Fundamentals of Marketing

Marketing is a social process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others.

Marketing Strategy * Development of Product / Service* Stimulation of Demand* Determination of Price* Make up of Channels to reach Customers

Marketer is one who seeks response to an offer he makes to a prospect.

Prospect is a person who has a set of needs and wants which can be met by the offer of the Marketer.

Consumer is a person who uses a product to derive satisfaction

Needs represents the basic requirement of human. They represent lack of a thing, an inadequacy or a gap. One has needs like hunger, thirst, shelter, friendship, status etc

Wants are description of tangible and intangible products and services, which satisfy human needs. A thirsty person wants tap water or mineral water or soft drink.

Products or Services are those which have 4 characteristics1.Utility : It is Want satisfying Power. It can be Time Utility, Place Utility, Form Utility, Possession Utility2.Value : It is Value in use if it provides benefits when used. Value in exchange if it can be exchanged with money or a product.3.Availability : Demand and Supply 4.Tangibility : Products and Services

Demand is willingness to buy, supported by ability to pay. Buying intentions and disposable income together help determine demand.Market is a place where sellers and buyers meet and exchange products or services for money and mutual benefit.Competition denotes the existence of actual and potential rival companies, which manufacture perfect or close substitute product offerings to attract customers.

Exchange is process of give and take -transacting. Transactions are negotiated. Negotiation is a process of sorting out differences and arriving acceptable to both parties.

The five essential conditions of exchange are :1. There are at least two parties2. Each party has something of value for another party3. Each party is capable of communication and delivery4. Each party is free to accept or reject the exchange offer5. There are mutual benefits making continuation of exchange desirable for both parties

Goals of Marketing 1. Profitability * Sales Revenue Maximization * Cost Minimization2. Growth * Sales Growth Maximization * Product Development * Market Penetration * Market Development

* Diversification3. Market Standing * Innovation * Market Leadership * Customer Satisfaction4. Image * Brand Image * Company Image

Marketing Trends

* Opening of Indian Economy to Foreign Companies

* Increasing number of Foreign Corporate Alliances (ashok layland)

* Growth of Global Brands in Indian Markets

* Rapid dissemination of Global Life Styles

* The emergence of attractive Rural Markets

Marketing Issues

1. Changing Consumption Patterns2. Changing Consumer Psychographics3. Markets in Transition(conversion of markets from small to big markets)4. Market Fragmentation & Saturation5. Inter-category Competition6. Value Conscious Consumption7. Offering Value for Money Proposition8. Branding / De branding & Customization

Challenges to Indian Marketers

1. Reengineering 2. Bench Marking3. Total Quality Management4. Outsourcing5. E-commerce6. Alliances7. Supply Chain8. Marketing9. Markets

1. Reengineering :

From : Focus on functional departments

To : Key process in organization and multi-discipline teams

2. Bench Marking :

From : Reliance on self improvement

To : Study world class performers and adopt best practices

3. Total Quality Management

From : Quality control in select areas

To : Total Quality is company wide program

4. Out-sourcing :

From : A physical company making everything inside

To : A virtual company making every thing outside

5. E-commerce

From : Attracting customers to stores and selling standardized products

To : Attracting customers to internet and delivering direct customized products

6. Alliances

From : Playing alone

To : Partnership teams

7. Supply Chain :

From : Many retailers, loosely controlled, less reliable intermediaries

To : Few retailers, closely controlled, highly reliable partners

8. Marketing

From : Transaction Marketing, long range commercial relationship with focus on satisfaction

To : Relationship Marketing, long range socio-commercial relationship with focus on delight and welfare

9. Markets

From : National - Urban Markets and Exports

To : National - Urban - Rural Markets and Global Markets

All the above are company responses to environment

Marketers in Action

To Survive and Strategize1. Clarify by Positioning - Modern Consumers want Variety Marketers to respond with a Profusion of BrandsThe Result - a bloated product portfolio, failure to differentiate the offer and a Confused Consumer. A better response is to develop sharper brand positioning.

2. Offering Value for Money Proposition (economical products / no frills)3. Reviving old category magic (narrow product-centric definitions)

4. Finding new category values (more Customer-centric)

5. Facing inter-category competition6. Positioning for different segments

Delivering Customer Value & Satisfaction Value delivered is difference between benefits and costs. It indicates worthiness of product evaluated on perceived value of product.

Customer Oriented Companies have Customer Satisfaction as the goal. Satisfied Customers* Stays loyal to brand makes repeat purchases * Talks favorably of brand* Buys new products introduced by Company* Underrates the offers of Competitors* Offers suggestions and new ideas In the era of Competition, Customer Satisfaction has become a central theme of Marketing.

Relationship Marketing

The reasons for Organization Existence is 1. To generate New Customers2. Retain Existing Customers

• Relationship Marketing Objectives are :

1. Protect existing high profile customers2. Re-price expensive service based on Cost-to-serve3. Discount, if necessary, to gain business with low cost-to-serve customers4. Negotiate win-win relationship that lowers cost to serve with cooperative customers5. Concede permanent loss customers to competition6. Attempt to capture high profit Customers from Competitors

Relationships built up with every one in Value Chain - Consumers, Suppliers and Vendors results in Delivering Customer Value and Satisfaction.

In India Economic Transition, Heightened Competition, Fragmented Retail Structure, Extreme Consumer Price Sensitivity, Low levels of Product Differentiation led to CRM the Marketing Tool beyond 4 P’s.

CRM Definition - Managing Relationships with Channel Partners, helping them reach out the End Consumer.

• Demand Management

Marketing is primarily Demand Management. To meet the objectives of the company marketers have to influence three aspects of demand.*Nature of Demand *Level of Demand *Timing of Demand

Nature of Demand

1. Latent Demand Consumers may have a hidden desire to possess a product that satisfies a need, which cannot be satisfied with the existing products.Examples : low priced, fuel-efficient cars, painless surgery, overnight complexion changing skin creams

2. Unwholesome Demand Consumers are not hundred percent, health and social welfare oriented.They consume alcohol, smoke cigarettes.De-marketing campaigns are necessary to reduce the consumption.Social Marketing is to be employed to educate people on important social issues and create right social citizenship.

Levels of Demand

1. Negative DemandWhen consumers develop negative attitudes and beliefs about a product, the demand will be negative.Examples : Family Planning, Vaccinations, Literacy Campaigns, Tooth pasteThis requires Conversion Marketing.

2. No DemandThere will be no demand for a product when people cannot afford to buy the product or when people are not aware of or convinced about product benefits.Examples : Products like Digital TV, Fax machines, Air Conditioners have no demand in rural areas. They cannot afford such products.Company need to do Stimulational Marketing or Developmental Marketing.

3. Full DemandOrganizations face the situation of full or overfull demand.Examples : Cinema Halls on the day of release of a new movie, Entertainment Parks on Sundays, Leading Doctors, Lawyers, MBA programs of IIMs, Government Hospitals.Use Queuing / Reservation for cope the demand without dissatisfying the customer.

Timing of Demand

1. Regular DemandEven, steady, or regular demand for a product. Products like toiletries, cosmetics, beverages have steady demand. They do not vary significantly in different seasons. Need to adopt aggressive marketing strategies, heavy promotions, intensive distribution, and product development.

2. Irregular DemandSome products may have demand, which varies seasonally. Demand for fans and A/Cs are seasonal. In such a cases, off-season discounts are offered to produce regular demand. These efforts are also called Synchro-Marketing. It aims at matching supply and demand according to variations over time.

Evolution of Marketing

In the evolutionary stages of marketing one finds the transformation from

*Seller’s Market to Buyer’s Market*Local Markets to Global Markets

The Philosophy of Marketing

The philosophy of marketing has been changing with times. It is found marketing has been conceptualized in five different ways.

1. Production Concept 2. Product Concept 3. Selling Concept 4. Marketing Concept 5. Societal Concept

1. Production Concept

The emphasis is on production of goods and services and distributing them at lower price. This is based on “Supply creates its own demand”. The high volume - low price philosophy succeeds when,*Consumers are interested in product availability, as there was no supply so far*Consumers are looking for low-priced products since they cannot afford to buy the existing products.

Example : Low-priced Nirma Detergent Powder for middle and low income group expanded the market and high volume of production became essential.

2. Product Concept

This centers around Quality.Quality Sells - make unique products and lead the market.This will yield results, when*Consumers are interested in quality and features, like buying the best*Consumers can afford high prices and are willing to pay for quality.

But product obsession can lead many companies to failure.(Case of Office Files)

Product failures takes place when products are designed, without real understanding of the needs. The undue concentration on the product rather than the need is referred to as “Marketing Myopia”

Case of Promise Tooti-Frooti flavored Toothpaste Just-for-kids. Soaps and cosmetics was available for kids but not toothpaste. Segment is very small for kids less than 2%. Toothpaste is a family product. Tooti-frooti flavor may make children eat it than use it for brushing teeth. Quality or distinctiveness are essential, but are to be related to the needs of the market.

3. Selling Concept

Here focus is on motivation. People are inertia by nature; they tend to postpone things. To make them active, motivation is needed. Here it is one sided, helping the seller. It is unmindful of buyer’s needs. It advocates the use of persuasion and pressure to make people buy. As such, it may create post-purchase dissatisfaction among buyers.

Eureka Forbes promoted its vacuum cleaners by door-to-door selling (direct marketing). The sales person demonstrated of how it works and sold them. After some time most of the housewives found it less useful for floor cleaning which is a daily routine and slowly it found a place in store room.

4. Marketing Concept

This embraces all activities of the enterprise and focuses on matching the “Offer” with “Needs” to secure the desired satisfaction among customers and “Targeted Profits” to the Organization.

The 3 requirements of Marketing Concept area. Market Focus - Who are our customers? Segmenting and Target Marketingb. Consumer Orientation - What are their needs? Consumer Research based practicesc. Coordinating Marketing - What must we do to win their preferences? Integrating Marketing with other functions

HLL’s “Lifebuoy” oldest as well as largest selling soap in India. Why?

*Priced low and is within reach of common man*150gram soap and therefore offers value for money*Its long lasting (important from target segment’s point of view)*Its health positioning is also appealing (Tandurusti-ki-raksha). The children sing with delight.*Also, the dream it sells of being a “Winner” also excites the consumers.

Market Focus : Market segment is clearly identified as the low income segment comprising hard working people, who are price sensitive

Consumer Orientation : HLL has identified consumer needs like health consciousness and achievement orientation.

Coordinated Marketing : The need to deliver customer satisfaction by each employee and activity is an important of marketing concept. Consumer is central, and all work together to sense, serve and satisfy the customer. Small viable units is the answer for this.

5. Societal Concept

This is broadened version of marketing concept. Besides customer, it also included society in its focus. Consumer satisfaction with welfare of society is the concern of marketers. These two aspects always conflict many a time.

Customers prefer harmful products like cigarettes and alcohol. Marketers should de-market to promote welfare. Customers prefer “use and throw” products. But they cause environmental pollution.

How to reconcile these opposing view points? A marketer strikes a balance between them depending upon the situation and one’s own ethical values.

Consumer Buying Behavior

Analyzing Marketing Opportunities

1.Understanding Consumer Buying Behavior2.Marketing Intelligence and Market Research3.Market Segmentation, Targeting and Positioning

Consumer Behaviour

The basic model applicable to all Consumers

Marketing Offer + Environment Product Socio-culturalPrice TechnologicalPlace EconomicPromotion Political

Socio-cultural factors

Culture : Buying decisions which are influenced by social customs, traditions, beliefs. Social norms influence directly individuals.

Social Class : Occupations / Incomes, Lower / Middle / High Classes

Groups : Humans, being social animals form groups and develop behaviours. Primary Group > Family, Friends, NeighboursSecondary Group > Offices, Self Help, Political (Opinion Groups)Family : Important Consumer Buying Organization. Decision maker is head of the family.

Role & Status : Every person is a member of more than one group or organization. Role refers to the behaviour expected of the individual in the group.

Status refers to the place given to the person by the group because of his position and achievements.Sociability : Exposure to other people and the interactions they have.

Technological Factors New / Innovative Technology has an impact on the occupations and life styles of people. Economic Factors Poverty Levels, Income Levels,Per capita consumptionPolitical FactorsDevelopment Plans, Employment Program,IT Policy

StimuliInternal : Originates from self * feel need for food (natural phenomena)

* for elegant dressing on observing friends / other around you (social comparison)External : By Market Offer & Environment which induce a consumer to think about purchasing a product

Buyer Characteristics which effect the buying process

1. Age & Life-cycle StageBelow 12 years (child) books, pencils13 to 19 years (teenage) two wheelers, cell phones20 to 40 years (young) restaurants, entertainment40 to 60 years (middle aged) credit cards, garmentsAbove 60 years (old) clubs, parks

2. OccupationThe goods and services bought by the individual is influenced by the occupation3. Economic SituationThe purchasing power of an individual is the prime consideration and income sensitivity of goods and services will result in viable market offer in the form of low priced pack sizes, installment payments / discounts etc

4. Life-styleIt is person’s pattern of living determined by activities, interests and opinions of people.Activities - work, hobbies, social events Interests - food, fashion, family, recreationOpinions - about self, society, government, business

5. Personality and Self-conceptUnique psychological characteristics which relates to products people buy.(based on situation and type of person)6. Psychological FactorsHelps describe what goes on the minds of the consumer, have influence on his decision makingPerception, Cognition, Beliefs and Attitudes, Motivation

Perception : is the process by which people select, organize and interpret information to form meaningful picture of the object / product.Selection Attention - people pay attention to things that they consider of valueSelection Distortion - people interpret information to support what they already believeSelection Retention - people remember what, in their view, is supportive to the beliefs and attitudes

Cognition : information gathering and processing style

Beliefs and AttitudesA belief is a descriptive thought that a person holds about anything. Beliefs may be based on knowledge, opinion, faith or emotion.

