Principles of Marketing - psau.edu.sa

Principles of Marketing

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Principles of MarketingTheories & Applications

Dr. Tarek Tawfik AlkhateebAssistant Professor, College of Business Administration, Al Kharj Prince Sattam Bin Abdulaziz University, Kafrelsheikh University.

Dr. Saji GeorgeAssistant Professor, College of Business Administration, Al Kharj

Prince Sattam Bin Abdulaziz University

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Principles of MarketingConcepts, Theories & Applications

Authored byDr.Tarek Tawfik Alkhateeb Dr. Saji George

ISBN-978-1-64223-105-2Library of Congress Control Number: 2018939045

© 2018 byScitus Academics LLC,616 Corporate Way, STE24766,Valley Cottage,NY 10989United States of America

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Acknowledgements 17

Preface 19

Chapter-1 Introduction to Marketing 1

Chapter-2 Strategic Marketing Planning 12

Chapter-3 Consumer Behaviour 25

Chapter-4 Business Buying Behaviour 34

Chapter-5 Customer Driven Marketing Strategies 43

Chapter-6 Product 58

Chapter-7 Pricing 70

Chapter-8 Place 88

Chapter-9 Promotion 99

Chapter-10 Social Responsibility And Marketing 122

Chapter-11 Marketing Ethics 132

Chapter-12 New Trends In Marketing 140

Index 153

b r i e f c o n t e n t s

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c h a p t e r s c h e m e

Chapter-1 Introduction To Marketing. 1

Introduction to Marketing 2

Evolution/Orientation/Concepts of Marketing 2

Production Concept 2

Product Concept 2

The Selling Concept 2

The Marketing Concept 3

Societal/Integrated/Holistic Concept 3

DefinitionsofMarketing 3

Core Concepts of Marketing 3

Social Process 3

Managerial Process 4

Satisfaction 5

Needs, Wants and Demands 5

Exchange and Transactions 6

Product or Offering 7

Value 7

Relationship Marketing 7

Marketing Environment 7

Microenvironment [Task Environment] 7

Macro Environment [Broad Environment] 9

Marketing Management 9

Marketing Mix 11

Chapter-2 Strategic Marketing Planning. 12

Introduction to Strategic Marketing Planning 13

Vision 13

Mission 13

Values 13

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Objectives 13

Strategy 14

Goal 14

Programs 14

Levels of Strategic Marketing Planning 14

Corporate and Division Level Planning 15

Formulating Corporate Mission 15

Establishing Strategic Business Units (Sbus) 16

Assigning Resources to Different SBUs 16

Planning New Businesses 19

Business Strategic Marketing Planning 20

Business Mission 20

Swot Analysis 20

Formulating Goals 21

Strategy Formulation 21

Program Formulation 22

Implementation 22

Feedback and Control 22

Product Level Planning 23

Title Page, Executive Summary and Table Of Contents 23

Present Marketing Situation 23

Opportunity and Issue Analysis 23

Establishing Objectives 23

Formulating Marketing Strategies 23

Action Programs 23

ProjectedProfitandlossStatement 24

Implementation & Control 24

Chapter-3 Consumer Behaviour 25

Introduction to Consumer Behaviour 26

FactorsInfluencingConsumerbehaviour 26

Cultural Factors 27

Culture 27

Subculture 28

Social Class 28

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Social Factors 28

Family, Friends and Relatives 28

Reference Groups [Aspirational and Disassociation Groups] 29

Roles And Status 29

Personal Factors 29

Age & Life Cycle Stages 29

Personality 30

Lifestyle 30

Economic Situation 30

Psychological Factors 30

Motivation 30

Perception 31

Learning 31

Attitude &Belief 31

Consumer Buying Process 31

Realizing the Need 31

Gathering Information about Product 32

Evaluating available and known Alternatives 32

Purchase Decision and Purchase of Product 32

Post Purchase Reaction/Behaviour 32

Chapter-4 Business Buying Behaviour 34

Introduction to Business Buying Behaviour 35

Participants in Business Buying 35

FactorsInfluencingBusinessBuying 36

Environmental Factors 36

Organizational Factors 37

Social Factors 38

Personal Factors 38

Business Buying Process 38

Problem and Need Recognition 39

ProductSpecification 39

Search for Suppliers 39

Value Analysis 39

Vendor Analysis 40

Ordering 40

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Performance Review 40

Comparing Consumer Buying with Business Buying 40

Chapter-5 Customer Driven Marketing Strategies 43

Introduction to Customer Driven Marketing Strategies 44

Introduction to Segmentation 44

Levels of Segmentation 45

Mass Marketing 45

Segment Marketing 45

Niche Marketing 45

Local Marketing 45

Individual Marketing 46

Bases/Criterion 0f Segmentation 46

Geographic Segmentation 46

Demographic Segmentation 46

Psychographic Segmentation 47

Behavioral Segmentation 47

Requirements for Effective Segmentation 48

Measurable 48

Substantial 48

Accessible 48

Differentiable 48

Actionable 49

Introduction to Target Market 49

Evaluating and Selecting Target Market 49

Segment Selection Strategies 49

Single Segment Concentration 49

Selective Specialization 49

Product Specialization 50

Market Specialization 50

Full Market Coverage 50

Introduction to Positioning 50

Types of Positioning 51

Positioning Errors 52

Over Positioning 52

Under Positioning 52

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Doubtful Positioning 52

Confused Positioning 52

Introduction to Differentiation 52

Bases of Differentiation 53

Product Differentiation 53

Service Differentiation 54

Personnel Differentiation 54

Channel Differentiation 55

Image Differentiation 56

Chapter-6 Product 43

Introduction to Product 59

Types of Product 59

Levels of Product 60

ClassificationofProduct 60

Product Life Cycle [PLC] 62

Developing New Products 65

Methods to Develop New Products 65

Different Types of Product Development 65

Conditions for Success of New Products 65

Strategic Objectives of Developing New Products 66

Strategies to Develop New Product 66

Stages of New-Product Development 66

Product Mix 68

Dimensions 0f Product Mix 68

Packaging 68

Levels of Packaging 68

Importance of Packaging 69

Labelling 69

Brand 69

Importance of Brand 69

Chapter-7 Pricing 70

Introduction to Pricing 71

Concept of Pricing 71

Importance of Pricing for Companies 71

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Economic Bases of Pricing 72

Methods of Pricing 72

Pricing Objectives 73

Costs and its Relation with Pricing 74

Factors affecting Pricing 75

External Factors 75

Internal Factors 75

Consumer’s Evaluation of Price 76

Stages in Pricing Process 77

FirstStageSpecificationofPricingObjectives 77

Second Stage Study of Factors Affecting Pricing Decisions 78

ThirdStageDemandandCostanalysisandRealizedProfit 78

Price Change 79

First Case of Price Decrease 79

Second Case of Price Increase 80

JustificationsforPriceChange 80

Reactions to Price Change 80

Pricing Strategies 81

First Pricing Of New Products 81

PriceModificationStrategies83

Discount and Allowance Pricing 83

Segmented Pricing Strategy 83

Psychological Pricing Strategy 84

Promotional Pricing Strategy 84

Geographical Pricing Strategy 84

International Pricing Strategy 85

Pricing in Manufacturing, Commercial and Service Companies 85

CostPlusProfitMarginMethod 85

Breakeven Analysis Method 86

Method of Perceived Value in Pricing 86

Dominant Pricing Method 86

The Pricing based on Target Revenue 86

Pricing based on Income 87

Pricing based on Competitors’ Prices 87

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Chapter-8 Place 88

Introduction to Place 89

Marketing Channel (Distribution Channel) 89

Functions of Marketing Channels 89

Channel Levels 91

Channel-Design Decisions 91

Understanding Consumer Requirements 91

Establishing Channel Objectives 92

Identifying Channel Alternatives 92

Evaluating the Channel Alternatives 93

Managing Channel 94

Training Channel Members 94

Motivating Channel Members 94

Controlling Channel Members 94

Channel Dynamics 95

Vertical Marketing Systems (VMS) 95

Horizontal Marketing Systems 95

Hybrid Marketing Systems 96

ChannelLevelConflictsandTypesofConflicts 96

ConflictManagementTechniques 97

Chapter-9 Promotion 99

Introduction to Promotion 100

DefinitionsofPromotion 100

Importance of Promotional Activity 100

Relationship between Promotion and Marketing Communication 101

Promotion Objectives 102

Components of Communication & Promotion 103

Promotional Mix 103

Elements of Promotional Mix 103

First Advertisement 103

Types of Advertising 104

Planning for Advertising Program 104

Means of Advertising (Advantages & Disadvantages) 106

Levels of Advertising 106

Advertisement Writing Success Factors 106

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Costs of Advertising 106

How to Specify Intended Advertising Objectives 107

Kinds of Advertising Campaign 107

Second Personal Selling 108

Personal Selling Objectives 108

Stages for Execution of Personal Selling 108

Sales Program Planning 109

Execution of Sales Program 110

Evaluation Of Salesmen’s Performance 110

Third Sales Promotion 110

Fourth Public Relations 111

Tools of Public Relation 112

Fifth Direct Marketing 112

Advantages 0f Direct Marketing 113

Types of Direct Marketing 113

Direct Marketing and Ethical Aspects 115

Factors affecting the Promotional Mix 116

Promotion Budget 116

FactorsaffectingSpecificationofPromotionBudget 116

Methods to specify Promotion Budget 116

Promotion Budget on International Level 117

Preparation of Marketing Communication Program 117

Integration an Implementation Communication Programs 118

Strategies of Promotion 118

Some other Promotion Methods 119

Organize Promotion Activity 119

Modern Promotion 120

The Use of Internet In Promotion 120

Chapter-10 Social Responsibility and Marketing 122

Introduction Social Responsibility and Marketing 123

Development of Social Responsibility Concept 123

Principles of Social Responsibility 124

Levels of Social Responsibility 125

Factors for Success of Social Responsibility 125

Advantages of Company’s Commitment to its Social Responsibility 125

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Criterion to Measure and Evaluate the Social Responsibility 125

Social Responsibility and Marketing Ethics 127

Elements of Social Responsibility 128

Social Response 129

Sources of Ethical Values in the Organization 129

Chapter-11 Marketing Ethics 132

Introduction to Marketing Ethics 133

DefinitionofEthics 133

Sources of Ethics 133

Reasons for the Study of Ethics for Individuals and Organizations 133

Nature of Marketing Ethics 134

Ethical Standards in Marketing 135

Ethical Approach in Marketing 135

Ethical Problems in Marketing 136

Ethical Marketing Charter [Code of conduct for Marketers] 136

First Responsibilities of the Marketer 136

Second Honesty and Equity 136

Third Rights and Obligations of Parties of Marketing Exchange Process 136

Understanding Ethical Marketing Behavior 137

Social and Ethical Responsibility in Marketing 138

Elements of Social and Ethical Responsibility in Marketing 138

Chapter-12 New Trends in Marketing 140

Introduction to New Trends in Marketing 141

New Trends in the Concept of Marketing 141

New Developments in Strategies of Marketing 141

New Trends in Marketing with Special Emphasis to Kingdom of Saudi Arabia 142

Evolving Marketing Practices and Products 145

Exoskeleton 145

Space Tourism 145

Virtual Reality 146

Three Dimensional [3D] Bio printing 146

Roboticsandartificialintelligence 146

References 147

Essential journal articles 152

Websites 152

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Figure Page No.

Figure (1-1) Functions of Management 4

Figure (1-2) Marketing Environment 8

Figure (1-3)Marketing mix 10

Figure (2-1) Strategic planning 14

Figure (2-2) Boston Consulting Group 17

Figure (2-3) The General Electric Model 18

Figure (2-4) Planning New Businesses 20

Figure (2-5)Business Strategic Marketing Planning Process 20

Figure(3-1)FactorsInfluencingConsumerBehaviour 27

Figure (3-2) Consumer Buying Process 31

Figure(4-1)FactorsInfluencingBusinessBuying 37

Figure (4-2) Business Buying Process 39

Figure (6-1) Product 63

Figure (6-2)The Product Life Cycle 63

Figure (6-3) Five Distinct Stages For Product Life Cycle 65

Figure (6-4) Stages of in New-Product Development 67

Figure (7-1) objectives of the pricing 73

Figure (7-2) Price Determinant Factors 76

Figure (7-3)Consumer’s evaluation of price 77

Figure (8-1) Distribution channel 89

Figure (8-2) Channel Levels 90

Figure (8-3) Managing Channel 94

Figure (9-1) Basic Steps for the planning of Advertising Program 105

Figure (9-2) Personal Selling Process Stages 109

Figure (9-3) Strategies of Promotion 119

Figure (10-1) The Figure of Carrol 124

f i g u r e s

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Table Page No.

TableNo(11-1)ClassificationofMarketingDecisions 134

Table No (11-2) Elements of Social and Ethical Responsibility in the Marketing 139

t a b l e s

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Acknowledgements

With all humbleness and modesty, though words cannot elaborate on extent of gratitude, for those who directly and indirectly encourage us and for all those who extend silent support, we owe to them and all, reverences and recognitions. We offer our prayers to “Allah” whom we felt was carrying us all through and specially during the times of trouble, His blessings were immensely showered on us, we bow our head with all our faith.

We sincerely believe that the Prince Sattam bin Abdulaziz University under the able leadership ofourRectorHisExcellencyDr.AdulRahmanAlAsimi,theDeanshipofScientificResearchunderthe patronage of the Dean Dr. Gahleb Hamad Alnahdi, are the entities behind the genesis of this project and have been continuous source of inspiration for the successful completion of the same. We hereby, from our deep soul thank them for all their solace.

We stand with great reverence to specially thank Dr. Nasser S. Al Kahtani, Dean of the college and Head, Department of Human Resource Management for his endeavor for excellence, for the empathetic and leadership skills and for the quality of being a reliable mentor. We extend our appreciations and regards to the Vice Dean of the College Dr. Ali Zahrani for all the kind intellectual interactions and providing a cushion for the things to happen.

We thank the Supervisor, Department of Marketing, College of Business Administration Dr. Ahmed Sohail Ajina who had been great analyst for us, who contributed by reviewing some parts of the book and providing invaluable insights and suggestions. We appreciate his holistic and logical approach and extend our sincere thanks for all the time he gave us and for being such a kind empathetic person.

We also cannot forget the support extended by Mr. Mohammad Abdulmatloob Hamdan,the manager of the College, Mr. Bassem Ayub, Supervisor, Students Affairs and all other administrative staff of the college for their constant positive reinforcements.

We thank all our colleagues of the Department, Dr. K. Elangchezhian, Dr. Nabil Hazmi, Dr. Mohammed Rishad Faridi, Mr. Venkatesan Narayanan,Mr. Mubarak Abdullah Hnaia Al Dossari for lending us their invaluable suggestions, time and effortsin helping us to author the book. Their contribution has been instrumental in correcting and improving critical aspects of the book. Dr. K. Elangchezhian has been an experienced critical analyst who contributed by helping us improve and maintain the quality of work. As a supervisor of department, he gave us enough space and academic freedom so that potentials could be exploited to the optimum. We thank him for his contributions. Mr. Narayanan and Mr. Mubarak specially has been kind enough to go through some of texts and also reviewed some chapters, we extend a special thanks to them.

We thank all our colleagues specially Professor Nawab Ali Khan and head of all departments, Dr. Alaa Mohamad Maloain, Department of Accounting, Dr. Nabil Farah Maalel, Department of Finance, Dr. Mohammad Imdadul Haque, Department of Management, Dr. Tariq Mohamed Hassan, Department of Management Information Systems, Dr. Syed Abdulmalik, Asst. Dean, Quality Unit in our college for their encouragement, moral support and motivation.

We thank all our elders and seniors who had been strong moral support for us. We always had in the back of our mind that there are these experienced people to sail us through the rough

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terrains and weather of this expedition, people we can trust, people we can rely. For all their guidance and associations we feel honored. We also stand to thank all our mentors and guides whohavehelpedusforwhatwearetoday.WecannotbutforgetthesignificanceofDr.J.K.Sharma, HoD, Department of Business Administration, Jai Narain Vyas University, Jodhpur [India], Dr. S. C. Sharma, Ex. Professor with College of Applied Sciences, Sur, Oman, Dr. Sandeep Ojha, Senior Lecturer with College of Applied Sciences, Salalah, Oman, Dr. Sanjeev Prasher, Professor, IIM, Raipur [India], Dr. Ravichandran, Associate Professor, New York Institute of Technology, Abu Dhabi [UAE] and many others who have orchestred our personal and professional lives.

We cannot forget our friends and known who have helped us the way they can and were with usinallourdifficulttimes.Thefeelingofthembeingthereforanyandeverykindofsupportissoinspirational and helped us to have an outward approach. We are not specifying the names as they all deserve a mention for this work and for all.

We also need to thank and appreciate the cooperation extended by Mr. Mohammed Helal who has been really very helpful in editing of our book which gave a punch to our work. He was an ever ready person to extend any kind of active support, from bottom of our heart we recognize his efforts and extend our gratitude to him.

The foundation of our personal and professional lives, our parents who crafted our personalities, we owe all our achievements and dedicate all our work and life to them. Words cannot thank them for the tireless nights they have spent tobring us up, for all their sacrifices so thatweexperience a better future and all those who shaped us for what we are, we bow in reverence. We will fail in our duty if we do not place on records the sincere feelings of appreciation for our siblings, parents in law and other relatives who have been instrumental in numerous ways through their moral support and encouragement.

Last but not the least, we owe a deep debt of gratitude to our spouses and children who have suffered a lot during our preoccupation with this project. They have been extremely tolerant and supportive which provided the thrust to our work.

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Preface

Marketing has been a widely used term in any and every sphere of business. With times many concepts of marketing has evolved and today marketing has become a distinctive integral part of not only any business activity but also of business management schools globally. This book presents various concepts and theories of marketing in an organized and easy to understand way. It also highlights the importance and concepts of various marketing tools used in business spheres to have a competitive edge. The concepts have been complimented and supplemented by contemporary examples. From the genesis of marketing to the latest trends in marketing, Marketing has not just become a specialized area but also super specializations within is a happening fact.

Thisbookhasconfined itself toparticularly theundergraduatebusiness students. Thecontentsof the book has been screened and selected to cater to modern day requirements of business schools and industry. The book has been divided into twelve chapters which tries to educate students from the basics of marketing to marketing strategy formulation techniques and as such introduces technical marketing terminologies and ending up with new trends in marketing. Most of the concepts are explained with supporting contemporary real time examples particularly from Middle East with special emphasis on Kingdom of Saudi Arabia.

Chapter-1 Introduction to Marketing: introduces marketing to students, starts with evolution ofmarketing, to definingmarketing elaborately with concentration on the core concepts ofmarketingandthengettingtounderstandmarketingmanagement,benefitsofmarketingandmarketing mix concept.

Chapter-2 Strategic Marketing Planning: talks about strategic marketing planning which introduces students to different terms used in planning process and the process of marketing planning at different levels of business including corporate, division, business and product level.

Chapter-3 Consumer Behaviour: describes consumer behaviour, how different factors in terms of cultural, social, personal and psychological factors affect consumer’s choice of product, brand, timing,quantumandplaceofpurchase. Every factor isdefinedanddetailedand supportedby relevant examples at relevant places. This chapter also describes the consumer purchase process, the steps consumer undergoes to make purchases of consumer products.

Chapter -4 Business Buying Behaviour: describes the Business buying behavior, talks about participants in business buying, the factors in terms of environmental, organizational, social and personal factors thereto affecting organization’s choice of product, brand, timing of purchase, place of purchase, quantum of purchase. Apart from elaborating on the business buying process the chapter also puts forth the differences between consumer buying and business buying.

Chapter-5 Consumer Driven Marketing Strategies: introduces students to certain marketing terminologies as segmentation, target market, positioning and differentiation. The meaning of the terms, how these concepts are executed in business scenario with real time examples are cushioned to make understanding of concepts simple.

Chapter-6Product:chapterdetailsproductandtriestodefineandexplainwithexamplesdifferenttypesofproduct,itsclassification,andintroducestheproductmixconceptandthennewproductdevelopment process and the product life cycle stages.

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Chapter-7 Pricing: tries to explain the concept of pricing. Various dimensions of pricing in terms of objectives of pricing, elements to be taken into consideration while pricing, pricing strategies etc. are covered in this chapter.

Chapter-8 Place: talks about the distribution tool of marketing mix. Its tries to explain the meaning of distribution, levels of channels, functions of distributors, channel design decisions, managing channel,channeldynamicsandchannelconflictmanagement.

Chapter-9 Promotion: details the promotional tool of marketing mix as to what all and how it is put in action to create a consonance between the product and the person so as to increase the probability and possibility of the exchange to take place by igniting and catalyzing the psychological urge of the consumer to possess the product.

Chapter-10 Social Responsibility in Marketing: emphasizes the social dimension of marketing and its responsibility towards creating a better society, healthy society, moral society and ultimately a developed society. It talks about the elements of social responsibility and how it’s useful to marketing as such. For doing so it also touches on the ethical dimensions of marketing too.

Chapter-11 Marketing ethics and new trends in Marketing: is a concluding chapter of the book which emphasizes on the importance of practicing ethics in all functions and dimensions of marketing. Differentiate between what is good and what is bad, what is right and what is wrong, what is moral and what is immoral and incorporate all goods, rights and morals in marketing activities and keep bad, wrongs and immoral away from marketing.

Chapter-12 is the concluding chapter which tries to give a view about the future trends in marketing and current happenings leading to future outcomes. The chapter peeps into new marketing strategies which could be adopted for effective business outcomes, current market and marketing trends in Kingdom of Saudi Arabia and ends up by showcasing some of evolving marketing practices and products.

This book is intended to be reference book not only to undergraduate students of business schools but also for professional practitioners. The book covers essentials of marketing in an easy to understand manner and relates the topics with real marketing happenings supported by relevant exemplifications. Thebook is rich incontentsand innovative in itsapproach.Thecontentsaresystemically put in place. Fundamentals of mnemonics has been applied to provide the cutting edge sustainable understanding.

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CHAPTER

1 Introduction to Marketing

After studying this chapter, you will be able to:

1. Know the developmental stages of marketing and modern concept of marketing.

2. Know the meaning of marketing and tools of marketing mix.

3. Comprehend the importance of marketing at individual, organizations and community level in the contemporary age.

4. Identifybenefitsfrommarketing.

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1. Introduction to Marketing

From the genesis of humans till this stage of growth and development, there has been tremendous geographical, social, environ-mental, psychological, economical, tech-nological and many other change agents which has brought about systematic im-provements in quality of life. The basis of life is need and all through, need forms the dy-namics for all human activities. To satisfy the sense of deprivation has been the basic in-stinct of human kind and laid foundation for business. This sense of business was prevalent from ancient times in one way or the other and during the course of time it has become moreorganized, systematic, scientific,com-plicated and sophisticated.

Marketing had always been an implicitly or ex-plicitly integral part of business. The major goal had been to increase sales, customer base andprofits.Thecatalysttoachievingthisgoalhas been marketing. The marketing schools of thought has been dynamic and has under-gonevarioussystematicandscientificchang-es which has transformed the discipline as a specialized course in management schools as well as earned a professional distinction glob-ally.

Marketing activities has to be efficient andeffective but at the same time has to be so-cially responsible marketing. Infact, there are five chronologically developed market-ing thoughts: production thought, product thought, selling thought, marketing thought and the integrated/societal thought.

2. Evolution/Orientation/ Concepts of Marketing

2.1. Production Concept

The production concept or thought is one of the earliest concepts of marketing. It as-sumes that for the exchanges to take place, the product has to be distributed widely and making it available at low price. Under these conditions, marketers would be able to cre-ate more exchanges leading towards better

revenues andmore profit for the organiza-tion. To achieve lower price for the products, productionefficiencieshastobebroughtinthrough economies of scale, better technol-ogy and process reengineering. For making the products available across geographical areas, distribution has to be intensive and strong marketing channels have to be de-signed.

This thought makes sense in countries where per capita income is not very high and con-sumers are more sensitive towards price and moreover goes for window shopping.

2.2. Product Concept

The second chronological development in marketing thought came in form of product concept. It assumes that for more exchanges to take place, than what was created during the production era, keeping the basics of the previous period but extending concentration and emphasis on the product itself in terms of improved quality, better performance, in-novative features, deeper variants and de-viants, market expansion would take place and also improved basket size thus increased revenuesandprofitsfortheorganization.Thiscould be achieved through market research and new product development activities.

The product thought can lead to marketing myopia. Marketing myopia is marketing short sightedness that is a short term look in ap-proach rather than a long term look out ap-proach which may lead to marketing failures and hence the marketing people should be cautious not to be affected by this marketing disease.

2.3. The Selling Concept

The selling concept is a further improvement in chronologically ordered development of mar-keting thought to enhance business. This con-cept says that to increase exchanges thereby revenuesandprofits,inadditiontoproductionand product concept, what needs to be done is getting in direct touch with the consumers creating stimuli in them, communicating clear-

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ner in consonance with each other to serve consumers. Integrated marketing works out at two levels.

First, within a department ex. the various marketing functions such as sales, adver-tisement, customer service, etc. all must work in coordination with each other. Sec-ond, marketing should coordinate with oth-er functional departments of business such asfinance,humanresources,managementinformation’s etc. All branches also if any should strive as a team to effectively and efficientlyachieveorganizationalgoals.

Further the Societal concept talks not only about consumer satisfaction but social sat-isfaction taking into aspects concepts such as philanthropy, environment protection, health, safety, ethics, social responsibility and overall social welfare and therefore also called cause-related marketing which aims-tobuild a long lasting relationship leading to increased reputation, brand image, custom-erloyalty,sales,andprofitability.

3. Definitions of Marketing

Marketing is about increasing the probabili-ty and possibility of the consumers and mar-keter creating exchanges. The marketing tools of product, price, place and promotion could be used for the purpose.

According to a social definition, marketing is a social and managerial process by which in-dividuals and groups try to satisfy their needs, wants and demand through creating, offer-ing, and exchanging products of value with others.

4. Core Concepts of Marketing

4.1. Social Process

The marketer should understand the needs of the society and deliver products what they require and is ready to pay for it. For this the marketer need to communicate with the society and in turn the marketer receives in-

ly about the marketing mix of the product. This includes explaining the consumers about the product, price, distribution, delivery, availabil-ity and promotional aspects. The further pro-cess would enable increased exchanges to take place leading to better sales, revenues andprofitsforthebusiness.

2.4. The Marketing Concept

A further advancement to selling concept is the marketing concept. The marketing con-cept holds that for more exchanges to take place leading to more revenues and prof-its, in addition to production, product and selling concept, marketers’ need a profes-sional,scientificandsystematicapproachincreatingaperfectfitbetweentheproductand the person and also formulating mar-keting strategies accordingly. This calls for understanding the needs of the consumer even before production, defining market,segmenting the market, creating differenti-ation and positioning strategies, product de-velopment, pricing the product, distributing and promoting the product in a way that creates a consonance between the prod-uct and the consumers. Satisfying the needs of thecustomerprofitablybothatpreandpost purchase stages, creating value propo-sitions which ultimately lead to achievement of organizational goals in a better effective andefficientway throughbetter sales, rev-enueandprofits for thebusinessthanwhatwas about thought in the selling concept.

The concept also estimates that Customer retention is thus more valuable than custom-er attraction since the cost of attracting new customers is much more costly than satisfying the existing customer.

2.5. Societal/Integrated/Holistic Concept

The societal or Integrated or holistic concept is the most contemporary and modern mar-keting thought and has an integrated and holistic approach to create more exchang-esandtherebyrevenuesandprofitsforbusi-nesses. The concept holds that all sections of business should work in an integrated man-

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ployees.Basically therearefive functionsofmanagement. These are planning, organiz-ing,staffing,leadingandcontrolling.

4.2.1. Planning

It is the mental activity which involves deciding vision, mission, setting objectives & goals. It’s also about deciding the actions necessary to achieve them. It’s about deciding where one wants to be, analyzing where one currently is and how to achieve or reach where he wants to reach or what he wants to achieve.

4.2.2. Organizing

It involves deciding on the tasks to be done, organizing the tasks, the positions to be cre-ated, for each position deciding on their responsibilities and authorities, making com-munication channel among and between the positions.

formation. This information provides input to the marketers to produce goods & services which they give to the society and the soci-ety pays money in lieu and also gives feed-back which is incorporated in the product and given back to the society. Again differ-ent and new needs are communicated by the society and products are delivered and feedback obtained and the process goes on and hence marketing becomes a social process.

4.2. Managerial Process

It is a process of optimally using available re-sources (both in terms of men & materials) effectively,efficiently inanefforttoachieveorganizational goals. It also includes manag-ing men tactfully. Optimally utilizing human resources, getting the work done from them to achieve organizational goals using differ-ent methods appropriately with different em-

Staffing

Organizing

Controlling

Planning

Leading

Functions of Management

Figure (1-1) Functions of Management

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Expectation to Outcome/Performance. If what is expected is met, then the consum-ers feel satisfied. We fail to understand that human behaviour is much more complex in nature and that humans just don’t get sat-isfied when their expectations are met but one’s individual input and output is com-pared with others input and output, the result of which yields a sense of delight, sat-isfaction or dissatisfaction. Marketers need to understand the dynamics and mechan-ics of this human behaviour to satisfy con-sumers profitably.

Under normal circumstances if performance of the product exceeds expectation, it leads to a state of delight, if the performance of the product equals expectation then it leads to a state of satisfaction and if the perfor-mance of the product falls below expecta-tion then it leads to a state of dissatisfaction.

If the customer is satisfied then the custom-er is going to spread good word of mouth, go for repeat purchases, influence others to purchase the product and in turn brings in more credibility & awareness and hence more revenues and profitability from the product.

If the customer is delighted, the custom-er would be spreading very strong word of mouth, positively reinforce other consumers to purchase the product and would gener-ate repeat purchases.

If thecustomer isdissatisfied,thecustomer isgoing to return the product, spread bad word of mouth, no repeat purchases, file com-plaints and legal cases thus damaging the im-age and purchase prospects for the product.

Each marketer should try to delight the con-sumers.

4.4. Needs, Wants and Demands

For laymen the above terminologies are sim-ple words but for a marketer these are tech-nical terminologies which requires in depth understanding to effectively plan and exe-cute marketing strategies.

4.2.3. Staffing

It basically involves putting right people at right positions to carry out various business func-tions. Itbasically involvesfivefunctionswhichare Human Resource Planning (It includes HR demand & supply forecasting and taking actions accordingly), Staffing ( Recruitment,Selection & Induction: The process of attract-ingappropriatenumberofqualifiedrespons-es is recruitment, selection process includes screening application blanks, appearing for some tests, interviewing, medical examination and giving offer letter. Induction is the process of socialization in the organization), Training & Development (It includes imparting appropri-ate skill & knowledge so that the employee performance is as per what is required), Per-formance Appraisal (it involves measuring & evaluating the performance of the employ-ees on certain criterion) and Compensation (Involvesremuneration&benefitsasaccord-ing to the performance parameters)

4.2.4. Leading

The next important task of management is leading. Leading involves making the staff appointed for different positions to work optimally to achieve the greater vision, mis-sion, objectives and organizational goals. It involves understanding the dynamic and complex human behavior, motivating and effectively communicating desired things across, up and down the organizational hi-erarchy.

4.2.5. Controlling

Controlling involves measuring performance of staff and their progress in implementing plans. Basically it involves: measuring the re-sults, diagnosing the results and taking cor-rective actions.

4.3. Satisfaction

It is a sense of psychological contends and is relative in nature. Under normal circum-stances what we understand about sat-isfaction is that it is the function of one’s

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and apply to dynamically and mechanically regulate consumer behaviour.

Marketers influence wants by touching either or all senses of consumers. Senses could be touch, smell, taste, hear and feel. Though needs could be pre-existed or could be made existent by the marketer’s strategies, marketer could also influence the timingcomposition and level of demand. The de-mand could be of various types which would be discussed in the “Marketing Manage-ment” part of this chapter.

4.5. Exchange and Transactions

Exchange formsthe core reason for all and any marketing activity. It is aboutacquiring a desired product from someone by offering some product which the other person wants in return. For exchange to happen there must be at least two people involved, each should have some product which the other person wants, the people involved should be authorized to exchange what they have, no content of threat or pressure should be there and the people concerned should feel it to be desirable to go for exchange with the other person involved in exchange process. Exchange is purely a marketing terminology which makes people involved in exchange satisfied.Exchangecouldbebarterorcouldbe monetary exchange. A barter exchange involves exchange of product in lieu of prod-uct. It does not involve money for example Saudi Arabia exchanging its oil with America for its Aircrafts. Monetary exchange would in-volve money in the process.

When there are agreed upon terms and condi-tions between the two parties, agreed upon time and agreed upon place can agree on terms and conditions and which takes a legal form then such exchanges becomes transaction.

Transaction is different fromtransfer. In transfer, the person may spend but in return receives nothing tangible for examplegift, subsidy, and charitable contribution. Contemporary marketers have included the study of trans-action and transfer behaviour to understand consumer behaviour more candidly.

Needs as such for a layman means funda-mentalhuman requirements such as food, clothing and shelter which are needed for survival but from a marketer’s perspective needs mean something over and above the basic needs. It’s a feeling or sense of depri-vation which could mean anything and everything which human being pays and purchase. It could be a feeling of travelling byflight,wearingexpensiveclothes,watchesetc. There could be different types of need, which could be different levels and and dif-fers from consumer to consumer depending onsomanyfactorsinfluencinghisbehaviourincluding cultural, social, personal and psy-chological factors.

Wants are desires out of alternatives which could satisfy needs. There are several means bywhichaneedcouldbesatisfied.Aneedof hunger may be satisfied by eating rice,pizza, burger, chicken etc. The consumer’s desire out of the alternatives available which satisfy his need become his want. So if the consumer likes pizza, pizza becomes his want tosatisfyhisneedofhunger.Wantsareinflu-enced by several factors including personal and social factors.

Demands are wants plus the ability and will-ingnesstopayplus legalqualification.Con-sumers who form a part of market for car may like to buy any car ranging from Hyundai, Ford, Nissan, GMC. Mercedes, Rolls Royce, Ferrari, Limousines etc. He may want to buy Rolls Royce, Rolls Royce becomes his want he does not have the money to pay for it, but it will become his demand only if he has the money to pay for it, otherwise it just remains a want and does not take shape of demand. Some children may have the willingness and ability to pay for example say alcoholic drinks butsincetheydon’thavethelegalqualifica-tions to purchase the product hence does not constitute a state of demand. Marketers should always target consumers in the state of demand, or otherwise the purpose and meaning of being a marketer is not served.

Since what seems to be simple words for lay-men, marketers needs to technically under-stand in depth the insight meanings of words

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5. Relationship Marketing

Relationships play a pivotal role in any and ev-ery aspect of personal and professional trans-action and as such become an integral part of marketing. Therefore transaction marketing is incomplete without relationship marketing. Relationship marketing aims to build long-last-ing symbiotic relationship with micro and macro environmental entities inclusive of col-leagues,superiors,peers,distributors,financialagencies, political establishments etc. and more importantly customer relationship. This relationship leads to the formation of market-ing network which could function perpetually, steadily, smoothly and thus becomes an auto-mated marketing system. The marketing goals as such become easily achievable through this automated mechanism and would re-main prognostic ally contemporary keeping the stakeholders and stockholders delighted.

6. Marketing Environment

Marketing has to function under certain en-vironment which effects the formulation of marketing strategies and is categorised under microenvironment and macro environment.

6.1. Microenvironment [Task Environment]

It consists of immediate entities marketing and marketers are dealing with. The entities include company employees, customers, suppliers, distributors, competitors and pub-lic. Theseentitiescould influencemarketingactivities and the marketing activities could influence them. Marketers have some de-gree of control over them.

6.1.1. Employees

Company employees include employees of all level from top level to bottom level inclusive of all functional areas of business. Marketing influencesemployee’sperformancebygivingthem a job environment which increases their productivity,efficiencyandeffectiveness.Thisis witnessed in companies like “Microsoft”, “Google” etc. wherein employees are given all job freedom with respect to place of work,

4.6. Product or Offering

Needs which forms the basis for exchang-es is satisfied bywhat is called product orinotherwords,itiscouldbedefinedasanyoffering by the marketer to satisfy market needs. It could be physical goods, services, experiences, events, persons, places, prop-erties, organizations, information, and ideas. Product is one of the basic elements of mar-keting mix. The product is the subject of ex-change press, without which there would be nothing that can be priced, distributed or promoted.

