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Ref: Chapter 1 of Core Text

1. Marketing is the creation and delivery of a standard of living. 2. Marketing is a managerial and societal process by which individuals and groups obtain what they need and want through creating, offering, and exchanging products and services of value with others.

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

Marketers are involved with marketing ten types of entities:


1. Physical Goods 2. Services

3. Experiences 4. Events

5. Persons 6. Places 7. Properties 8. Organizations 9. Information 10. Ideas

Good Marketing is No Accident


The roaring success of four-wheeler Tata Ace, in a market earlier dominated by threewheeler load carriers, was due to a deep understanding of the market needs and customer requirements Big on technology. Small in size

Tata Ace, a mini truck with the engine capacity of less than one ton launched by Tata motors in 2005. The resounding success of Tata ace was due to deep understanding of the market needs and the customer requirement. The company realized that, as the Indian economy was growing, there would be for smaller vehicles that can navigate through the narrow roads and by lanes of city, small towns and village

In order to compete effectively with three wheeler majors who dominated the market of small payload vehicles, the company needed to offer better solution to the customer. The solution lay down in the market, and that is where the engineers went- to talk the transporters, the small traders and the farmers- to learn what they wanted. Discussion with potential customer and detailed marker research indicated that potential customer needed vehicles for last mile distribution for carrying less than one ton load over short distances.

Customer were willing to pay a marginally high price for such product. But what come out more strongly was the social status associated with four wheeler. Based on customer insight, the company decided to introduce a vehicle positioned as a Tata truck in mini size with competitive price tag while maintaining higher quality standards. Within 22 month of launch of vehicle, the company rolled out the 1,00,000th ace , surpassing the company optimistic target

Marketers and prospects A marketer is someone who seeks a responseattention, a purchase from other parties called prospect. If two parties are seeking to sell something to each other, we call them both marketers

Market It is collection of buyers and sellers who transact over a particular product or product class

A Simple Marketing System

1-

Structure of Flows in a Modern Exchange Economy

Key Customer Markets


Consumer Markets Global Markets

Business Markets

Nonprofit/ Government Markets

www.marutitruevalue.com

Functions of CMOs
Strengthening the brands Measuring marketing effectiveness Driving new product development based on customer needs Gathering meaningful customer insights Utilizing new marketing technology

Improving CMO Success

Make the mission and responsibilities clear Fit the role to the marketing culture and structure Ensure the CMO is compatible with the CEO Remember that show people dont succeed Match the personality with the CMO type Make line managers marketing heroes Infiltrate the line organization Require right-brain and left-brain skills

Needs, Wants and Demand Needs are basic human requirement Wants are needs directed to a product Demand is a want accompanied by buyers ability to pay. Today the challenge for the marketer is that of converting needs to wants to demands

Marketers don't create needs: Needs preexist markets. Marketers along with other societal factors, influence wants. Five type of needs 1.Stated need(the customer wants an inexpensive car) 2.Real needs(the customer wants a car whose operating cost is low) 3.Unstated needs(the customer expects good service from dealer) 4.Delight needs 5.Secret need (the customer wants friends to see him as a savvy consumer)

Target Markets, Positioning and Segmentation A marketers can rarely satisfy everyone in the markets. Marketers start by dividing the market into segments. They identify and profile distinct groups of buyers who might prefer or require varying product mix by examining demographic, psychographic, and behavioral differences among buyer

After identifying market segments, the marketer then decides which present the great opportunity-which are its target market. For each, the firm develops a market offerings ie positions in the minds of the target buyers as delivering some central benefits E.g. Scorpio (SUV) launched by M&M is designed for people who prefer sturdy vehicle that offers luxury and comfort

Offerings and Brands Company address needs by putting forth a value proposition(functional, emotional and self expressive benefits) A brand is an offering from a known source. the brand name carries many associations in peoples mind that make up the brand image

Positioning

Press ads of the Scorpio focused on the functional features of the vehicle and the television ads focused on emotional benefits.

Value and Satisfaction The offering will be successful if it delivers value and satisfaction to the target buyer. The buyer choose between different offerings based on she perceive to deliver the most value Value reflects the sum of the perceived tangible and intangible benefits and costs to the customer

Value is a composition of of quality service and price (QSP) called the customer value triad Value increases with quality and service and decreases with price although other factors can also play an important role in our perception of value Marketing can be considered as identification , creation , communication delivery and monitoring of customer value.

Satisfaction reflects person judgments of a product perceived performance in relationship with expectations. If performance falls short of expectation he customer is dissatisfied and disappointed. If it matches expectations, the customer is satisfied, if it exceeds them, the customer is delighted.

Marketing channels To reach a target market, the marketers uses 3 kinds of marketing channels Communication channels deliver and receive message from target buyers and include newspaper, magazines, radio, tv, billboard and internet. Distribution channels is used to display, sell, or deliver the physical product or services to the buyer or user.

It include distributors,wholesalers,retailers and agents. Service channels is used to carry out transactions with potential buyers. It include warehouses, transportation companies, banks, and insurance companies that facilitate transactions.
Marketer face a design challenge in choosing the best mix of communication, distribution, and service channels for their offering.

Supply Chain The supply chain is a longer channel stretching from raw materials to components to final products that are carried to final buyers Each company captures only a certain percentage of the total value generated by supply chains value delivery system.

When a company acquires competitors or expands upstream or downstream, it aim to capture a higher percentage of supply chain value.

Competition Competition includes all the actual and potential rival and substitute a buyer might consider Marketing Environment It consists of the task environment and broad environment The task environment includes the actor engaged in producing, distributing, and promoting the offering

These are company suppliers, distributor dealers, and the target customers. In the supplier group are material suppliers and service suppliers, such as marketing research agencies, ad agencies, banking and insurance companies and transportation companies. The broad environment consists of six components: demographic environment, political-legal environment and socio cultural ,technical, natural and economic

The marketplace isnt what it used to be


Information technology Globalization Deregulation Privatization Competition Convergence Consumer resistance Retail transformation

New Consumer Capabilities

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

The Production Concept It holds that consumers will prefer product that are widely available and inexpensive. Manager of production oriented business concentrate on achieving high production efficiency, low costs and mass distribution This orientation make sense in developing country

The Product Concept It proposes that consumers favor products that offer the most quality, performance, or innovative features. Manager in these organization focus on making superior product and improving them over time. But a new or improved product will not necessarily be successful unless its priced, distributed, and sold properly.

The selling concept This concept holds that a organization must undertake an aggressive selling and promotion effort. The selling concept is practiced most aggressively with unsought goods, goods that buyer normally dont think of buying. Most firm also practice the selling concept when they have over capacity. Their aim is to sell what they make, rather than what the market wants.

The Marketing Concept The marketing concept holds that the key to achieving organizational goals is being more effective than competitors in creating, delivering, and communicating superior customer value to your chosen target market.

Holistic Marketing Dimensions

The holistic marketing concept is based on development, design ,and implementation of marketing programs, processes, and activities that recognizes their breadth and interdependencies. It is an approach that attempts to recognize and reconcile the scope and complexities of marketing activities

Relationship Marketing Marketers must respect the need to create prosperity among all these constituents and develop policies and strategies to balance the returns to all stakeholders To develop strong relationships with these constituents requires an understanding of their capabilities and resources, as well as their needs, goals, and desires.

The ultimate outcome of relationship marketing is a unique company assets called a marketing networks. A marketing networks consists of the company and its supporting stakeholders-with whom it has build mutually profitable business relationships The operation principle is simple:build an effective network of relationships with key stakeholders, and profits will follow. Attracting a new customer may cost five time as much as doing a good enough job to retain an existing one.

Integrated Marketing The marketers task is to devise marketing activities and assemble fully integrated marketing programs to create, communicate, and deliver value for customer. McCarthy classified these activities as marketingmix tools of four broad kinds, which he called 4ps of marketing: product, price, place, and promotion.

The Four Ps

The firm can change its price, sales force size, and ad expenditures in the short run.it can develop new product and modify its distribution channels only in long run. The four ps represents the sellers view of marketing tools available for influencing buyers From buyers point of view, each marketing tool is designed to deliver a customer benefits. A complimentary breakdown of marketing activities has been proposed that centers of customer four dimensions are (SIVA) solution, Information, Value and access

Internal Marketing It ensure that everyone in organization embraces appropriate marketing principles, especially senior management. It is the task of hiring , training, and motivating able employees who want to serve customer well. Smart marketers recognize that marketing activities within the company can be more important than marketing activites directed outside the comapany It make no sense to promise excellent service befor the companies staff is ready to provide it.

Performance Marketing It is understanding the returns to the business from marketing activities and programs as well as addressing broader concerns and their legal, ethical, social, and environmental effects Top management is going beyond sales revenue to examine the marketing score card and intreprete what is happening to market share, customer loss rate, customer satisfaction, product quality, and other measures

Financial Accountability Marketers are being increasingly asked to justify their investments to sinior management in financial and profitability terms, as well in terms of building brand and growing customer base. They are applying broader variety of financial measures to assess the direct and indirect value their marketing efforts create.

