MARKETING MANAGEMENTConcepts, Cases, Challenges and Trends

SECOND EDITION

M. GOVINDARAJANFormerly Assistant Professor

Department of Management StudiesAnna University

Delhi-1100922007

MARKETING MANAGEMENT: Concepts, Cases, Challenges and Trends, 2nd Ed.M. Govindarajan

© 2007 by PHI Learning Private Limited, Delhi. All rights reserved. No part of this book may bereproduced in any form, by mimeograph or any other means, without permission in writing from thepublisher.

ISBN-978-81-203-3259-1

The export rights of this book are vested solely with the publisher.

Published by Asoke K. Ghosh, PHI Learning Private Limited, Rimjhim House, 111, PatparganjIndustrial Estate, Delhi-110092 and Printed by Mudrak, 30-A, Patparganj, Delhi-110091.

Dedicated tomy wife Ava

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Contents

Preface ................................................................................................................................................ xix

Chapter 1 UNDERSTANDING THE BASICS OF MARKETING ............................. 1–69

1.1 Marketing Process ................................................................................................................... 11.2 Marketing Dynamics ............................................................................................................... 21.3 Marketing Definitions ............................................................................................................. 21.4 Role of Marketing .................................................................................................................... 4

1.4.1 Marketing in Agriculture, Basic Industries, Mining and Plantation ............ 41.4.2 Intermediate Industrial Goods ............................................................................... 41.4.3 Semi-industrial Products ......................................................................................... 41.4.4 Services ........................................................................................................................ 5

1.5 The Scope of Marketing ......................................................................................................... 51.6 Core Concepts of Marketing ................................................................................................. 5

1.6.1 Exchange ...................................................................................................................... 51.6.2 Transactions ................................................................................................................ 61.6.3 Transfer ........................................................................................................................ 6

1.7 Needs, Wants and Demands ................................................................................................ 61.7.1 Needs ............................................................................................................................ 61.7.2 Wants ............................................................................................................................ 61.7.3 Demands ...................................................................................................................... 6

1.8 Value, Satisfaction and Expectations .................................................................................. 71.8.1 Value ............................................................................................................................. 71.8.2 Satisfaction .................................................................................................................. 71.8.3 Expectations ................................................................................................................ 8

1.9 Marketplace, Marketspace and Metamarket ..................................................................... 81.9.1 Web Marketing .......................................................................................................... 81.9.2 Metamarket ................................................................................................................. 9

1.10 Philosophies of Marketing ..................................................................................................... 91.11 Marketing Concepts and Implications ............................................................................... 9

1.11.1 Strategic Marketing Concept ................................................................................ 101.11.2 Holistic Marketing Concept .................................................................................. 101.11.3 Marketing Perspectives .......................................................................................... 10

1.12 Marketing Environment ....................................................................................................... 12

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1.13 Marketing Mix ........................................................................................................................ 131.13.1 List of Behavioural Factors ................................................................................... 141.13.2 Importance of Marketing Mix .............................................................................. 15

1.14 Classical Four Ps .................................................................................................................... 171.15 Role of Packaging in Marketing ........................................................................................ 20

1.15.1 Importance of Packaging ....................................................................................... 211.15.2 Functions of Packaging .......................................................................................... 211.15.3 Packaging Concept .................................................................................................. 221.15.4 Packaging and Product Differentiation ............................................................. 231.15.5 Package Variety ....................................................................................................... 231.15.6 Packaging Strategies ............................................................................................... 241.15.7 Cost Effectiveness .................................................................................................... 241.15.8 Social Aspects ........................................................................................................... 251.15.9 Packaging Materials ................................................................................................ 25

1.16 Demand States ........................................................................................................................ 261.17 Types of Marketing ............................................................................................................... 26

