Marketing Management

*SELF--NOTES

* Fundamentals of Marketing, Customer Value and Satisfaction,Customer Delight, Conceptualizing Tasks and

* Philosophies of Marketing Management, Value Chain, Scanningthe Marketing Environment, Marketing Mix

* Elements, Difference between marketing and Selling,Relationship marketing, Social marketing, Strategic

* Planning in marketing, formulating the marketing plan.

* Module I: Understanding Marketing in Newperspective

Marketing is the delivery of the customer satisfaction at

a

profit. The two fold goal of marketing is to attract new customer by promising superior value and to keep and grow current customers by delivering satisfaction. delivering on its promise. always low pricesalways.

EXAMPLEWal- Mart has become the world largest retailer byDell leads the personal computer industry by consistentlymaking good on it promise to be direct. Making it easy to the customers to custom design their own computers and have them delivered them at the door steps or desktops. experiences for their hotel guests.

Ritz Carlton promises and delivers truly memorable

And Coca-Cola the world leading soft drink, delivers on the

simple but enduring promise that with Coca-Cola, life tastes good

*

* ..the process of discovering and translating consumer needs and wantsinto product and service specifications, creating demand for these products, services, and in turn expanding the demand at managing customer demand , they seek to influence the level , timing and composition of demand.

* Marketer is skilled

* Marketing is the management process that identifies, anticipates and

satisfies customer requirements profitably(The Chartered Institute of Marketing)

* The right product, in the right place, at the right time, and at the rightprice (Adcock et al )

* Marketing is the human activity directed at satisfying human needs andwants through an exchange process (Kotler 1980)

*

* Marketing is a social and managerial process by which

individuals and groups obtain what they want and need through creating, offering and exchanging products of value with others Kotler 1991

* From a managerial point of view Marketing is a process of

planning and executing the conception pricing and promotion and distribution of ideas and goods/ services to create exchanges that satisfy individual and organizational goals.

* MM is art and science of choosing target markets, and getting ,

keeping and growing customers through creating , delivering and communications superior customer value

*

* NEED human need are the state of felt deprivation. They

include basic physical needs for food, clothing , warmth, and safety. Social needs for belonging and affection and individual needs for knowledge and self-expression. These needs are not invented by marketers, they are a basic part of the human develop.shaped by culture and individual personality. An American needs food but want a hamburger, French fries and a soft drink. A person in Mauritius needs food but want mango rice, lentils and beans . Wants are shaped by the society and are described in terms of objects that will satisfy needs. they choose the products that provide the most value and satisfaction for the money. And when these are backed by buying power, wants become DEMANDS

* WANT these are the form of human needs take as they are

* People have almost unlimited wants but limited resources. Thus

*

* PRODUCT it is anything that can be offered to a market to

satisfy a need or want. The concept of the product is not limited to physical objectsanything capable of satisfying a need can be called a product. are activities or benefits offered for sale that are essentially tangible and dont result in the ownership of anything.

* In addition to tangible goods, products include services , which* EXAMPLE--: banking, airline, hotel, tax preparation and homerepair charges.

* If, more broadly defined, products also include other entities

also include other entities such as experiences, persons, places, organization, information and ideas.

* EXAMPLE---:Disney land is an experience.

*

* GOODSphysical goods constitute the bulk of most countries

production and marketing efforts. Each year, Indian companies market cars, trucks television sets, machine tools, machines, industrial chemicals, watches, cosmetics and various other mainstay of an economy.activities focuses on the production of services. Services include the work of airlines, hotels, cars rental firms, barbers, beautician, bankers, lawyers, etc. many market offerings consist of a variable goods and services. In a fast food restaurant consumer consumes both a product and a service. trade shows, artistic performances and company anniversaries. Global sporting events such as Olympics and the World cup are promoted aggressively to both companies and both.

* SERVICESas economies advance, a growing proportion of their

* EVENTSMarketers promote time based events such as major

*

* EXPERIENCESby orchestrating several services and goods , a firm

can create, stage and market experiences. An amusement park or a water park represents experimental marketing , customers, by taking different rides in the amusement parks and enjoy the thrill provided by these experiences. * PERSONScelebrity marketing is the major business. Artist, musicians, CEO, physicians, high profile lawyers, and other professionals all get help from celebrity marketers. Some people have done a masterful job of marketing themselvesthink of David beckham, and the rolling stone celebrities like Amitabh bachchan, Sachin Tendulkar, Shahrukh khan. * PLACEScities, states, and regions and whole nations compete actively to attract tourists factories, company headquarters and new residents. Place marketers include economic development specialists, real state agents, commercial banks, local business * EXAMPLEIn the software industry Bangalore is positioned as the silicon valley

*

* PROPERTIESproperties are intangible right of ownership of either

real property (real property) or financial property(stocks and bonds). Properties are bought and sold, and these exchanges require marketing. Real state agents work for the property owners or sellers or they buy or sell residential and commercial real estate. Investment companies and bank markets securities to both institutional and individual investors. favorable, and unique image in the minds of their targets publics. In the united kingdom Tescos every little help marketing program reflects the food marketers attention to detail in everything it does within as well as outside the store in the community. Revson once observed in the factory we make cosmetics; in the store we sell hope. Products and services are platforms for delivering some ideas or benefits.

* ORGANIZATIONSorganizations actively work to build a strong,

* IDEASEvery market offerings includes a basic idea . Charles

*

* VALUEvalue reflects the sum of the perceived tangible and

intangible benefits and costs to the customers. Its primarily a combination of quality, service and price(QSP) called the customer value triad. Value increases with quality and service and decreases with price, although other factors can also play an important role in our perceptions of value.of marketing as creation, communication, delivery, and monitoring of customer value. perceived performance(or outcome) in relationship to expectations.

* Value is the central marketing concept. It is because we can think * SATISFACTIONit reflects a persons judgment of a products * QUALITYQuality has a direct impact on the product service andperformance. Thus it is closely linked to customer value and satisfaction. It can be defined in other words as freedom from defects.

*

* Customer value is the difference between the values the customergains from owing and using a product and the costs of obtaining a product. EXAMPLE_--- FedEx customers gains a number of benefits. The most obvious are fast and reliable package delivery.

* However FedEx customers also get some status and image values. * When deciding whether to send a package via FedEx, customers

Using Fed Ex both the package sender and the receiver feels more important. will weigh these and other values against the money, effort, and psychic cost of using the service. Moreover they compare the value with other shippers.

*

* OFFERINGcompanies address needs by putting forth for a valueproposition, a set of benefits that they offer to customer to satisfy their needs. The intangible value proposition is made physical by an offering which can be a combination of products and service, information and experinces.

* BRANDit an offering from a known source. A brand name such asMcdonalds carries many associations in peoples mind that make up the brand image(hamburger, fun, children, fast food, ). All companies strive to build a strong favorable and unique brand image.

*

* To reach a target market, the marketers uses three kind ofchannel which are as follow--:

* Communication channel--:it delivers and receive message from

target buyers and include newspaper, magazine, radio, television, telephone, bill boards, posters, fillers, CD, audio tapes and internet.

* Distribution channelto display the physical product or services tothe buyer or user. They indicate distributors, wholesalers, retailers and agents.

* Service channelsto carry out the transactions with potentialbuyers. They include warehouse, transportation companies, banks, insurance companies that facilitate transactions.

*

*choosing and targeting appropriate customers

*positioning your offering*interacting with those customers *controlling the marketing effort

*continuity of performance

*

*Developing marketing strategies & plans *Capturing marketing insights

*Connecting with customers*Building strong brands

*Shaping the market offerings*Delivering value *Communicating value

*Creating long-term growth

* The supply chain is a longer channel stretching from raw materialsto components to final products that are carried to final buyers. The supply chain for womens purpose starts with hides and moves through training, cutting, manufacturing and the marketing channel to bring the products to customer.

* Each company captures only a certain percentage of the totalvalue generated by the supply chains value delivery system.

* When a company acquires competitors or expands upstream or

downstream. Its aim is to capture a higher percentage of supply chain value

*

* It includes all the actual and potential rival offerings and

substitutes a buyer might consider. Suppose an automobile company is planning to buy steel for its cars. There are several possible levels of competitors. India, or import from abroad. Or buy aluminum for certain parts to lighten the car weight

* The company can buy steel from Tata Steel, Steel Authority of

* The another option is that to buy engineered plastics for bumpersinstead of steel. In fact in the long run the steel companies are more likely to be hurt by substitute products than by other steel companies.

