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Marktng management

fundamentals
What is mrktg all about?
Understanding mrkts
and
managing markts
effectively,efficiently to be
successful
how to do this?
What are markets?
• Mrkts are prospects,customers and
consumers with unfulfilled needs,with a
desire to fulfill the same and
• An ability to buy and willingness to buy,
• An ability to pay& willingness to pay and a
willingness to be loyal as long as the
marketer’s offer is perceived to be of far
higher value than those of all substitute
and competitive offers
What is mrktng?
• Marktg is a continuous and proactive
process of creating,nurturing and retaining
a loyal customer base and helping them
perceive that the co’s offer is far superior
to those of all current and future substitute
and competitive offers
Purpose of any business-what is it?
• Because it’s purpose is to create a customer,a business
has two and only two basic functions; marktg and
innovation. Mrktg and innovation produce results; all the
rest are costs.
• Mrktng is too important to leave to a mrktng department.
Mrktng is so basic that it cannot be considered to be a
separate function.it is the whole business seen from the
point of view of its final result, that is ,from the
customer’s point of view,

• Peter F Drucker’

• Concept of internal and external customers


Types of business orientations-
what philosophy guides your
business?
• The producttion concept or orientation
• The product concept or orientation
• The selling concept or orientation
• The marketing concept or orientation

• What are the differences?what are the implications?

• The elephantine electronics co case


Elephantine case
• The engineering manager of this co one day
concieved of a new computer terminal that
would do every thing but peel potatoes- a slight
exaggeration perhaps ,but the concept was a
widely applicable, broadly compatible device.
• Since the manager enjoyed excellent rapport
with the firm’s general manager,who was also an
engineer,it was easy to convince the GM of the
merit of the idea, and a product development
program was vigorously undertaken.
Elephantine-----
• When the prototype was complete and functionally proven,a
production line was set up and manufacturing was begun.
About this time,the sales manager and his sales force were
called in for a product presentation. After the new device was
explained and demonstrated, they were told to ”go,sell it”.

• SInce the new production line was capable of producing 500


units a month, this was established as average sales goal
.The sales manager and the sales force went optimistically
forth into the market, but 6 months later reported back to the
general management that they were unable to move this
wonderful new product in any thing approaching the target
volume.
Ele---contd
• After firing the sales manager, the gm and the engg mgr
commisserated with one another about the
incompetence of sales people who couldn’t sell a product
that is obviously superior to anything else available and
right for the markt.
• Neither of them knew quite where the mrkt was or who it
was,and unforttunately even the ex sales mngr hadn’t
known either.Since the mountain wouldn’t come to
Mohemmad and Mohemmad didn’t know where the
mountain was, so he could go to it, a lot of time and
money were wasted for practically nothing.
• It was certainly too bad Elephantine was so unlucky,
because,when the product design was eventually sold to
Whiz-Bang computer co, it was a roaring success.
Elephantine----Discussion
questions
• 1.Does ur group think Elephantine was really unlucky?
Why? Why not?
• 2.What do u think whiz-bang did to make it a roaring
success? Step by step process or activities?
• 3.What is wrong with Elephantine?What is right, If any?
• 4.What concept or philosophy drove Elephantine
mngmnt? Whiz-bang mngmnt?
• 5.Do u think Ele– learnt any mrktng lessons? What
mrktng lessons did u learn? What is the moral of the
story?
Mrktng fundamentals
• Mrktng is ---
• A rouge function---
• Salesmen are cheats---they push you into buying things that
you don’t want
• Advertising is a bunch of lies
• Mrktng is a sheer waste. Goods cost us much less if we don’t
promote them and advertise.
• Inshort, life wd be better off without this function.

• Do we agree with this? If so why? If not why not?


Finally what is mrktg?
• It is a function
• It is a process
• It is a concept
• It deals with understanding mrkts,effectively and
efficiently managing the same and continuously
measuring the success through monitoring continuous
profitable growth in sales volume,markt
share,profit,customer nos and brand loyltycompared to
all competitors.

• What attitudes,knowledge,skills and behaviour does


mrktg need to be effective?
Characteristics of market-oriented
companies
• 1.have clear market objectives
• strategic intent
• Ambitious mrkt share,positioning goals

• 2.segment their mrkts


• Identify growth opportunities
• Tailor strategies to segments

• 3.understand customers’existing and potential needs


• Get close to customers
• Focus on solutions, not products

• 4create competencies to match opportunities


• Develop capabilities
• Integrate functions and resoutces around this task.

• 5.build competitive advantage


• Beating competition
• Sustainable advantages via branding and continuous improvement
• Beating competition
• Sustainable advantages via branding and continuous improvement

• 6.recognise environment changes


• Existing strategies erode
• Priorities to change and innovation

• 7.customer-focussed organisation
• Inverting and flattening the pyramid
• Prioritising service providers
• Lower costs-faster response—greater motivation

• 8.monitor and bench mark customer satisfaction


• Quantitative research systems
• Indepth research.
Formulating a mrktng plan
• 1.situational assessment
• Current performance
• Background analysis
• Trends and projections
• Opportunity and issue analysis

• 2.objectives
• Marketing
• Financial
• Human

• 3.positioning strategy
• A.tarjet market segment(s)
• B.differential advantage
Mrktng plan
• 4.marketing mix
• A.product
• B.price
• C.promotion
• D.place

• 5 action programs

• 6.organisation and control & Recruitment of talent

• 7,budjet & Control systems in implementation.


Key tasks of mrktg mgmt
• 1.Understand broad mrkts&segment
• 2.Carry out environment analysis
• 3.Set goals and objectives
• 4.Develop positioning strategies
• A)select target mrkt segments—a.broad market b.identify bases for
segmentation c.develop profiles of segments d.measure
segments’attractiveness
• B).create a differential advantage a.identify benefits sought
b.measure competitor positioning c.create reason for preference
• 5.Develop appropriate mrktg mix a.product b.price c.place
d.promotion
• 6.Action programs
• 7.Create organisation structure &Recruit Appropriate talent
• 8.Budjets and controls and implementation
• 9.Learnings
The essence Of marketing
Customer Wants Marketing MIX Variables

Functional Product

Value Price

Self image Advertising

TMS DA
Availability Distribution

Service Servicing

Risk Avers ness Guarantees


Marketing Mix

• 1product
Product
• Quality-features—options—style—brand name—packaging—sizes
—services—warranties—returns
• 2price
• List price—discounts—allowances—payment period—credit terms
• 3place
• Channels—coverage—locations—inventory—transport
• 4.promotion
• Advertising—personal selling—sales promotion—public relations

• All addressed at target market segment


Characteristics of mrkt –
oriented co’s
1have clear mrkt objectives-----
have strategic intent------
have ambitious markt share and positioning
goals

2segment their markets---------------


identify growth opportunities-------
tailor strategiesto segments
3understand customers’existing and
potentialneeds
Get close to customres
Focus on solutions,not products
Characteristics of mrkt oriented
co’s
• 4.Create competencies to match
opportunities
• Develop capabilities
• Integrate functions and resources around
this task
• 5.Build competitive advantage
• Beating competition
• Sustainable advantages via branding and
continuous improvement
Charactiristics of---
• 6.Recognise environment changes
• Existing strategies erode
• Priorities to change and innovation

• 7. Customer-focussed organisation
• Inverting and flattening the pyramid
• Prioritising service providers

• 8.Monitor and bench mark customer satisfaction


• Quantitative research systems
• In-depth research
The strategy of a modern airlines
• In the olden days, airlines didn’t segment their markets.It
soon became clear that passengers differ in their
expectations. Business travellers value convenience,
comfort and service,while,leisure travellers were more
interested in lower price,
• A carrier flying from London to New York, using a 300
seater plane and anticipating an average load factor of
80%, if it pursues an un-differentiated strategy-one class
plane-the management can charge a highest price of
$250 TO AChIEVE A 80% OCCUPANCY RATE.The
variable cost for the airlines was $20 per passenger and
the fixed cost is $50,000per flight.
Airlines----contd
• However to the mrktng mgmnt,it is obvious that while a price of
$250 already begins to lose the business of low budget
travellers,business people and the more affluent people would be
willing to pay much more for superior service and comfort.
• The result was that the airlines moved to the differentiated strategy
whereby they offered 3 levels of service on the
plane;economy,business and first class at very different price levels.
• To get the same 80%occupancy level,the prices are respectively
$250,500,and 1000 per passenger while the variable costs
are$20,40 and 100 per passenger. It is estimated that the fixed cost
would go up by 10% to accommodate the changes in the aircraft to
provide the desired comfort to the upper 2 classes, each of them
taking 50% of the additional amount.It is also estimated that the
business class pssengers wd be 3 times the number of first class
and economy passengers wd be double the business class
occupants at 80% plane loading factor.
Airline---contd.
• The consequences are to massively enhance the revenue and the profitability for the
airlines.In addition,the strategy better meets the needs of all customers by offering
the values that the particular type of passenger prioritises
• And this example of airline segmentationis exactly analogous to the strategies
pursued by most of the sophisticated cos of today!
• You are requested to calculate the profits,the profitability, the revenues and the costs
incurred in both the strategies,for the full plane,for each class and per passenger in
each class, assuming in both cases the plane is 80%loaded.Pl find the break even
point in both.

• Discussion q’s
• 1List all benefits of segmentation to all stakeholders of the airlines
• 2Who all could be the beneficiaries
• 3Do u think any segment is subsidising for any other segment? If so who to whom? If
not,why not?What do u understand by absolute satisfaction and relative satisfaction?
Do u think that there is a possibility that any cass may feel relatively dissatisfied
although absolutely satisfied, When wd that happen? How wd mgmnt prevent it?
• 4When can segmentation go wrong?How to avoid segmentation from going wrong?
What precautions to take?
What is your position?are we
positioned correctly?
• A manufacturer of industrial cutting equipment
was concerned about its poor market share and
wondered whether its prices were the problem.
• It undertook a markt research study which
identified the product and service attributes most
desired by customers and evaluated how its
product “ X “ & its key competitors were rated in
tablebelow on a 1to 6 scale where 1 is lowest
and 6 is highest.
Table assessing price & value
competitiveness
Importa Quality Competi
nce wt dimensio tors
ns
abcx
35% Precision 6 5 4 6

25% reliability 6 6 3 4

15% durability 5 3 2 5

20% service 5351

5% Delivery 2 5 5 5
weigh A B C X
tedsc
ore
5.5 4.6 3.7 4,3
Actual
prices
29 K 21 K 15 K 22 K