4.7. Value

Any product’s success depends on its ability to satisfy consumers and delivers value tp tar-get market. The buyer purchases the product which delivers highest value from among the competing products. Value couldbedefinedas a ratio between total benefits and totalcostsmeanstotalbenefitsiswhatthecustom-er gets and total costs is what he gives. The customer gets benefits and pays costs, there-fore:

Value=TotalBenefitsdividedbyTotalCosts

TotalBenefits=[Functional+emotional]benefits

Costs=[Money+time+energy+ psychological] costs

By virtue of this equation, the marketer can bring up value of the customer offering by

(1) Increasing benefits keeping cost con-stant, (2) decreasing costs keeping ben-efitsconstant(3)increasingbenefitsanddecreasingcosts,(4)increasingbenefitsand costs but increase benefits morethan the increase in costs, or (5) lowering benefits and costs but reduce benefitsby less than the reduction in costs.

Marketers should try to increase value, which would in return increase the prob-ability and possibility of exchange taking place.

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ducer to consumer like “Abdul LateefJamil” in Saudi Arabia is distributor of “Toyoto” cars. Distributors marketing strategies can affect the company and company’s marketing strategies can affect distributor’s business.

Competitors: Competitors are entities en-gaged in commercial competition or are opponents like competitor of “Almarai” dairy companyinSaudiArabiais“AlSafi”Dairyor“Nadec” Dairy”. Competitor marketing strat-egies in terms of product portfolio, pricing, distribution network or promotion can affect company’s business and vice versa.

6.1.5. Publics

Publics include all those entities which direct-ly or indirectly help the exchange process to takeplaceandalsocaninfluenceinachiev-ing the objectives of the company. Various typesofpublics include financialpublics likebanks which help consumers take loans and purchase product, media publics like televi-sion, print media etc. which educates con-sumer about product, government publics which through its various ministries formulates

time of work, providing employees with all fa-cilities. Employees also effect the functioning of the company by their ideas, dedication, knowledge and performance.

6.1.2. Customers

Customers are end users of company prod-ucts. They can affect the company’s profitand company can affect even their lifestyle as how “Apple” changed the lifestyle of its customers by its iPhone which was previously dominated by “Nokia” mobile.

6.1.3. Suppliers

Suppliers are entities which supplies raw ma-terials to the company like in Saudi Arabia “Almarai” dairy company is a supplier for “Panda” retailer. Both can affect each other by their marketing policies.

6.1.4. Distributors

Distributors are entities in the marketing chan-nelwhichhelpstheflowofproductsfrompro-

Figure (1-2) Marketing Environment

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bution strategies to achieve organizational and individual goals.

Marketing management can also be called as demand management because market-ing influences the level, composition and tim-ing of demand.

There are different demand states and accord-ingly marketing strategies has to be formulated to achieve marketing objectives. Following are the eight types of demand.

1) Negative Demand

If the market is ready pay a price to avoid a product. eg. Consumers have a negative demand for products like surgeries, vacci-nations etc. Some consumers are ready to block some internet contents for which they pay money,such state of demand would be termed as negative demand. The market-ing task is to educate the market who dis-likes the products about the goods of the product.

2) No Demand

No demand means that the consumers are not purchasing the. Eg. People have no de-mand for products like new farming meth-ods for farmers, submarine cruises etc. The reason for no demand could be lack of awareness about the product. The market-ers need to put the product at least in the awareness set of the consumers so that an interest is created in the minds of the con-sumers to go for purchases of such products. The lack of demand may also be reasoned to the prevailing culture

3) Latent Demand

Many consumers may possess a strong de-sireforaproductwhichcannotbesatisfiedby currently available products. Example: Consumers may have a desire to have an odorless cigarette, or vehicle which may not need refueling.

The marketers need to understand the inner mind of the consumers, translate their thought into products which can satisfy their natural unrealized interests.

policies which can affect businesses and con-sumers and general public like society which directly influences company and companytakes all its sues from society.

6.2. Macro Environment [Broad Environment]

Successful companies recognize and re-spond to trends and keep changing accord-ingly. Macro environmental variables are variables which would affect business but the business has to function under the given environment, cannot influence theenviron-ment much and includes following variables:

Demographic Environment like size and growth rate of population; age distribution and ethnic mix; educational levels; occupation, income levels, household patterns; and regional char-acteristics and movements.

Economic Environment like purchasing pow-er, taxes, economic growth, per capita income, prices, savings, debt, and credit availability.

Income Distribution like very low incomes, medium incomes and high incomes.

Natural Environment like air, water pollution, rawmaterials,costofenergy,draught,flood,earthquakes, weather, climate etc.

Technological Environment like techno-logical change, research & development intellectual property rights, availability of technical people.

Political-Legal Environment like laws, govern-ment, legislation regulating business.

Social-Cultural Environment like social be-liefs, values, norms, culture, national and sub-culture.

7. Marketing Management

Marketing management is deciding and executing the very marketing concepts of choosing target markets creating superior customer value, product, pricing and distri-

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Figure (1-3) Marketing Mix

Variety quality

size weight features package features

Product Price Place

Target Market/Consumer

+ + +

Credit policy discounts

installments cash

payment period

Distribution channel

deliveries transportation

inventory availability

logistics

Advertisement public relations sales promotion, personnel selling direct marketing

Promotion

4) Declining Demand

It is the state where the demand for a par-ticular product drops considerably. Exam-ple, Nokia witnessing a considerable drop in demand for their mobile handsets, Black-berry also witnessing the same. The market-ers need to use the marketing mix to deal with such a critical situation. Correctly un-derstanding the dynamic consumer behav-ior and according reformulating marketing strategies could prove to be effective in containing the drop in demand for the product.

5) Irregular Demand

There are some products for which there might be a periodic demand variations caus-ing underutilization of available resources leading to over capacities at certain times. Ex. demand for ice creams is more in sum-mers than in winters, consumers visit restau-rants more during evenings than during day time.

The marketers need to create such a mar-keting package that leads to optimum uti-lization of resources, utilizing the capacities during idle or low demand times. They must practice called Synchronic Marketing (adjust pricing, promotion & other strategies) which

would create a balance of demand for the product.

6) Full Demand

Full demand is a state when production equals consumption. E.g.: Hyundai car in Sau-di Arabia. The marketers need to maintain the existing level of demand by monitoring changing consumer taste and preferences over time and altering marketing strategies accordingly.

7) Overfull Demand

Overfull demand is a state when production is less than consumption. Eg: Apple’s iPhone-6 is having a overfull demand in Saudi Ara-bia. Marketers need to formulate strategies which would lead to reduction in demand It could be called ass De-marketing. This could involve increase in price for the product, re-ducing promotional efforts etc.

8) Unwholesome Demand

Unwholesome demand are for products which the consumer will purchase at any cost, possibly because they have got ad-dicted to it so price may not be a distract-ing factor. Un-selling campaigns have been conducted for such kind of products exam-ple cigarettes, alcohols, pirated products.

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that are directly linked to product. The ele-ments of price are credit policy, discounts, instalments, cash, payment period etc. The elements of place are distribution channel, deliveries, transportation, inventory, avail-ability, logistics etc. The elements of promo-tion are advertisement, public relations, sales promotion, personnel selling, direct market-ing. These elements constitute marketing mix. Marketing mix is mixing the elements of 4P’s in a proportion which is preferred by the target market so that consonance is estab-lished between the target market and the product. It could be even taken to custom-ization levels. While formulating marketing mix strategies, marketers should consider the macro and micro environmental factors.

For smooth exchanges to take place and more number of exchanges to take place there has to be consonance between the product and the person. Every individual has different tastes and preferences and as such for the consonance to be created, different components of product, price, place and promotion have to be mixed according to the preference of the consumer to increase the probability of exchange.

8. Marketing Mix

Marketing mix is one of the extremely import-ant tools to establish consonance between consumer and the product. Proper market-ing mix would lead to more exchanges and thusbetterrevenuesandprofitsforbusiness-es. This tool is aimed to achieve desired re-sponses from their chosen consumers. As say for example different people have different tastes towards food, some people like more spicy food, some like for salty food, some like more sweet food and so on. When the food is prepared we need to mix various ingredi-ents according to the taste and preference of the person. And as according proportions of ingredient have to be mixed so that the personfindsthefoodtastyandgetsatisfied.In marketing these ingredients are product, price, place and promotion also called as 4P’s or marketing mix. When the elements of 4P’s are mixed in correct proportions accord-ing to the consumer’s taste and preference thentheconsumergetsatisfiedandweareable to achieve the marketing objective. The elements of product could be variety, qual-ity, size, weight, features, packaging, fea-tures, reparability, durability, etc. those things

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2After studying this chapter, it is expected that you will be able to:

1. Know the concept and characteristics of strategic planning for marketing activity.

2. Understand and analyze the steps of strategic planning for marketing activity.

3. Comprehend the importance of strategic planning for marketing activity in the business organizations in the modern age.

Strategic Marketing PlanningCHAPTER

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1. Introduction to Strategic Marketing Planning

Marketing is a discipline which is crucial to the success of any and every business. As planning is the first step towards starting ofany business, marketing function also begins with planning often referred to as marketing planning. Planning refers to deciding as to what to achieve, where to reach and how to reach the desired destination. When this planning is related to marketing function, it is referred to as marketing planning. Strategy refers to the overall and long term approach towards planning. This strategic marketing planning in a company is done at different levels and as such the kind and scope of stra-tegic marketing planning at different levels of a company differs, those at highest level would have comparatively wider and broad scope and as it trickles down the compa-ny levels, the scope of strategic marketing planning gets more concentrated and con-tained. Before going into the intricacies of strategic marketing planning, we will brush through some related terminologies.

Strategic planning is the process of creating a consonance between organization’s re-sources and objectives with its dynamic mar-ketingenvironmenttooptimiseprofits.

The reason for strategic planning is to give direction to the businesses so that they can achieve sustainableprofits,growthandde-velopment by having a competitive edge.

Strategies for company’s businesses are plannedforadefinedtimeperiod.Strategycan be developed at different levels of busi-ness, like at the top level of the company, at a subsidiary level of the company and so on.

Strategic planning involves first identifyingthe present status, in terms of existing (SWOT) Strengths, Weaknesses, Threats and Oppor-tunities and translating it in terms of strategy development covering the following:

* Vision * Mission * Values * Objectives * Strategies * Goals * Programs

1.1. Vision

Vision is the realistic view one has about the shape of business at a futuristic point of time. This calls for having a clear picture of the or-ganizationinfivetotenyears’timeframeinterms of its possible looks, scale and scope, business arenas, organizational structure, markets served, technological possibilities, business image and value etc.

1.2. Mission

Mission indicates reason for existence, the nature, aims and activities of the business in terms of business characteristics, organiza-tion functions, customer segments, product offerings, scale of operations, product appli-cations, company policies, production and product technologies etc. The mission to be realistic and practical and should be for a long term. As the marketing environment changes, the mission of the organization could change but should not change in short term as mis-sion statement guides the geographically dispersed or dispersed employees anywhere towards a common purpose. Mission of a com-pany is represented in few simple and clear statements covering the above said scopes.

1.3. Values

Values are underlying principles which gov-erns the business as a whole. Values are againstatementswhichreflectastowhatallthings the company give importance to cul-ture, product, means to achieve objectives, conduct and relationships with its stakehold-ers. Stakeholders include society at large, customers, suppliers, distributors, government and its institutions, company’s employees etc. Values are fundamentals to achieving the mission of the company.

1.4. Objectives

Objectives states the results company strives to achieve in medium to long term time frame. Objectives should take into consideration the expectations and wants of stakeholders, involving employees, consumers, suppliers,

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For example: To acquire 20% market share in the next 5-years, To open 20 new stores in Saudi Arabia by 2014, To acquire 20% market shareinthenextfiveyears.

1.7. Programs

Programs are small elements of overall strat-egy whicharelaidoutforeffective,efficientand time bound implementation of strategic plans. These should cover aspects like the task layouts, time scales, assignment of per-son responsible for particular tasks, resources needed, and performance targets.

Programsareverymuchspecificinnature,tothe extent of organizing and executing spe-cificactivities, time lines,assigning responsi-bilities etc. to achieve goals.

Strategic planning involves 3-major steps plan-ning, implementation, and control. This happens at different levels of business, corporate or head-quarters, division, business and product level.

2. Levels of Strategic Marketing Planning

We can understand and differentiate be-tween corporate, division, business and product level by taking an example of a company: TATA Company in India.

distributors etc. These objectives could be growth,maximizingprofitability,diversificationetc. It should have a time line and should state the resources’ needed to achieve objectives.

1.5. Strategy

Strategy is the broad approach in framing ho-listic action plan to achieve the mission, ob-jectives etc. of the company. These long term holistic action plans cover whole of business activities and give directions to various busi-ness functions leading them to vision already planned forand toeffectivelyandefficient-ly achieve mission of organization. Strategic decisions to business may involve growth, retrenchment, stabilization or combination of these, the strategy could be through low cost leadership, focus strategy, differentiation strategy. This could also be seen in terms of strategic objective.

1.6. Goal

Goals indicate what business unit want to achieve specifically in terms of the statedobjectives. Businesses have both short-term goal and long-term goals. For terming it as goal it should be in quantity form, consistent in nature, realistic,and achievable in prac-tice. The company could have many goals at the same time but should be prioritized.

STEPS INSTRATEGIC PLANNING

Corporate Level

Division Level

Business Level

Product Level

Organizing

Implementing

Measuring Result

Diagnosing Result

Corrective Action

PLANNING IMPLEMENTING

CONTROLLING

Figure (2-1) steps in Strategic planning

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a brief statement about why the business ex-ists and what it wants to achieve e.g. Mission statement of Nike Company is: “To be the world’s leading sports and Fitness Company”.

According to Peter Drucker, mission would include nature of business, type of consum-ers, value additions, major policies, futuristic view etc. A well thought mission statement besides incorporating above aspects also provides functionally and geographically dis-persed employees with a common direction independently but yet collectively leading towards realizing the common organization’s goals. Mission statements also incorporates the company’s major competitive scopes. These include:

• Industry scope: The mission statement should also include the future range of products from different industry which the company could incorporate in its businesses or range of industries. For example, Tata operates in hotel industry, automobile industry, steel in-dustry etc but in future if it wants to enter say space industry, this should be evident from its mission statement.

• Products and applications scope: The range of products from within the indus-tries which the business is operating and possible applications of these product that a company will supply. Example What all could the company Apple provide, Lap-tops, Desktops, I pads, Mobiles etc. and then whether it could get into new ven-tures say such as interactive televisions etc. and within say desktops what all ap-plications the product would be able to perform like desktop could be used as a computer, monitor to some other equip-ment, television etc.

• Competence scope: The core competen-ciesthatacompanywillbeusedtofightcompetition example Apple and Sam-sung used the smart phone technology to rival Nokia.

• Market-segment scope: The different new markets a company could add to its present market or new type of customers the busi-nesses would add to its present customers.

TATA corporateheadofficeissituatedinMum-bai (India) which controls all business opera-tions of all divisions spread across the world.

TATA has several divisions as automobile divi-sion, hotel division, steel division etc.

Within each division they have different busi-ness levels like in automobile division they have the car business unit, truck business unit, bus business unit etc.

Within each business unit they have different product levels like in the car business unit they have different products like “Indica” car, “In-digo” car, “Jaguar” car etc.

3. Corporate and Division Level Planning

This planning is done at the highest level of the company. It is called corporate or head-quarters level planning and involves pre-paring of mission statement, policy framing, setting objectives and goals, strategy for-mulation, establishing guidelines for business and product units so as to enable them to prepare their strategic marketing plans at their respective levels. The degree of free-dom given to varying levels in the organiza-tion to set goals and to formulate strategies differs from company to company. Strate-gic marketing plans formulated at different levels, together in symphony with each oth-er leads the overall company to achieve its corporate mission.

Strategic Planning at the corporate and divi-sion level involves the following steps

1. Formulating corporate mission

2. Establishing Strategic Business Units (SBUs)

3. Assigning resources to different SBUs

4. Planning new businesses

3.1. Formulating Corporate Mission

The reason for existence of a business is re-ferred to as the mission of the business. It is

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For a business to be a separate strategic busi-ness unit, it should satisfy the following major conditions:

(1) It should be a business or related set of businesses that can be separated from the rest of the company;

(2) This business or set of businesses as a unit should have its own competitors; and

(3) This business or set of businesses as a unit should have its own manager responsible for its overall performance and is respon-sibletomakeitaseparateprofitcentre.

3.3. Assigning Resources to Different SBUs

The reason for separating SBUs from rest of businessestoisformulatespecificmarketingstrategies, assess its performance separate-ly, fix accountability and as such to assignresources in terms of money, men and ma-chines. Managers at corporate level use sta-tistical tools and business portfolio evaluation model to allocate appropriate resources to different SBUs based on possible profit SBUscould generate. SBU evaluation model in-clude that of Boston Consulting Group mod-el and the General Electric model.

3.3.1. The Boston Consulting Group Approach

Developed by Bruce Henderson of The Bos-ton Consulting Group (BCG), was one of the formostmanagementconsultingfirminearly1970’s, it is a growth-share (determinants of profits) matrix which helps in planning for al-location of resources’ to various SBU’s.

It assumes:

a. Relative market share is directly propor-tionaltoprofits.

b, To increase market share, businesses wouldrequiremorefinancialresources.In-jectingfinanceswouldhelpbusinesstoin-crease its capacity and face competition.

So a matrix between relative market growth rate and relative market share could act as

For example, Tata makes expensive cars for the upper class market e.g. Land Rover, Jag-uar with worldwide market and makes cars like Indigo, Indica for mid segment consum-ers in India but could later add other coun-tries as its market for mid segment cars also.

• Vertical scope: It cannotates the distri-bution channel, the number of intermit-tent agencies involved from the place of production to place of consumption and distribution channel design and the future changes thereon. What all func-tions would the company get into in terms of forward, backward or horizontal inte-gration e.g. For cars TATA manufactures, would they even start with a tyre manu-facturing facility also or would they also go for retailing of the their car also.

• Geographical scope: The possible geo-graphical locations in terms of regions or countries in which businesses could ex-pand its operations. Companies can func-tion in a specific city or state or countryand which all places, it would function or would they go global. On the other hand multinationals such as Unilever and Procter and Gamble, operate in almost every part oftheworld.Thisscopeisreflectedintheirmission statement.

Abusinessmustdefine,redefineandreviewitsmission if therearesignificantchanges inmarketing environment. Xerox from being a copying machine has projected itself as companybringinginofficeefficiency.

3.2. Establishing Strategic Business Units (Sbus)

Strategic business units are businesses which could be described in terms of set of related activities which aims at satisfy-ing consumers need profitably and should thereby define itself in much broader terms of producing product than what it is doing presently taking into consideration product, application and industry scope. Example Aramco could instead of defining itself as a petroleum producing company in Saudi Arabia, could define itself as an energy pro-ducing company.

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es in terms of money, men and materials. Cash generation is less. It is a “problem child” and only after careful analysis, the strategy should be to build (invest). Question if suc-cessful goes on to become Stars.

Stars are businesses with high relative market growth and at the same time enjoys high rel-ative market share. As these businesses grow, the businesses travel from question mark quadrant to star quadrant. It generates large cash because of high market share but also consumes large cash to maintain growth rateandfightcompetition so starsmaynotgenerate positive cash flow, the strategy isto hold the position. Successful stars become cash cows.

Cash cows are businesses with low relative market growth but enjoys high relative mar-ket share. Usually these businesses come to this quadrant from the star quadrant. A cash cowproduceslargeprofitsforthecompanyand produces more than what it consumes, Profits should be “milked” to fund for otherbusinesses or activities, so the strategy is to harvest.

Dogs are businesses with low relative market growth and low relative market share. Over a period of times, new products come in and

an indicator between investment and returns i.e. cash generation and cash consumption.

Cash required by rapidly growing business units could be obtained from business units which are in mature stage.

This model is based division of SBU’s into 4-classes or categories i.e. between relative market growth rate on the vertical axis and relative market share on the horizontal axis.

In the matrix the SBU’s are spotted as ac-cording to the growth-share states and are represented by circles, the area of the circle represents the size of the business.

This model is based on division of SBU’s into 4-classes or categories, each quadrant rep-resenting different businesses based on rela-tive market share and relative market growth:

A question mark usually represents new busi-nesses. Normally when one begins a new business, it would be business with high mar-ket growth potential but since it is new and there are already competitors present in the market, the relative market share is low. As time passes this new business would try for more market share in this high growth arena. Initially new businesses need lot of resourc-

Stars Question Marks

Cash Cows Dogs

20%

15%

10%

5%

0%

10.0 5.0 1.0 0.5 0.0

Mar

ket G

row

th R

ate

Relative Market Share

BOSTON CONSULTING GROUP(BCG) GROWTH-SHARE MATRIX

Figure (2-2) Boston Consulting Group

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market,profitability in themarket,competi-tion, industry growth, future prospects, and competitor’s marketing strategies etc.

There are also factors which affect Competi-tive Strength and these include: business own strengths, brand equity, financial strength,market share, consumer base, its own em-ployees, its public relations etc.

Using dimensions of market attractiveness and business strengths and using three crite-ria for each – high, medium and low, the GE matrix is divided into nine cells.

Each SBU according to its market size and share is represented with respectively sized circle, the circle itself acts as pie chart show-ing its market share with the shaded area and possible future position could be directed by

theoldbusinessesstartgeneratinglowprofitsor eventually start making losses. Since these businesses are cash traps, the strategy should be to divest.

3.3.2. The General Electric Model

General Electric screen matrix is a different SBU evaluation model essentially derived from Boston Consulting Group’s model. For General Electric Company, it was modelled by McKinsey and Co.

In GE matrix, the axis are made between market attractiveness and business strengths and uses high, medium and low criterions for each thus forming nine quadrant matrix.

Now there are factors which affect Market Attractiveness and these include: Size of

PROTECT POSITION • Invest to grow at

maximum digestible rate • Concentrate effort on

maintaining strength

INVEST TO BUILD • Challenge for leadership • Build selectively on

strengths • Reinforce vulnerable

areas

BUILD SELECTIVELY • Specialize around

limited strengths • Seek ways to overcome

weaknesses • Withdraw if

indications of sustainable growth are lacking

BUILD SELECTIVELY • Invest heavily in most

attractive segments • Build up ability to

counter competition • Emphasize profitability

by raising productivity

SELECTIVITY/MANAGE FOR EARNINGS

• Protect existing

program • Concentrate

investments in segments where profitability is good and risks are relatively low

LIMITED EXPANSION OR HARVEST

• Look for ways to

expand without high risk; otherwise, minimize investment and rationalize operations

PROTECT AND REFOCUS

• Manage for current earnings

• Concentrate on attractive segments

• Defend strengths

MANAGE FOR EARNINGS

• Protect Position in most

profitable segments • Upgrade product line • Minimize investment

DIVEST

• Sell at time that will maximize cash value

• Cut fixed costs and avoid investment meanwhile

High

Medium

Low

MA

RK

ET A

TTR

AC

TIV

ENE

SS

High Medium Low

BUSINESS STRENGTHS

GENERAL ELECTRIC MATRIX

Figure (2-3) General Electric Matrix

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3.4.2.Diversification growth

The other way to plan new businesses is by di-versification. Diversification basically relatesto coming out of altogether new products. Diversificationgrowthcouldtaketheformofconcentric diversification, horizontal diver-sification and conglomerate diversification.Concentricdiversification relates tocomingout with altogether new products which are targeted towards a different set of market than the current market but these products make technological and marketing syner-gies with present set of products. Horizontal diversificationalsorelatestoaltogethernewproducts which are technologically different or has no relation with the current set of prod-uct but caters to the need of present market. Conglomeratediversificationrelatestoalto-gether new products not related to current products and also caters to altogether new market.

Again the business growth strategy could also be achieved through strategies like mar-ket penetration, market development, prod-uctdevelopmentanddiversification.

Market Penetration: Market penetration means to be more aggressive with present consumers and having the same portfo-lio of products. This could be done through aggressive promotional campaigns and in-tensive distribution network. This helps the company increase its total salesandprofitsby increased quantum and frequency of purchases by its present set of consumers and also helps increase its market share.

Market Development: Market development means to include more and new consum-ers for its present portfolio of products. This can be achieved by enhancing the geo-graphical scope or market scope. This helps thecompanyboost its salesandprofits. Forexample, Samsung increased its business by entering into many more countries than previously it was into. The companies can adopt a multinational (different strategy for different countries) or global strategy (same strategy for all countries) to enter into foreign markets.

arrows, upward direction arrow representing projected to gain strength with respect to competition.

The strategies for the SBU’s as according to its position in the matrix is presented in the di-agram.

3.4. Planning New Businesses

Corporate management desires higher prof-its for the SBU portfolio. There could be many ways to achieve it. The major ways by which business could be increased involves inten-sive growth strategy, integrative growth strat-egyanddiversificationgrowthstrategy.

3.4.1. Intensive growth

This strategy is based on expanding the cur-rent range of product and including more number of consumers. The company decides on increasing the current level of operations with present product portfolio. Through inte-grative growth the businesses also achieve cost economies through economies of scale. Like for example Al Rajhi banks opening more number of bank branches in Saudi Arabia to increase its business.

3.4.2. Integrative Growth

Business could also be increased by vertical or horizontal integration of business. Vertical integration could be two types’ backward integration and forward integration. Back-ward integration is when the current business incorporate the activities done by its suppliers is when or merges or acquires the business of suppliers. Forward integration is when the cur-rent business incorporates the activities done by its distributors. Horizontal integration is when the current business incorporate the activities done by its competitors or when merges or ac-quires the business of competitors. This could even be seen as expanding the business by opening up a related business other than the current business for example Al Rajhi bank opening a new business, say Al Rajhi money transfer or al Rajhi insurance, these business are related to its current business of banking.

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4.1. Business Mission

As in corporate level mission is made for the whole set of business portfolio, business mis-sion concentrates at formulating mission for the business only, but in line with corporate mission. The mission of the is discussed at the beginning of this chapter under corporate mission heading, the same applies here but at business level only.

4.2. Swot Analysis

SWOT analysis relates to analysis the business environmental factors both at micro and macro level. It calls for studying the intrinsic and extrinsic environmental analysis under which the business is operating. “S” and “W” represents strengths and weaknesses respec-tively of the business which are internal to the business and could also be called internal en-vironmental analysis. “O” and “T” represents opportunities and threats respectively faced by the business which are external to the business and could also be called in terms of

Product Development: This strategy calls for new product development for its present mar-ket which would help them increase their sales andthusprofits.Thenewproductdevelopmentincludes modification to its current product,newmodels,newfeatures,benefits,altogethernew products etc. The introduction of Apple’s “iPhone 6” is an example in this regard.

Diversification Strategy: This strategy aimsat coming out with new products for new mar-ket thus helping the company achieves more sales and thus more profits. The new prod-uct or new businesses are altogether new to its present business portfolio. Example: if Dell, which is in manufacturing of computers (desktops and laptops), starts manufacturing mobiles,itwouldbediversification.

4. Business Strategic Marketing Planning

The followingfigure shows thebusiness stra-tegic marketing planning process for each business or SBU and is represented by 7-steps:

Figure (2-4) Planning New Businesses

Present New

Present

New

Products

Markets

Market

Penetration

Product

Development

Market

Development

Diversification

Planning New Businesses

Figure (2-5) Business Strategic Marketing Planning Process

Business Mission SWOT Analysis

Internal & External Environment

Goal Formulation

Strategy Formulation

Program Formulation

Implementation

Feedbackand Control

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4.2.2. Internal Environment Analysis (Strengths and Weaknesses)

The sum total of all that very close to the busi-ness and that which affects business activi-ties and formulation of marketing strategies is said to be the intrinsic environment which comprises strengths and weaknesses of the organization.

Strengths are characteristics of the busi-ness that give it an advantage over others. Weaknessesare characteristics that place the team at a disadvantage relative to others.

The strength and weakness factors may in-cludeallof the4-P,aswellasmarketing,fi-nancial, manufacturing, and organizational competencies and businesses need to peri-odically evaluate it.

4.3. Formulating Goals

Once environmental analysis is over i.e. SWOT analysis is completed, we go for the next step of formulating goals for the business. There could be many goals which could be formulat-edbutmustbespecific,measurable,achiev-able, realistic and time bound. Formulation of goals helps business achieve its objectives more effectively and efficiently. The goalsshould be set according to priorities, should be quantitativeinnature,shouldbetimespecific,and should be realistic and consistent.

Example:’ to achieve a sales of one million dollar over a period of six months’, ‘to get a return on investment in one year’s time’ etc.

4.4. Strategy Formulation

Strategy is the overall long term action plans to achieve the already set out goals. It is an ho-listic approach which analysis overall business environment to formulate marketing strategies which could help business grow and counter risks. Michael Porter has suggested basically 3-types of strategies to be formulated for ef-fective and efficient achievement of goalsand these are cost leadership, differentiation, and focus strategies.

external environmental analysis. Internal and external environmental analyses are togeth-er called SWOT analysis.

4.2.1. External Environment Analysis (Opportunities and Threat)

All business functions under given set of dy-namic environment is segregated into micro environment and macro environment. Micro environmental factors are those factorswhich are very much near to the business and that the business can influence these factorsand the business itself could be influencedby these factors. These factors include cus-tomers, competitors, distributors, employees and suppliers. Macro environmental factors are those factors which are little away from business and the businesses have to function under these conditions. These factors affect businesses but businesses cannot do any-thing to these factors but has to submit to it and adjust itself to this macro environment. The macro environmental business factors include demographic factors, economic factors, technological factors, politico-legal factors, socio-cultural factors and natural factors. Management needs to continuously monitor the marketing environment to iden-tify opportunities and threats and modify its marketing strategies accordingly.

A marketing opportunity is a business pros-pect; current business is not functioning but possibleareatoearnprofits.Thepossibilityofsuccess of business depends on whether the strengths of business are able to meet the needs of the target market and has a com-petitive advantage. The more the company delivers value, the more probability of the company achieving sustainable profits andlong term survival.

A business threat is an external environmen-tal factor that risks the business of its sales or profitsand if notcounteredbyappropriatemarketing strategies poses serious threat to its salesorprofitsormarketor theveryexis-tence of the business. Serious threats must be carefully monitored and counter plans should be developed to tackle the threats.

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implementing the selected strategy is called program formulation. For instance, if the busi-ness selected the cost leadership strategy to achieve its goals it must plan programs to bring the cost of production down and as such to bring the price of the product down. They might have to interact with suppliers, develop technology, reengineer process, go for economies of scale etc. Overall cost cutting would enable the business to price its product lower than its competitors and thus able to achieve its set goals.

After the marketing programs are formed, the marketing people must go for a cost benefitanalysis.

4.6. Implementation

After the programs are formulated, the com-pany needs to implement them carefully. To implement the marketing programs, the or-ganization should be equipped with the right resources in terms of capital, equipment, trainedandqualifiedhumanresources, therequisite know how’s etc. Implementation should be done through the use of activ-ity charts. This helps track the responsible person, meeting timelines and organizing various activities to achieve the planned objectives.

4.7. Feedback and Control

The control part involves three steps i) mea-suring the results, ii) diagnosing the results and iii) taking corrective actions. The firststep involves identifying the present position where the company has reached in terms of achieving the desired planned objectives in line with its vision and mission statements. The secondstepinvolvesfindingoutthereasonsfor aberrations from the planned outcomes. Thefinalandthethirdstepinvolvereviewingand revising its programs, strategies, or even objectives as according to the outcomes of the audit or the diagnosed problems. Ex-ample of Nokia once a market leader in the mobile segment lost its leadership to com-panies like Apple and Samsung as it was not able to keep in pace with smart mobile

Cost leadership: According to this strate-gy, the very basis to achieve goals to price the products less than theircompetitors. This is done through cost reductions which are achieved through economies of scale, tech-nology and process reengineering. The main aimistokeeptheprofitmarginslowandin-crease sales thus overall leading to impro-vised profits and effective achievement ofgoals. In laptop computer industry, “Acer” practices this strategy to achieve its goals.

Differentiation: According to this strategy, the business wants to improve its sales and thus profits by coming out with a productwhich is different from any of the product which competitors offer in the market. The basis of differentiation could be product itself intermsofitsbenefits,features,style,qualityetc., service in terms of training, repair and maintenance, installation etc., personnel in terms of their competence, reliability, trust-worthiness, knowledge etc., intermediaries in terms of their expertise, performance etc., and image in terms of symbols, colours, logos etc. Apple Macintosh, for example, differen-tiates itself through technology not available in other competitor’s product.

Focus: According to this strategy, the business restricts itself to some very specialized range of product in which their core competency lies and concentrates on niche market. For example Philips which has several product portfolios like music systems, televisions, shav-ing accessories, lighting etc. is now planning to shed all other businesses and concentrate on just lighting systems in which its core com-petency lies but wants to range of special-ised products in lighting.

Johnson & Johnson for example just concen-trates on baby products and focuses on a very niche segment of the market.

4.5. Program Formulation

After the business chooses one of the strate-gies or combination of above said strategies, the details of the strategy has to be worked out. This details of how to exactly go about

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5.2. Present Marketing Situation

This is introductorypartbriefingabout situa-tional analysis and presents the background data on macro environment (economical, legal, technological environment), micro environment (company resources, suppliers distributors etc.), market analysis (industry structure, competition, market share, market size, competitor’s strengths and weaknesse-setc.) and consumer analysis ( buying pref-erences, factors effecting buying decisions etc.).

5.3. Opportunity and Issue Analysis

This section is to do with SWOT (strengths, weaknesses, opportunities and threats) anal-ysis facing the product and coming out with critical success factors and sustainable com-petitive advantage.

5.4. Establishing Objectives

This part of the marketing plan details the ob-jectivestobeattainedforspecificproductsintermsoffinanceandmarketingobjectives.

5.5. Formulating Marketing Strategies

This section explains the strategy to be ad-opted for the marketing tools in terms of product (brand name, brand image, brand equity, quality etc.), price (pricing objec-tives, methods, discounts, allowances etc.), place (distribution channels, delivery strat-egies, geographic coverage, logistics etc.) and promotion (advertising, sales promotion, sales force requirements, publicity etc.).

5.6. Action Programs

This section is like activity chart which de-lineates marketing strategies into specificresponsibilities. This may be done through creating activity chart which details which all small tasks has to be executed, the time period to execute it and the person respon-sibletoexecuteit.Specificactionplanwithactivity charts are formulated for different products.

phones and the same we witnessed as Sony is losing its television (TV) market of LED’s TV’s to Samsung which has come out with Smart LED TV’s.

A company should do the right things rightly so as to incorporate effectiveness and effi-ciency and for this to happen, the company should measure the results, diagnose the re-sults and go for corrective actions from wher-ever needed.

5. Product Level Planning

Product level (product line brand) activities relate to developing marketing plan for spe-cific products. The plan draws inputs fromcross departments and is developed through a team effort. Marketing plan may vary in length but most marketing plans are meant for a year’s time frame. The marketing plan may take a brochure format with a thickness rangingfromfivetofiftypages.

The product level planning includes prepar-ing a written marketing plan. The marketing plan is prepared for each and every prod-uct. The plan sets out the goals and objec-tivestobeachievedbyspecificproductsina time frame and spells out different market-ing strategies to achieve them example en-vironmental analysis for the product, SWOT analysis, identifying target market, special features of the product, pricing scheme, dis-tribution channels and types of promotion and media to be used etc. taking into ac-count budgets, available resources’ and set objectives.

Usually marketing plan is divided into eight parts:

5.1. Title Page, Executive Summary and Table Of Contents

The title page consists of the Title, name of product, the period for which it is valid etc. followed by table of contents and then ex-ecutive summarybriefingabouttheoutlinesof the plan.

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out budget plan and the environmental im-pact. Thebudgetsandfinancialsaremon-itored monthly or quarterly and the results are measured, diagnosed and corrective steps are taken to achieve the planned ob-jectives.

Marketing plan for product is important as it give a clear picture about the expectations from the product and clear path to achieve the desired results from the product within a set out time frame. These marketing plans helps individual business plans which again helps in achieving the totality of the whole company’s vision, mission, objectives and goals helping realize the corporate level planning objectives. It also helps to show to the investors the reliability and trust worthiness of the company through statistical based logics the returns they would yield from their investment in the company.

5.7. Projected Profitandloss Statement

On the basis of action program budgets with-predicted sale revenues (volume multiplied by per unit price), total costs (variable and fixed),andestimatedprofitsareformulated.Financial summary is formulated in terms of monthly income statements, contribution margins, break even analysis etc.

5.8. Implementation & Control

The concluding part ofmarketing plan talks about implementation and control. It de-tails about the path to reach the goals set and control mechanisms to ensure effec-tiveandefficientachievementofgoals.Thiscalls for continuous monitoring of activities at each level and see whether what has been planned in terms of sales, revenues, profits are being achieved within the set

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After studying this chapter, it is expected that you will be able to:

1. Know the concept and importance of consumer behavior.

2. Identify the elements and factors affecting the purchasing behavior.

3. Comprehend the different stages of purchase process.

4. Analyze the consumer behavior.

Consumer BehaviourCHAPTER

3

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ing place creating more revenues and thus profitsforthebusinesses.Thebetterbusiness-es are able to understand the consumers, better would be their competitive edge and better would be their performance.

