MARKETING CONCEPTS, PRINCIPLES AND STRATEGIES

INTRODUCTION
The origin of marketing as an identifiable economic activity can be traced to the time when human beings organized
themselves as a family unit Going by the historical accounts of trade practice, some conclude that as long as there
have been people, some form of marketing has been going on. "Over 6,000 years of recorded history document that
the roots of both Western and Eastern civilization included some form of trade". Marketing is commonly believed to
have progressed through five distinct phases of evolution since the beginning of time

(a) The simple trade era,

(b) The production era

(c) The sales era

(d) The marketing department era

(e) The marketing company era.

This are the five classical era progression is taught in business schools. In addition to this there are seven distinct eras
which are apparent.

Simple trade era: where everything available has made or harvested by hand and available in limited supply.
Exploration and trade in resource was the focus of the economic activity, Commodities ruled the day. This era is
described as having lasted from the beginning of time through the mid 19th century "Whenever a person made more
than he needed or wanted more than he made, the foundation was laid for trade, and trade is the heart of marketing".
Thus man began to think in terms of exchanging one item for another. Even food and materials cultivated in one farm
was exchanged for tools and animals.

Production era: The simple trade era was replaced by the production era at the time of industrial revolution. Mass
production increases the availability of product option in the market place. This is the era of the field of dreams
business philosophy of "if you build it, they will come", successful only because there were few alternative product
option available. This marketing era lasted approximately for 60 years from the 1860's until 1920's, goods began to be
produced in large quantities by small producers for future use. Some wealthy producers began to engage the services
of labours under them to work in their workplaces. They also employed agents to find markets for their products. "As
the size of wealthy class increased some goods and shops emerged that catered to the rich, and here some of the
characteristic consumer oriented retailing first appeared.

Sales era(1920's-1940's): During this era, the primary marketing concept belief held that consumers if left alone
would not buy enough of the organization’s products; therefore, the organization must undertake an aggressive selling
and promotion effort. The selling concept assumes that the consumer must be coaxed into buying. It also assumes that
the organization has effective selling and promotional tools to stimulate more buying. Today, this concept is still
practiced most aggressively with unsought goods, such as insurance, funeral plots and even fundraising activity by
non-profit groups. These industries have perfected various sales techniques to locate prospects and had to sell them on
their product benefits. Most firms practice the selling concept when their aim (knowingly or unknowingly) is to sell
what they make rather than make what the market wants. In today’s competitive environment, most markets are buyer
markets and sellers have to scramble hard for customers. Prospects are bombarded with commercials, print ads, direct
mail, telemarketing and sales calls. At every turn, someone is trying to sell you something. Unfortunately, as a result,
the public often identifies marketing with hard selling and advertising. Marketing based on hard selling is unhealthy
and carries high risks, especially customer dissatisfaction. It is a surprise to most people when they learn that selling is
not the most important part of healthy marketing. Selling is only one part, be it an integral part, of the marketing mix.
As management and marketing Guru Peter Drucker states: “There will always, one can assume, be a need for some
selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the
customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer
who is ready to buy. All that should be needed then is to make the product or service available.”

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Marketing department era: where manufacturing firm realized that the sales orientation was not resonating with
consumer. New levels of affluences provided consumers with more power in the market place. Business consolidated
marketing related activities (advertising, sales promotion, public relations etc) into single department, this period
lasted from the 1940's through the 1960's.

Marketing company era: The marketing company era emerged once the promises of the marketing concept became
widely accepted. The marketing concept, in brief contents that business exist to address customer needs that is the
customer is the focus of our business endeavors no longer marketing was marketing compartmentalized it became the
goal of the business all employees became part of the marketing effort either directly or indirectly and customer
became the king. It began in1960's and still in play.

Relationship marketing era: The 6th era is identified as the relationship marketing era the goal is to build a long
term mutually beneficial, relationship with a customer. the focus changed to life time customer value and customer
loyalty CRM and data mining became the buzz words in marketing clearly the relationship marketing era exists and is
in play today from the 1990's to 2010.

Social/mobile marketing era: It subsumes of knowledge and theories of its predecessor era but focuses as real time
connection and social exchange based on relationship driven by the consumers in this era business are connected 24/7
to current, future and potential consumer in real time communication and exchange of information is a critical success
factor.

MARKETING MANAGEMENT

Marketing management represents marketing concepts in action, i.e., preplanned demand management under
customer-oriented marketing philosophy. Marketing management looks after the marketing system of the enterprise. It
involves planning, implementation and control of marketing programs included in the process of marketing.
Marketing management is directly in charge of setting the goals/objectives of marketing, developing marketing plans
for their accomplishment, organizing the marketing activities needed to carry on these objectives, implementing the
marketing programs and controlling them as per needs. Marketing management in fact, represents an important
functional area of business management efforts under which goods and services flow from the producers to
consumers. Marketing management takes place when at least one party to a potential exchange gives thought to
objectives and means of achieving desired responses from other parties. "Marketing Management is the process of
planning and executing the conception, pricing, promotion, and distribution of goods, services, and ideas to create
exchanges with target groups that satisfy customer and organizational objectives"

"Marketing management is the analysis, planning, implementation, and control of programs designed to bring about
desired exchanges with target audiences and coordination of product, price, promotion and place of achieving
effective response."

MARKETING MIX

Marketing activities do not take place in a vacuum. The marketing environment which includes competitive,
economic, political, legal and regulatory, technological and socio cultural forces surround the customers and affects
the marketing mix. The forces of marketing environment affect a marketer's ability to facilitate exchanges in 3 general
ways. First, they influence customers by affecting their lifestyles, standard of living and preferences and needs for
products marketing environment is so interesting and challenging because these forces are closely interrelated.
Changes in one may cause changes in one may cause changes in others. Even though changes in the marketing
environment produce uncertainty for marketers and at times hurt marketing efforts they also create opportunities.
Marketers who are alert to changes in environmental forces cannot only adjust to and influence these changes but also
capitalize on the opportunities such changes provide.

Marketing involves a series of activities directed towards satisfying the needs and wants of the customers. ''Marketing
is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market.'' It begins with
developing a product that will satisfy the customers and making it available to the customer in the right includes
functional, social, and psychological utilities or benefits.'' The product of an organization is both the physical product

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as well as the service offered to the customer. In marketing the word the product means any kind of articles or services
offered to a customer to satisfy his needs and wants.

A product has three basic levels. The first level is called the core product. That is the conceptulised product. The
second level is Actual Product. It is the benefits enjoyed by the consumer by buying the product. When a consumer
buys a fridge, the core purchase is not so much in the fridge, as in the benefits offered by the fridge, like being able to
preserve food materials in the fridge without getting spoiled. The third level of product consists of services and
benefits that surround the first two levels of the product. The services include technical assistance in operating the
product and future and future service agreements. The question is: does the firm produce what its prospective
customers need? Hence, the organization has to define the qualities of the products or services that meet the needs of
the customers. People always want news products. Hence, every firm must give keen attention to developing new
products. Companies that fail to develop new products are at a risk of losing their attraction. ''Their existing products
are vulnerable to charging consumer needs and tastes, new technologies, shortened product life cycles, and increased
domestic and foreign competition.''

What Is Marketing Mix?

Businesses have technically always used marketing tools to promote and sell their work, but the term "marketing mix"
was coined in the mid-20th century. One of its first uses was in a 1953 address to the American Marketing
Association, in which Harvard professor and marketing expert Neil Bordon outlined how marketers develop and
execute a successful marketing plan.

Identifying and arranging the elements of its marketing mix allows a business to make profitable marketing decisions
at every level. These decisions help a business:

 Develop its strengths and limit its weaknesses

 Become more competitive and adaptable in its market

 Improve profitable collaboration between departments and partners

Since the 1950s, the elements of marketing mix have undergone various transformations in response to new
technologies and other changes in marketing best practices.

The Four Ps of Marketing Mix

Since the 1960s, marketing mix as been associated with the four Ps: price, product, promotion, and place.

 Price. The cost to purchase a product. Price depends on the customer's perceived value of the product, and it
can dramatically change your marketing strategy. A lower price makes a product accessible to more
customers, while a higher price appeals to customers seeking exclusivity. Either way, the price must be
greater than the cost of production so your business can make a profit.

 Product. What is being sold. Marketers must consider the life cycle of the product to address any challenges
that may arise once it's in the hands of the consumer. For example, the earliest version of the iPod had a
battery life problem that was only noticeable after a certain amount of time, and Apple needed to develop
ways to combat that problem.

 Promotion. Advertising, direct marketing, and sales promotion. TV commercials, Internet ads, catalogs, trade
fairs, billboards, and even ads on the top of taxi cabs are all types of promotion. This category also includes
public relations, such as the distribution of press releases or ongoing relationships with the media. Promotion
encompasses what is communicated, who it is communicated to, how that audience is reached, and how often
promotion happens.

 Place. Any physical location where the customer can use, access, or purchase a product. This includes
distribution centers, transport, warehousing, inventory decisions, and franchises.

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 TYPES OF MARKET STRUCTURES
The definition of a market has a very wide scope. So understandably not all markets are the same or similar. We can
characterize market structures based on the competition levels and the nature of these markets. Let us study the four basic
types of market structures.
A variety of market structures will characterize an economy. Such market structures essentially refer to the
degree of competition in a market.

There are other determinants of market structures such as the nature of the goods and products, the number of
sellers, number of consumers, the nature of the product or service, economies of scale etc. We will discuss the
four basic types of market structures in any economy.

One thing to remember is that not all these types of market structures actually exist. Some of them are just
theoretical concepts. But they help us understand the principles behind the classification of market structures.

(Source: Business Jargons)

1] Perfect Competition

In a perfect competition market structure, there are a large number of buyers and sellers. All the sellers of the
market are small sellers in competition with each other. There is no one big seller with any significant influence
on the market. So all the firms in such a market are price takers.

There are certain assumptions when discussing the perfect competition. This is the reason a perfect
competition market is pretty much a theoretical concept. These assumptions are as follows,

 The products on the market are homogeneous, i.e. they are completely identical
 All firms only have the motive of profit maximization
 There is free entry and exit from the market, i.e. there are no barriers
 And there is no concept of consumer preference.