Mrkt
share 27 45 20 8
%
1.What is the problem of x In
marktng jargon?
• 2.how do you solve? What srategy do u
recommend? Why?
• 3. What alternates can be considered by
X? Why should they be dropped?
How to take positions? - 2 ways
based on Quality&price conscious

markets
QUALITY-CONSCIOUS MARKTS-steps
• 1.find out quality dimensions,relative importance
between them and assess performance of all current
players on each dimension
• 2.If there is a gap between expectations and
performance tae a position
• 3. fill the position by offering the highest value than the
average value provider as well as the best value provider
so that no one will find a gap in value to replace u in
future.
• 4 constantly monitor and defend this position thro
innovation.
Price conscious
customers/markts---how to take
positions
• 1.find out what price are the markets willing to
pay?
• 2.find out what quality are they willing to accept
for the price they are willing to pay
• 3.find put a gap if any where u can offer a higher
value for the price they are willing to pay –better
than the average value privider as well as the
highest value provider in the markt.
• 4defend and protect .
Concepts of
cost,price,revenue,value &
quality.how are they connected?
• Adi godrej said,when asked what is important,top line or
bottom line?
• REVENUE IS (read sales) vanity,PROFIT IS SANITY
and cash is reality.Cost is a fact & Value is a perception.
• Value is benefit divided by price
• Customer delivered value=total customer benefits(TCB)-
total customer costs(TCC).
• TCB=Product benefits+Service benefits+personnel
benefits +image benefits
• TCC=monetory cost+Time cost+energy cost+psychic
cost
Quality is 2 types –Quality of
conformance & quality of

performance
QUALITY OF CONFORMANCE-consistently meeting specifications
laid down batch after batch/supply after supply.—at any agreed
level of quality
• Performance as per promise.supplier commits to buyer a certain
level of quality features,prices and performance and delivers in
practice what was promised.
• QUALITY OF PERFORMANCE-this has got to do with the level of
quality Certain products promise and perform at higher level of
quality and certain other products promise and perform at a lower
level of quality.
• EXAMPLE.Which product has a higher quality of
performance,Mercedes Benz? Or Maruti 800? Answer is the former.
• Which of the above 2 products has a higher quality of conformance/
Answer is both can have the same level or one can have a higher or
loer level than the other depending on the actual percetved
performance over a period of time.
Cdv=tcb-tcc
• Compare the customer deliverd value of
any 2 brands fighting with each other in
the same TMS/
• Compare cdv of kinetic Honda to ladies
with cdv of Hero Honda to male Youth.
Which one is greater?
Caterpiller VS komatsu how to
price caterpiller’s buldozer?
• Cost to make =$30k
• Perceived worth of customers=$100k
• Added value=$70k
• Pricing options—A.Share equally,P=$65k.
—B.take a higher share,P=$80k—C.Take
a smaller share,
• P=$50k.
• How to decide what strategy to follow.?
Caterpiller ‘s price strategy
depends on
• 1.the Co’s goals/ambitions
• 2.the competitive factors and
• 3. the customers value perceptions
• If the co wanta a short run high return,and
doesn’t mind losing competitive entry, price it
high.
• If the co’s interest is to gain a high markt share
quickly and protect it over a long term,go for a
low price but a longer pay-back.
positionings
• Usp development—an attribute to tout as
number 1—common no1 positions—best
quality ----lowest price—safest---best
service—best value---fastest—most
customised—most convenient—most
advanced technology etc.
• Examples of value propositions
Co/prod Target 1 uniquePercvd Value Remark
uct custome benefit benefit propositi s—
rs’ to price on compact
profile ratio stateme ,artistic,
nt punchy-
--

Hll/lux Geo- The Just


Demo- best andright
the price for
Psycho
firstbeauthe
Tcchno ty soap benefit
4 positioning errors to avoid
• 1.Under positioning; buyers have only a vague
idea of the brand.Nothing special is seen. Pepsi-
Cola’s clear ‘Crystal Pepsi”, was introduced in
1993. Costomers didn’t see ‘clarity’ as important
benefit in a soft drink.
• 2.Over positioning. Buyers have too narrow an
‘image’ of the brand. Consumers think ‘diamond
rings’ at Tiffany’s start at $5000 while Tiffany’s
now offers affordable diamond rings $900
upwards Unsuccessfully.
Positioning errors--contd
• 3.Confused positioning; Too many changes in brand’s
positioning too frequently.eg.stephen job’s sleek and
powerful NeXT computer positioned first for students,
then for engineers and then for business people all
unsuccessfully.
• 4.Doubtful positioning; Buyers find it hard to believe the
brand features.GM’s Cadillac division launched Cimarron
as a luxury competitor with BMW, Mercedes and Audi.
While the car featured leather seats, a large luggage
rack,lots of chrome and Cadillac logo stamped on the
chassis, customers saw the car as a dolled-up version of
Chevy’s Cavalier and Oldsmobile’s Firenza. While the
car was positioned as “more for more” customers saw
“less for more”.
Factors affecting positioning
strategies
• A.Attractiveness of market
• 1.Market size
• 2.Mrkt growth
• 3.Competitive structure
• 4.Profitability
• 5.Socio-political constraints

• B.Ability of Co to create a relative strength.


• 1.Mrkt share & position
• 2.Cost competitiveness
• 3.Technical capability
• 4.Mrktng and distrbn capability
• 5.Future cash requirements
• 6.Commncn & Branding capabilitry.
6 key analyses for developing
positioning strategies
• 1.Mrkt analysis
• 2.Customer analysis
• 3.Competitor analysis
• 4.Trade analysis
• 5.Economic analysis
• 6.Environmental analysis
1.Market analysis
• A.How attractive are alternate mrkts?
• 1.Size
• 2.Growth
• 3.Competition
• 4.Profitability.
• 5.Socio-political issues
• B.Do we have the capability to compete effectively?
• 1.Mrkt share &position
• 2.Cost competitiveness
• 3.Technical capability
• 4. Mrktg & distribution
• 5.Future cash requirements.
2.Customer analysis
• 1.How is the mrkt segmented?
• 2 What are the needs of each segment?
• 3.How are purchasing decisions made?
• 4.Who makes the key decisions?
• 5.Are there any new segments to appear
or be created?
3.competitor analysis
• 1.Who are the key competitors?intra-type?---
Inter-type?---Innovative?
• 2.What are the strategies of competitors?---
Aggressive?---Me-too?---Segmentation?
• 3.How are we positioned as competitors?----
Where are they vulnerable?---Where are we
vulnerable?
• 4.Are there any srategic windows?---New markt
segmentation?----New technologies?---Market
redefinition?----Channel changes?
4.Trade analysis
• 1.What are the key channels?
• 2.Are new channel opportunities likely to
develop?
• 3.What are the needs of our dealers?
• 4.Do we have an effective partnership to
develop our mrkt opportunities?
• 5.How are we perceived relative to our
competitors?
• 6.What can we add to enhanceour dealer
business?
5.Economic analysis
• 1.Can “ROI” and “share holder value”be
enhanced ?
• 2.Can costs be reduced?
• 3.Can prices be revised ?up and down wards?
• 4. Can the product mix be improved?
• 5. Can volume be improved by investing in new
mrkts or brand enhancements?
• 6. Can investment in fixed and current assets be
rationalised?
• 7. Can time be taken out of the production and
marktng processes?
6.Environmental analysis
• 1 How are we likely to be affected by trends in
the environment?----------------------
Demographic?--------------------------------------
Economic?------------------------------------
• Pollution and environmental protection controls
• Technology? Political? Cultural?
• 2.what contingency and crisis mngmnt plans
exist? For key vulnerabilities?
Developing the “value proposition”
USP,UBP,VP CONCEPTS
• USP—unique selling proposition
• UBP—unique buying proposition
• VP—value proposition
• USP is an attribute to tout as No.1.
Common No.1 positions—Best Quality—
Lowest Price—Safest—Best Service—
Best Value—fastest—Most Customised—
most Convenient—Most Advanced
Technology.
Examples of value propositions-
Step by step process
• 1. Co name? and Product name?
• 2.What is target customer profile In
Geographic,Demographic,Psychographic including life
style and Technosavviness parameters?
• 3.What is one unique benefit that is distinctly different
from others? And a couple of other normal benefits?
• 4. What is customers perception of Benefit to price ratio?
Expressed as—Too high a price for the benefit?---
Moderately high price for the benefit?—Just right price
for the benefit?—Moderately low price for the brenefit
• 5.Make a value proposition statement—An artistic
statemennt, compact, unambiguous’ and easily
understood—Neither too long nor too short- but covering
the salient aspects of all the above 4 points.
3definitions of positioning strategy
• 1 Positioning strategy is choice of target mrkt
segment(TMS), which determines where the
business competes and the choice of “DA” which
dictates how it competes.
• 2.Positioning strategy is deciding which game to
play and how better to play so that the co
continues to win the game for ever
• 3.Positioning is not so much what the product
actually is, but rather how the Co wants it’s
target customers to perceive it. A Co can choose
from a No. of different strategies.
• Match the strategy with the example.
Match strategy with example

• Positioning strategy • Example


• 1.Positioning by • A.”Master card is
attribute;Associating a accepted at more
product with a particular restaurants than any
feature other card”
• 2.Positioning by • B.”Head & Shoulders” is
benefit;Associating a
the best shampoo for
product with a spl customer
people with dandruff.
benefit
• 3.positioning by use or
• C.”Chevy trucks out-
application perform Ford trucks”
Matching------
• 4.Positioning by • D.“Timex watches take a
user;Associating a licking but keep on
product with a user or ticking”
class of users. • E“Preference by
• 5.Positioning by L’Oreal.It costs a little
competitorIdentifying a more, but I am worth it”
product by using a • F.”7-UP is the Un-
competitor as reference Cola.It’s lighter& more
• 6.Positioning by product refreshing.”
category; • G.”A box of
• 7.Positioning by quality& Arm&Hammer baking
price soda in your refrigerator
will keep it clean-
smelling”
How do Co’s add superior value?
In 3 ways

• 1By strategies adding value


• 2,by strategies reducing cost &
• 3.by developing more effective
positionings.
• Let us get into details of each.
Drivers of utility
drivers of cost &repositionings
• 1.Drivers of utility.
Utility,usefulness,perceived value
orcustomer satisfaction is a combination of
rational, economic factors and subjective
image dimensions—4 drivers
-----.Product,Service,Personal &Image
drivers
• A,Product drivers
Product drivers & service
drivers
• Product drivers; • Service drivers;Become
• 1,Performance important as competition
• 2.Features narrows down product
differences.
• 3.Reliability • 1Credit&Finance
• 4.Conformance to specs • 2.Ordering facility
expected
• 3delivery
• 5.Durability
• 4Installation
• 6.Seviceability
• 5Training&consultancy
• 7.Operating costs
• 6 Aftersales-service
• 8.Aesthetics.
• 7 Gaurantee
• 8Operating support
Personal & image drivers
• Personal drivers. In service- oriented Co’s,
personnel become a valuable source of “DA”-
since difficult to copy high quality person or
service. Important traits;
• 1.Professional skill, knowledge,talent
• 2.Courtesy
• 3.Trustworthiness,reliability,Positive attitude
• 4.Initiative
• 5.Communicability etc.
Image drivers
• Image drivers give customers the
confidence in the product.This confidence
value is in socio-psychological utility of the
brand or it’s economic performance or
both.
• Ex.Youngsters see Coke, Levi’s
jeans,Sony Walkman,Nike shoes as
consistent with their life styles.
2 drivers of cost
Michael Porter’s 5 force theory&

value chain
Typical P&L of a Co
• Revenue---100
• Materials-----25
• Manfacture---15
• R&D-----------o5
• Sales&Distrbn15
• Corp.OHS-----20
• Mrktng OHS---15
• TOTAL COST—95
• --------------------------
• Margin-----------05
Cost drivers
• It is cost drivers that decide if a Co’s costs are
lower or higher than it’s competitors.Eg.
• 1.Economies of scale
• 2.Learning curve or Experience curve
• 3.Capacity utilisation
• 4.Sharing of costs with group Co’s
• 5.Vertical/horizontal integration
• 6,First/leader in mrkt
• 7.Location,Marktng strategy advantage.
Value chain
5 forces of porter
3.Repositioning strategies
are you positioned adequately?
• Product X is positioned wrongly in between mass & premium mrkts-
where the economy and luxury segments are at the 2 extremes of
the markt.
• On the Quality VS Cost or price map, there could be 3 reasons of
inadequate positioning of X.
• 1.Un-attractive segment-too small in size,declining,too
competitive,or unprofitable.
• 2.Quality & features don’t match the target segment.
• 3.The product costs too high to allow it to be priced competitively.
• IN OTHER WORDS.PRODUCT X IS TOO COSTLY FOR THE
MASS MRKT AND HAS INSUFFICIENT QUALITY TO APPEAL TO
THE PREMIUM SEGMENT.
• Therefore it has TO REPOSITIOn itself
7 repositioning options
real & psychological options
• 1.Introduce a new brand. In 1990,IBM , in the PC mrkt,
introduced it’s own cheap clone under AMBRA brand
name to have a foot - hold in the emerging mass or
economy mrkt.
• 2. Change existing brand. In contrast to IBM,Compaq
solved the problem by cutting price & simplifying features
offered to hold on to position in mass mrkt.
• 3.Alter beliefs about brand.; Chivas Regal scotch
repositioned itself from the mass mrkt to the premium
segment thus rationalising it’s higher price and quality.
• 4. Alter beliefs about competing brands; The BODY
SHOP retail group has communicated that the beauty&
personal care products of competitors are not
environmentally friendly.
Repositions--contd
• 5. Alter attribute importance rates; VOLVO
raised importance of safety as an attribute
in choosing a car thus enhancing the
value of it’s differentiation.
• 6. Introduce new or neglected
attributes;Unilever successfully introduced
“RADION”, a new detergent that
eliminated odour-a benefit previously
considered not important.
Repositions—contd.
• 7. Find a new mrkt segment; DUNHIL
diversified from smoking accessories into
mens’ clothing. Instead of getting into the
crowded segments,created a new luxury
segment of expensive high quality ready-
to-wear suits. As the only typically British
competitor in the segment,it brought a
unique brand with a strong appeal to
affluent executives—especially the
Japanese.
Creating brands & nurturing them

• Why brand technology products?