1.17.1 Organization Marketing ........................................................................................ 261.17.2 Person Marketing .................................................................................................... 261.17.3 Place Marketing ....................................................................................................... 261.17.4 Idea Marketing ......................................................................................................... 271.17.5 Mass Marketing ....................................................................................................... 271.17.6 Product Variety Marketing ................................................................................... 271.17.7 Target Marketing ..................................................................................................... 271.17.8 Internal Marketing .................................................................................................. 271.17.9 Relationship Marketing .......................................................................................... 271.17.10 Integrated Marketing .............................................................................................. 281.17.11 External Marketing ................................................................................................. 291.17.12 Total Quality Marketing ........................................................................................ 291.17.13 Mega Marketing ...................................................................................................... 291.17.14 Turbo Marketing ...................................................................................................... 301.17.15 Micro Marketing ...................................................................................................... 301.17.16 Concept Marketing ................................................................................................. 301.17.17 Services Marketing .................................................................................................. 31

1.18 Systems Approach ................................................................................................................. 321.18.1 Systems Approach in Marketing ......................................................................... 321.18.2 Conceptual/Physical/Open/Closed Systems ................................................... 331.18.3 System Concepts ...................................................................................................... 331.18.4 Marketing Subsystems ........................................................................................... 341.18.5 System Linkages ...................................................................................................... 341.18.6 Advantages ............................................................................................................... 341.18.7 System Simulation ................................................................................................... 35

1.19 Marketing Information System (MIS) ............................................................................... 351.20 Marketing Organization ....................................................................................................... 35

1.20.1 Significance of Organization ................................................................................ 371.20.2 Types of Marketing Organization ....................................................................... 371.20.3 Attributes of Effective Marketing Organization .............................................. 38

Contents vii

1.21 Sales Policy and Sales Force Management ...................................................................... 381.21.1 Sales Force Management ....................................................................................... 391.21.2 Selling vs Marketing ................................................................................................ 39

1.22 Marketing and Finance Interface ....................................................................................... 401.22.1 Interdependence ........................................................................................................ 40

1.23 Marketing Crises .................................................................................................................... 411.23.1 Transforming Marketing ......................................................................................... 41

1.24 Global Marketing ................................................................................................................... 421.24.1 Global Market Environment .................................................................................. 431.24.2 Problems in Global Marketing .............................................................................. 43

1.25 Country of Origin .................................................................................................................. 451.26 Core Competence ................................................................................................................... 45

1.26.1 Examples of Diversification .................................................................................. 461.27 Managing Customer Value ................................................................................................. 46

1.27.1 Customer Focus ........................................................................................................ 461.27.2 Value Chain ............................................................................................................... 471.27.3 Value-Delivery System ............................................................................................ 481.27.4 New Customer Value Chain ................................................................................. 48

1.28 Customerization ..................................................................................................................... 501.28.1 Process of Customerization .................................................................................. 50

1.29 Delighting the Customer ..................................................................................................... 511.29.1 The Foods Business of ITC .................................................................................... 521.29.2 Delivering Delight .................................................................................................... 52

1.30 Competitive Strategy ............................................................................................................ 541.31 Joint Ventures ......................................................................................................................... 551.32 Benchmarking ......................................................................................................................... 571.33 Marketing and Social Responsibility ................................................................................ 581.34 Quality Management ............................................................................................................ 59

1.34.1 Quality Function Deployment ............................................................................... 591.34.2 International Organizations ................................................................................... 60

Summary ............................................................................................................................................. 62CASE STUDY THE CASE OF THE COOL BREEZE ................................................................................. 65Review Questions ............................................................................................................................... 67For Discussion .................................................................................................................................... 69

Chapter 2 CLASSIFICATION OF GOODS, CUSTOMERS AND MARKETS .... 70–88

2.1 Product ..................................................................................................................................... 702.2 Product Hierarchy ................................................................................................................. 742.3 Classification of Goods ......................................................................................................... 75

2.3.1 Consumer Goods ...................................................................................................... 762.4 Industrial Goods .................................................................................................................... 77

2.4.1 Installations ................................................................................................................ 782.4.2 Equipment .................................................................................................................. 782.4.3 Semi-manufactured Goods ..................................................................................... 78