*

* PRODUCTION CONCEPTit holds that the consumers will favor

the products that are available and highly affordable. Therefore, management should focus on improving production and distribution efficiency. This concept is one of the oldest philosophies that guides sellers.first occurs when the demand for a product exceeds supply. Here management should look for ways to increase production. and improved productivity is needed to bring it down.

* This concept is still useful philosophies in two situations. The

* The second situation occurs when the products cost is too high * EXAMPLEfor many years Texas instruments followed a

philosophies of increased production and lower cost in order to bring down prices. It won a major share of American handheld calculator market by using this approach.

*

* It holds the consumer will favor the product that offer the most in

quality performance, and innovative features. Thus, an organization should denote energy to making continuous products improvements . Some manufactures believe that if they can build a better mouse trap, the world will beat a path to their doors. But they are often rudely shocked. Buyers may well be looking for a better solution to this mouse trap problem but not for a better mouse trap. or something that works out better than a mouse trap. Further a better mouse trap will not sell unless manufacture designs packages, and price it attractively , place it convenient distribution channel, brings it to the attention of the people who need it and convinces buyer that it is a better product.

* The solution might be a chemical spray, an exterminating service,

* Product concept can be a marketing myopia because it overlooksthe competition.

*

* It holds that the consumer will not buy enough of the

organizations products unless it undertakes a large scale selling and promotion effort. The concept is typically practiced with unsought goods(those goods that buyers do not normally think of buying such as encyclopedia, insurance. These industries must be good at tracking down prospects and selling them on product benefits. sell what they make rather than make what market wants. Such marketing carries high risks. It focuses on creating sales transaction rather than on building long term profit, profitable, relationship with the customers. It assumes that the customers who are coaxed into buying will like it. Or if they dont like it they will forget their disappointment and will buy it later.

* Most firm practice this when they are overcapacity. Their aim is to

* There are usually poor assumptions to make about buyers. Most ofthe studies shows that disappointment customers will not buy it again.

*

* This concept emerged in 1950s. instead of product-centered,

make and sell philosophy, business shifted to a customercentered sense and respond philosophy. The job is not to find right customers for the product, but to find right products for your customers. make perfect computers for their users. Rather it provide product platforms on which each person customizes the feature he desires in the computer. that companies that embrace marketing concept achieve superior performance. market orientation by understanding and meeting the customers expressed needs. Some says that high level of innovation is possible if the focus is on the customers latent needs. This is called proactive marketing orientation.

* EXAMPLEDell computer dont

* It focuses on the needs of the buyer. Several scholars have found

* This was first demonstrated by the companies practicing Reactive

* Successful companies learn through probe-and learn process

*

* The holistic marketing concept is base on the development,

design, and implementation, of marketing programs, processes and activities that recognizes their breadth and interdependencies. It recognizes that everything matters in marketing and that a broad, integrated perspective is often necessary.

* It is thus an approach that attempts to recognizes and reconcilethe scope and complexities of marketing activities

* Successful companies are those that can keep their marketing

changing with change in their market place and market space.

*

Marketing department

Performance Internal marketing marketingcommunications

Relationship Integrated marketing marketing

Product and services channels

*

*

*2) The Value ChainMichael Porter of Harvard has proposed the value chain as a tool for identifying ways to create more customer value. According to this model, every firm has combination of activities performed to design, produce, market, deliver, and support its product. The value chain identifies nine strategically relevant activities that create value and cost in a specific business. These nine value-creating activities consist of five primary activities and four support activities.1-26

* 2) The Value ChainThe primary activities cover the sequence of: 1) bringing materials into the business (inbound logistics), 2) converting them into final products (operations), 3) shipping out final products (outbound logistics), 4) marketing them (marketing and sales), and 5) servicing them (service).

1-27

*2) The Value ChainThe support activities: 1) technology development, 2) human resource management, 3) firm infrastructureare handled in certain specialized departments, as well as elsewhere. 4) Procurement and hiring

1-28

*

*The traditional view of marketing is that the firm makes

something and then sells it. In this view, marketing takes place in the second half of the process.

*The company knows what to make and the market will buyenough units to produce profits.

*Companies that subscribe to this view have the best chanceof succeeding in economies marked by goods shortages where consumers are not fussy about quality, features, or style

*for example, with basic staple goods in developing markets.

*

*The traditional view of the business process, however, willnot work in economies where people face abundant choices.

*The smart competitor must design and deliver offerings forwell-defined target markets.

*This belief is at the core of the new view of business

processes, which places marketing at the beginning of planning.

*

* The value creation and delivery sequence can be divided intothree phases.

* The first phase is choosing the value ---it represents the

homework marketing must do before any product exists. The marketing staff must segment the market , select the appropriate market target, and develop the offerings value position.

* Second phase is providing the value. Marketing must determinespecific products, features, prices and distribution.

* Third phase is communicating the value---by utilizing the salesforce, sales promotion, advertising and other tools of communication to announce and promote the product

* Each of the product has its cost implications.

*

** *

The holistic marketing framework is designed to address three key management questions: 1. Value exploration - How can a company identify new value opportunities? 2. Value creation- flow can a company efficiently create more promising new value offerings? 3. Value delivery- How can a company use its capabilities and infrastructure to deliver the new value offerings more efficiently?

*

* Holistic Marketing Framework

* A Holistic Marketing Orientation And CustomerValue

*

A Holistic Marketing Orientation And Customer Value

VALUE EXPLORATIONVALUE EXPLORATION Because value flows within and across markets that are themselves dynamic and competitive, companies need a well-defined strategy for value exploration. Developing such a strategy requires an understanding of the relationships and interactions among three spaces: (1) the customer's cognitive space; (2) the company's competence space; and (3) the collaborator's resource space. The customer's cognitive space reflects existing and latent needs and includes dimensions such as the need for participation, stability, freedom, and change

*

A Holistic Marketing Orientation And Customer Value

VALUE CREATIONTo exploit a value opportunity, the company needs valuecreation skills. Marketers need to: 1) identify new customer benefits from the customer's view; 2) utilize core competencies from its business domain; and 3) select and manage business partners from its collaborative networks. To craft new customer benefits, marketers must understand what the customer thinks about, wants, does, and worries about. Marketers must also observe who customers admire, who they interact with, and who influences them

* VALUE DELIVERY

*Delivering value often means substantial investment ininfrastructure and capabilities.

*The company must become proficient at customerrelationship management, internal resource management, and business partnership management.

*Customer relationship management fallows the company todiscover who its customers are, how they behave, and what they need or want.

*It also enables the company to respond appropriately,coherently, and quickly to different customer opportunities.

* The Central Role of Strategic PlanningCompanies should have the capabilities to:

Developing Marketing Strategies and Plan

1) 2) 3) 4) 5)

understanding customer value, creating customer value, delivering customer value, capturing customer value, and sustaining customer value.

*

The Central Role of Strategic Planning

Only a handful of companies stand out as master marketers: Procter & Gamble, Southwest Airlines, Nike, Disney, Nordstrom, Wal-Mart, McDonald's, Marriott Hotels, and several Japanese (Sony, Toyota, Canon) and European (IKEA, Club Med, Bang & Olufsen, Electrolux, Nokia, Lego, Tesco) companies These companies focus on the customer and are: 1)organized to respond effectively to changing customer needs. 2)have well-staffed marketing departments, and 3) all their other departmentsmanufacturing, finance, research and development, personnel, purchasingalso accept the concept that the customer is king.

Part 2: Corporate and Division Strategic Planning


1) 2) 3) 4)

Defining the corporate mission Defining the business Assessing growth opportunities Organization and organizational culture

1-40


What is Strategic Planning? It is the managerial process that helps to develop a strategic and viable fit between the firms objectives, skills, resources with the market opportunities available. It helps the firm deliver its targeted profits and growth through its businesses and products.1-41

planning, implementation, and control cycle

1-42

1)

Defining the corporate mission

How to go about it? Defining the corporate mission Establishing SBUs Allocating resources for SBUs Planning for new business

1-43

Corporate Mission This seeks to embody the entire goals of the organization and the objective of its existence. It seeks to provide a sense of purpose, direction and opportunity

1-44

* Defining the CorporateMissionAccording to Peter Drucker, it is time to ask some fundamental questions. What is our business? Who is the customer? What is of value to the customer? What will our business be? What should our business be? Successful companies continuously raise these questions and answer them thoughtfully and thoroughly.