Attitudes describes a person’s relatively consistent evaluations, feelings and tendencies towards an object or idea. Attitudes has three components Cognitive - information evaluation and inferenceConative - emotional feelingsBehaviour - disposition to do or not to do

Motivation An inner urge that moves or prompts an action.

Maslow’s Need Hierarchy Theory of Motivation.Basic, Productivity, Social, Esteem, Self Actualization Needs

Buying Decision ProcessNeed recognition, Information search, Evaluation of alternatives, Purchase decision, Post purchase behaviour.Buying Behaviour PatternsDegree of Involvement - Rational, Emotional Time Spent - Planned, Emergency, Impulse Buying

Marketing Intelligence & Market Research

• Why Marketing Intelligence & Market Research?

• Effective Marketing Decisions are based on information in market place rather than intuitions or hunches.

• In changing market place, Marketers should continuously gather information on Customers, Competitors and Environment to decision making.

• Marketing Intelligence

• Marketing Intelligence is an on-going activity to provide continuous information for decision making.

• Market research is on of the parts of Marketing Intelligence.

• Marketing Intelligence System

Secondary Data Sources +

Market Research Studies +*

Internal Information System +*

Marketing Intelligence System->

Decision Support System->

Marketing Strategy Development->

Market Response*

DSS - a coordinated collection of data, systems, tools,and techniques with necessary software & computer hardware

Market Research

• Market Research is defined as the “Objective and Systematic Process” of obtaining, analyzing and reporting of data (or information) for decision making in marketing.

• “Objective and Systematic Process” is that market research which should not be influenced by personal views and considerations.

• Market Research undertakes periodic studies (not on continuous basis) to collect and analyze data with specific objectives like sales analysis, market share analysis, forecasting sales, assessing market potential, competitor analysis, bench marking, new product research etc.

Market Research Process

How to conduct market research? Or What are the tasks involved in market research?Step 1. Identify the Problem / Opportunity and Define Research Objectives.Step 2. Develop Research Design (or plan)Step 3. Collect the Data (or information)

Step 4. Process and Analyze the DataStep 5. Present Research Findings or Report

Step 1. Identify the Problem / Opportunity and Define Research Objectives.

The first step is to identify the marketing problem or opportunity accurately, and define the objectives of marketing research. “Research Brief” gives the background information about the problem and how the findings of marketing research will be useful for making decisions to solve the problem. Normally through this there is an agreement between the Marketing Manager and the Researcher about the Problem and the Research Objectives.

Step 2. Develop the Research Design (or plan)

This basically indicates the procedure and the cost of conducting research study. The decision areas in Research Design are :1.Information Type 2.Sources of Data3.Research Methods4.Sampling Plan5.Method of Contacts6.Data Collection Methods (Research Instruments)

• 1. Information Type Prepare a list of information required from Research Objectives.

For example one of the research objectives is to obtain Competitors Information, the list should include : List of Competitors,Their Market Share, Whether they are Local, National or MNC’s, Whether they will be any new competitors in future,Major Competitors strength, weaknesses, objectives, marketing strategies, pricing policies and prices.

• 2. Sources of Data

Primary Data consists of original information gathered for specific purpose.Survey method is extensively used in market research to collect information from buyers.

Secondary Data consists of information that exists somewhere and was collected earlier for some purpose. Its advantages are ready availability and at low cost. Its disadvantages are that data may be outdated, inaccurate or incomplete.

Commercial Data are the marketing information offered by some market research organizations (referred as syndicated research) to select clients on payments basis.

• 3. Research Methods for Primary Data Collection

(a) Observational - people and their behaviour are observed and the information is recorded, without asking questions.(b) Exploratory - when the problem is not clearly defined or little information is available about the problem, exploratory research methods such as focus groups and indepth-interviews are used to gain insight into the problem

(c) Survey - descriptive study (ie describing the way the things are) or Survey Method is used by interviewing or asking questions to people who are believed to possess desired information. It measures magnitude of people’s knowledge, attitudes and buying behaviour.

(d) Experimental - purpose of experimental research is to measure cause and effect relationship by setting up a controlled situation.

Primary Data Collection

The primary data collection method is through Survey Research - Awareness, Attitudes and Buying Behaviour of Customers.In Survey Method Four Different Possibilities of Data Collection takes place *Structured and Direct Interview*Unstructured and Direct Interviews*Structured and Indirect form of Interviews*Unstructured and Indirect form of Interviews

*Structured and Direct Interview

“Structured Survey”Preferred when Sample Size is Large & When Market is Geographically Disbursed Less Skilled Interviewer - Low Cost per Interview Standardized Information - Easy to Edit, Tabulate and Analyze Data Difficult to get Unbaised and Complete Answers to Questions regarding Personal & Motivational Factors.

*Unstructured & Direct Interviews

“Depth Interview”Used for Exploratory Research, Conducted in Informal and Casual Manner, More Probing Questions, Builds Rapport and Obtains Information on Hidden MotivesAdvantages - Encourages Respondents to Express any /many Ideas, Gives Flexibility to Interviewers Disadvantages -Takes Longer Time InterviewingDifficult to Quantify / Analyze DataCompetent Interviewers are Required - Cost per Interview High

*Structured and Indirect form of Interviews

“Delphi Technique”Obtain Info from Group of Experts within or Outside the CompanySeek Responses Separately from Each Panel Member to Same ProblemCoordinator Collects, Summarizes and gives Group’s AverageIndividual Experts again Responds to same problem

“Delphi Technique”This gets repeated 3 to 4 Rounds until Consensus Opinion is reachedUsed to get answers to difficult problems of forecasting future trends on external environmental factors such as Economic, Technological and Political. Selection of Experts is very Important.

*Unstructured and Indirect form of Interviews“Focus Group Interview”

Group of 6 to 10 Invitees spend few hours with a skilled Moderator to discuss a given ProblemMeeting held in Pleasant SurroundingsDiscussion held in Relaxed and Informal MannerSkilled Moderator Focuses on Problem and leads DiscussionDiscussion recorded through Note Taking - Audio – Video.

“Focus Group Interviews”

Recordings are examined subsequently to Understand Attitudes, Opinions, and Buying Behaviour of Present and Potential Customers.

Focus Group Techniques is used :

Obtain Preliminary Information (Exploratory) before undertaking a large scale market surveyFor generating HypothesisExamining New Product ConceptsGenerating Ideas for Improving Existing Products

Getting Insights into Consumer’s Perceptions, Attitudes, and BehaviourAdvantages - Saving in Time compared to depth interviewsOne should not generalize the findings of Focus Group Research as Sample Size is Small and not Drawn Randomly.This is used more in Consumer Research (for Exploratory Research)

4. Sampling Plan

Sample is a Part of Population (or Universe) which is selected to obtain the Necessary Information.A Universe consists of all the items (or objects) under consideration in a research project, and depends on the research objective.

Sampling Plan consists of three decisions :(a) Sampling Unit(b) Sampling Size(c)Sampling Procedure (or scheme)

(a) Sampling Unit

Researcher should determine population.

Answer - Who is to be Surveyed?

(b) Sample Size

Researcher decides on how many people (firms) should be selected from the population for survey. Use of mathematical formulas in determining the Sample Size.

(c)Sampling Procedure / Sampling Scheme

The decision on how study objects are selected. Good Sampling Scheme / Procedure characteristics are : *It should be truly representative sample*It should result in small sampling error*It should consider the cost and time available for research*It should enable results of the sample study to be applicable for the population with a reasonable level of confidence

Sampling Schemes are classified into 2 types

(a) Probability based Sampling Scheme (Probability or Random Sampling)

(b) Non - probability based Sampling Scheme (Non-probability Sampling)

(a) Probability or Random Sampling

Based on concept of random selection - each object or item in the populationHas an equal chance of being included in the sample.Advantages - it can measure errors of estimation statistically.Dis-advantage cost and time involved are high

(b) Non-probability Sampling

Non random samplingSampling error cannot be estimatedResearch findings cannot be generalizedPossibility of personal biases of researcher while selecting sampleAdvantages - cost and time involved are less

Sampling Schemes and Sampling Techniques

For Probability or Random Sampling1. Simple Random Sampling2. Stratified Random Sampling3. Cluster (area) Sampling4. Systematic Sampling

1. Simple Random Sampling

All study Objects (members) of population have equal chance of selection in the sample

2. Stratified Random Sampling

Population is segmented into several homogeneous groups (or stratas) and then a sample is selected from each group at random

3. Cluster (area) Sampling

Large population is divided into small clusters (or geographical areas). Then randomly selection of a sample of few areas (or clusters) is done and again a few members from each area are chosen at random or census conducted.

4. Systematic Sampling

First, study object is selected randomly and then remaining units (or Objects) are selected at a fixed interval, which is calculated by formula : Population divided by Sample Size

Non-probability Sampling

1. Convenience SamplingSample is selected based on convenience of location or cooperation of study objects2. Judgement SamplingBased on past studies (or experience), the researcher uses judgement in selecting a sample

3. Quota SamplingBased on prior knowledge of population, the researcher first defines categories or groups, and then interviews a fixed number (or quota) of people in each category, based on convenience or judgement.

Methods of Contact

1. Personal Interviews - most widely used when the sample size is relatively small. This is most expensive, time consuming, needs more planning and supervision and is also is subject to interviewer’s biases. 2. Telephone Interviews - useful if interviews are short and not too personal.It is quicker and response rate is high and expenses are lower than personal interviews but gaining access to respondents is bit difficult.3. Mail SurveysWording and structure of collecting data is important because contact is impersonal and replies can be ambiguous or omitted. Problem is low response rate but low in cost.

Data Collection Methods (Research Instruments)

1. Questionnaire: This includes number of questions, printed or typed in proper sequence, for presenting to respondents for their answers. Each question should contribute to research objectives. Questions should be simple, easy to understand, direct and unbiased. Questions can be closed end to open end – yes/no, multiple choice. Normally first pre-tested (pilot survey)using convenience sampling method 2. Mechanical Instruments : audio, video, eye camera

Step 4 Process & Analyze Data

Processing includes Editing, Coding, Classification (Qualitative & Quantitative), Tabulation Analysis of Data can be categorized into Descriptive Analysis, Inferential (or statistical) analysis through computer programmes

Step 5 Presenting the Research Findings / Reports

1. Title Page 2. Table of Contents

3. Executive Summary

4. Introduction (or Research Brief)

5. Problem Formulation and Research Objectives

6. Research Methodology

7. Results (or Findings) of Research

8. Conclusions and Recommendations

9. Appendix 10.Bibliography

Consumer vs Industrial Market Research

1. Sources of Data Con More reliance on primary data Indl More reliance on secondary data

2. Research Method Con Survey - Observational / Experimental Indl Survey - Exploratory - Expert Opinion

3. Researcher Con General Orientation Indl Technical Orientation

4. Sample Size Con Large sample due to large universe and individual / house hold buyers are geographically dispersed Indl Small sample due to small universe(or Population) and concentration of buyers

5. Respondents Con Simple as individuals or households users are generally the buyersIndl More difficult, as buying decisions are made by several members of buying committee and not purchase executives only6. Respondents cooperation / accessibility Con Less difficult to obtain data, accessibility is easyIndl More difficult due to time constraint and accessibility is limited to working time

Market Segmentation, Targeting & Positioning

Selecting and attracting markets involves three key decisions Segmenting, Targeting and Positioning

àSegmentation is the process of dividing or categorizing market into different groups based on one or more variables

àTargeting is selecting the market segments, which can be served efficiently and profitably. It is deciding on market coverage strategies.àPositioning is a market attraction strategy, which involves placing the product or brand in the minds of the customers in the target market.

The various steps involved in the market coverage and attraction process are:Decision : * Segmentation

Action :

1.Identification of various basis for segmenting market2.Developing Profiles of the market segments

Decision : * Targeting

Action :

3.Evaluating market segments for their attractiveness 4.Deciding market coverage strategy

Decision : * Positioning

Action :

5.Identifying possible competitive advantages of brand6.Selecting the right competitive advantage7.Communicating chosen competitive advantage to target customers

Segmentation Segmentation is a process of dividing a heterogeneous market into homogeneous sub-units. The division is based on the premise that different people have different preferences.

The basic market preference patterns are :àHomogenous preferences where consumers have roughly the same preferencesàDiffused preferences where consumers are scattered throughout the market by their preferencesàClustered preferences where consumers are found in distinct preference groups

Degrees of Segmentation

If Segmentation is considered as a process with two polar points from zero to complete, four distinct segmentation approaches are identifiable

Zero àMass Marketing - Considers all people as a bunchàSegment Marketing - Identifies people as different groupsàNiche Marketing - Serves selectively one or very few groups of peopleComplete àRelationship Marketing - Focuses on individuals or very small groups

Marketing Evolving

Mass Marketing * Product Focus * Anonymous * Few Campaigns * Wide Reach * Little or No Research * Short Term

Segment Marketing* Group Focussed * General Category Profiles * More Campaigns * Smaller Reach * Based on Segment Analysis of Demographics * Short Term

Niche MarketingA niche is a very small group with a distinctive set of traits, who seek a special combination of benefits. Niche Marketing identifies special sub-groups within larger segments and offers different products and services.