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2.4.4 Component Parts ...................................................................................................... 782.4.5 Supplies ....................................................................................................................... 782.4.6 Raw Materials ........................................................................................................... 79

2.5 Further Classification ............................................................................................................ 792.5.1 Goods Entering the Product Completely ........................................................... 792.5.2 Goods Entering the Product Partly ...................................................................... 792.5.3 Goods Not Entering the Product .......................................................................... 80

2.6 Customer Classification ........................................................................................................ 802.6.1 Industrial Customers ............................................................................................... 802.6.2 Publics ......................................................................................................................... 81

2.7 Differences between Industrial and Consumer Marketing ......................................... 82Summary ............................................................................................................................................. 83CASE STUDY CUSTOMER CARE .......................................................................................................... 85Review Questions ............................................................................................................................... 87For Discussion .................................................................................................................................... 87

Chapter 3 CONSUMER BUYING BEHAVIOUR........................................................ 89–110

3.1 Consumer Market .................................................................................................................. 893.1.1 Culture ........................................................................................................................ 903.1.2 Social Factors ............................................................................................................. 903.1.3 Demographic Factors ............................................................................................... 903.1.4 Importance of Time ................................................................................................. 90

3.2 Buying Motives ...................................................................................................................... 913.3 Types of Buying Behaviour ................................................................................................. 91

3.3.1 Dissonance-Reducing Buying Behaviour ............................................................ 913.3.2 Habitual Buying Behaviour ................................................................................... 913.3.3 Variety Seeking Buying Behaviour ...................................................................... 923.3.4 Impulse and Planned Buying ................................................................................ 92

3.4 Perceptions and Marketing ................................................................................................. 923.4.1 Encashing on Perceptions ....................................................................................... 933.4.2 Ignoring Consumer Preferences ............................................................................ 93

3.5 Motivation ............................................................................................................................... 953.5.1 Maslow’s Need Hierarchy ...................................................................................... 963.5.2 Implications ................................................................................................................ 97

3.6 Buying Decisions ................................................................................................................... 973.6.1 Need Recognition ..................................................................................................... 983.6.2 Information Search ................................................................................................... 983.6.3 Evaluation of Alternatives ..................................................................................... 983.6.4 Purchase Decision..................................................................................................... 993.6.5 Post-Purchase Behaviour ...................................................................................... 100

3.7 Influence of Social Class on Buying Behaviour ........................................................... 1003.8 Lifestyle Patterns ................................................................................................................. 1003.9 Reference Groups and Reference Individuals .............................................................. 102

3.9.1 Family Influence and Opinion Leader .............................................................. 102

Contents ix

3.9.2 Process of Learning ................................................................................................ 1023.9.3 Personality ................................................................................................................ 103

3.10 Indian Consumer ................................................................................................................. 1033.10.1 Emerging Indian Middle Class ........................................................................... 1033.10.2 Characteristics of Indian Middle Class Consumer ........................................ 1033.10.3 Urban Teenager ...................................................................................................... 1053.10.4 Mobility ..................................................................................................................... 105

3.11 Consumer Protection in India .......................................................................................... 105Summary ........................................................................................................................................... 106CASE STUDY READY-TO-EAT ........................................................................................................... 107Review Questions ............................................................................................................................. 109For Discussion .................................................................................................................................. 110

Chapter 4 MARKET SEGMENTATION ..................................................................... 111–121

4.1 Market Segment ................................................................................................................... 1114.2 Segmentation Factors .......................................................................................................... 111

4.2.1 Customer Size.......................................................................................................... 1124.2.2 Technology Involved ............................................................................................. 1124.2.3 Product Usage ......................................................................................................... 1124.2.4 Heterogeneity .......................................................................................................... 1124.2.5 Financial Characteristics of Customers ............................................................. 1124.2.6 Buying Strategy ....................................................................................................... 112

4.3 Nature of Variables ............................................................................................................. 1134.3.1 Measurable ............................................................................................................... 1134.3.2 Relevant .................................................................................................................... 1134.3.3 Operational ............................................................................................................... 113