2] Monopolistic Competition

This is a more realistic scenario that actually occurs in the real world. In monopolistic competition, there are
still a large number of buyers as well as sellers. But they all do not sell homogeneous products. The products are
similar but all sellers sell slightly differentiated products.

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Now the consumers have the preference of choosing one product over another. The sellers can also charge a
marginally higher price since they may enjoy some market power. So the sellers become the price setters to a
certain extent.

For example, the market for cereals is a monopolistic competition. The products are all similar but slightly
differentiated in terms of taste and flavours. Another such example is toothpaste.

3] Oligopoly

In an oligopoly, there are only a few firms in the market. While there is no clarity about the number of firms, 3-
5 dominant firms are considered the norm. So in the case of an oligopoly, the buyers are far greater than the
sellers.

The firms in this case either compete with another to collaborate together, They use their market influence to set
the prices and in turn maximize their profits. So the consumers become the price takers. In an oligopoly, there
are various barriers to entry in the market, and new firms find it difficult to establish themselves.

Coca cola and Pepsi are in an oligopoly market. They are selling the homogeneous product so they can control
over price but they will consider their action when they would like to change the price of their goods.

4] Monopoly

In a monopoly type of market structure, there is only one seller, so a single firm will control the entire market. It
can set any price it wishes since it has all the market power. Consumers do not have any alternative and must
pay the price set by the seller.

Monopolies are extremely undesirable. Here the consumer looses all their power and market forces become
irrelevant. However, a pure monopoly is very rare in reality.

Example: Electricity board run by Government say in U.P.

MARKETING ENVIRONMENT

Marketing Environment is the combination of external and internal factors and forces which affect the
company's ability to establish a relationship and serve its customers. The marketing environment of a business
consists of an internal and an external environment.
Types of Marketing Environment: Micro and Macro Environment :-
A. Micro Environment- 1. Company 2. Suppliers 3. Marketing Intermediaries 4. Competitors 5. Public 6.
Customers

B. Macro Environment- 1. Demographic Environment 2. Economic Environment 3. Natural Environment 4.

Technological Environment 5. Political and Social Environment 6. Cultural Environment 7. Legal
Environment.

There are basically two types of environment which affects marketing decisions namely:

Type1. Micro Environment:

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Philip Kotler explains this environment in his definition as, “The micro environment includes all the actors
close to the company that affect, positively or negatively, its ability to create value for and relationship with
its customers”

Thus, Customer satisfaction and communication should be developed for healthy relationship. Marketing
managers cannot make this relationship working because of several factors affecting at the same time.

The factors are as follows:

a. The Company:

The company is a hierarchical entity consists of different departments like purchasing, production, top
management, research and development, finance etc. All these interrelated groups forms the internal
environment of organization. Top management is responsible for companies’ mission, objectives, and broad
strategies, policies. Marketing management make decisions within the actions and decisions of top
management. Other departments also have impact on marketing department. Harmony must be established
with all the departments.

b. Suppliers:

Suppliers are important part of the overall link of customer to company. Suppliers supplies goods and
resources needed to produce goods and services to the company. Their problems must be studied because
they can seriously affect marketing. Cost and supply availability must be checked by marketing department.
In current scenario marketers treat suppliers as their partners in creating and delivering customer value.
Many suppliers provides valuable information on their web portals about their marketers and give important
feed back to them about customer responses.
Supply shortages, delays, labor strikes and other events can cost sales in the short run and affect customer
satisfaction in the long run.

c. Marketing Intermediaries:
Intermediaries helps the company to promote, sell and distribute its products to final buyers. Marketing
intermediaries includes resellers, physical distribution firms, marketing services agencies and other
intermediaries including financial intermediaries.
Reseller includes distribution channel firms that help the company to find customers or make sales to them.
In India it is a growing trend that in near future manufacturers will now be facing competition of large and
powerful intermediaries. Some resale organizations in India have emerged and troubled the manufacturers.
For example Big Bazaar, Shoppers Stop. Pantaloons retail. Like suppliers, intermediaries form an important
component of the company’s overall marketing strategic management.
For optimizing customer satisfaction company must become partner with these intermediaries to balance the
performance of whole system.

e. Public:

Public is any group that has an actual or potential interest in or impact on organization’s ability to achieve its
objectives.
Noted marketing author and thinker Philip Kotler identifies seven types of public which attracted and which
affects organization’s decisions which are:

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i. Financial Public – Banks, Investment Agencies, Stockholders, Debenture holders etc. are included in this
type.
ii. Media public – Newspaper, Magazine, reporters, editors etc.
iii. Government Public – Lawyers, Tax consultant, Government Personnel etc.
iv. Citizen- Action public – minority groups, social groups, RTI activists, other social activists etc.
v. Local public – Neighborhood residents, community organization etc.
vi. General Public – General public in the country
vii. Internal Public – Leaders, Board of Directors, Volunteers, Managers etc.
Each class of public have different agenda and needs to be treated differently.

Type # 2. Macro Environment:

There are number of factors which influences the marketing decisions.
Hence it is very important to understand each parameter. Macro environment generic in nature, impacts the
whole business environment, while micro environment specific to the industry affects industrial decisions on
personal level.
The macro environment includes all the factors which are external to the firm and which cannot be
controlled by the organization. Macro environment influence is not specific to any particular industry but
influence all the firms on a different level. Marketing management must have knowledge of different factors
which influences the marketing decision of a firm. Since they are not controllable, one must adjust the
decisions as per the changes in the environment.
“The macro environment consists broader forces that affects the actors in the micro environment.”
The conditions that exist in the economy as a whole, rather than in a particular part of a region affects
organization very much rather than micro economic forces. Macro Environment generally includes trends in
gross domestic product (GDP), inflation, employment, spending, and monetary and fiscal policy. The macro
environment is closely linked to the normal business cycle, as opposed to the performance of an individual
business sector.
The macro environment affects micro environment and therefore business.
The macro environment in which an organization is operating will be influenced by its forces and in return is
affected by organization’s performance as well.
This macro environment forces are so influential that can result in a major changes in organization’s outlook
to a large extent. Service sector have contributed largely towards economic growth of a country, this macro
environment change affects every organization in respect of providing services and fulfillment of consumer
needs.
All the departments and people in the organization work under the bigger impactful macro environment.
Following are the elements of macro environment:
i. Demographic Environment
ii. Economic Environment
iii. Natural Environment

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iv. Technological Environment
v. Political and Social Environment
vi. Cultural Environment

i. Demographic Environment:
Changes in demography’s in the nature of human population means ultimate changes in markets.
Demographic environment is study of human population in terms of size, density, location, age, gender,
race, occupation and other statistics. It is the study of people who are nothing but market. People are
responsible for demand for a product and some other people contribute towards the supply of the product. So
people and people mix are the most important factor of macro environment.
Thus as a marketer, one must understand the demographics of the nation and the also due to globalization,
global population also influences the marketing decisions.

a. Population Mix:
Population study is very important because it is very dynamic and rapidly changing. Not only growth of
population should be considered but also composition of population is equally important.
In India where youth is the largest denominator, promotion must be made accordingly.

b. Population Growth:
India is the second largest populated country after china. According to 2011 census report Indian population
reached 1.21 billion constituting 17.5 % of the world population. India is projected to be the World’s most
populous country by 2025, surpassing china. This provides an exceptional opportunity for business. Many
foreign companies got attracted with this market because of its dynamism and power to increase sale with
very high percentage.

c. Geographical Shift:
Very diversified culture is present on Indian soil with changes spotted every 100 kilometers including
change languages and traditions. Marketer must have this knowledge of different culture where he wants to
sale his product.
d. A Changing Family System:
India had a tradition of joint family system in which all the parents, grandparents and sometimes great
grandparents would live together under one shelter. The eldest man being the Head or Chief of the family
and the able bodied men would work for daily bread and butter and women were responsible for kitchen and
other household responsibilities.
Modern India parted with this traditional joint family system. In a present world, both husband and wife
work. They may not live with their parents. This duel income source and single kid family has created a big
dent in the social fabric of our society.
Because of more regular income, demand and consumption increased which resulted in a compulsion for
increase in manufacturing and production.

e. Changing Role of Women in India:

Women in India were basically engaged in household activities and took responsibility of kitchen and other
work including maintenance, cleaning of house, raising kids etc. Today more and more women, even from
rural area, are completing graduation and even post-graduation. Women are working shoulder to shoulder
with men in every sphere of activity, be it in education, organization, hospital, or a science research Institute.

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The entry of women into the corporate world has changed the economy in many ways. Their earnings have
increased the disposable income of the family. Many products are developed specially for these women.
They have become an active member in a family.

f. Rural Population:
The MGI India consumer Demand Model forecasted that the population in rural India will be 1400 million
by 2019. Which will result in rising demand at a compounding rate. Such demographic factors affects
marketing decisions.

g. Middle Class Factor:

India is showing tremendous growth in middle class with their own set of nature, features, likes, dislikes and
demands. It is a study subject for marketing managers because it changes product requirements, demands for
services etc. It is predicted that middle class will dominate the urban consumption in near future.

ii. Economic Environment:

The economic environment can offer both opportunities and threats. It refers to the factors that affects
consumer buying power and spending patterns.
To attract the India’s growing middle class, Tata motors introduced the small, affordable Tata Nano car
designed to be the Indian model T- the car that puts the developing nation on wheel.
Economic considerations includes, inflation, GDP, bank policies, market trends, union budget. Fiscal
policies, credit issues, financial crisis or progress, and global economic situation.
All these environmental factors must be studied in depth because they affect buyer’s demands and hence
product’s demand. Consumer spending pattern and income distribution must also be looked for so as to have
a bulls eye view about economic environment.
Credit availability and saving trends in economy has an influence on the purchasing ability of the consumer.
The availability of installment schemes and EMI options has boosted service sector, reality sector and
consumer durable products.

