get better returns for their agricultural produce.The increased income motivates a
 farmer to improve his livelihood by purchasing a good quality product and thus, the marketer
gets an opportunity to enter into the rural market.
3. Competition in Urban Market: There is a lot of competition in the Urban market, where
people are well aware of the goods and services and have created a brand loyalty.Therefore,
the marketers move to the rural market to escape the intense completion and generate
revenues from the untapped areas.
4. Improved Infrastructure facilities: Today, many villages are well connected with the roads
and transportation facilities that enables the marketer to access the rural market and promote
his goods and services.With the growth in telecom services, the rural people can be reached
easily via mobile phones.
5. Saturated Urban Market: Also, the marketers may move to the rural markets, when the
urban market has reached the saturation point, the i.e. market is well stuffed with the
products, and the consumers are not likely to make a frequent purchase due to the varied
options available in the market.
6. Support of Financial Institutions: Several Co-operative banks and public sector banks offer
the loan facility to the rural people at low-interest rates. With the loan, the purchasing power
of an individual increases, thus resulting in a better standard of living.
7. New Employment Opportunities: The Government is running several employment
opportunity programmes, with the intention to engage people in other activities apart from the
agriculture occupation.The Integrated Rural Development Programme (IRDP), Jawahar
Rozgar Yojana (JRY), Training Rural Youth for self-Employment are the certain
programmes, designed to increase the livelihood of rural people.
Due to so much potential in the rural areas, the companies are focussing more on the needs
and desires of people living in here and are taking every possible step to stimulate people to
buy products and services and improve their livelihood.

Rural Marketing Strategy

Definition: A rural marketing strategy refers to the planning of adequate supply of consumer
goods and agricultural input to the villages at an affordable price to fulfil the needs of the
consumers residing in these rural areas. Rural markets have a high potential and can generate
huge sales volume for the companies which manufacture cost-efficient products and have
active supply chain management.
For Example; In rural markets, most of the selling products belong to spurious brands. These
with a name similar to those of well-known brands have penetrated the Indian rural markets
due to the product’s look-alike feature (copy of branded products) and cheap prices.
A brand named ‘Vinovo’ (often misunderstood as ‘Lenovo’ which is a renowned smartphone
brand) is selling budget mobile phones to the rural consumers, that look identical to the
Lenovo handsets.
However, brands like GlaxoSmithKline (GSK), a UK based multinational FMCG launched a
product, Asha-milk food drink for rural consumers. The product was 40% cheaper than the
outcomes of well-known brands like Horlicks. It gained popularity due to its excellent pricing
strategy.

4 A’s of Rural Marketing

Whenever a company plans to enter the rural markets, it has to restructure its marketing
strategies to suit the needs and requirements of rural consumers. Since they are mostly
illiterate and belong to a low-income group.
Following are the various components of 4 A, described in the context of rural marketing:

Affordability
In rural areas, the income of the people is meagre. This is the reason for which the consumers
are unable to spend on luxury goods. Moreover, they are mostly concerned about buying the
necessary products.
Keeping in mind the low affordability of rural consumers, marketers must plan for small
packaging of the products at an economical price to capture the attention of price-
sensitive consumers.
Availability
The regular supply of the products in the remote areas is another challenging task. We know
that rural consumers are usually daily wage earners who spend on the necessities every day.
But, many times, the product is not readily available in the rural markets, due to which such
consumer may shift to another substitute product.
Acceptability
The product should be designed in a user-friendly manner such that it satisfies all the needs of
a consumer by deriving them some value. If the rural consumers are willing to put in extra
money for buying the product, it shows their acceptability towards the brand.
Awareness
A rural consumer has low accessibility to the media, such as television and smartphones.
Moreover, they have a very different perspective from that of an urban consumer.
Therefore, marketers need to focus on that medium of communication and entertainment
which are commonly available in rural areas. This will help them to create brand awareness
and grab the attention of these potential rural consumers towards their product.
Rural Marketing Strategies
When we talk about 4 P’s of marketing mix of a product, the first thing that strikes us is the
combination of product, price, place and promotion. This is what we will be discussing under
rural marketing strategies.
Let us now discuss these four components of the marketing mix concerning the product being
introduced in the rural market:

