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Marketing Management

Module:1
Chapter:1 – Nature & Scope of Marketing

Introduction to Marketing

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From the time you wake up..

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• Turn off that alarm – brush your teeth – take a shower – have breakfast – get dressed – travel to work – use the copier – go out for dinner at ____ - fall asleep • We use more than 250 brands by the time our day ends !!

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Marketing is omnipresent ..!
“The average person in a metro-city is exposed to over 3,000 advertising messages a day…!!” ...consciously or otherwise.
Source: http://www.superprofile.com

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• We are constantly being targeted !!

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Marketing is natural…
• Analogy of marketing with the nature’s law of “survival of the fittest”

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What is sold
A grocery shop sells ‘Channa’ A restaurant sells ‘ChannaBhatura’ MDH , a food company sells ready to eat channa masala Tata Consultancy Service sells TCS Certainity
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What is marketed Commodity Product Brand Solution

What is Marketed?
Goods Services Events & Experiences Persons Places & Properties Organizations Information Ideas
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Good Marketing is No Accident
The roaring success of four-wheeler Tata Ace, in a market earlier dominated by three-wheeler load carriers, was due to a deep understanding of the market needs and customer requirements.
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Let’s define…

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

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What is Marketing Management?

Marketing management is the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value.

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‘Marketing is the management process that identifies, anticipates and satisfies customer requirements profitably’ The Chartered Institute of Marketing

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‘The right product, in the right place, at the right time, and at the right price’ Adcock et al

‘Marketing is the human activity directed at satisfying human needs and wants through an exchange process’

Philip Kotler
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• The AMA definition:
“Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.”

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No single definition or approach
• But the common subject matters: – The ability to satisfy customers, – The identification of favorable marketing opportunities – The need to create an edge over competitors – The aim to increase market share mainly in target markets

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Some marketing Gurus..

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Selling is only the tip of the iceberg

“There will always 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 is to make the product or service available.” Peter Drucker
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Key Customer Markets
Consumer Markets Global Markets

Business Markets

Nonprofit/ Government Markets

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Consumer , Buyer & Customer
• Consumer :
A consumer is one who consumes goods and services.

• Customer :
Customer are those who buy goods and services.

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Evolution of the marketing concept

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Company Orientations Towards the Marketplace
Production Concept Product Concept
Consumers prefer products that are widely available and inexpensive
Consumers favor products that offer the most quality, performance, or innovative features Consumers will buy products only if the company aggressively promotes/sells these products Focuses on needs/ wants of target markets & delivering value better than competitors
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Selling Concept
Marketing Concept

Societal Marketing Concept
(Human Welfare)

Society

Societal Marketing Concept
(Want Satisfaction)
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Consumers

Company
(Profits)

Holistic Marketing
• The Holistic Marketing concept is bases on the development, design and implementation of marketing programs, processes and activities that recognizes their breadth and interdependencies. • Holistic marketing recognizes that “everything matters” in marketing and that a broad, integrated perspective is often necessary.

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Figure 1.4 Holistic Marketing Dimensions

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Modern Marketing Concept Traditional
Organization Chart
Top Management

Middle Management
Front-line people Customers
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Modern Marketing Concept CustomerOriented Organization Chart
Customers
Front-line people Middle management

Top management
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Figure 1.2 A Simple Marketing System

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The Marketing Mix
Developed to achieve the company’s objectives. Also called: 4 P’s of Marketing

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Product

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What is a Product?

A product is anything that can be offered to a market to satisfy a want or need, including physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas.

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Product Mix
• Total sum of all products and variants offered by an organization (Hindustan Unilever Limited)

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Product Differentiation
• • • • • • • • • Product form Features Customization Performance Conformance Durability Reliability Repairability Style
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Service Differentiation
• • • • • • Ordering ease Delivery Installation Customer training Customer consulting Maintenance and repair

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Product Life Cycle

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PRICE

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Definition:
• In ordinary usage, price is the quantity of payment or compensation given by one party to another in return for goods or services.

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Objectives of Pricing
• • • • • • Short-term profit maximization Short-term revenue maximization Maximize quantity Maximize profit margin Differentiation Survival

Source: http://entrepreneurs.about.com/od/salesmarketing/a/pricingstrategy.htm
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Place

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Marketing Channels and Supply Chain Management

The fourth ‘P’ of marketing (place)

Consumer Marketing Channels

0-level channel Manufacturer 1-level channel Manufacturer 2-level channel Consumer

Retailer

  

Consumer

Mfg

 

Wholesaler

Retailer

Consumer

3-level channel Mfg Wholesaler  Distributor
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Retailer

Consumer

Promotion

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Concept of ‘Promotion’
• Promotion is all personal and impersonal efforts by a seller to – Inform – Persuade or – Remind a target audience.