Following are some of the factors of economic environment:

a. Recession or Boom:
If the economy is going through a recession it is obvious that businesses generally will not be doing well due
to low aggregate demand in the economy. On the other hand, a boom period will lead to higher business
profits and revenue for most of the businesses in the economy. Recent global recession brought software
industry in country to perform at very lower profit levels.
b. Inflation:
High rate of inflation leads to lower purchasing power for consumers resulting in lower demand for goods
and services. Moreover, a higher inflation rate will make business uncompetitive in the international market
leading to lower sales for the business.
c. Tax Structure in Country:
High level of taxes will lead to low disposable income and contraction of demand in the economy. Business
will find it difficult to attract consumers. Moreover, taxes affects overall spending pattern. Debit card
swapping sometimes attracts 2 percent tax hence many consumer purchase products with cash only.
d. Uemployment:
High level of unemployment in the country can also adversely affect a business. People will not have
enough money to purchase a firm’s product. With the rising per capita income in India as a result of increase
in job opportunities, spending increased rapidly in a last decade.

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e. Labor Costs: High labor cost will result higher production costs. This will make a firm’s product more
expensive as compared to other firms affecting its sales and profit margin.

f. Prevailing Rates of Interest:

Higher Interest rates will lead to a fall in the aggregate demand in the economy thus leading to difficulty for
business to find customers willing to buy its product. Lower interest rates will lead to an increase in demand
in the economy.
g. Income Distribution:
High level of disposable income is good for business producing luxury goods. A large disparity in income
distribution will promote businesses dealing in luxury goods as well as inferior goods.
With duel income sources per home, spending and distribution pattern have changed significantly.

iii. Natural Environment:

Marketers need to be aware of the threats and opportunities associated with the four trends
associated in the natural environment which are stated below:
a. Shortage of raw material
b. Increased cost of energy
c. Increase in pollution
d. Government policies
Natural environment consists of natural resources that are required as inputs by marketers or that are
affected by marketing activities.
All corporate are now looking for eco-friendly approach because of showing respect towards Mother Nature
and trying to act more pollution free in an effort to save environment.
First cause of concern for marketer is the shortage of raw material is growing because of increase in
consumption. Second is government intervention in natural resource management. So companies should
accept social responsibility and less expensive devices can be found to control and reduce pollution.
It is a common practice in the scenario of pollution and social natural awareness. Companies are making
Eco- friendly strategies to deal with problems of pollution and short resources.
Many companies are using handmade papers for internal use and promoting save paper campaign.
Idea launched this concept of paper saving on a broad scale. Aircel introduced save tiger campaign for
saving tigers all over the country.

iv. Technological Environment:

Technology is the most influential force that is shaping marketing environment which includes forces that
are the new technologies affecting new product and market opportunities. Technology has created miracles
in the area of robotic surgery, antibiotics, laptop computers, which affect every organization’s marketing
environment.
The technology is a synonym for change. It changes rapidly with destroying all the previous researches, like
invention of handy sub devices demolished floppy from the market. Android based smart phones have
destroyed all the other previous platforms like java based and Symbian based operating system compelling
mobile manufacturers to use new android based operating system. Even school going kids are well aware of
the latest smart phone product and features of that.
Internet usage has increased very drastically, so because of increase in the usage of smart phones with the
availability of internet in a fingertip, number of internet cafes has reduced. Such is a power of technology.
There are approximately 700 million mobile users in India in 2012 rising up to 900 million in 2016 shows
the technological advancement and factor needs attention of marketers.

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New technologies create new markets and opportunities. However every new technology replaces an older
technology. Thus marketers should watch the technological environment closely. Companies that do not
keep up will soon find their products outdated.

v. Political and Social Environment:

Markets works best under some regulative forces. Well-conceived regulation can encourage competition and
ensue fair markets for goods and services.
Thus, governments set up public policies to guide businesses that also limit business for the good of society
as a whole. Almost every business activity including marketing activities are subject to laws and regulations.
Every company operates under some obligation and without that chaos will rule the corporate sector with
competition running the top management. Social sector is keeping corporate sector to work under some
obligatory forces which show some responsibility towards society and country.
Many organizations are now engaged in social work for showing their concern for problems of economy and
providing some assistance to the government and other social agencies for overcoming them.
Many corporate sector companies are initiating Fund raising campaigns, portals for child education, drought
management, water purity education, save girl child campaign etc. showing social responsibilities.
India’s top most software company’s CEO took project named ‘AADHAR’ to give unique identification
number to every citizen of the country. This project got praised by government and corporate sector.
This cause related marketing have been criticized because of intention of increase in sale rather than
tendency of giving.

vi. Cultural Environment:

Cultural factors affect how people think and how they consume. So marketers are keenly interested in the
cultural environment.
The cultural environment generally includes people’s thinking about following:
a. People’s view of themselves – It includes people view about themselves which vary in their emphasis than
their view of outer world
b. People’s view of others – People are becoming more and more introvert and so their views of others are
changing
c. People’s view of organization – People vary in their attitudes toward corporations, government agencies,
trade unions, universities and other organization.
d. People’s view of society – People vary in their attitudes toward their society based on their culture,
opinions, character etc.
e. People’s view of nature – Recently people in general have recognized that nature is fragile and can be
destroyed by human activities.
f. People’s view of universe – Finally, people differ in their beliefs about the origin of the universe and their
place in it.
Religion plays an important role in every human being even if in life of a staunch atheist.
The cultural environment includes institutions and other forces that affects society’s basic values,
perceptions, preferences and behaviors etc.
Cultural core beliefs are so strong that it affects buyers’ demands to that respect greatly. So company must
take that environment into consideration before making marketing strategies. Because of software sector
development in India, sale of consumer durable goods increased widely. So marketing department must have
studied nature and culture of these software sector employees before even their introduction in India.
Hence, cultural environment can affect production and marketing decisions deeply which must be studied in
depth.
CONSUMER BUYING BEHAVIOR

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Definition of Buying Behavior:
Buying Behavior is the decision processes and acts of people involved in buying and using products.
Need to understand:
 why consumers make the purchases that they make?
 what factors influence consumer purchases?
 the changing factors in our society.
Consumer Buying Behavior refers to the buying behavior of the ultimate consumer. A firm needs to analyze
buying behavior for:
 Buyers reactions to a firms marketing strategy has a great impact on the firms success.
 The marketing concept stresses that a firm should create a Marketing Mix (MM) that satisfies (gives
utility to) customers, therefore need to analyze the what, where, when and how consumers buy.
 Marketers can better predict how consumers will respond to marketing strategies.
Types of Consumer Behaviour:
An important worth-mentioning information on types of consumer behaviour as given by Henry Assael has
been reproduced here. Consumer decision making varies with the type of buying decision. There is a great
difference between buying toothpaste, a tennis racket, a personal computer and a new car.
The more complex and expensive decisions are likely to involve more buyer deliberation and more buying
participants. Henry Assael distinguished four type of consumer buying behaviour based on the degree of
buyer involvement in the purchase and the degree of differences among brands.
The four types are:
(1) Complex Buying Behaviour:
Consumer go through complex buying behaviour when they are highly involved in a purchase and are aware
of significant differences existing among brands. Consumers are highly involved in a purchase when it is
expensive, bought infrequently.
Risky and highly expensive. Typically, the consumer does not know much about the product category and
has much to learn. For e.g. – a person buying a personal computer may not even know what attributes to
look for.
This buyer will pass through a cognitive learning process. It is characterized by first developing beliefs
about the product, then moving towards attitudes towards the product, and finally making a deliberate
purchase choice, the marketer of high-involvement product has to understand the information-gathering and
evaluation behaviour of high-involvement consumers.
He needs to develop strategies to assist the buyer in learning about the attributes of the product class, their
relative importance and the high standing of his brand on the more important attributes. He needs to
differentiate the features of his brand, and enlist sales personnel and the buyer friend to influence the final
brand choice.
(2) Buying Behaviour Reducing Dissonance:
Sometimes the consumer who is highly involved in a purchase sees little difference in the brands. His high
involvement is based on the fact that the purchase is expensive, in-frequent and risky. The buyer will shop
around to learn what is available but he will buy fairly quickly because brand differences are not
pronounced.
He may respond primarily to a good price or the convenience of purchasing at time or place. For e.g. –
carpet’ buying is an involving decision because it is expensive and relates to self-identification, yet the
buyer is likely to consider most carpeting in a given price range to be the same.
The consumer might experience past purchase dissonance due in noticing certain disquiet features of the
carpet or hearing favourable things about carpets. He starts learning more things and seeks to justify his or
her decision to reduce the dissonance. He passes first through a state of behaviour, acquires some new
benefits and ends up evaluating his choice favourably.

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In this situation pricing, good location and effective sales personnel are important influences of brand
choice. The major role of market communication is to supply beliefs and evaluations that help the consumer
feel good about his or her choice after the purchase.
(3) Buying Behaviour Based on Habits:
Many products are purchased under conditions of low consumer involvement and the absence of significant
brand differences. For example- in purchase category. They go to store and reach for the brand, having no
strong brand loyalty. They have low involvement with most low cost, frequently purchased products. Their
behaviour in these cases does pass through the normal belief/attitude/behaviour sequences. They do not
search extensive information about the brands.
They evaluate their characteristics and make a weighty decision on which one to buy. They are passive
recipient of information as they watch T.V. or see a print ad Ad repetition creates brand familiarity rather
than brand conviction. Consumers do not really form an attitude towards a brand but select it simply because
of its familiarity.
After purchase, they may not evaluate it because they are not involved with the product. So in the buying
process, brand beliefs are formed by passive learning and followed by purchase behaviour, which may be or
may not be followed by evaluation.
In case of low involvement products marketers with few brand differences find it effective to use price and
sales promotions are an incentive to product trial, since buyers are not highly committed to any brand. A
number of things should be observed in advertising a low involvement product. The ad copy should street
only a few key points.
Visual symbol and integer are important because, they can be easily remembered and associated with the
brand. The ad campaigns should go for high repetition with short- duration messages. Television is more
effective than print-media. It is a low involvement medium that is suitable for passive learning.
(4) Variety-Seeking Buying Behaviour:
Some buying situation depicts low consumer involvement but significant brand differences. Consumers are
often observed to do a lot of brand switching. For example – in purchasing cookies the consumer has some
beliefs, chooses a brand of cookies without much evaluation and evaluates it during consumption. In future,
the consumer may reach for another brand out of boredom or a wish to experiment. Here brand switching
occurs for the sake of variety rather than dissatisfaction.
In this product category and the minor brands the marketing strategy is different for the market leader who
will try to encourage habit of buying behaviour by dominating the shelf space, avoiding out-of-stock
conditions and sponsoring frequent reminder advertising, on the other hand, challenging firms will
encourage variety by offering lower prices, deals, coupons, free samples and advertising that features
reasons for trying something new.
CONSUMER BUYING PROCESS
To understand consumer behaviour, it important to first understands consumer buying process. Buying
process represent different stages through which the consumer goes through when he has to purchase
something. Consumer has a bundle of desires, needs, out of which the pressing needs move to the top. This
is known as need recognition. After this consumer searches relevant information related to product on the
basis of which decision is taken and purchase is made.

