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Sales and Promotion ofAgricultural Machineries

Part I

Introduction to Marketing

1.1.MarketingIntroduction

Many large and small organizations seek success. Major factors contribute to making a business

successful - strategy, dedicated employees, good information systems, excellent implementation.

However, today's successful companies at all levels have one thing in common - they are

strongly customer-focused and heavily committed to marketing. These companies share an

absolute dedication to sensing, serving and satisfying the needs of customers in well-defined

target markets. They motivate everyone in the organization to deliver high quality and superior

value for their customers, leading to high levels of customer satisfaction. These organizations

know that if they take care of their customers, market share and profits will follow.

Marketing, more than any other business function, deals with customers. Creating customer

value and satisfaction are at the very heart of modern marketing thinking and practice. Althoughwe will explore more detailed definitions of marketing later in this chapter, perhaps the simplest

definition is this one: Marketing is the delivery of customer satisfaction at a profit. The goal of

marketing is to attract new customers by promising superior value, and to keep current customers

by delivering satisfaction.

Many people think that only large companies operating in highly developed economies use

marketing, but some marketing is critical to the success of every organization, whether large or

small, domestic or global. In the business sector, marketing first spread most rapidly in consumer

packaged-goods companies, consumer durables companies and industrial equipment companies.

Within the

past few decades, however, consumer service firms, especially airline, insurance and financial

services companies, have also adopted modern marketing practices. Business groups such aslawyers, accountants, physicians and architects, too have begun to take an interest in marketing

and to advertise and to price their

services aggressively.

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Figure 1.1 Core marketing concepts

What is Marketing?

What does the term marketing mean? Marketing must be understood not in the old sense of

making a sale - 'selling' - but in the new sense of satisfying customer needs. Many people think

of marketing only as selling and advertising. And no wonder, for every day we are bombarded

with television commercials, newspaper ads, direct mail and sales calls. Someone is always

trying to sell us something. It seems that we cannot escape death, taxes or selling!

Therefore, you may be surprised to learn that selling and advertising are only the tip of the

marketing iceberg. Although they are important, they are only two of many marketing functions,

and often not the most important ones. If the marketer does a good job of identifying customer

needs, develops products that provide superior value, distributes and promotes them effectively,

these goods will sell very easily.

Peter Drucker, a leading management thinker, has put it this way: 'The aim of marketing is to

make selling superfluous. The aim is to know and understand the customer so well that the

product or service fits ... and sells itself. This does not mean that selling and advertising are

unimportant. Rather, it means that they are part of a larger marketing mix - a set of marketing

tools that work together to affect the marketplace.

The American Marketing Association offers the following formal definition: Marketing is an

organizational function and a set of processes for creating, communicating, and delivering

value to customers and for managing customer relationships in ways that benefit the

organization and its stake holders.

Coping with exchange processes calls for a considerable

amount of work and skill. Marketing management takes place when at least one party to a

potential exchange thinks about the means of achieving desired responses from other parties. We

see marketing management as the art and science of choosing target markets and getting,

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keeping, and growing customers through creating, delivering, and communicating superior

customer value.

Marketing can be defined as: a social and managerial process by which individuals and groups

obtain what they need and wantthrough creating and exchanging products and value with

others:''To explain this definition, we examine the following important terms:needs, wants and

demands of products;Value and satisfaction; exchange, transactions and relationships; andmarkets.Figure 1.1 shows that these core marketing concepts are linked, with each conceptbuilding on the one before it.

Marketing Core Concepts

Needs

States of felt deprivation, part of human makeup

Physical and social needs

Wants

The form needs take (e.g. food => hamburger)Shaped by culture and personality

Demands

When wants are backed by buying power

Products

Aproductis any offering that can satisfy a need or want, such as one of the 10 basic offerings of

goods, services, experiences, events, persons, places, properties, organizations, information, and

ideas.

Service: Any activity or benefitthat one party can offerto another which isessentially intangible

and does not result inownership of anything.