Social Responsibility Marketing The effect of marketing clearly extend beyond the company and the customer to society as a whole. Marketers must carefully consider their role in broader terms, and the ethical, environmental, legal, and social context of their activities The societal marketing concept holds that the organizations task is to determine the needs , wants, and interest of the target market and to deliver the desired satisfaction more efficiently and effectively than competitors in away to preserve or enhances the consumers and society long term well being.

Marketing Management Tasks


Develop market strategies and plans Capture marketing insights Connect with customers Build strong brands Shape market offerings Deliver value Communicate value Create long-term growth

Understanding the behavior of key environmental forces that have an implications on marketing decisions. Grasp the technique available for environmental scanning. Some important macro economic development.

It is very important for the marketer to monitor the environmental forces and take necessary steps to negate/take advantage of them before competition In India many industries lost their competitive advantage to relatively new entrant in 1980 and thereafter HM and premier automobiles lost their pre eminent position in the Indian market to Maruti 800

Titan watches herald a new era of watches and shock the giant HMT. Today south Korean brand LG and Samsung are the principal players leaving behind the Indian Companies like Videocon. Analysis of the external environment consists of identification of opportunities and threats and tracking it to particular sources. E.g. A small family with a one child means the emergence of a child market where all parental attention is focused on this child

1.Fad A fad is unpredictable, short-lived, and without social, economic and political significance. A company can cash in on a fad, but getting it right is more a matter of luck and good timing than anything else.

2.Trend A trend is a direction or sequence of events that has some momentum and durability Trends are more predictable and durable than fads. A trend reveals the shape of future and provide many opportunities. E.g. physical fitness.

3.Megatrends It is a large social, economic, political, and technological changes that are slow to form, and once in place, they influence us for some time 5-10 years. E.g. young employees companies and their suppliers, marketing intermediaries, customers, competitors, and public all operate in a macro environment of forces and trends, increasingly global that shape opportunities and poses threats

Environmental Forces
Demographic
Political-Legal Economic

Technological Natural

Socio-Cultural

The main demographic force that marketers monitor is population, because people make up the markets. Marketers are keenly interested in the size and growth rate of population in cities, region, and nations; age distribution and ethnic mix; educational level; household patterns; and regional characteristics and movements

a)Age composition a marketer needs to understand the age composition in a country. This will help them to decide their optimal marketing mix and also take strategic decisions regarding entering a particular market segment. E.g. about 72% of Indian market is a young market consisting of people in the age group of 5-44 years

b) Sex structure of population and role of women Besides the age , it is necessary to break up population according to sex and study the role of women in Indian society. E.g. more and more women have taken to working and to professional careers and hence one observes an increase in the no. of working couples To help her and the family, many time-saving appliances like cooking range , washing machine, vacuum cleaner, as well ready to eat foods are available in the market.

c) Role of Man Today man is perceived as more caring, concerned and sensitive. He is continuously searching for new avenues of growth for himself and other family member His relation with his family, peer group, and opposite sex, has changed. He perceives entertainment as very important for the family, so long as it does not lead to extravaganza.

d)The new urban child This child is more responsible, disciplined, careerminded, and conscious for family values. He or she has a role in the purchase and consumption of all products and services. A highly ambitious, confident, and aware child, dreams for becoming rich and famous like D Ambani, s tendulakar or Bill gates, therefore role models are parents, the rich, and celebrities. Fashion plays an important part. But for him, adopting fashion product is dependent on the peer groups influence.

e) Occupation and Literacy profile A major determinants of market structure in counties like india is the literacy rate of the population, this is so because it affects the demand for information and also the quality of demand for other products and services. As in 2001, about 65.4% of Indian were literate.75%of Indian males were literate as opposed to 54% of women. the Indian market has been on ascent so far as literacy is concerned. The occupational profile of the population also affects the media choice and product demand, E.g. a shirt or suiting exclusively for the professional executive sells best when advertised in business magazines

The available purchasing power in an economy depends on current income, prices, savings, debt and credit availability Marketer must pay attention to ternds affecting purchasing power because they can have strong impact on business, especially for companies whose product are geared to high-income and price sensitive consumers

The economic environment affects the demand structure of any industry or product. in order to assess the impact of these forces. It is necessary that a marketer examines the following factors in great detail. Gross National Product Per capita income Balance of Payments Position Trends the prices of goods and services

Income Distribution A marketer needs to understand the distribution of income to reach more meaningful conclusions about taking specific decisions. 77.7% of urban households in India have a monthly income of up to Rs 3000.Urban households with a monthly income between Rs3001 and 6000 are estimated to about 16.2% and another 4% with a monthly household income of Rs 60001- 10,000. Only about 2.15 of urban household have monthly income of over Rs 10000.

The NCAER has classified Indian consumers into 5 categories according to annual house hold income Destitute :Below Rs 16,000(Not active Participant in market exchange for a wide range of goods) Aspirants: Between Rs 16001 and 22,000(New entrant in consumption system due to increase in their real income) Climbers :Between Rs 22001 and 45000(Have desire and willingness to buy, but have limited cash at hand) Consuming Class: Between Rs 45000 and 215000 (household that form the majority of consumers; have money and willing to spend) Very rich : Over Rs.2,15,000(those who have money and own a wide range of products)

The no. of households classified as the rich is estimated to grow by 95% from the year 95-96 to 2006-2007, the consuming class by 132%, and the climber class by 51%. The percentage of aspirants is expected to decline by 54% and the destitute by about 50% The rich class in urban areas is estimated to increase by 400%, where as rural India indicate a growth of 200% The climber are estimated to grow by 145% in urban areas and by 119% in rural areas. It is expected that the urban areas are likely to register a sharper reduction in households belonging to the aspirants and destitute category than the rural areas.

Cultural forces are the most difficult uncontrollable variable to predict. It is important for marketer to understand and appreciate the cultural values of the environment in which they operate. The element that build up the cultural environment are Language, aesthetic(art, drama, music, folk), Religion and education. Changes in cultural environment affect consumer behavior, which affects sales of products. Culture has a large impact on the consumption habit of people. since culture is homogeneous within a group. so there is similarities in choice which need to be paid attention by marketing manager E.g. Mc D, KFC, Kelloggs

The deterioration of the natural environment is a major global problem. There is a great concern about Green House Gases in the atmosphere due to burning of fossil fuels. About the depletion of the ozone layer due to certain chemical and global warming and about the growing water shortage.

The campaign against Coca-cola by the local community in Kerla, alleging the environmental deterioration and shortage of drinking water in the vicinity of the plant, is an example of the increasing environmental consciousness. Steel companies and public utilities have had to invest billions of dollars in pollution-control equipment and more environmentally friendly fuels. The soap industries increased its product biodegradability.

Every new technology is a force for `creative destruction` transistor hurt vacuum tube industry, Xerography hurt the carbon paper business. Marketer should monitor the following four trends in technology: A) accelerating pace of change Many of today's common products were not available 40 years ago. Electronic researchers are building smarter chip to make our cars, homes and office connected and more responsive to changing conditions

b) Some of the most exciting work today is taking place in biotechnology, computers, microelectronics, telecommunication and designer materials c)Varying R&D Budgets Increasing opportunities emerging as a result of globalization are forcing many companies in South Asia to increase their R&D efforts. d)Increased regulation of technological change Gov. has expanded its agencies power to investigate and ban potentially unsafe product

It consists of laws, government agencies, and pressure group that influence and limit various organization and individuals. These laws sometimes also create new opportunities for business.e.g. Recycling Major trend in political legal environment are

a)

Increase in business legislation Its main purpose are to protect companies from To protect consumers from unfair business practices To protect the interests of society for unbridled business

b)Growth of special interest group in order to protect interest of consumer Gov. passed legislation consumer protection act 1986. under this act following 6 rights of consumer were recognized safety Information Choice Representation Redressal Consumer education

a)Choosing the Value It represents a `homework `marketing must do before product exist The marketing staff must segment the market, select the appropriate market target, and develop the offering value positioning by STP. b)Providing the value Marketing must determine specific product features, prices, and distribution. c)Communicating the value By utilizing the sales force, sales promotion, ad and other communication tools to announce and promote the product

Three Vs Approach to Marketing


Define the value segment

Define the value proposition

Define the value network

Michael Porter of Harvard has proposed the value chain as a tool for identifying ways to create more customer value. According to this model, every firm is a synthesis of activities performed to design, produce, market, deliver, and support its product. The value chain identifies nine strategically relevant activities-five primary and four support activitiesthat create value and cost in a specific business.

The primary activities are inbound logistics or bringing materials into business; operations or converting them into final products; outbound logistics or shipping out final products; marketing theme, which includes sales; and serving them. The support activities-procurement, technology development, human resource management , and firm infrastructure-are handled in specialized department The firms task is to examine its costs and performance in each value-creating activity and to look for way to improve it Managers should estimate their competitors costs and performances as benchmark.