After consuming the product the post purchase behaviour is evaluated and a dissatisfied customer again has
an unsatisfied need, and the process starts again. Each stage in the consumer buying process is a challenge to
the marketer, for which he must have a careful understanding of behaviour before he develops the marketing
programme.
The various stages in consumer buying process are:
1. Need Recognition:

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The starting point of the buying process is an unsatisfied need. It is the perceived want or desire that paves
the way for next stage. As we know every customer has bundle of desire or needs, many of which are not
satisfied. When such unfulfilled needs are identified, the buying process starts. It is important to note that
need recognition should be of those needs without whose satisfaction, consumer is restless and under
tension. He should feel that he has desire or need which has arisen and which needs to be satisfied.
Dissatisfaction from the existing product or service may also give rise to restlessness and again a need to
satisfy the urge. Need or wants arise due to internal or external situations. A person may be having deep
rooted desires which may suddenly become dominant and pressing under conducive environment. Needs
may also arise due to external situations where consumer is exposed to different advertisements and people.
It is the intensity or urgency of wants which decides the speed at which it has to be satisfied. The pressing or
urgent wants are first satisfied as resources are limited.

2. Information Search: For satisfying the need which has aroused, he has to look for suitable product
which will best satisfy his needs. For this, consumer is willing to gather more information about the product.
Alternative sources are there from where information can be gathered. He may contact his family, friends,
colleagues, neighbours who are personal sources, or he may look for commercial sources like –
advertisement, retailers etc. or he may look at other people which constitute the public source. In this way
before purchasing the product, he tries to collect the relevant information, as he is willing to satisfy this
need.

3. Evaluation:
The desire to satisfy need, gives way to evaluation stage where the consumer try to evaluate the information
he has received in the pre- purchase stage of information search. This is a stage of mental trial of the product
by consumer. On the basis of the information received, he has number of alternatives before him, out of
which he has to choose one.
His selection will be based on the relative worth of each alternative i.e. how suitable the product will be to
satisfy his wants i.e. product’s want satisfying potential. On the basis of factors like- product attributes,
brand image, facilities, convenience, etc. he accepts or rejects the alternatives. His final decision to buy will
depend upon the relative strength of the positive intention to buy.

4. Purchase Decision: The positive decision or evaluation of product leads to purchase decision. This
decision implies consumer’s commitment for a product or a service. Here he purchases the product and
exchange process is thus complete. Purchase can be trial purchase or adoption purchase.

Trial purchases are mostly done for non-durable goods where the consumer buys the goods for the first time.
For consumer durable goods, adoption purchase is done because; these items are not purchased frequently.
On consuming the goods, consumer may be satisfied or dissatisfied. Satisfaction leads to repeat purchase.

5. Post Purchase Reaction: This stage is concerned with the behaviour of the consumer after he
consumes the product. This post-purchase reaction may be positive or negative. If consumer is satisfied,
repeat purchase may be there or he may recommend the product to other people. Dissatisfaction leads to
anxiety and makes a person restless. He has a problem before him and again he tries to solve it by going for
other alternative products or services.

A marketer help the buyer feel good about the product purchased. In order to reduce his anxiety about the
product, the after-sale services are very important as it develops loyalty, increases sales and profit.

BUYING MOTIVES OF CONSUMERS:

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Consumer behaviour basically starts with needs. Need may be of different types, at different point of time.
The need hierarchy as given by Abraham Maslow classifies the needs into five types viz. Basic need, Safety
need, Social need, Esteem need and Self-actualization needs. A person moves from one level need to
another, as one need is satisfied, he moves on to next need. It is for this need that consumer shows some
behaviour pattern.

When a need is sufficiently aroused, it becomes a motive. William J. Stanton points out that “a motive is a
need sufficiently stimulated to move an individual to seek satisfaction”. He further adds that “the motive
become the buying motive when the individual seeks satisfaction through the purchase of something”.
According to D. J. Durian “Buying motives are those influences or considerations which provide the
impulse to buy induce action or determine choice in the purchase of goods or services”.

Buying motives are those motives of consumer’s which are sufficiently stimulated so as to induce the
consumer to buy the product. These are the needs, which are pressing needs, causing anxiety and
restlessness to the customers, so much so that the consumer has to make efforts to buy a suitable product.
Buying motive is a motive which can be satisfied by the purchase of the commodities.

Types of Buying Motives:

Buying motives can be grouped into different levels. First, when the need is recognised by buyer and he
talks about the motives for buying the product (conscious). Second the buyer is convinced that he has a need
to buy but is not in position to understand the motives (sub-conscious) and last buyer is not in position to
explain the factors which influence their purchase decisions (unconscious). These motives are known as
conscious, sub-conscious and unconscious motives.

Another classification of motives are:

1. Product Motives

2. Patronage Motives

1. Product Motives:

Product motives are those motives which are related to the product that induce the consumer to buy the
product. Product motive may relate to different attributes of the product.

It can be further classified as:

I. Emotional product motives

II. Rational product motives

III. Operational product motives

IV. Socio-psychological motives

Emotional product motives are those which invoke a person emotionally so that he buys the product, without
analysing and evaluating its various attributes. Examples of emotional product motives are love, pride fear,
comfort, ego, habits etc. Here consumer has the motive of only buying the product because he is emotionally
attached to it. Other factors are absent here. As against the emotional motives, there are rational motives.

These are the motives which are concerned with the logical analysis of the various aspect of the product.
Here the consumer makes a rational evaluation of different product attributes so as to determine its want

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satisfying potential, only then he buys the product. The various utility attributes of the product, credit
facilities, transportation facilities etc. are included here.

On the basis of functions performed and socio-psychological benefit provided, buying motives are classified
as operational product motive and socio-psychological product motives. Operational product motives refer
to the satisfaction derived from the function or physical utility of the product. More efficiently the functions
are performed, and more are the functions performed, better are the chances of product being purchased.

Socio- psychological motives are different from operational motives. Here the consumer buys the product
because of the prestige attached to it. The product here is, evaluated on the basis of its social status and
prestige. It must satisfy the psychological need of the buyer of having a product which is perceived high by
the society.

2. Patronage Motive:

Patronages motives refers to those motives which make a consumer buy from a particular shop.

Many time consumers have reasons to buy the goods from a particular shop only. The patronage of that shop
attracts him. Patronage motive may also be classified as emotional patronage motive and rational patronage
motive.

Many times the buyer buy goods from a specific shop for reason not clear to them also. Such motives are
called emotional patronage motives. Here the reason for buying from that shop is purely subjective. Each
buyer may have his own personal reason. On the other hand rational patronage motive are the logical reason
that a consumer has for buying the goods from a particular shop only.

Here the consumer is aware of advantages of that shop in terms of wide variety of goods, wide selection,
good quality, easy availability, good behaviour of salesman, after sale services etc. and therefore he is
attached to the shop. Thus, we see that motives have significant influence on the consumer behaviour. A
marketer should therefore develop a clear understanding of the product and patronage buying motives before
he goes to attract the customers and develop their loyalty.

Marketing Opportunities Analysis

Marketing research
What Is Market Research?

Market research is the process of determining the viability of a new service or product through research conducted
directly with potential customers. Market research allows a company to discover the target market and get opinions
and other feedback from consumers about their interest in the product or service.
This type of research can be conducted in house, by the company itself, or by a third-party company that specializes in
market research. It can be done through surveys, product testing, and focus groups. Test subjects are usually
compensated with product samples and/or paid a small stipend for their time.
[Important: Market research is a critical tool in helping companies understand what consumers want, develop products
that those consumers will use, and maintain a competitive advantage over other companies in their industry.]

Understanding Market Research

The purpose of market research is to look at the market associated with a particular good or service to ascertain how
the audience will receive it. This can include information gathering for the purpose of market segmentation and
product differentiation, which can be used to tailor advertising efforts or determine which features are seen as a
priority to the consumer.
A business must engage in a variety of tasks to complete the market research process. It needs to gather information
based on the market sector being examined. The business needs to analyze and interpret the resulting data to
determine the presence of any patterns or relevant data points that it can use in the decision-making process.

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How Market Research Works?

Market research consists of a combination of primary information, or what has been gathered by the company or by a
person hired by the company, and secondary information, or what has been gathered by an outside source.
Primary information is the data that the company has collected directly or that has been collected by a person or
business hired to conduct the research. This type of information generally falls into two categories: exploratory and
specific research.
Exploratory research is a less structured option and functions via more open-ended questions, and it results in
questions or issues being presented that the company may need to address. Specific research finds answers to
previously identified issues that are often brought to attention through exploratory research.
Secondary information is data that an outside entity has already gathered. This can include population information
from government census data, trade association reports, or presented research from another business operating within
the same market sector.

Marketing information system

Definition: The Marketing Information System refers to the systematic collection, analysis, interpretation, storage
and dissemination of the market information, from both the internal and external sources, to the marketers on a
regular, continuous basis.
The marketing information system distributes the relevant information to the marketers who can make the efficient
decisions related to the marketing operations viz. pricing, packaging, new product development, distribution, media,
promotion, etc.
Every marketing operation works in unison with the conditions prevailing both inside and outside the organization,
and, therefore, there are several sources ( viz. Internal, Marketing Intelligence, Marketing Research) through which
the relevant information about the market can be obtained.