Product Strategies
The company first needs to analyze the requirements and demand of the rural consumers.
Since whatever products are being sold in the urban areas may not be acceptable in the
villages also.
Following are some of the factors which are taken into consideration while framing the

product strategies:
 Product Launch: The rural consumers earn a lump sum amount two times a year
according to the crop cycle. Therefore the product must be launched only in these
harvesting seasons, i.e., rabi and kharif.
 New Product Design: The product design for an urban market may not perform well
in the rural market too. Thus, the company must plan for a robust model of the
product (especially of durable goods) while launching it for rural consumers.
 Brand Name: Brands are gaining significance in the rural markets as the people are
becoming aware and informed. However, in these markets, brands are recognized by
the simplicity of their name, visual logos, taste and colour of the products.
 Small Unit Low Price Packaging: Considering the daily wage earners who have less
disposable income; the product should be packed in small units with a minimal price
to serve the requirements of the rural consumers.
Pricing Strategies
In rural markets, consumers are less brand conscious and more responsive to the price of the
products. The company’s pricing decision is dependant upon the consumers’ occupation and
income pattern.
Let us now understand the various strategies followed by marketers while planning for the
product pricing in rural markets:

Differential Pricing: The pricing strategy for the rural markets should be different from that
in urban markets. The product should be priced slightly cheaper to grab the attention of rural
consumers.
Psychological Pricing: The psychological pricing is a tactic used to make the deal appealing
to the consumers. A product is priced at odd amounts like ₹9, ₹59, ₹99, etc. which seems
less than ₹10, ₹60 and ₹100 respectively. It is a fruitful strategy in rural marketing.
Create Value for Money: The rural consumers are more concerned about the durability of
the products, i.e., the value it generates to the customer. They tend to pay a slightly higher
amount for a better product with additional features.
Pricing on Special Events: In the rural areas, occasions and festival are highly valued and
celebrated. Therefore, companies make use of these special events to attract rural consumers
by giving them various offers and discounts.
Simple Packing: Rural consumers have a basic living standard. They don’t like to spend
much on the products which have fancy packaging; instead, they look for the utility of the
product. So it would be a waste of time and money if the brand spends on sophisticated
product packaging.
Low Price Points: A consumer belonging to the rural area have limited resources out of
which he or she needs to buy various daily utility products. Therefore, a product must be
priced quite low to make it affordable for such consumers.
Schemes for Retailers: Rural retailers are the most significant medium of sales in the
village. The companies must come up with cash discounts, gift schemes, offers and quantity
discounts to build the loyalty of such retailers towards the brand and increase product sales.
Bundle Pricing: A bundle is a mix of different products in a single pack available to the
consumer for a reasonable price. The marketers must plan for a product bundle pricing to
make the offer appealing to the consumers and survive in the competitive rural market.
Distribution Strategies
To create a regular demand for the product, the marketer must ensure the uninterrupted
supply of the goods in the rural markets. The product availability can be achieved by
implementing the following strategies:

 Local Markets: In rural areas, local markets exist in the form of fares, farmers’
market, Sunday market and feeder market. Here, rural people gather to buy goods and
communicate with each other.
 Company Depots: The company owns warehouses and depots in some major rural
areas to make the goods readily available to the native consumers and that of nearby
cities.
 Public Distribution System: The government runs fair price shops in the villages to
sell the daily utility and durable products at a nominal price. In India, one such PDS is
the ration shops.
 Retailers: The most straightforward way a rural consumer can acquire a product is
through a retail shop located in the village. Therefore, companies must plan their
supply chain management in such a way that the goods are regularly made available
to these retailers.
 Redistribution Stockists and Clearing Agents: The redistribution stockists and the
clearing agents are the intermediaries between the companies and rural consumers.
They supply goods to the retailers from where it reaches the consumers.
 Delivery Vans, Traders, Sales Person, NGO: The company must run its van for
delivering goods in the remote areas where there is lack of proper transportation
facility.
Promotion Strategies
Promotion is the stage where the product is introduced in the market. In rural markets, the
promotion mix should be planned in such a way that rural consumers can easily understand
the product features.
Following promotional strategies are used by the marketers:

 Mass Media: The villages have limited means of entertainment which include tv,
radio, press and cinema. The companies advertise their products through these
popular mass media.
 Personalised Media: It can be seen as hiring a salesperson for performing door to
door sales and collecting information and queries related to the product and the brand.
 Local Media: As we have already discussed in the distribution strategy, local media
includes audiovisual vans, animal parades, fares, folk programmes, etc. Displaying
advertisements, video clippings, short films, posters and paintings at these places is
also useful promotional activity.
 Hiring Models and Actors for Promotion: Rural people are fascinated by the
television actors and models and consider them as their role models. Therefore the
marketers must engage famous faces in their tv commercials to promote the brand.
 Advertise Through Paintings: The rural consumers are attracted towards the bright
colours and the pictorial representation of the products; hence, wall paintings are a
good idea in the rural markets.
Other Marketing Strategies to Conquer Rural Markets
The rural markets function diversely from the urban markets. Therefore, marketers need
to customize a whole set of different strategies to penetrate the rural market.
Being updated with the traditions and values of the rural consumers and planning the
marketing strategies accordingly, like a promotion campaign targeting a festival is another
suitable option.
Rural marketing should not be used as a means of demoting under-performing managers.
Instead, an enthusiastic person belonging to the rural background having the willingness to
work in villages must be appointed.
The marketers can introduce new business models and programmes with a social concern
like promoting education or empowering women for overall growth.
To understand the market in a better way, the company can hire a rural marketing specialist
agency which has prior knowledge and experience in the field and is well-versed with the
regional language.
To estimate the feasibility of expenditure in rural marketing, the organization should
determine its per capita sales in advance. The company must time the marketing cycle of
products by the sowing, growing and harvesting seasons of the crops.
Rural consumers are slowly upgrading to technology with the help of smartphones and
computers. The companies must make use of simple and easy to access technological
means to create awareness about the products in rural areas.
As a means of digital marketing in the villages, marketers can opt for mobile messaging,
internet ads, applications and interactive voice response to promote their products.
The companies must invest in rural marketing with a long-term perspectiveand should have
the patience to achieve the desired results.
To develop a sharp brand image and loyalty in a rural market, the best way is the word of
mouth publicity by the locals.
Digital marketing encompasses all marketing efforts that use an electronic device or the
internet. Businesses leverage digital channels such as search engines, social media, email, and
their websites to connect with current and prospective customers.

Digital marketing

Digital marketing is defined by the use of numerous digital tactics and channels to connect
with customers where they spend much of their time: online. From the website itself to a
business’s online branding assets — digital advertising, email marketing, online brochures,
and beyond — there’s a spectrum of tactics that fall under the umbrella of “digital
marketing.”

The best digital marketers have a clear picture of how each digital marketing campaign
supports their overarching goals. And depending on the goals of their marketing strategy,
marketers can support a larger campaign through the free and paid channels at their disposal.

A content marketer, for example, can create a series of blog posts that serve to generate leads
from a new ebook the business recently created. The company’s social media marketer might
then help promote these blog posts through paid and organic posts on the business’s social
media accounts. Perhaps the email marketer creates an email campaign to send those who
download the ebook more information on the company.

Scope and Importance

Digital Marketing industry is booming not just in India but all parts of the world. The year
2016 took the industry by surprise with over 1.5 lakh job opportunities in the Digital
Marketing domain. Well, the following was a bigger surprise when only the first quarter of
2017 marked for 8 lakh job opportunities.
The surveys conducted by several forums have predicted this number to grow with
Digitalisation in the nation. Our Prime Minister has been actively promoting the idea of
Digital India. PM Modi’s digital India campaign gained massive popularity. The initiative of
Government of India is aimed at providing easy services to its natives.

Now imagine when a nation’s government is promoting the digital interaction, what do you
think will be the Digital Marketing scope in that nation.