Core Business Processes


Market-sensing process New-offering realization process Customer acquisition process Customer relationship management process Fulfillment management process

Successful marketing requires companies to have capabilities such as understanding customer value, creating customer value, delivering customer value, capturing customer value, and sustaining customer value. To ensure that they select and execute the right activities, marketers must give priority to strategic planning in three key area

Managing companies business as an investment portfolio. Assessing each business`s strength by considering the market growth rate and the company position and fit in that market. Establishing a strategy . For each business, company must develop a game plan for achieving its long run objective.

Most

large companies consist of four organizational levels: The Corporate level The Division level The Business Unit level The Product level

Corporate HQ is responsible for designing a corporate strategic plan to guide the whole enterprise. It make decisions on amount of resources to allocate to each division, as well as on which businesses to start or eliminate. Each division establishes a plan covering the allocation of funds to each business unit within the division. Each business unit develops a strategic plan to carry that business unit into a profitable future. Finally each product level(product line, brand) within a business unit develops a marketing plan for achieving its objectives in its product market.

The marketing plan is the central instrument for directing and coordinating the marketing effort. The marketing plan operate at two level a) Strategic marketing plan b) tactical marketing plan. The strategic marketing plan lays out the target markets and value proposition , the firm will offer based on the analysis of best market opportunities. The tactical marketing plan specifies the marketing tactics, including product features, promotion merchandising, pricing, sales channels and service

The Strategic Planning, Implementation, and Control Processes

All corporate HQs undertake 4 planning activities 1. Defining the corporate mission 2. Establishing strategic business units 3. Assigning resources to each SBU 4. Assessing growth opportunities

5.

An organization exists to accomplish something: to make car, lend money and so on. Organizations develop mission statements to share with managers, employees and in many case customers. A clear, thoughtful mission statements provides employees, with a shared sense of purpose, direction and opportunity. Mission statements are at their best when they reflect a vision , an almost `impossible dream` that provide a direction for the company for next 10 to 20 years

Peter Druckers Classic Questions:


1. What is our business? 2. Who is the customer? 3. What is value to the customer? 4. What will our business be? 5. What should our business be?

Good Mission Statements


Focus on limited number of goals Stress major policies and values

Define major competitive spheres


Take a long-term view Short, memorable, meaningful

Major Competitive Spheres


Industry
Geographical Vertical channels Market segment Products

Competence

Infosys Technologies Limited

To achieve our objectives in an environment of fairness, honesty, and courtesy towards our clients, employees, vendors, and society at large.

Biocon

To be an integrated biotechnology enterprise of global distinction.

Copyright 2009 Dorling Kindersley (India) Pvt. Ltd.

2-96

eBay

We help people trade anything on earth. We will continue to enhance the online trading experiences of allcollectors, dealers, small businesses, unique item seekers, bargain hunters, opportunity sellers, and browsers.

Product Orientation vs. Market Orientation Company


Xerox

Product
We make copying equipment
We make movies We sell encyclopedias

Market
We improve office productivity
We entertain people We distribute information

Columbia Pictures Encyclopedia Britannica

Carrier

We make air conditioners and furnaces


Copyright 2009 Dorling Kindersley (India) Pvt. Ltd.

We provide climate control inside homes 2-98

Companies often define their business in the terms of products , but company must see their business as a customer satisfying process, not a goods producing process Product are transient; basic needs and customer groups endure for ever. A target market definition tends to focus on selling a product or service to a current market. Pepsi could define it target market as everyone who drink cola beverage and competition would therefore be other cola company. A strategic market definition, however focuses also on the potential market If Pepsi considered everyone who might drink something to quench their thirst, their competition would include noncola soft drinks, bottled water, fruit juices, tea and coffee.

Large companies normally manage quite different businesses, each requiring its own strategy, each different business unit is called Strategic Business Unit.(SBU). An SBU has three characteristics 1. Its is a single collection of related businesses, that can be planned separately from the rest of the company. 2.It has its own set of competitors 3.It has a manager responsible for strategic planning and profit performance, who controls most of the factors affecting profits

The purpose of identifying the companies strategic business units is to develop separate strategies and assign appropriate funding Senior manager knows that its portfolio of business usually includes the number of `yesterday has beens` as well as tomorrow breadwinners` Yet it cannot rely just on impressions; it needs analytical tools for classifying its business by profit potential Two of the best known business portfolio evaluation models are the BCG Model and GE model

The Boston Consulting Group (BCG), a leading management consulting firm, popularized the growth-share matrix. The eight circles represent the current sizes and positions of eight business unit in hypothetical company The dollar volume size of each business is proportional to circle area Location of each business unit indicates its market growth rate and relative market share The market-growth rate on the vertical axis indicates the annual growth rate of the market in which the business operates. The relative market share, measured on the horizontal axis, refers to the SBUs market share relative to that of the largest competitor in the segment. A relative market share of 0.1 means that the company`s sales volume is only 10% of leader sales volume; a relative share of 10 means that the company's SBU is the leader and has 10 times sales of the next-strongest competitors in market

RELATIVE MKT SHARE

20%

STARS 4 5

MKT GROWTH 10%

QUESTION MARKS 3 1

2
6 7 DOGS 8

0% CASH COWS 10x

1x

0.1x

The growth- share matrix is divided into four cells, each indicating a different type of business 1.Question marks Question marks are business that operate in high growth markets but have low relative market shares Most business start off as question marks as the company tries to enter a high growth market in which there is already a market leader A question mark require a lot of cash because the company has to spend money on to keep up with fast growing market, and because it wants to overtake the leader

2.Star: If the question mark business is successful, it becomes a star. A star is the market leader in a high-growth market. A star doesn't necessarily produce a positive cash flow for the company. the company must spend substantial funds to keep up with the high market growth and fight off competitors attack. 3. Cash Cows: When a market annual growth rate falls less than 10% the star becomes a cash cow if it still has the largest relative market share. A cash cow produces a lot of cash for the company.the company doesnt have to finance capacity expansion because the market growth rate has slowed down

Since the business is the market leader, it enjoys economies of scale and higher profit margins. The company uses its cash-cow businesses to pay its bills and support its other businesses If the cash cow starts losing relative market share, the company will have to pump money back into it to maintain market leadership. if it does not, the cash cow may devolve into dog. 4.Dogs: Dogs are the businesses that have weak market shares in low growth markets. They typically generate low profit or loss. The company should consider whether it is holding on to these business for good reason such a expected turnaround or for sentimental purpose.

After plotting its various businesses in the growth share matrix, a company must determine whether its portfolio is healthy An unbalanced portfolio would have too many dogs or question marks and/or too few stars and cash cows

The next task is to determine what objective, strategy, and budget to assign each SBU, four strategies can be pursued 1. Build- here the objective is to increase market share, even forgoing short term earning to achieve this objective if necessary, building is appropriate for question mark whose market share must grow if they are to become star.

2.Hold- here the objective is to preserve market share. This strategy is appropriate for strong cash cows if they are to continue yielding a large positive cash flow. 3.Harvest-here the objective is to increase short term cash flow regardless of long term effect. Harvesting involves a decision to withdraw from a business by implementing a program of continuous cost retrenchment 4. Divest-here the objective is to sell or liquidate the business because resources can be better used elsewhere.

Portfolio planning model like BCG and GE fallen out of favor as oversimplified and subjective. More recent methods firm use to make internal investment decisions are based on shareholder value analysis(SVA). These value calculations assess the potential of business based on potential growth opportunities from global expansion, repositioning or retargeting, and strategic outsourcing.

It includes planning new businesses, downsizing, and terminating older businesses If there is gap between future desired sale and projected sales, corporate management will need to develop and acquire new businesses to fill it.

The Strategic Planning Gap

The lowest curve projects the expected sales over the next 5 years from the current business portfolio. The highest curve describes desired sales over the same period. Evidently, the company wants to grow much faster than its current businesses will permit. how can it fill strategic-planning gap?

1. Intensive growth
Current Product New product

Current Market New Market

1.Market Penetration 2.Market development

3. Product development Diversification

The company first considers whether it could gain more market share with its current product in thier current market, using market penetration strategy. Next it consider it can find or develop new markets for it current products, in a market development strategy. Then it considers whether it can develop new products of potential interest to its current market with product development strategy Firm will also review opportunities to develop new products for new market in a diversification strategy.