Internal Records: The Company can collect information through its internal records comprising of sales data,
customer database, product database, financial data, operations data, etc.

Marketing Intelligence System: The marketing intelligence system provides the data about the happenings in the
market, i.e. data related to the marketing environment which is external to the organization. It includes the information
about the changing market trends, competitor’s pricing strategy, change in the customer’s tastes and preferences, new
products launched in the market, promotion strategy of the competitor, etc.

Marketing Research: The Marketing Research is the systematic collection, organization, analysis and interpretation
of the primary or the secondary data to find out the solutions to the marketing problems.

Marketing Decision Support System: It includes several software programs that can be used by the marketers to
analyze the data, collected so far, to take better marketing decisions. With the use of computers, the marking managers
can save the huge data in a tabular form and can apply statistical programs to analyze the data and make the decisions
in line with the findings.
Market Measurement and Forecasting
Introduction:

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Market measuring and forecasting requires an analysis of the market with an aim of expressing it in quantitative
(numeric) quantities both present and in the future. The quantitative measurement and forecasting of the market,
together with its qualitative characteristics, are used as a basis for decision making by marketing management. Market
measurement and forecasting can be seen as a subdivision of market research. Once the research is complete, the
company must measure and forecast the size, growth, and profit potential of each market opportunity

Definition of Market Measurement:

“Usually applied to fundamental measurement of market volume, value, brand shares and the trends of all of these.
Data for these may be collected from secondary sources, from special censuses or surveys, or from syndicated
research such as CONSUMER PANELS. The definition of the market to be measured is often difficult, and depends
on the marketing or corporate objectives involved.” -- The Westburn Dictionary of Marketing Market measurement is
management tool through which the markets which is investigated is expressed in quantitatively measurable entities.

Need for measurement and forecasting:

The main goal of market measurement and forecasting is to serve as an aid in the decisions that marketing
management has to make Knowledge of market sizes and probable growth patterns provide the basis for the selection
of attractive markets It helps in the formulation of appropriate marketing strategies It helps in taking decisions in a
more objective and scientific manner and to lessen the risk and uncertainty that accompany subjective decisions and
guesswork. It helps evaluating the feasibility of entering new segments It helps organization to decide how best to
allocate its marketing resources and activities among market segments in which it is already active.
Example:
In Coca Cola, When Roberto Goizueta became CEO of Coca-Cola, many people thought that Coke's sales were
maxed out. Goizueta, however, reframed the view of Coke's market share. He said Coca-Cola accounted for less than
2 ounces of the 64 ounces of fluid that each of the world's 4.4 billion people drank on average every day. "The enemy
is coffee, milk, tea, water," he told his people at Coke, and he ushered in a huge period of growth.

Levels of market measurement:

Levels of market measurement Consumer level Product level Geographic level Time level

Consumer level:
The consumer level of market measurement is the most popular level used as it provides information on the number of
final consumers defined in different market segments For example; the consumer level of the market for potato chips
would provide measurement information on segments such as schools, sports meetings and private households.

Product level:
As most markets are targeted by various formats of the same product, the market measurement can also be expressed
in terms of the total number of current buyers for each product type. For Example, Product types for potato chips
would, for example, be divided into all sales of potato chips, sales of small packets (60 g) and sales of large bags (150
g).

Geographic level:
The total market can be divided into geographical segments and it is thus possible to express the market measurement
in geographic terms. For example, Potato chips can, for instance, be divided into sales for each of the provinces of
country or for certain climatic regions.

Time level:
A market measurement should also be specific in terms of the time of purchase and provide information on the sales
over different time periods such as monthly sales, seasonal sales and annual sales. For example, Potato chips sales can
be divided into sales in different season in a region.

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 Market segmentation
Market segmentation involves dividing a large homogenous market of potential customers into clearly identifiable
segments. Customers are divided based on meeting certain criteria or having similar characteristics that lead to them
having the same product needs. Segments are made up of customers who will respond similarly to marketing
strategies. They share common interests, needs, wants and demands.

Most companies don’t have enough resources to target a mass market. Which is why they need to target the specific
market segment that need their product. They divide the market into similar and identifiable segments through market
segmentation.

What types of market segments can a company have?

 Geographic – based on land, rural or metropolitan area.

 Demographic – based on age, gender, income, occupation, education, nationality.

 Psychographic – based on social status, lifestyle-type, and personality type.

 Behavioral – based on intensity of product use, brand loyalty, user behaviors, price sensitivity, and technology
adoption.

Demographic segmentation

This is the most common type of segmentation. A target audience is divided based on qualities such as, age, gender,
occupation, education, income and nationality.

Demographic segmentation is the easiest way to divide a market. Mixing demographic segmentation with another type
of market segmentation can help to narrow your market down even further.

The information required for demographic segmentation is easy to gather and doesn’t cost a company too much to
obtain.

For example, a common product which is segmented based on demographics is body wash. Generally, you’ll see body
wash for women and body wash for men.

Behavioural segmentation

A company can segment their market based on consumer’s behaviours. By dividing your target audience based on
their behaviours allows you to create specific messaging that will accommodate to those behaviours.

Behaviours include;

 What actions were taken on a website?

 What are their online shopping habits?

 How loyal are they to the brand/ product?

 What is their usage rate of your product?

 What need is a consumer trying to satisfy?

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This information is relevant because it’s directly related to how a consumer interacts with your products. Therefore,
marketers can market more effectively to customers by knowing their behaviours.

Geographic segmentation

This involves splitting up a market based on location. Even though this is a basic form of segmentation it is highly
effective. By knowing where a customer is located can help a company better understand the needs of their customers
and companies can then target customers with location-specific ads.

You can divide a segment based on their locations, such as town, county, zip code or country. But you can also
identify customers based on the climate they live in or the population density of their location. Dividing a segment
based on the characteristics of their location, allows marketers to be even more specific with their targeting and
messaging.

When targeting different geographic segments, marketers need to take into consideration elements such as language.
Language may change depending on the region you are targeting.

Psychographic segmentation

This form of segmentation is very similar to demographic segmentation however, it deals with characteristics that are
related to mental and emotional attributes. Psychographic segmentation divides a group of customers based on their
personality traits, values, interests, attitudes and lifestyles. Demographics as we discussed earlier are much easier to
observe than psychographics, however, psychographics give marketers valuable insights into customers motives,
preferences and needs. By understanding psychographics, marketers can develop content that is more relatable to their
customer segments.

Demographic segmentation can merge very well with psychographic segmentation. If you feel your messaging isn’t
appealing to your demographic segment, you can try including psychographic information. It is psychographic
information that informs you why people purchase or don’t purchase a product or service.

What are the benefits of market segmentation?

Market segmentation makes it easier for marketing teams to develop highly targeted and effective marketing
campaigns and plans.

Below we’ve outlined several benefits which exist with understanding and defining market segments.

 Greater company focus

When a company has identified specific market segments, it helps them to focus on what segments they want to target
with specific products/ services/ content/ blogs and campaigns. When a company has a focus on specific segments,
they ensure they are targeting the right segment with the right product which will see the greatest ROI.

 Better serve a customer’s needs and wants

Having defined segments enables companies to satisfy a variety of customer needs by offering different bundles and
incentives. Different forms and promotional activities will be used for different segments based on that segments
needs/ wants and characteristics.

 Market competitiveness

When a company is focusing on a specific segment, their market competitiveness increases. Which in turn will lead to
a higher ROI. The company is focused on specific segments and learns everything they need to know about that
segment, to market their products to them.

 Market expansion

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With geographic segmentation as discussed earlier, market expansion is possible immediately. When a company
understands their segments and how to market to a segment in a particular location, they can expand immediately into
another nearby location. If segmentation is based on demographics, then once the company knows their demographic
segment they can expand in that segment with similar products.

 Targeted communication

Even when product features and benefits are the same, it is important for companies to target segments with specific
communication. For example, if your segment was senior engineers, they may respond better to technical information
about a product in the form of white papers or infographics, but a project manager might respond better to information
regarding cost savings, efficiencies etc in the form of a blog, case study or video. Messaging will be different for
different segments. Platforms which are used to target different segments will be different also. The key is to
understand your segments and target communication relevant to them on the relevant platforms.

Why market segmentation is important?

When marketers use market segmentation it makes planning campaigns easier, as it helps to focus the company on
certain customer groups instead of targeting the mass market. Segmentation helps marketers to be more efficient in
terms of time, money and other resources. Market segmentation allows companies to learn about their customers.
They gain a better understanding of customer’s needs and wants and therefore can tailor campaigns to customer
segments most likely to purchase products.

STP stands for Segmentation, Targeting and positioning. STP plays an important for role to get to your right customer.
All three (segmentation, targeting and positioning) are tools to align your products with the right customers.

In this context:

Segmentation: Classifying your customers on some basis like demographically, behaviour , geographically etc.

Targeting: Marketing to a particular segment of the market/group of customers

Positioning: Basically it means building a brand image in the mind of the customer

Why are they important?

a) Segmentation splits buyers into groups with similar needs and wants to best utilize a firm's finite
resources through buyer based marketing.
b) Attract the right customer.
c) Reduce risk in deciding where, when, how, and to whom a product will be marketed.
d) Increase marketing efficiency by directing effort specifically toward the designated segment in a manner
consistent with that segment's characteristics.
e) Helps in customer retention.
f) Customer delight
g) Reduce the cost of the company by not marketing the product where its not required.

Marketing Planning
"Marketing Planning is the process of developing marketing plan incorporating overall marketing objectives,
strategies, and programs of actions designed to achieve these objectives."

Marketing Planning involves setting objectives and targets, and communicating these targets to people responsible to
achieve them. It also involves careful examination of all strategic issues, including the business environment, the
market itself, the corporate mission statement, competitors, and organisational capabilities.

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Marketing Planning Process

Marketing planning process is a series of stages that are usually followed in a sequence. Organisations can adapt their
marketing plan to suit the circumstances and their requirements. Marketing planning process involves both the
development of objectives and specifications for how to achieve the objectives. Following are the steps involved in a
marketing plan.

