Introduction - IGNTU · 4. Developing Growth Strategies – Intensive growth opportunities:...

Introduction

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Introduction

Defining MarketingMarketing is a societal process by whichindividuals and groups obtain what they needand want through creating, offering, andexchanging products and value with others.

OR

Marketing is an organizational function and set ofprocesses for creating, communicating anddelivering value to customers and for managingcustomer relationships in a way that benefits theorganization and its stakeholders 2

Marketing is a societal process by whichindividuals and groups obtain what they needand want through creating, offering, andexchanging products and value with others.

OR

Marketing is an organizational function and set ofprocesses for creating, communicating anddelivering value to customers and for managingcustomer relationships in a way that benefits theorganization and its stakeholders

Production Concept

Product Concept

•Consumers favor products that areavailable and highly affordable.

•Improve production and distribution.

•Consumers favor products that offerthe most quality, performance, andinnovative features.

•Consumers will buy products only ifthe company promotes/ sells theseproducts.

•Focuses on needs/ wants of targetmarkets & delivering satisfactionbetter than competitors.

•Focuses on needs/ wants of targetmarkets & delivering superior value.

Marketing ManagementPhilosophies

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Product Concept

Selling Concept

Marketing Concept

Societal Marketing Concept

•Consumers favor products that areavailable and highly affordable.

•Improve production and distribution.

•Consumers favor products that offerthe most quality, performance, andinnovative features.

•Consumers will buy products only ifthe company promotes/ sells theseproducts.

•Focuses on needs/ wants of targetmarkets & delivering satisfactionbetter than competitors.

•Focuses on needs/ wants of targetmarkets & delivering superior value.

Core Marketing ConceptsNeeds, wants,and demands

ProductsMarkets

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Value,satisfaction,and quality

Exchange,transactions,

and relationships

Need, Wants, Demands• Need. A human need is a state of felt

deprivation. Examples include the need forfood, clothing, warmth and safety.

• Wants. Wants are how people communicatetheir needs. A hungry person may want ahamburger, noodles, or cheese and bread.

• Demands. When backed by buying power,wants become demands.

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• Need. A human need is a state of feltdeprivation. Examples include the need forfood, clothing, warmth and safety.

• Wants. Wants are how people communicatetheir needs. A hungry person may want ahamburger, noodles, or cheese and bread.

• Demands. When backed by buying power,wants become demands.

Marketing and Sales ConceptsContrasted

Factory ExistingProducts

Sellingand

Promoting

ProfitsthroughVolume

The Selling ConceptThe Selling Concept

StartingPoint Focus Means Ends

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The Selling ConceptThe Selling Concept

Market CustomerNeeds

IntegratedMarketing

Profitsthrough

Satisfaction

The Marketing ConceptThe Marketing Concept

Marketing mix

The Four PsThe Four Ps

MarketingMix

ProductPlace

(Distribution)

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Product

Price Promotion

Place(Distribution)

Marketing mixThe marketing mix is the combination of variables

that a business uses to carry out its marketingstrategy and meet customer needs.

The marketing mix is often called the 4Ps:• Product• Price• Place• Promotion

The marketing mix is the combination of variablesthat a business uses to carry out its marketingstrategy and meet customer needs.

The marketing mix is often called the 4Ps:• Product• Price• Place• Promotion

Product

• ‘Product’ refers to the functions and features ofa good or service

• Should satisfy the needs of the customer• May have a Unique Selling Proposition (USP)• ‘Product’ also includes a range of factors such as

packaging, quality, warranties, after-salesservice and branding

• ‘Product’ refers to the functions and features ofa good or service

• Should satisfy the needs of the customer• May have a Unique Selling Proposition (USP)• ‘Product’ also includes a range of factors such as

packaging, quality, warranties, after-salesservice and branding

Price

The price of a product will depend on:• The cost to make it• The amount of profit desired• Other objectives of the business• The price competitors charge• The price customers are willing to pay

– Is there a high demand?– Is demand sensitive to changes in price?

The price of a product will depend on:• The cost to make it• The amount of profit desired• Other objectives of the business• The price competitors charge• The price customers are willing to pay

– Is there a high demand?– Is demand sensitive to changes in price?

Place• Products should be conveniently available

for customers to buy• ‘Places’ include:

– Stores– Mail order– Telesales– Internet

• Products should be conveniently availablefor customers to buy

• ‘Places’ include:– Stores– Mail order– Telesales– Internet

The use ofe-commerce (promoting

and selling on the internet)has grown massively over

the last few years

Promotion

The aims of promotion are to:• Raise awareness• Encourage sales• Create or change a brand image• Maintain market share

The aims of promotion are to:• Raise awareness• Encourage sales• Create or change a brand image• Maintain market share

The Promotional Mix

Advertising Sales promotion Direct Marketing Personal selling Public relations

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Advertising Sales promotion Direct Marketing Personal selling Public relations

Product

A product is anything that can be offered to satisfy aneed or a want.

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A product is anything that can be offered to satisfy aneed or a want.

Value, Satisfaction, andQuality

• Customer value is the difference between thebenefits that the customer gains from owningand/or using a product and the costs ofobtaining the product.

• Customer satisfaction depends on a product’sperceived performance in delivering valuerelative to a buyer’s expectations.

• Quality begins with customer needs and endswith customer satisfaction.

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• Customer value is the difference between thebenefits that the customer gains from owningand/or using a product and the costs ofobtaining the product.

• Customer satisfaction depends on a product’sperceived performance in delivering valuerelative to a buyer’s expectations.

• Quality begins with customer needs and endswith customer satisfaction.

Exchange, Transactions, andRelationships

• Exchange is the act of obtaining a desiredobject from someone by offering something inreturn.

• A transaction is marketing’s unit ofmeasurement and consists of a trade ofvalues between two parties.

• Relationship marketing builds relationshipswith valued customers, distributors, dealers,and suppliers by promising and consistentlydelivering high-quality products, good service,and fair prices.

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• Exchange is the act of obtaining a desiredobject from someone by offering something inreturn.

• A transaction is marketing’s unit ofmeasurement and consists of a trade ofvalues between two parties.

• Relationship marketing builds relationshipswith valued customers, distributors, dealers,and suppliers by promising and consistentlydelivering high-quality products, good service,and fair prices.

The Life Time Value of theCustomer

Revenue and profits by averagecustomer over a lifetime by segment

Increase average purchase, frequencyof visit, life

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Revenue and profits by averagecustomer over a lifetime by segment

Increase average purchase, frequencyof visit, life

Example

Corporate business traveler - 4x a year,2 nights per visit, $200 per visit = $800a year

Average life is 4 years 4 yrs x $800 = $3200 lifetime value

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Corporate business traveler - 4x a year,2 nights per visit, $200 per visit = $800a year

Average life is 4 years 4 yrs x $800 = $3200 lifetime value

Markets

A market is a set of actual and potential buyerswho might transact with a seller.


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Marketing’s Future

• “It (marketing) encompasses the entirebusiness. It is the whole business seenfrom the point of view of the final result,that is, from the customer’s point ofview.”

• Peter Drucker

• Marketing has become the job ofeveryone.

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• “It (marketing) encompasses the entirebusiness. It is the whole business seenfrom the point of view of the final result,that is, from the customer’s point ofview.”

• Peter Drucker

• Marketing has become the job ofeveryone.

The Role of Marketing inStrategic Planning

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The Role of Marketing inStrategic Planning

Strategic Planning

Strategic planning is the process of developingand maintaining a feasible fit between

the organization’s objectives, skills, and resourcesand its changing marketing opportunities.



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Reasons for Planning• If we do not know where we are going

any road will take us there.• The essence of strategic planning is the

consideration of current decisionalternatives in the light of their probableconsequence over time.

• The future is unpredictable but it is not arandom walk.

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• If we do not know where we are goingany road will take us there.

• The essence of strategic planning is theconsideration of current decisionalternatives in the light of their probableconsequence over time.

• The future is unpredictable but it is not arandom walk.

Four Organizational Levelsof Large Corporations

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Corporate SBU Unit Functional

The High-PerformanceBusiness

Processes

Stakeholders

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Processes

Resources

Organization

Corporate Strategic Planning–Four Planning Activities

1. Defining the corporate mission.2. Establishing strategic business units.3. Assigning resources to each SBU.4. Developing growth strategies

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1. Defining the corporate mission.2. Establishing strategic business units.3. Assigning resources to each SBU.4. Developing growth strategies

Corporate Strategic Planning (cont.)Defining the corporate mission

• The mission should define the competitive scopes withinwhich the company will operate. Industry scope,products and applications scope, competencies scope,market-segment scope, and vertical scope.

• Mission– What business are we in? What businesses should

we be in? What do we do best? What are thevalues/ethics of the firm?

– Define business by need rather than product.- Lodging vs hotel- Quick service restaurants vs fast food hamburgers

– Marketing myopia - Transportation vs railroad29

• The mission should define the competitive scopes withinwhich the company will operate. Industry scope,products and applications scope, competencies scope,market-segment scope, and vertical scope.

• Mission– What business are we in? What businesses should

we be in? What do we do best? What are thevalues/ethics of the firm?

– Define business by need rather than product.- Lodging vs hotel- Quick service restaurants vs fast food hamburgers

– Marketing myopia - Transportation vs railroad

Corporate Strategic Planning(cont.)

Assigning resources to each SBU.

• Analytical tools such as the BostonConsulting Group growth-share matrix areused to guide.

• Anticipate changes

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• Analytical tools such as the BostonConsulting Group growth-share matrix areused to guide.

• Anticipate changes

Question Marks• High growth, low share• Build into Stars or phase out• Require cash to hold

market share


market share

Stars• High growth & share• Profit potential• May need heavy

investment to grow

Relative Market ShareHigh Low

Mar

ket G

row

th R

ate

Low

Hig

hAnalyzing Current SBU’s:

Boston Consulting Group Approach

?

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market share


market share

Stars• High growth & share• Profit potential• May need heavy

investment to grow

Cash Cows• Low growth, high share• Established, successful

SBU’s•Produce cash

Cash Cows• Low growth, high share• Established, successful

SBU’s•Produce cash

Dogs• Low growth & share• Low profit potential

Dogs• Low growth & share• Low profit potential

Mar

ket G

row

th R

ate

Low

Hig

h


4. Developing Growth Strategies– Intensive growth opportunities: Identify

further opportunities to achieve growth within thecompany’s current business.• Market penetration strategy seeks to

increase current products in current markets.• Market development strategy looks for new

markets in which current products canexpand.

• Product development strategy considersnew product possibilities

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4. Developing Growth Strategies– Intensive growth opportunities: Identify

further opportunities to achieve growth within thecompany’s current business.• Market penetration strategy seeks to

increase current products in current markets.• Market development strategy looks for new

markets in which current products canexpand.