2.Integrative growth Sales and profit of a business can be increased through backward forward, or horizontal integration within industry. 3 Diversification Growth It make sense when a company finds a highly attractive new industry where it can leverage its strength. So three type of diversification are possible

Concentric Diversification-the company could seek new products that have technological or marketing synergies with existing product line appealing to a new group of customer b) Horizontal diversification- the company can develop new products that are technologically unrelated to its current product line and could appeal to its current customer. c)Conglomerate Diversification-the company may seek new opportunities that have no relation with its current technology, products, or markets.
a)

The Business Unit Strategic Planning Process

1 Business Mission Each business units need to define its specific mission within the broader company mission E.g. A TV-studio-lighting equipment company might define its mission as `To target major television studios and become their vender of choice of lighting technologies that represent the most advanced and reliable studio lighting arrangement. This mission does not attempt to win business from smaller TV studios, win business by being lowest in price, or venture into non lighting product

2 SWOT Analysis a) External environment(OT)analysis A business unit must monitor key macro environment forces and significant microenvironment factors that affect its ability to earn profits The business unit should set up a marketing intelligence system to track trends and important developments and any related opportunities and threats

A marketing opportunity is an area of buyer need and interest that a company has a high probability of profitably satisfying. There are three main source of market opportunity. first is to supply something that is short in supply .This require little marketing talent as the need is fairly obvious. The second is to supply an existing product or service in new and superior way There are several way to uncover possible product or service improvements The problem detection method ask consumers for their suggession The ideal method has them imagine an ideal version of the product or service The consumption chain method ask consumer to chart their steps in acquiring, using and disposing product

Ways of trapping opportunities a company may benefit from converging industry and introduce hybrid product. E.g mobile with camera A company may make a buying process more convenient or efficient. E.g. online purchase A company can meet need for more information and advice A company can customize a product or service that was formerly offered only in a standard form. A company may be able to deliver a product or service fast. A company may be able to offer a product at a much lower price

Market Opportunity Analysis (MOA)


Can the benefits involved in the opportunity be articulated convincingly to a defined target market? Can the target market be located and reached with cost-effective media and trade channels? Does the company possess or have access to the critical capabilities and resources needed to deliver the customer benefits?

Market Opportunity Analysis (MOA) (cont.)


Can the company deliver the benefits better than any actual or potential competitors? Will the financial rate of return meet or exceed the companys required threshold for investment?

An environmental threats is a challenge posed by unfavorable trend or development that would lead, in the absence of defensive marketing action, to lower sales or profit Internal environment (SW)Analysis Its one thing to find attractive opportunities, and another to be able to take advantage of them. Each business needs to evaluate its internal strengths and weakness.

3. Goal Formulation Most business units pursue a mix of objective, including profitability, sales growth, market share improvement, risk containment, innovation, and reputation. the business unit sts these objectives and then manages by objectives(MBO) For an MBO system to work the units objective must meet four criteria

There must be arranged hierarchically, from the most to least important E.g. a business units key objective for the period may be to increase ROI. Managers can increase profit by increasing revenue and reducing expenses. They can grow revenue, in turn, by increasing market share and prices. b)Objective should be quantitative as possible c)Objective should be realistic d) Objective must be consistent
a)

Opportunity Matrix

Threat Matrix

Strategic formulation Porters Generic Strategies


Overall Cost Leadership

Differentiation
Focus

Categories of Marketing Alliances

Product or Service Alliances


Promotional Alliances Logistics Alliances

Pricing Collaborations

Even a great marketing strategy can be sabotaged by poor implementation. If the unit has decided to attain technological leadership, it must plan programs to strengthen its R&D dept, gather technological intelligence, develop leadingedge products train the technical sales force, and develop ad to communicate it technical leadership. Once they have formulated marketing programs, the marketing people must estimate their cost Activity based cost(ABC)accounting can hep to determine whether each marketing program is likely to produce sufficient results to justify its cost.

Feedback and control A company`s strategic fit with the environment will inevitably erode, because the market environment changes faster than the company Thus a company might remain efficient while it loses effectiveness. It is important to `do the right thing`-to be effectivethan `to do thing right`-to be efficient. The most successful companies excel the both.

Product managers come up with a marketing plan for individuals products, lines, brands, channels, and customer groups. A marketing plan is a written document that summarizes what the marketer has learned about the market place and indicates how the firm plans to reach its marketing objectives

Marketing Plan Contents


Executive summary Table of contents Situation analysis Marketing strategy Financial projections Implementation controls

a)Executive summary and table of content The marketing plan should open with a brief summary for senior management of the main goal and recommendations. A table of content outlines the rest of plan and all the supporting rationale and operational detail. b)Situation Analysis It presents relevant background data on sales, costs, the market, competitors,

c) Marketing Strategy In this section product manager defines the mission, marketing and financial objectives, groups and needs that the market offerings are intended to satisfy. The manager than establishes the product line competitive positioning, which will inform the game plan to accomplish the plans objectives

d) Financial Projection It includes a sales forecast, an expenses forecast, and break even analysis. Expected costs of marketing e) Implementation and Control It says about the goal and budget for each month or quarter , so management can review each periods results and take corrective action as needed. Firm should also take a no. of different internal and external measures to assess progress and suggest possible modification.

Conventional Model The conventional model of value creation process is highly firm centric, where the firm believes that the competitive edge lie in its ability to innovate. Contemporary Model This thought is to involve the customer in the value creation process. Source of competitive advantage lies in involving the customer in value creation process.

This goes beyond just market research. suggesting a continuous dialogue and involvement of the customer in the value creation process, a model is outline called DART. DART(Dialogue -Access-Risk AssessmentTransparency)- this stand for dialogue between the company and customer. Dialogue goes beyond then just listening the customer.

It involves a sharing between two equal problem solvers who share identical concerns and have the same interests Dialogue process requires a forum and rules to ensure an orderly and productive interaction For a customer access to a product or service is more important than its ownership,ie access to desirable experience is more important today. With IRCTC the customer today has access to a range of services including travel reservations and getting tickets delivered to choice of address.

Risk refers to a potential harm to the customer if the product/service is consumed Hence while communicating features and benefits of the products, a should also communicate risk of consumption. the risk should be shared between the firm and customer. Transparency today is necessary for any relationship building exercise

Customer value From the customer perspective , value can be understood as what he or she is willing to pay and hence customer value refers to perceived value the customer in an offer. It is the value that the customer perceives as being superior and relevant to him/her and hence is willing to pay for purchase and consumption of the products/services

Customer Value from Customers perspectives It is important to understand two term `value` and `values` Value refers to preferential judgment, while values refer to the decision criteria that shapes this preference. E.g. when a housewife chooses a brand of microwave oven or a detergent she is communicating that brand is more valuable than others What has made choose that brand? Research shows that the following factors collectively influence a consumers decision to buy may be termed as values that customers look for.

a)Personal The demographic and lifestyle of the customer are personal factors that influence her to purchase. b)Esteem This is on of significant factor now a days. E.g. luxury product or premium priced product are often bought to enhance the esteem of buyer. c) Utility The economic perspective of a product purchase is its utility. Different target markets attach different utility values to the same product. E.g. younger customer may perceive `staying in continuous contact with friend as a major utility of a cell phone `but customer in the higher age group may perceive a cell phone primary utility as a means of communication in emergency only

d) Social Many a time a customers social needs drive them to buy the product. When this happens, the primary value a product serve is social. Hence the marketer need to project it in its positioning statement Thus affiliation, acceptance by peer group, opinion leadership, friendship, etc are some important social motives which direct a customer to a brand or service e) Price Another important value in the purchase of a product is reflected by its price tag. e.g. value of low price and product quality draw customer to Big Bazaar, while the value of exclusivity attached to premium priced product draw customer to designer showrooms f) Quality Quality is what a customer pays for and not the company wants the customer to believe in. Hence it is the perceived quality that is important to a customer. As there is relation between price and perceived quality and hence the perceived value

Experience as a Value another approach to understanding to understanding customer value is to examine a purchase situation as an experience. So there are three situation: Value in purchase, Value in consumption and post consumption experience. Value in purchase include convenience in buying, experience in the store and with the sales person, payment options, delivery at the point at which a customer may want. Value in use is a functional outcome. Its is a goal that served directly through product consumption Customer today pay for experience and not just for an acquisition of a service. The more positive and rewarding an experience is, higher is the price the customer is willing to pay.

Firms perspective of Customer Value From the firm prespective,customer value is often understood as the value of a single customer to a firm`s profit and market share. Firms gain more through their retained customers and hence they need to focus on enhancing the life of a customer in their customer portfolio. 5% point increase in customer retention could yield as much as 125% improvement in net present Value(NPV)

In order to understand the value of a customer to the organization, one needs to calculate cost of acquiring customer(acquisition cost). This can be done by analyzing the buying patterns of both new and existing customers. this can help in identifying customer segments and the marketing effort required to win over the profitable ones as also its cost. This acquisition cost can be calculated as

Acquisition Cost = Cost(direct and indirect) to the customer/response rate Once the cost of acquiring a customer has been determined, one can use the information to know how many purchases or year it will take for each customer to realize profits for the firm. It may be worthwhile at this juncture, to segregate customers into frequent and occasional buyer. this break even analysis can now help the firm calculate accumulated profit over his life time of each customer.