1) Mission
Mission is the reason for which an organisation exists. Mission statement is a straightforward statement that shows
why an organisation is in business, provides basic guidelines for further planning, and establishes broad parameters for
the future. Many of the useful mission statements motivates staff and customers.

2) Corporate Objectives
Objectives are the set of goals to be achieved within a specified period of time. Corporate objectives are most
important goals the organisation as a whole wishes to achieve within a specified period of time, say one or five years.
All the departments of an organisation including marketing department works in harmony to achieve the corporate
objectives of the organisation. Marketing department must appreciate the corporate objectives and ensure its actions
and decisions support the overall objectives of the organisation.
Mission statement and corporate objectives are determined by the top level management (including Board of
Directors) of the organisation. The rest of the steps of marketing planning process are performed by marketing
department. All the actions and decisions of the marketing department must be directed to achieve organisation
mission and its corporate objectives.

3) Marketing Audit
Marketing audit helps in analysing and evaluating the marketing strategies, activities, problems, goals, and results.
Marketing audit is done to check all the aspects of business directly related to marketing department. It is done not
only at the beginning of the marketing planning process but, also at a series of points during the implementation of
plan. The marketing audit clarifies opportunities and threats, so that required alterations can be done to the plan if
necessary.

4) SWOT Analysis
The information gathered through the marketing audit process is used in development of SWOT Analysis. It is a look
at organisation's marketing efforts, and its strengths, weaknesses, opportunities, and threats related to marketing
functions.

 Strengths and Weaknesses are factors inside the organisation that can be controlled by the organisation. USP
of a product can be the example of strength, whereas lack of innovation can be the example of weakness.

 Opportunities and Threats are factors outside the organisation which are beyond the direct control of an
organisation. Festive season can be an example of opportunity to make maximum sales, whereas increasing
FDI in a nation can be the example of threat to domestic players of that nation.

5) Marketing Assumptions
A good marketing plan is based on deep customer understanding and knowledge, but it is not possible to know
everything about the customer, so lot of different things are assumed about customer.
For example :-

 Target Buyer Assumptions - assumptions about who the target buyers are.

 Messaging/Offering Assumptions - assumptions about what customers think are the most important features
of product to be offered.

6) Marketing Objectives and Strategies

After identification of opportunities and challenges, the next step is to develop marketing objectives that indicate the
end state to achieve. Marketing objective reflects what an organisation can accomplish through marketing in
the coming years.

Objective identify the end point to achieve. Marketing strategies are formed to achieve the marketing objectives.
Marketing strategies are formed to determine how to achieve those end points. Strategies are broad statements of
activities to be performed to achieve those end points.

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7) Forecast the Expected Results

Marketing managers have to forecast the expected results. They have to project the future numbers, characteristics,
and trends in the target market. Without proper forecasting, the marketing plan could have unrealistic goals or fall
short on what is promised to deliver.

 Forecasting Customer Response - Marketing managers have to forecast the response that the average
customers will have to marketing efforts. Without some idea how the marketing will be received, managers
can't accurately plan the promotions.

 Forecasting Marketing cost - To make the marketing plan stronger, accurate forecast of marketing cost is
required to be done.

 Forecasting the Market - To accurately forecast the market, marketing managers have to gain an intimate
understanding of customers, their buying behaviour, and tendencies.

 Forecasting the Competition - Forecast of competition like - what they market, how they market, what
incentives they use in their marketing can help to counter what they are doing.

8) Create Alternative Plan

A alternate marketing plan is created and kept ready to be implement at the place of primary marketing plan if the
whole or some part of the primary marketing plan is dropped.

9) Marketing Budget

The marketing budget is the process of documenting the expected costs of the proposed marketing plan. One common
method to allocate marketing budgeting is based on a percentage of revenue. Other methods are - comparative, all you
can afford, and task method.

10) Implementation and Evaluation

At this stage the marketing team is ready to actually start putting their plans into action. This may involve spending
money on advertising, launching new products, interacting with potential new customers, opening new retail outlets
etc.

The marketing planning process is required to be evaluated and updated regular. Regular evaluation of marketing
efforts helps in achieving marketing goals.

PRODUCT POLICY AND PLANNING

Product mix, also known as product assortment, refers to the total number of product lines a company offers to its
customers. For example, your company may sell multiple lines of products. Your product lines may be fairly similar,
such as dish washing liquid and bar soap, which are both used for cleaning and use similar technologies. Or your
product lines may be vastly different, such as diapers and razors.

Product mix, also known as product assortment, refers to the total number of product lines a company offers to its
customers. The four dimensions to a company's product mix include width, length, depth and consistency.

Width: Number of Product Lines

The width, or breadth, of a company's product mix pertains to the number of product lines the company sells. For
example, if you own EZ Tool Company and have two product lines – hammers and wrenches – your product mix
width is two. Small and upstart businesses will usually not have a wide product mix. It is more practical to start with
some basic products and build market share. Later on, the company's technology may allow the company to diversify
into other industries and build the width of the product mix.

Length: Total Products

The product mix length is the total number of products or items in your company's product mix. For example, EZ Tool
has two product lines, hammers and wrenches. In the hammer product line are claw hammers, ball peen hammers,

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sledge hammers, roofing hammers and mallet hammers. The wrench line contains Allen wrenches, pipe wrenches,
ratchet wrenches, combination wrenches and adjustable wrenches.

Thus, EZ Tool's product mix length would be 10. Companies that have multiple product lines will sometimes keep
track of their average length per product line. In this case, the average length of your company's product line is five.

Depth: Product Variations

Depth of a product mix pertains to the total number of variations for each product. Variations can include size, flavor
and any other distinguishing characteristic. For example, if your company sells three sizes and two flavors of
toothpaste, that particular line of toothpaste has a depth of six. Just like length, companies sometimes report the
average depth of their product lines; or the depth of a specific product line.

If the company also has another line of toothpaste, and that line comes in two flavors and two sizes, its depth is four.
Since one line has a depth of six and the second line has a depth of four, your company's average depth of product
lines is five (6+4=10, 10/2=5).

Consistency is Relationship

Product mix consistency describes how closely related product lines are to one another – in terms of use, production
and distribution. Your company's product mix may be consistent in distribution but vastly different in use. For
example, your company may sell health bars and a health magazine in retail stores. However, one product is edible
and the other is not.

The production consistency of these products would vary as well, so your product mix is not consistent. Your
toothpaste company's product lines, however, are both toothpaste. They have the same use and are produced and
distributed the same way. So, your toothpaste company's product lines are consistent.

What is a Product Life Cycle?

The life cycle of a product is associated with marketing and management decisions within businesses, and all products
go through five primary stages: development, introduction, growth, maturity, and decline. Each stage has its costs,
opportunities, and risks, and individual products differ in how long they remain at any of the life cycle stages.

1. Development

The product development stage is often referred to as “the valley of death.” At this stage, costs are accumulating with
no corresponding revenue. Some products require years and large capital investment to develop and then test their
effectiveness. Since risk is high, outside funding sources are limited. While existing companies often fund research
and development from revenue generated by current products, in startup businesses, this stage is typically funded by
the entrepreneur from their own personal resources.

2. Introduction -- The introduction stage is about developing a market for the product and building product awareness.
Marketing costs are high at this stage, as it is necessary to reach out to potential customers. This is also the stage
where intellectual property rights protection is obtained. Product pricing may be high to recover costs associated with
the development stage of the product life cycle, and funding for this stage is typically through investors or lenders.

3. Growth-- In the growth stage, the product has been accepted by customers, and companies are striving to increase
market share. For innovative products there is limited competition at this stage, so pricing can remain at a higher level.
Both product demand and profits are increasing, and marketing is aimed at a broad audience. Funding for this stage is
generally still through lenders, or through increasing sales revenue.

4. Maturity

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At the mature stage, sales will level off. Competition increases, so product features may need to be enhanced to
maintain market share. While unit sales are at their highest at this stage, prices tend to decline to stay competitive.
Production costs also tend to decline at this stage because of more efficiency in the manufacturing process. Companies
usually do not need additional funding at this stage.

5. Decline

The decline stage of the product life cycle is associated with decreasing revenue due to market saturation, high
competition, and changing customer needs. Companies at this stage have several options: They can choose to
discontinue the product, sell the manufacturing rights to another business that can better compete or maintain the
product by adding new features, finding new uses for the product, or tap into new markets through exporting. This is
the stage where packaging will often announce “new and improved.”

Successful manufacturing companies generally have multiple products each at different points in the product life cycle
at any given time.

The 7 main product pricing strategies – and when to use them

Pricing products can be a tricky business, but it’s one of the most important activities an enterprise can do. Finding
the right pricing strategy is crucial to locking in sales while ensuring your revenue levels are healthy enough to stay
afloat.

So, which pricing strategy is best for your business? Here we’ll look at a range of options to help you make the right
choice, covering off:

The 7 main product pricing strategies

1. Value-based pricing

2. Competitive pricing

3. Price skimming

4. Cost-plus pricing

5. Penetration pricing

6. Economy pricing

7. Dynamic pricing strategies

Why product pricing strategies are important

A good product can flourish or fail in the market depending on its price.

If it’s deemed too high, customers will look for cheaper alternatives, and sales will be lost. If it’s too low, you may sell
a decent number, but your profit margins will take a hit.

The cost of an item also helps define its perceived value to potential buyers, and the value of your brand. It can help
paint a picture about a product’s desirability, usefulness, popularity, or quality. Under pricing a product can be
worthwhile from a competitive point of view, but for the wrong product, it can also make consumers think less of its
value. Additionally, if you’re relying on retail outlets like supermarkets to stock your products, they may give
preferential shelf space to higher priced competitors because they bring in more margin – despite offering less value
for money to customers. This is one situation in which dropping your pricing can make you less competitive, rather
than more.

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So finding the sweet spot will depend on a variety of factors, like the type of product you’re selling, to whom, and in
which market conditions. High end clothing and electronics, where customers expect a high price point, will differ
from run of the mill items such as household products.