The Digital Marketing industry is at its peak at the moment due to many reasons, take a
look at some of them:

It is the newest thing in town

Hasn’t the internet driven all of us crazy? well, it sure has. There was a time when a new
serial on the TV used to be the hot topic whereas today, the online posts or a new music video
on YouTube grabs our attention. What is this? this is a shift in the choice and preferences.
Digital media is gaining mass attention because of the fresh air it has got with itself. It’s like
living in a new era. We are experiencing a revolution, while we are shifting from the
traditional to the Digital media.

It is flexible

Since the entire work is to be done on the internet, there is no restriction of the place. It
doesn’t matter if you are at the office or at home. All you need is a device that is connected to
the internet and you are sorted. Yes, it is actually that easy. Do you want to check your bank
balance? do it on your smart phone. Want to book movie tickets? pick up your smartphone
and book! This is the digital age, everything is available at your fingertips.

It is easy

Accessing the digital media is no rocket science. It is a piece of cake. The newest of users
also take a maximum of few days to learn how to operate the digital media. This is purely
because it is designed in such a user-friendly manner that its primary objective is to ease the
operations for human beings, the reason why our mobile phones are now called smartphones.

Eco- friendly

Being responsible citizens of the world it is important that we operate through mediums that
do not harm our atmosphere cause being ignorant to the atmosphere will only have an
adverse effect on us. The digital media additionally cuts down on paper usage. We operate
the digital media over the internet and thus can save ourselves a lot of hustle in terms of hard
work, long process of work and all the other drawbacks of using the traditional medias.

Fastest Reach

Previously radio was considered to have the fastest reach because of the live communication
feature. Radio is still the medium with the widest reach but the new media is gradually
overshadowing the most popular medias like a newspaper, television, etc.
Today, you post anything online and it gets trending within a few hours. This is because the
number of users of the digital media are touching heights with each passing day.

Influential

The man kind is used to being influenced by whatever is trending the most. The virtual media
has not fallen short of influencing the masses of its own new style. The social media
occupying the most space has infused itself so well in the lives of the users that it is like the
early morning newspaper that is a must. Only this newspaper is carried forward all day long
(pun intended).

Job Opportunities

The massive user engagement calls for more and more job opportunities. The employment
sector has seen a major share of jobs generated by the Digital Marketing Industry. The
statistics show that the total number of job opportunities in the Digital Marketing industry to
cross 8 lakh job in 2017. The career scope in Digital Marketing seems attractive to masses
and that is the reason why many professionals are learning this course to enter the industry.

High engagement

It is true that the traditional media are being completely overshadowed by the internet- led
Digital Marketing due to high engagement factors. The brands and companies have begun to
give extra emphasis to the ad campaigns run on the internet over television ads. The
revolution is here!

Small investments and big Returns

Digital Marketing ad campaigns ask for a very little amount of investments as compared to
television and print ads. The high ROI is attractive enough to draw the attention of the
marketers and advertisers.

Measure immediate results

An advertiser running a social media campaign can easily measure the performance of the
campaign in real time without waiting for long intervals. The leads generated and online
purchases are a direct measure of the performance of the campaign.

The campaign is run over the internet and the performance is measured in real time what can
be better than this for a business?

There must be many more reason to the list of why Digital Marketing industry is at its peak
but we will move further from here to briefly discuss the scope of Digital Marketing jobs in
India.

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Internet Vs. Traditional Marketing Communications
To clarify the terms, the use of print ads on newspapers and magazines is a simple example
of traditional marketing. Other examples include flyers that are put in mailboxes, commercials
both on TV and radio and billboards. On the other hand, when a business invests on building a
website, advertising the brand name through different social media such as Facebook, Twitter
and YouTube, this kind strategy is called digital marketing.

Benefits of Traditional Marketing

You can easily reach your target local audience. For example, a radio ad might play in one
location: your city or region. Or mailbox flyers will go to households in a select number of
suburbs.

The materials can be kept. The audience can have a hard copy of materials of which they can
read or browse through over and over again.