• Product development strategy considersnew product possibilities


- Diversification growth opportunities:Identify opportunities to add attractivebusinesses that are unrelated to thecompany’s current businesses.• Concentric diversification strategy:

Company seeks new products that havetechnological and/or marketing synergywith existing product lines, even thoughthe product may appeal to a new classof customers

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- Diversification growth opportunities:Identify opportunities to add attractivebusinesses that are unrelated to thecompany’s current businesses.• Concentric diversification strategy:

Company seeks new products that havetechnological and/or marketing synergywith existing product lines, even thoughthe product may appeal to a new classof customers


- Horizontal diversification strategy:Company searches for new productsthat could appeal to its currentcustomers though technologicallyunrelated to its current product line.

• Conglomerate diversificationstrategy.

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- Horizontal diversification strategy:Company searches for new productsthat could appeal to its currentcustomers though technologicallyunrelated to its current product line.

• Conglomerate diversificationstrategy.


- Integrative growth opportunities.• Backward integration: A hotel company

acquiring one of its suppliers.• Forward integration: A hotel company

acquiring tour wholesaler or travel agents.• Horizontal integration: A hotel company

acquiring one or more competitors, providedthe government does not bar the move.

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- Integrative growth opportunities.• Backward integration: A hotel company

acquiring one of its suppliers.• Forward integration: A hotel company

acquiring tour wholesaler or travel agents.• Horizontal integration: A hotel company

acquiring one or more competitors, providedthe government does not bar the move.

1. MarketPenetration

3. ProductDevelopment

ExistingMarkets

ExistingProducts

NewProducts

Ansoff’s Product/ Market Expansion Grid

Market Expansion GridDeveloping Growth Strategies in the Age

of Connectedness

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1. MarketPenetration

2. MarketDevelopment

3. ProductDevelopment

4. Diversification

ExistingMarkets

NewMarkets

Business Strategy Planning –Planning at the SBU Level

1.Business mission2.External environment analysis–

opportunities and threats3. Internal environment analysis– strengths

and weaknesses4.Goal Formulation (What do we want?)–The

vision

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1.Business mission2.External environment analysis–

opportunities and threats3. Internal environment analysis– strengths

and weaknesses4.Goal Formulation (What do we want?)–The

vision

Business Strategy Planning(cont.)5. Strategy Formulation (How do we get

there?)- Michael Porter’s three generic types of strategy:

• Overall cost leadership• Differentiation• Focus

– Strategic Alliances: companies need to form strategicalliances with domestic or multinational companies thatcomplement or leverage their capabilities andresources to achieve leadership nationally or globally.

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5. Strategy Formulation (How do we getthere?)- Michael Porter’s three generic types of strategy:

• Overall cost leadership• Differentiation• Focus

– Strategic Alliances: companies need to form strategicalliances with domestic or multinational companies thatcomplement or leverage their capabilities andresources to achieve leadership nationally or globally.

Business Strategy Planning(cont.)6. Program formulation. A company must

develop hiring, training, advertising, and otherprograms to support its strategy.

7. Implementation. A firm must communicateits strategy to its employees and it must havethe resources to carry out its strategy.

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6. Program formulation. A company mustdevelop hiring, training, advertising, and otherprograms to support its strategy.

7. Implementation. A firm must communicateits strategy to its employees and it must havethe resources to carry out its strategy.

Business Strategy Planning(cont.)

8. Feedback and control are absolutelynecessary to track results and monitornew developments in the environment.

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8. Feedback and control are absolutelynecessary to track results and monitornew developments in the environment.

The Marketing Environment

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Chapter 5

Marketing InformationSystems

AndMarketing Research

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Chapter 5

Marketing InformationSystems

AndMarketing Research

The Marketing Information System

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Marketing Information System

Developing Information

InformationAnalysis

InternalDatabases

DistributingInformation

Assessing InformationNeeds

Marketing Managers

Mar

ketin

g D

ecis

ions

and

Com

mun

icat

ions

The Marketing Information System

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InformationAnalysis

InternalDatabases

MarketingResearch

MarketingIntelligence

Marketing EnvironmentMarketing Environment

Mar

ketin

g D

ecis

ions

and

Com

mun

icat

ions

• Comment cards• Registration-membership• Disguised/mystery shoppers• Company records• Exit interviews• Follow up phone calls

Customer Information

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• Comment cards• Registration-membership• Disguised/mystery shoppers• Company records• Exit interviews• Follow up phone calls

The Marketing Research Process

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Defining theproblem andresearchobjectives

Developing theresearch planfor collectinginformation

Implementingthe researchplan -- collectingand analyzingthe data

Interpretingand reportingthe findings

Marketing Research ProcessStep 1. Defining the Problem &

Research ObjectivesExploratoryResearch

•Gathers preliminary informationthat will help define the problem

and suggest hypotheses.

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DescriptiveResearch

CausalResearch

•Test hypotheses about cause-and-effect relationships.

•Tests hypotheses about cause-and-effect relationships.

•Describes things as marketpotential for a product or thedemographics and consumers’

attitudes.

Marketing Research ProcessStep 2. Develop the Research Plan

• Research plan development follows thesesteps:– Determining Specific Information Needs

– Gathering Secondary information

– Planning Primary Data Collection

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• Research plan development follows thesesteps:– Determining Specific Information Needs

– Gathering Secondary information

– Planning Primary Data Collection

Information ThatAlready ExistsSomewhere.

+ Obtained MoreQuickly, Lower Cost.

- Might Not beUsable Data.

Develop the Research PlanGathering Secondary Information

Both MustBe:

Relevant

Accurate

Current

Impartial

InformationCollected for theSpecific Purposeat Hand.

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Information ThatAlready ExistsSomewhere.

+ Obtained MoreQuickly, Lower Cost.

- Might Not beUsable Data.

Both MustBe:

Relevant

Accurate

Current

Impartial

InformationCollected for theSpecific Purposeat Hand.

ObservationalResearch

Gathering databy observing

people,actions andsituations

(Exploratory)

ExperimentalResearch

Using groups ofpeople todetermine

cause-and-effectrelationships

(Causal)

Develop the Research PlanPlanning Primary Data Collection

SurveyResearch

Askingindividuals

about attitudes,preferences or

buyingbehaviors

(Descriptive)

Research Approaches

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ObservationalResearch

Gathering databy observing

people,actions andsituations

(Exploratory)

ExperimentalResearch

Using groups ofpeople todetermine

cause-and-effectrelationships

(Causal)

SurveyResearch

Askingindividuals

about attitudes,preferences or

buyingbehaviors

(Descriptive)

Develop the Research PlanPlanning Primary Data Collection

Who is to besurveyed?

(What SamplingUnit?)

Probability orNon-probability

sampling?Sample -

representativesegment of the

population

SamplingPlans

51

How manyshould besurveyed?

How should thesample be

chosen?

Sample -representativesegment of the

population

Collecting theData

Marketing Research ProcessStep 3. Implementing the Research

Plan

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Processing theData

Analyzing theData

Research Plan

Marketing Research ProcessStep 4. Interpreting and Reporting

FindingsResearcher Should Present Important Findings that are Useful in the

Major Decisions Faced by Management.

Step 1. Interpret the Findings

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Step 2. Draw Conclusions

Step 3. Report to Management

Environments• Internal:various

departments• Micro: suppliers,

marketingintermediaries

• Macro: competitive,demographic,economic, natural,technological,political, and cultural

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• Internal:variousdepartments

• Micro: suppliers,marketingintermediaries

• Macro: competitive,demographic,economic, natural,technological,political, and cultural

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Major Forces in the Company’s Macroenvironment

Levels ofCompetition(Adapted fromAnalysis for MarketPlanning), DonaldR. Lehmann andRussell S. Winer,p.22, ©1994 byRichard D. Irwin

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Levels ofCompetition(Adapted fromAnalysis for MarketPlanning), DonaldR. Lehmann andRussell S. Winer,p.22, ©1994 byRichard D. Irwin

Key Demographic TrendsKey Demographic TrendsChanging Age StructurePopulation is getting olderChanging Age StructurePopulation is getting older

Changing Family StructureMarrying later, fewer children,

working women, and nonfamily households

Changing Family StructureMarrying later, fewer children,

working women, and nonfamily households

Geographic ShiftsMoving to the suburbs


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Increased EducationIncreased college attendance

and white-collar workers

Increased EducationIncreased college attendance

and white-collar workers

Growing Ethnic and Racial DiversityGrowing Ethnic and Racial Diversity

Global EconomicDevelopment

Global EconomicDevelopment

Changes in IncomeChanges in IncomeKey

EconomicConcerns for

Marketers

KeyEconomic

Concerns forMarketers

Economic Environment

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Changes in IncomeChanges in Income

Changing ConsumerSpending Patterns

Changing ConsumerSpending Patterns

KeyEconomic


KeyEconomic


Natural EnvironmentNatural Environment

ConservationOf ResourcesConservationOf Resources

EcotourismEcotourismFactors Affecting

theNatural

Environment

Factors Affectingthe

NaturalEnvironment

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EcotourismEcotourism

Recycle andReduce WasteRecycle and

Reduce Waste


NaturalEnvironment


NaturalEnvironment

Technological Environment

• Robots and machines• Computerized video checkout services• Electronic guest room locking systems• Locking fax machines receive orders at

restaurants• The development of the Internet

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• Robots and machines• Computerized video checkout services• Electronic guest room locking systems• Locking fax machines receive orders at

restaurants• The development of the Internet

IncreasingLegislation

ChangingGovernment

AgencyEnforcement

Includes Laws, Government Agencies, Etc. that Influence& Limit Organizations/ Individuals in a Given Society

Includes Laws, Government Agencies, Etc. that Influence& Limit Organizations/ Individuals in a Given Society

IncreasedEmphasis on

Ethics &Socially

ResponsibleActions

Political Environment

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IncreasingLegislationIncreasingLegislation

ChangingGovernment

AgencyEnforcement

ChangingGovernment

AgencyEnforcement


Ethics &Socially

ResponsibleActions


Ethics &Socially

ResponsibleActions

Cultural Environment

• Persistence of Cultural Values• Subcultures

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Responding to theMarketing Environment

• Environmental managementperspective

• Environmental Scanning• Using information about the

marketing environment

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• Environmental managementperspective

• Environmental Scanning• Using information about the

marketing environment

Environmental Scanning

Determine Environmental Areas That Needto Be Monitored

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Determine How the Information Will Be Collected

Implement the Data Collection Plan

Anaylze and Use the Data in Planning

(1) people or organizations with

(2) needs or wants, and with

(3) the ability and

(4) the willingness to buy.

A group of people that lacks any one ofthese characteristics is not a market.

(1) people or organizations with

(2) needs or wants, and with

(3) the ability and

(4) the willingness to buy.