The customer lifetime value can be expressed as n __ AC CLV1 = (Ma Ca )r(a-1) (1+i) a where n= no. of years customer is expected to last

Ma = profit margin this customer generates in the year a C a =cost of marketing targeted at the customer in year a r =retention rate(r(a-1) I is the survival rate for year a. i= the interest rate AC= acquisition cost

Now if Ma and Ca are relatively fixed across time period, the CLV can be expressed in simpler form by assuming the economic life of the customer(n) as infinite. CLV = M-C __ AC 1-r +i this understanding of lifetime value can help firms reward loyalty, out source unprofitable customers & also identity opportunities to cross-sell

Organizational Charts

Customer Perceived Value Customer are more educated and informed than ever, and they have the tool to verify companies claims and seek out superior alternatives. In making a choice customer tend to be value maximizers, within the bounds of search costs and limited knowledge, mobility, and income.

Customer estimate which offer will deliver the most perceived value and act on it. Customer perceived value is the difference between the prospective customer`s evaluation of all the benefits and all the costs of an offering and the perceived alternatives Total customer benefit is the perceived monetary value of the bundle of economic, functional, and psychological benefits customers expect from a given market offering because of the products, services, personnel, and image involved. Total customer benefit is the perceived bundle of costs customer expect to incur in evaluating, obtaining, using, and disposing of given market offering, including monetary, time, energy, and psychological costs. Thus CPV is based on the difference between what the customer gets and what he or she gives for different possible choice. The customer gets benefits and assume costs. The marketer can increase the value of the customer offering by some combination of raising economic, functional, or emotional benefits and reducing one or more of the various types of costs

Determinants of Customer Perceived Value


Total customer benefit Total customer cost

Product benefit Services benefit

Monetary cost Time cost

Personal benefit
Image benefit

Energy cost
Psychological cost

Steps in a Customer Value Analysis


Identify major attributes and benefits that customers value Assess the qualitative importance of different attributes and benefits Assess the companys and competitors performances on the different customer values against rated importance Examine ratings of specific segments Monitor customer values over time

Total Customer satisfaction Whether the buyer is satisfied after purchase depends on the offer`s performance in relationship to the buyer`s expectation, and whether the buyer interprets any deviations between the two. If the performance falls short of expectations, the customer is dissatisfied, matches the expectation customer is satisfied, exceed the expectation customer is delighted

Measuring Satisfaction
Periodic Surveys

Customer Loss Rate

Mystery Shoppers

Monitor Competitive Performance

Copyright 2009 Dorling Kindersley (India) Pvt. Ltd.

5-161

J.D. Power Rates Customer Satisfaction

Customer Complaints Some companies think they are getting a sense of customer satisfaction by tallyingcomplaints, but studies of customer dissatisfaction show that customer are dissatisfied with their purchase about 25% of the time but that only about 5% complain. The other 95% feel complaining is not worth the effort, or they dont know how or whom to complain, and just stop buying. Of the customer who register a complaint, between 54% and 70% will do business with the organization again if the complaint is resolved The figure goes up to staggering 95% if the customer feels the complaint was resolved quickly.

Maximizing Customer Lifetime Value(CLV) Marketing is the art of attracting and keeping profitable customer. Yet every company loses money on some of its customer.20-80 rule says that the top 20% fo the customer often generates 80% or more of companies profits.in some case the most profitable 20% of customers may contribute as much as 150% to 300% of profitability.

Maximizing Customer Lifetime Value

Customer Profitability

Customer Equity

Lifetime Value

Customer-Product Profitability Analysis

CPA is best conducted with the tools of an accounting technique called activity based costing(ABC). The company estimates all revenue coming from the customer, less all costs. When company does this for each customer, it can classify customer into different profit tier Platinum customer(Most profitable), gold customers(profitable), iron customers(low profitability but desirable for volume), and lead customer(unprofitable and undesirable) The company can than move iron customers into the gold tier and gold customers into platinum tier, while dropping the lead customers or making them profitable by raising their price or lowering the cost of serving them.

It is the process of carefully managing detailed information about individual customer and all the customer touch point to maximize customer loyalty. A customer touch point is any occasion on which a customer encounters the brand and product-from actual experience to personal or mass communication to casual observation

Framework for CRM


Identify prospects and customers
Differentiate customers by needs and value to company Interact to improve knowledge Customize for each customer

Building a Relationship with Rural Consumers


Challenges due to lack of technology and resources Personal relationship between buyer and seller for ages SBI Tiny initiative was aimed at starting a relationship with an eye on future profits Aadhaar offers home delivery of agri-inputs to villagers in busy sowing season

Customer Retention
Acquisition of customers can cost five times more than retaining current customers. The average customer loses 10% of its customers each year. A 5% reduction to the customer defection rate can increase profits by 25% to 85%. The customer profit rate increases over the life of a retained customer.

The Customer Development Process


Suspects

Prospects

Disqualified

First-time customers

Repeat customers

Clients

Members

Partners Ex-customers

Customer Database A customer database is an organized collection of comprehensive information about individual customers or prospects that is current, accessible, and actionable for such marketing purposes as lead generation, lead qualification, sale of a product or service, or maintenance of customer relationship. It contains the customers past purchases, demographics(age , income, family members, birthday) psychographics(activities , interest, and opinion) media graphic(prefered media) and other useful information

Database Marketing It is the process of building, maintaining, and using customer databases and other databases(product, suppliers, resellers) to contact, transact, and build customer relationship. Business Database It would contain business customers past purchases; past volumes, price, and profits; buyer team member names(and ages, birthdays, hobbies, and favorite food); status of current contracts; and estimate of the suppliers share of customers business; competitive suppliers;

Data Warehousing Data collected by the company`s contact center and organized into data warehouse where marketers can capture, query, and analyze it to draw inferences about an individuals customers needs and responses Data mining Through data mining marketing statisticians can extract useful information about individuals, trends, and segments from the mass of data. Data mining uses sophisticated statistical and mathematical technique such as cluster analysis, automatic interaction detection, predictive modeling, and neural networking.

Using the Database


To identify prospects To target offers To deepen loyalty To reactivate customers To avoid mistakes

Dont Build a Database When


The product is a once-in-a-lifetime purchase Customers do not show loyalty The unit sale is very small The cost of gathering information is too high

It is a set of procedure and source manager use to obtain everyday information about developments in the marketing environment. Marketing manager collect marketing intelligence by reading books, news paper, trade publication, talking to customer, suppliers and distributors; monitoring social media on the internet via online discussion group e mailing lists etc.

Step to improve quality of intelligence 1. Train and motivate the sales force to spot and report new development 2. Motivate distributors , retailers, and other intermediaries to pass along important intelligence 3. Network externally 4. Set up a customer advisory panel 5. Take advantage of government data resource

6. purchase information from outside suppliers 7. Use online customer feedback system to collect competitive inteligence.

CREATING CUSTOMER VALUE AND SATISFACTION


Customer delivered value: the difference between total customer value and total customer cost. Total customer value: the bundle of benefits customers expect from a given product or service. Total customer cost: the bundle of costs customers expect to incur in evaluating, obtaining, using, and disposing of the product or service.

CREATING CUSTOMER VALUE AND SATISFACTION

Example of Customer Delivered Value: a) Buyers perception of offers worth = Rs.2,00,000=00 b) Companys cost of manufacture = Rs.1,40,000=00 c) Companys price = Rs.1,60,000=00 1. Customer Delivered Value: = Rs.40,000=00

CREATING CUSTOMER VALUE AND SATISFACTION


Customer Satisfaction: Whether a customer is satisfied after purchase depends on the offers performance in relation to the buyers expectations. We may define it as: Customer satisfaction or dissatisfaction is a persons feeling of pleasure or disappointment resulting from comparing a products perceived performance (or outcome) in relation to the persons expectations.

Competitive Forces

Michale Porter has identified five forces that determine the intrinsic long run attractiveness of a market or market segment. These forces are industry competitors, potential entrants, substitutes, buyers, and suppliers. The treat these forces pose are as follows

1.

Threat of intense segment rivalry A segment is unattractive if it already contains numerous, strong, or aggressive competitors. Its even more attractive if its stable or declining, if plant capacity must be added in large increments, if fixed cost or exit barriers are high, or if competitors have high stakes in staying in the segment. These condition will lead to frequent price wars, advertising battles, and new product introduction and will make it expensive to compete. The cellular phone market has seen fierce competition due to segment rivalry.

Mobile service providers compete with each other through innovative marketing ideas

2.Threat of new entrants The most attractive segment is one in which entry barriers are high and exit barriers are low. few new firm can enter the industry, and poorly performing firm can easily exit. When both entry and exit barriers are high, profit potential is high, but firm face more risk because poorer-performing firms stay in and fight it out. When both entry and exit barriers are low, firms easily enter and leave the industry, and the return are stable and low The worst case is when entry barriers are low and exit barriers are high: here the firm enter during good times but find it hard to leave during bad time . e.g. airlines industry.

3.Threat of substitute product A segment is unattractive when there are actual or potential substitutes for the product. Substitute place a limit on prices and on profits. If technology advances or competition increase in these substitute industries, price and profit are likely to fall. 4.Threat of buyers growing bargaining power A segment is unattractive if buyer possess strong or growing bargaining power.

