Marketing Management

MARKETING MANAGEMENT (MBA SEM II)

Prof. Shashank Divekar

MARKETING MANAGEMENT

PRODUCT A product is anything that can be offered to satisfy a need or want. Offering and solution are synonyms to the product in marketing context.

A ‘Product’ is a good or service that most closely meets the requirements of a particular market and yields enough profit to justify its continued existence. A good, idea, method, information, object or service created as a result of a process and serves a need or satisfies a want. A product is more than a mere physical object, it has a personality of its own. Products carry certain meanings with them and project certain distinct images.


THREE LEVELS OF A PRODUCT

CORE PRODUCT

ACTUAL PRODUCT

AUGMENTED PRODUCT


THREE LEVELS OF A PRODUCT

CORE PRODUCT : This is the most basic level and simply looks at what people set out to buy and what core benefits or services are being offered to the buyers. ACTUAL PRODUCT : The aim of this level is to design a product with features which will attract and persuade buyers into preferring this product over competitors/ alternatives. These features may involve quality level, design and appearance, performance features, styling, branding and packaging. AUGMENTED PRODUCT : At this level additional, non-tangible benefits are added to the product. Competition at this level is based around delivery, after-sales service, installation, help-lines, warranties, etc..


• Generic Product

• Branded Product

• Differentiated Product

• Customised Product

• Augmented Product

• Potential Product

Different Levels of Product

Unbranded and undifferentiated commodity, such as rice, bread, flour or cloth.

Product carrying a well-known name which gives it respectability, and acceptance in the market.

Product with certain unique features and offerings which sets it apart from the competitors.

Product which is designed/ developed as per the customer’s specific requirements/ requests.

Product with improvements made voluntarily by the manufacturer to enhance its value.

Product of the future, with all possible improvements and finesse in the given economic and competitive conditions.


Product Line and Product Mix : A group of related products constitute a product line. A product mix is the complete set of all products offered for sale by a company. Product Mix is 4-Dimensional :

• Width

• Depth

• Length

• Consistency


Product Line and Product Mix :

Width refers to how many different product lines the company carries (eg. HUL has different product lines such as Personal Care, Food Products, Oral Care, Fabric Care etc.)

Depth refers to the number of product items offered under each product-line. It indicates the variants offered in each product-line (Eg. ‘Real’ fruit juice is sold in 3 sizes and 7 flavours. Thus, the depth is 3X7=21)

Length refers to the total number of items in the mix. The average length can be arrived at by dividing the total length by the number of lines.

Consistency refers to the close relationship of various product lines either to their end-use or to production requirements or distribution channels etc.


PRODUCT LIFE CYCLE

Product Life Cycle is similar to a biological life cycle. Every product goes through four major stages in its life :

1. Introduction

2. Growth

3. Maturity

4. Decline


PRODUCT LIFE CYCLE


PRODUCT DEVELOPMENT stage begins when a company finds and develops a new product idea. The product undergoes a lot of changes and modifications, involving a lot of time and expenditure.

Product development goes through various stages such as idea generation, idea screening, concept development and testing, business analysis, beta testing and market testing, technical implementation, commercialization, etc.

INTRODUCTION phase involves the product launch, with a view to have maximum impact in the market. This period too involves a lot of expenditure mostly on promotion and advertising. Pricing and distribution are the most crucial aspects during this phase.

PRODUCT LIFE CYCLE


INTRODUCTION Contd… Properly defining the target audience, customer and distributor feedbacks, impact of the marketing mix on the sales etc. during the Introduction phase determine the long-term performance of the product in the markets.

GROWTH phase is when the product takes off on its own. The company shifts its focus from launch and promotion to growth in market share. Product is modified and re-positioned if required according to the market feedback.

This period is the time to develop efficiencies and improve product availability and service.