It’s easy to understand. It can be easily understood by most people because they are already
exposed to this kind of strategy.

Neuroscience seems to support the benefits of hard copy marketing. A study sponsored
by Canada Post and performed by Canadian neuro-marketing firm TrueImpact compared the
effects of paper marketing (direct mail pieces, in this case) with digital media (email and display
ads).

The technologies used in this study were eye-tracking and high resolution EEG brain wave
measurement. The three key metrics evaluated in the study were cognitive load (ease of
understanding), motivation (persuasiveness), and attention (how long subjects looked at the
content).

Direct mail was easier to process mentally and tested better for brand recall. According to the
report,

Direct mail requires 21% less cognitive effort to process than digital media (5.15 vs. 6.37),
suggesting that it is both easier to understand and more memorable. Post-exposure memory
tests validated what the cognitive load test revealed about direct mail’s memory encoding
capabilities. When asked to cite the brand (company name) of an advertisement they had just
seen, recall was 70% higher among participants who were exposed to a direct mail piece (75%)
than a digital ad (44%).

The Downside to Traditional Marketing

There is very little interaction between the medium used and the customers. It is more of
providing information to the public that the brand exists with the hope of these people patronizing
the brand.

Print or radio advertisements can be very costly. Printing materials can be expensive and
you need to hire people to distribute these.

Results on this marketing strategy cannot easily be measured. Was the campaign
successful?
Benefits of Digital Marketing
You can target a local audience, but also an international one. Further, you can tailor a
campaign to specific audience demographics, such as gender, location, age and interests. This
means your campaign will be more effective.

Your audience can choose how they want to receive your content. While one person likes to
read a blog post, another person likes to watch a YouTube video. Traditional marketing doesn’t
give the audience a choice. Most people hate receiving sales flyers in their mailbox or phone
calls at inconvenient times on stuff that they have little interest in. Online people get the choice
to opt in or out of communications and often it is relevant because they were the ones searching
for it in the first place. Don’t underestimate the power of market segmentation and tailored
marketing.

Interaction with your audience is possible with the use of social media networks. In fact,
interaction is encouraged. Traditional marketing methods don’t allow for audience interaction.
You can encourage your prospects, clients and followers to take action, visit your website, read
about your products and services, rate them, buy them and provide feedback which is visible to
your market.

Digital marketing is cost-efficient. Though some invest on paid ads online; however, the cost
is still cheaper compared to traditional marketing.

Data and results are easily recorded. With Google Analytics and the insights tools offered by
most social media channels, you can check on your campaigns at any time. Unlike traditional
marketing methods, you can see in real time what is or is not working for your business online
and you can adapt very quickly to improve your results.

Level playing field: Any business can compete with any competitor regardless of size with a
solid digital marketing strategy. Traditionally a smaller retailer would struggle to match the
finesse of the fixtures and fittings of its larger competitors. Online, a crisp well thought out site
with a smooth customer journey and fantastic service is king – not size.

Real time results: you don’t have to wait weeks for a boost to your business like you would have
to waiting for a fax or form to be returned. You can see the numbers of visitors to your site and
its subscribers increase, peak trading times, conversion rates and much more at the touch of a
button.

Brand Development: A well maintained website with quality content targeting the needs and
adding value to your target audience can provide significant value and lead generation
opportunities. The same can be said for utilising social media channels and personalised email
marketing.

Viral: how often do your sales flyers get passed around instantly by your customers and
prospects? Online, using social media share buttons on your website, email and social media
channels enables your message to be shared incredibly quickly. If you consider the average
Facebook user has 190 friends of which an average of 12% see their liked posts – your one
message has actually been seen by 15 new prospects. Now imagine a number of them also like
and share your message and their friends do the same? That’s why high-quality content is so
important.

So which kind of marketing is better?

 Well, we would recommend both. Obviously, we are passionate about digital marketing, because
we know that it works. But we do use traditional marketing materials, too.

A 2009 study conducted by Bangor University and branding agency Millward Brown also used
fMRI to study the different effects of paper and digital media.