(Customer) Value: a ratio between what the customer gets and what he gives. The customer gets

benefits and assumes costs.Is difference between value gained by owning and using a product

and cost of obtaining the product.Value gained not necessarily monetarySimilarly cost of obtaining not necessarily monetary

Customers act on perceived value [and perceived cost]

Customer satisfaction: The extent to -which aproduct's perceivedperformance matches a

buyers expectations. If the product's performance falls short, of expectations, the buyer is

dissatisfied. If performance matches or exceeds expectations the buyer is satisfied, or delighted.

Quality: Is closely related to satisfaction

Narrow definition: no defects

Broad definition: ability to satisfy customer needs [circular definition!]Exchange: The act of obtaining a desired object from someone by offering something in return.

Obtaining a desired object from someone by offering something in return

Offerings could be money, product, service, ...Transaction: A trade between two parties that involves at least two things of value, agreed-upon

conditions, a time of agreement and a place of agreement.

A trade of values between two parties; marketing's unit of measurement!

Monetary transactions and barter transactions

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Relationship marketing: The process recreating, maintaining and enhancing strong, valuable

relationships with customers and other stakeholders. Relationship marketing aims to build long-

term mutually satisfying relations with key partiescustomers, suppliers, distributorsin order

to earn and retain their long-termpreference and business.

Marketing networkcompany and all its supporting stakeholders

Market

Economist's definitionPlace (virtual or physical) where buyers and sellers meetMarketMarketer's definitionThe set ofactual and potential buyers of a productThesellers of a product are considered as the industry

IndustryMarketer's definition

The sellers of a product

1.2. Marketing Management

Marketing management can be defined as the analysis, planning, implementation and control of

programmes designed to create, build and maintain beneficial exchanges with target buyers for

the purpose of achieving organizational objectives.

Thus, marketing management involves managing demand, which in turn involves managingcustomer relationships.

Most people think of marketing management as finding enough customers for the company's

current output, but this is too limited a view. The organization has a desired level of demand for

its products. At any point in time, there may be no demand, adequate demand, irregular demand

or too much demand, and marketing management must find ways to deal with these different

demand states. Marketing management is concerned not only with finding and increasing

demand, but also with changing or even reducing it.

Managing demand means managing customers. A company's demand comes from two groups:

new customers and repeat customers. Beyond designing strategics to attractnew customers and

create transactions with them, companies are now going all out to retain current customers and

build lasting customer relationships.Companies today are facing some new marketing realities. Changing demographics, a slow-

growth economy, more sophisticated competitors and overcapacity in many industries - all of

these factors mean that there are fewer new customers to go around. Many companies are now

fighting for shares of flat or fading markets. Thus, the costs of attracting new customers are

rising. In fact, it costs five times as much to attract a new customer as it does to keep a current

customer satisfied.

Attracting new customers remains an important marketing management task. However, the focus

today is shifting towards retaining current customers and building profitable, long-term

relationships with them. The key to customer retention is superior customer value and

satisfaction.

1.3. Consumer and Organizational Buying Behavior

1.3.1. Customers

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Figure 1.2. Types of customer market

The company must study its customer markets closely. Figure 1.2 shows six types of customer

market.

i. Consumer marketsconsist of individuals and households that buy goods and services forpersonal consumption.

ii. Business marketsbuy goods and services for further processing or for use in theirproduction process, whereas

iii.Reseller marketsbuy goods and services to resell at a profit.iv.Institutionalmarketsare made up of schools, hospitals, nursing homes, prisons and other

institutions that provide goods and services to people in their care.

v. Governmentmarketsare made up of government agencies that buy goods and services inorder to produce public services or transfer the goods and services to others who need

them.

vi.International marketsconsist of buyers in other countries, including consumers,producers, resellers and governments.

Each market type has special characteristics Chat call for careful study by the seller. At anypoint in time, the firm may deal with one or more customer markets: for example, Unilever

has to communicate detergent brand benefits to consumers as well as maintaining a dialogue

with retailers that stock and resell its branded products.