Buyers bargaining power grows when they become more concentrated or organized, when the product represent a significant fraction of the buyers cost, when the product is undifferentiated, when buyers switching cost are low. 5.Threat of suppliers growing bargaining power A segment is unattractive if the companys suppliers are able to raise prices or reduces quantity supply . e.g. Oil company

We can examine competition from both an industry and market point of view. An industry is a group of firm that offer a product or class of product that are close substitute of one another. Marketer classify industries according to the number of sellers, degree of product differentiation; presence or absence of entry, mobility, and exit barriers; cost structure; degree of vertical integration; and degree of globalization.

Using the market approach, we define competitors as companies that satisfy the same customer need. Coca-Cola , focused on its soft drink business, missed seeing the market of coffee bars and fresh fruit juice bars that eventually impinged on its soft drink business. The market set of competition reveals a broader set of actual and potential competitors than competition defined in just product category term.

Once a company identifies its primary competitors, it must ascertain their strategies, objectives, strength and weaknesses. Strategies A group of firms following the same strategy in a given target market is called strategic group. The company develops the chart and discovers four strategic group based on product quality and level of vertical integration

Strategic Groups

Suppose group A has one competitors, group B has 3, group c has 4 and group D has 2.if a company successfully enters a group, the members of tat group become its key competitors. Objectives Once a company has identified its main competitors and their strategies, it must ask:

What is each competitors seeking in the marketplace? What drives each competitor`s behavior? Many factors shape a competitors' objectives, including size, history, current management, and financial situation. If the competitor is a division of a larger company, it is important to know whether the parent company is running it for growth, profits, or milking it.

Competitors strive to maximize profits, sales growth(volume, revenue), market share, cash flow, technological leadership, service leadership, or mix of these. These objectives also differ in emphasis depending upon whether they are for short term or long term. Finally a company must monitor competitors expansion plans

A Competitors Expansion Plans

Dell, which started out as a strong force in selling personal computers to individual users, is now a major force in the commercial and industrial market. Other incumbent may try to set up mobility barriers to Dells further expansion. Strengths and Weaknesses A company need to gather information about each competitors strengths and weakness

Customer Ratings of Competitors on Key Success Factors

Above table shows the results of a company survey that asked customers to rate its three competitors A,B,and C, on five attributes. Competitors A turn out to be well known and respected for producing high quality product sold by a good sales force but I is poor at providing technical assistance and product availability.

In general , a company should monitor three variables when analyzing competitors 1. Share of market- the competitors share of target market. 2. Share of mind- the percentage of customers who named the competitors in responding to the statement,' Name the first company that comes to mind in this industry` 3. Share of Heart- the percentage of customers who named the competitors in responding to the statement'` Name the company from which you would prefer to buy the product` company that make a steady gains in mind share and heart share will inevitably make gains in market share and profitability

1.

Strong versus weak Most companies aim their shots at weak competitors, because this require fewer resources per share point gained. Yet the firm should also compete with strong competitors to keep up with the best. Close versus Distant Most company compete with the competitors that resemble them the most. Coca-cola recognizes that its number one competitor is tap water, and Pepsi.

3. Good versus Bad Good competitors play by industries rules; they set prices in reasonable relationship to costs; and they favor a healthy industry. Bad competitors try to buy share rather than earn it; they take large risks; they invest in overcapacity.

Competitive Strategies for Market Leader

10% 20% Market Market Nichers Follower

30% Market Challenger

40% Market Leader

This firm has the largest market share in the relevant product market, and usually leads the other firm in price changes, new product introductions, distribution coverage, and promotional intensity. 1) Expanding the total market If the Indian consumer increase their consumption of ketchup, the Kissan brand of HUL as the market leader will be the biggest gainer

a) New Customers Every product class has the potential to attract buyers who are unaware of the product or who are resisting it because of price or lack of certain features A company can search for new users among three groups: those who might use it but dont(Market penetration strategy), those who have never used it(new market segmentation strategy), or those who live elsewhere (geographical- expansion strategy)

b) More Usage Marketer can try to increase the amount, level, frequency of consumption. The amount of consumption can be increased through packaging or the product redesign. Larger package sizes have been shown to increase the amount of product that consumer use at one time The usage of impulse consumption of product such as soft drinks and snacks increases when the product is made more available. Increasing frequency of consumption requires Either identifying additional opportunities to use the brand in the same basic way Or identifying completely new or different ways to use the brand.

While trying to expand total market size, the dominant firm must continuously and actively defend its current business. This can be done through continuous innovation. The leader should lead the industry in developing new products and customer services, distribution effectiveness, and cost cutting. it keeps increasing its competitive strength and value to customers by providing comprehensive solutions

Six Types of Defense Strategies

a)

Position Defense Position defense involves building superior brand power, and making the brand almost impregnable. Nescafe has defended its position against several attacking brand using this strategy

b) Flank Defense A market leader should protect its weak front, where there is high possibility of invasion. Firms should be ready for counter attack. c) Preemptive defense A more aggressive strategy is to attack before the enemy starts its offense. Marketer can introduce a stream of new product, making sure to precede them with preannouncementdeliberate communications regarding future actions.

d) Counter offensive defense When attacked, most market leaders will respond with a counter attack. In a counter offensive, the leader can meet the attacker frontally or hits its flank. An effective counter attact is to invade the attackers main territory so that it will have to deploy resources to defend it. E.g. Hero Honda 100CC pleasure, just 4 her.

e)Mobile defense In mobile defense, the leader stretches its domain over new territories that can serve as future centers for defense and offense through market broadening and market diversification Market broadening shifts focus from current product to underlying generic need. The company get involved in R&D across the whole range of technology associated with that need. Marker diversification involves shifting into unrelated industries. ITC Ltd., faced with growing concern over illeffects of smoking and the ban on smoking cigarettes in many places, moved quickly into processed food, echoupal, garments and so on.

e) Contraction defense Large company sometimes must recognize that they can no longer defend all their territory. The best course of action then appears to be planned contraction also called as strategic withdrawal; giving up weaker territories and reassigning stronger territories E.g. P&G India

3.Expanding the market share In many markets, one share point is worth 10 millions of rupees.. No wonder competition has turned fierce in so many markets. Gaining share un served market, however, does not automatically produce higher profits-especially for labor intensive service company that may not experience many economy of scale. Much depend on company strategy A company should consider 4 factor before pursuing increased share

Optimal Market Share

Possibility of provoking antitrust action Economic cost Pursuing the wrong marketing-mix strategy The effect of increased market share on actual and perceived quality

Many market challengers have gained ground or even overtaken the leader. Challenger set high aspirations, leveraging their resources while the market leader often runs the business as usual

Competitive attack strategies of market challenger 1. Defining the strategic objective and opponent a) It can attack the market leader This is a high risk but potentially high-payoff strategy and make good sense if the leader is not serving the market well. It often has the added benefit of distancing the firm from other challanger

b)It can attack firm of its own size that are not doing the job and are underfinanced These firm have aging product, are charging excessive prices, or are not satisfying customer in other ways. c) It can attack small local and regional firms

2) Choosing a general attack strategy a) Frontal Attack Here the attacker matches its opponents product, advertising, price, and distribution. cutting price can work if the market leader doesnt retaliate, and if the competitor convinces the market that its product is equal to the leader

b) Flank attack An enemy weakest spots are natural targets. A flank attack can be directed along two strategic dimensions- geographic and segmental. In a geographic attack, the challengers spots areas where the opponent is underperforming.eg LG rural specific product Sampornna The other flanking strategy is to serve uncovered market needs

C)Encirclement attack Its an attempt to capture a wide slice of the enemy`s territory through blitz.it means launching a grand offensive on several fronts Encirclement makes sense when challenger commands superior resources and believe a swift encirclement will break the opponent `s will

d) Bypass Attack The most indirect assault strategy is bypassing the enemy altogether and attacking easier market to broaden the firm`s resource base. This strategy offer three lines of approach Diversify into unrelated product, Diversifying into new geographical market Leapfrogging into new technologies to supplant existing product E.g. Pepsi Aquafina,quaker, Tropicana

e)Guerrilla Warfare It consist of intermittent attack to harass and demoralize the opponent and eventually secure permanent footholds. The guerrilla challenger uses both conventional and unconventional means of attack These include selective price cuts, intense promotional blitzes, and occassional legal action.

Market Follower Strategies


Counterfeiter
Cloner Imitator Adapter

Market Follower Strategies Strategy of product imitation might be as profitable as product innovation. The innovator bears the expenses of developing new product, getting it into distribution, and informing and educating the market. Market followers can come along and copy or improve on the new product Although it probably will not overtake the leader, the follower can achieve high profits because it did not bear any of the innovative expense

Counterfeiter The counterfeiter duplicates the leader`s product and packages and sells it on the black market or through disreputable dealer. E.g. Music CD. 2 . Cloner The cloner emulates the leaders products, name, and packaging, with slight variation 3.Imitators The imitators copies something from leader but maintains differentiation in terms of packaging, advertising, pricing, or location. the leader doesnt mind the imitator as long as the imitator doesn`t attack the leader aggressively. 4.Adaptor The adapter take the leader`s products and adapts or improve them. The adaptor may choose to sell it to different markets, but often it grows into future challanger
1.