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Personal Selling
• Direct presentation of a product to a prospective customer by a representative of the organization selling it.
– Face to face – Over the phone

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Advertising
• The non-personal communication of information usually paid for & usually persuasive in nature, about products (goods & services) or ideas by identified sponsor through various media.
– – – – – – Broadcast media (TV, Radio) Print media (newspapers, magazines) Outdoor media (billboards) Internet Mobile phones Other media
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Sales Promotion
• Incentives given to encourage sales and help personal selling.
– – – – – – Premiums Event sponsorships Contests Trade shows In-store displays, samples, rebates Discounts and coupons

If given to channel partners: Trade
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Promotion

Public Relations
• Efforts to develop favorable attitudes and opinions about products/organizations
– Newsletters – Annual reports – Lobbying, charitable events etc.

• Publicity
– News stories about organization & products

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Marketing Concept - The 4 P’s & The 4 Cs
Marketing Mix Product

Place

Customer Solution

Convenience
Price Promotion

Customer Cost

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Communication

Acoording to customer point of view-SIVA
Product Solution

Promotion
Price Place

Information
Value Access

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Marketing Concept - The 4 P’s

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The extended marketing mix
Also called the service marketing mix • • • • People Process Physical Evidence Productivity (8th P)

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*Problem & Challenges in Marketing
• • • • • • • • • Network information Technology Globalization Deregulation Privatization Heightened competition Industry Convergence Consumer Resistance Retail Transformation Disintermediation
*In Marketing Elective

New Consumer Capabilities
• A substantial increase in buying power • A greater variety of available goods and services • A great amount of information about practically anything • Greater ease in interacting and placing and receiving orders • An ability to compare notes on products and services • An amplified voice to influence public opinion

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*Role of Marketing Manager
• • • • • • • • Developing marketing Strategies & Plans Capturing Marketing Insights Connecting with Customer Building Strong brands Shaping the Market Offering Delivering Value Communicating Value Creating Long Term Growth
*In Marketing Elective

Identifying & Selecting Markets
• Segmentation • Targeting • Positioning

( chapter – 3 in detail)
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Consumer Behavior
The behavior that consumer display in buying, using and disposing of products & services.

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What Influences Consumer Behavior?
Cultural Factors

Social Factors

Personal Factors

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What is Culture?
Culture is the fundamental determinant of a person’s wants and behaviors acquired through socialization processes with family and other key institutions.

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Subcultures
Nationalities

Religions Racial groups

Geographic regions

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Social Classes
Upper uppers Lower uppers Upper middles Middle class Working class Upper lowers Lower lowers
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Social Factors
Reference groups

Family

Social roles

Statuses

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Personal Factors
Age
Selfconcept Lifestyle Values Personality Life cycle stage

Occupation
Wealth

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Figure 6.1 Model of Consumer Behavior

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Key Psychological Processes

Motivation

Perception

Learning

Memory

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Motivation
Maslow’s Hierarchy of Needs Behavior is driven by the lowest, unmet need Herzberg’s Two-Factor Theory Behavior is guided by motivating and hygiene factors

Freud’s Theory Behavior is guided by subconscious motivations
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Maslow’s Hierarchy of Needs

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Herzberg’s Two-Factor Theory

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Perception
Selective Attention
Selective Retention Selective Distortion Subliminal Perception
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Figure 6.3 State Farm Mental Map

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Figure 6.4 Consumer Buying Process
Problem Recognition Information Search Evaluation Purchase Decision Postpurchase Behavior
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Glimpse of Marketing Specializations
– Consumer Behavior – Marketing Research – Sales and distribution – Integrated Marketing Communications – Services Marketing – International Marketing – Brand Management

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Market Demand
Chapter :2

Need, Want, Demand

Desire + Willingness + Purchasing Power
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Management-II
Chapter:2 Market Demand

Demand States
Negative Nonexistent Latent

Declining

Irregular

Full

Overfull

Unwholesome

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Demand
• Negative Demand : * consumers dislike the product and may even pay a price to avoid it. * Eg. : vaccinations * Marketing Task : Market Analysis, Positive promotion, change belief & attitude of people, product redesign, lower price