1-45

A business must be viewed as a customer-satisfying process, not a goods-producing process. Products are transient; basic needs and customer groups endure forever. Transportation is a need: the horse and carriage, the automobile, the railroad, the airline, and the truck are products that meet that need.

*

Strategic Business Units

The purpose of identifying the company's strategic business units is to develop separate strategies and assign appropriate funding.

1-47

SBU has three characteristics: 1. It is a single business or collection of related businesses that can be planned separately from the rest of the company. 2. It has its own set of competitors. 3.It has a manager who is responsible for strategic planning and profit performance and who controls most of the factors affecting profit.1-48

Assessing Growth Opportunities1. planning new businesses, 2. downsizing, or 3. terminating older businesses.

1-49

Assessing Growth Opportunities

1-50

Assessing Growth Opportunities

1. 2. 3. 4.

INTENSIVE GROWTH Integrative Growth Diversification Growth Downsizing and Divesting Older Business

1-51

Assessing Growth Opportunities1. market-penetration strategy The company first considers whether it could gain more market share with its current products in their current markets . 2. market-development strategy the company considers whether it can find or develop new markets for its current products. 3. product-development strategy the company considers whether it can develop new products of potential interest to its current markets 4. diversification strategy the company will also review opportunities to develop new products for new markets.1-52

Business Unit Strategic Planning Strategic planning:

Developing a strategic fit between organizational goals and capabilities, and changing marketing opportunities

1-53

Process whereby an organization allocates it marketing mix resources to reach its target markets. Planning Implementation

Evaluation

*

Strategic Marketing Process

* Planning Phase Situation Analysis* This is a complete analysis of the firms situation whichassesses internal strengths and weaknesses and external threats and opportunities (SWOT) * Internal analysis (controllable factors) assess the firm itself to identify strengths and weaknesses * External analysis (uncontrollable factors) assess the firms external environment to identify opportunities and threats

* Specific levels of performance desired for a product orproduct line to be achieved by a given date.

* Stated in terms of market share, sales, profit * Should be measureable, attainable, specific, andconsistent with organizational objectives

* Planning Phase MarketingObjectives

* The process where marketers try to create a productimage or identity in the minds of their target market relative to competitive products.

* Planning Phase:

Product Positioning

* Process of putting the marketing plan into action. * Involves great attention to detail

*ImplementationPhase

* Involves measuring the results of the actions from the

implementation phase and comparing them with goals set in the planning phase.sales analysis

market share analysisexpense to sales analysis

*Evaluation

SBUEstablishing Strategic Business Units A business can be defined in terms of three dimensions: customer groups, customer needs, and technology. It is a company within a company The business is differentiated from the rest of the company It has its own set of competitors It is a separate profit centre

1-60

*Assigning Resources to SBUsThe purpose of identifying the companys strategic business units is to develop separate strategies and assign appropriate funding to the entire business portfolio.Senior managers generally apply analytical tools to classify all of their SBUs according to profit potential. Two of the best-known business portfolio evaluation models are the Boston Consulting Group model and the General Electric model. 1-61

* It is a single business or collection of related businesses * It has its own set of competitors * It has a leader responsible for strategic planning andprofitability

*Characteristics of

SBUs

* Market penetration strategy * Market development strategy * Product development strategy * Diversification strategy

* Ansoffs Product-MarketExpansion Grid

Ansoffs Product-Market GridCurrent products New products Current Mkts Mkt penetration strategy Product development strategy

New Mkts

Mkt development strategy

Diversification strategy

1-64

The Planning Process Analysing Market opportunities Developing Marketing strategies Planning Marketing Programs Managing the Marketing Effort

1-65

Marketing Control Annual Plan control Profitability control Strategic Control

1-66

Market-oriented strategic is the managerial process of developing and maintaining a viable fit among the organizations objectives, skills, and resources and its changing market opportunities. The aim of strategic planning is to shape the companys businesses and products so that they yield target profits and growth and keep the company healthy despite any unexpected threats that may arise.

* Market-oriented strategic planning1-67

Corporate culture is the shared experiences, stories, beliefs, and norms that characterize an organization.

*What is Corporate

Culture?

** Industry is a customer satisfying process not a goodsproducing process.

* It is important therefore how you redefine your business. * Lack of foresight,effective forecasting, vision and missionsteadfastness.Lack of anticipation of the future trends.

COMPANYS MARKET SHARE High Low

High INDUSTRY GROWTH RATE Stars Question marks

Low

Cash cows

Dogs

*Cash Cows SBUs that have a high market share of alow sales growth market.

*Stars SBUs that have a high market share of a highsales growth market.

*Question marks SBUs that have a low market share ofa high sales growth market.

*Dogs SBUs that have a low market share of a lowsales growth market.

*

*??? Stars

Dogs

Cash Cows

Mkt Share

Product

Production

Selling

Marketing

Societal Mktg

As business philosophy has evolved, so has the role of marketingcustomer satisfaction is now at the core of most successful corporations

*

* Marketing Environment: * The actors and forces outside marketing * * * *

that affect marketing managements ability to build and maintain successful relationships with target customers Microenvironment Includes the actors close to the company Macroenvironment Involves larger societal forces

*3 - 75

Goal 1: Understand environmental factors

*Actors1. The company* Marketing must considerother parts of the organization including finance, R&D, purchasing, operations and accounting relate to broader company goals and strategies

2. Suppliers3. Marketing intermediaries 4. Customers 5. Competitors 6. Publics3 - 76

* Marketing decisions must

Goal 1: Describe environmental factors

*Actors1. The company* Marketers must watch supplyavailability and pricing

* Effective partnership


relationship management with suppliers is essential


*Actors1. The company* Help to promote, sell anddistribute goods to final buyers distribution firms, marketing services agencies and financial intermediaries management is essential

* Include resellers, physical


* Effective partner relationship


*Actors1. The company* The five types of customermarkets


*Consumer *Business *Reseller *Government *International


*Actors1. The company* Conducting competitoranalysis is critical for success of the firm competitors offerings to create strategic advantage

* A marketer must monitor its



*Actors1. The company* A group that has an actual orpotential interest in or impact on an organization * Seven publics include:


*Financial *Media *Government *Citizen-action *Local *General *Internal


* Financial publicsinfluence the company ability to obtain funds.Banks, investment house, and stock holders are the major financial publics. * Media publics carry the news, features, and editorial opinions. They include newspapers, magazines, radio and television situations. * Government publicsmanagement must take government developments into account. Marketers must often consult the companys lawyers on issues of product safety, truth in advertising and other matters. * Citizen-action publicsa companys marketing decisions may be questioned by consumer organizations, environmental groups, minority groups and others. * Local publicsinclude neighborhood residents and community organizations. Large companies usually appoint a community officer to deal with the community and attend the meeting s, answer questions and contribute to worthwhile causes

*

* General publica company needs to be concerned about the

general public attitude toward its products and activities. The public image of the company affects its buying.