Market- Nicher Strategy An alternative of being follower in a large market is to be a leader in a small market, or niche. Smaller firms normally avoid competing with larger firm by targeting small markets of little or no interest to the larger firms. But even large, profitable firms may choose to use niching strategies for some of their business units or companies. Firms with low shares of the total market can become highly profitable through smart niching. Scu company tend to offer high value, charge a premium price, achieve lower manufacturing costs, and shape a strong corporate culture and vision

The Control Process

What do we want to achieve? What is happening? Why is it happening? What should we do about it?

Types of Marketing Control


Annual plan control
Profitability control Efficiency control

Strategic control

Approaches to Annual Plan Control


Sales analysis Market share analysis Sales-to-expense ratios Financial analysis Market-based scorecard analysis

Sales analysis It measures and evaluates actual sales in relationship to goals. Two specific tools make it work. a) Sales Variance Analysis It measures the relative contribution of different factors to a gap in sales performance e.g. due to volume decline, price decline etc.
1.

b) Micro sales analysis It looks at specific products, territories, and so forth that failed to produce expected sales 2.Market share analysis Company sales doesnt reveal how well the company is performing relative to the competitors

Over all market = Customer x Customer x Share penetration Loyalty Customer x selectivity Price Selectivity

CP= percentage of all customers who buy from the company. CL= purchases from the company by its customers as a percentage of their total purchases from all suppliers of the same products. CS= Size of the average customer purchase from the company as the percentage of the size of the average customer purchase from an average company Price Selectivity = average price charged by the company as a percentage of the average price charged by the company.

3.Marketing Expenses- to the Sales Analysis Annual plan control requires making sure the company is not overspending to achieve sales goals. In one company, the ratio was 30%. And considered of 5 component. Sales force-to-sale (15%), advertising to sale(5%),sales promotion to sale(6%), marketing research to sale(1%) and sales administration to sale(3%). Fluctuation outside normal range are cause of concern. Management needs to monitor period to period fluctuations in each ratio on a control chart

The Control-Chart Model

4.Financial Analysis Marketers should analyze the expense-to-sales ratios in an overall financial framework to determine how and where the company is making its money. Management uses financial analysis to identify factors that affects the company`s rate of return on net worth The return on net worth is the product of two ratios, the company`s return on assets and its financial leverage.

Financial Model of Return on Net Worth

Marketing Profitability Analysis


Step 1: Identify functional expenses Step 2: Assign functional expenses to marketing entities Step 3: Prepare a profit-and-loss statement for each marketing entity e.g. Marketing vice president of a lawn mover company want to determine profitability of selling through three types of retail channels: hardware stores, garden supply shops, and departmental store. The company profit and loss

Simplified Profit-and-Loss Statement

Mapping Natural Expenses into Functional Expenses

Bases for Allocating Functional Expenses to Channels

Profit-and-Loss Statements for Channels

The company is loosing money in selling through garden supply shops and makes virtually all its profit through department store Determining corrective Action Instead of making conclusion that the company should drop garden supply shop and possibly hardware stores so that it can concentrate upon departmental store. We need to answer following question first

To what extent do buyers buy on the basis of type of retail outlet versus brand? What are the trends with respect to importance of these three channel? How good are company marketing strategies directed at the three channels Direct versus Full Costing Marketing profitability analysis can lead or mislead marketing executives, depending upon how well they understand its method and limitations. The lawn mover company showed some arbitrariness in its choice of bases for allocating the functional expense to its marketing entities. Instead of no. of sales call , number of working hours is a more accurate indicator of cost

Another judgmental element affecting profitability analysis whether to allocate full cost or only direct and traceable cost in evaluating a marketing entity`s performance a) Direct Cost We can assign direct cost directly to the proper marketing entities. Sales commissions are a direct cost in a profitability analysis of sales territories

b) Traceable cost We can assign traceable common cost only indirectly. E.g. Rent . c) Nontraceable common costs Common cost whose allocation to the marketing entities is highly arbitrary are non traceable common cost. To allocate corporate image expenditure equally to all product is highly arbitrary.


A) 1. 2. 3. 4. 5. 6.

7.
8. 9. 10.

This mechanism help a marketer determine if there are better way of performing a task. It is used in determining sales force, distribution, advertising and sales promotion efficiency Sales force efficiency indicator average no. of sales calls per sales person per day Average no. of sales call per sales person per customer group Average time spent per customer Average time spent on travel Return on time invested on differente customer gropu Number of new customer added No. of customer lost Volume of potential business lost to competition Average cost per sales call Sales force cost as a percentage of total sale

B) Advertisement efficiency Indicators 1. Advertising cost per thousand reach by media 2. Advertising recall as a percentage of the total target market reached by the compaign 3. Top of the mind awareness of the brand 4. No. of enquiry generated by an advertisement 5. Cost per enquiry

c) Distribution Efficiency 1. Market reach of the channel member as measured by no. of customer served by it. 2. Sales extraction from the channel member as measured by the brand`s sale to the total product sales by the channel members 3. Cost per channel member, or the cost that the firm incurs to service a particular channels

Organizing the Marketing Department


Functional Organization Geographic Organization Product- or Brand-Management Organization Market-Management Organization Matrix-Management Organization

The most common form of marketing organization consists of functional specialists reporting to marketing Vice president, who co-ordi

The

Marketing Process consists of: Analyzing Marketing Opportunities Researching and Selecting Target Markets Designing Marketing Opportunities Planning Marketing Programs Organizing, Implementing, and Controlling the Marketing Effort

Ref: Chapter 4 of Core Text

Strategic control
company should periodically reassess its strategic approach to market place with a good marketing audit. A marketing audit is a comprehensive, systematic, independent, periodic examination of a companys or business units marketing environment, objectives, strategies, and activities with a view to determining problem areas and opportunities, and recommending a plan of action to improve the companys marketing performance.
Each

Organizing the Marketing Department


Functional Organization Geographic Organization Product- or Brand-Management Organization Market-Management Organization Matrix-Management Organization

The most common form of marketing organization consists of functional specialists reporting to marketing vice president, who coordinate their activities. Additional specialists might include a customer service manager, a marketing planning manager, a market logistics manager, a direct marketing manager, and digital marketing manager. The main advantage of functional marketing organization is its administrative simplicity A functional organization often leads to inadequate planning for specific product and market. The marketing vice president constantly weighs the claims of competition functional specialists and faces a difficult co ordination problem

Functional Organization

A company selling in the national market often organizes its sales force on geographic Lines National sales manager

Regional Sales manager Branch(Area) sales Manager sales Officer Sales Supervisor sales Person

Companies producing a variety of products and brands often establish a product or brand management organization The brand management organization doesn't replace the functional organization, but serves as another layer of management A product manager supervises product category managers, who in turn supervise specific product and brand manager. A product management organization makes sense if the company`s product are quite different, or if the sheer no. of products is beyond the ability of a functional organization to handle Product and brand management is characterized as hub and spoke system

The Product Managers Interactions

Task of product or brand manager includes Developing a long range and competitive strategy for the product. Preparing a annual marketing plan and sales forecast. Working with advertising and merchandising agencies to develop copy, programs and campaign. Increasing support of the product among the sales force and distributors Gathering continuous intelligence on the produts performance, customer and dealer attitudes, and new problem and opportunities

The product management organization lets the product manager concentrate on developing a cost effective marketing mix and react more quickly to new product in te market place. Disadvantages Brand manager become experts in their product area but rarely achieve functional expertise. Brand management system often turn out to be costly

A second alternative in a product management organization is product teams. There are three type of structure vertical Product team Triangular product Team Horizontal product Team

Vertical Product Team

PM = Product Manager APM = Associate PM PA = Product Assistant

Triangular Product Team

PM = Product Manager R = Market Researcher C = Communication Specialist

Horizontal Product Team

PM = Product Manager R = Market Researcher C = Communication Specialist S = Sales Manager D = Distribution Specialist F = Finance Specialist E = Engineer

The triangular and horizontal product team approaches let each major brand run a brand-asset management team(BAMT) consisting of key representative from functions that affects the brand performance. Third alternative of product management organization is to eliminate for product management positions for minor products and assign and assign two or more product to each remaining manager

A fourth alternative is to introduce category management, in which a company focuses on the product categories to manage its brand

When customers fall into diferent user groups with distinct buying preferences and practices, a marketmanagement organization is desirable. Market manager supervise several market development manager, market specialist, or industry specialist and draw o functional service as needed. Markets manager are staff (not line) people with duties similar to those of product managers. They develop long rang and annual plan for their market Their performance is judge by their market growth and profitability

Companies that produce many product for many market may adopt a matrix organization. DuPont was pioneer in developing the matrix structure

Product/Marketing-Management Matrix System

Building a Creative Marketing Organization


Developing a company-wide passion for customers Organizing around customer segments instead of products Understanding customers through qualitative and quantitative research

How Can CEOs Create a Marketing-Focused Company?