PRODUCT LIFE CYCLE


PRODUCT LIFE CYCLE

MATURITY Phase is when the market becomes saturated with variations of the basic product. In this phase the sales growth is at the expense of someone else’s business. This period is the period of highest returns possible, from the product. In this phase, introduction of new brands/ models in the same product category, frequent changes in pricing and discount policies etc. are the common strategies. DECLINE phase arrives when the sales begin dropping over consecutive periods and all efforts to revive the product fail. This is the time to start withdrawal of the product from the market.


PRODUCT LIFE CYCLE MANAGEMENT

PLM or Product Life cycle Management is a process or system used to manage the data and design process associated with the life of a product from its conception and envisioning through its manufacture, to its retirement and disposal.

PLM manages data, people, business processes, manufacturing processes, and anything else pertaining to a product. A PLM system acts as a central information hub for everyone associated with a given product, so a well-managed PLM system can streamline product development and facilitate easier communication among those working on/with a product.

PLM integrates people, data, processes and business systems and provides a product information backbone for companies and their extended enterprise. PLM systems help organizations in coping with the increasing complexity and engineering challenges of developing new products for the global competitive markets.


PRODUCT LIFE CYCLE MANAGEMENT Product Lifecycle Management (PLM) is an approach of integrated and cross-company administration and control of all product-related processes and data across the whole product lifecycle following the extended logistic chain – from construction and production via sales through to disassembly and recycling Product Lifecycle Management is an extensive concept to effective and efficient configuration of the product lifecycle. Based on the entirety of all product information, which is incurred across the whole supply chain and spread over several partners, processes, methods, and tools are provided in order to make the relevant information available at the right time, quality, and at the right place.


NEW PRODUCT DEVELOPMENT

Types of New Products : 1. New-to-the-world : Products that create an entirely new market.

2. New product lines : New products that take a company into an established market for the first time.

3. Additions to the existing product lines

4. Improvements or revisions of existing products : Improved technology/ performance, greater perceived value and replacement of existing products

5. Re-positioning : Existing products that are target to new segments or new markets

6. Cost Reductions : New products that provide similar performance at lower cost.


WHY DEVELOP NEW PRODUCTS ?

1. To expand product portfolio

2. To Replace declining products

3. To create stars and cash-cows for the future

4. Take advantage of new technology

5. Maintain/ Increase market share

6. To keep up with competition

7. To maintain competitive advantage

8. To fill a gap in the market

9. To attract new customers


STAGES IN NEW PRODUCT DEVELOPMENT : 1. Assessment of current product portfolio

2. Assessment of opportunities and threats

3. Determine the type of product that fits in with the

corporate strategy

4. Idea generation

5. Idea Screening

Contd.


STAGES IN NEW PRODUCT DEVELOPMENT : 6. Concept Development & Testing

7. Business Analysis

8. Product Development

9. Test Marketing

10. Commercialisation


PRODUCT PORTFOLIO ANALYSIS :

A product portfolio is the range of products a firm produces.

Product portfolio analysis is the study of each of a company's products in an attempt to improve market performance. The Important functions include : 1. Filling in the product line 2. Product modernization 3. Product featuring 4. Product pruning Product portfolio management involves the following tasks :

• Pointing out growths in the market and improvements made • Analyzing failures and successes • Setting goals and targets • Sales strategies • Identifying gaps leading to drop in market share or profits


BRAND : A Brand is 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 other sellers.

- American Marketing Association

A brand is a combination of your thoughts + feelings about your experiences with it. A brand creates a positive sentiment among the target audience. A brand is used to distinguish a product from others in the market. The objectives that a good brand will achieve include:

• Confirming credibility of the product/ manufacturer • Connect with the target market emotionally • Motivate the buyer • Consolidate user loyalty


The word ‘Brand’ is derived from the Old Norse brandr meaning "to burn." It refers to the practice of producers burning their mark (or brand) onto their products.

Product and the manufacturer offer features and benefits that consumers want and need, but it’s the BRAND that makes those features and benefits recognizable and preferred. Those features and benefits are extensions of the brand.

A brand conveys upto 6 levels of meaning : 1. Attributes 2. Benefits 3. Values 4. Culture 5. Personality 6. User


The first branding strategy decision is whether to develop a brand name for the product. Assuming a firm decides to brand its products or services, it must then choose the brand names.