Study of consumer behavior is of immense importance to any and every kind of busi-nesses. As for the scope of this chapter, con-sumer behavior would include the factors affecting consumer behavior and the study of consumer purchase process.

Consumer starts the thought of exchange or purchase of product from the time of need generation in his/her mind, that is the con-sumer feels a sense of deprivation towards a certain product which is created, initiated by internal and external stimuli forces. The inter-nal stimuli forces include the feeling gener-ated from within the mind of the person like individual concepts, personal dreams, seen unseen factors, imaginations etc. The exter-nal stimuli forces may include technology, economy, demography, culture, nature etc. The marketing mix components and the fac-tors influencing consumer behavior wouldtrigger the consumer towards the beginning of the purchase process ending with the post purchase behavior.

Consumer goods are bought by consumer for personal use and consumption and not for further selling or producing other product for the purpose of selling. It could be a conve-nience product such as grocery items, mag-azines and drinks, shopping product such as refrigerator, washing machine, furniture etc. or could be specialty product such as high value products, luxury or premium products.

2. Factors Influencing Consumer behaviour

The factors influencing consumer behaviormeans the factors which affects the consum-er’s choice of product, brand, timing of pur-chase, quantum of purchase and place of purchase. The factors influencingconsumerbehavior broadly could be categorized into four major categories and those are: cultural

1. Introduction to Consumer Behaviour

All that happens in business, all that what matters in business all that what lays founda-tion to businesses are consumers. Consumers are fundamental factors on which the struc-tural strength of any business is dependent upon. If consumers become weak and con-sumption goes down so does the business becomeweakandprofitcomesdown.

Consumers are people and entities who con-sume products or in other terms they are the end user of the product. Consumers are who are in need of product. It is they with whom actual ex-change of product happens. They are the pro-spective buyers of product and who forms the market for product. Consumers could be indi-viduals, households, organizations, governments, international institutions etc. They are the source ofsales,revenueandprofitsforbusinessesandtherefore holds utmost importance for each and every business.

Behaviour is a psychological process of acting and reacting in different situations. How would a consumer react to purchase of a product say if consumer income increases or say if the price of the product decreases or say arrival of substitute product or in case a competitor comes up so on so forth. Would consumer’s purchase remain the same or whether he would increase their purchase or whether they would decrease their purchase or would they stop buying the product are all possible ways to react to different situations and the specif-ic action they take under different situations is what defines their behavior. As such busi-nesses need to understand and continuously monitor the complex and dynamic consumer behaviourial trends to sustain in the competi-tive market.

Consumer behavior gives direction and leads to businesses to formulate its business strate-gies. Businesses by continuously monitoring consumer behavioral trends would be able to align their marketing strategies to create a consonance between the product and the consumer which leads to increased proba-bility and possibility of actual exchange tak-

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language, education, religion, physical envi-ronment etc. For example religion is a com-ponent of culture which affects purchase of product. In Muslim religion pork and alcohol is considered to be “haram” meaning con-sumption of these products are considered to be sin therefore Muslims don’t purchase these product as a part of their culture.

Brand choice is also affected by culture. For example Palestine people don’t tend to pur-chase any brand which has its origin from Is-rael.

Timing of purchase is also affected by cul-ture. For example according to Muslim tradi-tions, the most important occasions include that of Ramadan, Id and Haj. During this time the purchases goes very high particularly in Muslim countries These traditional festivals are normally celebrated in the months of July and October and during these months, the purchases goes exceptionally high. In Christian dominated countries, Easter and Christmas are traditionally celebrated festivi-ties which normally happen in the months of April and December during which period, in these countries and during these months, the purchases goes exceptionally high.

Quantum of purchase is also affected by culture. For example demographics which forms a part of social structure, a component of culture affects quantum of purchase. Size

factors, social factors, personal factors and psychological factors.

3. Cultural Factors

One of the major factors affecting consumer behavior is the cultural factors. Cultural fac-tors comprises of elements like culture, sub-culture and social class.

Culture is a set of values, beliefs, manners, attitude, customs, and way of life followed by a particular class of people. Culture in its exhaustive meaning includes aspects of society like aesthetics (dance, drama, painting, architecture), education, social structure, manners and customs, values and beliefs, communication, religion, physical environment (geography, topography & cli-mate). Consumer’s affiliation to particularculture would affect their behaviour in terms of product what they purchase, brand what they purchase, timing of purchase, quantum of purchase and place of purchase.

3.1. Culture

What product a consumer would purchase is affected by culture. Culture is a set of val-ues, beliefs, way of life, institutions held by some category of people and includes as-pects like dance, drama, music, clothes, food, manners, customs, social structure,

Product Choice

Brand Choice

Timing of purchase

Quantum of purchase

Place of Purchase

Cultural Social Personal Psychological Affecting Consumer's

FACTORS AFFECTING CONSUMER BEHAVIOUR

+ + +

Culture

Subculture

Social class

Family, friends & relatives

Reference groups

Roles & status

Age &Life cycle stages

Personality

Lifestyle

Economic situation

Occupation

Motivation

Perception

Learning

Attitude & Beliefs

Figure (3-1) Factors affecting consumer

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products, high brand image products, may go for bulk purchases, may purchase any time they wish to, may purchase from exclusive or branded retailers. This purchase pattern would differ for middle or low class people who may not purchase new technology products, may choose local brands or unbranded products, may go for less quantum purchases, would purchase products when there is high neces-sity, may purchase from intensive distribu-tors.Assuchsocialclassinfluencesconsumerbehaviour.

4. Social Factors

The second major factor affecting consumer behavior is the social factors. Social factors include factors like family, friends and rela-tives, aspirational and disassociation groups, roles and statuses. These factors affect product choice, brand choice, quantum, timing and place of purchase.

4.1. Family, Friends and Relatives

Family as such can be segregated into 2-segments, family of orientation and family of procreation. Family of orientation consists of father, mother and siblings. Family of procreation comprises of wife and children.

Family members affect product choice, brand choice, quantum, timing and place of purchase. The basic values tastes, prefer-ences, need perception for a product has its basic source from family and purchases are highly influenced by them. One mayhave to purchase products for home util-ities, while being with parents, their choices have to be kept in mind, same with wife and children, the purchase to have be made taking into consideration their taste, choice and preferences. Therefore one’s purchase of product would witness the influence offamily members in terms of product choice, brand choice, quantum, timing and place of purchase.

Friends and relatives affect purchase. Many a times the need feeling itself is generated from friends and relatives. Seeing a friend

of family differs from culture to culture. Indi-an culture normally witnesses a joint family culture. The quantum of purchase of a joint family would be normally higher than that of a nuclear family.

Place of purchase is also effected by cul-ture. For example social structure includes high, medium and low income groups. Their selection of retailers may differ. There are retailers with many frills and all out services and charge premium. Rich people may like to buy from such retailers but not the middle or low income group.

3.2. Subculture

Another domain within the larger culture is subculture. Subculture effects consumer behaviour. Subculture is a culture within the larger domain of culture and incorporates certain changes in the components of cul-ture. Subculture may cut across countries, could be regional, and could be sect of a re-ligion. For example within say Muslim religion, Sunnis and Shias may form subculture within a larger Muslim culture. As such the choice of product, choice of brand, quantum of purchase, time of purchase and place of purchase may differ between the two sub-cultures. Even within a country different re-gion constitute subculture and may have some difference in components of culture within the larger culture of country and as such affects product what they purchase, brand what they purchase, timing of pur-chase, quantum of purchase and place of purchase.

3.3. Social Class

Consumer behavior is also affected by social class which again forms a part of cultural factors. Society could be divided into different classes based on criterions like income, caste gender etc. Say if we take income as basis to categorize society, categories could be upper class [rich or high income people], middle class [medium income people, lower class [poor or low income people]. Upper class people may purchase new technology

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brother for his siblings, husband to wife, friend for a friend, employee for an employer and so on so forth. Being in so many roles, the expec-tations and depth of mutual relationships vary. The requirements also vary from role to role for example, the kind of dressing for a party where one’s role is as a guest would vary from the kind of dressing one does going toanoffice,whereheisanemployee,wouldvary when he attends an association where he could be the head of association, the kind of say pen he keeps, the shirt he wears, the shoe he wears, the watch he uses etc. could be different because different roles require him to use different products, different brands etc. As such roles & status affects consumer behavior.

5. Personal Factors

Personal Factors also influence the productchoice, brand choice, timing, quantum and place of purchase. Personal factors include factors like Age and life cycle stages, person-ality, lifestyle, economic situation etc.

5.1. Age & Life Cycle Stages

Age & life cycle stages refer to different ages and stages of life and at different ages and stages the choice of product, brand, timing, quantum & place of purchase differs. Man when born as an infant, his requirement is that of mother milk, soft bed, soft clothes, blanket etc. When he grows to being a child his requirements differ, he needs baby food, toys, pampers etc. When he grows a little more to be able to go to school, he requires school uniform, kindergarten books, toys; he starts taking food like fruits, grains, cereals etc. As he grows further his requirements and wants undergo changes. When he reaches college, he requires branded products, requires vehicles, wants to go for leisure etc. As he finishes college and gets into profes-sional life his requirements and wants further undergo changes, he wants to travel, spend on clothes, leisure etc. When he gets married most of the expenses are for his wife, his focus is more on fulfilling his wife’s wants, spends

possess a particular product may prompt one to have one. Sometimes, at a time when one aspires to buy a product, relative may need some money for medical purpose. The money kept for purchase of product gets diverted and one may land up buying nothing. These unanticipated circumstances may cause changes in consumer purchase patterns. As such friends and relatives affect consumer behavior in terms of product choice, brand choice, quantum, timing and place of purchase.

4.2. Reference Groups [Aspirational and Disassociation Groups]

Aspirational and disassociation groups also affect consumer behavior. Aspirational group are those set of people whom one like to be, they may be role models. For example there are people who are admirers and fans of former football player “Pele”, these people would dream to be “Pele” but actually are not, to realize their dream of becoming “Pele”, these people would purchase prod-ucts used or endorsed by him. If “Pele” uses or endorses a brand of shoes then these people areinfluencedtobuythatparticularbrandofshoes.As suchaspirationalgroup influencesconsumer behaviour.

Disassociation groups are those set of people, whom one would like to keep away from. They are like foes and would not like to get linked with them. They won’t prefer to use or purchase the products which disassociation group uses or produces. For example India and China are not in good terms with each other; India doesn’t purchase any defense equipment from China. Saudi and Iran are not in good terms with each other; Saudi does not purchase any product from Iran. As such disassociationgroupdo influenceconsumerbehavior.

4.3. Roles And Status

Roles and status is also a social factor affecting consumer behavior. Roles mean the different characters a person has to play in the theatre of life. A person could be a son to his father,

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lifestyle, people living green lifestyle, rural life-style. All their purchases differ in product, brand, timing, quantum and dealer of purchase.

5.4. Economic Situation

Economic situation refer to the monetary condi-tion and creditworthiness of a person. Better the monetary condition and creditworthiness, such people would prefer premium products to be purchased from premium stores may be very frequently and the value of purchases may be high. People from weak economic backward may not prefer designer clothes or premium luxury products but would rather concentrate onfulfillingthebasicneedsoflife.

6. Psychological Factors

Psychology is the study of human mind and the factors that affect human behavior in specificconditions/situations.Thewaypeoplethink, the mental makeup which designs their behavior and reaction patterns in different situations would vary from consumer to consumer. Basically motivation, perception, learning, beliefs and attitude are psycholog-ical factors which affect human behavior and also consumer behavior.

6.1. Motivation

Motivation is that level of state wherein a person acts physically to satisfy his needs. Motivational levelsare different in different people, some people at launch of a product purchase the product, some people would wait for some time after the launch of the product to purchase it and some would purchase it at much further point of time, some people would also stay away from purchasing the product. There are some moti-vational factors for some people who may get prompted to purchase certain product for example by seeing an advertisement some people get motivated to purchase the product, some people get motivated by sales promotions etc. and as such the things by which and how consumer gets motivated influencepurchasebehavior.

on travel etc. As he becomes a father again his requirement for product, brand, timing, quantum and place of purchase under-goes changes. He is more sensitive towards expenses, starts to think about saving, future of his child, becomes attentive to purchase of child products etc. As he fathers two chil-dren, his quantum of purchase undergoes changes, he purchases bigger size products, goes for investments etc. As he grows old, his children passes out college and gets into their professional life and then gets married, consumer behavior undergoes changes. They may consider refurnishing their house, visit religious places etc. As he retires, he reduces many expenses, concentrates on medical requirements, and only spends on basic requirements. One of the spouse expires, spouse now does not require much of worldly products, instead becomes more spir-itual and more of requires the togetherness of his nears and dears. And then this life also comes to rest and with children this life cycle continues.

5.2. Personality

Personality refers to the traits and character of a person. The personality traits could be like emotional, aggressive, miser, extravagant, sporty, sober etc. As according to different personality, the product, brand choice, the timing, quantum and place of purchase may differ. A sporty person may purchase a BMW car but a sober person may go for Mercedes car. A miser purchases would be very much limited, not very brand conscious, but an extravagant may go for lavish spending, purchase new branded products from branded stores may be very often.

5.3. Lifestyle

Lifestyle is the way one lives their lives, how they maintain their life in the society they live. A person staying in a posh locality may purchase high priced branded products for use, like branded pens, watches, footwear, clothing, premium caretc. Thismay reflecthis statusand imagein the society. There are people living an urban

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attitude towards American made prod-ucts, Japanese made electronics, French perfumes, Italian designer products, while some may believe and have a negative atti-tude towards Chinese made products as it may be considered inferior and accordingly wouldinfluencepurchases.

Belief is the assumption which is taken to be true without being tested. For example people believe in the existence of God without needing any evidence or test to proveit.Beliefinfluencesconsumerbehavior.The belief that “Pork” is haram [forbidden] in Islam, anything other than “Halal” is Haram in Islam makes people who believe in Islam abstain from purchasing such products which are considered “Haram”.

7. Consumer Buying Process

It refers to the sequential steps followed by a consumer in the purchase of any product. Therearebasicallyfivesteps involved intheconsumer buying process and those are:

7.1. Realizing the Need

The purchase process begins with a feeling of deprivation towards a certain product. The feeling of deprivation could be created by various stimuli. These stimuli include internal stimuli like that of hunger, thirst, love, pain etc. and external stimuli like that of light, touch, seeing a product, discounts, technology etc. These stimuli stimulate the internal need feeling for the product in a consumer. This need feeling is created over a period of time due to constant attack by these stimu-lants. Though initially, the consumer may try

6.2. Perception

Perception relates to the organization of selected inputs to reach conclusions. What all is selected and how it is organized may lead to different conclusions and hence different reactions to the same situation also by different people. Selective reten-tion, selective distortion and selective reten-tion influences perception. A discount for aperson may sound to be good but for some people it may sound as if the company is disposing unwanted products. Some people purchase burgers because of the taste some won’t because of high calories may instead prefer salads. This is all due to perceptual differences and as such perception affects consumer behavior.

6.3. Learning

Learning basically molds the way one thinks and acts. The sources of learning include seeing, hearing, reading and experience. The summation of all the above components result in total learning output. The source and level of each of the component in different people differs and hence the level of learning for each individual differs. According to levels of learning about a product, the purchase behavior may change. Some may prefer using a medicinal product like “Aloe Vera” juice instead of fruit juice because of the knowledge about “Aloe Vera” plant.

6.4. Attitude &Belief

Attitude is the negative or positive feeling one has towards certain things. For example some people believe and have a favorable

Figure (3-2) Consumer Buying Process

Realizing the Need

Gathering Information about Products

Evaluating available and known alternatives

Purchase decision and Purchase of Product

Post Purchase Reaction/Behaviour

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analyzing the best alternative. This normally is done through mental process. He puts the attributes of the product in a row and the brands in a column so that it forms a matrix. Now for every attribute of the product he gives some weightage, the sum total of which represents the product in its totality i.e. would equal to one. Now in a scale of 1- 10, he rates the attributes for various brands. Now he multiplies rate and weights to get a value for each of the attribute for every brand. These values are added up row wise and column wise. The highest value in the row represents the brand which would give the maximum value among the analyzed alternatives for the consumer. This would be the brand he would choose to purchase.

7.4. Purchase Decision and Purchase of Product

Once this step is over, he proceeds towards purchasing the product. But before he purchases the product, there could be unfore-seen circumstances like a medical condition of a relative due to which the consumer could be forced to divert the money he may have kept to purchase the product or last minute influ-ence like a friend calling and giving an adverse comment about the chosen brand which may stop him from purchasing the product. If he does not meet any of these unforeseen circumstances, he would choose a retailer to purchase the chosen brand of the product.

7.5. Post Purchase Reaction/Behaviour

Once he purchases the product, he would use it and this would make the consumer dissatisfied, satisfied or delighted. But thisstate of mind about the product would be decided by comparing the performance of the product against the expected perfor-mance about the characteristics of the product. If the performance is less than what the consumer expected out of the product, then he would get dissatisfied and if theconsumergetsdissatisfiedhemaycomplainabout the product, file legal cases, spreadbad word of mouth, restrict other consumer from purchasing the brand etc. This would

to restrict this feeling but the stimulants may capture the consumer so much that and alongside could get motivated so much that the consumer would start physically acting to attain satisfaction by starting the process of possessing the intended product.

7.2. Gathering Information about Product

Thefirstphysicalactaftertheconsumerfeelsthe requirement for the product is to search for information about the product. The consumer starts observing and recording any information about the product. He may get information about the product from primary orsecondarysources.Primarysourcesarefirst-hand information like by seeing the product, using the product, previous experience etc. Secondary sources of information are infor-mation from other sources which may include commercial sources such as various media including television, print media like news-papers, magazines, advertisements, dealers etc., personal sources such as relatives & friends, and public sources such as credit rating agencies, news etc. He tries to get relevant and adequate information about as many competing brands of the product or may also look for information about brands of substitute product. The brand information would include that of features of the product, price of product, size, weight, color, service-ability, promotions, and availability about the product. The consumer tries to organize this collected information about the product in a way that would help him evaluate the alter-natives available so that he is able to choose the best available alterative and to purchase the same to attain satisfaction.

7.3. Evaluating available and known Alternatives

The consumers now jumps on to the proceeding step in the purchase process wherein now he starts the analysis process of the collected and organized data. Some of the known alternatives would straight away be taken out of his choice set because of some perceived perceptions about the brand. For the remaining alternative he starts

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Please note that the way consumer go through the purchase process differs from product to product. The time spent and the efforts put in each of the steps would differ according to the kind of product purchase. For conve-nience products like, soaps, groceries etc., consumer spends a lot less time and efforts in each of the purchase process steps and many a times may skip some of the steps in purchase process, for shopping products like mobiles, furniture, television, furniture, etc., the consumer may go through all steps in purchase and would give some time and put some efforts in each of the purchase process steps, for specialty products like high end electronics, premium and luxury products, the consumer would spent more of his time and efforts in each of the purchase process steps.

adversely affect the revenues and image of the business house. But if the performance of the product equals or is more than what the consumer had expected, this would make the consumer satisfiedordelighted. In thiscase,the consumer could repurchase the product, recommend the brand to others, and spread good word of mouth about the brand. This state is very favorable to the business in terms ofbothprofitsand image.This stage iswhatis called post purchase behavior. After using the product for a particular period of time, which differs from consumer to consumer until the next stimuli catches him, he would dispose of the product through selling it to some other consumer, keeping the product idle, giving it as gift, allowing other to use it etc. and would go for up gradation or would go for new product. Again the buying process may start.

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1. Know about business purchases.

2. Identify the different purchasing stages for business organizations.

3, Comprehend the factors affecting the purchasing decision of business organizations.

4. Analyze the business purchasing behavior and the factors affecting it.

Business Buying BehaviourCHAPTER

4

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or towards suppliers say if the quality of product is not as per standards, price of product changes, new regulations by government, market changes, supplier inconsistencies etc. determines business buying behaviour. Would organization’s purchase remain the same or whether he would increase their purchase or whether they would decrease their purchase or would they stop buying the product or similar reactions for suppliers are all possible ways to react to different situations and the specificactiontheytakeunderdifferentsitu-ationsiswhatdefinestheirbehavior.Assuchbusinesses need to understand and contin-uously monitor the complex and dynamic developments going on in the market to sustain in the competitive market.

Themoreeffectiveandefficientthebusinessbuying, better satisfied consumers, bettercompetitive edge and better would be the business performance.

Understanding business behavior is of impor-tance to both businesses and suppliers. As for the scope of this chapter, business buying behaviour would include participants in business buying, factors affecting business buying, and business buying process.

Business or industrial products could be cate-gorized as installations & machines such as buildings, machines used for production etc., devices suchascalculators, office furniture,screwdrivers, hammers etc., parts and manu-factured materials such as tires, lights, seats for a car etc., raw materials such as cotton, wool, curd oil, vegetables, fruits etc., opera-tion & maintenance items such as oil, greases, light bulbs, stationeries, spare parts etc.

2. Participants in Business Buying

There are some terms used for individuals or group of people who participates in organi-zational purchases. These individuals or group of people have different roles to play in busi-ness purchase process. Some of the terms used in organizational purchase involve initi-ators, influencers,users,deciders,approvers,buyers and gatekeepers.

1. Introduction to Business Buying Behaviour

Business buying refers to purchases made by business houses for its business purposes that are for further selling or processing but not for its personnel ultimate consumption. Therefore it’s also called industrial purchase or business to business purchase (B2B). The major char-acteristics of business buying includes fewer buyers but large buying, demand for industrial/business products depends upon the derived demand from consumers, normally the demand for such products by business houses iscomparativelyinelasticandfluctuating,thebusiness for its buying has got comparatively a higher degree of seller dependency, prefer local suppliers than sourcing it from global sources, the length of distribution channel for such products is comparatively shorter, goes for purchase of products with exact speci-fications and specialty managers requiredwho engage in a more complex business buying process for business products and thisbasicallydefinesthedifferencebetweenconsumer buying and business buying. Busi-ness buying could be done by institutional buyers, producers, resellers, governments and otherprofitornot forprofit local,nationalorinternational organizations. In today’s rele-vance as the globe is witnessing economic growth, growth of industrial sector, business buying has become more prominent.

Though consumers are fundamental factors on which the structural strength of any busi-ness is dependent upon, business buying plays an crucial part in providing value to consumers and also consumer satisfaction which would decide the profit generationcapabilities of the organization. If organi-zational buying is weak and it would affect consumption adversely and so does the busi-nessbecomeweakandprofitcomesdown.

Businessbuyinginfluencesales,revenueandprofitsforbusinessesandthereforeholdshighimportance for each and every business.

Behaviour is a psychological process of acting and reacting in different situations. How would a organization react to purchase of a product

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fromspecificvendorsinspecificquantumatspecific time.Asaccording to thequantumof purchases the authority and according to the extent of decentralization, the approval authority for different products or for varied-quantum of product may differ. Sometimes a panel of managers are comprised in the approval process.

Buyers: These are people in the organization who are authorized to make actual purchases of the product, place purchase orders, and makesurethatthespecificproductreachesthe particular area at the particular time at the required quantum from the particular supplier. They may also get involved in the purchase process and may be asked to iden-tify suppliers and negotiate the terms and conditions of the purchases with the suppliers.

Gatekeepers: These are people in the orga-nizationwho influences the flowof informa-tion to and from outside the organization and within the organization. People at the frontoffice,secretaries,telephoneoperators,attendantsetc.whocouldinfluencecontactor contact points like may not pass informa-tion further or restrict some supplier meeting the managers’ etc. may act as gate take keepers, suppliers and the purchase depart-ment should tackle them effectively.

3. Factors Influencing Business Buying

Business buying is influenced by numerablefactors inclusive of environmental factors, organizational factors, societal and personal factors.

3.1. Environmental Factors

Environmental factors are factors external to the business which influences businesspurchases including factors like political and legal, technology, culture, economy and competition. These factors influence theorganizational purchase process.

Political factors such as the kind of political system prevalent in the country. Political systems include democracy or totalitarian.

Initiators: These are people who make the organization recognize the actual problem and need for the product. These people could be from inside the company or could be from outside the organization. Manager from the information technology division of the organization may require particular soft-ware, or the supplier may present or demon-strate new product or technology to bring inbetter effectivenessandefficiency in theorganization which may prompt the purchase process.

Influencers: These are people who could give further insights to problem or need recogni-tion,influencetheproducttobepurchased,source of purchase etc. These people could be ultimate users, people who could be affected by use of product, engineer’s, financepeople,marketingpeople, produc-tion people, people from supplier’s side or competitor’s too.

Users: These are people in the organization for whom the actual purchase of product is meant for. These people will be using the product for the planned purpose to bring the organization closer to achieving its objectives moreeffectivelyandefficiently.Thesepeoplecouldactasinitiatorsandinfluencerstoo.

Deciders: These are people in the purchase process who are empowered to decide on the best alternative based on some crite-rions.Theycould influencedecisionsmakingwith respect to the product to be purchased, the brand to be purchased, from whom to be purchased, quantum, timing and frequency of purchases. Different people in the purchase process could be assigned with purchase of different products and also authority level could differ and such there could be different people who could be purchase deciders to various products to be purchased by the organization. Sometimes for simple low value products users could act as deciders but for purchase of vital high value products the decisions are taken at higher levels.

Approvers: These are people usually from higher hierarchy of the organization who formally approve the specific purchases

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buying, size of competitors, competitor busi-nessstrategiesetc.wouldhaveaninfluencein the organizational buying process ulti-mately affecting product, brand selection, vendor selection, frequency and quantum of business purchases.

3.2. Organizational Factors

Organizational factors such as objectives, policies, processes, structure and systems adoptedbybusiness entitywould influencebusiness buying. The goals and objectives as envisioned by management in terms of business strategies to be pursued, in terms of market share to be achieved, target market to be catered, positioning and differentia-tion strategies would impact the product and brand to be purchased, vendor selec-tion, frequency and quantum of business purchases. The policies with regard to quality of product purchase, origin country of product, image of the product to be purchased,supplierselectionpolicy,financialpolicies, goods return policy, policy regarding profitmargin etc.would influence businessbuying. The process and procedures used in business buying adopted and decided by the management or by the purchase department would influence supplier andproduct registration process, the time taken for the purchases to take place, supplier’s

Doing business and their requirements differs from one political system to the other and as such business buying. Legal systems like common law, civil law or theocratic law and legal factors affect business by imposing laws regulating business buying like local content requirements, taxes, limitations on quantum of purchases, business ownership conditions, levels of investment, etc.

Technological changes happening at a past pace around the globe substantially influ-ence the product and brand choice which an organization may go for and hence ven-dor selection. Business would prefer to buy technology savvy products but would also consider cost economies.

The cultural factors like social structure, edu-cational level, values and attitudes, manners and customs, physical environment etc. of the nation in which the business is operating would influencebusinessbuyingintermsofproduct,brand selection, vendor selection, frequency and quantum of business purchases.

The economic situation in terms of business cycle, industry growth rate, per capita in-come, unemployment rate etc. in the country ofoperationwouldinfluencebusinessbuying.

Competition in terms of level of competition, number of competitors, competitor business

Figure (4-1) Factors Influencing Business Buying

Environmental Factors

Organizational Factors

Social Factors

Personal Factors

Political & Legal

Technology

Culture

Economy

Competition

Objectives

Policies

Processes

Structure

Systems

Interpersonal understanding

Interpersonal relationships

Department influences

Empathy & persuasiveness

Motivation

Knowledge

Perception

Tastes & preferences

Purchase Influence

Product

Brand

Vendor

Frequency

Quantum

FACTORS INFLLUENCING BUSINESS BUYING

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tion’s part and supplier’s part, their mutual adjustments, alternative options avail-able with both of them, market conditions, product availability status, extend of mutual affiliation would also affect the product,brand purchased, timing and quantum of purchase.

3.4. Personal Factors

Personal factors in terms of motivation, knowledge, perception, tastes and prefer-ences of the person involved in the process would have an effect on business buying. Usually the supplier concentrates and directs their major marketing efforts to key individ-uals in the organization involved in purchase process. These factors influence businesspurchases under the broader framework of organizational objectives, policies and procedures. Motivation is that thrust level at which the person acts towards making purchases. Level and motivational factors like competitors, technology, suppliers etc. differs from person to person. Perception relates to the organization of selected inputs to reach conclusions. What all is selected and how it is organized may lead to different conclusions and hence different reactions to the same situation also by different organiza-tion and individuals. Perceptual differences affect industrial purchases. Knowledge basi-cally molds the way one thinks and acts. The sources of learning for organization may include their own experience, market knowl-edge, knowledge about product, experi-ence from suppliers etc. The sum totals of all the above components result in affect the purchase process. Tastes & preferences differ from individual to individual and organiza-tion to organization and also are dynamic in nature and accordingly also affect business buying.

4. Business Buying Process

It refers to the sequential steps followed by the organization in the purchase of any product. The sequence of processes involved in the business buying are:

interest in supplying product to the organiza-tion, payment terms and process to suppliers, goods return processes, inventory processes etc. The structure in terms of organizational height, organizational hierarchy, central-ized or decentralized structure, the authority and responsibility given to different hierar-chical positions, the nature of people occu-pying different positions in the organization, communication channels would influencebusiness buying. The systems in terms of tech-nology adopted by the organization, level of automation, use of kind of software and hardware, space availability, buying human resources etc. also impact business buying.

3.3. Social Factors

Social factors such as interpersonal under-standing, interpersonal relationships, departmental influences, empathetic andpersuasive factors also affect business buying. The business purchase process gets much more smoothened by having interper-sonal understanding. It refers to the under-standing of the roles and tasks carried out by different people involved in the purchase process. This would lead to quick, organized, timely, adequate and relevant purchases hence affecting business buying variables. Interpersonal relationships among the people involved in the purchase process, between the people involved in purchase process and the functional departments of the business house and also their relation-ships with extrinsic entities like suppliers also isvitalininfluencingbusinesspurchases.Thedepartmentalinfluencesalsoplaysinapartin deciding which product, which brand, how much to purchase, to some extend from whom to purchase and when to purchase. Business purchases are made according to the requirements of various functional units of the organization, what they require, when they require, how much they require would depend upon the place of requirements by the departments. They sometimes approach the top management for some special requirements or preferences which again could influence purchases. Empatheticand persuasive nature from both organiza-

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from business environment and through help of relevant suppliers.

4.3. Search for Suppliers

Now after finalizing product specifications,one need to identify reliable suppliers who couldsupplythespecifiedproductinrequiredquantity at required times and also cater to the other expectations and requirements of the organization. The source of information to findsupplierscouldbefromtradedirectories,publications by industry associations, internet, through present set of suppliers, industry rela-tions etc. After which the list of suppliers are finalized.Multiplesuppliersforeachrequiredproduct should be selected for sourcing to ensure continuous unobstructed supply. This is to reduce the dependence on one supplier, reduce the bargaining power of supplier, supplement and compliment other suppliers and in case one supplier is not able to meet organization’s product requirements.

4.4. Value Analysis

It requires analysis of techniques in terms of cost benefit analysis, reduced costs,improvedefficiencyandperformance, timesaving,qualityspecificationsetc.Thisisdonefor each value creating activities across the organization whether it be different func-tional units or the logistical aspects both inbound and outbound logistics including procurement, transportation, inventories, and

4.1. Problem and Need Recognition

Problemandneedrecognitionisthefirststairin the business buying process. The problem could be identified by people inside theorganization or could be people external to the organization like suppliers, competitors, government etc. The problems could be lower performance levels by functional unit, delays, dropinsales,revenueorprofits,customeroremployee grievances may require new tech-nology to be adopted, new products to be purchased etc. Even new product launches by competitors, new technology adopted by competitors, information or feedback given by suppliers and customers, new regulations and requirements by law and government could lead to problem recognition. Problem recognition could lead to need recognition in terms of product choice, quantum, quality requirements, which product required by which functional unit for, whom in the orga-nization etc.

4.2. Product Specification

After the problem and need recognition by specificunits fordifferentproducts, thenextstagedeterminesas to theexact specifica-tion of the product to be bought. For a low value product the user may himself give the specification but for high value vital prod-uctsthetechnicalspecificationisdecidedbytechnicalexpertise. The technical specifica-tioncouldbefinalizedbytakinginformation

Figure (4-2) Business Buying Process

Problem & Need Recognition

Product Specification

Search for Suppliers

Ordering Vendor Analysis

Value Analysis

Performance Review

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goes to its conclusion by receipt of the required goods in required quantity in good condition timely at the required place by the vendor. After quality inspections, receipt confirmations, terms and condition checksand other organizational processes the bills areforwardedtothefinancedepartmenttomake payments to the suppliers.

4.7. Performance Review

It is a control tool to monitor the performance of product and the suppliers. This is to ensure consistent effective, efficient and optimalorganization performance to cater to market requirements, fight competition and toachieve organizational objectives. Different methods could be employed to evaluate product and supplier performance. If the product or the supplier is underperforming, find out the reasons for underperformanceand then take corrective actions to fix thedetected problems. This could mean change specifications, terms and conditions or tochange the product or supplier also.

The current scenario of whole business buying is changing with wider choice of products and suppliers, dynamic and complex environ-mental changes in business especially pace of emergence of new technologies and way of doing businesses and the world shrinking to become a global market.

5. Comparing Consumer Buying with Business Buying

There are significant behavioral distinctionsbetween consumer and business buying both in terms of factors affecting buying behavior and also the purchase process.

Consumer is a single entity in its entirety but though organization is also a single entity but so many participants get involved in the purchase process.

Consumer has to coordinate his different urgesthoughinfluencedbysomanyenviron-mental factors with his economic situation but

storage spaces. One of the critical functions ofthepurchasedepartmentistofindmultiplesuppliers who could add value to the orga-nization optimally. Value analysis also helps cut the costs by identifying components and other things which is not adding value to the finalproductandachievementoforganiza-tional objectives.

4.5. Vendor Analysis

Thefinalselectionofsuppliersfromamongthelist of available suppliers should be done after careful vendor analysis based on important criterions. The criterions could include size of suppliers, years of experience, knowledge about the market, product expertise, capa-bilities of suppliers, adaptability of suppliers, geographical location, adaptability to orga-nization requirements, pricing, timely deliv-eries, continuous supplies, keeping up with delivery schedules, technology adopted by suppliers, suppliers image in the market etc. The best of suppliers are selected on the above mentioned basis. This could also be done through issue of tenders. Tender means inviting quotations from various suppliers for technically specified product and couldcater to the laid out predetermined terms and conditions. The supplier giving the lowest quote is selected as final supplier. Againmultiple suppliers for each product have to befinalizedforsourcingtoensurecontinuousunobstructed supply. This is to reduce the dependence on one supplier, reduce the bargaining power of supplier, supplement and compliment other suppliers and in case one supplier is not able to cater to organiza-tion’s product requirements.

4.6. Ordering

After finalizing on multiple vendors, as perrequirement of particular products, purchase orders have to be generated specifying the required product and quantum directed towards specific supplier. The terms andconditions of conditions of sale regarding price, discounts, warranties, terms of return etc. is already decided in the previous steps of business process. The purchase process

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and individual factors affect business buying.

8. There are no participants in the purchase process of a consumer but so many partic-ipants are there in business purchase process.

9. Demand for consumer purchases is more elastic in nature but business buying is comparatively inelastic in nature.

10. Consumers are not much dependent on any supplier but business have a very high degree of supplier dependency as they normally have selected list of suppliers from where they buy.

11. Consumers buy product for their personal nonbenefitusebutbusinessespurchasefor further production or for further resale.

12. Consumersdon’tgodeepintospecifica-tions of the product for purchases or are flexibletospecificationsbutbusiness lookvery deep into specifications of productthey purchase and normally stick to the specifications.

13. To purchase consumer product no special-ization is needed but business buying normally has specialist purchasers.

14. Consumers tend to be more global purchasers but businesses prefer local purchase as this caters to their after sales service or maintenance requirements.

15. The frequency and consistency of consumer purchases are much less as compared to business buying which tends to be more frequent and consistent.

16. Payment terms and also the prices for the same product if purchased by an individual consumer and as purchased by businesses or organization may differ as organizations tend to be powerful bargainer.

17. Consumer purchase decisions are indi-vidual informal decisions but business buying decisions are group formal deci-sions.

organization coordination for the purchase process is not only time consuming but also so complex as multiple and cross functional entities are involved.

Many Criterions differentiate consumer and business buying behavior. Some are as follows:

1. Comparatively large number of consumers but with business buying, the number of them organizations purchasing products would be much less.