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Demand
• Nonexistent Demand : * consumers may be unaware of or uninterested in the product. * foreign language courses * Marketing Task : connect the benefits of the product with people’s needs and interests

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Demand
• Latent Demand : * consumers may share a strong need that cannot be satisfied by an existing product * Harmless Cigarettes, More fuel efficient car * Measure the size of potential market, analyze strength of the company, develop goods and services to satify the demand

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Demand
• Declining Demand : * consumers begin to buy the product less frequently or not at all. * Typewriter, Desktop pc * analyze the causes of the decline and determine whether demand can be resituated by new target markets, by changing product features or by more effective communication. * reverse declining demand through creative remarketing
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Demand
• Irregular Demand : * consumer purchases vary on a seasonal, monthly, weekly, daily or even hourly basis. * tours and travels… peak in weekends… * Marketing Task : Synchromarketing Flexible pricing, promotion and other incentives

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Vocabulary for Demand Measurement
• • • • • • Market demand Market forecast Market potential Company demand Company sales forecast Company sales potential

Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd.

Demand Forecasting
• A forecast is a prediction or estimation of a future situation, under given conditions. • Sales Forecast is an task of projecting the future sales of the firm -Two types of Forecasting 1. Short Term Forecasting 2. Long Term Forecasting

Objective of Long Term forecasting
• • • • • • Deciding Plant Capacity Manpower Planning Estimating Cash flow Determining Dividend Policy Planning of long Term Production Long run Financial Requirmenet

Objective of Short term Forcasting
• • • • • • Formulation of suitable product policy Regulate supply of Raw material Best utilization of Machines Regular availability of labor Price policy formulation Forecasting of Short term Finance Requirement • Setting the sales Target

• Levels of forecast
(i) Macro-economic forecasting: Censes survey. Young India survey by CNN (ii) Industry demand forecasting: Tata’s Westside had conducted a survey in 1997 about retail market before starting the Westside retail outlet on Dec 15th 1998. (iii) Firm demand forecasting: Godrej (iv) Product-line forecasting: helps the firm to decide which of the product or products should have priority in the allocation of firm’s limited resources. P&G whether to produce more of hair shampoo( either head and shoulders or Pantene) or to produce Tide or Camay soap. Premium End segment

Qualities of Good Forecasting
• • • • • 1) Simple 2) Economy of time 3) Economy of money 4) Accuracy 5) Reliability

Methods of Demand Forcasting
• • • • • • Jury Method/ Executive Method Survey of Expert’s Opinion Sales Force Composite Method Survey of Buyers intention Market Share Method Analytical & Statistical Method
1. Single Projection 2. Extrapolation Method 3. Moving Average Method 4. Time Series Analysis

Sales Force Composite Method
• Forecasting Done by the sales force of the company • The men who are closest to the market are questioned and their responses aggregated. • Each salesman develops the forecast for his respective territory, the territory-wise forecast for his respective territory, the level and the aggregate of all these forecast is taken as the corporate forecast. • It is a grass root method

• Advantages: • cheap and easy
• Information will be more correct • Greater stability & Reliablity • Forecast could be easily broken in to categories.

• Disadvantages:
• Congenital optimism and congenital pessimism. • near-future forecasting is only possible,

• various socio-economic factors are not considered.

Survey of Expert’s Opinion
• Simple Method: Researchers identifies the ‘experts’ on the commodity whose demand forecast is being attempted and probes with them on the likely demand for the product in the forecast period. • Expert’s including dealers, distributors, suppliers, marketing consultants, and trade association. • This method leads to Delphi Method:

• Delphi Method: : Opinions are first collected from experts and then instead of mathematical averaging efforts are made to match them.
– To narrow down the gap experts are brought together, arranging one or more meetings and arriving at some narrow range for the forecast under attempt.

• Advantages • Forecast can be made easily and speedily. • Different expert’s ideas and opinions are taken into consideration for forecasting. • Suitable when past record of sales is not available or a new product is to be introduced. • Expenses are very less than actual survey. Disadvantage: • The reliability of forecasting is always doubtful because forecasting is based on opinions and suggestions and not actual facts.