• Purpose of any business?
• How do we measure success?
The 3 secrets of business success
& survival?
Secrets of----
• Product image

• Service image

• Corporate image

• Channel image
Right Business orientation needed
for success?
• Production orientation

• Product orientation

• Selling orientation

• Marketing orientation

• Customer focus/orientation

• The role of engineering/R&D in success


The elephantine electronics case
• What moral can we engineers draw from
this story?
Differences between products
&brands?
• Benefits of brands-
• to customers ?

• to company ?
• to society?
Purpose driven R&D-in commercial
firms
• What goals should we have?
• Market goals
• Financial goals
• People goals
Segmenting markts-how will we be
different & better?
• “all skills are subsidiary to the master skill of concentrated focus”
• FOCUS ON THE MARKT FOR SUCCESS
• 2 stages to undertake segmentation—Definition of potential
segments & selection of target segments
• DEFINITION-in a lot of different ways;
• FOR INDUSTRIAL MARKETS,
• Geographic; ,Industry,Type of application,Customer size,Markt
served,Channels of distribution,
• Demographic,Psychographic,Technographic, Behavioural etc.
• FOR CONSUMER
MARKTS;_GEO,DEMO.ECONOMIC,Psyco,Techno,Behavioural—
all can be used.
• When >2or3 variables are used, the process becomes complex.
• SELECTION—Is easier based on MA & DA.
A practical approach to segmenting
markts-cascade method
• Step1;what is our definable markt?
Questions to ASK;POTENTIAL
BENEFITS?—MAIN OVERALL NEED?—
KEY CUSTOMER PROBLEMS?—KEY
BUSINESS PROCESS?
• STEP2;BREAKING THE CASCADE OUT
THROUGH SUPPLEMENTARY
QUESTIONS
• EG:HARD COPY PRINTING
Cascade---
• 1.HOW MUCH?—v low—low—med—high
• 2.WHAT QUALITY?—
• LOW Q—LETTER QUALITY—DRAFT GRAPHICS—
BUSiness GRAPHICS
• 3.HOW OFTEN?—SPORADIC NON_URGENT—
SPORADIC URGENT—UNIFORM NON-URGENT—
UNIFORM URGENT
• 4.WHERE?—PERSONAL—WORK GROUP—
DEPARTMENT—SITE
• 5.WHAT PRICE?--<5k--5K-25K—25K-100K-->100k
Step3.Defining segments by
sentence
• EG.;DEPARTMENTS PRINTING LETTER
QUALITYOUTPUTS SPORADICALLY &URGENTLYIN
VOLUMES UPTO100K PAGES PER MONTH
• STEP4;make as many segment statements as possible.
• STEP5;FIND WHICH SEGMENTS ARE CURRENTLY
OCCUPIED BY WHOM?
• STEP6;FIND NICHE.
• STEP7;MEASURE ATTRACTIVENESS OF THE NICHE
& OUR CO’S CAPABILITY TO CREATE “DA”
Guidelines for cascading
• 1.AVOID TOO NARROW/BROAD DEFINITION AT STEP1
• 2.DON’T LET PRODUCTS APPEAR ON THE CASCADE.IT IS
NEED /SITUATION ANALYSIS
• 3.DEFINE “Q” TERMS WHEREVER POSSIBLE.
• 4.KEEP A MAX OF 5-6 LAYERS.
• 5.QUANTIFY ACROSS EACH LEVEL.RESEARCH IF
REQIUIRED DATA NOT AVAILABLE.
Cascade--
• 6.ANALYSE OBJECTIVELY.DON’T BE BIASED.
• 7.SEPARATE SEGMENTS FROM
SELECTION.SELECTION IS NEXT STEP.
• 8.ALTERNATE THE “Q”s.ELIMINATE NON_USEFUL
LREVELS.

• MYTHS OF SEGMENTATION
• “we segment our mrkts”
• ‘THERE IS ONE IDEAL SEGMENTATION VARIABLE”
• “segments are technologies or products”
• “Segments are forever”
• “WE want to be in all segments” ETC.
Assignment on cascade method of
segmenting markts
• Tke any markt u like and do follow the above
swtep by step process of cascade method,
• Divide into segments,
• Mention at least 3-4 segment statements,find out
if thjose sedgments were already occupied by
current players,if so who and if not check
attractiveness of the niche u have just
discovered.
• HOW DID U DISCOVER THENICHE?
Plc strategies. ch- fig--
Product strategies-Ansoff diagram
or directional policy matrix.
• 4 types of product strategies
• BCG matrix –ch fig
• GE or McKinsey matrix
Product strategies.HLL
• 1.product mix width strategy
• 2.product mix consistency satrategy
• 3.product line length strategy
• 4.product depth strategy
• PRODUCT MIX WIDTH measures the no of
individual(INDEPENDENT) lines of products the co
carries in its product portfolio.
• For ex,HLL has roughly 3 dozens of lines of products—
say,soaps,detergents,tooth
pstes,toiletries,cosmetics,personal care products,ice
creams,bread,shampoos,atta,salt,jams,jellies,tea,coffee
etc,
Product stra----
• Advantages;wide mix helps
• 1,growth in bad times for some lines
• 2.good customer coverage
• 3.prevent competitor entry
• 4develop trade interest
• 5reduce overall cost
• 6synergy etc.
• DISADVANTAGES
• 1.resources scarcely distributed
• 2.lack of focus
• 3.Confusion if overlap
• 4.too much inventories.
What is optimum width?
• If mix is too narrow,vulnerability, competitors get
strong if they discover & enter into new niches,
and stake holders growth expectations not met,
• Optimum width depends on
• 1,co’s resource capability
• 2.co’s ambitions for growth with matching
capability
• 3.ability to start a new line when the existing
lines can survive & grow on their own merits,
2.Product mix consistency strategy
• This measures how well each line is related to every other line in
terms of
• 1,technical capability
• 2.manufacturing skill& capability,
• 3.distribution capability,4,employee talent and skills,5branding&
commncn skills
• 6,customer mix etc.
• Advantages of high mix consistency
• 1.lower costs
• 2.quicker growth
• 3higher profit
• Disadvantages;1inability to venture into unrelated but high
opportunity areas.ex reliance.
Product line length strategy
• Line length measures the no of
independent products in a line.
• For example,HLL’s soaps line has a
dozen different soaps
• Jay Lux Hamam
• Breeze Liril Dove
• Lifebuoy Fair&lovely
• Rexona Pears
Long lines-advantages
• 1different segments
• 2high sale,MS & profit
• 3.prevent competition
• 4.be first to open a swegment
• 5overal markt leadership
• 6.More satisfied customer
groups7.synergies in marktng costs
• 7.satisfied trade
Long line-disadvantages
• Too long –unnecessary-wasted inventory
• Slow non-moving stocks
• Low ROI
• Confuse customer choice if overlap.
• Lack of focus
• Resources too thinly distributed.
product depth-no. of variants of
same product-by
sige,packing,colors,styles etc.
• Lux is available in 2 formulations,3 siges,3
colors and 2 skin types
• Therefore lux’s product depth is 2.3.3.2=36
• Why product depth?
• To cater to subsegmental needs
• To retain customers
• To meet needc fragmentation in evolving
markts
Plc strategies. ch- fig--
Branding strategies
Brands
Creating & Nurturing Them
The Agenda Today

• Why brand technology products?

• Purpose of any business?

• How do we measure success?


The 3 secrets of business success &
survival?

• Product image

• Service image

• Corporate image

• Channel image
Right Business orientation needed for
success?
• Production orientation

• Product orientation

• Selling orientation

• Marketing orientation
• Customer
focus/orientation
The role of engineering/R&D in success
The elephantine electronics case

What moral can we engineers draw from this story?


Differences between products
&brands?

Benefits of brands

To customers
To company
To society
Purpose driven R&D-in commercial
firms

What goals should we have?

1. Market goals
2. Financial goals
3. People goals
The Kano Model
Delighting Features
+

Insufficient Sufficient
Product features

Expected
Features

-
Assumed Features
From Commodities to Brands
Low High

Strong Brands
High
Relationship
Cognitive

d
ran
g B
i n
r od
E
Low

Commodity
Emotional
Relationship
Perceived
Name quality Brand
Awareness Associations

Proprietary
Brand Equity
Brand Assets
Name
Loyalty
Symbol
Provides value to firm by
enhancing:
•Efficiency and effectiveness
Provides value to customer by
of marketing programs.
enhancing Customer’s
•Brand loyalty
•Interpretation/processing of
information •Prices/margin
•Confidence in the decision •Brand Extension
•Use satisfaction •Trade leverage
•Competitive Advantage
Product
Unique Me - Too
Well Known

80% Depends
Supplying company

Buy Decision On
Whisper Sales Efforts

Depends
80%
Un known

On
Not – Buy
Sales Efforts
Decision

“LIKELIHOOD TO BUY MATRIX”


Price Differentiation
Low High
High

Branded
markets
Differentiation
Product Image

Whisper

Commodity
Low

Market

“BEHAVIOUR OF NEGLECTED BRANDS”


Productivity
Low High

Outstanding
Niche
High

Success
Marketing
Innovation

Commodity Cost
Low

Marketing Leadership

“Developing Competitive Position Through Innovation and Or


Productivity”
Productivity
Low High

SWISS SWATCH
High

Luxury Fashion Based


Watches Low cost
Innovation
Marketing

Production

SEIKO
Low

Low cost
Volume
Production

“In Watch Industry”


What is a successful brand?

3 Acid Tests & 1 Decisive Test

1. Leading share in it’s segment and


distribution channel?

2. Commanding prices sufficient tp provide a


high profit?
What is a successful brand?

Contd...
3. Will it sustain its strong share of profit against
emerging competition?

4. Will it induce customers to pay


preferentially compared to other brands
available?
Brand equity
Brand Create Provides value to
loyalty Reduced marketing costs
Awareness customers:
Trade leverage
*Interpretation/
Attracting new customers Reassurance
*Processing of info
Mation
Anchor to which other associations can be attached *Confidence in
Familiarity –Liking purchase
Signal of substance/commitment * Use satisfaction
Brand Brand to be considered
Aware
ness
Reason to buy
Differentiate/position
Perceived Price
Provide value to firm
quality Channel member interest
Extensions By enhancing:
*Efficiency/effectiveness
Brand Help process/retrieve information Of marketing programs
Associ
Differentiation/position *Brand loyalty
Reason-to-buy *Prices/margins
ations Create +ve attitude/feelings *Brand extns
Extensions *Trade leverage
proprietary *Competitive advantage
asstes Competitive advantage
Levitt’s Model
Potential
•F
lex
Augmented ibi
lity
on

•G
ti
lla

ua
t a
Ins

ra
• Basi

nt
ee
•Payback
c

•Re
•Styling
Approach
•Sensitivity

•System

Core •Package

sp o
Benefit

ns
•Brand

iv
•Operational

e
name

ness
•N •Quality efficiency ing
n
fa am
m e rai
e • T
an •Consultancy
d
•Maintenance