Relationship Marketing* Customer-Focussed * Targeted to Individuals * Many Campaigns * Discreet Reach * Based on Detailed Customer Behavior and Profiles * Long Term

Basis of Segmentation

There is no one way of Segmenting the Market. A Marketer may look for one or more variablesàGeographicàDemographicàPsychographicàBehavioral

1. Geographic Segmentation

Markets are divided into segments based on variables like

* Zones / Regions, States, Districts, Cities / Towns / Villages by

* Size, Density, Climate (tropical, rainy, cold) and Culture

2. Demographic Segmentation

Markets are divided into segments based on *Age and Life-cycle

*Gender *Marital Status *Family Size *Income *Occupation *Education *Religion.

a. Age and Life-cycleAge Segment :

Infants Age under 6 years Products : Milk Powder, Cereals, Soaps,

Diapers Typical Brands : Glaxo, Nestle, Johnson &Johnson, HLL

Age Segment :

Children Age 6 to 12 years Products : Toothpaste, Confectionery, Sports Cycle, Story Books, Magazines

Typical Brands : Peposodent, Nutrine, Britannia, Parle, BSA, Hero, Amar Chitra Katha

Age Segment :

Teens Age 13 to 19 years Products : Toothpaste, Face Cream, Shoes, Bikes, Soft Drinks

Typical Brands : Close-up, Fair & Lovely, Nike, Hero Honda, Coke, Pepsi, Thumps up

Age Segment :

Young Adults Age 20 to 40 Years

Products : TV, Music System, Computers, Cars

Typical Brands : Sony, Samsung, LG, Compaq, Maruti, Santro

Age Segment :

Elders Age 41 to 60 Years Peroducts : Suitings, Brief Cases, Spectacles

Typical Brands : Park Avenue, Arrow, Samsonite, Bauch & Lomb

Age Segment : Seniors Age above 60 years

Products : Rocking Chairs, Self Diagnostic Kits, Medicines

Typical Brands : Cipla, Reddy Labs

b. Gender : Differences are observed in terms of dress, footwear, cosmetics.c. Marital Status : Unmarried - Small size Houses / Flats or Hostels, Fast Food JointsMarried - Houses / Flats, Hotelsd. Family Size : As family size increases, consumption of consumables will increase.

e. Income : Income level influences the purchase decisions relating to quantity and quality.f. Occupation : Needs vary based on occupation.Doctor needs Medicines, Syringes, Needles, Stethoscope, BP Kit etc.Student needs Stationery items.

g. Education : This provides knowledge and skills. It improves the thinking process and facilitates understanding of issues more clearly and at higher plane.h. Religion : It provides a code of life and links the visible real world, with the invisible world of death. Each prescribes the way to worship god, through lighted lamps, incense sticks, camphor, candles, bells, perfumes, white caps etc

3. Psychographic Segmentation :

Geographic & Demographic Segmentations provide a physical view of the markets, the true dynamics of purchase can be assessed & marketing offer can be designed only on basis of Psychographics of people.Markets are divided into different segments based on three variables : *Social Class *Life-style and *Personality

Social Class

* Society consists of a structure, which represents a hierarchy of classes or grades of people.

* Caste is one of the divisions of class system in India along with wealth.

* However, presently social class is determined by a combination of factors like education, occupation, income, wealth and others.

The social classes may be categorized into six groups :

1.Upper - Upper 2.Lower - Upper3.Upper - Middle 4.Lower - Middle5.Upper - Lower6.Lower - Lower

Lets look at the Characteristics and Preferences of each of the social classes.

1. Upper - Upper : Characteristics àSocial elite, wealth inherited, well known family background, ascribed status, small in number, reference group for others Preferences àJewellery, antiques, farmhouses, vacations, luxury products at high prices.

2. Lower - Upper :CharacteristicsàSocial elite, wealth earned, educated and professional, active in social and civic affairs, aspire and associate with upper-upper stratum.PreferencesàStatus symbols - cars, homes, expensive school, exhibition products, art pieces etc.

3. Upper - Middle :CharacteristicsàCarrer oriented, dependant on education and hard work, dual career families, seek comfort, ambitious.PreferencesàQuality life products and entertainment, good interior decoration, vacation.

4. Lower - Middle :CharacteristicsàAvergae paid employees, small businessmen, college background, fashion oriented but traditional, dual career familiesPreferencesàBetter life products, nice homes, nice furniture, decent school, occasional vacations, travel and tours, regular and economical entertainment.

5. Upper - Lower :CharacteristicsàAbove poverty line - Depend on loans and advances, hand to mouth, dual career families, traditional, strong family ties, school education.PreferencesàEconomy products, instalment and credit buying, low priced popular brands and local unbranded products.

6. Lower - Lower :CharacteristicsàBelow poverty line, daily incomes, low per capita income, poor health and hygiene, dependence on petty loans and charity.PreferencesàLocal Unbranded products, daily purchases, cheap varieties, buy seconds or collect thrown out clothes, food etc.

Life Style

One way of Life Style classification is*Trend Setters*Traditionalists*Chameleons

Let us understand the influence of Life Style on Product Choices

1. Trend Setters Characteristics

àAmbitious for self and familyàInterested in changeàProgressive àCareer MindedàAchievement Oriented àPositive ThinkingàSocial àIndependent àStatus SeekingàGood reading habitsàSeek entertainment and recreationàPrefer love marriages and dual career families “Product Choices”

2. Chameleons Characteristics

àActive àLack Courage and ConfidenceàIndecisive àPrefer following than leadingàFavor love marriage and career oriented spouse at heart but do not allow full freedom to spouseàProgressive thinkersàGood reading habitsàAverage financial soundness “Product Choices”

3. Traditionalists Characteristics

àPassive àHopeful àConservativeàEmotional àCulture BoundàContended àUnder AchieversàPrefer peace to prosperityàPrefer tradition to fashionàHome lovingàPrefer arranged marriages “Product Choices”

One way of Life Style classification women is *A capable home maker*A career women*A free spirit

Personality

*Personality refers to the set of psychological and physical characteristics of an individual that determine the individual behavior*These characteristics are unique making individuals different from one another

*Personality can be defined with the help of characteristics like àSelf confidenceàSociabilityàAdaptabilityàAssertivenessàAutonomyàCreativityàSensitivity and so on

For example :* A person with social nature and creative zeal is likely to prefer picnics, parties, photography.* Marketers offer restaurants with good food and ambience, picnic spots, concessional membership cards, cameras, photo films, processing labs etc to satisfy their requirements.* Consumers buy those products or brands where the perceived personality of which match or fit with their self-perceived personality

Behavioral Segmentation

Behavior of consumers is a better guide to segment the markets. To understand the behaviors we need to raise following questions.àWhen do people buy? OccasionsàWhy do people buy? Benefits sought

àDo they buy? Once? More? User StatusàHow much do they buy? Usage rateàDo they repeat the buy? Loyalty statusàWhere do they buy? Place - Retail OutletàWhat do they buy? Products possessed

1. Occasions

*Festivals

*Events

*Important Dates

*Anniversaries etc

2. Benefits Sought

Varies from consumer to consumer. Consumer may buy a Car seeking one or more of following benefits*Status symbol *Sense of fulfillment*Convenience of transport*Economy in commutingBased on the benefits sought, consumers are grouped and positioning is effectively done to pull the consumers to buy.

3. User Status

Consumers can be categorized as follows based on their user status with the corresponding marketer actions User Status **Ex-user àStopped Using

àUsing other brandMarketers Action

Convince them about benefits

User Status **First Time user àTrial buy

Marketers Action Assure benefits

User Status **Regular users àRepeat buy

Marketers Action Appreciate them and advice them on usage. Assure service.

User Status **Potential users àUsers of other brand

àNon-users Persuade them explaining relative benefits

>>Evidently each category of users is to be treated as a separate segment and marketing offer should be designed to suit each one of them.

4. Usage Rate

Based upon the size of their consumption, consumers may be categorized as*Light Users*Medium Users *Heavy UsersPack sizes are designed differently to meet the requirements of different users.

5. Loyalty Status

A market can also be segmented on the basis of consumer loyalty to brands, stores, and companies. Companies design marketing actions based on loyalty status.

Loyalty Status Goal Marketing ActionStrong To retain Improve the features and promotions Weak To attract Identify weaknesses and fortify the brand. Support with good promotionNon-loyal To convert Heavy sales promotion campaign

6. Place

Products are promoted by developing an understanding of the place where the potential buyers congregate mostly and prefer to buy the products.Shopping malls / haats - melas àretail spaces promoting several products

7. Product Possession Categories

Targeting a buyer on the basis of products he already possesses.Product Categorization for durables and its hierarchy is based on the needs and wants of the people.

Category - I : Products are of immediate use to the family or things which tend to be instrumental in supplementing the income in these households

Category - II : Products consists of a combination of the products that ease the households, work-strain and act as a source of entertainment Category - III : Products show a combination of classy products that fulfill the above needs

Category Product Price Products I Below Rs.1000/- Wrist watches,

Transistor,

Pressure Cooker /

Pan, Electric Iron

II Between Rs.1000/- Mixer Grinder,

and Rs.6000/- Vaccum Cleaner, Two-in-one,

Sewing Machine

Category Product Price Products III Above Rs.6000/- Two-wheeler,

Refrigerator,

Color TV, VCR, VCP,

Washing Machine

Categorization is used as a guideline to target the next customer, who move from category to category.

Market Targeting & Positioning

Selecting and attracting markets involves three key decisions Segmenting, Targeting and Positioning

àSegmentation is the process of dividing or categorizing market into different groups based on one or more variables

àTargeting is selecting the market segments, which can be served efficiently and profitably. It is deciding on market coverage strategies.àPositioning is a market attraction strategy, which involves placing the product or brand in the minds of the customers in the target market.

Targeting

àSegmentation is the process of identifying and establishing alternative market segmentsàNext Step, Targeting involves evaluating the various segments and selecting how many and which ones to target.

The three aspects in targeting are evaluation, selection and coverage

1. Evaluation of Segments

In evaluating market segments a company has to first identify the criteria for evaluation. The following criteria may be applied to determine the attractiveness of segments.

a. àProfitability : Conduct cost-benefit analysis and ascertain profitability of the segment. Relevant information includes *Sales Volumes *Distribution Costs *Promotion Costs *Sales Revenues *Profit Margins

b. àAttractiveness : *Small and New Companies may lack the skills, experience and resources neede to serve the larger segments *Some segments may be less attractive when there is already more competition.

c. àGrowth Rate :*A segment’s attractiveness depends not only on its current profitability but also future prospects.*Growth Rate of the Segment is in reference to >Growth in Population>Rise in Purchasing Power>Increase in preference for the use products

d. àCompany Objectives :*Company should evaluate the segment opportunity with reference to their >Short Term Objectives>Long Term Objectives

e. àLimitations :*Company should examine whether the entry into segments is acceptable to the society and government.*If entry provokes unnecessary criticism, the Company may have to struggle hard to explain its stand and safe guard its image.

2. Selection of Segments

Selection of the Segment(s) can be made by rating the alternative segments on a predetermined scale in respect of the criteria we have discussed earlier.

S.No. Criteria Rating Scale High Medium Low Nil 1. Profitability 3 2 1 02. Growth 3 2 1 03. AttractivenessStrength (Resources) 3 2 1 0Threats (Competition) 0 1 2 34. Company Objectives 3 2 1 0 (Degree of Consistency) 5. Limitations 0 1 2 3

Segments are ranked based on the scores obtained and be considered for selection. Those with high scores will be accepted and others will be kept aside for future considerations.

3. Coverage of Segments

Organizations have three alternative coverage strategies to suit their segmentation approaches.Segmen- Type of Coverage tation Marketing Strategy Zero Mass Undifferentiated Substantial Segment Differentiated Selective Niche Concentrated

àUndifferentiated Strategy

This marketing strategy focuses on “What is Common” among the consumers and tries to employ it in its design of its marketing offer.

àDifferentiated Strategy

This marketing strategy investigates and identifies differences between segments and tries to match the market offer to the desires and expectations of each segment. The results of such exercise would be *Strong identification of the company in the product category*More costs but higher sales. Hence more profits. *More loyal customers

àConcentrated Strategy

This marketing strategy directs all marketing efforts towards one selected segment. It facilitates specialization in serving the segment and achieving higher level of consumer satisfaction, delight and loyalty. This has some risks in course of time, such as *Preference of consumers may change, and*Large companies may become competitors seeing the success of this company

4. Choosing a Coverage StrategyFour variables are used to choose a coverage strategy.

Variable / Strategy

Undifferentiated - Differentiated - Concentrated *Company Resources Moderate Large Limited*Product Variability Less More Less*Product Life-cycle Stage Introduction Growth Introduction*Market Variability Less High High

àUndifferentiated Strategy is to be chosen, when company resources are moderate, product variability is less, and product life-cycle is in introduction stage in the market, that has less variability

à Differentiated Strategy is to be chosen, when company resources are large, product variability is more, and product life-cycle is in growth stage in the market, that has high variability

à Concentrated Strategy is to be chosen, when company resources are limited, product variability is less, and product life-cycle is in introduction stage in the market, that has high variability

Positioning

Positioning is the act of finding a place in the minds of consumers and locating the brand therein. Companies have to plan positions that give their products the necessary advantage in the target markets.

Positioning involves three tasksàIdentifying the differences of the offer vis-a-vis competitors’ offers.àSelecting the differences that have greater competitive advantageàCommunicating such advantage effectively to the target audience

Identifying the Differences

The marketing offer may be differentiated along the following lines :*Product*Services*People, or*Image

àProduct DifferentiationProducts can be differentiated on attributes like shape, size, color, quality, composition, and performance. Functional differences signify ease in process and benefits of use.

àService DifferentiationServices may be differentiated in respect of delivery, installation, and maintenance. Long warranty periods, free service coupons, service at phone call distance, 24/7 service, emergency care etc. are examples.

àPeople*People, who come in contact with users, may quite often influence the decision of consumers. *In this era of Relationship Marketing, differentiation by people is worth considering.*Service Organizations like Hospitals, Schools, Banks, Road Transport, and Telecommunication, require people who serve with smile and are efficient.*Service Organizations mainly emphasize on competence of their people.

àImage*The image of a brand or company may win the consumer, even though the product is very much similar to a competitive

one.*Image is built by advertisements, symbols, signs, colors, logos, atmosphere of organization, and social activities.*Images may be related to attributes such as quality, high tech, ethical etc.