Some of their key conclusions were:

 Physical material is more “real” to the brain. It has a meaning, and a place. It is better connected
to memory because it engages with its spatial memory networks.
 Physical material involves more emotional processing, which is important for memory and brand
associations.
 Physical materials produced more brain responses connected with internal feelings, suggesting
greater “internalization” of the ads.

How We Use Both Digital & Traditional Marketing

Our traditional marketing methods support our digital marketing efforts. The two do not operate in
exclusion from each other. But we only use hard copy marketing materials to further strengthen a
relationship with a contact, referral partner or client. We don’t invest in television or radio ads, for
example, but we will give brochures to someone who is interested in our services. Rather than
taking an all or nothing approach, it appears that a multi-channel approach that leverages the
unique benefits of paper with the convenience and accessibility of digital will perform best.

Green marketing is the marketing of products that are presumed to be

environmentally safe. It incorporates a broad range of activities, including product modification,
changes to the production process, sustainable packaging, as well as modifying advertising. Yet
defining green marketing is not a simple task where several meanings intersect and contradict
each other; an example of this will be the existence of varying social, environmental and retail
definitions attached to this term. Other similar terms used are environmental
marketing and ecological marketing.
Green, environmental and eco-marketing are part of the new marketing approaches which do not
just refocus, adjust or enhance existing marketing thinking and practice, but seek to challenge
those approaches and provide a substantially different perspective. In more detail green,
environmental and eco-marketing belong to the group of approaches which seek to address the
lack of fit between marketing as it is currently practiced and the ecological and social realities of
the wider marketing environment.

The green marketing mix

A model green marketing mix contains four "P's":

 Product: A producer should offer ecological products which not only must not
contaminate the environment but should protect it and even liquidate existing
environmental damages.
 Price: Prices for such products may be a little higher than conventional alternatives. But
target groups like for example LOHAS are willing to pay extra for green products.
 Place: A distribution logistics is of crucial importance; main focus is on ecological
packaging. Marketing local and seasonal products e.g. vegetables from regional farms is
more easy to be marketed “green” than products imported.
 Promotion: A communication with the market should put stress on environmental
aspects, for example that the company possesses a CP certificate or is ISO 14000
certified. This may be publicized to improve a firm's image. Furthermore, the fact that a
company spends expenditures on environmental protection should be advertised. Third,
sponsoring the natural environment is also very important. And last but not least,
ecological products will probably require special sales promotions.
 Social marketing
Social marketing is the use of commercial marketing principles and techniques to improve
the welfare of people and the physical, social and economic environment in which they live.
It is a carefully planned, long-term approach to changing human behavior.
Social marketing has the primary goal of achieving "common good".
Traditional commercial marketing aims are primarily financial, though they can have positive
social effects as well. In the context of public health, social marketing would promote general
health, raise awareness and induce changes in behaviour.

What is Marketing Analytics?

The more technology develops, the more time and budget CMOs are allocating to
understanding the performance and growth influence of their marketing efforts. In fact, a
recent survey predicted spending in the area will increase by 200% in the next three years.
Marketing teams can often struggle to demonstrate credibility, but the adoption of strategic
marketing analytics can make it easier to show your marketing endeavors’ ROI.

Marketing analytics is the practice of managing and studying metrics data in order to
determine the ROI of marketing efforts like calls-to-action (CTAs), blog posts, channel
performance, and thought leadership pieces, and to identify opportunities for improvement.
By tracking and reporting on business performance data, diagnostic metrics, and leading
indicator metrics, marketers will be able to provide answers to the analytics questions that are
most vital to their stakeholders.

Regardless of business size, marketing analytics can provide invaluable data that can help
drive growth. Enterprise marketers at first may find the process too complicated, while small
and mid-sized business (SMB) marketers assume a company of their size won’t benefit from
implementing metrics, but neither perception is true. As long as marketing analytics is
carefully curated and properly implemented, the data collected can help a business of any size
grow.