•Credibility
•Reliability
In a Project Sales

20% of Sales impacct

The Core Product

80% of price

80% of Sales impacct

The other three levels

20% of price
The essence Of marketing
Customer Wants Marketing MIX Variables

Functional Product

Value Price

Self image Advertising

TMS DA
Availability Distribution

Service Servicing

Risk Avers ness Guarantees


Definition of a brand
• A brand is a differentiated product with a name,a logo,a
symbol,a trade mark and usually a combination of some
or all of these used in communicating the superior value
to the TMS and helping them percieve how the offer is
more in value and why they should be preferring this
product to all other substitute / competitive products.
• A brand is a trust-mark which helps customers meet
some of their self-image needs by rubbing off their
images on to the users of the brand-thanks to the
images they acqured over a period of time due to the
brand builing investment and efforts put in by the mgnt.
4 branding strategies
• 1.Line extensions-product category same,brand
name same with a suffix or prefix.ex.lUX,LUX
INTERNATIONAL soaps
• 2.BRAND EXTENSIONS-Product category
different,brand name same with a suffix or
prefix.ex.LUX SOAP,LUX SHAMPOO.
• 3.MULTI BRANDS-product category same,brand
name different.LUX,LIRIL,LIFEBUOY soaps
• 4.NEW UNIQUE BRANDS-product category
different brand name different.ex.LUX
SOAP,KNORR ANNAPURNA SALT.
4 Branding strategies based on
product category/brand name
existing or new?
• 1.line extensions-product category existing and
brand name existing.ex.LUX soap and LUX
international soap
• 2.brand extensions-product category new,brand
name existing.ex.LUX soap,LUX shampoo
• 3.multi brands-product category existing,brand
name new.exLUX soap,LIRIL soap.
• 4.new unique brands.-product category
new,brand name new.ex.lux soap,kn orr
annapurna salt.
Pros and cons of branding
strategies
• Line extensions • Brand extensions
• Pros-possible when both • Pros and cons similar to
products have3 similar line extensions
image and are tasrgeted to
similar and close
markets/segments
• Synergy in cost
• Rub off effect
• Quick success
• Cons-failure also rubs
• Confusing range
• Overlap
• Non moving stocks
Pros cons of multi brands/new
unique brands
• Multi brands
• Advs-possible when new product in same category meant for
dissimilar or distant mrkts and images dissimilar.diff features appeal
to diff markts.can protect major brands thro fighter or flanking
brands
• 1.create new segments and enter first,
• 2.pre-empt competition
• 3.segmen t leadership& overall market leadership
• 4.costomer loyalty &CRM 5.failure no bad effect 6.net profits larger
even if some cannibalism occurs.
• Disadvs-1.costly
• 2.Risky-high failure rate
• 3..line and brand extn possibilities4.resources too thinly spread.
• Newbrands pros &cons similar to MBS.
Product mix decisions
• 1.add new product lines&widen the product mix
,new lines build on Co’s reputation in other lines.
• 2.lengthen existing product line to become a more
full-line Co.
• 3.add more product versions of each
product&deepen it’s product mix.
• 4.pursue more product line consistency or less
depending on whether it wants a strong reputation
in a single field or in several fields.
Pricing decisions-why is price p is
the most imp of all p’s of M.MIX?
Price
higher lower

Premium strategy Good value strategy


higher

quality Over charging Economy strategy


strategy
lower
Price is the only p that gets
revenue all others add to cost!
• Prem strategy—High Q,High P—ROLEX
• Economy Strategy—Low Q, LowP-Timex
• Usually coexist,since markt consists of atleast 2
groups of buyers—Those seeking Q and those
seeking P.
• Good Value strategy---A way to attack premium
pricer.”we have high Q but at a low P.If really
true,and Q sensitive buyers believe this,they buy
and save money.---Un less the premium product
offers more status or snob appeal.
Over charging strategy
• Over price the product in relation to Q.In long
run, customers may feel “taken”,will stop buying
& may complain to others.So avoid this strategy.
• PRICING AN INNOVATIVE PATENT
PROTECTED PRODUCT.How to price first
time? Choose between 1,Market-skimming
pricing and 2,Market-penetration pricing.
• MARKET SKIMMING PRICING
• 1.Set a high price to skim maximum profit from
the segment willing to pay the high price.Fewer
but,more potential sales
Pricing an innovative patent
protected product first time
• Choose between
• A.market skimming pricing
• B.market penetration pricing
• 1.market skimming pricing.---set a high price to get a
high profit per unit from the segment willing to pay a high
price---fewer but more profitable sale.
• Conditions for success
• 1.quality & image must match the high price.
• 2.cost of production of small volume can not be so high
as to cancel out the high price.
• 3.competitive entry barriers should be high—not to enter
& under-cut.
2market penetration pricing
• Set a small price in order to attract a large
number of buyers and a large market share
deeply & quickly.Ex
• 1.Dell & Gatreway used penetration pricing for
high quality computers through lower cost mail-
order channel.Their sales increased
substantially when IBM,COMPAQ & APPLE sold
thro retail stores & could not match their prices.
• HOME-DEPOT & WALLMART & other discount
retailers charge low prices for high volumes
leading to low costs to allow keep prices low!
Conditions for setting low price
• 1.markt to be highly price-sensitive.so,low price
leads to more sales and growth.
• 2. production & distribution costs fall as sales
volume increases.
• 3.low price must help keep out competition-
otherwise price advantage may be purely
temporary.Dell & Gateway faced problems when
IBM & Compaq established their own direct
distribution channels.
3.skimming layer by layer
• Some firms that are highly innovative use a hybrid
strategy whereby they set a high price to begin with to
skim maximum profit from the top most segment and
then reduce price continuously to skim profit layer by
layer from the segments willing to pay the high price.Ex.
• Intel charges the highest price for the computer chip
“pentium”.When it first brought it out,they charged $1000
each so that computer producers priced first pentium
computer at $3500,attracting innovative & serious first
buyers
• Later, Intel cut pentium prices by 30% per year to
eventually allow the pentium PC prices to drop into the
price range of home buyers. ..
Choice between penetration and
skimming strategies.
• Penetration • Skimming-
• 1.Objective-long run markt • Short run profit
share;risk taking • Risk-avert
• 2.demand-price elastic;few
markt segments • Price elastic,multiple markt
• 3.competition-deter new segments
competitors;few barriers to
entry
• Accept new competitors,high
• 4.product.-image seen as
barriers to entry
unimportant,long product life
cycle • Seeks prestige and
• image,short PLC
5.price-pressure for prices to
fall,need to move fast • Prices can be sustained,fewer
pressures in markt.
Skim-penetrate-------
• Penetration • Skim strategy
• Promotion-customers • Unfamiliar product
understand product
• Distribution-existing • Unfamiliar channel
system
• Production-high scale • Few scale economies
economies,experienc and experience curve
e curve effects effects.
Price problem
• Case 1. A toaster marketer has the cost and pricing structure as
below.
• Fixed cost;$300,000
• Price/unit;$20
• Variable cost/unit;$10
• Q1.What is the break-even volume in units and value in $
• Q2.The Co invested $10,00,000 and wants a 20% return on
investment (ROI).How much should the Co sell in units and value?
• Q3.At an expected unit sale of 50’000 what is the total
manufacturing cost per unit?
• Q4.At the above manufacturing cost per unit,what should be the
selling price
• A,to earn a mark-up of 20% on cost?
• B,to earn a margin of 20% on selling price?
Price problem case-2
• Setting a price to Government A’c is quite
tough.In a sealed-bid pricing,the firm
needs to set a price based on how it
thinks competitors will price rather than on
its costs or demand.Both “high price “ &
“low price”setting strategies are
undesirable.One needs to strike a
balance.Suggest your pricing strategy with
following data.
What is the best price?
• Co’s bid & profit in $ • Assumed probability
of winning
• 9,500 &100 • 0.81

• 10,000 &600 • 0.36

• 10,500 &1100 • 0.09

• 11,000 &1600 • 0.01


EVC-Economic value To Customer
central concept in pricing in
industrial products
• The markt leader is selling a machine tool
(product X) at a price of Rs.30,000.The
customer will also have to cover start-up costs of
rs.20,000-(installation,initial training etc.)and
post-purchase costs over the life of the machine
with a present value of rs.50,000-
(labor,maintainance,power and other operating
costs).Thus the total LIFE CYCLE COST of the
m/c is Rs100,000.In other words,the price is
under 1/3rd of the total cost of employing the m/c.
By developing an offer with high
EVC ,a Co can charge significantly

higher prices and stll offer its
Customers a superior value.The higher vpriced
product may offer value because (a),it generates
more output thanits competitor or
• (b),because the operating costs associated with
it (mint,labor,depreciation etc)are lower over its
economic life.
• If a competitor wants to dislodge the markt
leader ,it must offer superior EVC.One way is
simply to price-cut.But this is not likely to be a
decisive strategy here,because,even if the m/c
price is cut by 20%,the savings to customer of
Rs.6000 is only 6% of total cost.
There are 2 other better ways.For
ex,a new product Yis shown as
reducing the start-up cost
• By Rs.10,000 and post-purchase cost by
Rs 20,000.What do u think is the highest
price the customer will be willing to pay for
product Y,assuming both X & Y would
have the same life cycle cost and
productivity?This represents the EVC that
Y offers to the customer and below the
EVC it would be rational for the buyer to
switch to Y ,provided that all other things
were equal between the 2 suppliers.
Assume a new product Z is
available which ,besides lowering
• The customer’s cost ,may enhance its revenues
also.Z actually turns out more finished product for the
customer or products with superior quality Product Z
has the same start-up cost as X ,but post-purchase
costs are Rs 10,000 lower and offers a NPV of Rs
30,000 extra contribution margin,arising from
enhanced output of higher quality for which demand
exists.Find out the EVC or the maximum price
customers are willing to pay for Z?
Questions on evc case
• If you are the market leader with X and
developed Y and Z for the first time what
marketing strategy would u adopt for
success?
• If u are the unsuccessful competitor for the
leader X and fortunately developed both Y
and Z,what marketing strategy wd u adopt
to challenge the leader and displace him?
Evc case solution
• Using the EVC concept, the firm can target
those mrkt segments where the evc is the
highest.
• In such segments the product is more attractive
and so here the firm can get the highest prices.
• In this eg, it may pay the firm to launch 2 new
products.
• A high price brand Zto the quality-oriented
customersand a low priced Y brand to the cost-
oriented segment of the brand mrkt.
Firm’s pricing policy setting
• 1.selecting pricing objectives
• Survival
• Max current profit
• Max current service
• Max sales grwth
• Max markt skimming
• Product-quality leadership
• Other pricing objectives
2.Determining demand-price elastic
demand & price-inelastic demand
• 3.estimating costs;Demand sets the sealing & cost sets
the floor for product pricing
• 4.analysing competitors’costs prices &offers
• 5.selecting aq pricing method.select the price based on 3
C’s---Customers’ demand schedule,cost function &
competitive prices.
• LOW PRICE costs
• competitors prices/substitutes
• Customers assessmnt of unique product features
• HIGH PRICES
• If price is lower than cost, no profit
• If price higher than customers’assessment of value,no
possible demand exists.
Various pricing methods
• A.mark-up pricing
• B.target-return pricing
• C.perceived value pricing---value in use
price
• D.value-pricing---fairly low price for a high
quality product ex.Toyota LEXUS
• E.going rate pricing
• F.sealed-bid pricing
Perceived value pricing or value-in-
use pricing
• Increasingly companies are basing prices on
buyers’ perception of quality and value,not on
the seller’s cost.
• They use other marketing mix elements,such as
advertising,packing,sales force,and promotion to
build-up perceived value in buyer’s mind.
• Eg.Dupont,when it developed its new synthetic
fiber for carpets,it demonstrated to carpet
makersthat they could afford to pay Dupont as
much as $1.4 per pound for the new fiber and
still make their target profit.
Dupont calls this $1.4 the value-in-
use price.
• Dupont sets a price lower than $1.4 to induce carpet
makersto adopt the new fiber,since at &1.4,the
customers are indifferent.
• Dupont didn’t use its manfng cost to set the price,but
only to judge whether there was enough profit to go
ahead in the first place.The key to perceived value
pricing is to determine the markt’s perception of the
offer’s value accuraely.
• Sellers with an inflated view of their offer’s value will
over-price their product.Sellers with an under estimated
view will charge less than they could both are
undesirable,
Perceived value pricing contd.
• When a customer asks Caterpiller’s dealer why he
should pay$10000 more,the dealer answers;
• $90k is the tractor’s price if it is only equivalent to the
competitor
• $7k is the price premium for Caterpiller’s superior
durability.
• &6k is the price premium for Caterpiller’s superior
reliability
• $5k is the premium for superior service
• $2k is premium for larger variety on parts.
• $110k is the normal price to cover Caterpiller’s superior
value.
• Minus $10k discount is equal to final price.
Value pricing
• Here sellers chargea fairly low price for a high quality offering,such
that the price should represent a high value offer to the consumers.
• Value pricing is not a matter of simply setting lower prices on one’s
products compared to competitors.
• It is a matterof reengineering the co’s operations to become a low
cost producer without sacrificing quality and lowering prices
significantly to attract a large no of value-conscious customers.
• An imp type of value pricing is every day low pricing(EDLP) at the
retail level.High-low pricing is resorted to by promotion oriented
competitors. Here the retailer charges higher prices on every day
basis but then runs frequent promos in which prices are temporarily
lowered to below EDLP levels.
• As super mrkts face increasing compttn,from counterparts and
alternate channels,the key to success is using a combination of high
low and EDLP strategies with increased ad promos!
6.Selecting the final price
consider addnl factors
• A.psychological pricing
• B.influence of other MM elements on
price.
• C.company pricing policies
• D.impct of price on other parties.
Adapting the price.Co’s don’t set a
single price,they follow a pricing
structure that reflects
• A variations in geographical
demands/costs
• B.markt segment requirements
• C.purchase timing
• D.order levels
• E.delivery frequency
• F.guarantees
• G.service contracts
Price discounts & allowances
• Cash discounts-prepayment
• Quantity discounts
• Functional discounts
• Seasonal discounts
• Allownces-trade-in allowances
Promotional pricing stimulates early
purchases
• Loss-leader pricing
• Spl-event pricing
• Cash rebates
• Low-interest financing
• Longer payment terms
• Warranties & service contracts
• Psychological discounting-was $359, now $299 only.
• Promotional strategies are usually a zero-sum game!
• if they work,competitors copy easily.
• If they don’t work,waste of money!
Discriminatory pricing
same product at diff prices
• Customer segment pricing-eg.museums-
low price for students&sr citizens
• Product form pricing-diff pack sizes
• Image pricing-diff names,diff prices,diff
images
• Location pricing-Tagj charges differently at
diff cities.
• Time pricing-season,day or hour.
Product mix pricing
• Product line pricing-price steps one sneaker to
another
• Optional feature pricing
• Captive product pricing-camera & films
• 2-part pricing-fixed fee plus variable usage fee
• Bye-product pricing
• Product bundling pricing-season tickets. Total
cost less than sum of individual products
Initiating & responding to price
changes
initiating price cuts
• Ex; excess plant capacity
• Declining markt share
• Drive to dominate markt thro lower costs
• Risks of price cuts
• Low-quality trap
• Fragile-merkt share trap-high priced
competitors may cut prices& can
withstand due to deep pockets
Initiating price changes
• Normally pressure exists on co’s to reduce
prices.Experience curve,competition and rising
customer price sensitivity as markets evolve,all
encourage falling real price levels.
• Inflation,stock markets expectations of growing
profits and possibility of new and improved
products/brands encourage enterprising
managers to consider ways of increasing prices
and margins.
• Cost reduction is another obvious way of rising
margins.But price increase has a better impact.