Selecting the Right DifferencesWhen a Company identifies several differences, it can evaluate them with the help of following criteria

àAttractive - Does it provide value to the Customer?àDistinctive - Is it different from that of its Competitors?àPreemptive - Is it very difficult for Competitors to copy it?àAffordable - Can Buyers pay for it?àCommunicable - Can the differences be clearly expressed? Is it visible? Is it Understandable?

The evaluation requires the following steps :

1.Identification of attributes, which can give competitive advantage. Attributes can be for example, Quality, Service, Technology, and Economy.2.Use of a rating scale. Say, 10 point scale.3.Rating the attributes on the five criteria viz., attractive, Distinctive, Preemptive, Affordable and Communicable4.Then, developing a comparative table of Competitive Advantages to arrive at an appropriate decision

Tables for Company and Competitors, on *Evaluation of Differences*Competitive Advantages

Difference Company CompetitorQuality 32 36Service 33 32Technology 34 36Economy 35 30

From above, Economy Position has a clear advantage than Service aspect. The other two differences are strengths of competitors. Hence positioning on Economy will benefit the company.

How many differences to promote?

Marketers develop “USP” for each brand to maintain it.Bets Quality, Best Technology, Best Service etc. Sometimes Companies claim more than one benefit to make its position less vulnerable, when it has no one “Best”.

Communicating Once the company has chosen the differences, it has to chose as appropriate communication strategy to reach the consumers.

• Competition

• Identifying & Analyzing CompetitorsUnderstanding Competitor’s Strategies

What is Competition?

Competition denotes the existence of actual and potential rival companies, which manufacture or produce perfect or close substitutes product offerings to attract consumers.

Types of Competition

1. Generic Competition : Every product is in competition with every other product. Eg All durables and consumables2. Form Competition : A product is in competition with different products offering similar benefits. Eg All vehicles , 4, 2 Wheelers

3. Industry Competition : A product is in competition with different companies making the same product. Eg Automobiles - Passenger Car industry 4. Brand Competition : A product is competition with other brands of the same product category, which is similar to it. Ambassador (Diesel) vs Zen (Diesel)

Levels of Competition for Maruti Zen - Diesel

* Generic All Durables and Consumables* Form All Vehicles, Four wheeler and Two wheelers* Industry Automobiles - Passenger Car Industry* Brand Ambassador (Diesel)

Marketing Strategy & Competition

The company’s basic Marketing Strategy is influenced by the nature and type of Competition it faces.The key questions need to be addressed are *Who are our Competitors? - Know your Competitor.*What are their strengths & weaknesses?*What are their strategies?*What are our Counter Strategies?

Who are our Competitors? - Know your Competitor.

Whether one has to consider Brand Competition, Industry Competition or Generic Competition?Industry Competition is right consideration when analyzed with Brands in Competition.“Product - Market Fit” analysis is useful in mapping the locations of Competitors with their brands in different market segments.

Example - Mapping of Toilet Soap Market

Cosmetic Johnson & Lux Lifebuoy Plus Johnson

Medicinal Dettol / Savlon Segment Kids Women Men Family

Assess Strengths & WeaknessesFinancial Data Analysis - Rating

1. Overall : Sales, Investments, Capacity Utilization, Reserves & Surpluses2. Marketing : Share of Market, Product Quality, Product Availability, Sales Force Effectiveness, Marketing Costs3. Finance : Availability of Funds, Cost of Capital, Debt Equity ratio, Turnover Ratio, Liquidity Ratio4. Manufacturing : Manufacturing Costs, Raw Material Availability, Technical Skills, Plant & Machinery and other Facilities5. Entrepreneur : Innovative, Visionary, Leader, Responsive to Change

For each Competitor, based on above information gathered, ratings are given like Excellent, Good, Average, Poor, Very Poor on points based on 3 to 5 years historical data rather than snapshot, current year study of Competitor.Based on above analysis Competitors can be classified as follows :1. Based on ability to engage in and sustain competition - Strong & Weak2. Based on % of Market Share - Close and Distance held by a Competitor

Competitive Positions

These Competitors, in turn, are assigned following Competitive Positions :1. Market Leader - Largest Market Share, Strong in Designing & Implementation Plans2. Market Challenger - Close & Strong Competitor to Market Leader, Aggressively or Mildly Challenges Leader

3. Market Follower - Distant / Weak Competitor whose is content in following Leaders and Challengers4. Market Nicher - Independent, Non-fighter, who carves his niche for peaceful and profitable specialized operations

Understanding Competitor Strategies What are the moves of the Competitors?

The possible moves of Leader, Challenger, Follower, Nicher are :1.Growth : Grow Strong, Become invincible2.Offensive : Weaken or Destroy Competitor3.Defensive : Develop Protection Against Attack4.Play Safe : Select Less Competitive Areas and Activate

1. Growth StrategiesGrow Strong, Become Invincible

Market PenetrationEncourage Current Customers to use moreEncourage Other Customers to SwitchEncourage Non-users to UseMarket DevelopmentIdentify New Market Segments and CultivateProduct DevelopmentIntroduce New FeaturesIntroduce New Products

Growth Strategies

Supply Chain Management Forward - Acquire DistributionBackward - Acquire SupplierIntegration - Acquire Competition

DiversificationConcentric Both Marketing & Technology SynergyNew Products related to Current Customers

Horizontal Only Marketing Synergy, New TechnologyProducts related to Current Customers

ConglomerateNew Marketing & TechnologyUnrelated to Current Customers

2. Offensive Attack Strategies of Company

Frontal Head on Collision with OpponentMatch the Competitor’s Offer

Flank Search for Gaps and ConquerTarget Offer to Uncover Market Needs orUncover Market Areas or Both

Encirclement : Launch an Offensive from All Directions - Front, Rear and SidesMatch Each and Every Offer of Competitor or Offer More

By Pass : Leave the Strong Spots of Enemy and Attack Vulnerable SpotsDiversify into Un-related ProductsNew Geographical MarketsAdopt New Technologies to Support Existing Ones

GuerillaSmall and Intermittent Attacks on Different Territories of OpponentPrice Cuts and Intense Promotional Bursts in Small, Isolated, Weakly Defended Markets and Litigation

3.Defensive Strategies Develop Protection Against Attack

Position DefenseAdd Different Products to SurviveImprove Existing Product Features

Lower Price if Market is Un-segmented If Segmented, Price Low in Vulnerable and Price High in Less Vulnerable SegmentsDrop Marginal Retailers, Fortify Distribution & Reduce CostsSpend more on sales Promotion and Less on Awareness Building

Flank Defense Line FillingDevelop Complete Product-Line, Leave No GapsProduct Line Stretch Upward, Downward and Two-wayPreemptive DefenseLaunch the Product much before the Competitor can doLine Modernization

Counter Offensive Defensive :Cause Delay or Postpone Introduction of Competitor’s Product and Gain Time, Identify Weak Position and Attack ItMobile Defense : Growth StrategiesContraction Defense : Product Line Pruning Strategies, With-drawl from Products and Markets which Lack Competitive Strength, De-segmentation or Concentration Strategy

4. Play Safe Strategies

Follower : Imitation : Offer Copy or Improved Product at Lower PricesMake Local Distribution and Promotion

Nicher : Specialization : Select a Distinct Segment and Serve Efficiently

Strategic Marketing involves Four Situations which use approaches to Planning and Implementation1. Competition Oriented Gaining Victory Over Competing FirmsAlready Discussed

2. Market Oriented Operating Through Market Life Cycle

3. Product OrientedEvolving Strategies Through Product Life Cycle

4. Consumer OrientedTracking Customers, Their Value Expectations and Satisfaction

2.Market OrientedA Market in the Process of Evolution passes through the following Stages

*Market Crystallization (Niche Single and /or Multiple Niches, Mass Market)*Market Expansion (No Serious Competition)*Market Fragmentation (Intense Competition)*Market Consolidation (New Products)*Market Dissolution ( Technology / Product Obsolete, Divestment)

3. Product Oriented Stages in PLC

IntroductionBasic Product, Cost Plus Pricing, Selective Distribution, Informative Ads, Heavy Sales PromotionGrowth Product Extension, Services and Warranty OfferPenetration Pricing, Intensive DistributionPersuasive Ads, Moderate Sales Promotion

Maturity Diversify Brands, Competitive PricingIntensive Distribution, Comparative Ads, Moderate Sales Promotion

Decline Phase out Weak Items, Lower PriceSelective Distribution, Reminder Ads, Minimal Sales Promotion

4. Consumer Oriented

To Keep Track of Customer’s Value Expectations and Satisfaction

Generate Brand Loyalty through * Understanding Customer’s Needs* Delivering High Customer Value

Customer Needs* Stated Needs (Articulated)* Real Needs (Exactly what customer is looking for. May have a Gap between What one says and What one wants)* Unstated Needs (Expected not Stated)* Delight Needs (Desire for surprise benefits not anticipated)* Secret Needs (Hidden)

Customer Value Value Delivered is the difference Between Benefits and CostsIndicates the Worthiness of a ProductBuyers Evaluate based on Perceived Value of the Products

The Balancing Act

Marketer finds himself confronted with 4 diverse orientations* Product Orientation* Market Orientation* Competition Orientation* Customer OrientationAlways Starting Point is “Customer Orientation” and need to evaluate the other three to find an integrated concept

1. Customer vs Product Orientations

High Technology Innovative Product Orientation OrientationOrientation Low Market Imitative Orientation Orientation High Low Customer Orientation

Customer vs Product Orientations

Technology Obsession to make Best ProductMarket High Pressure SellingInnovative (Most Desirable)Develop New Products to meet Consumer NeedsImitativeSelling Copy Cats / Fakes

2. Customer vs Market Orientation

High Push indifferent Market Approach ApproachOrientation Low problem solving Pull Approach Approach

High Low Customer Orientation

Customer vs Market Orientation

Indifferent Do not bother for Sales or Customer NeedsPull Attracts Customers by Relationships. Does not Pressurize to Buy.PushPressurize Customers to Buy whatever their needs beProblem Solving (Most Preferred)Selling Solutions and Not Products

3. Customer vs Competition Orientation

Yes Competition Market Competition Orientation OrientationOrientation No Product Customer Orientation Orientation Low High Customer Orientation

Customer vs Competition Orientation

Product : Obsession to make the Best ProductCustomer : To make Offers to Match the Consumer NeedsCompetition : Engaging in Market Warfare and Incidentally Satisfying Consumer NeedsMarket ( Best in the New Era of Competition) : Waging Market Battles and at the same time Satisfying Consumers

Micro / Industry Environment

• Industry is the Group of Firms manufacturing Goods or Rendering Services of Identical Nature. Industry Environment stands for things prevailing in an Industry.

• The Industry Environment has its Constituents, namely, Competitors,

Customers, Suppliers and Substitutes. Each is competing force.

Industry and Competition

How Competitive Forces Shape Strategy?

Porter, Michael E

(1) Threat of New Entrants

(2) Bargaining Power of Customers

(3) Bargaining Power of Suppliers

(4) Rivalry or Jockeying for Position

among Current Players

(5) Threat from Substitutes

(1) Threat of New Entrants

New entrants are a powerful source of Competition

New Capacity & Product Range - New Competitive Pressure

New Economies of Scale / Investment - Cost Advantage - Severe Competitive Effect

Developed Channels of distribution

New Limit on Prices - affects profitability of existing player

(2) Bargaining Power of Customers

Buyer Cartels on price, quality and delivery results in influence in Costs and Investments. Powerful Buyers bargain for better services which will cost more for Producer.

(3) Bargaining Power of Suppliers

The more specialised the offering the more bargaining power for Supplier.The limited in number of Suppliers the more bargaining power.

(4) Rivalry among the Current Players

• This is nothing but Competition.

• The Competitors influence price as well as the cost of competing in Industry, in Production Facilities, Product development, Advertising, Sales Force etc

(5) Threat from Substitutes

• Substitutes are latent and major source of competition.

• Substitutes Offering Price advantage and / or performance improvement

• The five forces together determine Industry Attractiveness / Profitability.

• Sizing up the “Competition Proper” is not enough; all forces Shaping Competition must be sized up.

“Value Chain” approach in Competitor Analysis Porter, Michael E.

Value Chain is basically a tool for identifying ways in which value could be created/ enhanced by a Firm.

Firms can use the concept for assessing the competitive position within the Industry, by comparing their own value with those of their competitors.

• The Value Chain Approach

Basis : Every firm is a collection of activities and can be disaggregated in terms of activities Porter identifies nine distinct activities as the ones which create value in a firm; they would, of course, create cost as well. Five Primary and Four Support Activities.

• Five Primary Activities

1. Inbound Logistics (bringing materials into business)

2. Operations (product design, manufacturing etc)

3. Outbound Logistics (sending products out)

4. Marketing and Sales 5. Service

•

Four Support Activities

1. Firm’s Infrastructure

2. Human Resources

3. Technology Development (R&D included)

4. Procurement

The four support activities occur through all

Primary Activities

* The Primary and Support Activities together generate a vast matrix of value- creating activities in the Firm.

* This matrix of value-creating activities along with their interacting effects, constitutes the Value Chain of the Firm

* Value creation depends on the each departments performance as well the coordination of all departments in a Firm. Value Chain also covers the coordination aspect.

* All Business Process is basically a Value-creating and value delivering process. Buyers patronise the Firm that offers the highest delivered value.

* Hence, the name of the game is to locate the activities in which value could be created, and create maximum possible in each of them.

* Firm examines the costs and performance in its Value Chain – the total value chain as well as in each link in the chain vis a vis Competitors.

* Firm will achieve a position of superiority / distinction relative to Competitor.