* Internal publics---include workers, managers , volume and boardof directors. Large companies use newsletter and other means to inform and motivate the internal publics .when employees feels good about their company, the positive attitude spills over to external publics

*

*The MacroenvironmentMacroenvironmental Forces

*Demographic *Economic *Natural3 - 84

*Technological *Political *Cultural


* Demographic Environment:* The study of human populations in terms of size, density,location, age, gender, race, occupation and other statistics

*3 - 85

Goal 2: Learn how demographic & economic factors affect marketing

Changing age structure of the U.S. population is the single most important demographic trendBaby boomers, Generation X, and Generation Y are the key groups

*3 - 86

Goal 2: Learn how demographic & economic factors affect marketing

Key GenerationsBaby Boomers Generation X Generation Y

Born between 1946 and 1964 Represent 28% of the population; earn 50% of personal income Many mini-segments exist within the boomer group Entering peak earning years as they mature

3 - 87

*


Born between 1965 and 1976First latchkey children Maintain a cautious economic outlook Respond to socially responsible companies

Will be primary buyers of most goods by 2010

3 - 88

*


Born between 1977 and 199472 million strong; almost as large a group as their baby boomer parents New products, services, and media cater to GenY Challenging target for marketers

*

* Natural Environment:* Involves the natural resources that are needed asinputs by marketers or that are affected by marketing activities

* Trends* Shortages of raw materials * Increased pollution * Increased government intervention

*3 - 90

Goal 3: Identify trends in natural and technological environments

* The most dramatic force shaping our destiny * Rapidly changing force which creates many new marketing

opportunities but also turns many existing products extinct

*3 - 91

Goal 3: Identify trends in natural and technological environments

*Consists of laws, government agenciesand pressure groups that influence or limit various organizations and individuals in a given society

* Legislation affecting businesses worldwide

has increased * Laws protect companies, consumers and the interests of society * Increased emphasis on socially responsible actions

*3 - 92

Goal 4: Explore political and cultural environments

Marketers create link between brand

and charitable organization Demonstrates social responsibility Helps build positive brand image Examples include General Mills Box Tops for Education, Tang and Mothers Against Drunk Driving, Eddie Bauer and local schools

*3 - 93


* Made up of institutions and other forces that affect asocietys basic values, perceptions, preferences and behaviors.

*3 - 94


Cultural Environment Includes * peoples views ofThemselves Identify with brands for self-expression

Society Patriotism on the rise

Others Recent shift from me to we society

Nature lifestyles of health and sustainability (LOHAS) consumer segment

Organizations Trend of decline in trust and loyalty to companies

Universe Includes religion and spirituality

3 - 95


* There are three kinds of companies:

those who make things happen, those who watch things happen, and those who wonder whats happened.

*3 - 96

Goal 5: Realize how companies react to the marketing environment

*

* The factors influencing consumer behaviour. The stages in thebuying process, the buying decision making

* process, factors effecting the buying decision., MarketSegmentations, Levels of Market Segmentations,

* Patterns, Procedures, Requirement for Effective Segmentation,Evaluating the Market Segments, Selecting the

* Market Segments, Tool for Competitive Differentiation, Developinga Positioning Strategy.

*

*refers to the buying behavior of final consumers (individuals &households) who buy goods and services for personal consumption. *Study consumer behavior to answer:

How do consumers respond to marketing efforts thecompany might use?

*the actions a person takes in purchasing and usingproducts and services, including the mental and social processes that come before and after these actions

*

*Product Price Place Promotion

Marketing and Other Stimuli

Economic Technological Political Cultural Characteristics Affecting Consumer Behavior

Buyers Decision Process

Buyers Black Box

Product Choice Brand Choice Dealer Choice

Buyers Response

Purchase Timing Purchase Amount

*Culture Social Personal

Psychological

Buyer

** Most basic cause of a person's wants and behavior. * Values * Perceptions

Subculture Groups of people with shared value systems based on common life experiences. Hispanic Consumers African American Consumers Asian American Consumers Mature Consumers

Social Class People within a social class tend to exhibit similar buying behavior. Occupation

Income Education Wealth

*Groups

MembershipReference Family Husband, wife, kids Influencer, buyer, user

Social Factors

Roles and Status

w e al thed uc at io n oc cu pa ti on

Upper uppers(1 percent) the social elite who live in on inherited wealth. They give large sums to charity, own more than one home, and send their children to the finest schools. Lower uppers(2 percent) Americans who have earned high income or wealth through exceptional ability. They are active in social and civic affairs and buy expensive homes, educations, and cars. Upper middles(12 percent) professionals, independent businesspersons and corporate managers who possess neither family status nor unusual wealth. They believe in education, are joiners and highly civic minded and want better things in the life. Middle class(32 percent) average pay white and blue collar workers who live on the better side of the town . They buy popular products to keep up with the trends. Better living means owing a nice neighborhood with good schools. Working class (38 percent) those who lead a working class lifestyle. Whatever their income, school background or job. They depend heavily on relatives for economic and emotional support for advice, purchases and for assistance in time of trouble

in c o m e

*Personal InfluencesAge and Family Life Cycle Stage Economic Situation Occupation

Personality & Self-Concept

Lifestyle IdentificationActivities Interests Opinions

*Principle Oriented

Actualizers

Abundant Resources

Status Oriented

Action Oriented

Fulfilleds

Achievers

Experiencers

Believers

Strivers

Makers

Strugglers Minimal Resources

Factors Affecting Consumer Behavior: PsychologicalMotivation

Beliefs and Attitudes

Psychological Factors

Perception

Learning

*Self Actualization(Self-development)

Esteem Needs (self-esteem, status) Social Needs(sense of belonging, love)

Safety Needs(security, protection)

Physiological Needs(hunger, thirst)

*High Involvement Significant differences between brands Low Involvement

Complex Buying Behavior DissonanceReducing Buying Behavior

VarietySeeking Behavior

Few differences between brands

Habitual Buying Behavior

*Need Recognition

Information SearchEvaluation of Alternatives

Purchase DecisionPostpurchase Behavior

The Buyer Decision Process Step 1. Need RecognitionDifference between an actual state and a desired state

Need Recognition

Internal Stimuli Hunger Thirst

External Stimuli TV advertising

Magazine ad Radio slogan Stimuli in the environment

A persons normal needs

*Personal Sources Commercial Sources Public SourcesFamily, friends, neighbors Most influential source of information Advertising, salespeople Receives most information from these sources

Mass Media Consumer-rating groupsHandling the product Examining the product Using the product

Experiential Sources

The Buyer Decision Process Step 3. Evaluation of AlternativesEvaluation of Quality, Price, & Features

Product Attributes

Which attributes matter most to me?

Degree of Importance

What do I believe about each available brand? Based on what Im looking for, how satisfied would I be with each product? Choosing a product (and brand) based on one or more attributes.

Brand Beliefs

Total Product Satisfaction

Evaluation Procedures

* The Buyer Decision ProcessStep 4. Purchase DecisionPurchase Intention Desire to buy the most preferred brand

Attitudes of others

Unexpected situational factors

Purchase Decision

The Buyer Decision Process Step 5. Post purchase BehaviorConsumers Expectations of Products Performance Products Perceived Performance

Satisfied Customer!

Dissatisfied CustomerCognitive Dissonance

* Stages in the Adoption ProcessAwareness Interest Evaluation Trial Adoption of rejection

*Percentage of Adopters

Early Majority

Late Majority

Innovators

Early Adopters13.5%

34%

34%

Laggards16%

2.5%

Time of Adoption Late

Early

Diffusion Process and Profiles of Product AdoptersEarly adopters 13.5% Innovators 2.5% Laggards 16%

Early majority Late majority 34% 34%

Time Innovators: Early majority: Laggards:

Venturesome, higher educated, use multiple information sources

Deliberate, many informal social contacts

Fear of debt, neighbors and friends are information sources

Early adopters:

Leaders in social setting, slightly above average education

Late majority:

Skeptical, below average social status

*Communicability

Can results be easily observed or described to others?

Relative AdvantageIs the innovation superior to existing products?

Can the innovation be used on a trial basis? Is the innovation difficult to understand or use?

Divisibility

Product Characteristics

Complexity

Does the innovation fit the values and experience of the target market?

Compatibility

6. Develop Marketing Mix for Each Target Segment 5. Develop Positioning for Each Target Segment 4. Select Target Segment(s) 3. Develop Measures of Segment Attractiveness 2. Develop Profiles of Resulting Segments 1. Identify Bases for Segmenting the Market

Market Positioning

Market Targeting

Market Segmentation

*

Market segmentation Identify bases for segmenting market Develop segment profile

Market targeting Identify the existing and future wants in the market. Examine the attributes that distinguish the segments

Market positioning

*

Market

segmentation is the process of dividing a potential market into distinct sub markets of consumers with common needs and characteristics.

For example, Cadbury India functions in three different markets namely, malted foods, cocoa powder and drinking chocolates and chocolates and sugar confectionary.

*

*The process of market segmentation.

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1. Identify

existing and future wants in the current market

** *

Marketers must understand the changing needs of customers.This process helps to know whether the customer is satisfied with the existing products or not. It also helps to test the companys new and innovative concepts.