Techniques to reduce customer
sensitivity to price rise
• 1.TRADING-UP
• 2.LINE EXTENSIONS
• 3.UNBUNDLING
• 4.MULTIPLE BRANDING
• 5.OPPORTUNISTIC PRICING
• 6.REPOSITIONING
• 7.ESCALATOR CLAUSES
• 8.REDUCTION IN DISCOUNT
• 9.COST PLUS FORMULAS
1.trading-up.Quality improvement is
the basis.alongwith commncn to
customers.a better Q for high P
6.REPOSITIONINg.Reposition a
product to get higher

prices.Eg.Chivas regal scotch.
In early 80’s, scotch whiskey was increasingly sold on price to boost
flagging volumesGuinness succeeded well in in repositioning many
of the brands as premium products taking advantage of increasin g
affluence and snob appeal of these established brand names.
• 7.Escalator clauses.with long term contracts and long gestation
periods,escalation clauses will allow producers pass on cost
increases to buyers.
• 8.Reduction in discount.Most Co’s erode their basic price with bcash
discounts for pre payment,quantity trade discounts,seasonal and
pomo allowances,or trade-in.Many of them can be dropped or
reduced without significant customer dissatisfaction.
• 9.Cost plus price formuylas.Offer to meet new customer needs on
basis of cost plus pricing.thus introduce enhanced products with the
buyer guaranteeing the margin.
Product mix pricing
• 1.Product line pricing-a range of products at various
prices for buyers to choose from.Castrol GTX at low
price to more expensive GTX2,GTX3 so on uptoGTX7
to exploit different price elasticities amongst consumers
and distributors and encourage customers to trade up to
higher margin brands
• Select price points to signal clear quality differences
between the brands.
• 2.FOLLOW ON PRODUCTS.Some products require
subsequent purchases.eg.cmera and film. Computer and
software.Initial product might be priced low to stimulate
demand and make profit on subsequent products.
• Supplier needs to be dominant or specialist to prevent
competitor to enter wirh lower priced substitutes.
3.BLOCKING PRODUCTS.Sell at
an economic price to block
competitive entry.
• Eg.cross-subsidise sales in one segment or geographical area to
dissuade competition.
• 4.BUNDLED AND OPTION PRicing.Advertise the product at a low
stripped-down price and at POP,encourage to add high margin
features.merc price Rs 20 lacs and Rs 5 lacs on options.
• In contrast Japanese competitors bundle a comprehensive range of
features into the sticker price to offer superior value proposition.
• 5.PARALLEL IMPORTS.Increasingly pricing is becoming
international problem with differences in living stds and distribution
systems.countries differ in price responsiveness and therefore set
prices differently in diff countries but legl restrictions and parallel
imports are making such strategies difficult .
Product mix pricing strategies
• Product line pricing-diff products at diff prices in a range
each offering more features than previous one.Kodak
royal gold and kodak fun time –high and low price
versions.
• 2optional product pricing-Basic price+accessories
• 3.Captive product pricing—In products razors,cameras
and computers, in services,the strategy is 2 part pricing-
a fixed fee plus charges for the calls made beyond a
numberas a variable vusage rate.
• 4.By-product pricing.Set a price for byproduct to make
the main product’s proice more competitive.
Customer types based on price and
perceived value.VALUE OF
MONEY vs VALUE OF DIFFRNCN.
• 1.PRICE BUYERS OR CREDIT BUYERS OR
COMMODITY BUYERS-diff low and vom high.Suppliers
develop multiple vendors and encourage them into
kamikaze price wars.Scream loudest and dictate
price,credit and selling strategies.Profits so low attn
unjustified but provide volume sale.
• 2.VALUE BUYERS OR VALUE LOVERS
• Best position to be as customers.Want lower
prices,longer credit where possible,more efficient
operations,superior features or services
• And wd pay faster for superior value where justified.
• From marktg pt of view,firms that attract value customers
get the loyal buyers as part of the bargainand sell to the
price buyer only when profitable and reasonable,
• LOYAL BUYERS_lovers of the care from
suppliers.
• Less concerned about price or credit.Often have
a single supplier and don’t intend to qualify
others.
• COMFORT BUYERS –lovers of convenience
• Don’t care who is supplying,what price,what
credit,as long as readily available.Most profitable
segment,but unfortunately have little brand
loyaltyand offer no SDA.
Cost based vs value based pricing
• COST BASED PRICING-setting price
based on buyers’perception of value.
• Product---cost---price---value---customer