• Five step approach to Competitor Analysis

1. Identify the Competitors

2. Identify what they want

3. Identify their Strategy

4. Identify their Strengths and weaknesses / relative capabilities

5. Predict what they will do

Product Strategy

• * Product is any thing that Satisfies Human Needs & Wants

* Product Decisions are a part of Marketing Strategy* Emergent Dynamic, Competitive Environment, Multi-Product Firms are fighting hard to gain commanding market share through their Product Strategies.* It is through continuous Design and Redesign of Product Mixes that a Company lays its way to success and fame.

Product Classification

Product Classification is Based on : 1. Tangibility and Intangibility2. Purpose of Use3. Functional Life of Products4. Shopping Habits5. Price & Quality6. Product Development7. Brand Hierarchy Level

1. Based on Tangibility & Intangibility

Characteristics Products Services

Tangibility yes no

Seperability yes no

Variability some times yes

Perishability some products yes

Ownership yes no

2. Based on Purpose of Use

Purpose

Type

User

Products

Purpose : Consumption

Type : Consumer Goods

User : Households

Products : Toiletries, cosmetics,

beverages, home appliances

Purpose : Production

Type : Industrial / agricultural goods

User : Industrial , Farms / poultries

Products : Raw materials, components,

agricultural inputs and machinery,

animal feed

3. Based on Functional Life of Products

Type : Consumables

Nature of use : One time

Functional life period : Short

Examples : Food & Beverages, Soft drinks

Type : Durables

Nature of use : Life Time

Functional life period : Long

Examples , Furniture, Cars, Computers

4. Based on Shopping Habits ( The way we buy)

Three categories

1. Convenience Goods

2. Shopping Goods

3. Specialty Goods

4. Convenience Goods

Mostly consumables like provisions, toiletries, cosmetics etc

Product Type : Consumables

Buyer Involvement : Low

Buy Frequency : Frequent

Buying Decision Evaluation : Simple

Buying Place : Provision stores, Departmental store, Super market, Maals, Pan shop,

2. Shopping Goods :

Clothing, Furniture, Home Appliances

Product Type : Durables

Buyer Involvement : Moderate

Buy Frequency : Occasional

Buy Decision Process : Complex

Buying Places : Urban - Show Rooms, Chain Stores,

Rural - Fairs, Haats, Mandis & Shops in Feeder Towns

3. Specialty Goods

Cars, Two-wheelers, Cameras

Tractors, Mopeds in Rural

Product Types : Durables

Buyer Involvement : High

Buy Frequency : Once in Life

Buying Evaluation Process : Complex

Buying Place : Shops in Cities & Towns

5. Based on the Price & Quality

1 Mass Products (Cheaper & Economy Products)

Cheaper Products - Low Quality and Low Price. Perform core function but lack certain attributes, which make them use less comfortable, less pleasant, less desirable Nirma washing powder

Economy Products - with all necessary functional features but no fancy features. Its price & quality are fairly reasonable. Mopeds

2 Premium Products (Superior Products)

Products which appeal to the ego of buyer.

Goods for conspicuous consumption. Being high quality, high priced goods, they are known as Premium Goods and Prestige Goods.

Examples : Jewellery, high price cosmetics, Cars

* Cheap Goods : Nirma Washing Powder - packaging poor, powder spills, cheap, when mixed with water burning sensation in skin / palms

* Economy Goods : necessary functional features and no fancy features (no frills)- money savers Needs Gratified. Moped, TV without remote, TV B/W with limited channels

* Premium Goods : Products which appeal to ego of the buyer. These are goods of conspicuous consumption. High Quality, High Price, Premium Goods & Prestige Goods. Jewellery, Dresses (designer wear), high priced cosmetics, perfumes, toiletries, Cars, Bunglows.

6. Based on Product Development : * Innovations Imitations ( Novelties, Me-too goods, Copy cats)Innovations In Urban markets - Communication Devises Cell phones, WLL etcIn Rural markets – Tractors, Fertilizers, High yield Hybrid seeds, New Farming methods

* Imitations Poor Imitator : Produces deception goods, spurious, fakes, copy cats.Dupes gullible customer by offering products have close resemblance's with Original. Quality very poor.

* Competent Imitator : Produces improved version of original product.Original Novelties Copy catsLife buoy Nirma buoy New line buoy,

Nimba buoyColgate Pepsodent CollegeNirma Wheel Neerbha, Nima,

NilimaFair & Lovely Fairever Friends & lovely

7. Based on Brand Hierarchy Level

Five levels of Products based on BrandingGlobal Brands Pepsi, Coke, LG TV, P&GNational Brands Tata, Birla, Mahendra, GodrejRegional Brands ETV, SUN channelsLocal Brands Surya Masala, Joy ChipsUnbranded Products Oils , Food GrainsCommodities Tamarind, Cloves, fish, eggs, meat

Product Strategy Concept

This refers to Long Range Competitive Plan Involving decisions on Product Items, Product Lines and Product Mixes to make proper utilization of Resources and achieve Marketing Goals

• Product Strategy Significance

Effective Product Strategy offers following benefits * Achieves Product - Market Fit Offers Products based on Market Needs* Encourages InnovativenessThis fine tunes the market offer to current and future needs of customers. This should form an in-built feature of Product Strategy

* Provides Competitive Edge

Through Good Intelligence anticipate competitive moves and launch new products. Through Effective Product Strategy attack, flank competition, defend and wage guerilla war fare.

* Makes Better Use of Resources Use Physical, Financial, Human Resources.

* Add - delete products. Increase Productivity / Quality.

Product Strategies

Level

Strategy

Product Item

Quality, Features, Design,

Brand and Package

Core and Augmentation

Product Mix

Width Extension - New Product Lines

Length Extension - New Product Items

Depth Extension - New Product Variants

Product Lines

Stretching - Upward, Downward, Bothways

Line Pruning - Line Modernization

* Product Line is a group of closely related products priced within a range and distributed through same channels to the same customer group.* Product Length - it refers to the total number of items in line* Product Depth - it is total number of variants to Product Items

* Line Stretching :Downward : adding lower end itemsUpward : adding high end itemsBoth ways : adding items at both higher and lower ends

* Reasons for Line Stretching :Reaction : To meet competition innovative products are addedOpportunity : Utilize existing market gap, new items are introducedImage : Full line company imagePressure : Pressure from sales force and dealersStrength : Use available excess capacityDesire : To fulfill CEO / Product manager - to introduce new product items

• Line Pruning

Product lines tend to lengthen over time. Some are stretched rationally, some emotionally. Some dead wood to accumulate. It is weeded out periodically based on contribution they yield.Some Product Lines are * Traffic Builders - which attract customers but generate marginal income* Bread Winners - which generate major share of incomes* Parasites - which incur losses and depend on Bread Winners

Reasons for Pruning :* Dead wood is depressing profits* Existing Production Capacity limited and cannot handle all product lines.

Line Modernization

Technological Developments change the products and their quality. Modernization decisions are taken on following aspects.Timing : * Conversion readiness of consumers from old to new products* Competitor moves* Profitability levels of existing product linesApproach : Change total or piece meal, cash flow, surprise competitors / imitators

Product Item Decisions Products or Service is an offer made by Marketer that has the ability to satisfy the needs and wants of customers1. Core Product Development2. Tangible Product Development3. Augmented Product Development

Core Product Development

Product are Transient, but basic needs of the customers remain same

Need-Product Relationships

Needs Old Product New Products

* Core Product

The product that provides the important form utility and ensures performance of basic functions.* Tangible ProductWhen psychological needs are satisfied in physical terms, product concept becomes visible and operational.

Product & Service has 5 Characteristics1. Quality – Durability, Capacity, Efficiency, Economy, Reliability2. Features – Rational / Problem Solving or Emotional / Fancy 3. Style / Design – Geometric Design / Modern Style4. Packaging – Primary Package (Bottle), Secondary Package (Carton), Shipping Package (Corrugated Box)

5. Branding

Packaging

Three levels of Appeal by Packages

Level

Purpose Package

Package Characteristics

Determinants

Different Packages offer different benefits

1. Easy to Identify and Easy to RecognizeDifferent Shapes

Different Sizes

Different Colours2. Easy to Carry, Easy to Use and Easy to DispenseTetra packs – Soft Drinks, MilksPolythene Covers – Dairy Milk

Metal / Plastic Tubes – Tooth pastes, Medicines (Ointments), Fairness CreamsCard board / Paper Packs – Toilet Soaps, Hair dyes, Shaving Creams, Mosquito coilsSmall Bottles – Honey, Sauce, Jams, Tonics, SyrupsSpray Bottles – Air FreshnersTear Sheets (Blister Packs) – Medicines (tablets), Mosquito MatsTins – Protex, Ovaltine, Threptin BiscuitsLamitubes – Cherry Blossom

3. Good to Store Food grade plastics / glass bottles.Beverages – Bournvita, Boost, Horlicks, Edible Oils (saffola)

4. Attractive to Re-useGood to store bottles are often reusable

5. Easy to Evaluate Product Quality, Product use Information, Life period of Product.All evaluated through labeling, through sight / smell

Packaging Strategies

1. Small Packs - affordability, usage, storability, benefits to retailers, display2. Large Size / Packs - economies of scale3. Combi Packs - related products are packed together and sold at an economical prices. Its an assortment. Eg. Johnson Baby care kit has Powder, soap, shampoo, hair oil, cream4. See Through Packs - Transparent tubes, wrappers

New Product Development

New Product Development

Consumers seek better & improved products that are

* Easy to use

* Occupy less storage place

* Are aesthetics and provide value for money

The above leads to Product Innovations which is a major component of Product Policy – which leads to

* Introducing New Products

* Improve existing ones

New Products can be classified as ;

1. New to the world - Products

First time and expected to create new markets - Polarized Instant Camera

2. New Products Lines

Helps company enter with new product in a established market

3. Additions to Existing Product Lines

New Products that contribute to existing Product Lines of the company. Variations of Product include - Size, Flavor, Color, packaging. Improved Life Buoy, Chota Coke)

4. Improvements & Revision of Existing Products –

Improved Versions / Performance

These Products usually improve the perceived value of existing products and replace them

5. Repositioning the Existing Products

Targeting the existing products to new markets or newer segments

6. Cost Reduction - Reducing the cost of product

Introducing new products that provide the same benefits at a lower cost

• Challenges in New Product Development

*Average age of a product continuous to be on decline

*Customers demand new and better products

*Competitors keep coming up with new products

*Innovate new products in order to create a competitive advantage

• Organizing the Product Development Process

*Product Managers

*Product Committees

*Product Departments - special for only

Product Development & Innovations

*Product Venture Teams - Groups bought together from various departments

Stages in New Product Development

1. Idea Generation

2. Idea Screening

3. Concept Testing & Analysis

4. Product Development

5. Test Marketing

6. Commercialization

1. Idea Generation :

R&D, Market Research, Sales Team and other Employees

2. Idea Screening :

* Product Idea matches the existing products of company

* Degree to which new product can cannibalize the sales of existing products

* Company’s ability to produce and market the product thus developed

* Buyer behavior and probable changes in environment

PURPOSE : Reduce the number of Ideas to a manageable few for further attention for development

3. Concept Testing & Analysis :

Idea is submitted for external evaluation

to get a feedback from market

àTo understand what attributes & benefits a customer is looking for in a product

a. Business Analysis : In-depth financials analysis

b. Sales Estimation

c. Estimating Costs & Profits

d. Risk Analysis (Probability)

e. Break Even Analysis

4. Product Development

àIdentifying Target Customers

àPositioning Strategy

àDeveloping Attributes of New Products

àCompetitors Activities / Strategies

àDifferentiation of Products / Competitive Advantage

àProduct Development Schedules

àMarketing Issues / Financials Issues / Legal & Regulatory Issues

àProduction Requirement

Proto-types

Product Use Testing

àPerformance, Safety, Acceptability of Sizes, Color, Weight

àCustomer Preferences

5. Testing Marketing

6. Commercialization

Brand Management

• Brand Management

** Branding Marketing relies on Branding to give Products / Services an Identity, Personality, Image, Equity and Attractiveness.** Brand ConceptBrand is Name, Term, Sign, Symbol, Design or Colouring or a Combination of them, which help identify Seller’s Products and Differentiates them from those of Competitors.

• Examples

*Brand Name MarksKelvinator PenguinDabur Chyawanprash RishiGoodlass Nerolac Tiger

*Brand Name ColoursNivea Bright BlueEverready, Coke, Lifebuoy RedLiril Lemon GreenTata Tea Green

Branding Policy

Branding Decisions Include

* To Brand or Not to Brand* Sponsorship - Company or Middleman* Name Individual or Family

Branding - The Need Arguments for

1. Brand Identity helps Processing* Gives Identity to the Company’s Products* Helps easy Processing for Company, Distributor and Consumers* Saves Cost and Time in Manufacturing, Warehousing, Transporting & Order Processing* Consumers can Spot & Select Product

2. Brand Image gives Competitive Advantage

* Earns Recognition and Reputation by their Performance* Helps Existing Products in the Line and New Products* Commands Higher Price than Competitors* Convinces Distributors to carry Products

3. Brand Personality convinces Consumers

* Brands in course of their association with Consumers develop Personality* Advertisers match Personality of Brands with that of Prospects

* Helps build Brand Loyalty - a Lasting Companionship.* Helps bring a Strong Bondage between a Brand and Consumer

4. Brand Equity enhances Value

* Enhances not only Value-in-Use but also in Value-in-Exchange* Commands Premium Price from Competitor / Entrepreneur willing to Own Brand

Arguments Against Branding

1. Investments - Returns doubtful

* Huge Long Terms Investments in R7D, Advertising Budgets, Dealer Discounts* No Assurance of Returns

2. Image and Personality an Emotional Nonsense* Psychological Fantasies created by Self-seeking Marketers* No Product Sells only on Brand Name* Fundamentally Product fulfills Need, Stays & Succeeds in Market

3. Brand Equity * Brand Equity Concept replaces the Old Term “Good Will”* Its an Identification Factor that helps Promote Distinctiveness

Brand Sponsoring

Who has to sponsor the brand?1. Manufacturer Brand (National Brand)2. Distributor Brand (Private Brand)

* The development of Retail Chains / Malls, Super Markets provides the opportunity to leave Branding to Distributors.* Consumers prefer National Brands. Identified as Quality Products.