1.3.1. Consumer Buying Behavior

Consumer buying behavior: the buying behaviorof final consumers -individuals and

households "who buygoods and services forpersonal consumption.

Consumer market is a set of all the individuals andhouseholds who buy oracquire gvods and

services fire personalconsumption.

The central question for marketers is; how do consumers respond to various marketing stimulithat the company might use? The company that really understands how consumers will respond

to different product features, prices and advertising appeals has a great advantage over its

competitors. Therefore, companies and academies have researched heavily the relationship

between marketing stimuli and consumer response. Their starting point is the stimulus - response

model of buyer behavior. This shows that marketing and other stimuli enter the consumer's 'black

box1 and produce certain responses. Marketers must figure out what is in the buyer's black box.2

Marketing stimuli consist of the four Ps: product, price, place and promotion. Other stimuli

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include significant forces and events in the buyer's environment; economic, technological,

political and cultural. All these stimuli enter the buyer's black box, where they are turned into a

set of observable buyer responses product choice, brand choice, dealer choice, purchase timing

and purchase amount.

The marketer wants to understand how the stimuli are changed into responses inside the

consumer's black box, which has two parts. First, the buyer's characteristics influence how he orshe perceives and reacts to the stimuli.

Second, the buyer's decision process itself affects the buyer's behaviour. This chapter first looks

at buyer characteristics as they affect buying behaviour, and then examines the buyer decision

process. We will never know what exactly is in the black box or be able perfectly to predict

consumer behaviour, but the models can help us imderstand consumers, help us to ask the right

questions, and teach us how to influence them.

Figure 1.3Model of consumer behavior

Characteristics affecting consumer behavior

Cultural factors CultureMost basic cause of wants and behavior, largely learnedCultural influences on buying behavior

vary greatly

Cultural shiftse.g. shift to concern for health => new market opportunities

Subculture

Groups of people with shared value systems based on common life experiences and situationssuch as nationalities, religions, ractial groups, geographic location

Social class

Society's relative permanent and ordered divisionsMembers share similar values, interests,

and behavior

Class is defined by a combination of occupation, income, eduaction, wealth, and other

variablesSocial Factors

Groups

Membership groupsPerson belongs to, and has a direct influence on the person

Reference groupsServe as points of comparison in forming attitudes or behaviorDoes not

require membership in the group E.g. aspirational groupa group to which the person wants tobelong

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Opinion leadersPeople in a reference group who because of some characteristics exert

influence on others

Family-most important buying organization

Roles and statusRole = activities people are expected to perform according the the persons around themStatus = reflects the general esteem given to role by society

Personal factors

Age and life-cycle stageTastes in food, clothes, furniture etc are age related

OccupationBlue collar => more rugged clothes, white collar => more business suits

Economic situationBuying behavior affected by e.g. income/wealth and business cycle

Lifestyle

Activities (work, hobbies, shopping, sports, social events)

Interests (food, fashion, family recreation)

Opinions (about themselves, social issues, business, products), etc.Personality and self-conceptPersonality = unique psychologicla characteristics that lead to relatively consistentand lasting

responses to one's own environment

Self-concept = self-image = people's possessions contribute to and reflected their identities (weare what we have)

Psychological factors Motivation

Motive (drive) = need sufficiently pressing to direct the person to seek satisfaction

Drive = strong internal stimulus that calls for action

Motive = drive actualized towards a stimulus object

Cues = minor stimuli, determine where, when, and how persons responds

Beliefs and attitudes

Belief = descriptive thought that a person has about somethingcan be

Business Markets

The business market consists of all the organizations that buy goods and services to use in the

production of other products and services that are sold, rented or supplied to others. It also

includes retailing and wholesaling firms that acquire goods for the purpose of reselling or renting

them to others at a profit. The business buying process is the decision-making process by which

business buyers establish the need for purchased products and services, and identify, evaluate

and choose among alternative brands and suppliers.2 Companies that sell to other business

organizations must do their best to understand business markets and business buyer behaviour.