• VALUE BASED PRICING-Setting price


based on seller’s cost
• Customers—value---price---cost---product
Place-the 3rd p of mmix
physical distribution & channel
mgmt
• Physical distribution/marktg logistics-Physical distribution
is process of delivering product to marktng channels
&consumers.Logistics has a higher scope –covers PD
plus part of task of mrktg channels
• PD takes care of transportation,ware housing and
inventory mgmt to facilitate flow of product while
channels connect the firm with its customers and thus
bring in greater value addition in delivery chain
• SCM has even higher scope encompassing the
materials mgmt task as well. Has all 5 primary activities
of value chain-both front end and back end of the
process to spread value and develop competitive edge.
Physical distribution-importance
• Ensures physical flow of product
• Confers place &time utility on products
• Helps build clientele
• Where production locations and markets
are distanced,PD becomes crucial
• A promising area of cost reduction.PD
costs are high and second only to
materials-a neglected area of cost control.
Component functions of
PD/logistics
• Planning the overall PD • Secondarytransportation,
system secondary handling
• In-plant warehousing &subdistribition
• Transportation • Inventory mgmt at each
• Field warehousing level in chain
• Order
• Receiving
processing/execution
• handling
• Accounting/record
keeping
• communication
Designing a physical distribution
system-5 steps
• 1.articulate distrbn objectives,specify the minimum
desirable service level in product delivery
• 2.find out what customers want in product delivery
• 3.Find out what competitors do
• 4.Keep the costs of the system as low as
possible,without sacrificing the guaranteed
minimum service level
• 5.keep the system sufficiently flexible.
Main tasks in transportation mgmt
• 1.Assessment of transportation
requirement
• 2.Choosing the mix of transportation
modes
• 3.Decide the routing
• 4.Develop operational plans
• 5.Implement/Review
• 6.control transportation costs
Role &importance of warehousing
• 1.Like transportation,warehousing too vests the product with time
and place utility
• 2.In some commoddities,warehousing vests the product with form
utility as well
• 3.A certain level of storage is inescapable in marketing of most
products.Storage needed in large scale for seasonal products.
• 4.sub-distribution realities also necessitate extra storage.
• 5.Storage reduces the need for instant transportation which is
difficult 7 costly.
• 6.storage is a competitive adv ,since better storage leads to better
servicing of channel and consumer.
• 7.Storage also helps in balancing demand and supply and ion
stabilising prices
• 8In some products storage by itself acts as a stimulant of demand.
Elements of inventory costs
• 1.Interest on capital tied up in the inventory
• 2.Warehouse rent,3.Staff salaries
• 4.Insurance,Rates and taxes,5.Stationery
• 6.Postage& cmmncn charges,7.Administrative OH’S
• 7,costs of handling,unloading & stacking
• 8.Loss of damages &deterioration on storage 9.Cost
of order processing /record leeping/accounting
• Optimum inventory is a compromisebetween cost &
service.
Outsourcing logistics
• Volvo-GM outsourcesmarktg logistics tying up
withFedEx. Dealers when requre spares in an
emergency call FedEx on a toll fgree no and
FedEx supplies parts by air the same night
either at dealer’s shop or at roadside at the
breakdown site.A central warehouse was set up
andsome of traditionalregional
warehouses&reduced overall inventory csotsby
15%.
• In India AFL, Elbee,& Bluedart are some of the
Airexpress Cos collaborating with manufacturers
for outsourcing
Marketing channel magmt.
Functions performed
• 1.Facilitate selling by being physically close to
customers.
• 2.Provide distribution efficiency by bridging the
manufacturer with the user,efficiently and economically
• 3.Break the bulk and cater to the tiny requirements of
buyers
• 4.Assemble products into assortments to meet buyers
needs;match ‘segments of supply ‘ with ‘segments of
demand’
• 5.look after a part of physical distribution/marktg
logistics;subdistribution—a.Reselling,b,Retransport.
C,Handling and d,Accounting---STOCK HOLDING-
a,Providing warehouse space. B,Storing the stocks.
C,bearing risks and d,Transforming static stocks
intooperational stocks,thereby aiding the sales process
Channel functions----
• 6.Share the financial burden of the
principal;Provide deposits;Finance the
stocks till they are sold to the ultimate
consumers;Extend credit to
retailers/consumers
• 7.Provide salesmanship
• 8.Provide pre and after sales service
• 9.assist in sales promos
• 10.Assist in merchandising
Channel functions---
• 11.Assist in introducing new products
• 12.Assist in implementing the price
mechanism;assist in price negigotations
• 13.Assist in developing sales forecasts/sales
plans for the territory.
• 14.provide markt intelligence & feedback.
• 15.Maintain records,16,take care of laison
needs17.Helpdiffuse innovationsamong
consumers,act as ‘change agents’and generate
demand
Alternative channel patteens
• 1Manf----M’s salesmen---User
• 2.Manf—M’s showrooms/Depots—User
• 3.Manf—Retailer—User
• 4.Manf—Franchisees—User
• 5.M—Wholesaler(stockist)/Distributor—R—User
• 6.M—W(s)/D—Semi-wholesaler—R—U
• 7.Manf—Markter—W(S)/D—SW—R---U
• 8.M—Soleselling agent—W(S)/D---SW---R--U
Steps in designing channel system
• 1.Formulating channel objectives
• 2.Identifying fubctions to be performedby the channel
• 3.Analysing the product & linking the channeldesign to
the product characteristics
• 4,evaluatingthe distribution environment,including legal
aspects
• 5Evaluating competitor’s channel design
• 6.Evaluating Co resourcesand matching channel design
to resources
• 7.Generating alternate designs,evaluating and selecting
the one that suits the firm best.
Objectives firms seek from
channels
• 1.Effective coverage of the target market
• 2.Efficient & cost effective distribution
• 3.ensuring that consumers incur minimum
exertion in procuring the product.
• 4.Helping the firm to carry on
manufacvturing uninterrupted ,confident
that channels will take care of sales
• 5.Partnering the firm in financing and sub
distribution tasks.
Types of marketing intermediates
• 1.Sole selling agent
• 2.Marketer
• 3.C&F Agent(CFA’s)
• 4.Redistribution stockists
• 5.Stockist/Whole saler/Distributor
• 6.Semi wholesaler
• 7.retailer/dealer 8.Broker 9.Franchisees
• 10Authorised reps 11Commission agents
• 12.jobbers
Linkage bet channel objectives &
channel design
• Channel objectives • Channel design
• 1.Castrol india-Locational • Vast net work of outlets—
convenience,Choice of backed by
product &Strong CFA’s/Stockists/warehou
reach;Speedy dely;Fill ses/delivery facility,1800
orders from outlets in 24 SKU’s,variety,packsizes.-
hrs. --Multi-tier design .
• 2.reliance • 2.Exclusive showrooms-
textiles(VIMAL)-Create 200nos-in all cities and
exclusive image for jumbo showrooms in
VIMAL,Cater to urban metros.outlet
markts,as per communicates.—
position.Build barriers to
comptn.
Channel design---
• 4.Archies gifts • 4.Outlets close to
&greetings— upper echelons of
Proximity to society,the TMS.Go
customers,convert for exclusive
low involvement shops/shop-in-
purchase inti shops;Trendy interior
HighIP,Make design and peppy
purchase an ambience.—Wide
enjoyable experience. range of appealing
merchandise
Channel design----
• 5,BBLIL(premerger with • 5.embrace all types
HLL)—Strong ofshops,super
reach,Provide choice of mrkts,grocery
brand,place&time utility— stores&kirana shops.A 3-
Fresh stocks to tier channel with
consumers always. CFA’s,RS’s and
R’s.Provide for proper
inventory/dely backup.At
each level minimise
distance bet issuing &
receiving points.
Channel obj’s & design----
• 3.Philips(appliances ,Pers • 3.Have a 3-tier channel of
care )—Cover mrkts CFA’s,distributors&
intensively<extensively;Af retailers(22ooR’s).Authris
ter sales servoice integral ed Philips Service
part of channels--,Build Centers(100 APSC’s) and
barriers to competitors. 4 CRC’s(consumer
response centers).60
engineers laise with
APSC’s.—Motivate
channel with guaranteed
30%ROI toAPSC’s.—
Make all strong dealers
philips dealers.
Channel design-----
• 6.Louis Philippe— • 6.Go for exclusive show
Promote as a complete & rooms,ensure full line at
premium wardrobe all outlets.Go for multi
line,with brand outlets and for
shirts,trousers,ties,socks, shop-in-shop in super
blazers,belts etc. stores like Akbar alis
• Cover the TMS(well-to-do where spl areas are
gents) adequately. provided as shop in
• Maintain an edge over shops.
comptn by competing on
quality,service,image &
value.
Channel design--
• 7.ITC tobacco division,- • Go for CFA’s and
ensure easy availability of wholesalers who
cigarettes. distribute resell to
• Build brands through retailers(8000)
advertising. • Go for different types
ofretailers,branded,traditi
onal and non traditional.
• Have branded retailers
and franchisee retailers
who sell only ITC
cigarettes and not other
brands
The promotion P—marketing
communication
• The mrktng commncn mix
• Product communicates
• Price communicates
• Place,point of sale communicates
• Promotion communicates
• -----advertising communicates
• -----personal selling communicates
• -----sales promotion communicates
• ------publicity communicates
Product communicates
• Product personality as a whole
communicates.produc t personality constitutes
various elements such as
• The physical features,the material,the
size,shape,design,the finish etc
• The package,its color,size,design &labeling
• The brand name,the co name.
• IN SHORT,THE PRODUCT SENDS OUT
MULTI-PRONGED MESSAGES
Mrktng commncn through price
cues
• Price conveys something more than price
• Price-quality equation
• Price-status equation
• Price,an indicator of technological
superiority
• Consumers’ concept of a ‘reasonable
price”
Place as a component in marktng
commncn.
• “I buy only from X store” Why?---”they have a big
choice”: “It is a lovely place to shop in”;”the service is
good”;”it is cheap”;It has a good location”;”they sell
quality products”.
• THE STORE IMAGE
• STORE LEVEL MERCHANDISING-display &
service;store is a display unit attracting high consumer
traffic.
• STORE,A POWERFUL COMMNCN
INSTRUMENT;particularly for image-led products and
brands—aesthetic display of Baccarose Cosmetics in an
aristocratic store environment –the color of the wood,the
glass fittings.etc imp.
• STORE CHOICE IS LINKED TO STORE IMAGE.
Promotion as a component in
mrktng commncn.
• PS,ADV,SP AND PUBLICITY and DM
• PERSONAL SELLING & its communicative role
• Sales man and his qualities in his role as a
communicator---
• Product knowledge &technical expertise
• Customer-salesman relatability in
age,culture,language,dress style etc.
• One who listens,communicates better
• Right sa;les message leads to effective
commncn.
Publicity-a potential tool of mrktng
commncn.
• Oversee & influence the stories/news that appear in media and
conduct publicity campaignsaround some innovations within co or
some topics of public interest like environment,health,social welfare
etc.
• SPONSORSHIP & EVENT MANGMNT are 2 most sought after tools
for creating wide publicity.
• Sponsorship-when news worthy events take place,firms associate
with such events as sponsors
• DIVERSE WAYS OF SPONSORING EVENTS
• Title sponsorship,cosponsorship,official supplier status for getting a
host of benefits & rights. Such as signage,tickets,hospitality,product
category exclusivity and the right to advertising,promotion &
publicity.Intention is to remain part of the news –creating eventand
reap the best of exposure to the firm.
Event management-a new addition
to publicity tools
• Making an event spectacular through a variety of
commncn and display techniquesis crux of event
mangmnt.
• The event can be product launch,an exhibition,a contest,
a stage show,or a sport event.idea is to capitalise on the
opportunity by converting the event itself into a grand
display.
• Event mngmnt firms do conceptualisation,program
design,logistics planning,technical planning 7 venue
mngmnt.
• To make the event spectacular,lighting,sound and spl
effects arte creatively used.to nleave a lasting
impression on the audience.
Pr-management of reputation
• Pr accomplishes the task of explaining to the
outside world about the issues that are going on
within the co.
• Good corporate reputation makes selling easier
& cheaper.It saves on advertising,and renders
every activity easier.
• Pr is more vigorous in in bad times ;for ex,in
recession,large cos often cut the ad budjet and
spend part of it on PR.
Advertising mangmnt
• “advertising” originates from the latin “adverto”which
means to turn round.
• Therefore advertising denotes the means used to draw
attention to to any object or purpose.
• In marktng, advertising is defined as “any paid form of
non-personal presentation and promotion of
ideas,goods,or services by an identified sponsor”
• Popularisation of products is basic aim of advertising and
hence rests on a thorough understanding of the buying
process-and influencing the purchase behaviour of
consumers in a way favorable to the advertiser.---
• ATTENTION<AWARENESS<INTEREST<DESIRE<ACT
ION<SATISFACTION <LOYALTY.
How does advertising influence
/persuade the buyer?
• 1.Should be of interest to the buyer
• 2.The audience should interpret the message
in the intended manner
• 3.the advertisement should influence the
audience/ buyer.eg.attitude change is a
central theme in advertising.
• Traditional theories of attitude suggest that it
is made up of 3 interrelated components-
cognitive,affective and conative.
Attitudes created by advertising---
• 1cognitive component of attitude deals with
cognition or knowledge.It is the faculty of
knowing,or percieving or concieving ideas.It is
the sphere dealing with knowledge.
• 2.The affective component deals with
affections /emotions.For ex feelings of likes and
dislikes towards objects are dealt on the
affective plane.
• 3.The conative component deals with behavior
or action.these 3 components together shape
what is known as attitude.
Theories of attitude
• Consistency theory.Man seeks consistency
,balance or harmony in his belief system.He tries
to resolve inconsistencies or imbalances
because he cannot tolerate them for long.
• When inconsistencies occur between existing
belief system and new information,to which he
gets exposed,the given attitude will tend to
change, so that the inconsistency will get
resolved.
Factors in advtng that accomplish
audience persuasion
• 1.Source/endorser of message
• 2The message structure and the message
appeal
• 1.THE SOURCE or THE ENDORSER
• A)the credibility of source
• B)Likability or attractiveness of source
• C)The source’s approach to the views and
disposition of audience.
2.The message in the ad.the
message structure and the appeal
• 1.Message structure
• A)the message sidedness
• B).order of presentation
• C)climax order,anti-climax order,pyramidal order
• D)message conclusion.
• 2.Message appeal-rational and emotional
• RATIONAL APPEALS.
• Physical feature-oriented,Function oriented,Brand to brand
comparisons
• EMOTIONAL APPEALS
• LOVE,AFFECTION,ENJOYMENT<FUN &HUMOR<SENSE OF
PRESTIGE<YEARNING FOR DISTINCTIVENESS
&LUXURY<FEELING OF ENVY,FEAR OF UNCERTAINITIES etc.
Advertisements using celebrities as
source/endorsers
• Amitab bachhan-icici bank campaign,for its retail banking.”makes
life easier”
• Mansoor AliKhan Pataudi for Gwalior suitings-well known cricketer
• Sachin Tendulkar for visa,Pepsi,and Philips
• Sunil Shetty endorses Colgate dental powder
• Sharukh Khan for Mayur suitings
• LUX uses film stars
• THE intention is to win over audience thro prestige and
attractiveness of endorser.
• MRF uses names of famous cars that are users of its tyres.The
copy showed Opel Astra,Ford Escort,and Fiat Uno.The
message”These cars ride only on MRF radials,” MRF radials-India’s
answer to world class cars.”
Rational appeal –ITC sundrop and
Zodiac shirts
• SUN DROP;”New Sundrop super refined oil offers not
just one but 4 imp health benefits-easy food
absorption,energy,heart care and vitamins.Food cooked
in Sundrop retains its natural flavour’.Copy highlighted
each of the 4 benefits
• Energy-9 k cals per gram
• Food absorption-helps the body absorb food faster as
the free fatty acid content is below 0.2%.
• Heart care-Keeps the heart strong as it contains over
60%poly unsaturated fats.
• Vitamins-Contains A, D and E.
Rational appeal-zodiac shirts.
• Why Zodiac makes the best shirts in india?
• 1.Fabrics-best,including,soft,light,long staple european 7 Egyptian
cottons,in Chambrays,Oxfords and Twills
• 2.Stitching-computerised M/cs create an almost invisible 21 stitches
per inch for max strength,others stop ay 16
• 3.Buttons-Genuine mother-of pearl,hand picked & matched.Others
use plastic buttons.
• 4.Collars use imported lining for durability.State-of –the-art fusing
eliminates warping & creasing
• 5.Style & comfort,6.collar/cuffs,7Button holes
• 8.Customer satisfactionEach Zodiac shirt reflects our chairman’s
obsession with quality and carries his personal guarantee.AMONG
THE BEST IN THE WORLD_ZODIAC.
Examples of rational appeal
• Sun drop,Zodiac
• 2.Brand to brand comparisons to convince
audience.highlight specialities,claiming superiority,name
of competing brand may be specified or implied.Eg.New
Pepsodent compared with Colgate.The claim is it is
102% SUPERIOR TO CDC.HLL compares its product
with the “leading tooth paste”Colgate Ad jingle in the
background sufficient to relate it to Colgate.
• ASCI specifies that comparative advertising –direct and
indirect, is permissible if 1.the aspects compared are
clear,2.comparisons do not confer artificial advantages
on the advertiser,3.it is factual,can be
substantiated,4.consumer is unlikely to be mislead and5.
there is no unfair denigration of the competing products.
Examples of emotional appeal
• Jenson & Nicholson ad creates a romantic setting to
drive home the elegance of J&N paints----Love at first
sight,Love ever after,Colors are like love,----J&N
colors---excitingly---beautifully---Give your home this
wonderful romance through J&N colors—
• Humour appeals-very common today,certainly attract
attention.an imp clutter breaker.Pause,read,capture the
current of fun and enjoythe message.Whether it brings
about an attitude change is debatable.It may sometimes
even distract from the central theme of message.In