Brand Identity

The primary purpose of branding is creating an Identity of the Product.

Two important considerations* Name What? * Name How?

Name What?1.Should each product be given a Brand Name?2.Should Each Group of Products be named with a Family Brand Name? Or all Products?3.Should Company Trade Name be associated with Brand Name?

The Brand Naming Options are related to Product Levels.Product Level - Individual Brand Names

Product Line Level - Product Group Family NamesProduct-Mix Level - Blanket or Umbrella Family Name

Individual Names examplesHLL - Lifebuoy, Liril, Lux, PearsP&G - Peposdent, ArielGodrej - Cinthol, Marvel, Ganga

Merits * Image of the Company not effected by failure of one brand* Free to introduce low quality products without any adverse impact on the high quality products in the line

Demerits

* Too many brand names result in confusion.

* Identification of Products with their Company is difficult

* Development Costs is incurred for each brand separately and together results in High Costs

* Spill-over benefits of Successful Brands are marginal

• Individual Names with Company Name - Examples

* Ponds : Ponds Dream Flower Talc, Ponds Magic* TVS : TVS 50 XL* Wipro : Wipro-Shikakai Merits * Company name Legitimizes the products* Image & Benefits of successful products helps other products of the CompanyDemerits* Product failures tarnish the image of Company

Product Group Family Names

Multi-Product Group Companies may choose to name different groups with different family brand names

ExamplesRaymonds : Raymonds for Textiles, Park Avenue for Ready-mades, shoes and toiletries

Merits * Helps promote a group of products. Hence development costs are less.* Failure of a product will have a limited negative impact on its group only* Different groups need different psychological associations. * Different Brand names help evoke different and appropriate responses.

Demerits* Individual Items will have sufficient Brand Power and Recognition.

Blanket Family Name

Namely all the Products of a Company with one Name - Family Brand Name

Examples Usha : Fans, Sewing Machines, Industrial PumpsNirma : Detergents, Toothpaste, SoapColgate : Dental Cream, Toothbrushes

Merits * Development Costs are very less* Under Umbrella Brand name all Products get Easy Recognition* Fear of Failure makes management cautious in launching New Products* Marginal Products also do better aided by the success of other products* New Products get instant recognitionSaves time and Money during Product LaunchDemerits * Unsuccessful products may dilute the Company Image

• Name How?

* Names generate distinct thoughts in the minds of the People. * Brands Names also reflect particular characteristics and accomplishments.* Guidelines to help name brands are :Easy to useEasy to understandEasy to distinguish

•

Effective Brand Names

Guideline Description Example

Easy to Use Short, Simple, Tide, Surf

(Learning Easy to Pronounce Rin, Colgate

Memory) Read & Remember

Easy to Meaningful & Medimix,

Understand Suggest Kleenex (Association)

Characteristics Walkman & Functions Cease fire of Products

Easy to Unique, Peculiar Clinic Plus

Distinguish & Distinctive. Pepsi (Preference)

Not Imitation Parachute KitKat

* The association of Brand grows larger beyond the product with which it is first associated. * Brand Identity starts with the product to which the name is given* Brand grows next to become a Symbol, a Person and finally an Organization* Example Philips - electrical products, symbol of quality, illustrious person and an innovative great company

Brand Strategies

1.Brand Extension2.Multi-Branding3.Co-Branding4.Brand Equity

1. Brand Extension

* Product Innovations are a regular feature for a Competitive Organization.* They can be launched as a Separate Brand or an Extension of existing Strong Brands.

* Decision in favour of Brand Extension are>>To make a brand more visible>>To reduce development costs of a brand>>To reduce risk, by banking on the image of a reputed brand>>To meet competition or to complete the line of offer

Types of Extensions

1. Category Related 2. Image Related3. UnrelatedCategory RelatedParent Brand Name is given to product variants, which have the same use but slightly different benefits. Here the common point is - same Customer Needs. Only tastes differs. It satisfies variety seekers. It is a part of flanking strategy of a Company.

Image Related Parent Brand name is given to the product items in a different Product-Line.Here, the common factor is Customer Group. The related needs of the customer groups will be satisfied by these product items. The image of the parent product and its emotional benefits can be transferred to the Brand Extensions.

UnrelatedThere is not even one common factor between the parent brand and the extension. It is entirely a different product line requiring a different marketing strategy catering to different customer groups.

• Examples

Product : Godrej Shaving Cream Category Related : Godrej Shaving CakeImage Related : Godrej Hair DyeUnrelated : Godrej Refrigerator

Product : Usha Ceiling Fan Category Related : Usha Table Fan

Image Related : Usha Sewing MachineUnrelated : Usha Industrial Pump

2. Multi-Branding

A Company may introduce several brands in a Product-Line with different features to appeal to different categories in the same customer group. Many FMCG Companies follow this StrategyBenefits Flanking of the major brandOccupying more shelf space of retailersGaining more profits

Disadvantages* Each brand may have a small market share* Cannibalization of some brands of the Company* High development costs as many brands are to be developed

• Examples

Company : HLLProduct Group : SoapsMulti Brands : Lifebuoy, Liril, Lux

Company : GodrejProduct Group : SoapsMulti Brands : Cinthol, Ganga, Marvel, Fair glow

3. Co-Branding

Offer one brand with another brand of same company or another company.

Offer may take two different forms1. Ingredient Co-Branding2. Product Co-Branding

Ingredient Co-Branding takes place when* Maker of the parts - get visibility and gain image - insists on publicizing his brand.* Part is important and maker has an image that enhances consumer acceptance of ultimate product* Competitors are following such practices

Examples IBM & Compaq buy chips from Intel. Advertise Intel Inside.Reliance markets its Pillow - SlumbRel - with Dupont Fibres highlightedCell & Milton advertise their thermoware saying “We use SAIL Steel”Kelvinator Refrigerator comes with ‘Blue Star” Thermostat

4. Brand Equity

When Brands are effectively managed they acquire “Value” and become “Assets” with “Good-Will”

“Brand Equity is a set of assets (and liabilities) linked to a brand’s name and symbol that adds to (or subtracts from) the value provided by a product or service to a firm and / or that firm’s customers.”

The major asset categories are :

1. Brand Name Awareness2. Brand Loyalty3. Perceived Quality4. Brand Associations

• Brand Management

Effective Brand Management involves* Enhancing Brand Personality* Protecting Brand Identity

1. Brand PersonalityLike a person, Brand is a psychological being having an appearance, emotional feelings and rational behaviour. Brand Personality can be described at three levelsSensory, Emotional, Rational

• Examples

Brand : OnidaSensory : Ugly Male DevilEmotional : Greed, Irritation Rational : Quality Image : Hi-TechBrand : LuxSensory : Beautiful, FeminineEmotional : Aspiration & Achievement Rational : Soft, High Quality Image : Star with Charisma

* The Interaction of a Consumer with the Brand at three levels produces Image, which may reflect Attractiveness, Trustworthiness and Expertise.* Brand Personality creates impressions in the minds of people. The impression left by the Brand in the minds of the people is known as “Brand Image”. The Purchase Behaviour is influenced by Brand Image.

2. Protecting Brand Identity

Protecting Brand Identity is through Semiotics - the study of signs, symbols and their interpretation.* Most FMCG Good’s protect brand identity through this.

* Colour, Logo and Mascot add strength to the above.

Pricing Strategy & Policies

Concept of Pricing

Determinants of Consumption (4A’s)

* Affordability * Availability * Awareness * Acceptability.Major Determinant of Consumption : Affordability - two main factors namely - Incomes of Consumer and Prices of Products & Services

* Price represents Market Value of a Product or Services.* Price contains all the terms of purchase. Monetary - Non Monetary including discounts, handling, credit etc.* Pricing relevance more in present day context of “Value Added Marketing”

Price is a Multi Dimensional Concept

* To the Company : It is a revenue generator being a Cost Plus factor.* To the Consumer : It is their cost of purchase as well as cost of living index.(Purchase Power Index)* To the Economy : It is the mechanism by which resources are allocated.* To the Government : It is the tool for promoting Welfare. (Regulatory - Support - Ration prices)

Significance of Pricing

* Historical Significance - Price & Demand Theory.

* Functional Significance - a. Economic Reason : Defines target market. Fixation of Price.

b. Technical Reason :

From the point of view of Consumers Price is quantitative, unambiguous

whereas Product Quality, Product Image,

Customer Service, Promotion and similar factors are qualitative, ambiguous. c. Social Reason : Symbolizes Quality, Value, Status, Life Style.

Recent Trends

Recent Trends which lead to pricing playing a significant role as an element in Marketing Mix decision.

1. Market Fragmentation :Based on the Income Classes, NCAER categories Indian Consumers into 5 Categories, Multi-tiered consuming classes.

* The Very Rich - Above Rs.215 k

1994-95 1999-00 2005-06 1m HH 3m HH 6m HHBenefit Maximisers : Own Cars, PC’s

* The Consuming - 45k to 215k 29 m HH 55 m HH 75m HHCost Benefit Maximisers : Have Bulk of branded consumer goods, 70% own 2 wheelers, refrigerators, washing machines

* The Climbers - 22k to 45k 48m HH 66m HH 78m HHCash Constrained Benefit Seekers : have at least one major durable (mixer, Sewing M/c, Television)

* The Aspirants - 16k to 22k 48m HH 32m HH 33m HH New Entrants into Consumption : Have bicycles, Radios, Fans

* The Destitute - < 16k 35mHH 24mHH 17mHHHand to Mouth Existence : Not buying

2. Market Saturation :Indian Urban Markets are well penetrated for all FCMG and White Goods.In Rural Markets products like TV’s, shampoos, toothpaste well penetrated in high income rural group. In fact in mass consumption goods like washing powder, Penetration ahs increased to unbelievable levels. Pricing plays a very important role in such saturated markets.

3. Inter-Category Competition : Market is flooded with several types of goods perplexing the mind of the consumers. Cell phones and Air time are both now very cheap than before. Computers are available cheap and in easy installments.

4. Value Conscious Consumption : The profusion of consumer offers and price wars have taught the Indian consumers that he can bargain with the marketers. When there is a choice , consumer is choosing the best brand with best value delivery5. Offering Value for Money Proposition6. Branding / Debranding and Customisation

Trends

Aspect From To *Government Support by Self Reliant Policy subsidies No subsidies

*Incomes Low Rise High Rise *Market Virgin, Exploited

Hungry Saturated

Less More

Fragmented Fragmented

* Consumer

Optimistic, Immature Depressed, Mature Brand Loyal Value Loyal* Competition

Brand Competition Category

Competition

Pricing Objectives

1. Profit : Profit Maximisation.Target Profit.

2. Sales : Gain Market Share, Growth in absolute sales, Growth in market share, Maintain Sales Volume, Minimum sales necessary to survive.3. Competition : Meet or prevent competition (Market Leader) Destroy Competition (Lower Price - Block entry of new firm)4. Development : Gain Market Share (Expanding existing markets, stimulating non users / encouraging to buy, enter new markets - new launch)

Constituents of a Pricing Policy

a. Identification of situations requiring pricing decisions. b. Understanding the factors – internal, external. c. Right approach - Cost, Demand or Competition Oriented. d. Selection of method of Price Determination.

When do you think organisations face pricing problems (situations)?

a. PLC stages : Introduction, Growth, Maturity and Decline. PLC Short - Long.b. Competition -High or Lowc. Consumer types - Gullible or Discerning?d. Product level promotion -Item or Product Mixe. Distribution Geography - local area or wide areaf. Motivating channel members

What do you think are the factors which influence pricing decision process?

1. Determine the Cost of the Product ( Cost Factor)2. Estimate the Demand for the product at various prices ( Demand Factor)3. Estimate the reaction of Competitors to alternate prices ( Competition Factor)4. Estimate the impact of Each Product Price on Complementary Products( Product Line Factor)

5. Determine how Reseller react to each proposed price ( Channel Factor)6. Assess the impact of each price on Product Mix Strategy (Marketing Strategy Factor)7. Determine whether any of the prices will result in Legal action from the Government ( Politico-legal Factor)8. Choose the Final Price (Management’s Judgement Factor)

Internal : Cost, Product Line, Marketing Strategy External : Demand, Competition, Channel, Politico- Legal Internal / External : Management Judgement Factor

Right Approaches / Methods available for Pricing.

1. Cost -Based Approach :

(It tends to ignore Demand and fails to reflect Competition adequately ) * Cost Plus or Mark Up : Full Cost + Fixed percentage of Margin* Marginal Cost or Contribution : Price is fixed to Maximise its Total Contribution to meet Fixed costs and Profit

* Target Return : % of Costs, % on Sales, % on Capital Employed)* Pay back period (Capital Recovery) : Price to cover all Costs and Capital Investment within a Specific Time Period )* Experience Curve : An Experience Curve represents the relation between Costs and Cumulative Experience. With Learning the Costs Decline and allow fixation of Lower Prices.

2. Competition -Based Approach :

* Leader Pricing : Some Product Items may be Priced Low , to Attract Customers and to Generate more overall Demand for Other Items.* Competitive Pricing : It is Reactive. It matches the Market Prices of Competitors.

Going Rate Pricing :

Products are Price at the Same Level or Below Prices of Leading Competitors. Sealed Bid Pricing :

In Indl Marketing / B 2 B Marketing, Open /Closed bids are invited. Firms quote their Price based on ( Probability ) What Competitor would quote.