Four general strategies options are often used : • Individual Name (P&G) • Corporate Name (Tata) • Independent Family Name (Aditya Birla) • Combination - Corporate family name + Individual

product name (Kellogs, Honda, Sony, HP)

Proper branding can result in higher sales of not only one product, but on other products associated with that brand.

The art of creating and maintaining a brand is called brand management. Careful brand management seeks to make the product or services relevant to the target audience.


“PACKAGING includes all the activities of designing and producing the container for a product."

-Philip Kotler

The intended purpose of the packaging is to make a product readily sellable as well as to protect it against damage and prevent it from deterioration while storing.

Packaging plays an important role as a medium in the marketing mix, in promotion campaigns, as a pricing criterion, in defining the character of new products, as a setter of trends and as an instrument to create brand identity and shelf impact in all product groups.

Product packaging can play an important role in the success or failure of the sales of the product.


Factors in Packaging Decisions

• Protection & Safety

• Visibility

• Attractiveness

• Promotion

• Positioning

• Differentiation

• Communication

• Added Value


PRICE

Price is the amount of money or goods for which a thing is bought or sold.

Price is the marketing variable that can be changed most quickly, perhaps in response to a competitor price change. Price supports the other elements of the marketing mix. Pricing decision takes into account the following factors :

1. Fixed and Variable Costs 2. Competition 3. Company objectives 4. Positioning strategies 5. Target group, willingness and ability to pay


Pricing Objectives : Common objectives include the following –

• Maximise Current Revenue • Maximise Current Profit • Maximise Volumes • Quality Leadership • Partial Cost Recovery • Survival • Status Quo

The pricing objectives depend on many factors such as market conditions, production cost, economies of scale, barriers to entry, product differentiation, rate of product diffusion, the firm’s resources and the product’s anticipated price elasticity of demand.


PRICING STRATEGIES An organisation can adopt a number of pricing strategies. The pricing strategies are based much on what objectives the company has set itself to achieve. Penetration Pricing Optional Pricing Premium Pricing Competitive Pricing Value Pricing Bundle Pricing Skimming Pricing


Price-Setting Process :

1. Decide the price objectives a. Survival b. Profit Maximisation c. Higher Market Share d. Counter Competition e. Status Quo

2. Assessment of Demand a. Check Demand Elasticity b. Check Demand Curve

3. Cost Estimate

4. Competitors/ Market Price

5. Select Final Price

MARKETING MANAGEMENT Pricing Methods

1. Cost-Plus Pricing : Set the price at production cost plus a certain profit

margin. This does not take into account competition, customer affordability or long-term business interests.

2. Target Return Pricing : Set the price with a view to obtain a certain return on

investment.

3. Value-based Pricing : Base the price on the effective value to the customer

relative to alternative products in the market.

4. Psychological Pricing Base the price on what the customer perceives to be fair,

based on quality, delivery and performance.


Cost-Based V/s Value-Based Pricing

Cost-based Pricing

Product Cost Price Value Customer

Customer Value Price Cost Product

Value-based Pricing


PLACE

'Place' is concerned with various methods of transporting and storing goods, and then making them available for the customer.

Place is also known as channel, distribution or intermediary. It is the mechanism through which goods and/or services are moved from the manufacturer/ service provider to the user or consumer.

‘Place’ refers to how an organisation will distribute the product or service they are offering to the end user. The organisation must distribute the product to the user at the right place at the right time.

Efficient and effective distribution is important if the organisation is to meet its overall marketing objectives

Channels of Distribution

Manufacturer/ Producer

Wholesaler

Manufacturer’s Chain Stores

Retailer Manufacturer’s Branch Offices

Consumer


TYPICAL CHANNELS OF DISTRIBUTION

C.O.D For Consumer Goods & Services :

Manufacturer

Manufacturer Retailer

Manufacturer Wholesaler Retailer

Manufacturer Agent


CUSTOMER


Distribution goes hand-in-hand with positioning and sales strategies.