Convince senior management of the need to become customer focused Appoint a senior marketing officer and marketing task force Get outside guidance Change the companys reward measurement and system Hire strong marketing talent

How Can CEOs Create a Marketing-Focused Company?


Develop strong in-house marketing training programs Install a modern marketing planning system Establish an annual marketing excellence recognition program Shift from a department focus to a processoutcome focus Empower the employees

Green marketing

Ecological issues are, today, the concern of all the corporate, who are today being called upon to maintain the ecological balance by ensuring that their product are biodegradable or they dont involve indiscriminate use of scarce natural resources Environmental activism has led to legislations and hence firm are now required to comply with regulatory mechanism, thus ecological Marketing also called `green marketing` has today come of age .

Why Green Marketing?


Increasing, customer are becoming aware of the causes and effects of polluted environment,. They are aware of the damage that polyutherane bags have caused to the soil and drainage system . An aware customer now insists on a green product and packaging materials Aware customers are joining together to form a interest group which lobby

Aware customers are joining together t form interest group which lobby for eco friendly products and legislation to protect their environment Given a choice, customers tend to buy eco-friendly products. This is especially so in case where product are perceived as affecting customer daily life and personal/family health. Being eco- friendly gives the firm a USP which competition may find difficult to match. Even if it does, it would be perceive as just another `me too` and hence prime mover advantage rests with the firm that takes the first step.

Toyota Experienced Success with Green Cars

Consumer Environmental Segments


True Blue Greens (30%)
Greenback Greens (10%) Sprouts (26%) Grousers (15%) Apathetics (18%)

True Blue Greens These are environmental leaders and activists. They are characterized by a strong knowledge of environmental issue. They are more likely than the average consumer to engage in environmentally conscious behavior, such as recycling. b) Greenback Greens They dont have the time or inclination to behave entirely green. However, they are more likely to purchase green.
a)

c) Sprouts They are environmental fence sitters. They feel some environmental issues are worth supporting, but no other. They will purchase a environmentally conscious product, but only meets their needs. d)Grousers They believe that their individual behavior cannot improve environmental conditions. They are generally uninvolved and disinterested in environmental issues. e) Apathetics They are not concerned enough about the environment to do anything about it. They also believe that environmental indifference is mainstream.

Design environmental products to perform as well as(or better than )alternatives. Promote and deliver the consumer desired value of environmental products and target relevant consumer market segment such as market health benefits among health conscious consumers. Broaden mainstream appeal by bundling consumer desired value into environmental product such as fixed pricing for subscribers of renewable energy.


1.

2.

Green marketing mix differs from traditional marketing mix in following ways Eco- system are considered to be the most critical element in the entire marketing decision making system. this represents the need to screen marketing strategies for environmental impact and the payment of eco-costs The criteria for evaluating the marketing mix is whether it helps in prevention of pollution .

Key input in marketing mix


An Integrated approach to waste management, It involves strategies for pollution prevention and resource recovery b) Product design it will need to incorporate ecological attributes. The firm would need to identify suitable packaging material for marketing the product. The product is starting point in determining whether the firm marketing mix will be green or not. One must keep in mind that the product design determines the type of resources and manufacturing processes that can be used to create form and function. The product design also impact delivery systems.
a)

Key issues in marketing mix strategies 1. Identification of the waste stream associated with the product in the manufacturing and distribution stages 2. Waste generated during use and disposal of product. 3. Identification of final disposal process 4. Can improvements be made within the existing manufacturing system and technology which can help produce green products? 5. Are the suppliers green? 6. Do customers perceive the product as environmental friendly or damaging?

Social marketing is a type of cause related marketing done by generally nonprofit or government organization. e.g. `say no to drugs` or exercise more and eat better. Choosing the right goal or objective for a social marketing program is critical. e.g. should a family planning campaign focus on abstinence or birth control?

Cognitive Campaign Explain the nutritional value of different foods Explain the importance of conservation B) Action Campaigns Attract people for mass immunization. Motivate people to vote `Yes` on a certain issue Motivate people to donate blood
A)

c) Behavioral campaign Demotivate cigarette smoking Demotivate uses of hard drugs Change attitude towards girls child d) Value Campaign Alter idea about abortion

Key Success Factors for Social Marketing Programs

Study the literature and previous campaigns Chose target markets that are ready to respond Promote a single, doable behavior in clear, simple terms Explain the benefits in compelling terms Make it easy to adopt the behavior Develop attention-grabbing messages Consider an education-entertainment approach

Competitive advantage is essentially a position of superiority on the part of the firm in the relation to its competition in any of the multitude of function/activities performed by the firm. Firm can gain competitive advantage in several ways, some firm may be R &D By developing a competitive advantage , a firm basically figure out how it can perform a particular function or group of function, either in superior way, or in distinctive way, relative to the competition

Company should answer two question 1. Do I perform some function in a superior/distinctive way, compared to competition? 2. Does the superiority/distinction mean something in terms of customer value? E.g. for Toshiba of Japan, variety and flexibility in production serves as competitive advantage through a flexible manufacturing system(FMS)

a)

Benchmarking it helps the firm know the best performance standards in the industry and secure a model for emulation. In benchmarking, company trace best practices across industries, and across the countries, gathering thereby still higher standard for emulation.

b)Value chain analysis Competitive advantage grow fundamentally out of the value a firm able to create for its buyer. Value given by a company is competitive advantage if it is superior to the value generated by the competitors..ie. Firm has to create differential value.

c. Competitive advantage through integration


d) Competitive advantage through brand power Maggi v/s Top Raman e) Competitive advantage through joint venture and Strategic alliances

For a long term success , the competitive advantages have to be durable. A durable competitive advantage can emanate only from strength that is unique to firm. In practice, most firms find over a period of time, that there is nothing extraordinary about their competitive advantages and their competitors have erased these competitive advantage.

Core competence is a fundamental, unique and inimitable strength of the firm that provide the firm, access to a variety of product/market, contributes significantly to customer benefits in the end product, is and exclusive preserve of the firm and can not be imitated easily by competitors.

Core Competence of Honda Honda has its core competence in the design and manufacturing of engines. It has nurtured engine making as its core competence. Honda won 15 out of 16 Formula one races in a single year 1988 and proved the superior performance of Honda engine. Though competitors keep challanging Honda`s standard from time to time, Honda manages to remain on top in engines

Honda engineers refuge to settle for second best in engines and insist that Honda should keep setting the pace for the whole World. The core competence in engines gives Honda a lasting competitive advantage in diverse products like cars, motorcycle, lawn movers and generators Honda has never transferred to others the responsibility for designing and manufacturing of engine. Honda has centralized all its critical engine related R&D in Japan, while it does not mind outsourcing body parts from manufacturers all over world.

A competitive advantage does not necessarily imply a core competence , while a core competence does imply a competitive advantage, often a no. of competitive advantages. A competitive advantage does not constitute a sure success formula for a firm over a long term; a core competence usually does.

A competitive advantage can be easily imitated and competitors catch up fast. A core competence is an exclusive and inimitable preserve of a firm. It is long lasting; competitors can not easily catch up with the firm. A core competence is fundamental and unique to a firm; competitive advantages are not unique to any firm over the long term.

Web Marketing The web constitute a reliable, readily accessible and inexpensive means of bringing together buyers and sellers, large and small, right across the globe. With web marketing, the market comes to the doorsteps of the customer. It is a form of direct marketing.

Benefits of web Marketing


a)

b) c)

Benefits the seller- Across to all markets, opportunity for constraint- free growth, scope for enhancing marketing productivity and reducing marketing costs. Helps offer many services and product from a single stop Help target the customer individually and customized the offer.

f) Helps Reduce Costs Business /transaction cost Channel Costs Communication/ Promotion Costs

www.Amazon.com The website Amazon is the largest bookstore in the world. Yet it has no showrooms. It is a virtual bookstore on the net, an internet retailer of the book. It provide access to book reviews, to discussion groups and even author themselves. Amazon has extended itself furthur to sell electronics and toys over the net and launched two new `stores` Amazon.com electronic, and Amazon.com Toys & Games

1. Web Design Consultation to determine the objectives and requirements of your business' website Virtual Marketing Manager can provide a complete website solution, from strategy to concept to copywriting. The result is a website that represents your company and brand, complementing your other marketing and sales activities

2.Online Marketing Virtual Marketing Manager can develop a comprehensive online marketing strategy, effectively targeting your key audiences and evolving into a solid online presence. This can include: Email marketing (or EDM - electronic direct marketing) Social Media Strategy and Implementation Blogging Strategy and Implementation. Online Advertising