Characteristics of Business Markets

In some ways, business markets are similar to consumer markets. Roth involve people who

assume buying roles and make purchase decisions to satisfy needs. However, business markets

differ in many ways from consumer markets. The main differences are in market structure and

demand, the nature of the buying unit, and the types of decision and the decision process

involved.

Market Structure and Demand

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The business marketer normally deals with far fewer but far larger buyers than theconsumer marketer does.

Business markets are also more geographically concentrated. Further, business demand is derived demand - it ultimately derives from the demand for

consumer goods. Mercedes buys steel because consumers buy cars.

Many business markets have inelastic demand: that is, total demand for many businessproducts is not affected much by price changes, especially in the short run. Finally, business markets have morefluctuating demand. The demand for many business

goods and services tends to change more

Nature, of the Buying Unit

Compared with consumer purchases, a business purchase usually involves more buyers and a

more professional purchasing effort. Often, business buying is done by trained purchasing

agents, who spend their working lives learning how to buy well. The more complex the purchase,

the more likely that several people will participate in the decision-making process. Buying

committees made up of technical experts and top management are common in the buying of

primary goods. Therefore, business marketers must have well-trained salespeople to deal with

well-trained buyers.

Figure 7.2 A model of business buyer behavior

Model for buying behavior

The environmentMarketing stimuli

Product, price, place, promotionOther stimuli

Economic, technological, political, cultural, competetive

The buying organizationThe buying center = people participating in buying processBuying decision process

Influences from the rest of the organization

Buyer responses

Product or service choice

Supplier choice

Order quantities

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Delivery terms and times

Service terms

Payment

Major types of buying situations

i. Straight rebuybuyer reorders without modification, based on past satisfaction =>very few participants

ii. Modified rebuybuyer wants to modify product specifications, price, terms, orsuppliers => involves more participants

iii. New-taskfirst time purchase => the riskier and larger the purchase, the moreparticipants

Participants in the business buying process

Userswho will use the product or service

Influencershelp define specifications, e.g. technical personnel Buyersformal authority, major role in selecting and negotiating, influence

specifications slightly

Decidersformal or informal power to select or approve final suppliers; in routinebuying often same as buyers

Gatekeeperscontrol the flow of information between participants, e.g. purchasingagents have authority to prevent seller from seeing the buyer

Major challenge

Roles sometimes difficult to recognize

Highest rank not necessarily same as highest influence

1.3.1 Marketing mixes

Marketing Mix

Marketers use numerous tools to elicit the desired responses from their target markets. These

tools constitute a marketing mix: Marketing mix is the set of marketing tools that the firm uses

to pursue its marketing objectives in the target market. Ps of marketing: product, price, place,

and promotion.

Marketing-mix decisions must be made to influence the trade channels as well as the final

consumers. Typically, the firm can change its price, sales-force size, and advertising

expenditures in the short run. However, it can develop new products and modify its distribution

channels only in the long run. Thus, the firm typically makes fewer period-to-period marketing-

mix changes in the short run than the number of marketing- mix decision variables mightsuggest.

Robert Lauterborn suggested that the sellers four Ps correspond to the customers four Cs.

Four Ps Four Cs

Product Customer solution

Price Customer cost

Place Convenience

Promotion Communication

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Winning companies are those that meet customer needs economically and conveniently and with

effective communication.

1.1.1. Market Segmentation, Targeting and Positioning

Market segmentation

The traditional argument for mass marketing is that it creates the largest potentialmarket, which

leads to the lowest costs, which in turn can translate into eitherlower prices or higher margins.

However, many factors now make mass marketingmore because...Customers too scattered

Customers too varied in buying practicesCompanies vary in their ability to serve a segment

Firms are focusing on the buyers who have greater interest in the values they create best (rifle

approach in contrast to shotgun approach)Market segmentation means dividing a market into distinct groups of buyers with different

needs,characteristics or behaviours, who might require separate products or marketingmixes.