And of course, in today’s age where consumers can buy their products from a huge array of sellers and platforms, a
multichannel selling approach is important to consider. If you’re only selling in-store, consider whether online could
work as well. If you’re already selling across platforms, consider whether your price points can vary on each. And if a
multichannel approach is right for you, make sure you adopt a strong multichannel order management system to
help keep track of and streamline your activity – otherwise things could get complicated quickly!

The 7 main pricing strategies

Value-based pricing

Value-based pricing does what it says on the tin. A business using this approach will price their products based
mainly on what the actual or perceived value of the goods or service is.

It often works best for tailor-made goods, bespoke or expert services, and craft products – for example, jewellery,
high-end fashion, or premium alcohol. It can also work well for items that come with ‘extras’ or those made popular
because of associations with high-profile people or events.

This strategy is the opposite of the ‘undercut the competitors’ approach, and more about making a statement about
why your product is worth the higher price. That doesn’t mean you won’t want to know what your competitors are
selling for and where you fit in. But once you’re comfortable with the lay of the land, it’s about knowing how your
product will improve your customers’ lives – whether it’s helping them achieve their goals, saving them time and
hassle, or adding to their social status and perceived desirability.

If you get it right, value-based pricing means you’ll be winning with higher profits. But it can be a complicated and
time-consuming approach, so weighing up the balance is important.

Competitive pricing

Competitive pricing is all about setting a price-point in relation to similar products sold by other companies – one
that will give you a competitive advantage. This strategy is often used in saturated markets and with mass-sold goods
that are well-established – for example, chewing gum, ‘big box’ beer, household products, or services like cleaning or
dinning.

It can also work for businesses with a wide range of goods who want to use the price-point of one product as an
entry point for customers to buy other products.

Competitive pricing means you’ll need to keep a close eye on your competitors, constantly. You’ll want to know
when they drop their prices or offer promotions. And you’ll want to think about how to use creative marketing
techniques to give your products an edge – especially at times when undercutting isn’t financially viable. If you go
with this approach, particularly if your competitor pool is large or aggressive, you’ll need a good tracking system to
keep you abreast of their movements so you can react quickly if need be.

Price skimming

Price skimming is about setting the price of a new product high to capitalise on consumer demand, and then
eventually lowering it over time. It works best for products that are highly anticipated, innovative, or of the moment
– and which have no real competition.

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Electronics and gaming is a big one for price-skimming. Think about the new Apple products selling at a premium, or
the latest PlayStation that customers are willing to pay top-dollar for – even knowing the price will eventually drop,
or that a new version will be released 1-2 years down the line.

It’s about capitalising on popularity, buzz, and scarcity. It can be a great strategy for the right product, but it can also
go badly wrong for your brand and sales if it backfires. Before you go with price skimming as your option, explore
whether your product can be easily and quickly replicated by competitors. And make sure you have the highest
confidence in its uniqueness. If you’re forced to drop the price soon after launch, you might end up with angry
customers and a tarnished brand.

Cost-plus pricing

Cost-plus pricing is one of the more common pricing mechanisms used – often by grocery and department stores
with a wide range of common products, as well as smaller businesses who aren’t able to spend huge amounts on
market research. The idea is as the name says – calculate the cost it takes to make a product (or deliver a service)
and then add a mark-up depending on what you hope to make as profit.

It’s a simple way of calculating costs and can also help brands justify their prices because of the easy-to-understand
pricing system.

Businesses using a cost-plus pricing strategy must beware of hidden production costs. Because this approach relies
heavily on the actual cost of making a unit, it’s imperative to get that right, or those missed costs will likely eat into
your profit margin. Make sure you account for things like materials, as well as labour, and overheads.

If you get it right, it can be a beneficial approach, especially for businesses looking for stability and consistency in
their returns. It’s also helpful if you don’t have much budget for market research.

Penetration pricing

Penetration pricing uses the opposite approach to price skimming. It’s when a business looking to break their
product into a market offers a low initial price point in order to reel buyers in and lure them away from competitors.
The idea is that once the product has a following and has established itself in the market, the price can gradually be
adjusted upwards.

It can be an effective marketing tool to introduce a large audience to the product or brand. It’s a common approach
with online subscriptions where you might be offered one month free, or 50% off the regular price in the hope that
you will remain with the service once your offer period ends. We also see it used with taxi services like Uber and its
competitors.

It can be a useful strategy for generating high sales volumes in a short period of time, and building a buzz as
customers flock to check what the fuss is about. The risks, of course, are that savvy customers take you up on your
initial offer but return back to their usual brand – or find another discounted offer – once their trial period is over or
their curiosity has been satisfied. It can also kick-off price wars with competitors, meaning you’ll need to live with
lower profits for longer.

Economy pricing

Economy pricing is where budget items live. Production costs are kept low so that prices can be kept low too. This
works best with products manufactured at scale – and is something big business like pharmaceutical companies or
airlines can easily take advantage of to sideline the competition and drive sales.

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Grocery stores often use economy pricing by producing their own no-frill lines of common products such as biscuits
or condiments. It can be incredibly effective when done right as there is always a market for thrifty consumers, or
those tightening their purse strings to save or get out of debt.

It’s also an effective way to grow deeper into a market, or weather economic downturns, as customers ditch
premium products for the basics. It can be a tough business though. Competition can run high, and for bargain
hunters who care more about price than product, they will likely switch when another brand offers a discount.

Revenues will rely heavily on high sale volumes – so it’s important to stay vigilant around your production costs and
market demand.

Dynamic pricing

Dynamic pricing is an agile pricing system to help maximise profits. It’s where a business will change the price of
their products depending on who they’re selling to, where, and when.

Even though dynamic pricing can benefit customers, they often don’t like this approach. It has been known to cause
backlash amongst buyers who find out they’ve been sold a service or item at a higher price point than someone else
– even though they themselves may have gotten a better price than someone else.

That said, it’s becoming an increasingly common approach for businesses thanks to multichannel selling and artificial
intelligence. Take Uber, for example. Customers who rely on the service regularly might be used to a certain low fare
for their journey home from the train station, but when the weather is bad, or rush hour hits, the car service will jack
up prices to capitalise on demand. The same approach is used in the travel and hospitality industry during peak
travel season, or in sports when a big game comes up.

While this approach can be successful, it’s important to understand that aside from brand risks, it can be resource
intensive and costly, which is part of the reason big businesses can take advantage of it while smaller businesses may
struggle to. The cost of the AI, data analysis, and the required resources should be thoroughly considered before
adopting this approach.

New product pricing strategies

How you price a product will vary depending on where it is in its life cycle, but getting it right for launch is crucial. As
we’ve explored above, pricing too high can turn customers off – unless it has the right kind of buzz or air of quality to
it. Likewise, pricing it too low without the right kind of marketing can give potential buyers the idea that its value is
low. This is why doing your homework is key – and you should examine all of the following areas.

Explore the market:

 What similar products are out there and how are they performing?

 What makes them popular or unpopular?

 What makes customers willing to pay the price for them?

 And importantly, what makes your product different?

Know your audience:

 Why do they want a product like yours in the first place?

 What value does it add to their lives?

Find out what they are willing to pay:

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  Set up focus groups to understand what potential customers see as reasonable.

It’s important to have a clearly defined idea of your target market and of what the product represents. Once you do,
work out the pricing strategy that fits those best.

Product life cycle stages and pricing strategies

Products go through various life cycle stages, including launch, growth, maturity, and their eventual end (or
reinvention). For some products, this cycle is short, for others, it may take many years. So when you consider which
pricing strategy to adopt, it’s also important to think about which to use at each stage of your product’s life.

Product launch pricing strategies

For the launch of the product, we’ve seen that several strategies can work depending on what your product is – for
example penetration pricing, price skimming or competitive pricing.

Mid life cycle pricing strategies

Once your product is out there and sales are growing, you might consider capitalising on demand and bringing prices
up. Consider things like the level of competition you’re facing and how popular your product is to work out what you
can reasonably charge without turning customers off. The strategies at play here include dynamic pricing, value-
based pricing, and competitive pricing

Later life cycle pricing strategies

The later stages of your product’s life cycle is often when competition becomes stronger as rivals have had time to
catch up with alternative versions, potentially at lower prices. To remain competitive, so too must your pricing – or
at the very least, what you’re offering. If lowering the cost isn’t an option for you, consider adding extras to your
product to make it worth the customer’s money. Here you’ll be looking at competitive and / or cost-plus pricing.

End of life cycle pricing strategies

When you reach the decline of your product’s life cycle, you may be at a point where customers no longer need your
product because they already have it; competitors are selling something similar for a lower cost; or it may simply be
out of fashion. Do what research you can to work out who is still buying your product and why – and then, work out
how to maximise what sale potential you have left. You may find economy pricing a relevant strategy at this point.
Or you can consider selling at a discount, in bundles, or with added extras to eke out what you can before you pull it
completely.

Pharmaceutical product pricing strategies

Pricing pharmaceutical products can be a minefield, particularly from a brand point of view. When products are new
and unique, they can command high prices, but the industry often comes under fire in these instances, accused of
taking advantage of desperate would-be customers, so it’s important to get the balance right.

If your product is unique and perceived as revolutionary, price skimming or value-based prices might be considered
to capitalise on demand and the lack of competition. Something that is unique to the industry is using data to price a
product based on the potential savings patients will make by using it, or the value of time that will be ‘given back’ to
them in the case of life-prolonging drugs. This can be complicated to calculate and not always easy to translate, but
may be worth considering.

For commonly used drug types, like those for colds or heartburn, competitive pricing will almost certainly need to be
considered as the market is highly saturated. In such conditions, penetration pricing might also work to cut through
the saturation and lure customers in with attractive price points.

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 Promotion-mix decisions
The promotional mix is one of the 4 Ps of the marketing mix. It consists of public relations, advertising, sales
promotion and personal selling. In this lesson, you'll learn how a marketing team uses the promotional mix to reach
company objectives and goals.

The Promotional Mix

A marketing plan is focused on the target market and made up of four key elements. These four elements are also
knows as the 4 Ps. One P is called the promotional mix and it contains advertising, public relations, personal selling
and sales promotion. They are used as tools to communicate to the target market and produce organizational sales
goals and profits.