3. Demand-Based Approach :

* Discrimination/ Differential/ Variable/ Flexible : Products are sold at two or more prices based on Customer Segment, Product-form, Image, Location and Time.* Perceived -value : Based on Perceived Value of each component of the Product, the Price is Estimated and Employed.

* Psychological : Based on Attitudes of Consumers on Quality - Price Relationship ( High Price means High Quality)Odd Prices (which Conveys the notion of Discount or Bargain) Reference Prices (a Price on an Average considered right for a Product)

* Value : Prices which will generate Value Satisfaction to the Consumers - Regular Prices on all Days but Lower Prices during Special Promotion Periods.

Now a days Consumers are more

* Quality Conscious

* Value Conscious

* Price Conscious.

How do react to these kind of consumers on pricing?

Life Style :

* Very Rich Annual Income Rs > 215K Category : Quality Conscious* Consuming Class > 45K & < 215K Value Conscious * Climbers > 22K & < 45K Price Conscious * Aspirants > 16K & < 22K * Destitute < 16K

Price in other Marketing Mix

(i) Quality Conscious Consumer Concerned with Functional Benefits Value for MoneyProduct : Premium Products Price : High Promotion : High(ii)Value Conscious Consumer Price Sensitive, Concern for Functional Benefits, No Frills, Value for MoneyProduct : Mass Products Price : Medium Promotion : High

(iii) Price Conscious Consumer No concern for QualityProduct : Spurious Goods Price : Low Promotion : No

Pricing for Quality Conscious

* Quality Difference : Larger the Perceived Difference in Quality of Brands in a Category, the P-Q relationship is stronger (eg : TV’s, Home Appliances, 2 Wheelers ) * Quality Uncertainty : Greater the uncertainty involved in judging the Quality of Product, stronger the P-Q Relationship (Consumers lack ability to judge the quality or they do not have / know other cues to detect quality) eg TV’s LG Golden Eye & KY Thunder Series

* Price Consciousness : Higher the price conscious and more prices variations within the category of Products, P-Q Relationship is stronger. Eg : HLL has Surf Excel at top end in the Fabric Wash Category, Rin Powder / Bar in Mid –Price Segment and Blue Wheel Powder at Lower End Segment.

* Need Compulsion : Certain Products more in Services that fill certain needs will have strong P-Q Relationship. Eg : Reputed Surgeon charge premium rates for their services as their services are viewed essential.

* Place of Availability : Within the same product category, P-Q Relationship is stronger for the brands sold to the premium market. Egs : Doctor’s services in a Corporate Hospital, Mineral Water in an a Restaurant.* Social Consciousness : Publicly consumed products like Shirts / Shoes etc have a strong P-Q Relationship than privately consumed products like toothpaste etc.

Pricing Methods for Quality Conscious

Discriminatory Pricing : * Product form Pricing : Different version of products are priced differently but not in proportion to their respective costsEgs : Books Hard Bound and Paper Packs are available at different pricesBeverages are offered in different sizes and packs.

* Location Pricing : The same products are priced different at different locations though the cost of offering at each location is same. Egs : In Theatres, seats are priced differently based on location.* Time Pricing : Prices are varied by day or season. Egs : Museums / Zoo’s / Parks charge higher on Sundays & Holidays.Hill Resorts charge higher in Summer and Lower in other Seasons.

Perceived Value Pricing : Companies add features to their products with a view to enhancing their Customer’s Perceived Value. For each of the features, which enhance convenience, durability, reliability, attractiveness etc of the Product, the Company fixes prices to be charged and adds tem to the product price to arrive at the Final Price.

Psychology Pricing

* Reference Pricing : Products are priced Higher which have Celebrity Endorsements, Products placed along with classy products.* Image Pricing : Effective in case of ego-sensitive products like Cars, Sunglasses, Cameras etc. People Buy Expensive ones as Price acts as signal of Quality.

Pricing for Value Conscious

Some Consumers are Price Sensitive irrespective of their place of living and socio-economic category. They are willing to pay for products of their choice as long as they get ‘Value for Money’. Consumers are getting more attracted by the Consumer Durables Market where they encounter goods with more feature and Lower Prices. There is greater alignment between value and price.

Pricing Methods for Value Conscious :Psychological Pricing-odd numbers.

Eg : Bata Value pricing : Skimming vs Penetration

Pricing for Price Conscious.

Small Unit Low Pricing - Promotional pricing. Affordability being less

PRICE WAR

Price War

* Is Customer benefited ?* How to fight a Price War ?

Why Price War ?

* To Capture the CustomerIn the battle to capture the customer increasingly, price is the weapon of choice and frequently the skirmishing degenerates into a Price War.* To Ward Off Competition & Competitors

* Some Marketers goal is to create low price appeal for their Products and Services. But what happens is that the result of one retaliating price slashing after another is often a precipitous decline in Industry Profits.

* Price War can create economically devastating and psychologically debilitating situations that can take an extraordinary toll on individual, company and industry profitability.

* No matter who wins, the combatants all seem to end up worse off than before they joined the battle. And yet, Price Wars are becoming increasing common and uncommonly fierce. * Price Wars are becoming more common because Managers tend to view a Price Change as an easy, quick and reversible action.* Virtually every competitive move is based on Price, every counter measure is a Retaliatory Price Cut.

* Most Managers will be involved in a Price War at some point in their careers. Every price cut is potentially the first salvo, and some discounts routinely lead to retaliatory price cuts that then escalates into full blown Price War.

When Price War ?

* High degree of sensitivity to price on consumer usage

* Price War starts because somebody thinks price in a certain market is high

* Someone is willing to buy market share at the expense of Current Margins

* The largest driver of Price Cuts and resulting in Price War is Excess Capacity* When reviving idle plants / service by stimulating demand through lower prices / price war* Low variable costs due to economies of scale and technology * Up-gradation tempting business to cut prices

Benefits to Customer due to Price wars * Product available at lower price* Possible Best Quality at Best Price* Better terms of Purchase

Loss to Customer due to Price Wars * Poor quality of Product* Lowering of Quality / Price / Value relationship

How to fight a Price War ?1. Diagnosis 2. Prescription 3. Cure

First Step : Diagnosis

Intelligent Analysis that leads to accurate diagnosis is more than half the cure.

Diagnosis Process involved is :* Understanding the opportunities for pricing actions based on Market Trends* Responding to Competitors action based on players and their resources

Through Diagnosis process :

* Understand why a Price War is occurring or may occur* It is also critical to recognize where to look for resources to do battle.

Analyze 4 key areas

* Customer Issues - Price Sensitivity and Customer Segments that may emerge if prices change * Company Issues - Business Cost Structure, Capabilities and Strategic Positioning

* Competitors Issues - Rivals Cost Structure, Capabilities and Strategic Positioning

* Contributor Issues - Other players in the industry whose self interest - profiles may affect the outcome of Price War

Once the four areas are examined carefully it will automatically result in actual quite a few different options.

1. Defusing the conflict2. Fighting it out on several fronts - when and how to fight a Price War ?3. Retreating - when to flee ?4. When to start one ?

1. Defusing- stop the war before it starts.

* Make sure your competitors understand the rationale behind your pricing policies.* Make sure your competitors know your costs are low. This effectively warns them about potential consequences of a price war. It some times pays to reveal your cost advantage.

* A business that has relatively low variable costs enjoy an enviable advantage in price war with competitor with higher variable costs. * But low cost companies should carefully consider strategic positions

before they start or join a price war. * Lower costs often tempt a business to cut its prices, but doing so can diminish consumers perceptions of quality and may trigger an unprofitable price war.

2. Fight it out :

First Respond with Non Price Actions * Customer Segments exhibit different degrees of sensitivity to price and quality. * Focus on Quality, not Price. Even rival / competitor price cut will not effect the company. * Introduce add on / supplementary services (free or marginal cost basis)

* Alert Customers to Risk. More specifically the risk of poor quality. * Emphasize other negative consequences.* Seek help or appeal to Contributors to weigh on competitive situation. * Appeal to Customers, Vendors, Channel Partners, Sales Reps and other like minded players.

Use Selective Pricing Actions :

1. Multiple - Part Pricing2. Quantity Discounts3. Loyalty Programs4. Time of use pricing 5. Price bundling6. Buy one get one free7. Change Customer choice

3. Retreat :On rare occasions, discretion is the better part of valor.

Other issues :Price leadershipPrice cartelsRegulators

Marketing Channels(Distribution or Trade) & Marketing Logistics (Physical Distribution)

Marketing Channels (Distribution or Trade) * A set of interdependent organizations that make a product or service available to customers for use or consumption.Marketing Logistics (Physical Distribution)* This consists of delivering completed products to customers and channels intermediaries - Warehousing, Transportation.

Marketing Channels (Distribution or Trade) - Trends

Element of Sales 1. Time (Selling When?)From : Restricted, Limited TimingTo : Unrestricted, Any Time2. Place (Selling Where?) Home or Work Place or Consumer’s PlaceFrom : Own Retail Outlet, occasionally public places for eg ExhibitionsTo : Any where

3. Choice (Selling What?)From : Limited to BrandsTo : Any Product to any Specifications, Unlimited4. Sales (Selling What?)From : Products To : Products, Experiences, Relationships, Achievements

5. Result (Selling Why?)From : Customer SatisfactionTo : Customer Participation & Satisfaction

6. Selling Who?From : Agents, Companies, Consumers

Marketing Channels - Nature

1. Geographic DistributionFor Consumer Products Spread across in areas close to commercial centresFor Industrial Products Concentrated near Industrial Estates2. Channel Size - Short / Long or only intermediary 3. Characteristics of Intermediaries - Agents, Brokers, Commission Agents 4. Mixed System - Use of both Direct & Indirect Channels

Alternate Channel Structures

1. Direct Channel StructureWhen value of transaction highBuying process lengthyBuyer insists on direct purchase2. Indirect Channel StructureWhen value is low Manufacturers have limited resources

Buyers widely disbursedBuyers buy one time

Why Marketers use Intermediaries?

Functions or Services performed by MiddlemanBuying, Promotion & Selling, assorting, Financing, Warehousing, Grading (inspection & testing), Transportation, Information, Risk Taking, Technical Service

Why Customers Buy from Distributors?

* Dependable Delivery

* Information

* Variety

* Liberal Credit

Types of Middleman / Intermediaries

*Manufacturers Representatives - Commission on Sales*Distributors or Dealers - Full FunctionsGeneral, Specialized, Combination *Brokers - represent either Buyer or Seller*Commission Agents - Standard Products (large quantity)*Value - Added Resellers (VARs)In Data Processing (Computer Industry) VARs Customize Hardware for Software Processing

Channel Design Framework

Develop Channel Objectives +

Analyze Channel Constraints +(environment, competition, legal (MRP), product / customer characteristics, geographic)

Analyze Channel Tasks =

@Identify Channel AlternativesSelective, Intensive, Exclusive Distribution Types of Intermediaries, Number of Intermediaries, Number of Channels (Multi Channels-Benefits *increased market coverage * low channel costs * more customized selling)Terms & Responsibilities of Channel Members (sales policy, territory or market segments) >>

@Evaluate Channel AlternativesEconomic factors (selling costs vs selling revenue)Control factor (company sales force, agent, broker)Adaptive factor (degree of adaptability)>>

@Selection of Channel

• Managing Channel Members

* Selecting Right Intermediaries at Right Time (continuous process)

Criteria for selection - Marketing Skills, Financial Standing, Technical skills, Location, Types of Customers served in past / present

*Motivating Middleman=>Partnership Concept - Dealership AgreementObjective >> lower total costFor mutual benefit>> increase value for channel

=>Reasonable Discount / CommissionDiscounts to dealers / distributorsCommission to agents / brokers

=>Distributors Councils or Meeting Conclaves=>Other Motivational Practices - Annual Retreat & Conference

Controlling Channel Conflicts

1. Difference in Objectives * Manufacturers - Long Term Profitability* Distributors - Short Term Profitability2. Dealing with Customers * If large customers met by manufacturer and dealer gets only small, the distributor feels cheated

3. Difference in Interests * Manufacturer feels Distributor does not give adequate attention to all products * Dealer wants only Fast Moving Items4. Differences in Perception * Manufacturer wants high inventory to carry, whereas Dealers want to stock less

5. Compensation * Manufacturers think commission given is High whereas Dealers always think the commission they are getting is less6. Unclear Territory * Boundaries not clear will result in conflicts

Evaluating Channel Members

*Sales Achieved vs Sales Quota*Customer Delivery*Customer Complaints *Market Feedback*New Customers Generated

Marketing Logistics (Physical Distribution)

Getting Right Goods to the Right Places at the Right Time for Least Cost.Business Logistics System * Physical Supply - for manufacturers involves Raw Materials, Components supplies Materials Management / Purchase Function* Physical Distribution (Marketing Logistics) - Completed Product or Finished Product to Customers & Intermediaries

Efficient Delivery *Creates value for customers & savings in costs *Better Customer Service

*Creates a Competitive Advantage-Companies with superior logistics performance gained higher percentage of Customer Loyalty

JIT System*Delivery at Right Time *Delivery at Exact Quantity as required by Customer*Perfect Quality as No Inspection

Tasks or Activities of Physical Distribution

Relationships are complex between various tasks or activitiesObjectives *Maximizing Customer Service*Minimizing Distribution CostsResult *****ConflictResolved by Good Mix of Both Objectives

Tasks or Activities

*Transportation*Warehousing - to make available when needed*Inventory Control - to make available Right Product Mix *Packaging & Labeling - for protection and identity*Material Handling - Speed of Loading and Unloading

*Order Processing - Delivery of Products*Communication - Information Flow*Factory & Warehouse Location - Right Locations >>Higher Customer Service and Lower Transportation*Customer Service >>Creates Customer Value which has impact on Market Share, Total Cost, Profitability etc

• Total Cost Approach

Focuses on balancing the two important elements*Total Distribution Costs (minimize)>> To maximize profits to company and channel members*Level of Service Provided to Customer (maximize)>> Customer Service