4.4 Process of Segmentation .................................................................................................... 1134.4.1 Stages in Segmentation ......................................................................................... 114

4.5 Benefits of Market Segmentation ..................................................................................... 1144.6 Strategic Bases for Market Segmentation ...................................................................... 114

4.6.1 Customer Dispersion ............................................................................................. 1154.6.2 Product Differentiation ......................................................................................... 115

4.7 Strategies ................................................................................................................................ 1154.7.1 Voicing Strategy ...................................................................................................... 1154.7.2 Flexing Strategy ...................................................................................................... 1154.7.3 Augmenting Strategy ............................................................................................. 115

4.8 Patterns of Segmentation ................................................................................................... 1164.8.1 Homogeneous Preferences ................................................................................... 1164.8.2 Diffused Preferences .............................................................................................. 1164.8.3 Clustered Preferences ............................................................................................ 116

4.9 Area Market Potential ........................................................................................................ 1164.9.1 Market Build-up Method ...................................................................................... 1164.9.2 Multiple-Factor Index Method ............................................................................ 117

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4.10 Market Gridding .................................................................................................................. 117Summary ........................................................................................................................................... 117CASE STUDY VIKASA STEEL TUBES LTD .......................................................................................... 118Review Questions ............................................................................................................................. 120For Discussion .................................................................................................................................. 120

Chapter 5 PRODUCT PRICING.................................................................................... 122–137

5.1 Pricing Situations ................................................................................................................. 1225.1.1 Approaches to Pricing ........................................................................................... 123

5.2 Objectives of Pricing ........................................................................................................... 1235.2.1 Price Stabilization ................................................................................................... 1245.2.2 Maintenance of Market Share ............................................................................. 1245.2.3 Target Rate of Return on Capital ....................................................................... 1245.2.4 Preventing Competition ........................................................................................ 1245.2.5 Ethical Pricing ......................................................................................................... 1245.2.6 Rapid Cost Recovery ............................................................................................. 1255.2.7 Market Share Improvement ................................................................................. 1255.2.8 Satisfactory Return on Capital Employed ........................................................ 1255.2.9 Elasticity Related Objectives ................................................................................ 125

5.3 Pricing Decisions .................................................................................................................. 1255.3.1 Recognize the Need for a Pricing Decision ..................................................... 1255.3.2 Developing Pricing Model ................................................................................... 1265.3.3 Identify and Anticipate Pricing Problems........................................................ 1265.3.4 Develop Feasible Courses of Action .................................................................. 1265.3.5 Forecast the Outcomes of Each Alternative .................................................... 1265.3.6 Monitor and Review the Outcome of Each Action ....................................... 127

5.4 Pricing a New Product ....................................................................................................... 1275.4.1 Skimming Pricing .................................................................................................... 1275.4.2 Penetration Pricing .................................................................................................. 1285.4.3 Choosing between Skimming and Penetration Pricing ................................. 129

5.5 Pricing Methods ................................................................................................................... 1295.5.1 Full Cost or Cost-plus Pricing ............................................................................. 1305.5.2 Marginal Cost or Variable Cost Pricing ............................................................ 1305.5.3 Flexible Markup Pricing ........................................................................................ 1315.5.4 Target Return-on-Investment Pricing ................................................................. 1315.5.5 Transaction Cost Analysis ..................................................................................... 131

5.6 Price Management ............................................................................................................... 1315.6.1 Price Reduction ........................................................................................................ 1315.6.2 Price Increase............................................................................................................ 132

5.7 Information Required .......................................................................................................... 1325.8 Marketing Audit ................................................................................................................... 132

5.8.1 Guidelines for an Operational Audit ................................................................. 133Summary ........................................................................................................................................... 133CASE STUDY STAR PRODUCTS LIMITED ........................................................................................... 134Review Questions ............................................................................................................................. 137For Discussion .................................................................................................................................. 137

Marketing Management : Concepts,Cases, Challenges And Trends

Publisher : PHI Learning ISBN : 9788120332591 Author : M Govindarajan

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