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2. Examine * *

the attributes among segments.

that

distinguish

In this process, marketers separate different types of wants into similar categories. The separation may be done on the basis of product features, lifestyle or behavior.

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3. Evaluate

the proposed segment attractiveness on the basis of measurability, accessibility and size

*

Segments selected in second step should be analyzed for measurability, accessibility, substantial, actionable and differentiability. The further plans of the company depend on the result of this process.

*

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1. Understanding the needs of Consumers 2. To adopt better positioning strategies. 3. Proper allocation of marketing budget. 4. Helps in preparing a better competitive strategy. 5. Provides guidelines in preparing media plan ofcompany.

the

6. Different offerings in different segments enhance thesales.

7. Customer gets more customized product. 8. Helps Company to identify niches. 9. Provides opportunities to expand market 10.Encourages innovations

*

*Mass MarketingSame product to all consumers (no segmentation)

Segment MarketingDifferent products to one or more segments (some segmentation)

Niche MarketingDifferent products to subgroups within segments ( more segmentation)

MicromarketingProducts to suit the tastes of individuals or locations (complete segmentation)

* Instead of Selecting Mass Market as Target

Market Segment , When Market targets specific segment , it is called Niche Marketing.

e.g. Restaurants offering all food are example of Mass Marketing. White PIzza Hut has targeted Pizza Market out of thousands of food products. It is called Niche Marketing

*

** When the marketing mix is altered to suit the local conditionse.g.. Giving a higher/ lower discount than whats prevailing in the rest of the markets or implementing a different promotion scheme

** When the firm deals with each customer on a one to onebasis

* Customerization- When products are customized for thecustomer

*GeographicNations, states, regions or cities

DemographicAge, gender, family size and life cycle, or income

PsychographicSocial class, lifestyle, or personality

BehavioralOccasions, benefits, uses, or responses

* Bases for Segmenting Consumer Markets1. GeographicDividing the market into different geographical units such as nations, states, regions, cities or neighborhoods In this segmentation the market is divided into groups on the basis of variable such as age, family size, family life-cycle, gender, income, occupation, education, religion, race, generation, nationality and social class.

segmentation:

2. Demographic

Segmentation:

Some factors used for demographic segmentation are:

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*

Age and life cycle stage The needs and wants of consumers change with age. On the basis of age, a market can be divided into four classes, children, young, adults and old. A good marketing manager should understand the age group for which the product is most suitable and then plan his marketing, pricing and advertising policy accordingly. For example, Hindustan Unilever launched Pepsodent Kids for small children.

*

Gender Segmentation on the basis of gender is useful in clothing, hair-styling, cosmetics and magazines.

*

Income Segmentation on the basis of income is useful for products and services like automobiles, clothing, cosmetics and travel.

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3.Psychographic

Segmentation: In this segmentation, buyers are classified into different groups on the basis of life-style or personality and values. * People belonging to the same demographic group may show very different psychographic characteristics. * Some factors used for psychographic segmentation are a)Life-style: Different people have different life-styles and the products they use shows their life-style. * One of the most common psychographic profiling scheme is the VALS,

developed by SRI International, INC. * VALS defined adult consumers into eight segments. They are 1.Innovators: They are successful, sophisticated, active, take charge. They are people with high self-esteem and rich resources. They are business leaders and interested in growth, innovation and change. They are image conscious. 2.Thinkers: They are mature, satisfied, comfortable, thoughtful people who value order, knowledge and responsibility.

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3. 4.

5.6. 7. 8.

Achievers: They are successful career and work oriented people who want a controlled life. They prefer predictability and stability over risk. They are committed to work and family. Experiencers: They are young, enthusiastic, impulsive, disloyal, disobedient. They want variety and excitement. They like variety and enjoy new things. They like exercise, sports, outdoor recreation and social activities. Believers: They are traditional people with high commitment to family, community and nation. They have a moral code. They prefer American products and established brands. Strivers: They look for motivation and approval from others. They are unsure of themselves and have less economic, social and psychological resources. Makers: They are practical people who have constructive skills and value self-sufficiency. They are happy with their families and have little interest outside their family. Survivors: They are poorly educated, low skilled and concerned about their health. They satisfy urgent needs of the present. They are concerned for security and safety. They are cautious consumers. They are loyal to favorite brands.

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b) Personality: c) Social

Marketers use personality variables to segment the market. They promote their products with brand personality that resembles consumer personalities.

class: It has a strong influence on preference in cars,

clothing, home furnishings, leisure activities, reading habits, etc. Many companies design products and services for specific social classes.

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4. In

behavioral segmentation, buyers are divided into groups on the basis of their knowledge or attitude towards the use of, or response to a product.

* Some factors used for behavioral segmentation are 1. Occasions 2. Benefits 3. User status 4. Usage rate 5. Loyal status 6. Buyer readiness stage138

1. 2. 3. 4.

Occasions: Buyers develop a need, purchase or use a product according to occasion. For example, Tanishq offer schemes and promotions for purchasing on Akshaya Truthiya. Benefits: Buyers can be classified according to the benefits they are looking for. User status: Markets can be segmented into non-users, potential users, first time users and regular users of a product. Marketing strategy for each segment is different. Usage rate: Markets can be segmented into light, medium and heavy product users. Heavy users are less in number but responsible for a large part of total consumption. Marketers like to attract one heavy user rather than many light users. For example, textile brand Allan Paine offered 4 cotton trousers for Rs. 999. It wanted to earn profits from sales volume.

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5.

Loyal status: Consumers have different levels of loyalty for different brands and stores. According to brand loyalty status, buyers can be divided into four groups:

a) b) c) d)6.

Hard core loyal: Such consumers buy only one brand all the time.Split loyal: Such consumers are loyal to two or three brands. Shifting loyal: Such consumers shift from one brand to another. Switchers: Such consumers show no loyalty to any brand.

Buyer readiness stage: A market consists of buyers who are at different stages of willingness to buy a product. Some are unaware of the product, some are aware, some are informed, some are interested, some desire the product and some plan to buy.

*Tweens and Teens *Rapidly growing market *Significant purchasing power *Cohert Effect *Tendency among members of a

generation to be influenced and drawn together by significant events occurring during their key formative years, roughly 17 to 22 years of age

9-141

*Baby Boomers *Born from 1946 until 1965 *Nearly 42 percent of U.S. adults *Values influenced both by the Vietnam War and thecareer-driven era *Huge disposable income

*Seniors *By 2025, 1 in 5 over age 65 *Median age is now 35.2 years *Life expectancy 74 for men and 79 for women *Heads of households aged 55-plus control about threequarters of the countrys total financial assets.

9-142

*Segmenting by Ethnic Group *By 2050, nearly half of the population ofthe US will belong to nonwhite minority groups. *Hispanic *African Americans *Asian Americans *Native Americans *People of Mixed Race

9-143

Family Life Cycle Stages Segmentation The process of family formation and dissolution Life stage, not age per se, is the primary determinant of many consumer purchases Segmenting by Household Type Todays U.S. households are very diverse Married couples and their children Blended by divorce or loss of spouse Headed by single parent, same-sex parents, grandparents9-144

*Segmenting by Income and ExpenditurePatterns

*Engels Laws, as family income increases: *A smaller percentage of expenditures gofor food

*The percentage spent on housing andhousehold operations and clothing remains constant

*The percentage spent on other items(such as recreation and education) increases

9-145

Demographic Segmentation Abroad Obtaining the data necessary for global demographic segmentation is often difficult Many countries do not operate regularly scheduled census programs For example, the most recent census of Holland is now over 20 years old, and Germany skipped its census from 1970 to 1987 Daily life cycle data is difficult to apply in global demographic segmentation efforts9-146

*Using Psychographic

Segmentation *Psychographic profiles produce rich descriptions of potential target markets *Greater detail aids in matching a companys image and its offerings with the types of consumers who are likely purchasers9-147

*Product-Related Segmentation

Dividing a consumer population into homogeneous groups based on characteristics of their relationships to the product *Can take the form of segmenting based on: *Benefits that people seek when they buy *Usage rates for a product *Consumers brand loyalty toward a product

9-148

*Brand Loyalty *Segmenting consumers grouped according *Frequent flyer programs of airlines andmany hotels

to the strength of brand loyalty felt toward a product

9-149

*Using Multiple Segmentation Bases *Increase accuracy in reaching the rightmarkets *Combine multiple bases *Geographic and Demographic *Product-related with income and expenditure patterns *Others

9-150

1.Measurable and obtainable The size, profile and other

characteristics of the segment must be measurable and should be obtained in the form of data.