addn, people tend to take such messages too lightly.But
many copywriters do use humour in their messages
Emotional appeal in ads
• Newsweek;Headline of a TIME magazine Ad reads .”If ur
ad in TIME magazine,change your ad agency”.Headline
of a subsequent Ad for NEWSWEEK;”if ur advertising
doesn’t work in TIME magazine,don”t change ur
agency,place it in NEWSWEEK”
• FORD;Subtly takes a dig at Japanese car
makers,highlighting the superiority of its
cars.s.es,ofcourse,Japanese cars are excellent—
AfterallFord motor Co taught them to make cars.In
1927,Ford started operations in Japan and installed the
first conveyors assembly line in all Asia.In fact for many
years,the Japanese word for automobiles is FORDO---”
Fear appeal in advertising
• Failure to use the advertised product might result in great
loss/damages in terms of money,health ,prestige etc.
• This fear appeal serves as stimulus for the receiver,creating a
favorable attitude towards the product.
• It may also induce the receiver to learn more about the product and
encourage him to get more info about the issue.May also create a
feeling of hostility in receiver .
• Be careful of 3 things;!Understand nature of product advertised
2,Understand attitudinal frame of target audience and 3,extent of
fear in hidden in the copy,
• Banks and insurance cos use fear appeal to evoke concern.UNITED
INDIA INSURANCE;”Today—a picture of safety---tomorrow---an
invitation to disaster.UR protection is our concern,take cover under
United India; Tonight—sleep better thsan ur neighbor.It costs so
little to insure ur household belongings”
Ad objectives—models that link
buyers attitude change and
purchase with advertising
• Some useful models;
• 1.AIDA-the 4 stage model proposed in 1920’s for any impersonal sales
presentation
• 2.5-stage & 6-stage models;proposed in 1930’s by rural socialogists
studying the process of innovation-adoption.There are 5 stages in any
adoption process-Awareness,Interest,Evaluation,trial and Adoption.Then
came 6-stage model;Awareness,Knowledge,Liking,Preference,Conviction
and Purchase.—divided into 3 main components;cognitive
component(Knowledge component-First two),Affec tive
component(emotions component-next two), and lastly conative
component(Action component-last two)
• All these mod.els belong to a class called “hierarchy of effect”models
• 3.DAGMAR..Looks at advertising as performing a commncn task and not a
sales task.
• What is required is a balancing act-advtng can not be loaded with the sales
task making it totally responsible for bringing in sales; nor can it be totally
exempted from a sales-related responsibility.
4 broad themes ad objectives
revolve around
• 1.The behavioural constructs-generating
trial purchase and store visits
• 2.Attitude-ATTITUDE CHANGE AND
ATTITUDE MEASUREMENT
• 3.Awareness-Creating awareness of new
products/brands/new ideas
• 4.Product positioning and brand building
Main decision areas in
advertising
1 deciding the advertising objectives
2.deciding the budget
3.deciding the copy
4.deciding the media.
Deciding objectives—Should they include sales growth? Or should it
have only commncn goals because ad is essentially a commncn
task?
Areas where ad objectives can be
set
• 1.introduction of new products
• 2.expansion of mrkt for existing & new products
• 3.building a long term consumer franchise for
the firm
• 4.countering competition
• 5.reminding customers
• 6.reassring customers by removing post-
purchase dissonance.
• 7.building up brand image and co image
Ad obj’s
• 8.aiding total selling function by taking customer
thro steps in purchase process-from awareness
to purchase
• 9.closing an immediate sale-’clincher ads’
• 10.supporting other sales promotion activities
• 11.stimulating ‘impulse buying’
• 12.enthusing the channel to stock the product
• 13.supporting &supplementing sale’s selling
effort and dealers’ selling effort.
Deciding ad budget
• 1.Competitive parity
• 2.Affordability
• 3.A fixed % of turnover
• 4.Budget based on functions to be performed
• 5.Regression analysis;An advanced quantitative technique to arrive
at budget.Done based on Historical data-either time series data or
cross-se4ctional data
• Time series data are records of past ad expenditures and sales over
time.Cross-sectional data are records of ad expenditure and sales
for a specific period over different markets.The aim is to predict the
dependent variable –sale or market share.Advertising expenditure
level would be one of the independent variables.The regression
coefficient crresponding to the advertising variable serves as a
measure of the short-term response to advertising.
Ad budget-the adaptive control
modeladds sophistication to budget
decision
• Ad budget decisions need updating because the relation
between advertising and sales changes over time with
the changes in makt conditions.
• The adaptive control model starts with a sales response
curve and locates an optimum level of ad
expenditure.The firm will now experiment advertising at
non –optimum levels in selected test mrktsto get more
knowledge about the sales response curve originally
set.The new info coming out of the experimental marktng
is added to the sales response function for arriving at the
current optimal advertising expenditure rate.
The compromise in ad budget
setting.consider basic q’s like
• 1.Which is the audience intended to be reached by advertising?
• 2.What is its size,location etc?
• 3.What are the media available for delivering the ad message?
• 4.Of the available media,which combination of media is likely to be
most cost effective?
• 5.To meet the given objectives,What kind of campaign is required?
What are its features?What type of endorsers are required?What is
the cost there of?
• 6.Does the campaigninvolve single release of an ad or repeat
releases?What is the frequency of releases proposed?IN OTHER
WORDS<BUDGET DECISION IS CLOSELY LINKED TO AD OBJS
<MEDIA AND COPY DECISIONS.THESE 4 INTERACT AMONST
THEM AND INFLUENCE EACH OTHER.One gets modified and
reshaped by the other.
Deciding the copy-copy refers to all
that appear in an ad –written
matter,pictures,labels,logo,and
designs
• To decide ‘copy platform’or a precise
statement of the ‘ad story’,
• 1,close interaction between advertiser and
ad agency
• 2,clear-cut ad objectives by advertiser
• 3,knowledge of market & consumer
characteristics,
• 4,nature of competition
• 5,profile of competing brands/products.
Major tasks in copy development-
1.fact finding stage and 2,idea
finding stage –alex osborn
• ‘the big idea’ in Advertising
• 1.All effective commercials have a ‘big
idea’.Says Roser reeves;The big idea in itself is
a USP.Get a big idea and say it in a simple style.
• 2.David Ogilvy says;Unless ur campaign
contains a big idea,it will pass like a ship in the
night.
• 3.Says Leo Burnett;Not only is great copy
deceptively simple,so are great ideas.And if it
takes a rationale to explain an ad,then it is too
complicated---
Ad copy-keep message simple and
short.Jack Trout
• POSITIONING-How does the mind work as it takes in,stores or
rejects ur message? The 5 elements to positioning process are
• 1.Minds are limited—too much info indigestion
• 2.Minds hate confusion.Best way to enter minds is to oversimplify ur
message,so it can slice thro all noise.Powerful mrktng commncns
focus on a single word;Crest-Cavities;Volvo-Safety.
• 3.Minds are insecure; So,use testimonials.Polls and panels create a
‘bandwagon effect’eg.Honda Accord advertises’In the 8 yrs Car &
Driver magazine has presented its 10 best list,only one car has
been chosen every time.’
• 4.Think simple..Focus on onme idea and drive into the
mind.Eliminate anything that others could claim as well as u
can.Forget anything that requires a complex analysis to prove.
• 5.Never ignore the obvious;Obvious ideas tend to be powerful
ideas,because they will be obvious to the markets as well.
Testing the ad copy-2 types
–post tests;after product
launch and pre-tests before
• 3 copy testing methods-1,lab tests,2,tests that
attempt to simulatethe natural reading or viewing
environment and3,tests done in the real/natural
environment,called market tests.
• 1.lab tests-use phisiological measuring
techniques with aids like eye-camera,polygraphs
etc.
• 2.simulated environment tests include intercept
research,mobile trailers,fixed facility
research,and in-home interviewing.
Ad copy testing-markt tests
• Markt tests also utilise several techniques.The
folio test is normally used in print media.TV
commercials are tested thro the in-home
projector vtest ,or live telecasts/on-the-air-
techniques
• The DAR test for TV commercials-The Day-after
Recall technique.The day after a TVC goes on
air,in a normal viewing situation,a sample of thre
viewers of the program is made.Those who saw
the test commercial are interviewed to find out
their ability to recall the commercial..Based on
certain steps,a ‘recall score‘is also made
Testing criteria in copy tests
• When a copy is put to test what is actually
tested?It’s ability to ensure a recall? Or its ablity
to ensure ‘recognition? Or its ability to ensure
‘persuasion’? Or someother factors?
• Same conflicts arise here as in ad objective
setting.
• A majority of tests centre on
‘attention’,’recognition’and ‘recall’ factors.The
tests are mostly concerned with commncn
effectiveness of the copy.
Deciding media-major ad media
• 1.print media
• News papers,magazines,trade
journals,direct mail
• 2.audio/visual/audio-visual/electronic
media
• Radio,television,internet,cinema,cassettes
-audio and video,outdoor.
Commonly used outdoor media
vehicles
• Hoardings ,posters
• Neon signs and other illuminations,
• Transit advertising(railways ,Other transport
• Fairs and exhibitions
• Amusement parks
• Dance,drama and puppet shows
• Loud speaker announcements
• Ballooons and sky writings
Internet advertising-unilever,revlon
&pond’s
• Unilever-had a 3yr vdeal with america Online Incto advertise scores
of its brands online.It also signed a separate deal with microsoft
Corp to advertise on Microsoft’s online servicesand to develop new
interactive soft ware for advertising,
• Revlon;Its website has an interactive page;’Virtual faces-Try A new
Look’where a customer can try out different shades(from Revlon’s
latest Laven Dare and Fleshtones collections)on virtual faces on the
screen and choose suitable shades.The person is then given a
personal color consultation,a print out of which can be taken to the
retail store and pick up the products recommended.
• Another web page is ;Revlon Give Aways.Customers fill in a
questionnaire and offers coupons for select products.Revlon also
offers self-care tips (on manicure etc )and info on fragrances.
Pond’s website
• Pond’s interactive site is positioned as a
one-stop site for skin-care tips and Pond’s
products.While other sites concentrate on
co-specific product oriented info,pond’s
attempted to give general info and advice
on common skin-care problems to make it
universal.
• Pond’s took 1 yr and invested more than
Rs 1 crore in the project to start with.
Advertising thro cassettes-
electrolux’s venture with Venus
Tapes
• The co tied up with music & film producing co Venus
Tapes & Records for promoting its brands
• Alwyn,Voltas,Maxclean,& Kelvinator.
• The Rs 2.5 crore deal enables the co to advertise its
brands thro audio,video cassettes & CD’s produced by
VENUS
• The tie-up will ensure insertion of E’s audiojingles in
each and every Venus cassette..Venus will also insert
E’s TVC in its video cassette and VCD’s for a total
duration of 5 minutes
• Scope wide since e’s Ads can be carried on a minimum
of 40 mn cassettes & CD’s during the contract.
Measuring TV viewership(TRP)
• Television Rating Point (TRP) is ca measure of the
viewership level of the program.It reveals % of audience
tuned to a program.
• TRP system involves collection of viewership data on a
weekly basis from a panel of TV viewers in select market
territories,Viewership figs are presented as % of total tv
audience with 1 TRp representing 1% of audience.
• EG.A serial on ZEE TV has a viewership of 11.5%among
a sample of men of age 25 plus in Mumbai’s C&S homes
While Zee News had just 0.2%viewership.That means
the serial has a TRP of 11.5 and Zee News has a TRP of
0.2.
GRP=TRP*No of times the spot is
aired
• $ spots on a program with a TRP of 20 yield a GRP of 80.Programs are
compared on basis of cost per rating point=ad tariff divided by TRP.
• TRP measurement; Diary system,people meter and Laser meter.
• Diary system is the most common,It is a system of program recall by panel
members who are supposed to keep a diary on what they watch.
• The people meter is a mechanical device ,which records when the tV set is
on and which member of the family is watching at a particular point.The
viewer has to clock in by pressing a button.
• The Laser meter is a more advanced device.It automatically records the no
of people present in aroom thro heat sensors
• Laser meter overcomes the limitations of both the previous devices.which
demand the active and timely participation of panel members.If the viewer
forgets to clock in or make timely notingsin the diary,then projections
become unreliable in case of people meter and diary system respectively.
Competitive strategies-building
competitive advantage/edge or
differential advantage
• CA or CE is an advantage over
competitors gained by offering consumers
greater value,either through lower prices
or by providing more benefits that justify
higher prices.
• Marketing strategies must consider (1) not
only the needs of target consumers (2) but
also the strategies of competitors
2 steps for building CA
• 1.competitor analysis-identifying and assessing
key competitors
• 2,developing competitive marketing strategies
that strongly position the Co against competitors
and give it the greatest possible competitive
advantage.
• COMPETITOR ANALYSIS-the process of
identifying key competitors,assessing their
objectives,strategies,strengthe and weaknesses
and reaction patterns and selecting which
competitors to select or avoid.
Steps in analysing competitors
• 1,identifying the Co’s competitors
• 2,determining competitors’ objectives
• 3,identifying competitors’ strategies
• 4,assessing competitors strengths and
weaknesses
• 5,estimating competitors’ reactions
• 6,selecting competitors to attack and
avoid.
1.Identifying Co’s competitors
• A.Co’s offering similar products and services to same
customers at same places and similar prices—Eg,Coca
Cola vs Pepsi Cola; For Buick Ford is a major
competitor not Mercedes
• B.competition at a wider level-All firms making the same
product or class of products.Eg.Buick competes with all
other auto makers
• C. competition at a more broader level—Even co’s that
supply same service such as makers of trucks,motor
cycles,even bicycles
• D.Even more broadly,Competitors might include all Co’s
that compete for the same consumer dollars.Eg Buick’s
competitors can include all Co’s that sell major
consumer durables ,new homes et
Well-behaved or disruptive
competitors
• Benefits of competition-1.Increase total demand ,
2.Share costs of market and product development
3,Legitimise new technology 4,May serve less
attractive segments 5,lead to more product
differentiation 6,Improve bargaining power against
labor.
• WELL –BEHAVED COMPETITORS—1,Play by rules
2,Favor a stable and healthy industry,3.Set
reasonable prices in relation to costs 4,motivate
others to lower costs & improve differentiation
5,Accept reasonable levels of MS & profits.
Disruptive competitors
• 1.break the rules
• 2.buy shre rather than earn3.take large risks
• 4,in general shake-up the industry
• Eg.American Airlines finds Delta & United to be
well-behaved,but finds TWA,Continental &
America westdisruptive since they de stabilise
airline industry thro continued heavy price
discounting and wild promotional schemes.
Competirive strategies-M Porter’s 3
winning competitive strategies
• Over-all cost leadership-Texas Instruments & Wall Mart
• 2.Differentiation-Highly different product line-IBM and Caterpiller
• 3.Focus.Serve a few markt segments well.Glass maker
AFGIndustries makes 70% of glass for microwave oven doors,and
75% of glass for shower doors(TEMPERED AND COLORED
GLASS)
• Cos pursuing a clear strategy (one of the above) perform
well.Middle-of –the-roaders like Sears,Chrysler,& International
Harvester suffered the worst as they didn’t stand out as 1,the lowest
in cost,or 2,highest in percieved value
• Or 3,best in serving some market segments.
• Middle-of –the-roaders try to be good on all strategic counts but end
up not being very good at anything.
Disruptive competitors
• 1,Break the rules
• 2,Buy share rather than earn
• 3,take large risks
• 4.In general shake-up the industry.
• EG,American Airlines finds Delta & United to be
well-behaved,but finds TWA,Continental &
america West disruptive since they destabilise
airline industry through continued heavy price
discounting & wild promotional schemes
Competitive strategies-michael
Porter’s 3 winning comp strategies
• 1.Over all cost leader ship-Texas
Instruments and Wall mart
• 2,Differentiation-highly differentiated
product lines –IBM,Caterpiller,Lever etc.
• 3,Focus-Serve few market segments
well.Glass maker AFG Industries makes
70% of glass for micro wave oven
doors,and 75% of glass for shower
doors(tempered and colored glass)
Comp strategies---
• Co’s persuing a clear strategy (one of the
above) perform well.Middle-of-the-roaders like
sears,Chrysler & International harvester suffered
the worst because they didn’t stand out as the
• Lowest in cost
• Or highest in perceived value
• Or best in serving some market segments.
• Middle-of-the-roaders try to be good on all
stategic counts but end up being not very good
at anything.
Competitor myopia
• Kodak was worried of Fuji. But real competition was from
film less cameras sold by Cannon & Sony that take video
still pictures that can be shown on a TV set turned into
hard copy
• IDENTIFY COMPETITORS
• BY linking industry
• And by market analysis by mapping out product/maket
segments
• 1.From industry point of view-Coke’s competitors are
Pepsi,7-Up,Dr pepper
• 2.From market point of view-Coke’s competitors are
“thirst quenchers” such as iced tea,friit juice,bottled water
etc,
Customer segmentation
• children/teens • Age19-35 36+
• Plain tooth paste • CP&P&G CP&P&G
CP,P&G
• Tp with fluoride-CP,PG
• CP&PG CP,PG
• GEL-CP,PG,LEVER