A group of people that lacks any one ofthese characteristics is not a market.

MarketMarket

MarketSegmentMarket

Segment

People or organizations withneeds or wants and the ability and

willingness to buy

People or organizations withneeds or wants and the ability and

willingness to buy

A subgroup of people ororganizations sharing one or morecharacteristics that cause them to

have similar product needs.



MarketSegmentMarket

Segment

MarketSegmentation

MarketSegmentation





The process of dividing a marketinto meaningful, relatively similar,identifiable segments or groups.

The process of dividing a marketinto meaningful, relatively similar,identifiable segments or groups.

Market Segmentation:◦ Dividing a market into distinct groups

with distinct needs, characteristics, orbehavior who might require separateproducts or marketing mixes.

Market Segmentation:◦ Dividing a market into distinct groups

with distinct needs, characteristics, orbehavior who might require separateproducts or marketing mixes.

process of dividing a larger market intosmaller pieces based on one or moremeaningful, shared characteristics and thatwill respond similarly to a marketing action

Segmentation variables are used to dividethe market into smaller slices:demographics, psychographics, behavior,etc.

process of dividing a larger market intosmaller pieces based on one or moremeaningful, shared characteristics and thatwill respond similarly to a marketing action

Segmentation variables are used to dividethe market into smaller slices:demographics, psychographics, behavior,etc.

Market segmentationaggregating buyers into groups that:

1. Have common needs and2. Will respond similarly to marketingaction.

The groups that result from themarket segmentation process arecalled market segments.

Market segmentationaggregating buyers into groups that:

1. Have common needs and2. Will respond similarly to marketingaction.

The groups that result from themarket segmentation process arecalled market segments.

Selecta

marketfor

study

Choosebases

forsegmen-

tation

Selectdescrip-

tors

Profileand

analyzesegments

Selecttarget

markets

Design,imple-ment,

maintainmkting

mix

Selecta

marketfor

study

Choosebases

forsegmen-

tation

Selectdescrip-

tors

Profileand

analyzesegments

Selecttarget

markets

Design,imple-ment,

maintainmkting

mix

• Size, purchasing power, profilesof segments can be measured.

• Segments can be effectivelyreached and served.

MeasurableMeasurable

AccessibleAccessible

• Segments are large or profitableenough to serve.

SubstantialSubstantial

Actionable/ResponsivenessActionable/Responsiveness• Effective programs can be

designed to attract and servethe segments.

DifferentiableDifferentiable• The segment should be

differentiable from other segmentsthe company is wishing to target.

You can reach them Group is large enough to be profitable You have the capability to build a

marketing program to target for them

You can reach them Group is large enough to be profitable You have the capability to build a

marketing program to target for them

Why segment?

◦ Identifies opportunities and needs.

◦ Allows firm to focus on specific needs.

◦ Improves marketing mix for each segment.

◦ Allows small firm to exist.

Why segment?

◦ Identifies opportunities and needs.

◦ Allows firm to focus on specific needs.

◦ Improves marketing mix for each segment.

◦ Allows small firm to exist.

◦ One Product and Multiple Market Segments◦ Multiple Products and Multiple Market Segments◦ Segments of One: Mass Customization◦ The Segmentation Trade Off: CRM versus synergies

◦ One Product and Multiple Market Segments◦ Multiple Products and Multiple Market Segments◦ Segments of One: Mass Customization◦ The Segmentation Trade Off: CRM versus synergies

Potential for increased profit and ROI Similarity of needs of potential buyers in a segment Difference of needs of buyers among segments Feasibility of a marketing action reaching segment Simplicity and cost of assigning buyers to markets

Potential for increased profit and ROI Similarity of needs of potential buyers in a segment Difference of needs of buyers among segments Feasibility of a marketing action reaching segment Simplicity and cost of assigning buyers to markets

Markets have a variety of productneeds and preferences

Marketers can better definecustomer needs

Decision makers can define objectivesand allocate resources more accurately

Markets have a variety of productneeds and preferences

Marketers can better definecustomer needs

Decision makers can define objectivesand allocate resources more accurately

Benefits/ADVANTAGES OF MARKETSEGMENTATION

Various advantages of market segmentation are:- Helps distinguish one customer group from

another within a given market. Facilitates proper choice of target market. Facilitates effective tapping of the market. Helps divide the markets and conquer them. Helps crystallize the needs of the target buyers

and elicit more predictable responses from them; helps develop marketing programmers on amore predictable base; helps develop marketoffer that are most suited to each group.

Benefits/ADVANTAGES OF MARKETSEGMENTATION

Various advantages of market segmentation are:- Helps distinguish one customer group from

another within a given market. Facilitates proper choice of target market. Facilitates effective tapping of the market. Helps divide the markets and conquer them. Helps crystallize the needs of the target buyers

and elicit more predictable responses from them; helps develop marketing programmers on amore predictable base; helps develop marketoffer that are most suited to each group.

Helps achieve the specialization required in product;distribution, promotion, and pricing for matching thecustomer group and develop marketing offers and appealthat match the need of each group.

Makes the marketing effort more efficient and economic.

Helps concentrate efforts on the most productive andprofitable segment, instead of frittering them overirrelevant, or unproductive, or unprofitable segment.

Helps spot the less satisfied segments and succeed bysatisfying such segments.

Brings benefits not only to the marketer but also to thecustomer as well.

When segmentation attains high sophistication, customersand companies can choose each other and stay together.

Helps achieve the specialization required in product;distribution, promotion, and pricing for matching thecustomer group and develop marketing offers and appealthat match the need of each group.

Makes the marketing effort more efficient and economic.

Helps concentrate efforts on the most productive andprofitable segment, instead of frittering them overirrelevant, or unproductive, or unprofitable segment.

Helps spot the less satisfied segments and succeed bysatisfying such segments.

Brings benefits not only to the marketer but also to thecustomer as well.

When segmentation attains high sophistication, customersand companies can choose each other and stay together.

Characteristics ofindividuals, groups,

or organizations usedto divide a total market

into segments.(variables)

Characteristics ofindividuals, groups,

or organizations usedto divide a total market

into segments.(variables)

DemographicsDemographics

GeographyGeography

BasesBasesUsed toUsed to

SegmentSegmentConsumerConsumer

MarketsMarkets



MarketsMarkets

BehavioralBehavioral

Benefits SoughtBenefits Sought

PsychographicsPsychographics



MarketsMarkets



MarketsMarkets

Region of the country or world

Market size

Market density : TV Companies

Climate: Woollen clothes

City

Region of the country or world

Market size

Market density : TV Companies

Climate: Woollen clothes

City


GeographyGeography



MarketsMarkets



MarketsMarkets






MarketsMarkets



MarketsMarkets

Age: Cartoon Network; MTV; News Channels Gender: Cosmetics & After Shave Income: Economical & Luxury goods Ethnic background: Food Family Life Cycle: Life Insurance Products,

Consumer Durable Products Generation: Apparels Education Occupation: PC Selling

Age: Cartoon Network; MTV; News Channels Gender: Cosmetics & After Shave Income: Economical & Luxury goods Ethnic background: Food Family Life Cycle: Life Insurance Products,

Consumer Durable Products Generation: Apparels Education Occupation: PC Selling


GeographyGeography



MarketsMarkets



MarketsMarkets






MarketsMarkets



MarketsMarkets

Psychographic segments market in termsof shared attitudes, interests, andopinions

Segments include demographicinformation such as age and income, butalso includes richer descriptions

Some organizations develop their ownpsychographic segments for theirconsumers, but others utilize nationalsystems (VALS by SRI International)

Psychographic segments market in termsof shared attitudes, interests, andopinions

Segments include demographicinformation such as age and income, butalso includes richer descriptions

Some organizations develop their ownpsychographic segments for theirconsumers, but others utilize nationalsystems (VALS by SRI International)

PsychographicPsychographicSegmentationSegmentation

PersonalityPersonality

MotivationMotivation



MotivationMotivation

LifestylesLifestyles

AttitudeAttitude

•Health Supplements•Cosmetics•Safola•Life Insurance•LG Products




•PRINCIPLE ORIENTED:•Fulfilled: Mature, Well Educated, Informed, Respectful butOpen minded•Believers: Conservative, Conventional, follow establishedrules•STATUS ORIENTED:•Achievers:Committed to family and Work, Image is veryImportant•Strivers: Unsure of themselves, Money is a measure ofsuccess•ACTION ORIENTED:•Experiencers: Young, Vital, Enthusiastic, rebellions•Makers: Practical, Suspicious of new ideas, value workingwith their hands





GeographyGeography



MarketsMarkets



MarketsMarkets






MarketsMarkets



MarketsMarkets

The process of groupingcustomers into marketsegments according tothe benefits they seek

from the product .Maruti Esteem, Honda City

The process of groupingcustomers into marketsegments according tothe benefits they seek

from the product .Maruti Esteem, Honda City


GeographyGeography



MarketsMarkets



MarketsMarkets






MarketsMarkets



MarketsMarkets

Behavioral segmentation slices consumers onthe basis of how they act toward, feel about,or use a product

Behavioral SegmentationBehavioral SegmentationVariablesVariables

Occasions User Status Occasions User Status User Rates: Airlines

Loyalty Status: CreditCards

Readiness Stage

Attitude Toward the Product

Geographic

Customer Type

Customer Size

Product UseBusinessBusinessMarketsMarkets

Macro-segmentation

Macro-segmentation

Product UseBusinessBusinessMarketsMarkets

BusinessBusinessMarketsMarkets

Purchasing Criteria

Purchasing Strategy

Importance

PersonalCharacteristics

Micro-segmentation

Micro-segmentation

Evaluating Market Segments Developing Segment Profiles Choosing a Targeting Strategy

A group of people ororganizations for which an

organization designs,implements, and maintainsa marketing mix intended to

meet the needs of thatgroup, resulting in mutually

satisfying exchanges.

A group of people ororganizations for which an

organization designs,implements, and maintainsa marketing mix intended to

meet the needs of thatgroup, resulting in mutually

satisfying exchanges.