The new amusement park Fun Town has spent most of this year customizing and fine-tuning their promotional mix.
Let's take a look at each element that Fun Town adopted to create an effective promotional communication program.

Advertising
One of the most important elements of the promotional mix for Fun Town was the creation of a viable advertising
program. Advertising is any form of impersonal (one-way) paid communication in which the company is identified.
Fun Town realized that it needed to have a good advertising campaign because this would allow the company to reach
a large number of people effectively. Fun Town used television, radio, newspaper, social media and Internet ads to
introduce the target market to a grand opening of the amusement park. The park also used giant billboards and e-mails
to reach other local customers. They promoted senior citizen discounts, family discounts and grand opening specials to
lure the target market into trying a day at Fun Town.

Public Relations

Another promotional tool that Fun Town utilized was public relations. The main purpose of public relations is that it
helps build a positive public image for a company, supports new product launches and sales, helps a company to
evaluate public attitudes and communicates the overall goals of the company. Fun Town has multiple days throughout
the year where they donate a percentage of ticket sales to local charities. They also have days where they close the
park down and invite disadvantaged youths to enjoy the rides for free. In addition, Fun Town uses their public
relations team to handle any negative park issues. For example, if a visitor is injured on a ride, the public relations
team must evaluate public attitudes and communicate with the media that the appropriate corporate response occurred.

Sales Promotion

Sales promotion is another tool in the promotional mix. It contains methods of stimulating consumer purchase and is
usually based on a short-term or immediate goal. Examples of sales promotion items are contests, sweepstakes,
giveaways, free samples or coupons. Fun Town has invested heavily in sales promotion. They have had contests, like
the first 1,000 people in the park would get a prize. They also had giveaways of free Fun Town water bottles, t-shirts,
hats and canvas bags. Lastly, Fun Town released a large number of coupons into the marketplace, such as BOGO (buy
one ticket, get one ticket free) or 15% off for students, family coupons for 20% off the day, etc.

Personal Selling

Personal selling is where businesses use people (the "sales force") to sell the product after meeting face-to-face with
the customer.

The sellers promote the product through their attitude, appearance and specialist product knowledge. They aim to
inform and encourage the customer to buy, or at least trial the product.

A good example of personal selling is found in department stores on the perfume and cosmetic counters. A customer
can get advice on how to apply the product and can try different products. Products with relatively high prices, or with
complex features, are often sold using personal selling. Great examples include cars, office equipment (e.g.
photocopiers) and many products that are sold by businesses to other industrial customers.

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The greatest product or service in the world won't make money unless consumers know it exists. In this lesson, you'll
learn the definition of advertising, common advertising media, and read some examples of effective advertising.

Advertising

Advertising is the attempt to influence the buying behavior of customers or clients with a persuasive selling message
about products and/or services. In business, the goal of advertising is to attract new customers by defining the target
market and reaching out to them with an effective ad campaign.

Target Market

Establishing the target market is the critical first step in any advertising campaign – you need to know who your
intended audience is before you can reach them. If your target audience is senior citizens, for example, an advertising
medium such as Facebook is a poor choice. Similarly, Millennials are much less likely to read newspapers or use the
Yellow Pages.

Defining the target market involves building a demographic profile of the prospective customer by taking into account
criteria such as age, gender, marital status, lifestyles, shopping habits, etc.

It is also important to check out the level of competition for your product or service with your target audience as you
may need to compete on price and/or service.

Common Advertising Methods

There are many different types of advertising that are typically used by small businesses.

Online advertising: Online marketing includes a myriad of advertising opportunities, such as:

 Local website advertising: Many municipalities and Chamber of Commerce chapters have websites that
provide listings of local businesses.

 Business web pages: Creating and maintaining a professional website with clearly outlined descriptions of
business offerings, optimized for search traffic.

 Email: Requires a customer email list and adherence to anti-spam regulations. Email newsletters can be useful
for keeping in touch with existing customers and passing on information about new products or services.

 Facebook: Taking advantage of social media by creating a business Facebook page and using it to regularly
promote products and services. A common advertising venue for businesses such as restaurants who use
Facebook fan pages to promote new menu items or specials and to receive feedback from customers. There
are also a number of available 3 for doing business on Facebook.

 Twitter: Assuming the business has Twitter follower’s tweets can be used to send out short promotional
messages.

Newspaper advertising: While on the decline (U.S. newspaper ad revenue dropped by over 50% between 2006 and
2015) newspaper ads can still be an effective way to reach customers. Many municipalities have special interest
newspapers which can be used by businesses for local advertising.

Yellow Pages: Usage of the printed pages is also in decline. However, there is an online version.

Direct mail: Can be very useful. Can be costly if sent via post, but even without a mailing list brochures, flyers, etc.
can still be delivered directly to residences and/or businesses in targeted geographic areas. Unfortunately, statistics
show that nearly half of direct mail ads are unread by recipients and tossed away as "junk mail."

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Cable TV and radio – Cable companies often have local info channels that offer affordable advertising for small
businesses.

Cold calling – By phone or in person can still be surprisingly effective. As an example, while on a call a service
company can take the opportunity to visit neighboring residences/businesses and mention their services (or drop off
flyers or brochures). Phone solicitation is now illegal in Canada to numbers registered in the National Do Not Call List
unless the business has an existing relationship to the customer.

Vehicle (wrap) advertising – Turning a vehicle into a “mobile billboard” is an excellent way to maximize business
exposure. Vehicle ads are eye-catching and in a major metro area can be seen over a million times a month.

Methods for Setting Advertising Budget

Several methods are used for setting advertising budget. Depending upon internal situations of the company, the
suitable method is followed. Every method has its merits, demerits, and applicability.

Commonly practiced methods have been briefly discussed in this part:

1. Percentage of Sales Method:

It is a commonly used method to set advertising budget. In this method, the amount for advertising is decided on the
basis of sales. Advertising budget is specific per cent of sales. The sales may be current, or anticipated. Sometimes,
the past sales are also used as the base for deciding on ad budget. For example, the last year sales were Rs. 3 crore and
the company spent Rs. 300000 for advertising. It is clear that the company has spent 1% of sales in the last year.

Company has the tendency to maintain certain per cent (or percentage) of sales as ad budget. Based upon the past, the
current and the expected sales, amount for advertising budget is determined. This method is based on the notion that
sales follow advertising efforts and expenditure. It is assumed that there is positive correlation between sales and
advertising expenditure. This is not the scientific method to decide on advertising budget.

2. Objectives and Task Method:

This is the most appropriate ad budget method for any company. It is a scientific method to set advertising budget.
The method considers company’s own environment and requirement. Objectives and task method guides the manager
to develop his promotional budget by (1) defining specific objectives, (2) determining the task that must be performed
to achieve them, and (3) estimating the costs of performing the task. The sum of these costs is the proposed amount
for advertising budget.

The method is based on the relationship between the objectives and the task to achieve these objectives. The costs of
various advertising activities to be performed to achieve marketing objectives constitute advertising budget.

3. Competitive Parity Method:

Competition is one of the powerful factors affecting marketing performance. This method considers the competitors’
advertising activities and costs for setting advertising budget. The advertising budget is fixed on the basis of
advertising strategy adopted by the competitors.

Thus, competitive factor is given more importance in deciding advertising budget. For example, if the close
competitors spend 3% of net sales, the company will spend, more or less, the same per cent for advertising. Here it is
assumed that “competitors or leaders are always right.” If not followed carefully, this method may result into
misleading.

It is obvious that a company differs significantly from the competitors in terms of product characteristics, objectives,
sales, financial conditions, management philosophy, other promotional means and expenses, image and reputation,
price, etc.

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Therefore, it is not advisable to follow the competitors blindly. Marketing/advertising manager should take
competitors’ advertising strategy as the base, but should not follow as it is. The advertising budget must be adjusted to
the company’s internal and external situation.

4. Affordable or Fund Available Method:

This is, in real sense, not a method to set advertising budget. The method is based on the company’s capacity to spend.
It is based on the notion that a company should spend on advertising as per its capacity. Company with a sound
financial position spends more on advertising and vice versa.

Under this method, budgetary allocation is made only after meeting all the expenses. Advertising budget is treated as
the residual decision. If fund is available, the company spends; otherwise the company has to manage without
advertising. Thus, a company’s capacity to afford is the main criterion.

5. Expert Opinion Method:

Many marketing firms follow this method. Both internal and external experts are asked to estimate the amount to be
spent for advertisement for a given period. Experts, on the basis of the rich experience on the area, can determine
objectively the amount for advertising. Experts supply their estimate individually or jointly.

Along with the estimates, they also underline certain assumptions. Internal experts involve company’s executives,
such as general manager, marketing manager, advertising manager, sales manager, distribution manager, etc.

Whereas external experts involve marketing consultants, dealers, suppliers, distributors, trade associations, advertising
agencies, and other professionals related to the field. Marketing consultants and advertising agencies provide such
services on professional basis.

Media Planning
Media planning is the series of decisions involved in delivering the promotional message to the prospective
consumers. It is the process of directing the advertising message to the target audience by using the appropriate
channel at the proper time and place.

The media plan marks on the best way to get the advertiser’s message to the market. Generally, the goal of the media
plan is to find that combination of media that allows the marketer to communicate the message in the most effective
manner to the largest number of potential customers at the lowest cost.

Media planning assists in controlling wasteful advertising. It ensures die optimum-utilisation of resources spent on
advertising. In media plan, media objectives are decided keeping in view the advertising objectives of the
organisation. Media plan specifies media strategies. Media strategy means plans of action designed to attain media
objectives.

The planning should concentrate on:

i. Whom to reach,
ii. When and where to reach,
iii. The total target group,
iv. The frequency of exposure,
v. The affordable cost involvement.
After rationalization of all the above issues, decisions are taken to formulate the media plan. Media planning involves
the coordination of three levels of strategy development – a) Marketing Strategy, b) Advertising Strategy, c) Media
Strategy. Based on the marketing strategy, the advertising strategy and media strategy are generated.

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