2. When a consumer purchase a product, he would purchase in limited quantum, but when organizations purchase the quantum of purchase would be much large.

3. Consumer’s demand is generated from his own sues and urges whereas the demand of a product for organizations are derived demand that is the quantum and what products to purchase would be depended on ultimate consumers of the product.

4. The purchase process in case of consumer buying is very simple, may or may not go through all the consumer purchase process steps and spends much less time in each of the steps but in case of orga-nization or business buying the process is much complicated as well the time taken for purchase is also very high.

5. Normally consumer any purchase from anywhere he likes may be from any retailer or also may prefer online purchases but in case of business buying they usually have select suppliers from where they procure there purchase.

6. Consumers purchase from highest level distribution channel that is they normally purchase from retailers but businesses normally buy from distributors or lower level of distribution channel, may be directly from the company.

7. The factors affecting consumer purchase includes cultural, social, personal and psychological factors but more of envi-ronmental, organizational, interpersonal

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understand both the dynamics and mechanics of consumer purchase and business purchases because both them constitute market.

These are some of the major distinguishing characteristics between business buying and consumer buying. For a marketer one needs to

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CHAPTER

5 Customer Driven Marketing Strategies


1. Know the concept/basics of market segmentation and segmentation variables.

2. Identify the strategies related to selection of target markets.

3. Understand positioning, different types of positioning and positioning errors.

4. Understand differentiation and differentiation variables.

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built their own level of expectations from products, it is for the marketers to bring out products which satisfy their level of expec-tation and matches their thought process. Since the level of expectation from the same product also differs, the whole of market could be divided into smaller groups accord-ingly and which requires different features for the product, price for the product, distribution strategies for the product and different promo-tion mix for the product. This act of doing so is termed as market segmentation. This actu-ally is a sophistication of the earlier marketing concept which talked about generalization that provides to all consumers the same kind of with same marketing mix like what “Ford” Car Company had in the earlier years. Henry Ford believed in the concept and said “One could have any color, he/she wanted, as long as it is black”. But as consumers became more modern and demanding the need for different kinds of car, and hence to cater to these different wants and needs, compa-nies started producing cars of different styles, power, features, speed limits, sizes, seating capacities etc.

Earlier products were mostly made for mass market, but with better quality of life, as con-sumer’s income grew, they became more aware and demanding and therefore the companies realized need for satisfying dif-ferent levels of expectation accordingly dif-ferent marketing mix needed to satisfy these different levels of need to sustain competi-tion, maintain market share and achieve profitability.Theeraofspecializationcameinwherein companies had to specialize in mak-ing product which caters to aexact level of need and the marketing mix strategies were aimed at making an exact consonance of the product with the targeted market only. So for example car market was segmented as small cars, mid segment cars, luxury cars, sports car, sports utility vehicles, four wheel carsetc.whichcateredtoveryspecificneedsofaveryspecificmarketwithinthelargercarmarket. Companies began excelling on it and made inroads in the minds of the con-sumers like BMW car for sports loving market, Mercedes for high class executive market,

1. Introduction to Customer Driven Marketing Strategies

The fundamental of marketing lies in under-standing the need of the consumers correctly and then offering them the kind of product with right marketing mix to form a consonance with the consumer’s need so that the proba-bility of exchange, value creation, customer satisfaction and long term customer relation-ship objectives of marketing are effectively met. Apart from the marketing mix strate-gies there are some more customer driven marketing strategies which are required to be formulatedforeffectiveandefficientaccom-plishment of marketing objectives and goals and includes concepts of segmentation, target market, positioning and differentiation.

2. Introduction to Segmentation

There are different expectation levels from the product for the same need. May be the need is the requirement to travel and car could be one of the product which cancater to this need. Now there are different require-ments from the car itself by different set of consumers. Some consumers may need a small car with basic features, some consumers need fast cars, some need fuel efficientcars, and some need luxury car. The level of expectation from the same product could differ due to psychographic reasons, cultural reasons, demographic reasons etc. So there is a market that is set of consumers with demand for the same product but different expectations from the same product. Now this market for car has to be divided according to the expectation levels from the product to achieve marketing objectives effectively. This process of segregating the market into smaller division according to expectation levels from the same product and that which requires different marketing mixes to achieve marketing objectives is called market segmentation.

To understand the particular needs of the consumers and according to different people and their circumstances, as consumers have

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some extend based on quality, purity, income level of consumers etc. Mass marketing is also called as undifferentiated marketing.

3.2. Segment Marketing

In this, the market is segregated based on similar kind of needs or need level at a broader level. In segment marketing, the segmenta-tion is done based on a broader similarity in need or expectation of consumer, though each consumer’s need or expectation level from a product is unique. The criterion for this kind of segmentation may differ. The basis could be geographic, occasions, demo-graphics etc. The aim of this kind of marketing is to satisfy the particular segment to a large extent. Example Toyota segments its market according to lower segment market [Yaris and Corolla], mid segment market [Camry and Avalon] and luxury segment market [Lexus]. This type of marketing is also called as differentiated marketing.

3.3. Niche Marketing

In this, the marketers’ aims at targeting a very special segment of the market wherein the number of competitors is very less and market requirements and needs are more specific.Here the markets aim to get more share of a small specialized segment and concentrates all marketing efforts to specifically cater tothe needs of this small segment of the market. Marketers have specialized knowledge about this portion of the market and specif-ically align their marketing mix elements to suit this segment of the market. For example Johnson and Johnson baby products. This type of marketing is also called as concen-trated marketing.

3.4. Local Marketing

In this marketing, the marketers concentrate on the requirements of the consumers on localbasis. This specificallycustomizesprod-ucts for local markets. Many of the global companies use this strategy with the notion of “think global and act local”. More and

Toyota Camry for middle class market, Suzu-ki Alto for small car market, GMC Yukon for big families, Ford Expedition for long trips etc. Researches indicate segmentation leads to more number of customers and market share for the company. Companies began to pro-duce different product ranges for different consumers groups to serve those categories better with better value proposition and this is what the purpose of segmentation is. For example “Toyota” produces “Yaris”, “Co-rolla”, “Camry”, “Avalon”, “Aurion”, “Lex-us”, “Prado”, “Land cruiser”, “Sequoia” etc. which caters to the needs of different set of consumers.

3. Levels of Segmentation

Different consumers have different needs, tastes and preferences. One could produce a product for the mass market at one extreme and one could also produce product according to particular need of a single consumer at the other extreme. According to the level of customization of products, there are different approaches or levels of segmen-tation and these are:

• Mass marketing

• Segment marketing

• Niche marketing

• Local marketing

• Individual marketing

3.1. Mass Marketing

In, the market is not divided into smaller groups and wherein the product is meant for mass market. Different marketing mix is not used to satisfy different need levels within the broader market. A common product is marketed to the whole of market. Customi-zation in this level of marketing is lowest. Only one marketing mix strategy is used to market the product for example salt, sugar, wheat, rice, water etc. Some of these products now lately has been trying segment marketing where there are trying to divide the market to

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that gives more profits. The level of profitsand market share would depend upon how company segments its market, what basis it uses to divide the market for its kind of product and also depends on the criterions are used to select the segment/segments which the organization would decide to serve and formulate its marketing mix strategy/strategies accordingly. There is several basis or criteria on which the market could be segmented and these are:

• Geographic Segmentation [cities, coun-tries, regions, climate etc.]

• Demographic Segmentation [Age, gender, income, religion etc.]

• Psychographic Segmentation [Values, personality, lifestyle etc.]

• Behavioral Segmentation [Occasions, benefits,usagerate,loyaltystatusetc.]

4.1. Geographic Segmentation

When the market for the product is segre-gated on the basis of physical feature of land, environment and its areal distribution, it is called geographical segmentation. This type of segmentation variables includes cities, countries, regions, climatic condi-tions etc. The product has to be adapted according to local requirements. Different editions of newspapers according to cities, books catering to needs of different coun-tries or regions [Pearson Global edition, Arab edition, etc.], four wheel drive cars for desert areas, clothes for areas with cold climate, rains and summer etc. are examples where the market is divided or segmented on the basis of geography.

4.2. Demographic Segmentation

When the market for the product is divided on the basis of demographic variables like age, gender, income, religion etc., it’s said to be demographic segmentation. This calls for formulating marketing strategies based on variables like age, gender, income, reli-gion etc. The product is aligned according to

more companies are trying to go global, but in doing so many companies fail and the reason of failure is lack of understanding of local taste and preferences. Kentucky Fried Chicken opened its counters in India but failed initially because of lack of understanding of the local culture. In India when people go out for dining, they usually go out in groups, with family, friends etc. and it so happens that one among the group member is a vegetarian and hence the whole group because of this one person, the whole group avoids going to KFC. KFC changed its strategy to cater to local preference and hence in the Indian menu included vegetarian food also. Same like different car manufacturing companies come out with same brand name products globally but country wise they differ in many of their attributes like size, pollution levels, engine capacity etc. This type of marketing is also called micromarketing.

3.5. Individual Marketing

In this marketing, marketers take care of each individual’s tastes and preferences and customize the product according to the individual consumer requirement. This type of segmentation attains the highest level of customization. The marketing mix makes consonance with the needs and wants of each individual consumer like a tailor stitching clothes according to body statis-tics of each individual, different sizes and shapes according to the consumer. Atten-tion is given to the exact expectation of each consumer and the product tailor made for him. For example Mercedes “May Bach”, each car is manufactured according to the specification given by each consumer. Thistype of marketing is also called customized marketing.

4. Bases/Criterion 0f Segmentation

The major purpose of segmentation is to increase profits and consumer shareforthe company. The company should go for segmentationonly if it isprofitablethereforecompanies should segment market in way

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4.4. Behavioral Segmentation

When the market for the product is segre-gated on the basis of occasions, benefits,usage rate, loyalty status etc., then it’s said to be behavioral segmentation. Some of the products like confectionaries, clothes etc. targets some occasions like clothes for marriage occasion, confectionaries for occasions like Ramadan, Eid etc. Some products are targeted to groups who look forsomespecificbenefitsfromtheproductlike toothpaste like “Sensodyne” and “Para-dontax” are meant more specifically forgroup of people having sensitive tooth whereas “Closeup” Mint more specificallyfor group of people having bad breath, Crestmorespecifically forgroupofpeoplelooking for whiter tooth, “Pepsodent” and “Oral B” more specifically for group ofpeople looking for multiple benefits etc.Usage rate refers to the frequency of use of the particular product, consumer could be a light user or a heavy user example “Quaker Oats” company segmented its market on the basis of user rate wherein they identified the households with large familysize and house wife under 40 years of age are frequent users and hence formulated its marketing strategies aligned to such fami-lies. Researches indicate that it’s better to retain and increase the frequency of purchases of present consumers rather than attracting new users and thus marketing strategies should be directed towards light till heavy users instead of non-users. Market could be segmented on the basis on the basis of loyalty status. Consumers could be loyal to the company, could be occasional switcher or regular switcher and accord-ingly different set of marketing mix strat-egies for consumers with different loyalty status example of industries like hotel, airlines, restaurants where they have loyalty programs, the companies give discounts or more services to more loyal consumers than switchers. Saudi Airlines Frequent Flier Scheme where upon accumulation of certain points, the traveller is entitled to several premium services offered to only frequentfliersnottoswitchers.

thespecifictastesandpreferencesof thesevariables so as to meet the expectation level of the concerned target consumers. Diges-tive Biscuits have categorized their product according to age variable wherein for chil-dren they have come out with biscuits which layered by cream, for health conscious youth Oats Biscuits and for old age people sugar free biscuits. “Tissot” watches have catego-rized their range of watches according to gender, watches for males and watches for females, Toyota have categorized their cars according to income, “Yaris” till “Aurion” for middle and upper middle class, Lexus for rich segment, Likewise for Muslim religion, Compa-nies have come out with “Halal” chicken.

4.3. Psychographic Segmentation

When the market for the product is divided on the basis of psychographic variables like lifestyle and personality then it’s said to be psychographic segmentation. Lifestyle relates to the way of life and is shaped by the person’s habits, morals, tastes, attitude, values, behavior, patterns of consumption, social relations etc. Lifestyles differs from place to place, person to person etc. like rural lifestyle, urban lifestyle, traditional lifestyle, modern lifestyle, green lifestyle etc. Example of lifestyle segmentation includes that of tradi-tionaldressesandmodernoutfits.Peoplewithluxurious lifestyle would like to have expensive products, brands like “GUCCI”, “VERSACE” etc. targets such people, green products are meant for people with green lifestyle.

Personality refers to the character and nature of a person which makes his/her identity. He/she could be sports personality, an executive personality, introvert personality, extrovert personality etc. and accordingly difference in choice of product and expectations from the product, the marketing mix elements of the product would differ. Marketers divide the market on basis of personality to cater to specificneedsofdifferenttypesofpersonalityfor example cars like BMW, Ferrari, Bugatti etc. are meant for sports personalities whereas cars like Mercedes, Volkswagen, Rolls Royce etc. are meant for executive type personalities.

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say income variable, the market should know how many consumers are rich, how many in middle class and how many rich consumers are there for the product.

5.2. Substantial

Marketers segment the market to make economic sense which could only be achieved if for each segment which the marketers divide, should have at least some minimum number of consumers or adequate consumers. The marketing mix strategies aimed for such segment should makeprofits forthecompany.Forexamplein India products are more of aimed towards the middle class segment rather than poor or rich people as the number of middle class consumers are much larger in size.

5.3. Accessible

One of the important criteria for effective segmentation is that the marketer should be able to access the particular segment. The product should reach the segment. The marketer should use various forms of media which could make inroads to the particular segment making the consumers aware of the product and create enough motivation to purchase the product. Also the marketing channel should be able to make the product available to the segment. Both reach in terms of media and marketing channel should take in to consideration the economies involved. For example ITC company in India selected the rural market segment as it was able to make a reach both in terms of media and marketing channel, it was able to access the ruralmarketandwasabletogenerateprofitsand market share out of this segment.

5.4. Differentiable

The market is segmented for the purpose of satisfying the exact needs of a particular segment as different segment have different need and expectation from the product. These needs and expectations should different enough so that different marketing strategies could be formulated accord-

The reason for segmenting the market is to perfectly align marketing mix strategies to consumer’s exact expectations from the product and thus helps increase compa-ny’sprofitsandmarketshare.Apartfromthesegmentation variables discussed above, there could be many more variables on which market could be segmented. Marketers cold use multiple segmentation variables to segment the market like geo-demographic segmentation [segmentation based on both geographic and demographic variables], Psycho-demographic [segmentation based on both psychographic and demographic variables] etc. This kind of segmentation based on multiple variables is called multivar-iate segmentation, multi attribute segmenta-tion or hybrid segmentation.

5. Requirements for Effective Segmentation

Since the purpose of segmentation is to help thecompanyincreaseitsprofits,marketshareand to have a competitive edge by formu-lating marketing strategies towards particular segments, but it could only be realized if the segmentation is effective. If segmentation doesnot yield increasedprofitsandmarketshare, market should not be segmented. For the segmentation to be effective, the segment should be:

• Measurable

• Substantial

• Accessible

• Differentiable

• Actionable

5.1. Measurable

Market should only be segmented only if the segment could be measured whatever be the segmentation variable. This is done to know the size of the market, if the market size is small, the segmentation objective cannot be achieved. For example if the marketer want to segment the market according to

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company resources, risk factors, company objectives, marketing environmental factors etc.

6.2. Segment Selection Strategies

After evaluating the different market segments based on different segmentation variables, marketers can select one of the segment selection strategies including:

• Single segment concentration

• Selective specialization

• Product specialization

• Market specialization

• Full market coverage

6.3. Single Segment Concentration

This refers to concentrating the marketing efforts towards a single segment instead of targeting multiple segments. This will help the company to work on its core compe-tency and could get into super specializa-tion wherein the marketers can understand their segment in much better way. Focusing on a particular segment helps marketers to exactly align their marketing mix elements to the expectations of the target market. But this is risky; if the selected segment does not get satisfieditbecomesextremelydifficultforthebusiness to survive. But the good is, it raises high entry barriers for the competitors to get in to this segment. Some companies adopt single segment concentration like car company “Mercedes” concentrates its product for the higher class of society only; “Johnson & Johnson” concentrates its product just for the baby segment.

6.4. Selective Specialization

In this the marketers select only some market segment and concentrates its marketing efforts to these select few market segments. Concentrating on more than one segment helps companies mitigate their risks. For example “Toyota” Car Company produces car for middle class, higher middle class and

ingly. Like market segment for car looking for low operational cost and economies is completely different from market segment for car looking for style, comfort and speed as such for these differentiable car market segments, distinguishable marketing strate-gies could be formulated.

5.5. Actionable

The segment should be such that the marketer could implement marketing action programs. The execution of marketing programs should be able to catch attention and attractiveness of enough consumers in the segment that the marketing actions are able to achieve the desired marketing objectives. For example the baby product market, here though the babies do not make purchase decisions but the products are marketed through mothers by understanding their expectations from the product for their babies, such that the marketing programs can be actionable through active involvement of the mothers.

6. Introduction to Target Market

After effective market segmentation, the next step is to select appropriate segment or segments which the company decide to align its marketing strategies for. Marketers focus their attention to this select segment which is called the target market.

This target market which the business decides to serve should be selected very carefully because this target market will decide the positive outcome for the company. Once the market has been segmented on the basis of segmentation variables, and once the effectiveness of the segment is established marketers need to assess the alternative segments based on some criterions which can serve company objectives.

6.1. Evaluating and Selecting Target Market

The major criterions for evaluation of market segment/s include size of the segment, prof-itability from the segment, future prospect of the segment, competition within the segment,

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tiated approach to cover the full market, the marketing and other costs are comparatively high but only one should use this approach if it leadstobetterprofits,marketshareandcompetitive strength.

7. Introduction to Positioning

It is the about the actions for creating a distinctive image of the product/brand in the mindset of the consumers. Positioning term has originated by Al Ries and Jack Trout in 1972. Al Ries and Jack Trout in their book titled “Positioning: The battle for your Mind” talks about positioning and it is about what marketer has to do to the brain and mind of the consumer instead of doing something to the product. As in a class room one has got different image of their classmates in their mind, positioning is about creating a partic-ular reflectionof theproduct in themindofthe consumer. As you have formed different images of your friends in the class, may be one friend’s image is that of a polite person, other friend could be aggressive, some other friend could be helpful, some would be intel-ligent, still some other would be sporty, some would be languid and so on so forth, analogy to this, even products occupy some distinct place in the minds of the consumer. This image in case of product is the creation of the marketers. Marketers use some unique selling concept to create a space in the brains and minds of the consumer so that their product could be recognized in a manner as thought by the marketer. This unique selling proposi-tion could be based on one or more special proposition that helps in creating a compet-itive advantage for the product. Positioning the product is about using one or more of this proposition is to build a unique image of the product/brand in the minds of the consumer.

The aim of positioning is to build a distinctive identity in the brains and minds of the target market. As there could be many competitors already present in the chosen segment, posi-tioning helps the consumer identify specif-ically the product when they think about certain proposition/s from the product. An identity of the product/brand is such created

rich class, Yaris and Corolla for middle class, Camry, Avalon and Aurion for higher middle class and Lexus for rich class.

6.5. Product Specialization

In this the company specializes in one product category only and does not produce other products, thus enabling them to use its core competency, helps raise high barriers for its competitors to enter this particular segment. For example “Phillips” is trying to specialize in light category, Gillette in Shaving products etc.

6.6. Market Specialization

Here the company specializes in under-standing the requirements of a particular customer group. In this company is able to align its product range according to the likes of the group. Like “Faber Castle” specializing in school stationery products. The company specially manufactures products for school going children like pencils, pens, color pencils etc.

6.7. Full Market Coverage

Here the company tries to provide a variety of products for all segments of the market instead of segment, product or market specializa-tion. Some company may choose full market coverage through undifferentiated product to cover the full market and some company may go for differentiated products to cover the total market. We call it as mass marketing also. Like “Fahya” water company in Saudi Arabia produces drinking water for all kinds of consumers whether it is for children, adults or households, no difference in product but only change in size to satisfy the needs of all segments of the market. Some company may follow a differentiated strategy that is different product for different portions of the market for example “Coke” produces carbonateddrinksinvariousflavorstocaterto different needs from different segments of the market like “Coke Cola”, “Fanta”, “Sprite” etc., also entered mineral water in the name of “Kinley”. Though in the differen-

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competing against each other, Rin washing powder claiming better than any other washing soap, Parachute hair oil claiming it to be better than their competitors and its adver-tisementsspecificallyshowingit,Doveclaimingto be better than any other bathing soaps by demonstrations, “Polo” mint claiming “a mint with a hole” and “Mentadent” mint coming out punch line “a mint without a hole”.

Product Class Positioning: In this type of positioning, the brand itself tries to project itself as the product category itself. This couldbedue tofirstentrybenefit, retentiveperceptual strategy, continuous frequent advertising, strong brand image etc. Like “Colgate” brand in the toothpaste category has become so strong that consumers often misunderstand “Colgate” as the product category toothpaste itself. Consumer asking for Colgate means, he wants toothpaste, not necessarily “Colgate” brand but just means he wants toothpaste. “Kleenex” facial tissue brand in Saudi Arabia represents the facial tissue product class.

Quality Positioning: Quality relates to the standards the product is maintaining in terms of some distinctive characteristics like make up, form etc. This positioning is meant for consumers who are quality conscious. In this type of positioning, the consumers relate the product to the quality aspect. Whenever he thinks about purchasing a quality product, the brand comes to his mind. Like in elec-tronics the brand “Sony” is associated with quality positioning.

Price Positioning: Price is the monetary value of the product and only source of revenue generation for marketers. This type of posi-tioning is mainly for those kinds of consumers who are price conscious and the major consid-eration in their purchase decision is the price of the product. Marketers try to create image of the product which gives maximum value and the consumers relate the product to the price aspect. Like in case of laptop computers, though there are many brands like Apple, HP, Toshiba, Sony, and Dell but when it comes to price and the consumer prefers an econom-ical one, the brand Acer comes to his mind.

in the minds of target market that when they think about proposition/s from the product, your brand should come into consumer mind.

8. Types of Positioning

The following proposition or combination of these propositions could be used to position the product in the minds of consumer which could also be talked in terms of types of posi-tioning:

Attribute positioning: In this positioning one or more important attribute of the product is pro-jected to create such an identity in the brains and minds of the consumer. For attribute po-sitioning terms like highest, longest, biggest, oldest, lightest, toughest, fastest etc. could be used. Like “Airbus A-380” is positioned as the biggest aircraft in the world, “BurjKhalifa” in United Arab Emirates [Dubai] is projected as the tallest building of the world, Volkswagen positions itself as the safest car etc.

Benefits positioning:Benefitmayrelatetoanadvantage from the product, comfort or ease of using the product or the sense of satisfac-tion or wellbeing from using the product. In this type of positioning one or more important distinctivebenefittheproductwouldoffertothe consumer like Crest toothpaste reduces cavities; Oral B toothpaste gives you many benefits like cavity protection, tooth whit-ening, fresh breath, Boeing Dreamliner aircraftbeingmorefuelefficientetc.

Usage positioning: Usage as such relates to consumption pattern or use pattern in the sense of how to use, when to use, manner of using, action amount or mode of using. In this type of positioning the occasion when the product would useful to the consumer is projected like offer to the consumer like Eight pm chocolates to be taken after dinner. Horlicks to be used as health drink.

Competitor Positioning: In this, to promote the brand marketers try to compare it with compet-itive brands. This is done in an indirect manner through basically the use of advertisements and demonstrations. Like Pepsi and Coke

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view the positioning plank does not hold value and the message from the marketer is not able not make a dent into the mind of the consumer. Example of beverage compa-nies like “Pepsi’ and “Coke” coming out with diet, sugar free, zero calorie variants which consumers didn’t take to be very important feature of the product.

8.3. Doubtful Positioning

This happens when marketer tries to posi-tion the product in such way that creates a question mark in the mind of the consumer. Consumers don’t feel the aspect of the product which is positioned would deliver what it says; they don’t accept the claims made by the product for example some dietary products claims to reduce the weight of body or some creams which assures fair skin color. Consumers also were doubtful when “Lexus” car was placed as a compet-itor to “Mercedes”.

8.4. Confused Positioning

This happens when marketer tries to position the product in more than one way which may be contradictory or very often changing posi-tioning strategies. For example “Crest” tooth-pastepositioneditselfasacavityfighterandthen later changed to anti-aging and then whitening and then multicare tooth paste and several others, confusion was created into the minds of the consumer actually for what does crest stand for and later lost its edge over “Colgate” tooth paste.

9. Introduction to Differentiation

Differentiation is one of the important marketing strategies to create more exchanges by the way of denting into the minds of the consumers by creating a different identity than that of its competitors. This is also an important tool to create a competitive edge. It is the act of creating a distinctive identity of the product so that consumers are able to identify the company’s products from its competitors. This is done through creating a superior value by identifying some aspect

9. Positioning Errors

The creation, formulation or selection of positioning strategy should be appealing to the target consumers and should land up in the same perceptual platform what marker attempts to target and where consumers stands. The message should be clear, concise and relevant.

Positioning errorsrefers to the mistakes made by marketers in creating a positioning strategy for the target market. When formulating posi-tioning strategy, marketers may have an inside out view due to which there may be a perceptual distortion or lack of clarity in the intended message from consumer’s point of view. Marketers would try to communicate some message to the consumers but the message fails to cater to its objectives. As such there are 4-types of positioning errors and these are:

• Over positioning

• Under positioning

• Doubtful positioning

• Confused positioning

8.1. Over Positioning

This kind of positioning error occurs when marketer modifies some dimension of themarketing mix which distorts the image of the product in the mind of the consumer. From consumers view angle the brand would be very premium one but positioning plank doesnotfitgoodandthemessagefromthemarketer undermines the brand image in the mind of the consumer. Example “Mercedes” Car Company holds a premium identity in the mindsoftheconsumersbutifthemarketersfixa very low price product, it dilutes the image of the product in the mind of the consumer.

8.2. Under Positioning

This happens when marketer feels some feature of the product to be very important but the consumer does not feel the feature to be important. From consumers point of

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itors. The act of creating superior value for the target market could be created by using the product components in terms of various product aspects like form, features, perfor-mance etc.

• Form: It relates to physical size, shape, or structure of the product e.g. the biggest passenger aircraft of the world “Airbus A-380”, the slimmest watch “Titan Edge”, “Cadillac” cars shape is completely different from any of its competitors.

• Features:That characteristics that supple-ments and compliments the primary func-tions of a product is said to be the feature for the product. e.g. “Samsung Smart TV” with internet functions incorporated in the TV, “Tesla” Car Company featuring a battery run car.

• Performance:The level at which the prod-uct’s basicfunctions operate is the perfor-mance of the product e.g. one of the best performers as far as fast cars are concerned is “Ferrari”, IPhone X”with a longer battery life, Samsung Galaxy 9 with faster wireless charging.

• Conformance:The levels to which all of the produced products are homogeneous andmeet thedesiredspecificationse.g.Japanese zero defect products.

• Durability: It is to do with the product’s expected operating life span under normal or stressful conditions e.g. “Dura-cell” batteries claim to last long, the most tough and indestructible laptop “Pana-sonic Toughbook”.

• Reparability:Reparability is to do with the comfort with which the malfunctioning (in case product fails to function proper-ly) product could be corrected e.g. Dell claims repair its product within 24 hours and provide online support, Toyota car ease of reparability than any of its com-petitors etc. are example of products and brands which have differentiated on the basis of reparability.

• Style: Style describes the appearance of the product and its feel to the buyer

which target market feels is important for them and that is not provided by the competitors present in the target market. Also company can use its core competency to create the distinguishing aspect which competitors wouldfindverydifficulttoreplicate.Thebasisthat could be put to use to generate a differ-entiation proposition includes Product differ-entiation, Service differentiation, Personnel differentiation, Channel differentiation and Image differentiation. There are several subcomponents within the major basis of differentiation. For example under product differentiation, company’s offering could be distinguished on the basis of size, form, features etc., on the criterion of service could be differentiated on the basis of ordering ease, training, maintenance and repair etc. on the basis of personnel could be distin-guished on the basis of their competency, reliability, courteousness etc., on the basis of channel could be differentiated on the basis their expertise, coverage etc., on the basis of image could be differentiated on the basis of colours, symbols, events etc.

10. Bases of Differentiation

Differentiation could be done on different bases as according to outcome of strength analysis and core competencies and could includefivefollowingbases:

• Product differentiation

• Service differentiation

• Personnel differentiation

• Channel differentiation

• Image differentiation

10.1. Product Differentiation

Thefirst“P”amongthe4”Ps” isput inusetocreate this type of differentiation. Though different types of product may use different components of product to create distinc-tiveness, it can also put in use one or more components of the product at the same time to create this distinctiveness which differentiates itself from rest of its compet-

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• Installation:It is to do with making a product functional in its planned site like free installation of soft wares for computers or installation of Ac’s. “Apple Mac” comes with a free operating system installed in its computer range, some industrial prod-ucts like “Toshiba” company provides free installation of transformers, control and relay panels for transmission of electricity.

• Customer training: It refers to how the customer’s employees are imparted the skill of operating the supplier’sproduct efficientlyandproperlye.g.“JDEdwards”ERP software when purchased, the company gives free training as to how to use the software to its customers, General Electric when selling X-rays machines to hospitals also gives extensive training to X-ray technicians of the customer.

• Customer consulting: It is to do with the advisory services that the seller offers to buyers. Hewlett Packard providing advi-sory services to its customers. “Apollo Hospitals” in India giving online patient consultation.

• Maintenance and repair: It is to do with the after sale services to keep the product in a good operating condition e.g. Dell e-support for maintenance and repair of its computers, “Chevrolet” car company providing free maintenance and service for its car for three years.

10.3. Personnel Differentiation

In this era of such tough competition, to compete in the market when all the competi-tors are coming with such similar products that formulating valuable differentiation strategy isbecomingdifficult.Personneldifferentiationrelates to the employees of the company and projecting their competences as the differentiation strategy. More so it is more suit-able to services like banking, retailing etc., where the product assortments are more or less same but what makes importance is the kind of employees or personnel inter-acting with the consumers. In service industry since the employees are in direct with the

e.g. fashion brands like “GUCCI”, motor-bike like “Harley Davidson, sports car like “Lamborghini” etc.are example of prod-ucts and brands which have differenti-ated on the basis of style.

• Design:design is to do with the product’s satisfying appearance look and the ease to open, install, use, repair, and dispose of e.g. “Boeing” Dreamliner, Apple mobile and laptops more of purchased for its design.

10.2. Service Differentiation

Apart from the tangible attributes, there are some accompanying intangible aspects associated with product that is service which can be used to distinguish compa-ny’s products from rest of its competitors. The service differentiators could be different for different products and again a combina-tion of service differentiators could be used to create the distinctiveness. Though the product features, form, design etc. could be similar but marketers use service differentia-tors like ordering use, delivery, installation etc.to create distinctiveness.

• Ordering ease: It refers to the easi-ness by which one can place orders for the product of their choice e.g. “Dell” computers can be ordered on line with customized configuration, no need tosearch for theparticularconfiguration inthe market place, “ICICI” banks coming out with home banking concept wherein to open a new bank account, the consumers don’t need to go to the bank but the bank would come to your home, “Amazon” selling products online etc.

• Delivery:It is about the speed and accu-racy by which the productcould reach the consumers including free and on time/fast deliveries e.g. “Domino Pizza” claims that within half an hour of order the pizza, the pizza would be delivered to the consumer otherwise the pizza would come free, “Federal Express” courier service claims on time deliveries and online tracking of parcels.

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• Communication: It refers to personnel skill of understanding customers correctly and communicating clearly.

10.4. Channel Differentiation

Distribution and distributors are important and indispensable part of marketing strategy and that which is one of the differentiators. Distrib-utors are important connect between the business and the consumers. The marketing strategies formulated at the company level becomesmoreefficientandeffectiveonlyifdistributors are able to trickle down the same in the way it is intended by the company and also distributors performance and relationship with consumers. Marketing channel deci-sions also play a major role as economies/financials, control and adaptation factorsare important deciding criterions. Marketing channels are used to create competitive edge over the competitors. The distribution channel could be differentiated in terms of its coverage, expertise and performance.

• Coverage: It is the extent of geographic area covered by the distribution channel. It also covers the reach of the channel. Which places the product is made avail-able timely and associated aspects in terms of after sales services, availability of spare parts etc. “Toyota” is able is differ-entiate its product through its wide distri-bution network, availability of mechanics in near vicinity of its consumers, effective communication and easy availability of its spare parts.

• Expertise: Some channels are experts in carrying out certain distribution functions and that those functions are difficult tocarry out by others. The company takes initiative in training their distributors so that their distributors are able to carry out the intended function perfectly. “Ford” trains its distributors with all sales and after sales related functions for its product range. Apart from training, they equip them with support systems and equipment so needed to deliver a perfect product with perfect after sales support through their reliable distributors.

consumers, they are all the more important to satisfy consumers and generate business. Employees thus become a strategic entity of competitive advantage for marketers. Companies hire requisite employees with stra-tegic competencies and train them accord-ingly. Personnel differentiation could be done on the criterion of competence, courtesy, credibility, etc. of its employees.

• Competence: It refers to the required skill & knowledge to perform a certain activity or to deliver the product. “Google” is known for its employee’s skill and knowl-edge due to which “Google’ has edge over its competitor’s products, be it the search engine of Google or the email service of Google.

• Courtesy: It refers to the friendly, respectful & considerate nature of the employees or person of the company. “British Airways” differentiates its airlines on the basis of courteous nature of its employees, providing quality service to its passengers.

• Credibility: It refers to the trustworthiness of the employees. “HDFC” bank boasts of its credible banking service delivered by their credible employees and makes sure that the consumer account remains all the more secure.

• Reliability: It refers to consistent and accurate service performance and done consistently. “Saudi Airlines” differentiates on the basis of its reliable services of its employees like time on time arrivals and departures.

• Responsiveness: It refers to the quickness in responding to customer requests and problems by the employees. “AirAsia” airlines, has made a presence in the social networking site “Facebook” and to the comments received through the social site, the company responds to most of the comments such received and similarly responds quickly and timely to customer queries. It is friendly and creates a personal touch in its replies 24 hours. “Starbuck” Coffee and “Wal-Mart” retails are popular for its responsiveness.

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Colonel Sanders symbolizing “KFC” Kentucky Fried Chicken, welcoming Maharaja (king) symbolizes Air India etc. Symbols communicates brand image, value and prestige of the company and its products. Logo is the short form of the Greek word “Logotype” which means word imprint. It is a visual identity of a brand recognizing the company. Its uniqueness symbolize product service, value, charac-teristics etc. Various colors, fonts, images, backgrounds and themes are used to support and reinforce the product, brand and company identity. Logo make the product, brand and company stand apart from the competitors because of its uniqueness. In fact true logos represents the name of the company in different styles in different backgrounds and color combinations like Coke Cola, Samsung, Ray-Ban, Sony, Ford, Honda, Siemens, ebay, HDFC Bank etc.

• Colors: Color is the property possessed by the logo/symbol/product/package etc. which gives different visual light sensa-tions to the consumers. There are different meanings associated with colors and as suchthecolorsreflectstheimage,cultureand characteristics of the product/company/brand. Different colors reflectdifferent cultures and property like red reflectswarmth,love,danger,speedetc.,pink reflectscare,nurture, feminismetc.,orange reflects affordability, creativity,enthusiasmetc.,brown reflectsdepend-ability,solidity,earthlyetc.,yellowreflectshunger, happiness, intellect, energy, comfort etc., green reflects reliability,durability, environmentalism, nature etc., blue reflects coolness, professionalism,loyalty, harmony etc., black reflectselegance, sophistication, formality, strength etc., white reflects cleanliness,purity, simplicity, innocence etc. There is a lot of impact of colors on consumer behavior and as such companies use different colors to communicate their nature and characteristics like “Wood-land” shoe uses green color reflectingenvironment friendliness, Coke Cola uses red color, Nikon uses yellow color, Tide

• Performance: It relates to the way the distributors deal through the channel and deal with the consumers and deliver the desired level of performance expected by the intermediaries and the consumers. “Apple” differentiates its product through its high performance distributor network. As soon as a consumer approaches a distributor with the product problem, distributors solves it to the satisfaction of the consumers immediately and even if it calls for replacing the product, without hassles and time consumption, it is done and sometimes exceeds the expectation level of the consumers what they had from the product distributors.