Undifferentiated Marketing Differentiated Marketing Concentrated Marketing Customized Marketing

Appeals to a broad spectrum of people Efficient due to economies of scale Effective when most consumers have similar

needs

Develops one or more products for eachof several customer groups with differentproduct needs

Appropriate when consumers arechoosing among well-known brands withdistinctive images and it is possible toidentify one or more segments withdistinct needs for different types ofproducts

Develops one or more products for eachof several customer groups with differentproduct needs

Appropriate when consumers arechoosing among well-known brands withdistinctive images and it is possible toidentify one or more segments withdistinct needs for different types ofproducts

Entails focusing efforts on offering one ormore products to a single segment

Useful for smaller firms that do not have theresources to serve all markets

Example: Hard Candy

Entails focusing efforts on offering one ormore products to a single segment

Useful for smaller firms that do not have theresources to serve all markets

Example: Hard Candy

Segments are so precisely defined thatproducts are offered to exactly meet theneeds of each individual◦ Example: Levi’s Original Spin (custom) jeans, hair

stylists Mass customization is a related approach

in which a company modifies a basicgood to meet the needs of an individual◦ Example: Gateway computers, Proctor & Gamble’s

products at Reflect.com Form Products to Be Soldinto Groups

Segments are so precisely defined thatproducts are offered to exactly meet theneeds of each individual◦ Example: Levi’s Original Spin (custom) jeans, hair

stylists Mass customization is a related approach

in which a company modifies a basicgood to meet the needs of an individual◦ Example: Gateway computers, Proctor & Gamble’s

products at Reflect.com Form Products to Be Soldinto Groups

◦ Criteria to Use in Picking the Target Segments Market size Expected growth Competitive position Cost of reaching the segment Compatibility with objectives and resources

◦ Choose the Segments

◦ Criteria to Use in Picking the Target Segments Market size Expected growth Competitive position Cost of reaching the segment Compatibility with objectives and resources

◦ Choose the Segments

ConcentratedStrategy

ConcentratedStrategy

UndifferentiatedStrategy

UndifferentiatedStrategy

MultisegmentStrategy

MultisegmentStrategy

AdvantagesAdvantages: Potential savings on

production and marketingcosts

DisadvantagesDisadvantages: Company more

susceptible to competition

AdvantagesAdvantages: Potential savings on

production and marketingcosts

DisadvantagesDisadvantages: Company more

susceptible to competition

AdvantagesAdvantages: Concentration of resources Meets narrowly defined

segment Small firms can compete Strong positioning

DisadvantagesDisadvantages: Segments too small, or

changing Large competitors may market

to niche segment

AdvantagesAdvantages: Concentration of resources Meets narrowly defined

segment Small firms can compete Strong positioning

DisadvantagesDisadvantages: Segments too small, or

changing Large competitors may market

to niche segment

AdvantagesAdvantages: Greater financial success Economies of scale

DisadvantagesDisadvantages: High costs Cannibalization

AdvantagesAdvantages: Greater financial success Economies of scale

DisadvantagesDisadvantages: High costs Cannibalization

Developing a marketing strategy aimed atinfluencing how a particular market segmentperceives a product in comparison to thecompetition

Strategy may also consider creating a “barrierto entry” for competitors

Developing a marketing strategy aimed atinfluencing how a particular market segmentperceives a product in comparison to thecompetition

Strategy may also consider creating a “barrierto entry” for competitors

Head-to-head

Differentiation

Head-to-head

Differentiation

Analyze the competitors’ positions in themarketplace

Offer a product with a competitiveadvantage

Finalize the marketing mix Evaluate the target market’s response so

modifications to the positioning strategycan be made (repositioning)

Analyze the competitors’ positions in themarketplace

Offer a product with a competitiveadvantage

Finalize the marketing mix Evaluate the target market’s response so

modifications to the positioning strategycan be made (repositioning)

A Positioning Strategy attempts to create abrand personality for a product - adistinctive image that captures itscharacter and benefits

How do marketers determine where theirproducts actually stand in the minds ofconsumers?

A Positioning Strategy attempts to create abrand personality for a product - adistinctive image that captures itscharacter and benefits

How do marketers determine where theirproducts actually stand in the minds ofconsumers?

Mass Marketing --(Economies of Scale)

(However, everyone isdifferent)

CUSTOMIZATION

The place a product occupies in consumers’minds relative to competing products.

The place a product occupies in consumers’minds relative to competing products.

Competitive advantages Points of Parity Points of Difference => Differentiation

Positioning results from differentiation andcompetitive advantages.

Positioning may change over time.

Competitive advantages Points of Parity Points of Difference => Differentiation

Positioning results from differentiation andcompetitive advantages.

Positioning may change over time.

◦ Product Design◦ Quality◦ Additional Services◦ Image◦ People (Staff)◦ Price◦ Other

◦ Product Design◦ Quality◦ Additional Services◦ Image◦ People (Staff)◦ Price◦ Other

6-55

The best competitive advantages are…

◦ Important◦ Distinctive◦ Superior◦ Communicable◦ Pre-emptive◦ Affordable (to company and consumer)◦ Profitable

Moral: Avoid meaningless differentiation.

The best competitive advantages are…

◦ Important◦ Distinctive◦ Superior◦ Communicable◦ Pre-emptive◦ Affordable (to company and consumer)◦ Profitable

Moral: Avoid meaningless differentiation.

Under-positioning:◦ Not positioning strongly enough.

Over-positioning:◦ Giving buyers too narrow a picture of the product.

Muddled Positioning:◦ Leaving buyers with a confused image of the product.

Under-positioning:◦ Not positioning strongly enough.

Over-positioning:◦ Giving buyers too narrow a picture of the product.

Muddled Positioning:◦ Leaving buyers with a confused image of the product.

1. Identifying a set of possible competitiveadvantages upon which to build aposition

2. Selecting the right competitiveadvantages

3. Effectively communicating anddelivering the chosen position to acarefully selected target market

1. Identifying a set of possible competitiveadvantages upon which to build aposition

2. Selecting the right competitiveadvantages

3. Effectively communicating anddelivering the chosen position to acarefully selected target market

Physical Attribute Differentiation

Service Differentiation

Personnel Differentiation

Location Differentiation

Image Differentiation

Physical Attribute Differentiation

Service Differentiation

Personnel Differentiation

Location Differentiation

Image Differentiation

Avoid:◦ Underpositioning - failing ever to position the

company at all◦ Overpositioning - giving buyers too narrow a

picture of the company◦ Confused positioning - leaving buyers with a

confused image of a company

Avoid:◦ Underpositioning - failing ever to position the

company at all◦ Overpositioning - giving buyers too narrow a

picture of the company◦ Confused positioning - leaving buyers with a

confused image of a company

Brand differences should meet thefollowing criteria prior to marketing:◦ Important◦ Distinctive◦ Superior◦ Communicable◦ Preemptive◦ Affordable◦ Profitable

Brand differences should meet thefollowing criteria prior to marketing:◦ Important◦ Distinctive◦ Superior◦ Communicable◦ Preemptive◦ Affordable◦ Profitable

Developing a specificmarketing mix to influence

potential customers’ overallperception of a brand,

product line, ororganization in general.

Developing a specificmarketing mix to influence

potential customers’ overallperception of a brand,

product line, ororganization in general.

The place a product, brand,or group of products

occupies in consumers’minds relative to competing

offerings.

The place a product, brand,or group of products

occupies in consumers’minds relative to competing

offerings.

Tide: all purpose family detergent, tough on stains,keeps clothing looking like new

Cheer with Triple Color Guard: the color expert,guards against fading

Bold: built in fabric softener Gain: gives you clean, fresh-smelling clothes Era: built in stain removers Dash: does it all for a low price Dreft: removes tough baby stains but gently Ariel: targeted to Upper Class market

Tide: all purpose family detergent, tough on stains,keeps clothing looking like new

Cheer with Triple Color Guard: the color expert,guards against fading

Bold: built in fabric softener Gain: gives you clean, fresh-smelling clothes Era: built in stain removers Dash: does it all for a low price Dreft: removes tough baby stains but gently Ariel: targeted to Upper Class market

Pepsodent Tooth Decay Close-Up Freshness Appeal Aqua fresh Triple Benefit Teeth Colgate CDC Strong Teeth Colgate Jr. Kids brand with fluoride Sensodyne Sensitivity

Pepsodent Tooth Decay Close-Up Freshness Appeal Aqua fresh Triple Benefit Teeth Colgate CDC Strong Teeth Colgate Jr. Kids brand with fluoride Sensodyne Sensitivity

POSITIONING THE PRODUCTPOSITIONING THE PRODUCT

Choosing a Positioning Strategy:Choosing a Positioning Strategy:◦ Identifying possible competitive advantages Products, services, channels, people or image can be

sources of differentiation.◦ Choosing the right competitive advantage How many differences to promote? Unique selling proposition (pick one benefit; Volvo = safety) Choose more than one if others share a claim to be best:

Which differences to promote?- Some: Important, Distinctive, Superior, Affordable, visible to buyers.

Choosing a Positioning Strategy:Choosing a Positioning Strategy:◦ Identifying possible competitive advantages Products, services, channels, people or image can be

sources of differentiation.◦ Choosing the right competitive advantage How many differences to promote? Unique selling proposition (pick one benefit; Volvo = safety) Choose more than one if others share a claim to be best:

Which differences to promote?- Some: Important, Distinctive, Superior, Affordable, visible to buyers.

POSITIONING THE PRODUCTPOSITIONING THE PRODUCT

Choosing a Positioning Strategy:Choosing a Positioning Strategy:◦ Developing a positioning statement Positioning statements summarize the company

or brand positioning EXAMPLE: To (target segment and need) our

(brand) is (concept) that (point-of-difference).◦ Communicating the chosen position

Choosing a Positioning Strategy:Choosing a Positioning Strategy:◦ Developing a positioning statement Positioning statements summarize the company

or brand positioning EXAMPLE: To (target segment and need) our

(brand) is (concept) that (point-of-difference).◦ Communicating the chosen position

Step 1. Identifying a set of possiblecompetitive advantages:◦ Competitive Differentiation.

Step 2. Selecting the right competitiveadvantage.

Step 3. Effectively communicating anddelivering the chosen position to the market.

Step 4: Evaluate market response andreposition if necessary

Step 1. Identifying a set of possiblecompetitive advantages:◦ Competitive Differentiation.

Step 2. Selecting the right competitiveadvantage.

Step 3. Effectively communicating anddelivering the chosen position to the market.

Step 4: Evaluate market response andreposition if necessary

Away fromCompetitorsAway from

Competitors

Product/ServiceAttributes

Product/ServiceAttributes

ProductCategories

ProductCategories

BenefitsOfferedBenefitsOffered

HHGG

Against aCompetitorAgainst a

Competitor

UsageOccasions

UsageOccasions

Away fromCompetitorsAway from

Competitors

UsersUsers

BB

AA

EEDD

CCHH

GG

FF

During the process of generating product positioning strategies,periodically review each one against the following list ofcharacteristics.

Is your product positioning strategy:

• Single-minded—does it convey one primary message at a time?

• Meaningful—will it connect with the target audience?

• Differentiating—does it contrast your strengths against thecompetition?

• Important—is it pertinent and significant to the target audience?

• Sustainable—will it resonate with the target audience well into thefuture?

• Believable—will it ring true with the target audience?

• Credible—can you clearly substantiate your claims?

During the process of generating product positioning strategies,periodically review each one against the following list ofcharacteristics.