€ Total Distribution Costs (minimize)Freight Cost + Warehouse Cost + Inventory Cost + Cost of Lost Sales Due To Delayed Delivery

Elements of Customer Service

>>Presales ServiceAdvisory ServiceTechnical ServiceOrdering EasePatronage Awards

>>During Sales ServiceKeeping Adequate Stocks

Speed and Accuracy of DeliveryProduct Substitution>>Post Sales ServiceReplacement of Defective ProductsProduct WarrantyMaintenance ContractRepair ServiceInstallation ServiceCustomer Training

Impact of Marketing Logistics on IntermediariesTo improve by *Developing Computerized System*Standardized Packaging & Material Handling*Manufacturer and Channel Members should improve Marketing Effectiveness

Role of Marketing Logistics (Physical Distribution)

*It is a long term Strategic Issue*It is a source of creating a Unique Competitive Advantage*Superior Customer Service at Lower Total Distribution Costs*It plays a key role in Global Competition, Worldwide Sourcing, JIT System and Total Quality Management(TQM)

Emerging Trends & Issues in Marketing

Marketing Trends

* Opening of Indian Economy to Foreign Companies

* Increasing Number of Foreign Corporate Alliances

* Growth of Global Brands in Indian Markets

* Rapid Dissemination of Global Life Styles

* The Emergence of Attractive Rural Markets

Analysis of Evolving Markets

1. Government Policy

From Support by Subsidies To Self Reliant, No subsidies2. Incomes

From Slow Rise To High Rise3. Market

From Virgin, Hungry, Less Fragmented

To Exploited, Saturated, More Fragmented

4. Consumer

From Optimistic, Immature, Brand Loyal

To Depressed, Mature, Value Loyal5. Competition

From Intra-Category, Brand Competition

To Inter Category, Category Competition

• Some Shocks

Some shocks we had faced in market place :1. Consumer Behaviour to a certain extent transformed into huge, homogenous, predictable West influenced market but still unpredictable2. Urban Consumers were expected to become less price sensitive, more benefit conscious and move up from popular (Mass) Products to Premium Products. They have also become more Value Conscious.

3. Rural Consumers on the other hand, Middle Income Rural Consumers are not settling for cheap TV and scooters as they were expected to.4. FMCG Manufacturing Growth Rate of 15% was taken for granted upto 1998 and there after is less than 5%. The story of Consumer Durables is not much better either.

• Marketing Issues

1. Changing Consumption Patterns

2. Changing Consumer Psychographics

3. Markets in Transition

4. Market Fragmentation

5. Market Saturation

6. Inter-category Competition

7. Value Conscious Consumption

Marketing Issues

1. Changing Consumption PatternsThe average Indian spent at the compounded growth rate of 9.7% (!991-92 to 2001-02). Huge increase in per capita consumption is due to two factors, namely - Growth in Volumes and Higher Prices.Spending on traditional / main categories like Food, Beverages and Tobacco is decreasing and spending on other categories expanding, zooming ahead.

• Consumer Shopping Basket Changes Years - 1999 to 2002

Foods & Grocery From 44% to 42.10%Personal Care From 6% to 8.80%Clothing From 5% to 6.60%Footwear From 1% to 2.50%Consumer Durables From 6% to 3.90%Home Appliances From 3% to 1.10%Movies / Theatres From 1% to 3.80%Eating Out From 8% to 12.20%Savings & Investments From 14% to 5.20%

• 2. Changing Consumer Psychographics

Consumer is Changing.

The New Values and Attitudes that drive Kids, Teens, Youth, Women and Families is also changing.* Kids freedom to do what I want ? 72% feel Very Important* Being Popular amongst friends 81% feel very important

* Whooping 90% of Teens in Urban India get pocket money.Where does all this money go? On eating out, personal grooming, fun &entertainment* The Indian Women

- changed values and attitudes - the young seek pleasures / enjoyment in different ways- old put family and tradition first

3. Markets in Transition On Supply Side : Grey markets to the premium end - competition is increasing – consumers are presented with interesting value propositionsOn Public Policy : Govenment is withdrawing subsidiesOn Sectorial Composition : Industry and Agriculture have slowed down and with its Consumer Growth. Growth in Services is recorded to balance.

In India Economic Transition, Heightened Competition, Fragmented Retail Structure, Extreme Consumer Price Sensitivity, Low levels of Product Differentiation and through Managing Relationships with Channel Partners, Organizations are helping themselves reach out the End Consumer.

4. Market Fragmentation Consumer India is Fragmented by 5 Consuming Classes (Socio Economic Classification) and Two distinct Generations Pre and Post Liberlisation1. Very Rich (Benefit Maximisers)2. The Consuming (Cost Benefit Maximisers)3. The Climbers (Cash Constrained Benefit Seekers)4. The Aspirants ( New Entrants into Consumption)5. The Destitute ( Hand to Mouth Existence)

5. Market Saturation

Indian Urban Markets are well penetrated for all FCMG and White Goods.

In Rural Markets products like TV’s, shampoos, toothpaste well penetrated in high income rural group. In fact in mass consumption goods like washing powder, penetration has increased to unbelievable levels. Pricing is plays a very important role in such saturated markets.

• 6. Inter-category Competition

Market is flooded with several types of goods perplexing the mind of the consumers.

* Cell phones and Air time are both now very cheap than before.

* Computers are available cheap and in easy installments.* Role of Consumer Finance has gained importance.

• 7.Value Conscious Consumption

The profusion of consumer offers and Price Wars have taught the Indian Consumers that he can bargain with the Marketers. When there is a choice , Consumer is choosing the best brand with best value deliveryConsumer is looking for offers on Value for Money Proposition through Brands / De branding (price discounts) and Customization

• Emerging Markets

1. What distinguishing features will characterize the marketing function and in particular marketing strategy in changing times?2. How will a market-driven, customer-oriented firm be organized?The answers to the formidable questions were taking shape in the last decade or more through a continuous string of momentous events.

• Emerging Markets & Momentous Events

1. Intensifying Competition

2. Changing Market Behaviour

3. Shifting Life Styles

4. Shortening Product Life Cycles

5. Continuing Pressures on Profitability and Productivity

The Momentous Events

1. Intensifying Competition in the Indian Market shocked many traditional-minded executives from the mainline firms into devising fresh strategies to respond to reduced prices prevailing in the market.

2. Changing Market Behaviour, along with new flexible manufacturing techniques, convinced even the most sceptical executives about the vast opportunities and competitive advantages of creating specialized products and services targeted to dissimilar groups based on age, income, education, occupation, race, ethinic and cultural characteristics.

3. Shifting Life Styles influenced marketers to focus on how different groups live, spend, and act – all of which were being highlighted by the media and influenced by diverse political, economic, cultural and social movements.

4. Shortening Product Life Cycles due to the proliferation of new products and the continuing flow of dazzling new and affordable technology convinced executives to probe for emerging or previously unserved market egments. In turn, these circumstances triggered even greater efforts to push for faster-cheaper-smaller-better products.

5. Continuing Pressures on Profitability and Productivity activated the pervasive movement towards downsizing, reengineering and outsourcing. The result, a rush for many forward looking executives to create market sensitive organizations committed to total customer satisfaction.

New Marketing Practices

1. Focus on The Customer

2. Build Net Works

3. Create Alliances

4. Develop Corporate Culture

5. Apply Technology

1. Focus on The Customer - the ability to translate the outside-in approach into reality means permitting your core customers to decide your strategy. The essential concept is that they know more about what they need you.

2. Build Networks - the new information technology allows links among customers, suppliers, business partners and employees. The continuous multi-directional flow of information and activities move in harmony from product concept to delivery of a wanted product to a customer and effective business model that allows you to be far more virtual with customers and suppliers.

3. Create Alliances - in the current stream of organizational and marketing strategy, alliances and other forms of partnering are key to success.

4. Developing Corporate Culture - indispensable to any organization is acquiring and maintaining a mind-set and an orientation that is totally customer-driven. A company’s culture –expressed as values, things, ideas and behavioural patterns- emerges to form healthy relationships, not only with customers and suppliers, but also with an attitude about employees as intellectual assets.

5. Apply Technology - Using the internet as an integral part of the marketing impacts directly on the traditional functions of the sales and customer service.

What Marketers are doing now?

1. Search for opportunities in unserved, poorly served or emerging market segments.Action * Pursue new product or market niches* Stretch Product Lines* Position products to the needs of customers and against competitors

2. Identify ways to create new opportunitiesAction* Differentiate and add value to products and services* Participate in new technology, Innovations and Manufacturing* Pioneer something new or unique

3. Look for opportunities through Market CreativityAction * Promote image through quality, performance and training* Use Creativity in Sales Promotion, Advertising, Personal Selling and the Internet

4. Monitor Changing Behavioural Patterns and PreferencesAction* Practice segmenting markets according to behavioural patterns, demographic and geographic information* Identify clusters of customers who might buy or utilise different services for different reasons

5. Learn from Competitors and adapt strategies from other industriesAction : Understand from your competitors * How they conduct business?* What products they sell?* What strategies they pursue?* How they manufacture, distribute, promote and price?* Their weaknesses, limitations and possible vulnerabilities

Summing up New Rules of Competition Demand that Organizations are :1. Built on Change, Not Stability2. Organized Around Networks, Not a Rigid Hierarchy

3. Based on Interdependencies of Partners, Not Self Sufficiency4. Constructed on Technological Advantage

Sales Force Organization & Management

The Selling Process

1. Prospecting

2. Qualifying – Screening Thru Qualified Criteria

3. Preparation – Sales Presentation

Pre-approach & Approach

4. Presentation & Demonstration àCanned Presentation àNeed Satisfaction Method àNegotiating Skills

5. a. Objection Handling b. Negotiation / Bargaining

6. Closing

7. Post-Sales Service (Follow-up & Maintenance)

What makes Successful Salesman

1. Greater Product Knowledge

2. More Enthusiastic Presentation

3. More ability to clinch order

4. Provides good service to customer

5. Asks questions &listens to customers

6. Responsibility / Delegation Skills

7. Contacts in Market / Industry – PR

8. Answers Objections Handling well

9. Pleasant impressions …….

Managing & Administration of Sales Force

1. Recruiting

2. Selecting Personal Interviews (Structured / Unstructured)

*Criteria àHuman Relations

àCommunication Skills àProduct / Job knowledge àNegotiating Skills

3. Training *Aims or Objectives à Company, Product, Market Information, Sales Policies, Selling Techniques

4. Supervising & Motivating

àCommunicating, Counseling, Establishing Standards of Performance, Creating Favorable Environment, Training & Development

5. Developing – Growth

6. Compensating – Fixed, Variable, Commission, TA/DA, Perks

7. Evaluating & Controlling – Quantitative, Qualitative – MBO Approach

Sales Organization

Four Types of Sales Organizations

1. Geographical / Territorial

2. Single Product / Multiple Products

3. Combination of (1) And (2)

4. Market-Customer Oriented Organization

Deployment of Sales Force

1. Setting Up or Revising Sales Territories

2. Size of Sales Force

3. Allocation of Sales Force to Sales Territories & Customers

Team Selling with Relationship Marketing is a major strategy used to secure consistently good business.

• Marketing Planning

Marketing Planning is an output of

Marketing Planning Process. It involves four steps :

1. Analyzing Marketing Opportunities

2. Segmenting, Selecting Target Segments and Positioning

3.Developing Marketing Strategies

4.Implementing & Controlling Marketing Plans

• Business Strategy Leads to Marketing Plan

1.Developing a Marketing Plan at Functional Level. The contents of Marketing Plan consists of

a. Situational Analysis

b. SWOT and Issue Analysis

c. Objectives and Goals

d. Marketing Strategy

e. Action Plan

f. Marketing Budget

g. Implementing & Control

h. Contingency Plan

2. Effective Implementation of Marketing Plans

Four Skills are required / Important

a. Allocating (MMM)

b. Monitoring (MIS)

c. Organizing (OB)

d. Interacting (Internal / External)

• Guide to Marketing Plan

1. Situational Analysis :

*Market Situation àIncludes data on Market Size, Growth, Sales, Market Share, Current Share, Future Projections of Total Market and each Target Market Segment. Includes Target Customer Needs, Buying Behavior.

*Competitive Situation :

Consists of Identifying, Ranking Market Share, Objectives & Strategies, Strengths & Weaknesses and Reaction Patterns of Major Competitors

*Product Situation :

Includes data on Sales, Unit Prices, Profits (or Contributions) for each major Product Item in the Product Line and across Product Mixes.

*Macro-Environmental Situation :

Identifying factors Economic, Political, Legal and Forecasting Future Trends and Impact on Product

2. SWOT and Issue Analysis :

• SWOT faced by the Product(s)

• Issue Analysis àDetermining major issues faced by firm, based on Situational & SWOT Analysis.

3. Objectives & Goals :

Determine Sales, Market Share, Profits considering Environmental & Issue Analysis done earlier

4. Marketing Strategies :

*Selection of Target Market Segments

*Positioning Strategies relative to Competitors

*Marketing Mix Strategy 4 P’s

*Customer Service & Marketing Research Strategies

5. Action Plan :

Each Marketing Strategy element is broken down to specific actions to answer. WHO will take the specific action, and at WHAT Cost?

6. Marketing Budget :

Building Revenue & Expenditure Budget

*Building Revenue thru Forecasted Sales àIn Units àAverage Unit Price àSales Revenue

*Expenditure Budget includes estimated Marketing Expenses on Personnel, Selling, Promotion, Distribution etc.

7. Implementation & Control :

*Building Marketing Organization to Implement the Marketing Plan

*Control includes periodic review of actual performance against goals and taking corrective actions if required.

8. Contingency Plan :

*To prepare Contingency Plans in case of any uncertain situation arises.