Patterns of Distribution Intensive Distribution : This strategy is used to ensure that the product is made available in as many outlets as possible so that the consumers should be able to obtain the product wherever he goes. Used commonly to distribute low priced or impulse purchase products eg. chocolates, soft drinks, soap etc..

Selective Distribution :

In this case the company wishes to make its product available only at specific outlets, carefully selected for the purpose. Such strategy is adopted for products which are positioned as ‘lifestyle’ products and therefore ‘special’. Selective distribution is common with products such as computers, televisions and household appliances.


Exclusive Distribution :

This strategy is used for products which are exclusive and identified as ‘status symbols’. Only one outlet in a city may keep the product. The product is usually highly priced, and requires the intermediary to place much detail in its sale. An example of would be the sale of vehicles through exclusive dealers. Besides, exclusive company showrooms may also be counted in this category.

Contd. Patterns of Distribution


WHOLESALING

Wholesaling involves sale and distribution of goods to users other than end consumers.

Wholesaling involves selling merchandise to retailers, other wholesalers and merchants, or to industrial, commercial and institutional users.

Wholesaling often occurs when large quantities of goods are re-assembled, sorted, then repackaged, and distributed in smaller lots, at a cost significantly lower than the average retail price.

Buying of goods in large quantities from producers and selling the same in small quantities to retailers is termed as wholesale trade and the person who carries on wholesale trade is called the "Wholesaler".


IMPORTANCE OF WHOLESALING

1. Providing retailers access to various products.

2. Providing suppliers/ manufacturers access to markets.

3. Providing stocking and warehousing services.

4. Value-addition to the distribution process by participating in promotion, financing, payment collection and market intelligence.

5. Sometimes wholesalers also share part of the business risks.

RETAILER

Any business entity selling products and services to end-consumers is ‘retailing’.

Retailing includes all activities involved in selling and/ or renting consumer products and services directly to ultimate consumers for their personal or home consumption.

A retailer purchases goods or products in large quantities directly from manufacturers or through a wholesaler, and sells in smaller quantities to the consumer for a profit.

Retailing can be done in either fixed locations, mobile outlets or online.



Functions of Retailing :

1. Breaking Bulk

2. Sorting and categorising of goods

3. Offer advise and guidance to help customers make the right choices.

4. Holding stock

5. Credit services

6. Training and after-sales service to end-users


1. Retailing creates time, place and possession utility.

2. Makes available a wide variety of goods available to consumers.

3. Plays a valuable role in creating a product and brand image.

4. Retailer is a vital communication link between the manufacturer and the end-user.

5. Personalised service and customising as and when required.

Importance of Retailing


FRANCHISING

Franchising is a business model in which A parent company allows entrepreneurs to use a successful company's strategies, techniques and trademarks; in exchange, the franchisee pays an initial fee and royalties based on revenues. The parent company also provides the franchisee with support, including advertising and training, as part of the franchising agreement. Arrangement where one party (the franchiser) grants another party (the franchisee) the right to use its trademark or trade-name as well as certain business systems and processes, to produce and market a good or service according to certain specifications.


Advantages of franchising

To the franchisee :

1. Immediate name recognition

2. Tried, tested and successful products/ offerings

3. Standard building design/ décor

4. Detailed techniques in running and promoting the business

5. Training of employees

6. Ongoing help in promoting and upgrading the products

7. Lower financial risk and smaller gestation period due to an established brand and goodwill.


Advantages of franchising To the franchisor :

1. Capitalised expansion : Rather than investing own or borrowed funds and human efforts for expansion, franchising facilitates faster expansion with the franchisee’s funds.

2. Brand development : The faster multi-unit expansion serves to supplement and expand the brand geographically.

3. Economies of scale : Larger volumes generated by multi-unit expansion results in higher volumes of purchases and leverage with suppliers and vendors.