Is your product positioning strategy:

• Single-minded—does it convey one primary message at a time?

• Meaningful—will it connect with the target audience?

• Differentiating—does it contrast your strengths against thecompetition?

• Important—is it pertinent and significant to the target audience?

• Sustainable—will it resonate with the target audience well into thefuture?

• Believable—will it ring true with the target audience?

• Credible—can you clearly substantiate your claims?

Trend to broaden and position to moresegments

◦ Lux soap: cleanses, deodorizes, moisturizes◦ Risks of disbelief and loss of clear position

Avoid◦ Under positioning◦ Over positioning◦ Confusion

Trend to broaden and position to moresegments

◦ Lux soap: cleanses, deodorizes, moisturizes◦ Risks of disbelief and loss of clear position

Avoid◦ Under positioning◦ Over positioning◦ Confusion

Assess the positions of competingproducts

Determine the dimensions of thesepositions

Choose an effective market position

Assess the positions of competingproducts

Determine the dimensions of thesepositions

Choose an effective market position

Changing consumers’perceptions of a brand

in relation tocompeting brands.

Changing consumers’perceptions of a brand

in relation tocompeting brands.

Consumer Buying BehaviorConsumer Buying Behavior refers to the buyingbehavior of final consumers -individuals &households who buy goods and services forpersonal consumption.

The central question for marketers is:“How do consumers respond to various marketing“How do consumers respond to various marketingefforts the company might use?”efforts the company might use?”

Consumer BuyingBehavior

77

Consumer Buying BehaviorConsumer Buying Behavior refers to the buyingbehavior of final consumers -individuals &households who buy goods and services forpersonal consumption.

The central question for marketers is:“How do consumers respond to various marketing“How do consumers respond to various marketingefforts the company might use?”efforts the company might use?”

Marketingand

OtherStimuliMarketing

ProductPricePlace

PromotionOther

EconomicTechnological

PoliticalCultural

Buyer’s BlackBox

Buyer CharacteristicsBuyer Decision Process

BuyerResponses

Product ChoiceBrand Choice

Purchase TimingPurchase Amount

78

Marketingand

OtherStimuliMarketing

ProductPricePlace

PromotionOther

EconomicTechnological

PoliticalCultural

Buyer’s BlackBox

Buyer CharacteristicsBuyer Decision Process

BuyerResponses

Product ChoiceBrand Choice

Purchase TimingPurchase Amount

Social

Referencegroups

Family

Rolesand

status

PersonalAge andlife-cycle

OccupationEconomicsituationLifestyle

Personalityand

self-concept

Psycho-logical

MotivationPerceptionLearning

Beliefs andattitudes

Culture

Sub-culture

Socialclass

Culture

Sub-culture

Socialclass

Cultural

79

Social

Referencegroups

Family

Rolesand

status

PersonalAge andlife-cycle

OccupationEconomicsituationLifestyle

Personalityand

self-concept

Psycho-logical

MotivationPerceptionLearning

Beliefs andattitudes

Buyer

Culture

Sub-culture

Socialclass

Culture

Sub-culture

Socialclass

Subculture• Group of people with shared

value systems based oncommon life experiences.• Hispanic Consumers

• African AmericanConsumers

• Asian American Consumers• Mature Consumers

Culture is the Most Basic Cause of aPerson's Wants and Behavior.

80

Subculture• Group of people with shared

value systems based oncommon life experiences.• Hispanic Consumers

• African AmericanConsumers

• Asian American Consumers• Mature Consumers

Culture is the Set of Values, Perceptions,Wants & Behavior Learned by a Member of

Society from Family.Social Class

• Society’s relativelypermanent & ordered

divisions whose membersshare similar values,

interests, and behaviors.• Measured by: Occupation,

Income, Education, Wealthand Other Variables.

81

Social Class• Society’s relativelypermanent & ordered

divisions whose membersshare similar values,

interests, and behaviors.• Measured by: Occupation,

Income, Education, Wealthand Other Variables.

Groups•Membership

•Reference

Groups•Membership

•Reference

Family (mostimportant)

•Husband, wife, kids•Influencer, buyer,

user



user

Social Factors

82



user



user

Roles and StatusRoles and Status

Social FactorsSocial Factors

Personal InfluencesPersonal Influences

Age and LifeCycle Stage

Age and LifeCycle Stage OccupationOccupation Personality &

Self-ConceptPersonality &Self-Concept

EconomicSituation

EconomicSituation

83

Age and LifeCycle Stage

Age and LifeCycle Stage Occupation Personality &

Self-ConceptPersonality &Self-Concept

EconomicSituation

EconomicSituation

ActivitiesActivities InterestsInterests

Lifestyle IdentificationLifestyle Identification

OpinionsOpinions

AchieversAchievers

ActualizersActualizers

FulfilledsFulfilleds

Believers

ExperiencersExperiencers

Makers

Abundant ResourcesAbundant Resources

Status Oriented Action OrientedPrinciple Oriented

84

Achievers

StrugglersStrugglers

StriversStriversBelieversBelievers MakersMakers

Minimal ResourcesMinimal Resources

PsychologicalFactors

AffectingBuyersChoices

Motivation

85

PsychologicalFactors

AffectingBuyersChoices

Perception

Learning

Beliefs andAttitudes

•A motive is a need that has a sufficientlevel of intensity. Creating a tensionstate that drives the person to act.•Satisfying the need reduces the felttension.

86

•A motive is a need that has a sufficientlevel of intensity. Creating a tensionstate that drives the person to act.•Satisfying the need reduces the felttension.

Changes in an individual’s behaviorarising from experience.

88

Changes in an individual’s behaviorarising from experience.

An attitude describes a person’srelatively consistent evaluations,feelings, and tendencies toward anobject or idea.

89

An attitude describes a person’srelatively consistent evaluations,feelings, and tendencies toward anobject or idea.

Esteem Needs(self-esteem)

SelfActualization

90

Physiological Needs(hunger, thirst)

Safety Needs(security, protection)

Social Needs(sense of belonging, love)

Post purchaseBehavior

PurchaseDecision

Evaluationof Alternatives

91

Post purchaseBehavior

InformationSearch

NeedRecognition

Designing and ManagingProducts

Designing and ManagingProducts

1

What is a Product?• A ProductProduct is anything that can be offered to a

market for attention, acquisition, use, orconsumption and that might satisfy a want or need.

• Includes:– Physical Objects– Services– Events– Persons– Places– Organizations– Ideas– Combinations of the above

• A ProductProduct is anything that can be offered to amarket for attention, acquisition, use, orconsumption and that might satisfy a want or need.

• Includes:– Physical Objects– Services– Events– Persons– Places– Organizations– Ideas– Combinations of the above

2

Product

Anything that can be offeredto a market that can satisfy a

need or want

Anything that can be offeredto a market that can satisfy a

need or want

Core ProductFacilitating Products-must be present for the guest to use the core

serviceSupporting Products-Add value to the core productAugmented Product-physical environment, accessibility,

interactions, physical environment

Facilitating Products-must be present for the guest to use the core

serviceSupporting Products-Add value to the core productAugmented Product-physical environment, accessibility,

interactions, physical environment

4

Five Product LevelsFive Product Levels

Basic product

Expected product

Augmented product

Potential product

Core benefit

Basic product

Product Mix

Set of all product thatany given seller offersfor sale to the market

Set of all product thatany given seller offersfor sale to the market

IntroductionPRODUCT DECISIONSWe define product decision as every conscious

decision made by a company for a product.There are many different such decisions. Atone extreme there are such things as a minormodification of the label or colour of thepackage. At the other extreme, there are suchthings as diversification into new businessfields, either through internal R&D or mergersand acquisitions.

PRODUCT DECISIONSWe define product decision as every conscious

decision made by a company for a product.There are many different such decisions. Atone extreme there are such things as a minormodification of the label or colour of thepackage. At the other extreme, there are suchthings as diversification into new businessfields, either through internal R&D or mergersand acquisitions.

There is a three-fold classification of product decisions:

• What are the decisions that a company should makeabout the product types?

• What are the decisions that a company should makeabout the tangible/physical product?

• What are the decisions that a company should makeabout the intangible/ augmented product?

There is a three-fold classification of product decisions:

• What are the decisions that a company should makeabout the product types?

• What are the decisions that a company should makeabout the tangible/physical product?

• What are the decisions that a company should makeabout the intangible/ augmented product?

Product Decisions

Decisions about the product typesThe management must first decide what products to offer in the marketplace before other intelligent product decisions pertaining to theproduct’s physical attributes, packaging, branding, and so on, can bemade.

There are two distinct levels at which such changes take place, namely:the product-mix level andthe product-line level.

American Marketing Association has defined product-mix as ‘thecomposite of products offered for sale by a firm or business unit’.

The American Marketing Association has defined product-line as ‘agroup of products that are closely related either because they satisfy aclass of need, are used together, are sold to the same customer groups,are marketed through the same type of outlet or fall within given pricerange’

The management must first decide what products to offer in the marketplace before other intelligent product decisions pertaining to theproduct’s physical attributes, packaging, branding, and so on, can bemade.

There are two distinct levels at which such changes take place, namely:the product-mix level andthe product-line level.

American Marketing Association has defined product-mix as ‘thecomposite of products offered for sale by a firm or business unit’.

The American Marketing Association has defined product-line as ‘agroup of products that are closely related either because they satisfy aclass of need, are used together, are sold to the same customer groups,are marketed through the same type of outlet or fall within given pricerange’

A company’s product mix refers to the total number of products that areoffered for sale. The product mix has certain width, length, depth andconsistency.

The width of a product mix refers to the total number of different product linesof the company. For example, width = 2 (pasta and pasta sauces).

The length of a product mix refers to the total number of brands in all of thecompany’s product lines. For example, length = 5 (three pasta brands andtwo brands of pasta sauce).

The depth of a product mix refers to the average number of variants of thecompany’s products. For example, depth = 4 (three pasta brands, eachmarketed in two sizes: 3 × 2 = 6 and 2 pasta sauce brands, each marketed in1 size: 2 × 1 = 2 means 6 + 2 = 8/2 = 4).

The consistency of a product mix refers to how closely related are thecompany’s product lines in terms of characteristics, production process,distribution channels to name just a few.

A company’s product mix refers to the total number of products that areoffered for sale. The product mix has certain width, length, depth andconsistency.

The width of a product mix refers to the total number of different product linesof the company. For example, width = 2 (pasta and pasta sauces).

The length of a product mix refers to the total number of brands in all of thecompany’s product lines. For example, length = 5 (three pasta brands andtwo brands of pasta sauce).

The depth of a product mix refers to the average number of variants of thecompany’s products. For example, depth = 4 (three pasta brands, eachmarketed in two sizes: 3 × 2 = 6 and 2 pasta sauce brands, each marketed in1 size: 2 × 1 = 2 means 6 + 2 = 8/2 = 4).