2.Substantial The size of the segment should be such that it is

profitable. For small segments the cost is high and hence the products are priced very high.

3.Accessible We should be able to reach the segment through existingnetwork at affordable cost.

4.Differentiable The segments are different from each other andhence require different 4Ps and programs.

5.Actionable The segments which a company wants to target must beactionable, i.e., there should be sufficient finance, personnel, and capability to target the segment.

*

** Targeting is defined as a group of people or organizations for which an organizationdesigns, implements and maintains the marketing mix.

* After segmentation, it is important to identify the people or organization for whichthe product is meant.

* Selecting target market segments * A company chooses its marketfactors

segmentation strategy on the basis of following

* Homogeneous preference showing no natural segments as in case of cold drinks. * Diffused preference showing clear preferences as in case of automobiles. * Clustered preference, market showing natural segments as in case of occupationhaving impact on the types of clothes worn.

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** Single segment concentration * Selective specialisation * Product specialisation * Market specialisation * Full Market coverage * -undifferentiated marketing * -differentiated marketing

*

* The farm equipment division of Mahindra and Mahindra

concentrates on tractors, primarily, targeted at agricultural markets.and professionals.

* The Zodiac brand concentrates on the formal shirts for executive

* Specialty hospitals focus on specific therapeutic areas such ascancer care, heart specialty, neonatal care, gynecology. production, distribution and promotion.

* Firm enjoys operating economies through specializing its * However there are certain risks. A particular segment can turnsour or competitor may invade the segment.

* When digital camera technology took off, Polaroid's earnings fellsharply . Thats why companies prefer to work in one segment.

*

* A firm selects a number of segments, each objectivelyattractive and appropriate.

* There may be little or no synergy among the segments, buteach promises to be a money maker.

* This multi-segment strategy has the advantage of diversifyingthe firms risk.

* Example--: when proctor and gamble launched Crest white

strips, initial target segments included newly engaged women and brides

*

* The firm makes a certain product that it sells to several

different market segments. A microscope, for instance, sells to university, government and commercial laboratories

* The firm make different microscopes for different customer

groups and builds a strong reputation in the specific product area

* The downside risk is that product may be supplanted by anentirely new technology

*

* The firm concentrates on the serving many needs of a particularcustomer group. For instance, firm can sell an assortment of products only to university laboratories.

* The firm gains a strong reputation in serving this customergroup and becomes a channel for additional products the customer group can use.

* The downside risk is that the customer group may suffer budgetcuts or shrink in size.

*

* The firm attempts to serve all the customers groups with all theproducts that they might need.

* Only large firms like Microsoft(software market), general

motors(vehicle market), and Coca-cola(non-alcoholic beverage drink), can undertake a full market coverage strategy.

* Large firms can cover market in two ways * Undifferentiated * differentiated

*

** Undifferentiated Marketing:when a firm produces only one product or product line and promotes it to all customers with a single marketing mix when a firm produces numerous products and promotes them with a different marketing mix designed to satisfy smaller segments

* Differentiated Marketing:

* Concentrated Marketing (niche marketing):

when a firm commits all of its marketing resources to serve a single market segment

* Micromarketing: involves targeting potential customers at avery basic level, such as by ZIP code, specific occupation, lifestyle, or individual household

* Selecting and Executing a Strategy* No single, best choice strategy suits all firms * Determinants of a market-specific strategy:

*Company resources *Product homogeneity *Stage in the product life-cycle *Competitors strategy

** Single product addressing all segments with a singlemarketing program.

* Mass production is possible giving scale economies * Pushes price downwards enabling to attract pricesensitive segments

** A separate market offering for every segment * Marketing programs for every segment could be different * Pushes up costs at various levels, necessitating sufficientvolumes for viability * Generates inter-segment rivalry

Comparison of Market Coverage Strategies

Focus

Undifferentiated Marketing One/Few

Differentiated Marketing Many

Concentrated Marketing One/Few

Product

Segment

All

Many

One/Few

Marketing Mix

One

Many

One/Few

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Choosing a Market Coverage Strategy

Undifferentiated MarketingConstrained Firm Resources Common Usage Products Different need satisfying products More suitable

Differentiated MarketingLeast suitable

Concentrated MarketingMost suitable

Most suitable

More suitable

Lease suitable

Least suitable

Most suitable

More suitable

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*Company Marketing MixA. Undifferentiated Marketing

Market

Company Marketing Mix 1 Company Marketing Mix 2 Company Marketing Mix 3B. Differentiated Marketing

Segment 1 Segment 2

Segment 3

Company Marketing Mix

Segment 1 Segment 2Segment 3

C. Concentrated Marketing

*

Company Resources

Product Variability Products Stage in the Product Life Cycle

Market Variability Competitors Marketing Strategies

** Positioningis defined as the process of designing the companys products and image to occupy a unique place in the target markets mind. called it as a unique selling proposition. Some unique selling propositions (USPs) companies use are best quality, best service, lowest price, best value, safest, more advanced technology, etc.

* Many marketers favor promoting only one major benefit and Rosser Reeves

168

*Under

positioning: Some companies find that buyers have only an unclear idea of the brand.

*Over positioning: Buyers have very narrow image of the brand.*Confusedpositioning: Buyers have confused image of the brand because the company has made too many claims or changed the brand positioning too frequently.

*Doubtful positioning: Buyers do not easily believe the claims made bybrands about the products features, price or manufacturer.

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*

Bases of positioning the product 1.Attribute positioning: The company positions2.Benefit

itself on the basis of attribute like size or number of years in existence. Sunfeast positions its snacky brand as bigger, lighter and cheaper.positioning: The company positions its product as leader in providing a certain benefit. For example Santro positioned itself as Indias simplest car to drive. for certain use or application. For example, Kenstar positioned its products as unexpectedly cold.

3.Use or application positioning: The company positions its products as best 4.User positioning: The company positions its product as best for some usergroup. For example, Parle-G positions the boy in the advertisement as rock star targeting the kids and boys.

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5.Competitor 6.Product

positioning: The company claims its products as better than a named competitor. category positioning: The company positions its product as leader in certain product category. For example, Bajaj CT 100 was positioned as leader in the entry segment bikes. the best value. For example, the vegetable oil brand Dhara positions itself as anokhi shuddata, anokha asar. This means the company offers unique purity and unique effect.

7.Quality or price positioning: The product is positioned as offering

171

*Positioning map

Graphic illustration that shows differences in consumers perceptions of competing products

*Reposition

Marketing strategy to change the position of its product in consumers minds relative to the positions of competing products

Hypothetical Competitive Positioning Map for Selected Retailers

*

*Products Position - the place the product

occupies in consumers minds relative to competing products; i.e. Volvo positions on safety.

*Marketers must:

* Plan positions to give products the greatest advantage * Develop marketing mixes to create planned positions

*

Product Class

Product Attributes

Away from Competitors

G H C

Benefits Offered

A

Against a Competitor

D E B F

Usage Occasions

Users

Marketing Mix (4ps)

Product

Price

Place

Promotion

The marketing mix principles are controllable variables which have to be carefully managed and must meet the needs of the defined target group. All elements of the mix are Linked and must support each other.

www.learnmarketing.net

Marketing Mix (4ps) ProductProduct Decisions

Branding

Quality Benefits offered

Features

We must remember that Marketing is fundamentally about providing the correct bundle of benefits to the end user, hence the saying Marketing is not about providing products or services it is essentially about providing changing benefits to the changing needs and demands of the customer (P.Tailor 7/00)

Marketing Mix (4ps) PricingPenetration Skimming

Pricing Strategies

Competition Product Line BundlePsychological

Pricing is the only mix which generates a turnover for the organisation. The remaining 3ps are the variable cost for the organisation. It costs to produce and design a product, it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship.