• CP,PG,LEVER
• STRIPED-Beecham andcp,pg,lever
• Smoker’s TP---------- • Beecham beecham
• Topol topol
Identifying competitors---
• P&G with several versions of Crest & Gleam and
CP with Colgate occupy 9 of the segments
• Lever Bros with Aim occupy 3
segments,Beecham one(AquaFresh) and Topol
two.
• If Topol wants to enter other seg bments it must
estimate the market size of each segment,the
shares of current competitors,and their current
capabilities,objectives and strategies.
• Each product/Markt segment poses different
competitive problems and opportunities.
2.Determine competitors’ objectives
• What drives each competitor’s behaviour?
A,short term vs long term profits? B,satisfactory
profits or maximise profits?
• C what goals beyond profits?
• Know relative impotance of each competitor for
a,current profitability,b.MS growth c.cash
flow,d.tech leadership.f.service leadership and
other goals.
• Judge competitive actions-Likely to pursue Low-
cost production strategy?or Ad promotion
strategy?
3.Identify competitors’ sytrategies
• Strategic group-A group of firms in an industry following
same or similar strategy.Ex.GE,Whirlpool,Maytag in
home appliances industry form a strategic group offering
a full line of medium price appliances plus good sevices.
• Sub-Zero and Kitchen Aid belong to a different group-
offering a narrow line of higher quality at a higher
price.but with a higher level service.
• If a Co enters one of the groups, it becomes a member
of others key competitors,
• It can succeed conly if it develops some strategic
advantage over these competitors.GE now offers a
premium quality premium price line to compete with
Kitche Aid and Sub-Zero.
Look at all dimensions of
competitors’ strengths
• Know each competitors’
• Product quality
• Features & mix.
• Customer services
• Pricing policy,
• Distrbution coverage
• Sales force strategy,
• Ad &sales promo programs.Also study each
competitor’s
R&D,Manufacturing,Purchasing,Financial,Manpo
wer & other strategies.
4 assessing competitors’strengths
& weaknesses
• What can our competitors do? Find their
goals,strategies,& performance over last few
years
• Collect info from secondary data,personal
experience & hearsay.
• Bench mark compare vyr Co’s products
,services and processes to those of competitors
or leading firms in other industries to find ways
to improve Q and performance.
• BENCH MARKING iS A POWERFULTOOL FOR
INCREASING A CO’S COMPETITIVENESS.
5 estimating competitors’ reactions
• What will our competitors do? SWOT analysis can help
us know their recations or actions.
• Each has a philosophy,a culture,guiding principles and
beliefs
• Each competitor reacts differently
• Some don’t react quickly/strongly.Some react only to
price-cuts,others only to Ad promos!
• Some competitors don’t show any predictable reaction
pattern.
• P&G is a fierce reactor.No new competitor wd like to
fight directly with P&G,who doesn’t let a new comer into
the detergent mrkt.
6,selecting competitors to attack
and avoid.(A).Strong or weak
(B)Close or distant competitors
• 1.Strong or weak.Assess strength by “customer
value analysis”-what benefits target customers
value and how they rate the relative valueof
various competitors ‘offers.
• The key to gaining competitive adv is to take
each customer segment and examine how the
the Co’s offer compares with that of its major
competitor.If Co’s offer exceeds that of major
competitor,on all key attributes,Co can charge
higher prices and earn higher profits or charge
same prices and get higher share,
2.Close or distant competitors
• Most want to compete with competitors who
resemble them most.Eg.Chevrolet competes
more with Ford than Jaguar
• A Co may also want to avoid trying to destroy a
close competitor.Eg. Bausch7 Lomb attacked
othersoft lens manufacturers but these were
forced to sell out to larger ones such as Revlon
& Johnson& Johnson.B&L now faced larger
competitors like J&J and faced the
consequences.
Hypothetical market structure
• Mrkt leader-40%
• Challenger-30%
• Follower-20%
• Nicher-10%
• MARKET LEADER STRATEGIES
• Competitors focus on the leader as a Co to
challenge,imitate or avoid.
• Leaders keep
• A constant watch
Leaders’ strategies
• A product innovation may come along and hurt the
leader .Ex.Tylenol’s non-aspirin pain killer took the lead
from baeyer”s aspirin .
• The leading firm might grow fat & slow ,losing against
new & peppier rivals.Xerox’s share came down from
80% to 35%,when Japanese producers challenged with
cheaper & more reliable copiers.
• SOME BEST KNOWN LEADERS ARE
• GM in autos,Kodak in photography,IBM in
computers,COCA Cola in soft drinks,WaLL MART in
retailing,Mc Donald’s in fast food,And Gillette in razors
and blades.
3 actions for leader to remain no 1-
• 1.Expand total market
• 2.Protect MS thro defensive and offensive actions
• 3.Expand MS further even if mrkt size remains same or even
declines.
• 1.EXPANDING THE TOTAL MARKET
• A.Find new users.Some customers are still unaware and some
resist on price or features.Ex Revlon’s perfume.Opened virgin mrkt
by convincing women who don’t use perfumes, and also looked at
other demographics by producing cologne for men,and
geographically by selling perfumes in other countries.
• Johnson’s baby shampoo Ad campaign aimed at adults and it soon
became a leading brand total shampoo market.
Leader’s actions---
• B.Find new uses.Eg.Dupont’s Nylon
• Fiber for parachutes
• Womens’ stockings
• Major matl in shirts/blouses
• Automobile tyres
• Upholstery and carpeting
• ARM&HAMMER baking soda as refrigerator
deodorant-by heavily advertising to put an open
box of baking soda in Fridge,
Leader’s 3 actions
• C.more usage;Convince people to use
more often or more per
occasion.Eg.Colgate tooth paste.Head &
Shoulders shampoo;more effective with 2
applications instead of one per shampoo.