The consistency of a product mix refers to how closely related are thecompany’s product lines in terms of characteristics, production process,distribution channels to name just a few.

Decisions on a product-mix level

Product decisions at the product-mix level tend to determine the width of a company’sproduct-mix. The basic product-policy/strategy issues at the product-mix level clusteraround the following questions:

1 Which product categories should we offer? Will we function primarily as a supplierof materials and components or as a manufacturer of end products?

2 What are the groups and classes of customers for which our products are intended to serve?

3 Do we seek to serve our markets as full-line suppliers or limited line specialists?

4 Will we attempt to take a position of technical leadership or will we achieve greatersuccess as a follower?

5 What are the business characteristics (criteria) such as target rate of profit, paybackperiod on investment, minimum sales volume, etc., that each product line mustmeet in order to be included in the product mix (portfolio)?

Product decisions at the product-mix level tend to determine the width of a company’sproduct-mix. The basic product-policy/strategy issues at the product-mix level clusteraround the following questions:

1 Which product categories should we offer? Will we function primarily as a supplierof materials and components or as a manufacturer of end products?

2 What are the groups and classes of customers for which our products are intended to serve?

3 Do we seek to serve our markets as full-line suppliers or limited line specialists?

4 Will we attempt to take a position of technical leadership or will we achieve greatersuccess as a follower?

5 What are the business characteristics (criteria) such as target rate of profit, paybackperiod on investment, minimum sales volume, etc., that each product line mustmeet in order to be included in the product mix (portfolio)?

Decisions on a product-line level

Important and complex decisions are also made at the product line level, which tend todetermine the length of a company’s product mix. The basic product policy strategyissues at the product line level cluster around the following questions:

1 What is the limit beyond which no product should be added?

2 What is the number of different products to be offered in the line and to what extentshould they be differentiated?

3 What is the number of different versions (models) to be offered for each product inthe line?

4 What are the business criteria (for example, minimum profitability, minimum salesvolume) that each product must meet in order to be included in the line?

5 In how many segments should we compete in order to maintain a secure overall costand market position vis-à-vis competitors?

6 Should we keep in the line unprofitable products in order to keep a customer happyor should we let the competitors have them?

Important and complex decisions are also made at the product line level, which tend todetermine the length of a company’s product mix. The basic product policy strategyissues at the product line level cluster around the following questions:

1 What is the limit beyond which no product should be added?

2 What is the number of different products to be offered in the line and to what extentshould they be differentiated?

3 What is the number of different versions (models) to be offered for each product inthe line?

4 What are the business criteria (for example, minimum profitability, minimum salesvolume) that each product must meet in order to be included in the line?

5 In how many segments should we compete in order to maintain a secure overall costand market position vis-à-vis competitors?

6 Should we keep in the line unprofitable products in order to keep a customer happyor should we let the competitors have them?

Product quality

In formulating a product quality policy, management mustanswer the following questions:

1 What level of quality should the company offer comparedwith what is offered by the competitors?

2 How wide a range of quality should be represented by thecompany’s offerings?

3 How frequently and under what circumstances should thequality of a product (line) be altered?

4 How much emphasis should the company place on thequality in its sales promotion?

5 How much risk of product failure should the companytake in order to be first with some basic improvements inproduct quality?

In formulating a product quality policy, management mustanswer the following questions:

1 What level of quality should the company offer comparedwith what is offered by the competitors?

2 How wide a range of quality should be represented by thecompany’s offerings?

3 How frequently and under what circumstances should thequality of a product (line) be altered?

4 How much emphasis should the company place on thequality in its sales promotion?

5 How much risk of product failure should the companytake in order to be first with some basic improvements inproduct quality?

The functional features of a product

Another set of decisions revolves around the functional characteristics of theproduct.

The selection of functional features depends very much on the company’sdesign policy, which should give answers to the following questions:

1 What specific product features should be developed and made ready forthe next product change?

2 Which of our competitors’ product changes should we copy?

3 Should we hold back certain new product features – and which ones – forpossible slowdown in sales?

4 What product features should our company emphasize?Functional features can make the product more attractive to customers.Functional features modification has several competitive advantages andmay assist the company, among other things, to find new applications forits product.

Another set of decisions revolves around the functional characteristics of theproduct.

The selection of functional features depends very much on the company’sdesign policy, which should give answers to the following questions:

1 What specific product features should be developed and made ready forthe next product change?

2 Which of our competitors’ product changes should we copy?

3 Should we hold back certain new product features – and which ones – forpossible slowdown in sales?

4 What product features should our company emphasize?Functional features can make the product more attractive to customers.Functional features modification has several competitive advantages andmay assist the company, among other things, to find new applications forits product.

The style of the productFinally, another set of decisions relating to a product’s physical configuration

involves style decisions, which aim at improving the aesthetic appeal of theproduct rather than its functional performance. Decisions about style mayrender a product ‘different’ in terms of its functional capacity and qualitylevel. Style decisions again depend on the company’s design and inducedobsolescence policies. For example, frequent changes in style can make aproduct out of date and thus increase the replacement market.

Finally, another set of decisions relating to a product’s physical configurationinvolves style decisions, which aim at improving the aesthetic appeal of theproduct rather than its functional performance. Decisions about style mayrender a product ‘different’ in terms of its functional capacity and qualitylevel. Style decisions again depend on the company’s design and inducedobsolescence policies. For example, frequent changes in style can make aproduct out of date and thus increase the replacement market.

Decision about Branding, Packaging and LabelingAs far as the product variable is concerned, the key characteristics

external to the physical product that offer a company means ofachieving a competitive plus are:

1 branding,

2 packaging and

3 product Services.

A brand is a name, sign, symbol or design or a combination of themwhich is intended to identify the goods or services of onemanufacturer or group of manufacturers and to differentiate themfrom those of competitors.

Management should make some more fundamental policy or strategicdecisions pertaining to branding

As far as the product variable is concerned, the key characteristicsexternal to the physical product that offer a company means ofachieving a competitive plus are:

1 branding,

2 packaging and

3 product Services.

A brand is a name, sign, symbol or design or a combination of themwhich is intended to identify the goods or services of onemanufacturer or group of manufacturers and to differentiate themfrom those of competitors.

Management should make some more fundamental policy or strategicdecisions pertaining to branding

First, should we establish our own brand names or should we engageexclusively in reseller brands (private labels or own label brands)?

Secondly, should we make products for reseller brands similar tothose bearing our own brand?

Thirdly, should we establish a ‘family’ brand (multiproduct brand)over all types of products offered or should we create a specialbrand for each type of product (multibrand product)?

First, should we establish our own brand names or should we engageexclusively in reseller brands (private labels or own label brands)?

Secondly, should we make products for reseller brands similar tothose bearing our own brand?

Thirdly, should we establish a ‘family’ brand (multiproduct brand)over all types of products offered or should we create a specialbrand for each type of product (multibrand product)?

A ‘family’ or ‘umbrella’ brand can take the following three forms:

Corporate/house trade name (for example, United Colors ofBenetton).

A combination of a corporate/house trade name with individualproduct names(for example TATA Gold Tea, TATA Premium Teaetc.

A combination of a common trade name with individual productnames (for example, Nescafé Classic, Nescafé Select, Nescafé GoldBlend from Nestlé).

A ‘family’ or ‘umbrella’ brand can take the following three forms:

Corporate/house trade name (for example, United Colors ofBenetton).

A combination of a corporate/house trade name with individualproduct names(for example TATA Gold Tea, TATA Premium Teaetc.

A combination of a common trade name with individual productnames (for example, Nescafé Classic, Nescafé Select, Nescafé GoldBlend from Nestlé).

Fourthly, should we use our existing brand name to introduceadditional items in the same product category?

Companies usually decide to use an existing brand name tolaunch additional items in the same product category. Forexample, a sugar confectionery brand (for example, Halls) iscan be further extended into new flavours (for example, HallsCherry, Halls Fruit Breezers).

Fifthly should we use a new brand name for launching productsin a new category?

Fourthly, should we use our existing brand name to introduceadditional items in the same product category?

Companies usually decide to use an existing brand name tolaunch additional items in the same product category. Forexample, a sugar confectionery brand (for example, Halls) iscan be further extended into new flavours (for example, HallsCherry, Halls Fruit Breezers).

Fifthly should we use a new brand name for launching productsin a new category?

New Product Development Process

ConceptConceptDevelopmentDevelopmentand Testingand Testing

MarketingMarketingStrategyStrategy

DevelopmentDevelopmentBusinessBusinessAnalysisAnalysis

ProductProductDevelopmentDevelopment

21

IdeaIdeaGenerationGeneration

IdeaIdeaScreeningScreening MarketMarket

TestingTesting

CommercializationCommercialization

New Product DevelopmentProcess Step 1. Idea Generation

Idea Generation is the Systematic Search for NewProduct Ideas Obtained Internally From Employees

and Also From:

22

Customers Competitors Distributors Suppliers

New Product DevelopmentProcess Step 2. Idea Screening

• Process to spot good ideas and drop poor ones as soonas possible.

• Many companies have systems for rating and screeningideas which estimate:– Market Size– Product Price– Development Time & Costs– Unit Costs– Rate of Return

• Then, the idea is evaluated against a set of generalcompany criteria.

• Process to spot good ideas and drop poor ones as soonas possible.

• Many companies have systems for rating and screeningideas which estimate:– Market Size– Product Price– Development Time & Costs– Unit Costs– Rate of Return

• Then, the idea is evaluated against a set of generalcompany criteria.

23

New Product Development ProcessStep 3. Concept Development

1. Develop New Product Ideasinto Alternative Detailed

Product Concepts

2. Concept Testing - Test theNew Product Concepts withGroups of Target Customers

24

2. Concept Testing - Test theNew Product Concepts withGroups of Target Customers

3. Choose the One That Has theStrongest Appeal to Target

Customers

New Product DevelopmentProcess Step 4. Marketing Strategy

Part Two Describes First-Year:Product’s Planned Price

DistributionMarketing Budget

Part One Describes Overall:Target Market

Planned Product PositioningSales & Profit Goals

Market Share

25

Part Three Describes Long-Term:Sales & Profit Goals

Marketing Mix Strategy

Part Two Describes First-Year:Product’s Planned Price

DistributionMarketing Budget

Step 5. Business AnalysisStep 6. Product Development

Business AnalysisReview of Product Sales, Costs,and Profits Projections to See ifThey Meet Company Objectives

Business AnalysisReview of Product Sales, Costs,and Profits Projections to See ifThey Meet Company Objectives

26

If No, EliminateProduct Concept

If Yes, Move toProduct Development

Product Development ProcessStep 7. Test Marketing

AtmosphereAtmosphere

ProductProductBudget LevelsBudget Levels

PositioningPositioning

Test Marketing is the Stage Where the Product and MarketingProgram are Introduced into More Realistic Market Settings.