Marketing Mix (4ps) PromotionAdvertising Public Relations

Promotional Mix

Sales Promotion Personal Selling

A successful product or service means nothing unless the benefit of such a service can be communicated clearly to the target market. An organisations promotional mix can consist of:

Direct MailInternet/ E-commerce

Marketing Mix (4ps) PlaceDirect Distribution Indirect DistributionManufacturer Manufacturer

Retailer

Consumer Consumer

MARKETING Marketing starts with the buyer and focuses constantly on buyers needs. Seeks to convert customer needs into products. Views business as a customer satisfying process Marketing effort leads to the products that the customers actually want to buy in their own interest

SELLING Selling starts with the seller and is preoccupied all the time with the sellers needs Seeks to convert products into Cash. Views business as a goods producing process. The company makes the product first and then figures out how to sell it and make a profit

Marketing communication is looked upon as a tool for communicating the benefits/ satisfactions provided by the productConsumers determine the price; price determines cost Customer satisfaction is the primary motive.

Sellers motives dominate marketing communication (promotions).

Cost determines the price. Sales is the primary motive.

Marketing views the customer as the very purpose of the business. It sees the business from the point of view of the customer. Customer consciousness permeates the entire organization all departments, all the people and all the time

Selling views the customer as the last link in the business.

External market orientation.Marketing concept takes an outside in perspective It is a broad composite and worldwide concept, more so in this era of globalization. Marketing is more pull than push Marketing begins much before the production of goods and services, i.e. with identification o f customers needs. It continues even after the sale to ensure customer satisfaction through after sales service

Internal company orientationSelling concept takes an inside-out perspective It is a narrow concept related to product, seller and sales activity Selling involves push strategy Selling comes after production and ends with the delivery of the product and collection of payment

Marketing Marketing has a wider connotation and includes many activities like marketing research, product planning & development, pricing, promotion, distribution, selling etc It concerns itself primarily and truly with the value satisfactions that should flow to the customer from the exchange It assumes: Let the seller beware. Marketing generally has a matrix type of organizational structure. The main job is to find the right products for your customers. The mindset is What is that we can make here or source from outside to satisfy the needs of the target customers. Conceptual and analytical skills are required

selling Selling is a part of marketing.

It over emphasizes the exchange aspect, without caring for the value satisfactions inherent in the exchange It assumes: Let the buyer beware It has a functional structure The main job is to find the customers for your customers The mindset is Hook the customer

Selling and conversational skills are required.

*Classification of products, New Product

development, stages of product development, Adoption process,

*Product mix decisions and line management,

Length, width and depth of a line, line analysis, and brand management affecting each stage, Managing product lifecycles.

*product life cycle, stages in lifecycle and factors *Setting the price, adapting the price, initiatingand responding the price changes

*

* Product: bundle of physical, service, and symbolic attributesdesigned to enhance buyers want satisfaction

* A product is any offering by a company to a market for

acquisition, use, or consumption that serves to satisfy customer needs and wants.

* It can be an object, service, idea,etc. * It includes more than just tangible goods. It include physical

objects, services, events, persons, places, organizations, ideas, or mixes of these entities.

*

* In planning its market offering, the marketers needs to addressfive product levels. Each level adds more customer value, and five constitute a customer value hierarchy.

* The fundamental level is the core benefit ---the service or

benefit the customer is really buying. A hotel guest is buying rest and sleep. The purchaser of the buyer is purchasing holes

* Marketers must see themselves as benefit providers * At the second level the marketer must turn the core benefit intoa Basic product. Thus a hotel room includes a bed, bathroom, towels, desk, dresser, and closet.

*

* At the third level, the marketer prepares an expected product,as set of attributes and conditions buyers normally expect when they purchase this product. and a relative degree of quiet.

* Hotel guest expect a clean bed, fresh towels, working lamps, * At the fourth level, the marketer prepares an augmentedproduct that exceeds customer expectations. takes place at this level. expected product level

* In the developed countries, brand positioning and competition* In developing markets competition almost takes place at the

*

* At the fifth level it stands as the potential product which

encompasses all the possible augmentations and transformations the product or offerings might undergo in future.

*

*Product Classifications*Nondurable *Durable* Tangible * Rapidly consumed * Example: Milk * Tangible * Lasts a long time * Example: Oven * Intangible * Example: Tax preparation

*Durability andtangibility

*Consumer goods *Industrial goods

*Services

*Product Classifications

*Classified by

shopping habits:



*Convenience goods *Shopping goods *Specialty goods *Unsought goods

*Product Classifications*Materials and parts


*Capital items* Installations * Equipment

* Farm products * Natural products * Component materials * Component parts


*Supplies and businessservices

* Maintenance and repair * Advisory services

* these are tangible goods normally consumed inone or few areas, such as soft drinks and soap. Because these goods are purchased frequently, the appropriate strategy is to make them available in many locations, charge only a small markup, and advertise heavily to induce trial and build performance

*

* These are tangible goods that normally surviverefrigerators, machine tools and clothing.

many uses:

* Durable products normally require more personal selling andservices, command a higher margin, and require more seller guarantees.

* Services are intangible, inseparable, variable, and perishable

products. As a result, they normally require more quality control, supplier, creditability and adaptability.

* Examples--- include haircuts, legal advice, appliances repairs

*

* These are the products and services bought by the final

consumers for personal consumption. Marketers usually classify these products and services further based on how consumer go about buying them.

* Consumer products include the following type of products* Convenience products * Shopping products * Specialty products * Unsought products

*

* These are the consumer products and services that customer

usually buys frequently, immediately, and with a minimum of comparison and buying effort.

* Example---include soap, candy, newspaper, and fast food.

Convenience products are usually low priced and marketers place them in many locations to make them readily well available when customer need them.

*

* These are less frequently purchased consumer products andservices that customer compare carefully on suitability, quality, price and style.

* When buying shopping products and services consumer spendmuch time and effort in gathering information and making comparisonsclothing, cars, major appliances, and hotel airline services. fewer outlets but provide deeper sales support to help the customers in their comparisons efforts

* Examplefurniture,

* Shopping products usually distribute their products through

*

* These are the consumer products and services with unique

characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort

* Examples---specific brands and types of cars , high priced

photographic equipment, designer clothes and services, of medical and legal specialists. buyers are usually willing to travel great distance to buy new one.

* A Lamborghini automobile is a specialty type of product because* Buyers normally dont compare specialty products

*

* These are consumer products that the consumer either dontknow or knows about but dont normally think of buying. through advertising.

* Most major innovations are unsought until consumer know it * Examples---life insurance, pre-planned funeral services, andblood donations to red cross society.

* By their very nature, unsought products require a lot of

advertising, personal selling and other marketing efforts

*

* Industrial products are those purchased for further processing of

for further processing of for use in conducting a business. Thus, the distinction between a consumer product and industrial product is based on the purpose for which the product is bought.

* Examplelawn mower for homeconsumer product * Lawn mower to use in landscaping business * The three group of industrial products include* Material and parts * Capital items * Supplies and services

*

* Material and parts include raw material and manufacturedmaterial and parts.

* Raw material consists of farm products (wheat, cotton,

livestock, fruits and vegetables) and natural products(fish, crude, lumber, petroleum, iron ore)

* Manufactured material and parts consists of component

material(iron, yarn ,cement, wires)and component parts(small motors, tires, casting)

* Most manufactured materials are sold directly to industrial users

*

* Capital items are the industrial products that aid in the buyers

production or operations , including installations and necessary equipment.

* Installations consist of major purchases such as building (factoriesand offices), and fixed equipment(generators, drills, presses, large computer systems, elevators)

* Accessory equipment include portable factory equipment and

tools(hand tools, lift trucks) and office equipment(computer, fax machines)

* They have a shorter life than installations and simply aid in theproduction process

*

* The final group of products is supplies and services * Supplies and services includes operating supplies(lubricants,coal, paper, pencil) and repair maintenance items (paint, nails, brooms)

* Supplies are the convenience products of the industrial field

because they are usually purchased with a minimum effort or comparison.

* Business services include maintenance services(window cleaning,computer repair) and business advisory service(management, consulting, advertising)

*

**Overestimation of Market Size *Product Design Problems *Product Incorrectly Positioned, Priced orAdvertised *Costs of Product Development *Competitive Actions

*To create successful new products, the companymust:

* understand its customers, markets and competitors * develop products that deliver superior value tocustomers.