10.5. Image Differentiation

Image relates to the representativeness of the product and the impression it creates about the product with respect to its competitors in the minds of the consumers. It creates a picture of how the product and associated attributes would be or could be stated as the reflectionof theproductandcompanyas perceived by consumers through seeing, hearing etc. Consumers respond differently to the images and thus images has a direct influenceontheconsumerbehaviourwhichcould affect purchases. Through images consumers distinguishes the product from its competitors, however there is a difference between identity and image. Identity relates to the impression which the marketers want to create in the minds of the consumers whereas image is the impression of the product as perceived by the consumer. Sometimes there may be a inconsonance between the two.Imageapartfromreflectingtheproductattributes, beliefs, values and benefits alsoreflects the personality and culture of theuser. Image could be differentiated on the basis of symbols, colours, slogans and events.

• Symbols and logo: Symbols refers to a character, figure, object, sign, mark ormultitude of these which may possess associated meanings and perceived to have a value. Example, the symbol Apple is associated with I phones, macs, I pods etc. The Tick mark symbolizing “Nike”,

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and going, “McDonalds” fast food brand slogan: I’m loving it, “KFC” fast food brand slogan: Finger lick in’ good, “Burger King” fast food brand slogan: Have it your way, “Apple” brand slogan: Think different etc.

• Events and sponsorships: It refers to an important planned happening whether it be business/social activity, tournament, competition etc. e.g. “Almarai” dairy company in Saudi Arabia sponsoring social program like 15th Group wedding ceremony in Jeddah in association with Young Person Marriage Association and Family Guidance Association, Coke Cola sponsoring 2018 FIFA world cup Russia, “ Nissan Infiniti” car sponsored Red BullFormula one team in 2011 and saw its global sales for the car rose by 27.5%. In recent years “Emirate Airlines”, “Rolex” Watch and “TATA Communication” has signed deals with Formula-one, “Zahid Group” infrastructure development company in Saudi Arabia,Construc-tion Products Holding Company(CPC), Procter and Gamble sponsoring CSR (Corporate Social Responsibility) Summit 2015 in Saudi Arabia etc. Association with certain events gives company a distinctive competitive edge over others resultinginbetterprofits.

uses orange color, United Parcel services uses brown color, Yahoo uses purple color etc.

• Slogans: It represents short striking phrase which may invade the minds/brains of the consumer and stay there making a separate place for the product, brand and company in the mind/brain of the consumer andwhich reflects distinctivepropositionwhich identifies the compa-ny’s products from rest of its competitors. It can also be called a tagline, catch line, strap line or a punch line which is very catchy and which communicates the product appeal, brand value and company mission. Slogan helps differ-entiate example for slogans of different companies and brands include Pana-sonic; ideas for life, “Harley Davidson” Bike brand slogan: American by Birth. Rebel by Choice, “Volkswagen” car brand slogan: Think Small, “Wal-Mart” retailer brand slogan: Save Money. Live Better, “Reebok” sports brand slogan: I am what I am, “Nike” sports brand slogan: Just do it, “Adidas” sports brand slogan: Impossible is Nothing, “Sony” electronic brand slogan: Make Believe, “DuPont” petrochemical company slogan: The miracles of science, “Energizer” battery brand slogan: Keeps going and going

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1. Know the concept and characteristics of products.

2. Identifytypesofproductsanditsclassification.

3. Understand terminologies with regard to product.

4. Comprehend lifecycle of product.

5. Know the steps in new product development.

ProductCHAPTER

6

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2. Services: It is normally characterized by intangibility, heterogeneity, perishability and inseparability. Hospitals, hotels, transporta-tion, education, communication, insurance, retailing, banks etc. comes under this category.

3. Events: Any happenings, occasions or occurrence which is of some importance could be termed as events such as compe-titions, contests, games, tournaments, matches, shows etc.

4. Properties: They are physical assets like land, apartments, buildings or also could be stocks, patents, copyrights, trademarks comes under this category of product.

5. Information: It relatestofacts,figures,par-ticulars, data, details, statistics etc. comes un-der this category of product.

6. Experiences: They are encounters, inci-dents, emotions which goes through the mind or senses, feelings, knowledge by direct observation or participation would form this category of product.

7. Person: A specific character, person ofimportance, in its legal sense could also include organizations, partnerships, associa-tions, corporations or any entity having legal rights.Sellingofticketstomeetspecificchar-acters, important people, also payments to buy partnerships, corporations etc. are repre-sentations of person as a product.

8. Organizations: A arranged or structured unit, clubs, agencies, alliances, establish-ments, firms, leagues etc. which tend topursue respective collective need satis-faction are organizations. One has to incur monetary expenses to become a member of aclub,purchaseafirm,togetassociatedtoagencies etc. making organizations part of product.

9. Places: A particular location, area in space, site etc. are places. Dubai, Malaysia, Australia as tourist locations, now even space tourism, domainsinweb,specificlocationsforhoard-ings, all th ese comes under the category of places as product.

1. Introduction to Product

Product i s considered as one of the basic elements of marketing mix which consists of following:

1 – Product 2 – Price 3 – Distribution 4 – Promotion

The product is the subject of exchange press, without which there would be nothing that can be priced, distributed or promoted.

Some people define product as “anythingthat is offered by a company in order to satisfy needs of customers” while some others define itas“Acollectionofbenefitsconsistsof attributes of products and its services”.

Kolterdefineproductas“anythingthatcanbe offered to the market in order to attract attention, acquisition, use and consumption”.

Starting with the fundamental of identifying the needs of society and then working on to create something to satisfy their need, using marketing mix elements to align that some-thing with the society, the first marketingelement is that of Product which kicks start the process of marketing. As such we say product is that something or anything that would satisfy the need element of a human being. Human needs are unlimited therefore the process of coming out with improved and new product is a continuous phenomenon of marketing. There are many categorization of product but in general products could mean anything from being a physical good, service, events, experiences, person, places, ideas, properties, information, organizations. The punch is that product should satisfy the needs of consumers. How the above said things could be products is discussed in brief below:

2. Types of Product

1. Physical goods: Anything which is tangible in nature, from a small pin to aircrafts and many more like cars, furniture, computers, clothes, mobiles etc. which can be touched are physical goods.

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5. Potential level: This is the highest level of the product which is over and above the augmented product. This caters to the delight psychological state of the consumer. Certain additions to augmented level of product which consumer would not have thought about like a feature of driverless cab, massaging leather seats, adjusting lighting, total entertainment system etc. inside the product catering to travel need become an potential product.

4. Classification of Product

1. Product Classification according to its Durability and Tangibility: we can classify the products according to this standard as the following:

A. Durable product: These are those prod-ucts which has comparatively larger life and are tangible in nature. They could be low or high value products like, watches, mobiles, refrigerators, television, buildings etc.

B. Non-durable products: These are those products which are consumed in a comparatively shorter period of time. Fast moving consumer products like soaps, groceries, toothpaste, fuel etc. come under this category. The price of the product is usually relatively low.

C. Perishable products: These are those product whose life is even relatively very short may be few days or so like farm products (fruits, vegetables), poultry products (chicken, meat, eggs), dairy products (milk, yogurt, cheese) and other edible products with very short shelf life.

D. Services: Services are products which have characteristics of intangibility, perishability, heterogeneity and insep-arability. It could be major product or be a minor product attached to a major product like service attached to car. Services as such includes hotels, hospitals, transportation, communi-cation, laundry services, baby-sitting,

10.Ideas: Plans, designs, projects, proposals, conceptions, thoughts to be possible causes of actions etc. are ideas. It is an outcome of a mental activity for a particular intent. One has to pay money to draw a plan for a house, prepare a proposal to submit to some agency, design products, Amway selling idea ofmakingpeoplericharereflectionsof idesbeing products.

3. Levels of Product

When we talk about a product, it is an out-come of some need. There are different levels of need from a product as such the product alsohasbasicallyfivelevelswhichare:

1. Core level: This level of the product actu-allysatisfiesthecoreneedofthepersonandthe product is made to satisfy just the very core need. For example travel need,wheels become the core product which can make travel possible from one place to the other.

2. Basic level: It represents certain important things needed with the core level to accom-plish the need. For example for travelling from one place to otherit’s just not wheels but also some chassis needed for the person to stand and sit on so that the core elements along with basic elements make the product usable.

3. Expected level: This level of need crosses the core and basic level and goes on to satisfy the expectation level of the consumer. Like for travel need, wheels become the core product, wheels plus chassis become the basic product and then consumer may need seat, speedometer, fuel tank and fuel meter, brakes, etc. which would be added to the basic product such that the product caters to basic requirements of the consumer.

4. Augmented level: This level talks about comforts to be added to the expected product, for example in the expected product of a product catering to travel need, addition of air conditioner,music system, videos, leather seats, etc. could take the expected product to a higher level of augmented product.

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• General advertisements are used for its promotion like magazines and news-papers.

ii - Shopping goods: -

Consumer Goods purchased by the consumer after comparison and selec-tion between them on the base of price, quality, type and appropriateness such as home appliances – carpets – shoes – furniture with the following character-istics: -

• Purchased after making a lot of efforts in the purchasing as the consumer compare between types of goods and select the appropriate one.

• Goods like Carpet include a collection of size, colors, style and different prices.

• Unit price of these goods is often average (more than soft goods price) andprofitmarginof its produceranddistributor in unit is average (sometimes high)

• Consumer Goods are offered in fewer stores in comparison with soft goods “selective distribution” and usually it is sold directly from the producer to retail stores, so the consumer is “medium distribution channel”.

• The burden of advertisement is on the shoulder of retailer and local adver-tising media is used in addition to windows exhibition and coordination of its display inside the stores.

iii-Special goods:-

It is name of consumer goods which have unique characteristics or par-ticular trademark. A large number of consumers making a great effort to purchase it such as home appliances of famous brands and rare stamps, this kind of goods are characterized by fol-lowings: -

• Its customers are limited and they are always ready to purchase it with the

haircut etc. Also maintenance and repairs, installations, home deliveries, consultations, training etc. are some services which could be attached to a major physical good.

2. Product Classification according to Usage: we can classify it to:

A. Consumer Products: Are those prod-ucts which are acquired by the finalconsumers for their personal non benefit use: Convenience products:Also called as staple products, these are those products which does not take much of the time to purchase, are relatively low priced, needs very little efforts to purchase, found very easily, normally comparisons or evaluation with other brands are not so much done. All of the steps of purchase process are not normally followed. The consumers are less brand conscious. These products are more frequently purchased.

There are 3- types of consumer goods:-

i –Soft goods: -

Consumer goods are purchased by consumer frequently, from nearest place, and with less effort such as gro-cery items, magazines and newspapers; consumer goods are characterized by followings:-

• It is purchased with less effort, frequently and from the nearest place of consum-er’s resident.

• Differences are limited between brands & items of goods

• Unit price of goods is low and profitmargin of its producer and distributer in the unit is low.

• Consumers of these goods are every-where, therefore, it is distributed on a large scale in all shops and its distri-bution channel is very long from the producer to wholesaler to retailer to consumer.

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expenses is not too high in comparison with installations and machines. Heads of Departments take its purchasing decision according to need. Examples include calculators, office furniture,screwdrivers and hammers.

iii Parts: parts are considered as concrete part of produced goods unlike previous two groups; parts are often excellent and having trademark. The consumer purchases it as spar part. Examples of parts include car engine, television screen and car batteries.

iv. Materials of manufactured products: it is a raw material that needs manufac-turing process in order to be a part or complete goods such as wood panels and papers which are sold according toparticularspecifications.

v. Raw materials: It is considered as a part of produced goods but not manufac-tured as it is extracted from the mines, farms, forests and seas such as cotton, wool, curd oil, vegetables and fruits.

vi. Operating & maintenance: it is not considered as a tool of production as it is not a part of goods production but necessary to continue production such as oil, greases, light bulbs, statio-neries and spare parts of machines. It is consumed during production and purchased systematically whenever needed.

5. Product Life Cycle [PLC]

Every product has a life span, some product have long life and some product has short life but all products undergoes some stages in their life which is called product life cycle and usually therearefivestagesofproductlifecyclewhichis as represented in the diagram below:

These are the staged through which a product passes from its launching in the market to its disposal. It is worth mentioning that a product initslifecyclepassesthroughfivebasicstageswhich are as following:

aim to purchase trademark or required item as well as they insist on purchasing certain items of it.

• Consumers make great efforts in order to get it as their loyalty to the item is very high.

• These products are having some unique attributes which make them high quality products as well as they have famous trademark.

• Unit price is high and margin of its producer and distributor in the unit is also high.

• These goods have limited quantity as it is not purchased by most of the consumers as well as its purchasing is not done frequently. Therefore, it is distributed in a small number of stores. Also, its producers adopt the policy of sole distributors in its distribution and selling. Its distribu-tion channel is short “from producer to consumer”, or from “producer to sole distributor to consumer”.

• The best way to promote these prod-ucts is that the producer himself adver-tises it and sometimes retailer also do the advertising.

A. Industrialgoods:These types of goods are purchased by industrial organiza-tions (Factories) with are used for further manufacturing of goods. Examples of such as raw materials and machines.

Industrial goods are divided into six groups as the following:

i. Installations and machines considered asfixedassetsforacompany,itspriceis too high so the purchasing deci-sion is very important, that is why it is taken by Board of Directors. Often it is purchased according to special speci-fications.Itsproductionageislongandreaches tens of years such as giant diesel machineries and printing press.

ii Small devices: used by many compa-nies; it don’t last for years as well as its

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inthisstageisinfluencebyseveralfactorsincluding following:

• Some byers are resistant to bring new product in place of old product.

• Lack of competitors in the market.

• High price of product due to high costs.

1, Stage of Product Development: It is char-acterized by high costs as it includes costs of development, experimentation, testing, studies of economic feasibility and speci-fying marketing plans and strategies. In this stage, no sale of product is done i.e. there is no revenue and it is taken into account that the consumer’s purchasing decision

Figure (6-1) Physical goods

Physical goods

Industrial goods

Operating &

maintenance

Parts

Devices

Materials of m

anufactured products

Services

Installations & m

achines

Consumer goods

Special

Shopping

Soft

Figure (6-2) Product Life Cycle [PLC]

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to think about replacing the product with other product. The purchasing decisions in this stage are effected by following:

• Occurring changes in distribution outlets.

• Increasing rate of replacing an item with a new item.

Usually, this stage is to be longest as the sales stabilize at the level of replacing the item (to end of its hypothetical life) and it increases if there is population increase in the region. Fol-lowing are the policies which are used in this stage for marketing of the product:

• Convince those who are not using the product to use it.

• Finding new markets.

• Persuade the existing users to increase the use of product.

• Improving the quality of product.

• Adding new features or increasing size or making new designs of the product.

• Re-designing of marketing mix such as decreasing prices, increasing adver-tisement, giving special offers and searching for new distribution chan-nels.

5. Stage of Decline: During this stage, the sales decrease as a result of advanced technology and change in the needs and desires of customers. In this stage, the customers lose their interest in the product. The total sales begin to decrease gradually or sharply. Sometimes, the sales reach “0” in some items. This is due to several factors such as emergence of newattractiveproductsandthebenefitsbetter than existing products, gradual or sudden change in the tests and desires of customers.

Thefollowinggraphdemonstratesthefivedis-tinct stagesof salesandprofit trends for theproduct lifecycle.

• Resistance to distribution of new product.

• Intensive advertising campaigns.

2. Stage of Introduction: This stage witnesses a slight rise in the sales as some individuals purchase the product and the Company doesn’t make profits due to exorbitantcosts accompanying the process of product launch in the markets and its advertisements which aim to introduce the product to the consumers and convince them to buy it. In this stage, the poli-cies of pricing vary as come companies set the lowest possible price for the high costs products with the aim to occupy the largest segment of the target market. The real problems facing this stage is the small number of vendors, their inexperience about the new products and high costs caused by large spending on researches and development.

3. Stage of Growth: In this stage, sales of product increase but with a lower rates and the touch competition leads to decrease the prices. The expenditures of marketing increase and consum-er’s purchasing decision is effected by following: -

• Modifying the products.

• Decreasing number of competitors.

In this stage, the initial purchasers acquire the item (product) and the sales increase dramatically. The company starts to make profits, new competitors emerge and theytry to penetrate the market with competi-tive products which force the company to decrease the prices. The important marketing policies which should be followed in this stage are developing the products, displaying new selling tempta-tions, decreasing the prices, improving performanceefficiencyoftheproductsandmaking promotional efforts to create loyalty towards the offered products.

4. Stage of Maturity: In this stage, the sales come down and consequently it is must

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• Complete new products which were unknown.

• New Marks.

• Expansion of commodity mix by adding lines to new products.

• Making some modifications to existingproducts.

• Re-arranging the positions of products and orienting new products to new markets.

• Decreasing the cost through producing new products in less cost.

6.3. Conditions for Success of New Products

For success of new products, it must fulfillseveral objective conditions and there should be innovative management capable of designing effective strategies for new products. Therefore, marketers think that there should be six (6) strategic roles which a company has to play to strengthen its new products which are: -

• Maintain the condition of innovated product.

• Defend the share of product in the market.

• Ensure its presence in the future market.

• Acquisition of a part of market.

6. Developing New Products

A company can develop new products through ownership and through adoption of any of following methods:

1. A company purchases the rights of inven-tions and innovations from other companies.

2. A company purchases the franchise rights of production for the products of other companies.

In the above methods, a company doesn’t develop new products but gets the owner-ship of rights of existing products.

6.1. Methods to Develop New Products:

The process of developing a new product can take following two basic tracks:

• A company develops new products in its own laboratories.

• A company assigns a number of indepen-dent researchers or agencies specialized in the area of developing the products to search for successful means and tools to develop new products carrying the name of the company.

6.2. Different Types of Product Development:

There are six types of new products:

Figure (6-3) Product Life Cycle

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or deleting some internal or external features such as function, quality, shape and weight.

4) Strategy of modifying or improving the 4Ps or improving the distribution outlets or promotion or pricing or individuals appli-cants for service or operations or physical environment.

7. Stages of New-Product Development

The following is the diagrammatic representa-tion of stages in new product development:

Generally, the process of planning new prod-ucts passes through following stages:

1. Generating the Idea: In this stage, new ideas must be generated about the products as desired by consumers in target market. These new ideas are gathered either through internal resources of a company such as: Department of Researches & Development and Department of Marketing or through external resources such as: consumers and competitors.

2. Screening the Idea: After the process of getting ideas, the process of its screening starts which aim to retains the ideas which are good for the company and get rid of ideas which seem to be impossible to achieve. One of the methods used in evaluating the available ideas is: discussion by concerned persons and which contains attraction and fascinationof idea fromfinancialpointandthe degree of response by consumers.

3. Concept Development & Testing: In this stage we have someideaswhich have passed the screening stage. The comput-erized versions of the selected ideas are given a shape and conceptsare devel-oped in terms of designs, features, materials, colors, size, weight etc. However, apart from internal opinions some customers are invited to express their opinion about the concepts developed for the selected ideas. Feasible ideas are incorporated in the concept, with

• Technological development using new method.

• Strengthen the strong points in distribution strategy.

6.4. Strategic Objectives of Developing New Products:

A company designs strategies to develop its products with following aims:

• Fulfill needs and desires of existingconsumers through developing the prod-ucts or modifying it.

• The product development contributes to find competitive advantage of acompany, strengthen its strengths and utilize the capacities.

• Drawing a mental image based on strengthening the development and entrepreneurship.

• Abiding by social responsibility towards individuals and societies through research and development.

• Achieving financial objectives (revenue,return, share etc.).

• Designing performance evaluation stan-dards.

6.5. Strategies to Develop New Product:

There are four strategies to develop new products:

1) Strategy of adding totally new products and that is through adding new products to the existing commodity lines (expansion in the depth).

2) Competition + change in tests + exploittheunexploitedpotentials+product life-cycle+enternewmarkets+findintegra-tion between the products in the same line.

3) Strategy of improving the existing products and that is through improvement or modi-ficationoftheexistingproductbyadding

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5. Business Analysis: This stage is called Economical Evaluation of ideas It is done through the studyof financialcostandesti-mate the expected demand for proposed item in case of its production. Also A company is trying to determine the Advantages of the product and demand and the persons in charge to do the feasibility study about it company uses several tools to analyze the economic viability such as decision tree and analyzing the costs and so on.

6. Product Prototype Development: In this stage initialand actual product is developed. It is done after specifying the area of choice for all ideas available in very less number ranging between 1 – 3 ideas. After that, practical tests are carried out with the aim to produce a few numbers of models of item and a concept about the shape of packaging, designing new brank/mark and a general visualiza-tion for the shape of marketing mix meant to examine in the market. Product development involves developing the product concept

enough in-depth information so that the consumer can visualize it.

4. Marketing Strategy Formulation: In this stage marketing strategies are formulated so that a consonance between the consumer and the product is formed and the possibility of exchange happening increases. The strategy is formulated with respect to the product as what features, benefits, size of product weight ofproduct, color of product, reparability, durability, conformability aspects of product are formu-lated. Strategies with respect to price as to what pricing strategies to adopt, how much discounts have to be given, installment and financingoptions etc. are to be planned. Strategies with respect to distribution have to be formulated. Promotion strategies needs to be developed in terms of designing in terms of advertisement, personal selling, sales promotion, public relations and direct marketing techniques. Also segmen-tation and target market has to be selected and appropriate positioning and differentiation strategies need to be formulated.

Figure (6-4) Stages of New-Product Development

Commercialization

8

Market Testing

7

Generating

The Idea

1

Screening

The Idea

2

Concept Development & Testing

3

Marketing Strategy Formulation

4

Business Analysis

5

Product Prototype Development

6

New

Product

Development

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• Width: It indicates to the expansion of product mix to different production lines which a company owns and produces the items through these lines. For example, the General Electric Company has expansion of products as it has eight (8) lines for product (Electric Bulbs, Home Electrical Appliances, Heavy Equipment, Small Engines, Medical Equipment, Aircraft Engines, Maintenance Services, and different Electrical Parts).

• Length: Number of different products existed in each production line.

• Depth: Number of different items for each product as production of products in different packaging or different color.

• Consistency: It pertains to the similarities and consistency between the products of commodity mix which are sold to the same consumers or distributed by the one distri-bution channel or the prices are almost same.

9. Packaging

It isdefinedasasetofelementswhichactsas supporting parcel of a product and sold with it to protect its contents. Packaging is comprised of following:

• External wrapping: It is decoration which is generally includes pictures, colors and texts.

• Packaging: It is the content (item for use) which is inside the wrapping such as glass, plastic, carton, iron etc.

9.1. Levels of Packaging:

There are 3-levels of packaging:

• Primary Package: It contains the actual product (attached with the actual product).

• Secondary Package: It includes several units of a product to make it in a sold unit i.e. extra layer to the product.

• Shipping Package: It allows transpor-tation and shipping of a large number

into physical product to make sure that the product idea can be converted into a work-able product.

7. Market Testing: The test of market of new proposed item is done through the test of a spec-ifiedareaandwidelyinthecommercialshopsand then the reaction of consumers regarding that proposed item as well as proposed marketing mix for that item is assessed.

8. Commercialization: In this stage, the new item is produced after its successful test in various markets potential to compete the items and other brands/marks. In the last, follow up plays very criticalpart in the success of process related to launching the new products in markets. Following are the areas of follow up:

• Follow up the process of launching new product to the market.

• Follow up the execution of marketing program.

• Follow up that how consumers react to the product.

• Follow up the sales volume.

In this stage a detailed launch plan is required for to run commercialization smoothly and to have maximum impact. It should include deci-sions regardingto when and where to launch to target your primary consumer group.

8. Product Mix:

The product mix is defined as all productswhich are offered to the market by one com-pany.Anotherdefinitionwhichsaysthatprod-uct mix is the line of product which represents a range of products offered by the business and is related to each other whether it has same featuresorfulfillsspecificneedsortargetedtothe same segment of consumers or distributed through the same distribution outlets.

8.1. Dimensions 0f Product Mix:

The product mix has several dimensions which are as following: -

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started to design the packaging of their products which is compatible with the environment and doesn’t pollute it.

10. Labelling

It identifies the product or brand, describeattributes, and provide promotion.

11. Brand

Itisdefinedasanameortermorsignorde-signormixofallaboveandwhichspecifiesthe commodities and services of a buyer as well as makes differentiation between it and products of competitors.

11.1. Importance of Brand:

The functions of Brand for a company and for consumers are:

• The brand indicates to the ownership of company.

• It distinguishes products and services.

• Division of market, presenting the symbols to support the loyalty of customers.

• Achieving communications.

• Productfixation.

• Get rid of tradition through registered trademark.

• Introduction to product and its monitoring.

• Quality Assurance (Sony).

of products from the manufacturer to the sale units of the product.

9.2. Importance of Packaging:

Presently, the packaging is considered as a vital part in the policy of developing the prod-ucts of a company. Also it is considered an important part of the product itself as it gives the consumer a complete concept about the contents and the quality of products. The importance of packaging lies in following:

• Protection of contents of a product during the process of packaging, transporting and storage so that it cannot be broken.

• Packaging is a communication means with the consumers through informing them about the company/brand and its instructions related to how to use the product and its usage.

• Packaging is used as a tool create image and provide competitive distinction.

• Packaging is considered to be an critical factor in the success of new products.

• The packaging helps a company to follow the policy of change in order to reduce the costs when the sales increase or come down due to oldness of package and emergence of new materials for pack-aging such as change in the glass, carton or plastic packaging.

• Environment protection: Under the pres-sure of environment protection move-ments, the producers and manufactures

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1. Know the concept and importance of pricing and its relation with other components of marketing mix.

2. Identify the factors affecting pricing decisions.

3. Specify different methods in pricing.

4. Analyze the different strategies for pricing in the business organizations.

PricingCHAPTER

7

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3. Importance of Pricing for Companies

In fact, the price has importance for the com-panies which deal with this marketing ele-ment because of following reasons:

• The price is considered as aextremely importantcomponent of marketing mix in terms of affecting the level, timing, composition of demand and to counter the competitors.

• High price can be an indicator for the nature of the product from view angle of consumers. This fact was is supported by many studies.

• Positive and strong relationship between hiking the price and amount of revenue orprofitabilityachievedbythecompanyfrom this price.

• Thepricecompetitionisanimportantfieldfor the companies working in the market.

• The price is considered as a method resorted to by the companies in deep-ening the understanding about the product in the market as most effective tool in making impact on the customers.

• The price is combined with the package of benefits expected to achieve at theconsuming of product or service. Also, the total cost for customer is the package of costs expected to achieve from eval-uation, acquisition and use of product or service. The value referred to the customer represents difference between the total value and its total cost.

• The price element differs from rest of other marketing mix elements in terms of its high sensitivity for the surrounding circum-stances while other decisions, related to planning of product, its distribution and its promotion need lengthy period to produce tangible results.

• The pricing is considered as a shade for the price, so it is a marketing activity asso-ciated with the philosophy of organization, its concentrations and its objectives. The

1. Introduction to Pricing

The price is considered as one of the critical elements of marketing mix as it explains the specificationsofproductqualityindigitalfor-mat. Mostly, the customers compare between the level of product and its price. If they feel that there is compatibility between the prod-uct and price, they begin to trust the company and its products. Also, the price is very import-ant because it is an element which is relied on in achieving the rates of return on invested funds. Accordingly, any mistake in pricing of theproductwillbetantamounttosacrificingmany customers who otherwise might have purchased the product. This mistake will affect negatively market share and the company will not be able to attain targeted objectives.

2. Concept of Pricing

The price is considered as one of the import-ant elements of marketing mix because it is taken into account when a company evolves a future policy or designs a future strategy. The price has effect on the revenues of the businessoritsprofits.Thisfactorisacommondenominator between consumers, suppliers and producers. Therefore, there are many concepts of pricing which can be summa-rized as following:

• It is a value which has been given to a productoraparticularservice.Thebenefit,which is gained by the consumer as a result of purchasing a particular item, is trans-lated in the form of a particular value. The companyfixesaparticularpricewhich ispaidbytheconsumerinreturnofbenefit.Therefore,thepricedoesnotreflectmate-rial components of the item/product only but it incorporates many aspects such as psychological aspect, reputation of the product and offered services related to product selling or service.

• It is a monetary value which is given in return of product, not because the product is a commodity or a service only but because the buyer is enjoying intan-giblebenefitalso.

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• Other elements which include: (1) excep-tional nature of the product (2) product related investment (3) target export market and (4) performance level.

5. Methods of Pricing

Some methods and policies of price fixingcan be summarized as following:

1. Cost Plus Pricing:

This method is considered as very simple and widespread, according to this method,thepriceisfixedasfollowing:

Price=Costs+ProfitMargin

The profit margin here is specified as apercentage of costs or as a percentage of specificreturnontheinvestment.Generally,this method is relied on a logic which says that the price in this case guarantees that it will cover total costs and make the company or businessmen remain in the market. Never-theless, there is a risk in this method which is: It can neglect the impact of demand, supply and competition. Also, any reason, which causes actual sales decline from planned sales, will lead to inability of the company to coveritsfixedcosts.

2. Pricing based on breakeven point:

The analysis of breakeven point relies on the percentage of total costs to total revenue asthere isnoprofitandnoloss.Thisanal-ysis is used to specify the appropriate price whichcangivemaximumpossibleprofit.

3. Demand-Based Pricing:

The price of the product is determined by the demand for product. So, while the costs determines minimum monetary value of the product, the level of demand determines maximum monetary value which the consumer can afford.

4. Competition-based Pricing:

This method is based on specifying prod-ucts of the company after taking into

price of product is fixed according to aset of bases connected with the costs and market mechanism is prepared according to supply and demand of the product, policies of competitors and approved marketing policies of the company to facilitate the task of customers / distribu-tors and consumer’s ability to pay.

• The pricing policy is considered as an important factor to achieve different objectives of the company in view of its big impact on consumer behavior and their preferences at one end and compet-itors’ behavior at the other.

• The price plays the role of advisor in the evaluation of quality and that is because people believe that high monetary value of the product is associated with the best quality.

• The pricing is an important administrative responsibility that entails operational results and effective strategy of the company. This elementishavingbigimpactonthefinan-cial aspect of the company compared with other marketing mix elements.

• The appropriate pricing decision increases sales volume and improves financialcondition of the company while the weak and inappropriate pricing can spoil the performance of the company.

4. Economic Bases of Pricing

The companies take into consideration following elements when determining the price of the product:

• The elements related to consumer side directly as these elements contain: (1) fair price fixing of a product (2) purchasingability of customers (3) difference in the prices of products or services according to geographical location (4) no focus on lowprices (5) fix the price based on thefeature and marketing skill and (6) keeping in mind other costs associated with the product such as costs of researches and administrative, transportation, shipping as well as travel expenses.

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than achieving profits, sales increaseand market share. The company fixeslower price for the purpose of main-taining its presence in the market and not to lower itsmarket shareunderdiffi-cult circumstances. But after improving the economic condition, the company adjusts its price.

2. Sales Increase:

Usually, the companies fix the priceswhich can help to increase sales even though the companies aware that there is negative relationship between volumes of sales and prices. The sales increase will be followed by increase in produc-tion volume which will ultimately lead to lowering the cost of per unit. Also, the strategy of market penetration is very effective while entering into international markets through internationally unknown companies. The credit of international success and growth of automobile manu-facturing companies such as Toyota etc. goes to pricing strategy based on market penetration.

3. Profit Objective:

Making a profit is always considered asone of the important objectives strived to achievebymanycompanies.Magnifica-tionofprofitneeds to full understandingof costs, demand and their interrelation-ship as well as estimation of costs and demand related to different alternative prices.

Increaseinthepricecanaffecttheprofits3 to 4 times more than the increase in sales

account the market prices in order to face the competition. There are three alterna-tives before the company which are:

• Pricing on competitors’ level,

• Pricing on the level which is less than the level of competitors,

• Pricing on the level which is higher than the level of competitors.

6. Pricing Objectives

The pricing decisions are taken to achieve specificobjectiveswhichareinconsonancewith the corporate mission and its marketing strategies. There are five following basicobjectives which the marketers should take intoconsiderationwhenfixingtheprices:

• To maintain market viability,

• To increase sales,

• Tomagnifycompany’sprofits,

• To encounter competitors or not to encounter, And

• To improve company’s reputation and maintain level of the quality.

Following diagram explains the objectives of the pricing

Following is the detailed presentation of pricing objectives:

1. To maintain Market Viability:

Mostly, maintaining market viability is thought to be more important objectives

Figure (7-1) objectives of the pricing

To maintain market viability

To increase sales

To magnify company’s profits

To maintain particular mental

image Face Competition

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8. To strengthen competitive edge of the company:

This objective helps the company to occupy leading position and price compe-tition increases in low segments of Market.

6.1. Costs and its Relation with Pricing

Naturally,fixingoftheprice is influencedbythe costs of product and a producer takes intoconsiderationcostfactorwhilefixingtheprice or at least extent of effect or relation of available alternative prices levels with the cost of product and then with its expected profits.Itwillhavebigimpactonpricingdeci-sion taken by the producer as the economic theory says that the product cannot achieve profitifthepriceofperunitisnothigherthanits cost. Therefore, the cost factor should be very clear but it doesn’t mean that the producer can reach selling price through specification of product cost (Costs ofproduction and thus the cost element is an importantelementinfixingthepricebutitisnot only element as there are other elements such as the nature of market and compet-itiveness etc.). The producer always strives (while fixing the price in the long term) toachieve revenues which can cover its costs easily and maintain its competitive position in the market.

Cost structure contains following:

• Fixed Costs: It is bore by the company whether it has carried out production process or not such as cost of machin-eries, equipment’s, production facilities and Bank Loan Interests. These costs don’t change in the short term.

• Variable Costs: It is related to the produc-tion process and its raw material as it increases with production increase and decreases with production decrease.

• Total Costs: It is overall costs which are borebythecompanyincludingfixedandvariable costs. (=Fixed Costs + VariableCosts for the Unit × number of produced and sold units).

volume but mostly the increase in the price reduces sales volume. And lowering the pricewillleadtoinadequateprofits.There-fore, the appropriate level of the price is required in most cases.

4. Competitors’ Prices:

The price is a tool to respond to the compet-itors. In the strategy of market penetration, the low prices forbid the competitor from entering into Market. The price compet-itiveness begins when the products and trademarks are similar or the differences between the trademarks are not clear for the consumers. The price competi-tiveness leads to price war and then the prices are lowered in order to respond to the competitors which cause losses for the company in short term. Usually, the price war can be seen very clearly in Airline Companies and Computer Manu-facturing Companies. Also, low compe-tition allows the companies to fix higherprices for its product. Often, the company cannot control the determinant factors for its prices and consequently fixes theprice of its products based on the prices of leadingcompaniesinthatfield.

5. To improve company’s image and main-tain quality level:

Mostly,thecompaniesseektofixthepriceinawaythatcanreflectproductspositionoffered in the markets in order to maintain mental image of the company. This strategy is based on the assumption that some consumers compare price and quality to avoid purchase of low quality products.

6. To increase sales revenue:

To increase sales revenue in order to establish a relationship between levels of sales quantity, costs and prices that can achievemaximumpossibleprofit.

7. To achieve rate of return on investment:

Themanagement specifies rateof returnand seeks to fix theprices in away thatcan achieves that rate.

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price as well as it should strive to predict the competitors’ behavior not only in the same industry but in other industries also which produce the products of same type. Many companies fix its products pricesbased on the competitors’ prices partic-ularly leading companies of the markets. Thus, some companies put the price on product which is less than competitors or equal to them or higher than prevailing prices while some companies seeks to be followers of best performing companies in the same industry as they put its prices in the light of leading companies’ prices.

• The Government Interference: The govern-ment interference plays very important role in company’s capacity to fix itsproduct prices in many countries.

• Economic Conditions: The Company’s capacity to fix its prices differs with thedifference of economic conditions facing the country. So, when the economy of the country is on boom, the company’s capacity to fix its prices increases unlikerecession as the companies seek to increase demand of the product through lowering the prices or increasing the product associated services.

• Suppliers & Distributors: All parties involved in the marketing system play very important role and have impact on the capacity of thecompanyinfixingitsprices.Thus,ifthesuppliers increase initial prices of mate-rials or mediators bargain to increase their profit margin, the company’s capacityto fix appropriate price for the marketwill be restricted. And as an alternative, thecompanywill decreaseprofitmargin,which it was planning to obtain, in order to avoid any increase in the prices or will use other resources or alternative distribution channels.

7.2. Internal Factors

These factors include:

• Objectives: Fixing of appropriate price mostly depends on the objectives of

• Marginal Costs: It is the cost of additional unit of production and indicates to vari-able in the total costs which arose by the variable in the production by a single unit only. The marginal revenue represents addi-tional revenue which the company obtains from selling of addition unit of products. This can be calculated as following: Revenue = Price × Sold Quantity. Inordertofixthepriceinaway thatcanmagnify theprofits, thecompany should bring about appropriate-ness between the information about the cost and the information about the revenue. Accordingly, the profit will be calculatedas: Profit = Total Revenue − Total Costs. We conclude from the above that costs increases should be followed by increase in general level of prices in order to maintain the revenue from production process.