27

AdvertisingAdvertising

AtmosphereAtmosphere PositioningPositioning

LocationLocationPricingPricing

BrandingBranding

Elements thatMay be Test

Marketed by aCompany

New Product Development ProcessStep 8. Commercialization

When is theRight Time to

IntroduceProduct?

Where toLaunch a

NewProduct?

Commercialization is the Introduction ofthe New Product into the Marketplace.

28


IntroduceProduct?


IntroduceProduct?

Where toLaunch a

NewProduct?

Where toLaunch a

NewProduct?

Causes of New Product Failures• Overestimation of Market Size• Product Design Problems• Product Incorrectly Positioned, Priced or Advertised• Costs of Product Development• Competitive Actions

• To create successful new products, the company must:– understand it’s customers, markets and competitors– develop products that deliver superior value to customers.

• Overestimation of Market Size• Product Design Problems• Product Incorrectly Positioned, Priced or Advertised• Costs of Product Development• Competitive Actions

• To create successful new products, the company must:– understand it’s customers, markets and competitors– develop products that deliver superior value to customers.

Product-Mix StrategiesProduct-Mix Strategies

Product Mix andProduct Line

• The product mixproduct mix is the set of all productsoffered for sale by a company.

• A product mix has two dimensions:–– BreadthBreadth - the number of product lines

carried.–– DepthDepth - the variety of sizes, colours, and

models offered within each product line..

• A product lineproduct line is a broad group of products,intended for similar uses and having similarcharacteristics.

• The product mixproduct mix is the set of all productsoffered for sale by a company.

• A product mix has two dimensions:–– BreadthBreadth - the number of product lines

carried.–– DepthDepth - the variety of sizes, colours, and

models offered within each product line..

• A product lineproduct line is a broad group of products,intended for similar uses and having similarcharacteristics.

BREADTH (DIFFERENT LINES)

Lawn mowers Gardening tools Lawn furniture

Power rotary

Power reel

Hand-powered

Rakes

Hoes

Shovels

Chairs

Chaise lounges

Benches

Product Mix - An Example

Hand-powered Shovels Benches

Each in varioussizes and prices

Each in varioussizes and prices

Various sizesand prices in

redwood oraluminium with

plastic webbing

Product Mix StrategiesPositioning the ProductPositioning the Product

•In Relation to a Competitor•In Relation to a Product Class or

Attribute•In Relation to a Target Market•By Price and Quality

ProductProduct--Mix ExpansionMix Expansion•Line Extension•Mix Extension

Positioning the ProductPositioning the Product•In Relation to a Competitor•In Relation to a Product Class or

Attribute•In Relation to a Target Market•By Price and Quality

ProductProduct--Mix ExpansionMix Expansion•Line Extension•Mix Extension

Expanding theProduct Mix

MixMix--extension strategiesextension strategies include:– Same brand, related product (Tim Horton

coffeemaker)– Same brand, unrelated product (Swiss

Army watch)– Different brand, unrelated product (Pepsi

& KFC)– Different brand, related product (P&G

adds Luvs diapers; already makesPampers)

MixMix--extension strategiesextension strategies include:– Same brand, related product (Tim Horton

coffeemaker)– Same brand, unrelated product (Swiss

Army watch)– Different brand, unrelated product (Pepsi

& KFC)– Different brand, related product (P&G

adds Luvs diapers; already makesPampers)

Trading Up andTrading Down

•• Trading up:Trading up: Adding a higher-priced productto a line to attract a higher-income marketand improve the sales of existing lower-priced products.

•• Trading down:Trading down: Adding a lower-priced itemto a line of prestige products to encouragepurchases from people who cannot afford thehigher-priced product, but want the status.

•• Trading up:Trading up: Adding a higher-priced productto a line to attract a higher-income marketand improve the sales of existing lower-priced products.

•• Trading down:Trading down: Adding a lower-priced itemto a line of prestige products to encouragepurchases from people who cannot afford thehigher-priced product, but want the status.

Other ProductMix Strategies

•• Alteration of Existing Products:Alteration of Existing Products:– Improve an established product with new

design, new package, new uses.

•• ProductProduct--Mix Contraction:Mix Contraction:– Eliminate an entire line or reduce assortment

within it.

– Pruning to reduce similar brands.

– Dump unprofitable or indistinct brands.

•• Alteration of Existing Products:Alteration of Existing Products:– Improve an established product with new

design, new package, new uses.

•• ProductProduct--Mix Contraction:Mix Contraction:– Eliminate an entire line or reduce assortment

within it.

– Pruning to reduce similar brands.

– Dump unprofitable or indistinct brands.

Product Life Cycle

Profits

SalesSales andProfits (Rs.)

Sales and Profits Over the Product’s Life From Inception toDemise

37

TimeProductDevelop-

ment

Introduction

Profits

Growth Maturity Decline

Losses/Investments ($)

Introduction Stage of thePLC

SalesSalesCostsCostsProfitsProfits

Low salesLow sales

High cost per customerHigh cost per customer

NegativeNegativeProfitsProfitsMarketing ObjectivesMarketing Objectives

ProductProductPricePrice

NegativeNegativeCreate product awareness

and trialCreate product awareness

and trialOffer a basic productOffer a basic product

Use cost-plusUse cost-plus

DistributionDistribution Build selective distributionBuild selective distribution

AdvertisingAdvertising Build product awareness amongearly adopters and dealers

Build product awareness amongearly adopters and dealers

Growth Stage of the PLCGrowth Stage of the PLC


Rapidly rising salesRapidly rising sales

Average cost per customerAverage cost per customer

Rising profitsRising profitsProfitsProfitsMarketing ObjectivesMarketing Objectives


Rising profitsRising profits

Maximize market shareMaximize market shareOffer product extensions, service,

warrantyOffer product extensions, service,

warrantyPrice to penetrate marketPrice to penetrate market

DistributionDistribution Build intensive distributionBuild intensive distribution

AdvertisingAdvertising Build awareness and interest in themass market

Build awareness and interest in themass market

Maturity Stage of the PLCMaturity Stage of the PLC


Peak salesPeak sales

Low cost per customerLow cost per customer

High profitsHigh profitsProfitsProfitsMarketing ObjectivesMarketing Objectives


High profitsHigh profitsMaximize profit while defending

market shareMaximize profit while defending

market shareDiversify brand and modelsDiversify brand and models

Price to match or best competitorsPrice to match or best competitors

DistributionDistribution Build more intensive distributionBuild more intensive distribution

AdvertisingAdvertising Stress brand differences andbenefits

Stress brand differences andbenefits

Decline Stage the PLCDecline Stage the PLC

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

Declining salesDeclining sales

Low cost per customerLow cost per customer

Declining profitsDeclining profitsReduce expenditure and milk the

brandReduce expenditure and milk the

brandMarketing Objectives

ProductProduct

PricePrice

Reduce expenditure and milk thebrand

Reduce expenditure and milk thebrand

Phase out weak itemsPhase out weak items

Cut priceCut price

DistributionDistribution Go selective: phase out unprofitableoutlets

Go selective: phase out unprofitableoutlets

AdvertisingAdvertising Reduce to level needed to retainhard core loyal customers

Reduce to level needed to retainhard core loyal customers

The ProductLife Cycle

• the concept of the product life cycle applies toproduct categories, not to brands; it is related tothe concept of diffusion of innovation

• different products will have differently-shaped lifecycle curves; will diffuse at different rates

• a product is normally perceived to pass throughfour stages over its life cycle; introduction,growth, maturity, and decline

• each stage requires different marketing strategies

• the concept of the product life cycle applies toproduct categories, not to brands; it is related tothe concept of diffusion of innovation

• different products will have differently-shaped lifecycle curves; will diffuse at different rates

• a product is normally perceived to pass throughfour stages over its life cycle; introduction,growth, maturity, and decline

• each stage requires different marketing strategies

Product LifeCycle Stages

•• IntroductionIntroduction—most risky and expensive.•• GrowthGrowth—both sales and profits rise, often

rapidly.•• MaturityMaturity—sales increase at a decreasing

rate and profits decline.•• DeclineDecline—demand drops, often because of

another product development.

•• IntroductionIntroduction—most risky and expensive.•• GrowthGrowth—both sales and profits rise, often

rapidly.•• MaturityMaturity—sales increase at a decreasing

rate and profits decline.•• DeclineDecline—demand drops, often because of

another product development.

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olla

rs

Sales Volume

INTRODUCTIONGROWTHMATURITY DECLINE

Product Life Cycle CurveD

olla

rs

Time in yearsLoss

0

Profit

Strategic Implicationsof the Stages

•• introductory stage:introductory stage: developing the market,creating awareness, reaching the innovators

•• growth stage:growth stage: competition begins, sales growquickly, profits peak, market penetration

•• maturity stage:maturity stage: competition is intense, salesslow down, differentiated product offerings,customers are brand loyal, few new entrants

•• decline stage:decline stage: customers move to other options,competitors leave, profits are low, consider exit

•• introductory stage:introductory stage: developing the market,creating awareness, reaching the innovators

•• growth stage:growth stage: competition begins, sales growquickly, profits peak, market penetration

•• maturity stage:maturity stage: competition is intense, salesslow down, differentiated product offerings,customers are brand loyal, few new entrants

•• decline stage:decline stage: customers move to other options,competitors leave, profits are low, consider exit

Characteristics ofLife Cycles

• length of the life cycle will vary across markets;some are quite short and may be getting shorter

• some fads have very short life cycles, while otherproducts stay at maturity for years

• in high-tech markets, life cycles are very short• some products do not make it through all four

stages; they may fail in introduction• the life cycle must be considered in relation to a

specific market; stage may vary across markets

• length of the life cycle will vary across markets;some are quite short and may be getting shorter

• some fads have very short life cycles, while otherproducts stay at maturity for years

• in high-tech markets, life cycles are very short• some products do not make it through all four

stages; they may fail in introduction• the life cycle must be considered in relation to a

specific market; stage may vary across markets

Managing theLife Cycle

Successful life-cycle management requirespredicting the shape of the curve and thensuccessfully adapting strategies at each stage.• when to consider entering the market• how to manage to capitalize on growth• it is possible to develop strategies that will extend

the maturity stage; modify the product, devisenew uses, or design new appeals– greatest challenge comes at the decline stage which

may result in product abandonment

Successful life-cycle management requirespredicting the shape of the curve and thensuccessfully adapting strategies at each stage.• when to consider entering the market• how to manage to capitalize on growth• it is possible to develop strategies that will extend

the maturity stage; modify the product, devisenew uses, or design new appeals– greatest challenge comes at the decline stage which

may result in product abandonment

Part a - Extendedintroduction stage

Part b - Fad

Time in years Time in years

Agg

rega

tesa

les

Different Life Cycles

Part c - Indefinitematurity stage

Time in years

Agg

rega

tesa

les

Branding, Packaging& LabellingBranding, Packaging& Labelling

American Marketing Association defined brand as

“a name, term, sign, symbol, or design, or a

combination of them, intended to identify the goods

and services of one seller or group of sellers and to

differentiate them from those of competition.”