** Idea Generation and Screening * Concept Development and Testing * Marketing Strategy * Business Analysis * Product Development * Test Marketing * Commercialization

New Product Development ProcessStep 1. Idea Generation

Systematic Search for New Product Ideas Internal sources Customers Competitors Distributors Suppliers

New Product Development ProcessStep 2. Idea Screening

*Process to spot good ideas and drop poorones *Criteria

* Market Size * Product Price * Development Time & Costs * Manufacturing Costs * Rate of Return

New Product Development ProcessStep 3. Concept Development & Testing1. Develop Product Ideas into Alternative Product Concepts

2. Concept Testing - Test the Product Concepts with Groups of Target Customers

3. Choose the Best One

New Product Development ProcessStep 4. Marketing Strategy Development Marketing Strategy Statement FormulationPart One - Overall:

Target Market Planned Product Positioning Sales & Profit Goals Market SharePart Two - Short-Term:

Products Planned Price Distribution Marketing BudgetPart Three - Long-Term:

Sales & Profit Goals Marketing Mix Strategy

New Product Development ProcessStep 5. Business Analysis Step 6. Product DevelopmentBusiness Analysis Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives

If No, Eliminate Product Concept

If Yes, Move to Product Development

New Product Development ProcessStep 7. Test MarketingStandard Test MarketFull marketing campaign in a small number of representative cities.

Controlled Test MarketA few stores that have agreed to carry new products for a fee.

Simulated Test MarketTest in a simulated shopping environment to a sample of consumers.

* Adoption process Stages that consumers go through in

learning about a * new product, trying it, and deciding whether to purchase it again. * Consumers go through five stages: * Awarenessindividuals first learn of the new product, but they * lack full information about it. * Interestpotential buyers begin to seek information about it * Evaluationthey consider the likely benefits of the product. * Trialthey make trial purchases to determine its usefulness. * Adoption/rejectiondecide whether to use the product regularly.

*

*

Adopter Categorization on the Basis of Relative Time of Adoption of Innovation

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* Consumer innovators People who purchase new productsalmost as soon

* as the products reach the market. * Diffusion process by which new goods or services areaccepted in the marketplace.

* IDENTIFYING EARLY ADOPTERS* Firms who reach early buyers can treat them as a test market. * Tend to be younger, have higher social status, are better educated,and

* enjoy higher incomes than other consumers.

*

* Relative advantageincreases the products adoption rate. *Compatibilityinnovation consistent with the values andexperiences of potential adopters.

*Complexitydifficulty understanding the innovation can slowthe speed of acceptance.

* Possibility of trial usecan accelerate the rate of adoption. *Observabilityobserving an innovations superiority increasethe adoption rate.

*

* Firms must be organized so personnel can stimulate andcoordinate new product development.

* New-product committees primarily review and evaluate othersnew product plans rather than develop their own.

* Tend to move slowly and conservatively in large companies. * New-product departments encourage innovation as a full-timeactivity.

* Product managers support the marketing strategies of anindividual product or product line.

* Venture teamsa group of specialists gathered from differentareas of an organization to work together in developing new products

*

* Product mix dimensions:* Width: number of product lines * Length: total number of items in mix * Depth: number of product variants * Consistency: degree to which product lines are related

*

* Product-Line Analysis * Product-Line Length * Product-Line Modernization, Featuring, and Pruning

*

* How many product lines should we have? *Example: Delft Sensor Systems offer a comprehensive range of products, including portable and platform mounted night vision systems and thermal imaging systems, head- and helmet mounted displays, laser rangefinders and fire control systems(Source: http://www.oip.be/press/brazil.htm)

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* How many product items in each line? * Example: Both Gardenia and Bonjour launched new flavorsin January 1999 to nibble away at each others market share of a loaf estimated to be worth about $80 million

(Source: ST, Home, Jan29/99)

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*1.Product line extension: add an item to the existing product line

*

Many FMCG companies introduced various sizes of the same product e.g.mini-packs for travelers, extra-large size for hospital

2.

Product category extension: add a new item or line of items for a company e.g.

*

P&G have Vidal Sassoon, Head & Shoulders, Rejoice, and Panthene in the same category

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3.

Brand extension: Product category extension that uses an existing brand name e.g.

*

Cerebos introduced Brands Essence of Chicken with TangKwei targeting women

*

Nestle extended its Bear Brand condensed milk in Thailand by introducing Bear Brand with Honey

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**Downward stretch by introducing lower range ofthe products e.g.

*In 1989 the Shangri-La, a chain of deluxe hotels and

resorts in Asia established the Traders Hotels, a sister brand to deliver high value, mid-range, quality accommodation to the business traveler *Mercedes introduced the baby Merz to cater to the upper class mid-sized range of the market

*Upward stretch by entering the high end of themarket e.g.Infiniti

*Toyota introduced the Lexus and Nissan introduced the222

** Two-way stretch by filling the whole line e.g.* Toyota has the Starlet at the lower end; the Corolla in theexecutive range; the Camry in the upper-management range and the Lexus in the luxury range

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*A companys assortment of product lines andindividual offerings offered.

*

*Product Width--the number of product lines *Product Length--the number of differentproducts a firm sells.

*Product Depth--variations in each product thata firm markets in its mix.11-224

*A firm may lengthen or widen its product mix *A Company may decide to add variations that willattract new users

*A product may be pruned or altered, and newproduct may extend the product life cycle

*Line extension:

introduction of a new product that is closely related to other products in the firms existing line

*

* A name becomes a brand when consumers associate it

with a set of tangible and intangible benefits that they obtain from the product or service benefits/services consistently to buyers

* It is the sellers promise to deliver the same bundle of

*

* When a commodity becomes a brand, it is said to haveequity.

* The premium a brand can command in the market * The difference between the perceived value and theintrinsic value

*

* Reduced marketing costs * Trade leverage * Can charge a higher price * Can easily launch brand extensions * Can take some price competition

*

* Brand Equity needs to be nourished and replenished. Wemust not flog the brand for equity to be diluted or dissipated

* Store brands

*

*Easy for the seller to track down problems and

process orders *Provide legal protection of unique product features *Branding gives an opportunity to attract loyal and profitable set of customers *It helps to give a product category at different segments, having separate bundle of benefits *It helps build corporate image *It minimizes harm to company reputation if the brand fails

*

* Consumers buy from a set of acceptable/ preferredbrands

*

* Products from different categories under one brand * Dangerous to the brand if the principal brand fails * Sometimes the company name is prefixed to the brand. Insuch cases the company name gives it legitimacy. The product name individualises it.

*

* Product benefits * Product qualities * Easy to pronounce * Should be distinctive * Should not have poor meanings in other languages andcountries

*

*Line extension existing brand name extended to

new sizes in the existing product category *Brand extension brand name extended to new product categories *Multi-brands new brands in the same product category *New brands new product in a different product category *Co-brands brands bearing two or more well known brand names

*

* This may be required after a few years to face newcompetition and changing customer preferences

*

* Includes the activities of designing and producing thecontainer for a product - primary - secondary - shipping

* Packaging is done at three levels

*

* Self service * Consumer affluence * Company and brand image * innovation

*

*Packaging concepts *Technical specifications *Engineering tests *Visual tests *Dealer tests *Consumer tests *Packaging innovations *Environmental considerations

*

* Identification * Grade classification * Description of product * Manufacturer identity * Date of mfg., batch no. * Instructions for use * Promotion

*

* Labels need to change with time or packaging changes togive it a contemporary and fresh look

*

*Sales and Profits ($) Sales

Profits Time

Product Develop-ment

Introduction

Growth

Maturity

Decline

Losses/ Investments ($)

*Firm works to stimulate demand for the newmarket entry

*Promotional campaigns stress features *Additional promotions to intermediaries

attempt to induce them to carry the product losses are common due to heavy promotional and research-and-development costs

*Although prices are typically high, financial

*

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*Sales Costs ProfitsMarketing Objectives Low sales High cost per customer Negative Create product awareness and trial Offer a basic product Use cost-plus Build selective distribution Build product awareness among early adopters and dealers

Product Price Distribution Advertising

* Growth Stage

* Sales volume rises rapidly * Firm usually begins to realize substantial profits * Success at

Marketing Management

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