Survey of buyer intention
• Actual user of the product are directly contacted by the investigator and their preference and attitude towards the product as well as future requirement are ascertained. • Method is suited for forecasting of sales of Industrial Products.
• Complete Enumeration Survey: DF = (ID1 + ID2 + ID3+ ….IDn) Where DF = demand forecast for all households, ID = individual demand of household. Ex. Census survey

Advantages: • Forecast comes direct from horse's mouth. • first-hand unbiased information Disadvantages: • costly, unwillingness of consumers to answer • uncertainty, time consuming, • respondents might himself not clear about his consumption pattern

Market Share Method
• The firm first work out the industry forecast, apply the market share factor to estimate the company’s sales forecast. • The market share factor is developed based on the past trend, companies present position, brand preference. • The firm must correctly appraise market standing, brand image, market share and strength and weakness as compared with the competitors in the industry

Analytical & Statistical Method
(i) Sales Trend Analysis (Extrapolation Method) • The firm uses its own record of past several years’ sales to estimate the future sales. • It involves plotting of the sales figure for the past several years and stretching of the line or the curve as the case may be. • The extrapolation will give the forcast figure.

• It basically assumes that the variable will follow its previously established pattern if the pattern of sales repeats itself fairly accurately in a given period of time. • In graphical Sales Trend Analysis Method the period is taken on X- axis and the corresponding sales values are on Y-axis.

(ii). Moving Average Method
• Defined as an average of some fixed or predetermined number of observations in a time series which moves through the series by dropping the top item of the previous averaged group and the next item below in each successive average. • Time period may be even or odd i.e. 3,5,7,9 years • The calculated values of the moving average become the basis for determining the expected future sales.

(iii)Time series predicts
• This method uses historical and cross – sectional data for estimating demand • Finding a Trend value for a specific year

• Finding seasonal fluctuations in the variable • Predicting turning points in future movements of the variable

Management - II
Chapter:3

Market Segmentation

Effective Targeting Requires…
• Identify and profile distinct groups of buyers who differ in their needs and preferences • Select one or more market segments to enter • Establish and communicate the distinctive benefits of the market offering

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Ford’s Model T Followed a Mass Market Approach

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Four levels of Micromarketing
Segments Niches

Local areas

Individuals

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What is a Market Segment?
A market segment consists of a group of customers who share a similar set of needs ad wants.

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The Himalaya Drug Company serves a growing niche market by focusing on ayurvedic medicines and health supplements
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Segmenting Consumer Markets
Geographic Demographic Psychographic

Behavioral

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Geographic Segmentation
Local market
Urban Market Rural Market Regional Market National Market International Market
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Demographic Segmentation
Age and Life Cycle
Life Stage Gender Income & Education Generation Social Class Religious Customs
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Bank Al Habib targets senior citizens

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Dove Targets Women

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Figure 8.1 The VALS Segmentation System

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Behavioral Segmentation
Decision Roles • Initiator • Influencer • Decider • Buyer • User Behavioral Variables • Occasions • Benefits • User Status • Usage Rate • Buyer-Readiness • Loyalty Status • Attitude

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The Brand Funnel Illustrates Variations in the Buyer-Readiness Stage • • • • • • Aware Ever tried Recent trial Occasional user Regular user Most often used

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Loyalty Status

Hard-core

Split loyals Shifting loyals Switchers
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Figure 8.3 Behavioral Segmentation Breakdown

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Segmenting for Business Markets
Demographic Operating Variable

Purchasing Approaches
Situational Factors Personal Characteristics
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• Demographic
• Which industry we serve • Company Size • Location of company

• Operating Variable
• Technology • User or Nonuser status • Customer Capabilities

• Purchasing Approach
• Purchasing- function organization (Centralized v/s Decentralized) • Power structure (Engineering v/s Finance dominated) • Nature of Existing Relationship (String v/s one time) • General Purchasing policies • Purchasing Criteria
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• Situational Factor
• Urgency • Specific Application • Size or order

• Personal Characteristics
• Buyer –seller similarity • Attitude toward risk • Loyalty
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Effective Segmentation Criteria
Measurable Substantial

Accessible
Differentiable Actionable
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Targeting Market
• After dividing the market into different divisions when the market planning and marketing strategy are arranged keeping one of these divisions in view, it is known as Target Market. • 1. Single product-Single Market • 2. Single Product- Many Market • 3. Many Product-Many Market
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The Revolution brand of readymade women’s apparel successfully focuses on the niche segment of plus-size clothes.
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Pepsi used Megamarketing in India

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Positioning
• Positioning means occupying a distinctive place into the mind of target customer • Stages of Product Positioning
– Identification of implies comp0etitive benefit – Selection of competitive benefit – To give information competitive benefit

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