7. Factors affecting Pricing:

The factors which affect company’s capabili-tyandfreedomtofixthepricesofitsproductscan be bifurcated into 2-basic factors:

Following are the detailed explanation:-

7.1. External Factors

These factors include:

• Demand: The demand of product or service affects the pricing particularly the pricing oftheproductforfirsttime.Therearemanyfactors which affect the pattern of demand for a particular product including: Income of consumer, consumer’s preference, purchasing power and number & power of competitors. Therefore, the demand of product should be studied while deter-mining the price of the product because there are some products which are char-acterized by the sensitivity of consumer towards its prices and its variables.

• Competitors: It is an important external factor which affects the company’s capability to fix its prices. Therefore, thecompany should takes into consideration the prices of competitors while fixing its

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product is good (2) Extensive promo-tional efforts have to be made in order to convince the consumers in a way that can justify the high price (3) The products should be offered in a good packaging and (4) Selection of distribution channels which have previous experience of marketing of high price products. Thus, it is appropriate to coordinate between the price and remaining elements of marketing mix.

Some studies view that there are other elements which affect the process of price fixing; these elements are known as 5C s.

8. Consumer’s Evaluation of Price

There are three levels of prices related to consumer’s evaluation:

The above chart makes clear that the model assumes that the consumer has informa-tion as a result of his previous experiences in purchasing the same or similar products. Most ofpeoplearenotsureaboutspecificpricesbut they have general expectations from market prices and accepted levels of prices and then they evaluate the price according to their expectations. When evaluating the price, people are influenced by severalparticular factors such as: Budget, Time Pres-sures, Use and Cost positions related to more search for low price products.

Generally, the consumers are less willing to pay high price for the products which promo-tionalpricesarespecifiedcontinuously.

pricing. The objective to increase market sharewill lead the company to fix lowerprice for its products unlike the objec-tivetomagnifytheprofitswhichisusuallyaccompanied by the higher price of the product.

• Degree of Product Quality: If the prod-ucts of the company are excellent and characterized by the features, different from the products of the competitors, the companywillfeelfreeinfixingitsprices.

• Management Philosophy: Some compa-nies incline to adopt philosophies related to the prices when they want to fix thelow prices for its products. The manage-ment philosophy is used by those compa-nies in forming a specificmental picturein minds/brains of customers and target sectors, Bata Shoes Company – Egypt isanexampleof it. It isverydifficult foracompany to fix priceof its newproduct.The companies which incline to not to put its products prices more than the prevailing price, they have to adopt this method in fixingprocessofprices.

• Marketing Mix: The price is considered as one of the important elements of marketingmix.Butwhenfixingtheprice,thecompany should not look at this element as an independent element but it should be addressed inside marketing strategy frame and its constituent elements. While deciding about fixing high price of theproducts, the company should take into account following: (1) The quality of the

Figure (7-2) Price Determinant Factors

Price Determinant Factors

Costs

Customers

Distribution

Channels

Competition

Compatibility

with

marketing

mix

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addition to achieve reasonable percent-agesofprofits for shareholders. The levelofrequiresprofitvariesfromBanktoBankas per priority of this objective compared with other objectives.

3. Return on Investment: This objective is one of the important and widely used objectives in contemporary companies to achieve rate of return on funds which are used or invested. For Banks, the objective of pricing is to achieve rate of return on funds invested in the Bank and accordingly the pricesarefixedtoachievespecificrateofreturn which can be accepted by inves-tors in the bank. Generally, this objective requires accurate and information about costs centers and volume of expected revenues to specify return on investment.

4. Cash Flow: This objective is an effective means to regain highest possible costs which has to be paid to dealers during a specificperiodagreedon.Thecashflowisa basic objective of pricing noting that it is acceptable in case of new services and lack of competition. Thus, the bank cannot increase the prices in the market if the competition is tough particularly if there are other banks which aim to increase their market share through prices.

5. To maintain existing situation: Some banks consider their existing situation in the market as exemplary, therefore, they make every efforts to maintain current

9. Stages in Pricing Process

The process of price specification for aproduct passes through several stages. Through these stages, we can avoid uncer-tain situations related to acceptance or rejection of imposed price from current or future buyers’ point of views. Following are the steps:

9.1. First Stage: Specification of Pricing Objectives:

Thespecificationofpricingobjectivesrequiresthattheseobjectivesshouldbeclearandflex-ible which can enable the planners to design theoretical framework for actual policies related to pricing. The marketing manage-ments in the companies have to design and develop pricing objectives in line with general objectives of Banks towards target market. Following are some such objectives:-

1. To maintain viability and market share: Maintaining the viability and expanding marketshareisfirstgeneralobjectiveinallBanks even though they have to bear some losses in short term in the way of achieving this objective. This objective means that theprice isflexibleandadaptabletotheconditions of competitors in the market.

2. Profit:ProfitMakingisconsideredasoneofthe basic objectives which all banks seek to achieve with the aim to ensure their viability and pay their existing obligations in

Figure (7-3) Consumer’s evaluation of price

1. Expected Price Level

The extent of price change from expected price?

2. Accepted Price Levels

Am I ready to pay price?

3. Expected Price Trend in Future

Will the price change in future from the current

price?

• Budget Constraints • Trademark / Price / Quality • Factors Affecting Purchasing Position

(Time Pressures) • Factors Affecting Use Position

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• Considerations of the Company: The bankshavetodecidethatwhowill fix thepricesasthepricesusuallyarefixedbyTopManagement and pricing is the responsi-bility of Department Managers while the Top Management reserve the task to design pricing objectives and pricing policies which are usually consistent with the prices presented by lower managements levels.

2. External Factors: The external factors which affect the pricing decisions contain trust of customer on products, market conditions, demand, competition and other envi-ronmental elements as the cost specifiesminimum prices. Following are the details of each factor:

• Trust of Customer on Products: In this, the study is conducted to know that the trust-worthiness of the customer towards the product.

• Market Conditions: The banks face a high degree of competition not only from other banks but other financial institutions alsoinaddition tomembersoffinancial stockmarket. Therefore, the banks adopted market oriented philosophy while speci-fying the prices. In this, the pricing is looked upon as a complementary element for remaining marketing mix elements inside specific marketing strategy framework.Also, it takes into account that the prices charged by the banks are consistent with marketing program as whole.

• Elasticity of Demand on Banking Services: To examine the appropriateness of the adopted pricing policies (Such as: Market penetra-tion, Perceived Value and Price Leadership), it has to be combined with a high degree of demand elasticity on banking service in the market. The elasticity of demand on banking service means a degree of sensi-tivity of demand on banking services for the changes occurred in levels of its prices.

9.3. Third Stage: Demand and Cost analysis and Realized Profit:

The banks specify several levels of prices, as other institutions, to cover all the costs spent to produce the services. There are two methods

market share without creating conflictswith competitors. This attitude leads to generate aenhanced image of the company in minds of customers (Because of Price Stability).

6. Cost Leadership: Some banks use the price in order to achieve cost leadership objective in market evaluation of a partic-ular product. It would be inappropriate tofixverylowpricefortheproductofthebank. But it depends on the quality of the product. So, if customers think that the quality is very high, they will be ready to pay any price for this product.

9.2. Second Stage: Study of Factors Affecting Pricing Decisions:

When fixing the price or prices for bankingservices, several facets should be taken into account. These factors are divided into two following group:-

1. Internal Factors: The following internal factors originated from the bank itself:-

• Marketing Objectives: If the specificmarketing objective is to produce a high quality service with the aim to keep hold on market against competitors, it requires entering into the market with high prices of the service. But, if the objective is to access to highest possible number of customers (Particularly, low income customers), it requires entering into market with low prices of the service.

• Strategy of Marketing Mix: The pricing decisions should be consistent with product, distribution and promotion (Elements of Marketing Mix) so that it can make an effective marketing program. Thus, the decisions related to marketing mix elements will affect pricing decisions.

• Cost Factor: It is observed that banks adopt traditional method while specifying prices. Thus, if the costs increased, the banks increase commission rates on their services in the light of increasing prices; therefore, we find that the banks in lastearn the profits equivalent to the coststhey had borne.

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revenues due to the sales change or the change that happened in the total reve-nues which has been reached after selling an additional unit of brand service.

10. Price Change

Price change means the selling of the same product but with different prices based on special conditions and considerations. The decision of price change, taken by the company, should be informed to distributors, customers and salesmen so that the process of price change can be completed at the same time taking into consideration the reac-tion of competitors and consumers as they term this decision as a new behavior of the company.

The prices will be decreased or increased; following is the explanation of each case:

10.1. First: Case of Price Decrease

There are many reasons or circumstances which force the company to decease its prices even though it causes price war, following are some reasons:

• Excess Productive Capacity: In this case, the company needs additional sales which cannot be achieved through its normal commercial efforts.

• Insufficient Market Share: In order to expanditsshare,thecompanymustfixtheprices according to the level of competi-tors because of touch competition in the market.

• Cost Reduction: In case of cost reduction, the company can reduce the prices as computer manufacturing companies do.

Negative Aspects of this Method:

• The product image will be spoiled in consumers’ mind; therefore, the company should convince its customers that the product has same quality and feature as before.

• There is risk of customers’ escape as the decrease in price contributes to market

which can be used to analyze and under-stand the relation between the demand, costandprofitasfollows:

a) Breakeven Point Analysis: Breakeven Point is a point where total sales revenues with totalvariable&fixedexpensesareequalorit is a point where total contribution margin with totalfixedexpensedareequal.As itis clear from those two definitions, thebreakeven point can be reached through two methods as the following:

• The equation method concentrates on the contribution of income statement which can take following equation form:

Profits=(Sales)–(VariableExpenses+Fixed Expenses) or

Sales=VariableExpenses+FixedExpenses+Profits

• Contribution Margin Method: It represents remaining value of sales revenues after subtract of variable expenses and focuses onthateachsoldunitproducesaspecificamount of contribution margin which covers fixed expenses. So, if the contri-butionmargin is insufficient tocover fixescosts, there would be losses during this period. Through contribution margin, we can produce a number of units which should be sold to achieve equation by distribution of total fixed expenses oncontribution margin for each sold unit:

Equation = Fixed Expenses / Contribution Margin Unit

Breakeven point analysis is considered as a direct and simple method as well as a reasonable indicator to know the ways which can be used in specifying number of produced or offered units. Also, it helps companies to reach breakeven point but it does not mention that how to achieve pricing objective.

b) Marginal Analysis: The process of marginal analysis revolves around maximum profitpoint. This is the point where marginal cost with marginal revenue gets equalized and generally it looks upon the marginal revenue as change that occurred in total

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fications and acceptable logic otherwise itwill have negative and harmful effect on the company.Followingaresomejustifications:

• To raiseprofit level: The factorsonwhichtheoriginalpricewasspecifiedwillchangewhich will force the company to review its pricing policy anew.

• Change in the Cost: Constantly changing cost according to the changes occurred in economic conditions.

• To Increase the extent of market penetra-tion: With the aim to increase sales volume and to have access to a large number of consumers. This process will require price change.

• Stage in the lifecycle of product: The stages of lifecycle of product are naturally accompanied by price change.

• Competition Factor: It is one of important pricechangejustificationsasthecompe-tition to acquire a big place in market requires price change.

• Demand Factor: The change occurred in the consumers’ styles is accompanied by change in the demand which requires price change either top-down or bottom-up.

11. Reactions to Price Change1. Reaction of Customers (Consumers).:Price

decrease means (For Customer):

• The product’s appearance will be change,

• The Product is not sold as before

• Thecompanyhas financialproblemandcannot guarantee spare parts of the product.

• The price will decrease

• DeficiencyinProductQuality

Price increase means (For Consumers):

• The product’s demand is very high

• The product has special feature and the price will increase

share increment but the company cannot get consumers’ loyalty.

• The policy of decrease in price can cause weaknessinthefinancialcapabilityofthecompany.

10.2. Second: Case of Price Increase:

The price increase can create negative reaction from consumers and distributors as they can search for other resources of low prices; therefore, the company should make sure that the competitors also will increase their prices before beginning the process of price increase. In other words, this policy is not suitable for implantation if all competi-tors companies in the market have not been agreed to increase the prices. Following are the reasons to increase the prices:-

• Cost Increase: If the management came to know that theprofit rateof thecompanyhas decreased due to the cost increase, they will take decision to increase prod-ucts prices in order to avoid losses. But it depends on cases and circumstances such as: Sensitivity of consumers in respect to price change and decisions of competitors.

• Change in Appearance of Product: For the company to create an premium image of its product, it needs to put the price high becausethepricereflectsthequality.Butthe business needs to be cautious about the price change as it could possibly alienate its consumers. Therefore, the company should change the attribute, appearance or color of the product etc. to justify the change in price.

• Raise the profitability of the Company: This is a rare case, but if the company has effective and durable monopoly, it should make sure that the price change will not affect the demand as well as there is no alternative and similar product accessible in the market.

10.3. Justifications for Price Change

We are refers to the decision to change the price cannot be made randomly without justi-

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of such products in addition to unavail-ability of alternative products which can be compared easily.

• If there is less possibility of competitors’ entry into the market in short term.

Advantages of this Strategy:

Skimming Strategy has several advantages from buyer’s point of view:

• The high price achieves revenues which can cover a big part of costs and devel-opment of new product.

• It enables the company to expand production of new product in the future and improve the products in case of entering new competitors in the markets.

• This strategy can develop good reputation andaspecificmentalimageinthemarketthrough connecting high price with high quality.

• It enables the company to encounter pricing risks, thus it will be easy for the company to decrease product price. On theotherhand,wefindthatthisstrategyattracts competitors to enter into the market quickly particularly in case of products which are not protected by patents.

2. Penetration Strategy:

Thisstrategymeansspecificationoflowpriceof the new product with the aim to allure a bulk of buyers and to achieve a high market share. Instead of specifying initial high price, some companies use penetration strategy. Therefore, they specify initial low price so as to penetrate the market to achieve greater market share. The high sales will result in de-crease in the costs which can enable the company to decrease its prices.

Thus, the company aims to adopt this strategy in order to acquire a big place in the market according to income or demand elasticity as itstrivestoreachtotalmarketthroughspecifi-cation of low prices for its products.

• Generally, the customers’ reactions to price change depend on their knowledge of the product.

2. Reactions of Competitors:

Before bringing about any change in the prices, the company should make every effort to estimate the reactions of compet-itors. Will the competitors react to price change or not? If they react, what would be their reaction? Also, the company should strive to discover the policies adopted by competitors through statistical analysis or methods of internal information systems.

12. Pricing Strategies

12.1. First: Pricing Of New Products:

Some pricing strategies are:

1. Skimming Strategy:

Thisstrategymeansspecificationofhighpricefor new product to achieve maximum reve-nues from the sectors of the market which can pay high price easily. The company achieves fewersalesbutmoreprofitsasthecompanieswhich invent new product set high initial prices.

This strategy is adopted in different markets according to income classes and demand elasticity of the product. A high price is set for newproductas it aims first categoryof themarket which has desire to get the product whatever the prices are.

There are certain factors which helps in the success of this strategy including following:

• Lack of demand elasticity on the product as well as if there is no method to measure potential demand on new product.

• In case of fragmented market which can be divided into sectors according to the income and purchasing power in addition to management’s desire to concentrate on high income marketing sectors.

• In case of lack of knowledge of consumer regarding production and marketing costs

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• Product Line Pricing:

Itisspecificationofpricingstepswhichareused in different products in the line based on the differences of costs between prod-ucts, evaluations of customers and prices of competitors. Usually, the airlines compa-nies develop product lines instead of indi-vidual products.

• Optional Product Pricing:

It means the pricing of optional or secondary products with its main product. Many companies use this strategy to sell optional or secondary products with its main product.

• Captive Product Pricing:

It is specification of products which mustbe used with main product such as Razor Bladesforshavinginstrumentsandfilmforthecamera. This strategy is used by the corpo-rates which produce such products which is a component part to its main product. The examples of captive products are Razor Blades, Video Games and Printer Cartridges.

For services, this strategy is called “Two Part Pricing”. Thus, the price of service is divided intofixedfeeandvariableuserate.There-fore, amusement parks charge entry fees in addition to fees for food and different games.Mobilecompaniesget fixed ratefor basic calling plan and after that they count additional minutes. Also, the service company should specify that how much it will charge against basic service and vari-ableuseandthefixedamountshouldbevery low so as to encourage consumers to use the service and thus the company will achieveprofitonvariablecharges.

• By-Product Pricing:

Thisstrategymeansspecificationofpricefor secondary products so that it can make main product more competitive.

• Product Bundle Pricing:

It is a process of combining several products and then offering it in the market as bundle

It is preferred to adopt this strategy in following cases:

• When the sensitivity of the market for price increase and when the low price attracts a large number of markets.

• If the product faces tough competition.

• If production cost and marketing of per unit is decreased as well as sold quantity increases which can lead to get benefitfrom big size production savings.

Penetration strategy enables the company to spread and achieve greater market share. This strategy is preferred to adopt if the objective of the business house is to enhance knowledge of the market in regard to the company and its products and to achieve a big market share. Also, this strategy leads to open the door of new markets which have not been entered before and new sectors where no marketing efforts have been made. Some Airlines Companies have made efforts in this way: A company has launched new flightfromNewYorktoGatwickin236$onlyand South West Airlines which has decreased itspricesfordomesticflightsandsucceededin attracting new sectors of consumers who were not using this means due to its high prices.

In the last, it is appropriate to indicate that these two strategies are contradicting in the sense that if we adopt one strategy, we cannot adopt the second one but sometimes the company can adopt skimming strategy and after a period, it can go for penetration strategy and vice-versa.

3. Product Mix Pricing Strategies:

Usually, the pricing strategy could change according to even stock keeping units (vari-ants and deviants) of the product in the prod-uct line, the number of product lines forming the product mix for the company. In this case, the company searches for a pricing strategy tomaximizetheprofitsonallproductmix.Thepricingcanbedifficultdue todemandandcosts pertaining to different products. Follow-ing could be the pricing strategies:

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• Functional Discount: Also known as “Trade Discount” for the members of trade distri-bution who carry out specific functionssuch sale, Storage and record-keeping.

• Seasonal Discount: It is price reduction for the buyers who purchase products or services in off-season. For example, discount on garden tools and equipment’s to retailers during autumn and winter in order to encourage early demand for the sales of summer and spring seasons.

• Allowances: It is another kind of price reduction. It is promotional money which is given to retailers by manufacturing companies in return of their approval to differentiate the products of manufac-turing companies in a particular way and to promote their products. This method is widespread in “Automobile Manu-facturing Companies”. The promotional allowances can be trickled down to the retailersin form of monetary payments or discounts on purchased or purchase of products as a reward to traders for their participation in any promotional schemes.

13.2. Segmented Pricing Strategy:

This strategy uses differential pricing for dif-ferent segment for the same product. The segmented pricing has several strategies, fol-lowing are some important strategies:

• Customer Segment Pricing: In this, different customers pay different prices for the same product or service. Let us take “Museums” for example: A museum charges very low entry fees for students, citizens and older persons.

• Product Form Pricing: In this, different pricing strategies are used for different variants of product, one variant may be priced on the basis of cost, for another competitor based pricing may be used and for yet another premium pricing may be used. For example, for the entry segment of the car market, compet-itor pricing strategy may be used but for the cars meant for upper class, premium pricing strategy may be used.

in less price. Usually, the sellers combine a number of products and offer it as bundle of products in very low price by using Product Bundle Pricing. For example, Fast Food Restaurants combine burger, French Fries and Cold Drink and offer it in low price. And, seasonal tickets are sold to Sport Teams in low price compared with its sale to individ-uals. The bundle price should be less so as to encourage customers to purchase it.

13. Price Modification Strategies

Generally, the companies modify its basic prices taking into account various differences among customers and changing stands.

Pricemodificationstrategiesare:(1)Discountand Allowance Pricing (2) Segmented Pricing (3) Psychological Pricing (4) Promotional Pricing (5) Geographical Pricing and we can explain it as following:

13.1. Discount and Allowance Pricing:

Discount is a direct reduction mostly in terms of percentage of price on purchases as most companies modify their basic prices to retain their customers if they make early payments of bills or purchase a big quantity of products or purchase the products during off-peak time. This kindofpricemodificationwhich iscalled “discounts” and “allowances” can be in different forms which are as follows:

• Cash Discount: It is a reduction in price for customers who pay instantly or prior to the extended credit period. For examplefor a customer if 30 days credit periodis terms of payment but if the buyer pays the bill say within 10 days, he gets 10% discount.

• Quantity Discount: It is a price reduction for buyers if they purchase a big quan-tity of products. For example, if the buyer purchases less than 100 units, he has to pay10$perunitbut ifhepurchases100or more than 100 units, he has to pay only 9$perunit.Thiskindofdiscountisgiventoattract customers to make purchases from a particular seller rather than different resources.

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have no information about that product, the price will be good indicator for the quality. In regard to another type of Psychological Pricing, these are reference prices which the buyers keep in their mind while searching for a particular product. The reference price can consists of existing prices of product or previous prices or evaluation of purchasing attitude.

13.4. Promotional Pricing Strategy:

It is temporary pricing of products which is less than price list and sometimes less than costs of production. The promotional pricing could be done in many ways: Supermarkets and Stores fix very low prices of some products(Consequently, they bear losses instead of makingprofits) inorder toattractcustomersbecause they hope that the customers will purchase other items in normal prices.

In the last, it can be concluded that the promotional pricing can prove to be effec-tive means in incremental sales for some companiesunderspecificcircumstancesbutit can adversely affect other companies.

13.5. Geographical Pricing Strategy:

The business should specify its products prices for existing customers in different locations of thecountryorworld,theyshouldnotfixhighprices for them in order to cover costs of logis-tics. The businessesshould fix same price forthe same product for all of its customers irre-spective of location. For this, it could adopt followingfivestrategies:

• Free Origin Pricing: It is a geographical pricing strategy as the product is shipped to locations, the customer could be charged for the shipping separartely.

• Uniformed Delivered Pricing: It is a geographical pricing strategy as the company fix same price in addition toaverage shipping for all customers irre-spective of their locations.

• Zone Pricing: It is a geographical pricing strategyasthecompanyspecifiestwoor

• Location Pricing:TheCompanyfixesdiffer-ential prices for different location by using Location Pricing Strategy even though the supply cost in the locationsare same. For example, Theater Locations are different because of public’s preferences for certain locations and Universities charge very high tuition fees for students who are coming from abroad.

• Time Pricing: The Company changes its price according to season, month, day and even the hour. Thus, some companies change its prices for commercial users daily and weekly for example “KFC” into chickens uses different pricing strategy during day time and in evenings different pricing strategy.

In order to make the segmented pricing strat-egyeffective, it should fulfill followingcondi-tions:

• The market should be segment able.

• Each segment should explain different degree of demand,

• Cost of market segmentation and its control should not exceed additional revenue which is obtained from price difference,

• Segmented pricing should be legal,

• Segmented pricing should reflectactual differences in perceived value of customers otherwise this practice will lead to resentment of customers in the long term.

13.3. Psychological Pricing Strategy:

This is a method of pricing which takes into consideration the psychological effect of prices. Many consumers decide the quality of product on the basis of price because they think that if the product’s price is very high, its quality would be better. But, if the consumers have previous experiences of using that product, they will not care of prices in deciding the quality. With respect to the product which is new for consumers or they

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ment of wholesale and retail trade system. The knowledge of consumers and their pref-erences can be different from one country to another which requires different prices. The company can have different objectives in different markets of the world which requires changes in pricing strategy. For example, the Panasonic Company can offer a new product in mature markets in highly developed coun-tries with the aim to quick gaining of market share and this objective requiresPenetration pricingstrategy. In contrast, the company can enter into less developed market through targeting the small and less price sensitive sectors and in this case, the skimming strategy would be used.

It’s well known that the costs play very import-ant role in price setting in international mar-ket. Insomecases,fluctuations inpricescancreate differences in sale strategies or mar-ket conditions. But, in most cases, the results offluctuationsarehighcostsofsale inothercountry, additional costs on products modi-fication, shipping, insurance, import and taxtariff and fluctuations in currency exchangerates and natural distribution.

14. Pricing in Manufacturing, Commercial and Service Companies:

The companies address the pricing issue through selection of one or more method of following methods:

14.1. Cost Plus Profit Margin Method:

This method relies on addition of a specificamount to the price of product’s cost in order to set its sale price. It means that the company addsaspecificamounttothecostofproductin order to specify the price of per unit item as this price can cover product’s cost and can guarantee the profitability for the companyi.e.Priceofperunit=Cost+Addition.

There is difference between original addition and actual addition.

The original addition is = original sale price – Cost.

more zones. All customers of the same zone will play individual price but the greater is the distance of zone, the higher is the price of product. In this way, the customers of a particular zone will get advantage in the price from the company. For example, the customers from Atlanta and Boston will pay the same price but the objection is that the customer of Atlanta will have to pay a part of shipping cost to the customer of Boston.

• Basing-Point Pricing: It is a geographical pricing strategy where the seller selects a particular city so as to make it a “Basing Point” and all customers have to pay ship-ping cost from this city to the location of customers irrespective of the city from where this product is shipped.

• Freight-Absorption Pricing: It is a geograph-ical pricing strategy as the seller absorbs all or a part of actual shipping charges so that he can get desired businesses. This strategy is used by sellers who wants to do his business with a particular customer and he can think that if he gets more busi-ness, his average cost will be less which will increase additional shipping cost. This pricing strategy is used in market pene-tration and to maintain most competitive markets.

13.6. International Pricing Strategy:

The companies which market their products internationally have to set such prices which can be borne by the different countries where they do their business. In some cases, the company can set an international price for all over the world. For example, The Boeing Company sells its airplanes in the same price in every country of the world whether it is America Europe or Third World Nations. But many companies set its prices in a way that canreflectlocalmarketconditionsandcostfactors.

Also, the price which should be set by the company for a particular country is relying on several factors including economic condition, competitions, rules and regulations, develop-

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product as a base for pricing as they use vari-able of marketing mix to create a perceived value in minds of customers about the productand then they fix thepriceagainstthis perceived value.

14.4. Dominant Pricing Method:

Some companies set their prices according to the prices of competitors as they don’t show any interest in cost levels or demand level of their products. The company sets for its prod-uctsthesamepricewhichhasbeenfixedbythe competitors. But some companies follow big companies in fixing and changing theirproducts’ prices. The companies restore to thismethodwhenit’sdifficulttoascertaintheelasticity of demand.

Generally, the company should take into consideration followingwhen fixing the finalprice of its product:

a) Psychological Pricing: This method is used in pricing of products which are purchased by final consumer in order to encouragepurchases through emotional stimulations.

b) To revise pricing policy in order to specify its implications on costs, competitive con-ditions and demand considerations. In the light of this revision, the change in an-nounced prices (in Price List or Catalogue) can be made.

c) Effect of Pricing on other parties: Many parties are affected by specification ofprice of product such as distributors and competitorsaswellas resource,financial,production and marketing managements. Therefore,thefinalpriceofproductshouldbe appropriate and acceptable for other concerned parties.

14.5. The Pricing based on Target Revenue:

This is an important method for pricing basedoncost forfinalizing the sellingprice.This method will lead to achieve a specificrevenue average on investment and natu-rally the expected cost and profit will bedependent on sales volume which has been predicted. The price specification is done

As for Actual addition = Actual Sale Price – Cost.

So, when a businessman has purchased an item in 100 ponds and added 20 ponds to the cost and then sold the item in 110 ponds, it means that:

“Original Addition = 20 Ponds and Actual Addition = 10 Ponds as the actual sale price is 110 Ponds”.

14.2. Breakeven Analysis Method:

Some companies depend in specificationof its products’ prices on breakeven anal-ysismethodas thecompany fixes thepricewhichcanachieveequityor specificprofit.The breakeven point indicates to the point where total revenues and total costs are equal in the sense that the company suffered losses before reaching to breakeven point. Atthispoint,thecompaniesdon’tgainprofitand don’t suffer losses as the revenues and expenses are equal. After reaching to this point, the companies gain profit for eachadditional unit.

Breakeven point is when:

Total Revenues = Total Costs

Then, (number of units’ × sale price of unit) = (FixedCosts+VariableCosts),

Then, (number of units’ × Sale Price of Unit) = (FixedCosts +NumberofUnits ×VariableCost of Unit),

Then, (number of units × Sale Price of Unit) = (Number of Units × Variable Cost of Unit) = Fixed Costs.,

Then, number of units which achieve breakeven point level is:

Fixed Costs(Sale Price of Unit Variable Cost of Unit)−

14.3. Method of Perceived Value in Pricing:

Some companies rely on knowledge of customer’s perceptions regarding value of

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Price = 1.20 SR = % 10/1200.00

Thepricecanbemodifiedaccordingtothepractices of competitors or with the aim to improve percentage of revenue on invest-ment in the future.

14.7. Pricing based on Competitors’ Prices:

The pricing on base of competitors’ prices is considered as one of the important methods usedinspecificationofthepriceasthepriceis fixed to encounter competitors’ prices.This method is characterized by following features:

• When many competitors are available who offer high quality products,

• When thecompetitorshavestrongfinan-cial center,

• When it is easy to copy the features of productaswellasitisdifficulttodifferen-tiate between product,

• When the competitors can enter into distri-bution channels very easily. For example, the company (A) produced and marketed socks in 10 SR per unit, so the company (B) will fix itspriceasper the(A)Company’spriceor a little more as its price will be estimated within the limit of 10 SR or 11 SR or 12 SR.

through following equation: - Price = Cost of Unit+RevenueexpectedfromInvestment×Capital of Investor / Sold Units.

For example, if a company produces toys and average variable cost of unit is = 16 SR and total operating assets of the company is 9000 SR and the company wants to achieve revenue percentage with investment which is equivalent to 30% as well as the company expects to achieve sales volume equivalent to 400 unit. The result is following:

Thepriceis:=22.75=6.75+16=400000/9000000 × 30%

This method is blamed because it ignores many factors which affect the price such as remaining elements of marketing mix and reaction of competitors.

14.6. Pricing based on Income:

The pricing, which is based on income that is gained from the sale of product, is very important and most widely used. The price is calculated according to this method relying on net income of sales after discounts and incentives of salesmen etc. ……………..and as well as percentage of revenue on investment for the same industries is 10%. The initial price of purchasing will be calculated as following:

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1. Know the concept and importance of distribution and its relation with other elements of marketing mix.

2. Understand the designing of distribution channels.

3. Knowing to manage channel.

4. Understand channel dynamics and manage channel conflicts.

PlaceCHAPTER

8

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the consumers is through various channels is called distribution and the channels used are called the marketing channels. Marketing channels (Distribution channels) refers to set of interdependent individuals and organi-zations engaged in transferring the product from the place of production to the place of consumption or to the end user for their non-business personal use. The design of the marketing channel would influence othermarketing mix elements and also ultimately theefficiencyandeffectivenessofattainingorganizational and marketing goals. As per Corey, “A distribution system . . . is a key external resource. It represents a significantcorporate commitment to large numbers of independent companies whose business is distribution—and to the particular markets they serve. It represents, as well, a commit-ment to a set of policies and practices that constitute the basic fabric on which is woven an extensive set of long-term relationships.” The contemporary technologies and inno-vations in terms of e-commerce, cyber tech-nologies, e-portals, automated processes and procedures, help and support speedier accomplishment of distribution functions. We will look into the functions of marketing channels, designing marketing channels, management of marketing channels, types of channel conflicts and conflict resolutionmethods of marketing channels.

2.1. Functions of Marketing Channels

The reason why producers use marketing channels is because they create greater efficiency than the producer themselves inmaking the product available to the target market through their contacts, specialization, experience, coverage etc. Intermediaries reduces the work redundancies for both the producers and the consumers as different

1. Introduction to Place

Marketing has always been an extremely chal-lenging activity in any kind of organization; it has become the most pivotal function as it has got the responsibility of creating viable fit within the internal environment, creatingrevenues and profits for the organizationand at the same time to maintain a conso-nance with the business environment, most importantly the consumers. In the process of doing so, marketers do use the marketing mix elements of product, price, place and promo-tion to create this viable fit of organizationand external environment at the macro level and product with consumers at the micro level and also to meet competitions.

Place is among the marketing mix elements which helps in attaining the organizational and marketing goals. Place refers to the marketing channels (Distribution channels) also called as marketing intermediaries involved in making the products available to the end consumers. The scope and complexity of marketing chan-nels have changed over a period of time with changing business dynamics, changes in consumer preferences, technological advancements and many more reasons. In today’s time, though we need to have a holistic approach of logistics in terms of upstream supply chain and downstream distribution chain to create integrated value approach, our focus would be on downstream distribu-tion chain, often referred to as the marketing channels or distribution channels.

2. Marketing Channel (Distribution Channel)

For all the products created in an organiza-tion, it has to reach the ultimate consumers; this link of making the product available to

MANUFACTURER DISTRIBUTOR CONSUMER

Figure (8-1) Marketing Channel (Distribution channel)

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tion in terms of ordering systems, delivery timing, merchandising etc.

As channels interact with consumers, they get valuable information about market and consumer preferences which they pass on to consumers and organization. Also they pass on the product and company information (promotion information, price information etc) to the consumers so that there is forward andbackwardinformationflow.

Financing and Risk taking: The channels are expected to bear the channel cost, pay for the product to the producer and also extend credit to the consumer, which calls for financingonthepartofthechannel.

At the same time the channel also need to bear the risks of obsolesce risk (expiry, out of fashion or old products), possession risk (spoilage, theft, physical damage etc.).

Inventory management, Grading and transfer of ownership: Timely ordering in correct quantum and composition and holding levels of inventory to able to satisfy consumer demand in a way that liquidity and profit-ability is balanced.

Channel members also perform the role of grading or sorting where they try to break heterogeneous supplies from various manufac-turers, arrange according to size and quality, and break down similar supplies into smaller lots.

producers won’t need to contact different consumers and similarly consumers don’t need to contact different producers, so for both producers and consumers intermediary becomes a common link. Value additions are done by marketing channels by reducing the gap between the product and the consumers in terms of reducing the time to take posses-sion of the product at the required place. The important functions of marketing channel include:

Market coverage, development and product availability: The channels need to be in contact with the existing consumers.

It has the function of helping find andcommunicate with prospective buyers so as to increase market share for the producer.

It has the function of making the right product available at the right time to the right consumers and in right quantity, helps in storage and physical movement of products.

Customer service and support: It also provides customer service, gives credit, delivery and technical advice/support. This is an important marketing function which helps attract, retain and increase customer base and helps promote brand image which helps in facing the competition.

Interaction and market information: Marketing channels coordinate all aspects of distribu-

Figure (8-2) Channel Levels

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of product from producers to consumers that is forward channel but we can have back-ward channel which takes back something through the same channel from consumers to producers such as recyclable wastes, goods return, redemptions etc.

3. Channel-Design Decisions

The long term objectives and available re-sources of the producer affect its choice of marketing channel. The design of marketing channel is influenced by factors like demo-graphics, competition, technology, available resources etc.

The marketer should have the following con-siderations in mind while designing its distribu-tion channel system:

• Understanding consumer requirements (Purchase size, Queuing/delivery time, Area required, Product variety, Service support)

• Establishing channel objectives (minimize total channel costs in terms of desired levels of service outputs, product char-acteristics, competitors’ channels, the marketing environment)

• Identifying major channel alternatives (Types of available intermediaries, number of intermediaries needed, and terms and responsibilities of each channel member)

• Evaluating the channel alternatives (Finan-cial criteria, Command criteria, Remod-eling criteria and historical criteria)

3.1. Understanding Consumer Requirements

In order to have an efficient and effectivedistribution channel, the marketers need to understand the target market requirements correctly. These requirements or needs could beofdifferentdimensionsandbasicallyfivedimensions are there which is as following:

Size of Purchase: It refers toquantum of purchase a consumer can purchase on one occasion. Example a individual customer may

They oversee actual transfer of ownership from one intermediary or person to another.

2.2. Channel Levels

The channel level would depend on the number of intermediaries the company uses to distribute its product to the end users. These intermediaries give rise to level of chan-nels. The manufacturer/producer and the consumer is an integral component for any level and type of distribution channel.

A: Zero-level channel means no intermediary between manufacturer/producer and the final consumermeaning thatmanufacturer/producer is directly selling their product to the consumer. This type of channel is also called direct-marketing channel. This could be done via Internet, personal selling, cata-logue marketing, company kiosks, vending machines, telemarketing, television marketing, and manufacturer’ retail stores etc.