American Marketing Association defined brand as

“a name, term, sign, symbol, or design, or a

combination of them, intended to identify the goods

and services of one seller or group of sellers and to

differentiate them from those of competition.”

Brand• Brands are among a company’s most

valuable assets• A Brand represents what the company is and

what it stands for• A Brand implies trust , consistency, and a

defined set of expectations• The strongest brands own a place in the

customer’s mind• From Scott Davis, Brand Asset Management

• Brands are among a company’s mostvaluable assets

• A Brand represents what the company is andwhat it stands for

• A Brand implies trust , consistency, and adefined set of expectations

• The strongest brands own a place in thecustomer’s mind

• From Scott Davis, Brand Asset Management

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Branding

Advantagesof

Brand Names

BrandEquity

Advantagesof

Brand Names

BrandEquity

AttributesAttributes

Quality & ValueQuality & ValueConsistencyConsistency

IdentificationIdentification

This Land-O-Lakes ad shows the depth of the brand.

52

Advantagesof

Brand Names

BrandEquity

Advantagesof

Brand Names

BrandEquity

Strong BrandAssociation

Strong BrandAssociation

Attributes Identification

Perceived QualityPerceived QualityName AwarenessName Awareness

High BrandLoyalty

High BrandLoyalty

Conditions That Support Branding

• Product is easy to identify• Product is perceived to be the best value

for the price• Quality and standards are easy to

maintain• Demand is enough to support branding

effort• There are economies of scale

• Product is easy to identify• Product is perceived to be the best value

for the price• Quality and standards are easy to

maintain• Demand is enough to support branding

effort• There are economies of scale

53

A brand mark refers to that part of brand which is not made up

of words, but can be a symbol or design such as swoosh mark of

Nike, or Golden Arches of McDonald’s. A trademark is a legal

registration indicating the owner’s exclusive right to use a brandor some part of brand. A trade name is the full and legal name of

a firm, such as Maruti Udyog Ltd., and not the specific name of a

product.

A brand mark refers to that part of brand which is not made up

of words, but can be a symbol or design such as swoosh mark of

Nike, or Golden Arches of McDonald’s. A trademark is a legal

registration indicating the owner’s exclusive right to use a brandor some part of brand. A trade name is the full and legal name of

a firm, such as Maruti Udyog Ltd., and not the specific name of a

product.

Brand Identity“A unique set of brand associations that the brand strategist

aspires to create or maintain. These associations represent what

the brand stands for and imply a promise to customers from the

organisation members.” Brand identity and brand image are

sometimes used interchangeably in different texts. Brand identity

refers to an insider’s concept reflecting brand manager’s decisionsof what the brand is all about. Brand image reflects the

perceptions of outsiders, that is customers, about the brand.

“A unique set of brand associations that the brand strategist

aspires to create or maintain. These associations represent what

the brand stands for and imply a promise to customers from the

organisation members.” Brand identity and brand image are

sometimes used interchangeably in different texts. Brand identity

refers to an insider’s concept reflecting brand manager’s decisionsof what the brand is all about. Brand image reflects the

perceptions of outsiders, that is customers, about the brand.

According to Jean-Noel Kepferer, a brand is complex symbol and

capable of conveying up to six dimensions or meanings:

Physique

Personality

Culture

Relationship

Reflection

Self-Image

According to Jean-Noel Kepferer, a brand is complex symbol and

capable of conveying up to six dimensions or meanings:

Physique

Personality

Culture

Relationship

Reflection

Self-Image

Brand Equity

Kevin Lane Keller defines brand equity:

“The added value that a brand gives to a product

in the marketplace

Brand equity is the intangible value of a particular

company or product based on consumer perception in

the marketplace. Many different factors contribute

to brand equity including advertising, consumer

reviews, and publicity. A brand with

strong equity tends to be well-known and thought of

positively by many consumers.

Kevin Lane Keller defines brand equity:

“The added value that a brand gives to a product

in the marketplace

Brand equity is the intangible value of a particular

company or product based on consumer perception in

the marketplace. Many different factors contribute

to brand equity including advertising, consumer

reviews, and publicity. A brand with

strong equity tends to be well-known and thought of

positively by many consumers.

Brand nameawareness

Brandloyalty

BrandEquity

Components of Brand Equity

Perceivedquality

Brandassociations

BrandEquity

Five dimensions of customer-based brand equity:

Performance

Social image

Value

Trustworthiness

Identification

Five dimensions of customer-based brand equity:

Performance

Social image

Value

Trustworthiness

Identification

Brand Image

Brand image is the key concept intervening between the brand

and its equity. It is the driver of brand equity.

Types of brand associations can be hard and soft and brand sub-

images consist of three elements:

image of provider,

image of product, and

image of user.

Brand image is the key concept intervening between the brand

and its equity. It is the driver of brand equity.

Types of brand associations can be hard and soft and brand sub-

images consist of three elements:

image of provider,

image of product, and

image of user.

Brand image management requires determining brand concept.

This concept embodies the central meaning of the brand that the

company chooses and is derived from basic consumer needs. The

more strongly the brand satisfies these needs, the more

differentiated and strong the brand image customers carry. These

needs can be put under three broad groups.

Functional needs

Symbolic needs

Experiential needs

Brand image management requires determining brand concept.

This concept embodies the central meaning of the brand that the

company chooses and is derived from basic consumer needs. The

more strongly the brand satisfies these needs, the more

differentiated and strong the brand image customers carry. These

needs can be put under three broad groups.

Functional needs

Symbolic needs

Experiential needs

Types of Brand

There are several brand options that include manufacturer brand

(also called national brand), private brand (also called distributor,

reseller, store, or house brand), or a licensed brand.

Manufacturer brands are initiated by manufacturers and

identify the producer.

Private brands is that they are resellers initiated brands.

Licensed brand is a relatively new trend and involves licensing

of trademarks.

There are several brand options that include manufacturer brand

(also called national brand), private brand (also called distributor,

reseller, store, or house brand), or a licensed brand.

Manufacturer brands are initiated by manufacturers and

identify the producer.

Private brands is that they are resellers initiated brands.

Licensed brand is a relatively new trend and involves licensing

of trademarks.

Brand Name Selection

Companies have four strategic options in choosing abrand name:

Company Name

Individual Names

Separate Brand Family Names

Combination of Company Name and Product Name

Desirable Qualities of Brand Names

Companies have four strategic options in choosing abrand name:

Company Name

Individual Names

Separate Brand Family Names

Combination of Company Name and Product Name

Desirable Qualities of Brand Names

Branding Strategies

Different companies adopt different strategies, and since there is

no best strategy for all types of products, a company may adopt

different branding strategies across its product mix.

Product Branding Strategy

This strategy focuses on promoting the brand exclusively so

that it reflects its own personality, identity, associations, and

image. The brand does not take on company associations and

any benefits from its name.

This strategy focuses on promoting the brand exclusively so

that it reflects its own personality, identity, associations, and

image. The brand does not take on company associations and

any benefits from its name.

Line Branding Strategy (Line Extension)

The term ‘line branding’ is altogether different than whatproduct line refers to in the context of product mix. In line

branding, products share a common concept. Line brands start

with a single product conveying a concept and later the brand

name extends to other complementary products.

The term ‘line branding’ is altogether different than whatproduct line refers to in the context of product mix. In line

branding, products share a common concept. Line brands start

with a single product conveying a concept and later the brand

name extends to other complementary products.

Range Branding Strategy (Brand Extension)This strategy seems to resemble line branding but is significantlydifferent. It is also called brand extension. Product categories aredifferent but brand name is the same, such as carrying the brandname Maggi is a range of different products: noodles, sauce, soup,Dosa mixes, etc.

In case of range branding, it is not the product concept but “thearea of expertise.” This strategy permits expanding into productsthat do not complement each other.

This strategy seems to resemble line branding but is significantlydifferent. It is also called brand extension. Product categories aredifferent but brand name is the same, such as carrying the brandname Maggi is a range of different products: noodles, sauce, soup,Dosa mixes, etc.

In case of range branding, it is not the product concept but “thearea of expertise.” This strategy permits expanding into productsthat do not complement each other.

Umbrella Branding StrategyThe approach is driven by economic considerations. The companyname itself is the brand name for all products across diversecategories. Investment in building one brand proves far moreeconomical than investing in building several brands.

Double Branding Strategy

This approach combines umbrella branding and

product branding. Along with the product brand

name, the company name is associated to create

double branding, such as Tata Indica and, Bajaj

Pulsar.

This approach combines umbrella branding and

product branding. Along with the product brand

name, the company name is associated to create

double branding, such as Tata Indica and, Bajaj

Pulsar.

Endorsement Branding Strategy

This is a minor variation of double branding strategy. The product

brand name gains a dominant position, while the company name

merits a lower profile.

Factors Influencing Branding Strategies Market Size

Competitive Situation

Company Resources

Product Newness

Innovativeness and Technology

Market Size

Competitive Situation

Company Resources

Product Newness

Innovativeness and Technology

Packaging & Labelling

Packaging includes all activities that focus on the development

of a container and a graphic design for a product. A package

may have three levels; the primary package is the container of

the product such as a bottle, jar, or tube, the secondary package

is the box of cardboard or some other material containing the

primary package; and the last is shipping package that contains

more units of secondary package.

Packaging includes all activities that focus on the development

of a container and a graphic design for a product. A package

may have three levels; the primary package is the container of

the product such as a bottle, jar, or tube, the secondary package

is the box of cardboard or some other material containing the

primary package; and the last is shipping package that contains

more units of secondary package.

Labelling

A label may be a part of package or it may be a tag

attached to the product.

The labels perform a descriptive function relating to a

product’s source, its contents, important features andbenefits, use instructions, cautions or warnings, storage

instructions, batch number, date of manufacture, and

date of expiry.

A label may be a part of package or it may be a tag

attached to the product.

The labels perform a descriptive function relating to a

product’s source, its contents, important features andbenefits, use instructions, cautions or warnings, storage

instructions, batch number, date of manufacture, and

date of expiry.

Elements that enhance positioningand create augmented products

• Atmosphere• Customer interaction with service

delivery system• Customer interaction with other

customers• Customer co-production

• Atmosphere• Customer interaction with service

delivery system• Customer interaction with other

customers• Customer co-production

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