With proper marketing metrics and analytics in place, marketers can better understand big-
picture marketing trends, determine which programs worked and why, monitor trends over
time, thoroughly understand the ROI of each program, and forecast future results. With 78%
of B2B marketing executives currently measuring the impact of their marketing programs on
revenue, it’s clear that more businesses are getting on board with marketing analytics, even if
they were a bit hesitant before.

“Too often marketers talk about activities instead of outcomes—for example, how many
campaigns they ran, how many trade shows they participated in, how many new names they
added to the lead database. These are metrics that reinforce the perception that marketing is a
cost center, not a revenue driver.”

— Glen Gow, Founder and CEO, Crimson Marketing

Common problems that marketing analytics can solve

Determining the effectiveness of your marketing efforts can be more complicated than
tracking simple engagement, and compiling that data doesn’t necessarily result in
optimization of your future campaigns. Below are a few problems that a marketing analytics
solution can help solve.

 Problem: I feel like I’m reporting for reporting’s sake. As a default, marketers
often put primary metrics such as lead source tracking and cost-per-lead in place, but
there is no holistic understanding of how marketing activities impact key bottom-line
metrics. Make sure to set up analytics to support the goals that your stakeholders most
care about, so you aren’t compiling data without a plan in place.

 Problem: I don’t know how to unify my data. Get your data out of silos and
spreadsheets. When you automatically connect and unify your data, you can spend
more time acting on insights you’ve worked hard to collect and less time on tedious
reporting tasks.
  Problem: I don’t know how to show the impact on revenue and profit. Many
marketers think of marketing ROI as reporting on the outcome of their programs—
often in the form of a set of reports they have to deliver monthly. However, the most
successful companies recognize that reporting for reporting’s sake is less important
than using those reports to make decisions that boost sales.

 Problem: My metrics don’t tie to actions that drive outcomes. Don’t just report on
a single campaign. The incremental contribution of individual marketing programs
and the ability to show how your marketing campaigns influence sales at every stage
of the customer journey will help build credibility and show long-term program
success.

 Problem: I struggle with forecasting. When marketing takes responsibility for the
early stages of the revenue cycle and understands how to model these stages, they
have better visibility into future revenue. Marketing analytics allows the ability to
forecast how many new leads, opportunities, and customers marketing will yield in
future periods because it tracks where prospects are in each revenue cycle stage—and
how likely they are to move through each stage over time.

Components of marketing analytics

Marketing analytics, a multifaceted practice used to drive ROI and improve future efforts,
consists of:

 Centralized marketing database: Analytics require access to highly detailed

marketing data, so marketers need to begin tracking this information now—preferably
in one place. Required information will include historical data around when marketing
programs ran, what their attributes were, who they touched, how much they cost, and
so on. Without this information, analytics are essentially worthless.

 Time series analytics: Unless an operational system stores historical data, a marketer
cannot measure or understand marketing trends. Many marketing and sales solutions
are operational and do not store historical information, requiring marketers who want
to analyze their metrics for prior time periods to manually take data snapshots from
their Excel spreadsheets. However, time series analytics gives marketers a full picture
of their performance trends over time because the engine can analyze beyond point-
in-time insight.

 Advanced attribution capacity: With marketing data in one place, marketers can
understand what moves the needle and maximize return on marketing investment, but
only if they have technology that facilitates attribution reporting. Many solutions only
offer basic attribution capacity— most commonly, first or last touch attribution or
multi-touch attribution limited by the type of channel or time horizon. This limits your
ability to grow into the most illuminating attribution models down the line. Be sure to
understand the attribution limitations of any technology you’re considering before you
buy.
 Powerful and easy insights: Very few of the marketers who want and need to
consume analytics data are business analysts. For such an audience, user-friendly
dashboards are required, so marketers can explore data trends and gain insight into
their programs without wasting time acquiring the expertise needed to maneuver the
technology, build custom reports, and so forth. Just make sure your marketing
automation solution offers tools that are both and powerful and simple to use!

 Ad-hoc reporting and dashboards: On the other hand, marketing analytics experts
will need the ability to delve deeply into the data and customize their ad-hoc reports.
In this case, table-like reports and charts are most effective and allow analysts to
“follow the scent” of particular insights as far as they need to go.