B: One-level channel means one interme-diary between manufacturer/producer and the final consumermeaning thatmanufac-turer/producer is selling their product to the retailer and retailer is selling to consumer.

C: Two-level channelmeans two intermediar-ies between manufacturer/producer and the final consumermeaning thatmanufacturer/producer is selling their product to the whole-saler and wholesaler is selling to retailer and retailer is selling to consumer.

D: Three-level channelmeans three interme-diaries between manufacturer/producer and the final consumer meaning that manufac-turer/producer is selling their product to carry and forward agents and these agents selling to wholesalers and wholesaler is selling to re-tailers and retailer is selling to consumers.

The more the level of channels, the more is it difficult and complex for the manufacturer/producer to exercise control over intermediaries.

Usually when we look at distribution channel, wedofeelthatitjustmeanstheforwardflow

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Effective planning to establish the best channel would require determining which market segmentstoserve.Typeofproductinfluencechannel design decisions and channel objec-tives. Example, perishable products (“Almarai” company which is in Dairy and Dairy products in Saudi Arabia) require more direct channels, whereas industrial products require a higher level of channel. Some customized products, such as custom-built product, are sold directly by the company to the consumers’ example of Mercedes “Maybach” car.

Marketers must consider marketing environ-ment in designing their distribution channel.

3.3. Identifying Channel Alternatives

The next step after understanding consumer requirements and setting channel objectives is to identify the alternatives which are in terms of:

(1) The types of available intermediaries, (2) the number of intermediaries needed, and (3) the terms and responsibilities of each channel member.

3.3.1. Types of Intermediaries

We have3-major types of intermediaries i) Merchants could be wholesalers and retailers. They buy, take title of the products, and resell them. ii) Agents could bebrokers, manufac-turers’ representatives and sales agents. They bring the sellers and buyers together. They negotiate on the producer’s behalf but don’t take title of products and for this function they may, they take commissions on the basis oftransactionamountorafixedamount. iii)Facilitators could betransportation, go downs, banks, and media agencies. They assist distri-bution of goods but do not take title to good or negotiate purchase or sale. The company needs to decide on the type of intermediary for distribution purpose.

3.3.2. Number of Intermediaries

After deciding on the type of intermediary, the number of intermediaries to be used has

buy a single car so that they can purchase it from the retailer but some companies buy cars in large numbers so they can buy from the company itself. As accordingly the company may design the marketing channel.

Queuing time: It is the time taken by a consumer to receive his choice of product. The less thequeuing time themore satisfiedthe consumers are. Example in Lulu hyper-markets, there are express cash counters where the customer need not wait for long to get the receipt of their purchases.

Area required: It refers to the area or space requirement of the target consumersin its interme-diary site. This also adds up to the comfort of the consumers and communicates the positioning and differentiation strategies of the marketers. Premium car sellers require their dealers to set up outlets with more move around space.

Product variety: Itrefers to the producer and product mix the channel is providing. Usually, consumers prefer a greater product choice in terms of number of stock keeping units. Example of “Jarir Bookstore” in Saudi Arabia, wherein from being a book seller, it has expanded the product variety to include stationeries, office equipment, computers,laptops, peripherals etc. to, maintain its lead in book store retailing.

Service support: It refers to additional/after sales support in terms of financing freeandfaster deliveries, installations, maintenance and repairs, training etc. provided by the channel. Example in automobile, nearly all automobile retailers have service centers along with its outlets to provide after sale services to its customers.

The more the service support, the greater the work provided by the channel and thus cost. One needs to balance between service outputs and costs.

3.2. Establishing Channel Objectives

Once the marketer is able to understand the requirements of its target market, they should establish channel objectives accordingly.

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terms like payment terms, warranties, guaran-tees, after sale services etc. to be extended. This may also include discounts terms, for bulk or cash/early payments, return terms in case of ex-piry, slow moving or defective products etc.

Geographical rights: The manufacturer/pro-ducer should set the territorial area in which the intermediary is authorized to sell their mer-chandise to avoid overlapping of other dis-tributor’s area of selling.

Symbiotic terms: The manufacturer/producer should make it clear to its distributors about the importance of getting associated with each other. In order to optimize business mutual symbiotic terms has to adhere in terms of ac-counting standards, promotional techniques, technical aspects, human resource strategies, space requirements, raw material sourcing etc.

3.4. Evaluating the Channel Alternatives

Afteridentificationofmajorchannelalterna-tives,oneneedstoevaluatetheidentifiedal-ternatives. The basis on which the evaluation could be done would be financial criteria,command criteria, remodeling criteria and historical criteria.

Financial criteria: Evaluation of channel could bedoneonfinancialbasis.Costandbenefitanalysis for each alternative has to be mea-sured. What would be the possible sales, reve-nuesandthecostsandthusthemostprofitablechannel alternative must be selected.

Command criteria: One of the criteria to eval-uating channel is the command criteria which measures the degree of control the producer would have over its intermediary. Normally in-long and intensive kind if distribution the pro-ducer would have less commanding power. Producers must go more an arrangement where in there are able to have adequate control over the intermediary which would optimizetheirprofits.

Remodeling criteria: Those channels stands greater possibility of success which sticks

to be decided, companies use one of three strategies:

Exclusive distribution: In this the middlemen cannot sell any other brand of products but the company’s product only. Firms selling specialty products such as mobile maker “Vertu” use this approach. Through this approach the companies maintain a tight control over the functioning of the intermediaries.

Selective distribution: In this type of distribu-tion,selected number of intermediaries which would mean lesser control than exclusive distribution offers but then gains more market coverage. Firms selling shopping products use this approach example Nokia sells its mobile through exclusive shops, selected hyper markets, department stores and selected mobile shops.

Intensive distribution: In this type of distribu-tion,the producer places their products in which-ever and wherever possible outlets. Producers of convenience products (like soaps, tooth-paste, toiletries, groceries, confectioneries etc.) usually adopt this kind of distribution strategy.

3.3.3. Terms and Conditions for the intermediaries

Terms and Conditions for the intermediaries must be settled by the producer. This includes deciding on responsibilities and authorities of channel members. Each intermediary should be clear as to what is expected out of them and what they should expect. Terms and conditions should also take in to consider-ations the following aspects also:

Pricing of product: The manufacturer/producer should clarify the prices of their products in form of a price list including dealer price, selling price and a schedule of discounts and allowances separately for dealers and customers that allows intermedi-ariestoearnreasonableprofitsandsuchthatthe promotional schemes for the consumers also trickled down.

Selling terms: The manufacturer/producer should also make clear to the distributors about selling

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the intermediaries perform better is one of the important parts of managing distribution channel. The intermediaries’ helps compa-niesearnprofitandalsocarry the imageofthe company itself. Therefore to optimize the complete performance of channel members, companies should carefully and adequately give appropriate training and capacity building programs for their channel members.

4.2. Motivating Channel Members

To continue the better channel performance levels, producers should keep the motiva-tional levels of their intermediaries’ high at any and all points of time. The intermediaries’ need constant reinforcement and positive motivation. This calls for continuous updating about market conditions through market research h, encouraging channel members through sales contests, family get together, foreign trips, personal meetings, site visits, acknowledgement recognitions, gifts, finan-cialandnon-financialincentivesthatitsinter-mediaries are partners in the joint effort to satisfy customers etc.

4.3. Controlling Channel Members

Controlling basically involves measuring performance, comparing it with the planned performance levels and according taking corrective actions. Companies must continu-ously monitor the performance of its channel members in termsof financialperformance,service outputs, promotional activities, company/brand image, customer satisfac-tion etc. If performance is deviating against the predetermined performance criterion after evaluation and critical review, appro-priate remedial actions should be initiated which could involve resetting performance

to agreed mutual commitments and have mutual understanding. They should be ready to make adjustments according to market requirements. Themore the channel is flex-ible in remodeling its business according to producer and market requirements, such channels are more desirable.

Historical criteria: The channel could also be assessed on historical criterion. For this eval-uation the channel’s experience in terms of number of years in the business, previous financial records of the channel, previouschannel reputation and image. This forms the basis for trend analysis and gives an idea about the possibility of success and growth potential.

Onthebasisoffinancial,command,remod-eling criteria and historical criteria, once the channel is evaluated, the channel alterna-tive has to be selected and channel design finalized. In factwe also should realize thatthe channel member selection is not done by the manufacturer/producer alone but also that the channel member should also select the manufacturer/producer.

4. Managing Channel

Once the channel alternative is selected, the individual intermediary in this selected channel must be trained, motivated, and evaluated. Further as per dynamic busi-ness and marketing environment, channel arrangementshavetobealteredtofit intothe environmental requirements.

4.1. Training Channel Members

Imparting and updating required knowledge/information, skills and abilities which enables

Figure (8-3) Managing Channel

MANAGING CHANNELS

TRAINING MOTIVATING CONTROLLING

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lined production, distribution, and retailing into a single efficient system to succeed inthe global market.

In this system, the channel members at various levels co-operate and collaborate to optimize effectiveness, efficiency andeconomies of scale such that the products and associated services reach the ultimate consumers.

In a VMS, a channel member owns other channel members, franchises the others, or influencesotherchannelmemberstocoop-erate through the channel power vested with them. Based on these aspects, VMSs can be divided in to corporate VMS, administered VMS, and contractual VMS.

Corporate VMS: This refers to the ownership and full control of various functions of distri-bution channel at different levels by the busi-ness. “Apple” has got its own designing team, production capacities and retail stores to sell its products.

Administered VMS: It is a type of vertical marketing system in which there is no common ownership or contractual ties at any level of distribution channel but one member becomes dominant through its size and power. For example, Wal-Mart exerting its power on producers with regard to exclusive promotions and pricing policies in terms of discounts on bulk purchase etc.

Contractual VMS: It refers to contract between channel members at different levels to carry out agreed functions and coordina-tion to make the distribution process more efficient.Franchisingisaformofcontractualvertical marketing system which companies like Kentucky Fried Chicken practice.

5.2. Horizontal Marketing Systems

It is a system with in a marketing channel in which 2 or more unrelated channel members at the same level work collectively to achieve a common goal with the objective of cashing a market opportunity. This type of an arrangement is arrived at because the

levels, further training the members or channel modifications. Channel modifica-tions should also be considered to align the business requirements with changing business environment.

5. Channel Dynamics

In dynamic marketing environment, distribu-tion channel systems evolve. Different types of distribution systems which have evolved include vertical, horizontal and multichannel marketing systems.

5.1. Vertical Marketing Systems (VMS)

Channel integration involves cooperation from various channel members and may not include ownership of the channel. In vertical marketing systems (VMS), manufacturer/producer would take over the functions of all the channel members until the product reaches the consumer and further or would have a very high degree of control over functions of the members of the channel. This channel leader oversees the functions of channel members and ensures that everyone performs only functions at which they are good. In this the degree of ownership of channel members or degree of control over the functions of the channel member would decide the level of vertical integration.

VMS consists of a manufacturer(s), distribu-tor(s) and retailer(s) bringing together their individual strengths to achieve synergies, operating economies, competitive advan-tage and to adapt to changing market conditions.

Conventionally, channel members operate individually and their objective is to maximize individualbenefits.InVMSs,channelmemberswork for a specified benefit common tothe whole channel system. VMSs are devel-opedwiththeobjectiveofreducingconflict,achieving better channel cooperation and coordination and to achieve maximum bene-fits.VMSsaremostprevalentandsuccessfullyused in the food service industry. Companies like McDonald’s have successfully stream-

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system.Forexample,conflictsbetweenmanu-facturer and retailer, between wholesaler and retailers, between two wholesalers, between tworetailersandsoon.Conflictscandifferinissues, intensity, frequency and importance. Conflictscanbemeasuredbysummatingtheproduct of intensity, frequency and impor-tance. Conflicts are always damaging andcould lead to damaged relations, loss of trust, economic losses, customer losses etc.

Depending on different levels of the channel whereconflictsarecreated,conflictsareofthree types, vertical, horizontal and multi-channel conflicts. Vertical and horizontaltypesofconflictsarealsocalledintra-channelconflicts.

Vertical channel conflicts: In this type of conflict, conflict occurs between channelmembers operating at different levels within the same channel structure. For example, conflictbetweenmanufactureranddistribu-tors. It could happen when the manufacturer changes its pricing, inventory or other policy which could adversely affect the retailer then thistypeofconflictisverticalchannelconflict.

Horizontal channel conflict: Horizontal type ofchannelconflictsarisesbetweenchannelmembers operating at parallel level within the channel structure. For example, a conflict between two retailers over territo-rial rights comes under this type of conflict. One channel member adversely affects the business of the other channel member at the same level.

Multi-channel conflicts: It occurs when theproducer/manufacturer forms two or more channels serving the same consumer group. For example, conflicts arise between themanufacturer and retailer, when the manu-facturer tries to bypass retailers by resorting to newer channels like the internet or telesales or catalogue sales.

Though the ultimate aim of any distribution channelsystemistoavoidchannelconflictsbut practically, sometimes they do occur. Channel conflicts should be quickly recog-nized as it could adversely affect the sales

organizations on their own do not have the resources, experience, or the know-how to exploit the marketing opportunity. Horizontal systems supplements and compliments skills and resources.

Thefirmsatthesamelevelcomplimentsandsupplements theirfinancial,production,andmarketing resources to form a symbiotic rela-tionship so that they could achieve more than what they could have achieved if they func-tioned independently. The relationship could be formed with competitors also. Kentucky Fried Chicken (KFC) opening its outlet in Lulu malls wherein Lulu itself has a food counter insideitsstores.KFCbenefitsfromLulu’smallstraffic,whileLuluMallgetsrentforthespaceandalsokeepshungryshopperssatisfied.

The integration of the horizontal could be done through information technology, inte-grating operations, human resources’ and shared purpose and work culture across differentlevelsofthefirms.

5.3. Hybrid Marketing Systems

With the increasing difficulties in sustainingprofitability and changing marketing envi-ronment, companies have been looking for innovative ways of reaching the customers. But alternative mode of selling have now emerged and these include retail selling, direct mail, Internet selling, and telemar-keting. In hybrid channel system firms usedifferent channels simultaneously example firms using retailers, catalogue selling, tele-marketing and online selling simultaneously. Hybrid marketing system is also called as multi-channel distribution system. Hybrid channels help firms increase their market coverageand reduce costs.

6. Channel Level Conflicts and Types of Conflicts

Channelconflictsarecreatedwhenanyoneentity in the distribution channel affects other entitiesintermsoftheirsalesvolumeorprofitsor margins or customer shifts. Conflicts cantake place at different levels of the channel

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parties and hence acquire a degree ratio-nality perceived to be true and objective by both parties that makes the solution to the problem mutually acceptable.

3. Arbitration: In this, the two conflictingmembers agree to submit their case to a third faction (arbitrator/arbitrators, referees or a private judge) and accept the verdict delivered by the third party. Two types of arbitration include compul-sory arbitration and voluntary arbitration. In compulsory arbitration the conflictingmembers have to submit their case to an arbitrator and the decision taken by the arbitrator would be binding on both the parties and is required by law. In volun-tary arbitration the conflicting memberson their own would submit their case to a commonly agreed arbitrator and whose decision is binding on both he disputing parties.

4. Joint membership in trade associa-tion: Membership by channel members in some common association could be really productive in sorting out the differences among channel members and resolving conflict among or between members.Joining the same association provides the channel members an opportunity to have more interactions and to understand each other. This paves way for better relationshipsand tends toavoidconflictsamong them.

5. Exchange of persons: This calls for exchange of personal among the channel members for specific time period. Member/s fromone channel goes to another channel member, be there and vice versa, such a way both the channel member would be able to understand better through an empathic view and this technique is similar to role plays.

6. Co-optation: It is the mechanism in which member from other channel is taken into its top management. In this the channel member makes an effort to win the support of other channel members by making them members of its advisory

and mutual relationship among the channel members.Conflictmanagementtechniquesshould be put in place to deal with divergent kindsofdistributionchannelconflicts.

7. Conflict Management Techniques

Theprocessofconflictresolutionandcontroliscalledandconflictmanagementandtech-niquesusedforthesameiscalledasconflictmanagement techniques. The purpose is to expedite the resolution of channel conflict.Conflictshouldberesolvedthroughawin-winapproach. It could be solved by identifying the reason of conflict and could be solvedcollaboratively. Relationship among channel members would be influenced by theirperceptionaboutthedegreeofconflictanddepending on situational variables and struc-turaldimensions; theconflictmanagement/resolution techniques would differ.

Several techniques/strategies are put in use to resolve/manageconflictsamongorbetweenchannel members and some of them are:

1. Diplomacy: In this technique, certain adjustments are made to manage rela-tionshipbetweentheconflictingmembersthrough diplomacy. Channel diplomacy relates to conducting negotiations with other channel member to pursue and reach to a settlement. Both the parties send their diplomats who discuss the matters relating to disputes, each express their own views and demands, finallythe matter is settled if each of the party involved make adjustments and accom-modate.

2. Mediation: It’s aapproach by which a party notrelatedtotheconflictingmemberstryto settle conflict by persuading both theaggrieved parties to settle the issue by urging them to continue negotiations till a solution is reached or to consider recom-mendations that the mediator may make. Mediation brings the conflicting partiestogether to negotiate which otherwise would not have been possible. Mediators own respect and acceptability by both the

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disputes could relate to credits, price, discounts, delivery, inventory levels etc. For the negotiation to be successful all the parties involved need to understand that they won’t get all that they want hence-forth the parties should be ready to accom-modate, adjust and reach at a common solution which would lie in between the extreme difference which the parties may have.

9. Personal relationships and communication: Channel members must strive to develop personal relationship among themselves, have some get together, organize some events together etc. This increases the inter-action, understanding and appreciation about the concerns and creates mutual trust among channel members which in the longer run would help prevent/resolve conflictissues.

Processes should be outlined in a way that increases exchange of information among channel members, there should be transpar-ency and consistent communication among inter and intra level should take place to avoid misperceptions, misunderstanding and create a friendly environment which again helpspreventandresolvingchannelconflicts.

Future of distribution channel may see emer-gence of e-commerce (e-electronic) and m-commerce (m-mobile).

council or board of directors. The member is included in the decision making and policy framing of the organization. In this method, one channel member would have to make concessions on its strategies to reinforce the newly elected member from other channel organizations. Also the new member could be helpful in taking concessions from the channel he belongs to. This mechanism is also risky due to the physicaland financial costsandpossibleleakageofconfidential information.Boththe channel members have to coordinate and cooperate and free exchange of information should take place.

7. Adopting super ordinate goal: Adopting super ordinate goal relates to a critical condition when channel’s involved needs to submit its own interests for survival purpose (desired by all channel members) and adopt goals that ensures the survival of channel and which could be achieved by merging resources, efforts and strengths of each conflictingmembers to reach acommon goal, a super ordinate goal.

8. Negotiation: Negotiation or bargaining is used by channel members as a method of resolvingconflicts.Negotiation involvestwo or more disputing parties to come together, discuss and resolve the issues. It calls for both the parties to be empathic and be flexible in their approach. The

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1. Know the concept of promotion and its relation with other elements of marketing mix.

2. Understandthesignificanceofpromotionactivity.

3. Analyze the steps of designing the promotional program in the business organization.

4. Explain the different elements of promotion mix.

PromotionCHAPTER

9

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1. Introduction to Promotion

The promotional activity is considered as an important element of Marketing Mix as no institution can survive without this activity under fierce competitiveness of other insti-tutions. The consumers’ behavior changes constantly as their desires increase with time. The Institution has to design a strong and inte-grated promotional strategy, in addition to other marketing mix strategies, to meet the needs of the consumers. Therefore, we will touch on the concepts of promotion and its importance in the following chapter as well as discuss promotion strategies. The relation of promotion with other elements will be deliberated towards the end of this chapter.

2. Definitions of Promotion:

There are many definitions of promotionaccording to the point of views of economists butallofthesedefinitionshaveoneconcept.Followingaretheimportantdefinitions:

• The Promotion is defined as cooperationbetween seller’s efforts to establish infor-mation outlets and facilitating the sale of item or service or accepting a certain idea considering that the promotion is one of the marketing mix elements, as the ob-jectives of marketing project cannot be achieved without promotional activity.

• Thepromotion isdefinedasall theactivi-ties undertaken by a company in order to communicate with the target consumers and efforts to convince them to purchase the product. The activities include adver-tisement, sales promotion tools and gener-al relations.

• That multi-faceted element, which inter-acts with other elements of Marketing Mix, and aims at achieving the process of com-munication between the products offered by the companies and that strive to satisfy needs and desires of consumers (Individu-als or Institutions as per their capabilities.

• This term has two meanings: General Meaning & Particular Meaning. Accord-ing to general meaning, it is all types of

activities carried out by the Company to increase its sales. As for Particular meaning, it has severaldefinitions. Thepromotion isdefinedasthecommunicationwithothersand introduces them to types of products offered by the seller.

• All kinds of business which are undertaken to increase sales volume except advertise-ment.

• Process of communication with the aim to sell.

• It includes all efforts made by a company in ordertocreateaspecificimpactoncon-sumers’ behavior in accordance with the marketing requirements in terms of sales in-crement of all products or services. It can be done through attracting new consum-ers, increasing current rate of demand or reducing the demand of a particular item and pay heed to other items.

Briefly,thepromotionistocommunicatewiththe customers and buyers in order to convince them with the products and persuade them to purchase it.

2.1. Importance of Promotional Activity:

• The promotion is an element of Marketing Mix. The importance of this element is be-cause it is an effective tool which is used by the institutions, irrespective of the na-ture of its activity, in achieving the process of communication with the external envi-ronment including groups such as consum-ers, competitors and other institutions.

• The success of any institution depends on the effectiveness of the implemented pro-motional strategies. From this standpoint, it can be said that the promotion is a tool which is used by the companies to deliver its products to its target market.

• The new concept of marketing is just not about making the consumers aware of the product but offer high quality products and price the product so as to satisfy the con-sumersandtofulfilltheirneeds.Thecompa-ny publishes brochures which contain infor-mation regarding its products in the frame

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years. These changes affect promotional decisions of a company. The most important changes are as follow:

• Targeting the small markets where indi-vidual consumers can be found,

• Growth in noncommercial media,

• The competitiveness facing the compa-nies in order to create more awareness about the prices,

• Moving towards being retailers from the manufactures,

The above mentioned trends not only affect the role of promotion in marketing mix but the weight-agegiven to thevariouselementsofthe-promotion as well as the volume of promotional budget. In addition, those trends motivate the companies to develop integrated marketing communication program.

The promotion helps to get rid of the problem faced by the consumer in getting neces-sary information related to the products. The promotion provides information about the company, Item, brand, prices and use of item. Since 1970 GC the communication has become a part or element of Marketing strategy. All vital elements of marketing mix help or hinder the efforts of communication and consequently the efforts of sale.

3. Relationship between Promotion and Marketing Communication:

Promotion isdefinedascommunicationpro-cess carried out by the marketer in order to propagate and convince the consumer to purchase the product.

In spite of technology development which has facilitated the communication process, following are the factors and problems which affect the communication and international promotion process:

• Language differences,

• Government rules & regulations,

of its specifications,pricesandbenefits forthe market. Therefore, it has become imper-ative for the companies to act as a commu-nicator and promoter at the same time.

• The responsibility of the company towards the communication extends from providing informationabouttheproductstoefficientcommunication for each party of the soci-ety. It means that the company must know the method of marketing to different groups and parties with the aim to win their trust and to improve its reputation among them. Thus, the company, which can customize com-munication according to segments gain a good reputation based on the mutual trust, will be superior to all other companies.

• Since the importance of promotion is in-creasing in the success of companies, the modernscientific toolsareused in select-ing, training and motivating the salesmen, designing advertisements and selecting appropriate means of advertisement dis-semination. Besides, use of advanced methodsinspecificationofthepromotionand evaluation of promotion programs.

• The basic problem is to specify the amounts which should be spent on the different promotion programs and selection of best available method of promotion.

• An important fact is that all marketing ef-forts should be integrated with each oth-er, because the best product, which price exceeds the purchasing capacity of the buyer or the excellent product, which is not launched at appropriate time and appro-priateplace,willnotbenefitthecompanies.

• The Marketing Process is not done in isola-tion from other activities of the Company but the production, finance, purchasing,researches and development are working hand in hand with the marketing. Therefore, a useful product cannot be bought if it is not concerned with the buyer. Integration of efforts means availability of a set of mutu-al relations of Marketing Management with remaining management of the Company.

There are many changes in promotional environment which occurred during recent

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b) Strategic Objectives:

• To motivate consumers to switch from competitive brands

• Increment in the consumption of products,

• To strengthen the efforts of marketing com-munication for the brands, And

• To motivate the loyalty for the brand.

C) Other objectives:

• To provide consumer with relevant infor-mation regarding the product and differ-ent services available in the market,

• To form a positive mental picture about the brand,

• To increase demand for the product/brand,

• To create positive trends toward products/brand,

• To strengthen the competitive place of the product/brand in the market,

• To create awareness about product/brand and services offered from time to time,

• To convince the consumers about the ben-efits/usageofthegoodsorservices,

• To provide various information about goods or services,

• To deepen the current positive consent of the consumers about the goods with the aim to persuade purchases,

• The promotion is an element of marketing mix which is necessary to achieve sales & profitobjectivesofthecompany,

• The promotion is a communication process which provide consumer with the informa-tion about the company, goods and ser-vices offered by the Company,

• Thepromotion isnot justconfined topro-viding information but it includes the reac-tion of consumer towards the information,

• The information, provided to the consumer through promotional communication, will

• Availability of Advertising Media,

• Tastes & Trends, And

• Availability of Agencies.

Non-linguistic communication is done in many ways including:-

• Appearance: It includes dress,

• Time: Time of Talk Exchange,

• Physical Movement,

• Eye Movement,

• Proximity, And

• Adhesion.

In the commercial promotion, the concerned person should know about the masses, iden-tify the market very accurately as well as study its effects and motivations before designing strategy and promotion campaign. Also, the differences of language, religion, values, tradition, climate factors, geographic factors and environmental factors all play very important role in estimating the demand for particular goods and services.

Following are the reasons which make the communication ineffective with buyers in international markets:

• The message does not reach the buyer,

• The message could not be understood,

• The message did not lure the buyers,

4. Promotion Objectives:

There are several objectives of promotion which can be summarized as following:

a) Tactical Objectives:

• To confront the growth of share of com-petitors in the market,

• To confront promotional efforts of compet-itors, And

• To make efforts to bring new life to the brands which sales have been declined,

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soft commodities and shopping items, it is better to depend on the advertisement and methods of sales promotion.

• Product Life Cycle: The personal selling and Advertisement are important at the time of launching the product in the Mar-ket in order to convince the customer to purchase. As for the growth period, it is pre-ferred to depend on the advertisement in order to face the competition. In case of maturity stage of the products, the com-pany adopts methods of sales promotion to maintain its current position. During the decline stage, the sales promotion is need-ed such as offering the products as free gift and reducing the prices with the aim to get rid of the stock.

• Characteristics of the Market: It is preferred to depend on the personal selling for the promotion of the product if the market is located in a specific geographical area.But if the product has to be distributed in several par apart geographical areas, it is better to depend on the advertisement and sales promotion.

7. Elements of Promotional Mix

• First: Advertisement

• Second: Personal Selling

• Third: Sales Promotion

• Fourth: Public Relations

• Fifth: Direct Marketing

7.1. First: Advertisement:

It means the efforts made by a Company to have impact on the opinions of individ-uals toward a particular product. The adver-tisement is a means to provide information about the products. Also, it indicates to all types of methods used to present ideas or products or non-personal services through a particular advertisement. The main objective of the advertisement is to sell a product but following should be done in order to achieve that objective: Specify the market or target market segments (Public).

bear positive impact on the behavior of consumer,

• The promotion contributes in improvising the image of the company in the market and to create the loyalty of customers to-wards the company in the long term.

5. Components of Communication & Promotion:

Communication process consists of following components:

• Message sender: It is the company which produces and distributes the goods,

• The Message: It contains the characteris-tics of the goods,

• Communication Channel: The method that create connection between the mes-sage sender and its recipient,

• Message Recipient: The public,

• Results: results of the message which con-tain the extent of message’s impacts, And

• Communication Means: It is considered very important to deliver the message about the goods such as: Telephone, Ra-dio and Newspapers.

6. Promotional Mix:

The promotional mix is considered as one of the elements of marketing mix which are: Product, Price, Distribution and Promotion. The promotional mix consists of four (4) basic components in addition to other compo-nents. These basic elements are: Advertise-ment, Personal Selling, Sales Promotion and Publicity. Even though these elements are very important in achieving the objectives of sales andbenefit for the company but it doesn’tmean that all elements are used in all cases orforalltypesofgoodsandmarkets.Specifi-cation of appropriate marketing mix depends on several factors including following:

• Type of Goods as the personal selling is important in the promotion of industrial goods because of its technical nature and its need before and after the sale. As for

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through the information provided to him by the company. Also, it aims to correct the wrong conception of customers towards the product or services.

e. Competitive Advertising: It is related to comparing products or new products of competitors. This type of advertising focuses on the competitive products and competitors only.

8. Planning for Advertising Program:

There are basic steps for the planning of advertising program can be explained through following points:

1. Target Market Specification: It means the specification of components and needsof target market. The advertising program aims to cover all markets or only one sector.

2. Advertisement Objectives Specification: It is related to have impact on customers’ behavior and convinces them to purchase the product or service through following:-

– To improve market share,

– To face market competitiveness,

– To maintain customers’ loyalty for the company, And

– To create awareness regarding com-mercial relation of the company.

3. Advertisement Budget Specification: We will indicate to the methods used in spec-ification of the budget in the chapter of“Advertising Cost”.

a. Designing of Advertising Message: It is a set of guide-lines, meanings as well as symbols which deliver an Idea and dis-play the basic attributes of the product/brand and concentrate on those facets in the promotional program. The mes-sage contains following aspects: Sym-bols, Message structure and repetition.

b. Selection of Advertising Means: Spec-ification of appropriate advertisingmeans to deliver the message such as television, newspapers, magazines, cin-

Theadvertisementisdefinedalsoasindirectand non-personal communication to deliver the selling message to target consumers through non-owned means against certain charges. Advertisement aims to:-

• To introduce potential customers to the products/brands offered by the company and its characteristics and features,

• To contribute to increase demand of prod-ucts/brands which will optimize utilization of capacities and resources of the compa-ny,

• To face commercial or advertisement competition about the competitive prod-uct or services in the Market,

• To spread awareness among customers about the company and its contribution to society,

• To create appropriate image and distinc-tive image of the company and its prod-ucts,

• To achieve stability in the sales and main-tain loyalty for the brand.

7.2. Types of Advertising:

There are many ways and means of adver-tising including the following:

a. Educational Advertising: It introduces customers to new products & services and its features. This type of advertisement helps the customer to know about new products and services,

b. Indicative Advertising: This type of adver-tisement helps customers to be updated about the information related to the prod-ucts/brands in terms of its features,

c. Reminder Advertising: It reminds the existing customers about the features of goods and services as well as means to get those products in order to insure sales stability and maintain market share of the company,

d. Media Advertising: It helps customer to make communication with the company

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on precise criteria based on the research-es to measure the effectiveness of adver-tising. Through this method, the advertising can be evaluated before, during or after its execution as per following:-

a. Test before the Advertising: The adver-tising message will be examined before delivering it in the Market through spe-cificquestionnaireofcustomersinorderto know their views towards some ad-vertisement which is planned to bring in the Market. The advertising message willbemodifiedinthelightofresultsofquestionnaires.

b. Test during the execution: The advertis-er uses inquiry coupons in order to mea-sure the effectiveness of some elements in the advertising program.

ema and radio etc. Each means has its pros and cons.

4. Execution of Advertising Campaign: It re-quires a very good planning for the adver-tising program taking into account the co-ordination with all those who are interested in the execution of advertising campaign.

5. Evaluation of effectiveness of advertising Program: It’s extremelystrenuous to mea-sure the outcomes of the advertisement, albeit there are 2- ways to assess the im-pact: (1) Non-Objective Evaluation and (2) Objective Evaluation. The former method depends on unlimited opinions and points of views, therefore, no clear standards or information is available which can be used for the effective evaluation of advertising. With respect to the second method, it relies

Figure (9-1) Basic Steps for the planning of Advertising Program

Selection of Advertising Means

Designing of Advertising Message

Target Market Specification

Advertisement Objectives Specification

Advertisement Budget Specification

Execution of Advertising Campaign

Evaluation of effectivenessof advertising

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on different levels. Therefore, the advertise-ment should contain logical, emotional and aestheticalideasatthesametime.Briefly,theadvertising message should be a mixture of logical, emotional and sentimental arguments. Following are the levels of advertising:-

• Logical Level,

• Emotional Level,

• Sentimental Level, And

• Arguments & documents

The logical level and arguments aims to address the objective ideas of the adver-tisement while the emotional level intends to raise the emotions (Address the emotional concepts of the customer).

9.2. Advertisement Writing Success Factors:

• Specificationofcontentofadvertisingmes-sage with clarity and sincerity in order to at-tract customer’s attention by using colors, explanations, size and source of the adver-tisement etc. Also, it is important to pay at-tention to title of advertising message with the aim to impact on the customer,

• To design schedule or programs for adver-tising production,

• Number of different pictures which will be presented in the advertising message,

• Place of advertisement in the radio or television program or in newspapers and magazines because the placement of an advertisement plays very important role in delivering the message to a great possible number of customers.

• Innovation in the ideas of advertisement and focus on the ideas which can create interest in the consumers to purchase the product or services. But the exaggeration should be avoided.

9.3. Costs of Advertising:

The cost of advertising is affected by some factors which determine the volume of adver-

c. Test after the execution: It contains sev-eralstandardstojudgetheefficiencyofadvertising program including: Distinc-tion & perception test as the advertiser presents some real advertisement to the customers and ask them about the ex-tent of their knowledge regarding that.

9. Means of Advertising (Advantages & Disadvantages)

1. Television: It is a best advertising means which can explain the symbols and impres-sions as well as can demonstrate the use of the product/brand, its features and reac-tions of customers. Also, it is characterized by reaching a largest possible number of viewers (potential customers). The disad-vantage is the increasing cost of television advertising.

2. Radio: It’s low in cost and widespread means which can reach several marketing sectors and is characterized by the possi-bility of advertisement message repetition. The disadvantage is that the message might not reach to the target customers.

3. Print Media (Newspapers & Magazines): It is a widespread means as the advertisement can be read more than one time. Also, the magazines can be reached very easily to aspecificmarketingsector.

4. Direct Post: It is a direct communication between the advertiser and customers as the message can be delivered with ease to the potential customers. The disadvantage isthedifficultyofitsuseforsomeproducts.

Generally, there are some factors which needs to be taken into cognizance while selection of appropriate means of advertising such as (1) Objectives of advertisement (2) Extent of effectiveness of means (3) Appropriateness means of the message (4) Time and Place of procurement decisions And (5) Cost of means.

9.1. Levels of Advertising:

The advertiser should make sure that the adver-tising message creates communication process

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• Evaluation of costs for these activities and then convert in form of cash budget.

Even though this method is very easy but its execution is considered very tough. In this method,theadvertiserdesignsspecificadver-tising objectives which help to measure the results of the advertising. Also, it is assumed that the higher hierarchy is aware of the rela-tion between the sales and advertising during the advertising period.

9.4 How to Specify Intended Advertising Objectives:

In order to specify these objectives, following points should be taken into consideration:

• Advertising Budgeting: The advertising message should be designed taking into consideration the selling temptations and attraction factors which motivate every sector.

• To set timetable for the advertising: Vari-ous means of advertising are: Newspapers, Television, Radio, Magazines, Banners, Posters, Mobile Advertising, Direct Mail, E-Advertising etc.

9.5. Kinds of Advertising Campaign:

The advertising campaigns aim to achieve marketing objectives which will strengthen thefinancialandsocialplaceofthebanksaswell as stabilize the selling of bank services to different segments of target market. Promo-tional campaigns represent following:

a) Institutional Advertising Campaign:

It aims to form general positive opinion about the bank through propagating the achieve-ment of bank and its financial efficiencyin addition to its contribution in the field ofsocial work. Also, it aims to strengthen the competitive capabilities inside the banking system and refute all fake information and news which were invented to ruin the reputa-tion. The objectives of these advertisings can be summarized in one objective which is: “To continue build the positive mental image in

tising budget such as material resources of the advertiser, size of market, size of product or service and objectives of the advertisement. Following are various methods which can be adopted in estimation of advertising cost:-

1. Percentage of Sales:

In this method, the advertiser connects adver-tising budget with the volume of sales directly ashefixes5%or10%ofsalesofpreviousyearor expected in the current year. This method is easy and having no risk elements but the disadvantage is: It assumes that the sales volume is the basic determiner not the partic-ular objectives; therefore, the advertising is changeable according the sales. Also, it is notappropriateforspecificcircumstancesincase of volatility of sales volume.