4. Continuing revenue streams : Continuing royalty serves as a steady cash inflow.


Direct Marketing

Direct Marketing is an interactive system of marketing which uses one or more advertising media to effect a measurable response and/ or transaction at any location.

Direct Marketing is a low cost, efficient alternative for reaching the customers through lower costs of media, also using digital technology like internet, email and web sites.

Direct Marketers communicate directly with customers, often on a one-to-one, interactive basis to build and cultivate long lasting customer relationships.

Direct Marketing is also referred to as Interactive Marketing or Database Marketing, because it is expected to be a two-way communication with the customer or prospect and it is database driven.


Direct Marketing Process

SET MARKETING OBJECTIVES

IDENTIFY TARGET MARKETS

COMMUNICATE THE OFFER

TEST RESPONSE

MEASURE SUCCESS & EVALUATE


Unique features of Direct Marketing

1. Uses customer database and insights into customer data

2. Targets smaller groups or individual customers

3. Is highly interactive

4. Tailor offers as per individual needs

5. Offers promoted through personalised communications

6. Can be timed to reach prospects at the right moment

7. Provides customers a ready access to wealth of information

8. Provides the customers a convenient, easy-to-use and private way of interacting with the sellers


Advertising

Advertising is a form of communication that typically attempts to persuade potential customers to purchase or to consume more of a particular brand of product or service.

Any paid form of non-personal presentation of ideas, goods and services by an identified sponsor

-American Marketing Association

Description or presentation of a product, service, idea or organization in order to induce individuals to buy, support or approve of it.

Advertising.. Attempts to inform and persuade a large number of people with a single communication.

- Kenneth A. Longman


Marketing Communication Mix :

• Advertising

• Sales Promotion – Short-term direct inducements to encourage sales.

• Publicity – Putting commercially significant news in media to create a favorable image.

• Personal Selling – Salesman interacting orally with buyers as sales presentations.

• Public Relations – Creating a favorable image of the organisation in the eyes of the public, Govt., shareholders etc.

Sales Promotion

Sales promotion includes several communications activities that attempt to provide added value or incentives to consumers, wholesalers, retailers, or other organizational customers to stimulate immediate sales.

These efforts can attempt to stimulate product interest, trial, or purchase.

Examples of devices used in sales promotion include coupons, samples, premiums, point-of-purchase (POP) displays, contests, rebates, and sweepstakes

Sales Promotion is used to introduce new product, clear out inventories, attract traffic, and to lift sales temporarily.


Consumer promotion (Free samples, free trials, loyalty rewards, discount coupons, cash paybacks, prizes, special prices etc.

Sales Promotion consists of :

Trade Promotion (Special prices to retailers, advertising and display allowances to retailers, free goods, longer credit periods etc.

Business & Sales Force Promotions (Trade shows & conventions, sales contests, awards, trophies etc.)



Public Relations

PR is the process or activity which aims at building awareness and a favourable image for a person, organisation and/ or its products, by managing the flow of information to the public.

PR dept of a company performs the following functions : 1. Closely monitors the numerous media channels for public

comments about the company.

2. Managing crises that threaten a company’s image or reputation.

3. Builds goodwill for the organisation through community, philanthropic and other special programs and events.


Extended P’s of Marketing

• People • Process • Physical Evidence

People : ‘People’ is one of the elements of service marketing mix. People include customers and service personnel. When these two interact, service encounter takes place. Customer service lies at the heart of modern service industries.

People are one of the few elements of the service that customers can see and interact with. In case of service marketing, people can make or break an organization.


Extended P’s of Marketing

Processes : ‘Process’ is the way of undertaking transaction, supplying information and providing service in a way acceptable to the customer and effective to the organisation.

Process defines speed, accuracy and satisfaction to the customer. It implies that everybody in the organisation knows what to do and how to do it.

Physical Evidence Physical evidence is about where the service is being delivered from. This element of the marketing mix will distinguish a company from its competitors. It is one tangible element that adds to customer experience in services sector (Layout, cleanliness, décor, comfort, atmosphere etc.)

Marketing Management

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