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The company identifies different ways to segment the market and developsprofiles of the

resulting market segments. Market targeting involves evaluatingeach market segment's

attractiveness and selecting one or more of the marketsegments to enter. Market positioning is

setting the competitive positioning forthe product and creating a detailed marketing mix. We

discuss each of these stepsin turn.

Markets consist of buyers, and buyers differ in one or more ways. They may differ in their wants,resources, locations, buying attitudes and buying practices. Through market segmentation,

companies divide large, heterogeneous markets into smaller segments that can be reached more

efficiently with products and services that match their unique needs. In this section, we discuss

seven important segmentation topics: levels of market segmentation, segmenting consumer

markets, segmenting business markets, segmenting international markets, multivariate

segmentation, developing market segments and requirements for effective segmentation.

Levels of segmentation

Mass marketing

Mass producing, distributing, and promoting the same product to all consumers Argument: largest potential market => lowest costs => low prices or high profits Nowadays problematic because of (a) splintering of consumer segments and (b)

proliferation of distribution channels and advertising media

Segment marketing

Broad segment, adapt offering to closely match the needs of the market

Benefitsmarket more efficiently, only consumers it can serve best, fine-tuneproducts/prices/programs, face fewer competitors

Niche marketing

Focus on subgroups within segments = Narrowly defined segment, or a sub segment of asegment

Normally only one or a few competitorsOpportunity for small companies Customers need to be willing to pay a price premium In todya's markets, niches are the norm

Segmentation Targeting positioning

3. Identify bases forsegmenting the

market

4. Develop profile ofresulting segments

5. Develop measures ofsegments

attractiveness

6. Select the targetsegment(s)

1.Develop positioning foreach target segment

2.Develop marketing mixfor each target

segment

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Micromarketing

Local marketingCities, neighborhoods, specific stores E.g. Citibank offers customized banking services to different neighborhoods

May have problemsreduce economies of scale, logistics problems, dilution of brandimage

Individual marketing = one-to-one or customized marketing, markets-of-one marketing Mass customizationmoden technology allows for efficient production of customized

products, e.g. Dell Computer

Market targeting

Evaluating market segments

Segment size and segment growth Right size and growth rate Structural factorscompetitors and substitutes Relative power of buyers and suppliers Note: largest size or growth not necessarily most desirablea small company might aim

for a segment with less absolute size or growth if it has less competitorsCompany objectives and resourcesCompany should have strengths that can provide basis for competing in the segment => offer

superior value and gain advantage over competitors

Selecting market segmentsTarget market = set of buyers who share common needs or characteristics that the companydecidesto serve

Market coverage strategies

Undifferentiated marketing = mass marketingFocus on what is common in all buyers, appeal to that Mass distribution, mass marketing, etc

Often difficult to compete with focused competitorsDifferentiated marketing

Target several segments and design separate offers for eachClaimdeveloping a stronger position within several segments creates more total sales than

undifferentiated marketing across all segments

Concentrated marketing

Firm goes after a large share of one or a few segments / niches

Shared marketing mix for all segments

Attractive when resources are limited

Choosing a coverage strategy is based on:

Company resourceslimited => concentrated Product variabilitylow => undifferentiated Product life cycle stage => undifferentiated in the beginning Market variability (how differentiated market?) - low => undifferentiated Competitors' marketing strategy => if competitors already using differentiated or

concentrated marketing, undifferentiated may be suicidal

Positioning

Product position = The way the product is defined by consumers on important attributes

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The place the product occupies in the consumers' minds relative to competingproducts

Consumers simplify their buying process by categorizing => positioningChoosing a positioning strategy

1) Identifying a set of possible competitive advantages to build on

2) Choosing the right competitive advantages3) Selecting an overall positioning strategy

The company must then communicate and deliver the chosen position to the market