2. Spend remaining amount:

The advertiser spends remaining amount on the advertising activity. First, he covers all other costs and then allocates the remaining amount for advertising program. This is not a common method and occupies last position in arrangement of the methods adopted for this purpose.

3. Stimulation of Competitors:

The advertiser stimulates the competitors in terms of expenditure on the advertisement as he designs a level appropriate for his current share in the market. This method takes into consideration the policy of competitors. The disadvantage of this method is: It ignores other elements of marketing mix and also the conditions of competitors is different from the conditions of the advertiser.

4. Target:

It’s one of the apt methods in specifying adver-tising budget because all other methods are criticized except this one. It contains following steps:

• Specificationofadvertisingobjectives,

• Specificationoftasksandnecessaryactiv-ities to attain the objectives,

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• To try to connect the process of promotion with the contribution in providing general ser-vice for the community as the consumer usu-ally sympathize with a company if it does so.

10. Second: Personal Selling

It is a verbal process through personal inter-action with a potential buyer with the aim to complete the selling process. It indicates the direct communication between the company and its consumers. The selling message is delivered verbally by the salesmen of the company. The personal selling is considered as a very important resource for information about the markets and competitors as well as it is a best tool to follow up after-sales services.

10.1. Personal Selling Objectives:

Following are the personal selling objectives:

• To achieve an appropriate degree of ac-ceptance of new product in the markets,

• To search for new customers for the exist-ing products,

• To maintain the loyalty of existing custom-ers for the product through providing ex-ceptional service,

• To provide the potential customers with technical services necessary to facilitate the selling process,

• To provide requisite product knowledge, and

• To accumulate information about the needs of the consumers, their desires and policies of competitors etc.

10.2. Stages for Execution of Personal Selling:

The process of personal selling passes by basic six stages which can be illustrated as following:

1. Potential Customers Discovery:

This stage distinguishes between a successful and failure salesman. In order to facilitate the

the minds of different segments of the society and deliver the bank’s vision to the Public”.

b) Services Advertising Campaign:

It is composed of advertising programs by using different indirect communication means in order to sell and promote different commercial and investment related banking services offered by the bank to various economic activities (Institutions & Individuals). This indirect campaign explains the charac-teristics and features of bank services as well asthebenefitsforthecustomers.

c) Competitive Excellence Campaign:

It concentrates on showing the competitive-ness and comparative features of structure of banking services offered by the bank to its customers which is different from the struc-ture of services of other competitors. At the same time, the focus is given on the competi-tive capabilities of the bank as this campaign promotes name of the bank (Brand Name).

d) Method to maximize the impact of adver-tising ( Dual task advertising):

The effectiveness of the advertising can be increased without increment in the expendi-ture. The value of the advertising will increase if the advertising has been prepared and executed in a way that can achieve two goals or more at the same time. The marketer should know that single task advertising is considered as a blunder and most expensive. The cost of advertising can be reduced through increasing the number of tasks, sales increase and then profits. Inorder tomaximize theeffectivenessof advertising to achieve two or more goals, following methods can be used:

• To exploit the period allotted for the ad-vertisement to promote the name of the product, its features as well as present gifts to the consumer when he purchases the product or give him discount if he purchas-es the product again and again.

• To make efforts to promote in one advertis-ing for more than one distribution channel (Wholesaler and Retailer).

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must convince the target customers to convert them to actual customers.

5. Completion of Selling Process:

Itmeansgettingfinalapprovalofcustomer,signing contract and executing sales deal.

6. After-Selling Services:

The selling task does not end by completing the deal but there are many services which are required by the customers such as facili-tating delivery, insuring product quality, super-vising installation process, maintenance and training etc. These services are of vital impor-tance to satisfy the customers and continue their dealings with the company.

11. Sales Program Planning:

Following fours aspects are very vital in this regards:

• To organize sales power by using founda-tions based on geography or products or customers or personal selling process. For each of these bases are its advantages and disadvantages.

• To specify follow up policies and custom-ersservicesasthesepoliciesreflectasetofguidelines which help to reduce the selling efforts. Also, these policies should specify

task, the salesman should strive to search for information which can help him to know the customers. He can get such information from chamber of commerce, industry records, telephone directory etc.

2. Beginning of relation with the customers:

To begin the relation with the customers, the salesman should accomplish the following:

• Specificationofindividualswhocanaffectthe purchasing decisions,

• Efforts to convince the customer and at-tract his attention to purchase the product.

3. Specification of importance of potential customer.

In this step, the salesman concentrate his efforts to know the importance of target customer e.g. cans this customer prove to be a good opportunity for the company or not?

This step requires that the salesman should have ability to gather objective facts and accurate information about the customers and he should not depend on his personal opinion only.

4. Present Selling Message:

The presentation of selling message is the core of selling process, therefore, the salesman

Figure (9-2) Personal Selling Process Stages

Potential Customer Discovery

Beginning of relation with the customers

Specification of importance of potential customers

Present Selling Message

Completion of Selling Process

After-Selling Services

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uct type or customer type as the results will be compared with the target quotas to specifytheefficiencyofsalesman.

• Analysis of costs: It means the analysis of selling activity such as travel expenses, ac-commodation and administrative expens-es etc.

• Analysis of Behavior: It contains the efforts made by salesmen, how he organized his time, how he communicated with the cus-tomers and how he addressed the prob-lems etc.

11.3. Third: Sales Promotion

The activity or the materials which are used as direct motivation to purchase the product/brand which can be presented to consumers, mediators and vendors. Sales Promotion is also defined as all means and activitieswhich are put in use by the business house to encourage its customers with the aim to increase their purchasing of company’s prod-ucts during a particular period. Sales promo-tion is one of the 4-elements of promotion mix (Advertising, Personal Selling, Sales Promotion and Publicity). There are various methods of sales promotion such as exhibitions, contests, lowering the prices, gifts, samples. Following are the details of these methods:

Exhibitions: It is organized in particular periods with the aim to display the products, main-tain the loyalty of existing customers, win new customers and improve mental image of the company. The company should be very careful in planning and preparing for exhibi-tions.

• Contests: It is organized for buyers in order to promote the products. Cash prizes are presented to the winners of the contest. The contests aim to enhance sales and win new customers particularly at a time when the demand of the product has been de-creased or in case of tough competition of the product in the markets.

• Lowering the prices: It aims to present the product in less than general price in order to encourage the buyers to purchase the

the method which will be adopted by the salesmen to conduct communication with the customers.

• To specify the selling regions and its allot-ment for salesmen as the company spec-ifies the target selling regions, kinds ofcustomers inside these regions and then specifiesthenumberofrequiredsalesmento cover those regions.

• To specify the sales quotas for salesmen as the company resorts to this step to know some standards which help to motivate salesmen such as sales share and profitmargin for each of them.

11.1. Execution of Sales Program:

Following three aspects should be taken into cognizance in the execution of sales plan:

• For selection and appointment of sales-men, it is necessary to search for appropri-ate source which meets the requirements of the company. For this purposeappropri-ateselection processneeds to be followed.

• To train salesmen to equip them with ap-propriate, adequate knowledge and skills necessary to enhance their performance. There are different means of the training such as lectures and group discussions etc.

• Bonuses & Incentives: In order to motivate the salesmen to good performance, the bonuses and incentives should be given to them through a good system. In this re-spect, the company uses salary method only or commission method only or salary with commission or salary with other incen-tives. The last method is widespread in most of the companies.

11.2. Evaluation Of Salesmen’s Performance:

The companies use three stages in the eval-uation of salesmen’s performance which are as follows:

• Analysis of sales level for each salesman according to geographical area or prod-

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11.4.1. Emergence of Public Relations:

The concept of public relations came into existence after the industrial revolution in Europe and the emergence of companies, factories and major institutions which started to strengthen its relation with public. The public relations were the key to communi-cation between the government and the publicwith the complexity of life and the multiplicity of activities which are carried out by the government and its institutions.

11.4.2. Concepts of Public Relations:

• PublicRelationNewsdefinesthepublicre-lation as an administrative function to eval-uate the trends of public and connects the policies and procedures of an individual or a company with the general interests and executes a practical program to get the un-derstanding of public and its acceptance.

• The dictionary of media and communica-tionissuedbyLongmandefinesthepublicrelation as an administrative job to evalu-ate the trends of public relation as an ad-ministrative function to evaluate the trends of public and this process follows the poli-cies and activities of the company which are compatible with the interest of public.

• The International Public Relations Asso-ciation defined the public relation as aplanning function and said that it is an administrative function through which the companies aim to win the sympathy and support of those who care about them and maintain their trust.

The differences between the public relations, advertisement and publicity:

• The Public Relation is an administrative task which depends on all kinds of communica-tion i.e. from personal communication to the mass communication and the nature of communication is of two directions.

• Advertising is a documentary task which relies on the means of mass communica-tion and the communication in this is of one direction.

product in particular seasons or at launch-ing new product in the market.

• Promotional Gifts: It is presented at pur-chasing a specific number of pieces ofitems. Usually, these gifts are supplement to other items for example; a small spoon is kept inside a Tea Package. Sometimes, one piece of item is given as gift if the con-sumer has purchased two pieces of a spe-cificitem.

There are many means which are used in sales promotion such as the following:

a) Means of Sales Promotion directed to the Consumer:

• Free Samples,

• Contests,

• Gifts connected to purchasing more than one piece of the Item,

• Discounts in the price in case of purchasing more than one piece,

• Discounts during a particular period.

b) Means of Sales Promotion directed to the Distributers:

• Award for best distributer,

• Tools which help to present the product like:

11.4. Fourth: Public Relations:

Introduction: Public relations are very import-ant in the modern administrative systems and it has vital roles related to highlighting the good image of the company and the services it provides to the society. Thus, it constitutes a communication link and an active interaction tools between entities both internal and ex-ternal to the company. The success of a com-pany whether it is a government company or a private company doesn’t depends on its achievement if it did not highlight its achieve-ment to the target segments of its public and clients through displaying the services it of-fered and the developmental programs.

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the society marketers use public relation tools including press conferences, exhibitions, newsletter, sponsorships, social mediaetc.

Press Conference: It is a direct face to face interaction between company and media. Information of product is trickled down through writing and given to the media for circulation as news in the newspaper.

Exhibitions: Organizing exhibitions or partic-ipating in exhibitions is also a good public relation tool to maintain a good image and spread awareness and information about company’s product to the target market. It showcases company products, responds to queries about product to the consumers, dealers and competitors too.

Newsletters: Newsletters, brochures, cata-logues of company are ways to keep the public informed and updatedabout the happenings in the company/product. It also helps in maintaining a personal touch and helps in driving the consumers towards the company and its product. All these needs to be well designed for it to be more effective.

Sponsorships: Sponsorships, partnerships and supporting certain events like Adidas spon-soring leading football association like FIFA, UEFA, Major soccer leagues like real Madrid, AC Milan, Chelsea, etc. and individual players like Thomas Muller, David Beckham etc., has seen Adidas sales grow and help build a premium image of the company and product in the mind of the consumers.

Social Media: Social media including blog-ging and posting reviews about companies/products in present times have become one of the most effective public relations tool having a wide reach. Social media applica-tions like Twitter, Facebook, blogs, reviews are been used to spread messages, update infor-mation etc. to the target audience which also acts as an interactive platform for the publics.

11.6. Fifth: Direct Marketing

The Direct Marketing get rids of all elements of traditional marketing chain comprised of

• Publicity: the publication of news stories in various Medias and thus it is a tool of gen-eral relations tools. The general relation uses the publicity to serve its objectives.

11.4.3. Objectives of General Relations related to Business:

The focus will be on objectives of general relations related to business and are as under:

1) To bridge the gap between individuals and groups, achieve the integration and create a state of knowledge and under-standing for theunificationof trendsandconvictions.

2) Makeeffortstodefinetheeffortsofinstitu-tions and its services and demand for these services from individuals of the community.

3) Create confidence between institutionsand individuals through building bridges of communication between them.

4) Positive interaction with the events and take into account the people’s interests and desires in a way that cannot contra-dict with the laws and regulations that govern public life.

5) Influence the public opinion and main-tain the good public opinion towards the institutions. Benefit from thedataafter itsanalyzing to rationalize the decisions.

6) Provide administrative tasks and advisory services which help the organization to implement its programs and planning for its projects according to the adequate perception and careful study.

7) Highlight the bright image of the institution to the community members.

11.5. Tools of Public Relation

The major purpose of public relationis to main-tain a good image in the society. It’s more of a interpersonal relationship between the company and the society. It’s for creating symbiotic relationship the publics. In order to create and maintain their relationship with

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perience through his relations with different segments, cultures, ages, races and levels.

• Interaction between the market and cus-tomer.

• Use of Media.

• Possibility to measure the reactions directly.

• Customer can interact directly and can specify his demands.

Therefore, the direct marketing makes more deals and takes more decisions through any other means such as telephone, fax and internet.

11.7.1. Benefits of direct market:

Irrespective of use of direct marketing as a business model and its being one of the elements of communication mix, the direct marketingachieve several benefits forbothconsumersandcompany.Thesebenefitsareas following:

1. Benefits for Customer:

• Convenience

• Easiness

• Freedom of choice

• Richness of Information

• Interaction and spontaneous

2. Benefits for Company:

• Strengthen customer relations

• Appropriate Timing

• Accurate estimation about needs of cus-tomers

• Costreductionandincreasedefficiency

• Flexibility

11.8. Types of Direct Marketing:

The traditional concept of direct marketing relies on catalogue, post and television while

distributor, wholesalers, retailers, promotion, advertisement and transportation expenses etc. All elements have been replaced with the consumer and reliance on him in the marketing process.

11.6.1. Concepts of Direct Marketing:

Therearemanydefinitionofdirectmarketingwhich are as following:

• Direct Marketing is refers to a system of ef-fective interaction which guarantees the use of a set of non-traditional tools which produce tangible response with least pos-sible effort. There exists a very critical role of direct marketing to create a continuous link between the company and consumers which differs from previously known tools and which helps cut costs and efforts.

• Direct Marketing works to achieve direct contact with a selected group of custom-ers and individuals to get an automatic re-sponse and establish strong relationships. Bythisdefinition,weobservethatthewriterfocused on the role and objective of di-rect marketing as he views that he is mak-ing efforts to achieve relation between company and customers to get their loy-alty for company and its products through strengthening the relation between them.

• Direct Marketing is an interactive market-ing which uses a set of tools and ideas with the aim to achieve a response or dealing.

11.7. Advantages 0f Direct Marketing:

It’s one of the most effective tools ofmarketin-gand relies upon following:

• Personal interaction with the customer: It is convincing and attracts the customer through selling dialogue.

• The process of acceptance by customer about the visit time and his welcoming the marketing employee is considered to be a preliminary acceptance to make purchas-ing decision.

• Diversification in relations: Thedirectmar-keting helps the employee to get good ex-

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nication with selected sectors of customers to display several products and encourage them to purchase through direct order.

Types of Catalogues:

There are 4-types of catalogues:

• Retail Catalogues

• Catalogues of Sale between the companies

• Catalogues of Special Items

• Catalogues of Integrated Products Lines

Elements of Success of Catalogues:

Following elements must be found in a cata-logue in order to reach the target for which the catalogue was designed:

• It should occupy a best position in the mind of customers.

• Appropriate Sale temptations.

• The publication should be attractive in terms of colors, shape, size and design.

• The purchasing orders should be put in an appropriate manner.

• It should be sent at appropriate time.

3. Television:

It is called “direct response” and it has two following forms:

• Presentations and Long Programs:

In this, the marketing is done through one or more than once television channels. Sometimes, the channel is fully devoted to sell the products as it displays the products, provideitsrelatedinformationandspecifi-cations and provide telephone number for communications and putting the order for the product. It is called “Home Shopping Channels”.

• Advertisement for Direct Response:

The products are advertised for one or two minutes, consumes are convinced and

the modern concept focuses more and more on fax, telephone, e-mail and internet so its effect is more and the cost is less and it has opened new prospects for companies.

1. Direct Mail:

Advertising through e-mail is considered to be an important means which is used at large level as it uses email between a company and consumer. A company prepares cata-logues for its products which contain all spec-ifications, information and then it is sent tothe e-mail address of consumer who requests for products and makes the payment using his credit card or banking transfer and then the company send the product to him. The direct e-mailing also is called “Sales People with Wings”.

Advantages of Direct Mail:

The direct mail has a lot of advantages which are as following: -

• Providing direct contact with consumers

• Communicate with the customers and re-tain them

• It possess several convincing tools

• The customers can be counted through re-ceived answers

• It contributes to support the activities of general relations and improve the image of company and its products.

Disadvantage of Direct Mail:

The consumer cannot see the product and makes the payment in advance and prices may change before delivery of the product to him.

2. Catalogues:

The traditional definition of catalogue is: “aprinted material” comprised of several pages to display the products with the aim to sell it. Themoderndefinitiondefinesitasaformofdirect marketing which relies on use of printed, videoed or electronic catalogue in commu-

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possible women at a time and then the salesman presents the items and the items are sold instantly as well as he get orders for purchasing. And this type have some advantage as the following:

– Cost of promotion is low.

– The atmosphere of party is considered to be more social than selling.

– The guests attend the party willingly.

– It generates the trust of guests in the company and its products.

12. Direct Marketing and Ethical Aspects:

Mostly, the direct marketing achieves bene-fits for each of customer andmarketer butsometimes we find that people are notinterested in the direct marketing as the cheating methods of some marketers harm the customers. Following are some negative points of direct marketing: -

• Inappropriate timing for communication

• Unfair practices, cheating and discomfort

• Sometime the privacy of customer is not respected

Conclusion:

After going through above, we can say that direct marketing has many marketing oppor-tunities for a company as it can increase the volume of sales as well as it is a type of communication activity which aims to impact on existing and potential customers and convince them. The direct marketing is more effective in communication with the customer and getting access to them particularly if the company utilizes the infor-mation and communication technology which emerged as an effective factor in activating this communication. In the end, we say that the effectiveness and success of any process or marketing activity is related to the extent of its serious use and safety of its operation.

telephone numbers are provided to put the order for product.

4, Mobiles:

a) The telephone: The mobilesareextensively used means in direct marketing commu-nications. The mobilecommunication with present and potential consumers is done to convince them about the provided of-fers. There are 2-types of mobile communi-cations: -

• Outgoing communications as the compa-ny communicates directly to the customer.

• Incoming communications as the custom-er puts purchasing order.

5. E-Marketing: It indicates to the marketing of a particular item on Internet. It has a lot of advantages like it contributes to open afield in frontofall formarketingof theiritems and experiences, low cost and its success can be evaluated easily.

Following are the approved methods of e-marketing: -

a) Search Engine Marketing

b) Display Marketing

c) E-mail Marketing

d) Interactive Marketing

6. Face To Face Selling: It is very old type of direct marketing which relied on using the professional sellers in searching form cus-tomers and establishing relations with them and have some types as the following:

• Roaming Around the Houses: In this type of marketing, a marketer goes house to house to meet the existing and potential customers and sometimes he goes to the officesandworkplaces

• Parties: In this, women in the houses are contacted and convinced to contrib-ute to the marketing process of particular products in exchange of giving them re-wards or free of cost products. The house-wife arranges a party and invites maximum

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14.1. Factors affecting Specification of Promotion Budget:

Thespecificationofpromotionbudgetofanycompany relies on several factors including: Size of the Company, Financial Resources, Nature of the Product, Manufacture Growth Rate and Company’s Position in the market.

Promotion budget differs with the differences of company’s objectives as the promotion budget of business organizations is different from those organizations which offer items andservicestothefinalconsumers.Thebusi-ness organizations spend a big portion of promotional budget on personal selling efforts while the companies, which provide items to the last consumer, spend a big portion of promotion budget on the advertising.

14.2. Methods to specify Promotion Budget:

The companies can adopt four methods to specify promotion budget which are: Percentage of Sales, Pricing based on competitors, Any method which the producer can afford and Aim (Goal). These methods are discussed as following:

1. Percentage of Sales:

The company can use sales of previous years as a base to specify its promotion budget as the percentage of sales. According to this method,thesalesareconsideredasaspecificvariable for promotion budget instead of its being a determinant for the sales.

The companies can specify promotion budget relying on the volume of expected sales.

2. Following the Competitors:

Some companies specify promotion budget based on the percentage allocated by other competitors companies of the same industry in order to make the promotion budget similar to their competitors. But before following the method of competitors, it should be taken note of that the competitor companies have the same goals and objectives.

13. Factors affecting the Promotional Mix:

• General economic situation: During the economic recovery period, the consump-tion increases which motivate the compa-nies to make more promotional efforts,

• Economic & financial condition of theCompany: If the financial condition isgood, then the various promotional means can be used,

• Role of product life cycle: The promotion and its method vary according to every-step of product life cycle. During the market introduction stage, we find thatthe advertising and personal selling are the best promotional mixelements. As for growth stage, the objective is to achieve the greatest possible sales volume emphasizing on a particular brand. With respect to the maturity stage, the organi-zation aims to achieve balance between the elements of promotional mix. In the decline stage, the organization works to reduce production and marketing costs.

• Types of goods and its characteristics: For example, a general item is different from a competitive item which can be promoted through advertisement, And

• Nature of prevailing competition: The marketing mix varies according to the types of the companies such as monopo-listic etc.

14. Promotion Budget

It specifies the amount whichwill be spentonmarketing communication. There is diffi-culty in measuring the results which can be achieved through most of the elements of promotional mix. The companies can spend millions of dollars on food and drink for the speculators of football games without estimating the expected results of these expenses. Also, it’s extremely strenuous to assess the tangible results of the adver-tisement and general relations etc. from elements of promotional mix.

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is specifiedonthebaseofexperienceofindividuals.

• Base of promotion budget of strong competitors: According to this base, the company has to identify strong competitors in foreign market and know their approved budget of promotion campaign.

• Base of actual needs of promotion campaign: In this, the provisions required to executethecampaignarespecifiedandfinancial needs are estimated for eachprovision. This base is considered as the best and widespread in practical reality.

16. Preparation of Marketing Communication Program:

The preparation of marketing communica-tion program contains designing of general strategy for marketing communications and abudget is allocated for specificprogramsaswellas it isspecifiedthat ifthecommuni-cations will be implicit and if the company will follow push or pull budget or a mixture of both of them. The marketing communica-tions might be stated or implicit.

• In stated communications, the message is specified very clearly. The messagethrough personal selling is different from the message of advertising or general relations or sales promotion or direct marketing. As for implicit communications, it represents the thing which is understood implicitly or the thing which the message contains about the product itself, price and place where the product is sold.

• In pull strategy, the producer begins the promotion through long scale advertising or through any other method of promo-tion in order to attract the consumer to purchase the product. As a result, the demand of product increases from whole-saler who sells the product to retailer who delivers the product to the consumer. As for personal selling is concerned, its tasks depend on the communication with the

3. Any Method that Company can afford:

Some companies specify promotion budget based on the remaining amount after meeting other costs or the amount which the company can afford. This method seems to be failed taking consideration the objec-tives/goals of the company and the amounts necessary to achieve those objectives. Also, any decrement in promotion budget can affect negatively on the size of the company.

4. Aim (Task):

Thismethod specifies promotion budget onthelevelwhichisrequiredtoachievespecificpromotion objectives. According to this method, the company specifies promotionobjectives and then specifies the requiredtask which will be carried out to achieve thoseobjectives.Inthelaststage,itspecifiesthe amounts necessary to carry out the tasks.

15. Promotion Budget on International Level:

The promotion budget is subjected to many determinants including comparison of expected revenue of promotion campaign (expected increase in the revenues of sales after execution of the campaign) with total costs which the company bears since the beginning of planning of promotion campaign, designing, execution and moni-toring its results on foreign market. But it should be taken into consideration that the expected revenue from promotion campaign will begin to appear after a long period of time. Also, it has long term impact which makes the comparison difficult between the expectedrevenue and expected cost of promotion campaign for the company in foreign market. Therefore, the company resorts to any of the following bases while preparing promotion budget:-

• Base of expected sales percentage. It means the promotion budget is based on the fixed percentage of the sales whichthe company expects to get during a particular period of time. This percentage

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there exists difficulty in evaluation of effec-tiveness of marketing communications. Also, there seems to be pressures on marketers to justify marketing communications, there-fore, it requires a new technology which can help marketers to evaluate effectiveness of marketing communication in a best manner.

17. Strategies of Promotion

The promotion mix used in the promotion campaign differs with the difference of strategy adopted by the company; there are two strategies of the promotion:-

1. Push (Defense) Strategy

The defense strategy is based on concen-trating all promotion efforts on the first ofchain of the distribution which is “Whole-salers” in order to convince them to purchase the product through displaying its character-istics and features as well as promise them toprovidewiththefacilities,discounts,profitmargin and other services if they make exten-sive promotion efforts to convince retailers to increase their salesvolumeand theirprofits.The retailers adopt the same method to make pressure on the last consumers to motivate them to purchase the product. This strategy is largely based on the personal selling except the promotion efforts made by the retailers to motivatefinalconsumers.

This strategy is used in case of tough compe-tition and need to make direct communica-tion with distribution channels particularly at a timewhen the product is in its first stageand needs extensive promotion efforts to push distribution channels to deal with that product. Also, this strategy used in case of high price product, narrow scope of the market,andweaknessof financialcapabili-ties of the Company.

2. Pull Strategy:

Unlike push strategy, the pull strategy relies on concentrating promotion efforts of the final consumer in order to create interestin them to purchase the product. Through

distributors and the demands are met timely.

• In push strategy, the company produces a product in limited quantity according to the prediction of sales using appro-priate prediction methods. After that, the company makes efforts to convince whole-salers through dealing with its products. The personal selling plays very important role in this as it strives to convince wholesaler to demand for the product, the whole-saler convinces retailer who himself makes every effort to convince the consumer to purchase the product.

The company uses various promotion means in order to convince the distributors including givingdiscountsorprofitpercentageaswellasprovides various products and give discounts to the consumers. Also, the company supports the distributors and provides them material assistances which help them to promote the product.

16.1. Integration an Implementation Communication Programs

The implementation indicates to designing of marketing communication programs and action plan relying on the promotional tools which will be put to use by the company in the sense that if the company advertise in television or will use another method or will resort to sales promotion or general rela-tions or direct marketing? These efforts are made to achieve the objectives of marketing communication.

The sales promotion program can be acti-vated through using of coupons or the effec-tiveness of new strategy of personal selling can be evaluated through observation of sales numbers which were achieved during sales period.

Usually, the marketers rely on sales methods and examinations in order to evaluate the efficiency of marketing communicationsandsometimesthesalesvolumeandfluctu-ations in sales are looked upon. Generally,

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method relies largely on awards, contests and coupons to motivate the customer to purchase. Also, the features of the product, its characteristics and its quality are not mentioned.

2. Soft Sell:

It addresses the customer with a soft method as the product’s features and qualities are mentioned and it is compared with the same products of other companies. However, the consumer purchases the product after he convinced with the features of the Item and after a long discussion as happens in the advertising “You can notice the difference when you use this item, it is best, cheap and gives effective results”.

19. Organize Promotion Activity:

Since the promotion mix composites of advertising, personal selling, sales promotion, public relations and direct marketing, the best way to organize this activity is to make them depend on the marketing manage-ment so that the coordination between the

this strategy, the attributes of the product/brandispresented to consumers, who in turn demands the product/brand from distribu-tors, which makes the distributors purchase that product/brand from the company. The pull strategy largely depends on advertising to possible number of consumers. In this, the widespread advertising media is used such as television and newspapers. The pull strategy method is adopted in case of widespread and low-price items. Following two charts explain that how both strategies complete:

18. Some other Promotion Methods

As for promotion methods used either in personal selling or in advertising, either the organizations relies in its promotion on push strategy or pull strategy, it divides into two methods:

1. Hard Sell:

It addresses the customer in clear language in order to convince him to purchase the product on the spot such as “Don’t miss the opportunity” “purchase today and win”. This

Figure (9-3) Strategies of Promotion

Push(Defense) Strategy

Final Consumer

Product

Promotion Efforts

Wholesaler

Promotion Efforts

Retailer

Promotion Efforts

Pull Strategy

Wholesaler

Product

Promotion Efforts

Final Consumer

Search for Product

Retailer

Product Demand

Two Strategies

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The direct marketing through Internet allows the direct marketers to modify their messages and their marketing ideas in addition to completing the selling processes fast and effectively. Also, it created possibility to publish a large amount of information and data with the availability of multimedia (Voice, Picture and Motion) for marketing message.

The internet can serve the companies through four following methods:

• The Companies can make websites for direct communication with the customers or individuals or other institutions (Suppliers and Distributors) which will help to exchange the information accurately and quickly.

• The Internet allows skipping others in Value Chain as distributers and mediators (Provide opportunity to direct selling to the consumers).

• The companies can use Internet in deliv-ering its products to new customers.

• The Internet can be used as main element to lay new foundations of businesses.

A study conducted by Jupiter Communica-tion Company showed that the volume of business which is expected to be executed through Internet in B2BTrade will reach six tril-lion dollar in the year 2005.

The companies have switched from dealing through traditional means to the use of this website: www.cyperatlas.internet.com/markets.hmt.

20.1 The Use of Internet In Promotion:

There are many advantages for using of inter-net in promotion achieves including following:

• Quickness in the communications with suppliers and customers,

• Quickness in the procedures of selling and purchasing,

• Quickness in knowing the global events which affect the prices of raw material in global stock market,

elements of promotion mix can be done. But some companies separate the personal selling from promotion mix and establish an independent unit which is called “Sales Commission” comprised of sales specialists and works under Sales Manager. It requires skills and capabilities different from those which the advertisers should possess but this trend will create distance between two activ-ities the thing which makes the coordination betweenthemdifficultparticularlyincaseoflaunching promotion campaigns which need the efforts of both salesmen and advertisers.

Some others demand that the general rela-tions should fall under the responsibility of those are carrying out promotion activi-ties. They say that the general relations use the same methods and means used in the promotion as it aims to improve the compa-ny’s image in peoples’ mind. But this trend will give the general relations color of sales which will create doubts in people’s mind in patterns of relations and they will lose trust in the rela-tions. Therefore, it is necessary to include the promotion activities under one presidency to avoid repetition and to achieve integrated marketing objectives.

20. Modern Promotion

The recent years have seen tremendous developments which are seen as challenges before market with the beginning of new millennium. The most prominent develop-ments are the technology developments whether on market level, production level or communication level.

The internet is considered as the most important revolution of technology in modern age. It does not require high cost as well as it allows its users in all over the worlds to access with ease the thing which made it a new plat-form for communication of the companies with its customers effectively.

With the advent of revolution of direct commu-nication, the company and customers have become one face as they deal equally through modern communication tools.

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• To follow up shipments (imports and exports) at any time,

• The correct information reaches the customers,

• Quick response to the suppliers,

• To manage the movement of goods with the distributors,

• To provide communication means to company,

• Availability before customers round the clock,

• To communicate with a great number of customers in the shortest possible time,

• To specify departments of target market to communicate with each of them with different message,

• To improve relations with the customers and know their views,

• To build a good mental image about the company, And

• Possibility of providing more services which satisfy the customers.

• Quickness in meeting the customers’ demands,

• Knowledge of latest local and international news related to the business of the company,

• Quickness in getting the information about the competitors,

• International and local advertising and international showroom in very low price,

• Providing the costs of international communications,

• Providing the use of general post,

• Lowering the prices through savings made by use of Internet,

• Providing the costs of traditional distribu-tion through severing relations with some mediators,

• To follow up the business from anywhere in the world,

• To transfer the company to a friendly envi-ronment institution through reducing the use of papers,

• Easiness in searching for suppliers,

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1. Know about social responsibility.

2. Understandthesignificanceofsocialresponsibilityforbusiness organizations in the modern age.

3. Analyze the social responsibility factors affecting different organizations.

Social Responsibility and MarketingCHAPTER

10

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2. Development of Social Responsibility Concept

The concept of Corporate Social responsi-bility developed in following manner:

• Classical Concept: It dates back to Mr. Adam Smith who stressed that all business organizations are striving to provide best services to the society and achieve high-estpossibleprofitinaccordancewithlegalprovisions and prevailing ethical norms. So, theprofithasbecomeasolegoaltheor-ganization strives to reach.

• Administrative Concept: It came into exis-tence in the year 1930 GC as the shift was made from a sole goal to another goal which is: “maximizing of managers/admin-istrators their own satisfaction and search-ing for power, security and an excellent position under the growth of organization. Francis X. Sutton indicated in his research in 1956 to the fact that social responsibility is appearing and standing out in the big companies and that is through the process of balancing which is done by the man-agement of organization between the elements/factors interacting with it (share-holders, lenders, suppliers, customers and government) and which has a big impact (in assisting the mangers) on providing moregeneralprofitstothesociety.

• Environmental Concept: It has different names such as “Social Environment Mod-el” of Jacoby, “Qualitative Model for life of Managers” of Hay – Gray and “General View Model” of Williams. It started to ap-pear in the year 1960 with the feeling of mangers that their responsibility is not con-finedtowithintheorganizationandisnotlinked to the market only but it extends to various and multiple parties of the society. Mr. Ralf Nader and Mr. John K. Galbraith best explained this idea.

Mr. Carroll presented four types of responsi-bility which together constitute the corpo-rate social responsibility according to the followingfigure:

1. Introduction Social Responsibility and Marketing

Social responsibility is considered as a stra-tegic decision which is adopted by the orga-nization and is implemented and activated with its different activities. Some of organiza-tions implement social responsibility forced by law and we see that such organizations present to the society less than required from them and some other organizations imple-ment it voluntarily and want to make contri-bution to develop the society.

The extent of responsibility of each organi-zation is specified by its social role and thebenefitachieved for thecommunity. Takinginto consideration social aspects of environ-ment, contribution for social development, abandon thephilosophyofprofitmaximiza-tion as the only goal and with business orga-nizations accepting the concepts and ideas of social responsibility, legislations and rules have been made so that it can make these concepts and ideas compulsory.

The subject of social responsibility is consid-ered as one of the subjects which received extensive attention in advanced coun-tries for a long time. The advanced coun-tries included the social responsibility in their plans and carried out extensive awareness campaigns in order to motivate the compa-nies to adopt this responsibility, spend money on this aspect and assist the government to solve the problems of society.

The contemporary global challenges including “Globalization” contributed to increase the interest of organizations in their organizational culture and human resources. The organizations have become more responsive to the business ethics and social responsibility towards the individuals working therein and other parties with the aim to fulfilling the expectations of societyincluding social responsibility generally and social responsibility for its working individuals particularly.

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Also, the corporate citizenship is definedas“adoption of strategic focus by the company to carry out its economic, social, ethical and welfare responsibilities which are expected by stakeholders.

3. Principles of Social Responsibility

During carrying out its social responsibility, a company aims to increase its contribution in sustainable development. To achieve that objective, a company must work based on a setofprincipleswhichreflectinfollowing:

• Accountability

• Transparency

• Ethical Behavior

• Respect of Interests of Concerned Parties

• Respect of Law

• Respect of International Standards of Be-havior

• Respect of Human Rights

So, the social responsibility according to “Carrol” the outcome of all four types of respon-sibility which can be written in following format:

Corporate Social Responsibility = economic responsibility + legal responsibility + ethicalresponsibility+philanthropicresponsibility

To convert a company into a good citizen, it mustmakeeveryefforttoachievenotonlyfi-nancial interest for shareholders but interests of all other beneficiaries such as consumers,employees, managers, environment, media and society in general. The social responsibili-ty doesn’t mean only giving charities but it in-cludes an active participation in educational programs and commitment to protect the envi-ronment in addition to working according to the principles of transparency and accountability.

The Boston College Center for Corporate Citi-zenship(BCCCC)definedthecorporateciti-zenship as “the business strategy that shapes the values underpinning a company’s mission and the choices made each day by its exec-utive managers and employees as they engage with society”.

Figure (10-1) The Figure of Carrol

Source: TahirHasan Mansour Al-Ghalibi and Saleh Mehdi Mohsin Al-Amri. (the reference has been mentioned previously, 2005, P: 83)

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• Keenness to present these programs with a strong, excellent and high quality perfor-mance.

• Best management of social aspects during carrying out economic activities by the companies. These aspects are seen in en-vironmental commitment, respect of labor laws and implementation of standards specificationswhichisachallengeforthecompanies.

6. Advantages of Company’s Commitment to its Social Responsibility:

The international experiences indicate to the important advantages those companies ob-tain which are committed to its responsibility towards the society/community. Those advan-tages are: improving the company’s reputa-tion, facilitating to get bank credit, attracting mostqualifiedhumanresourcesandbuildingstrong relations with the governments.

7. Criterion to Measure and Evaluate the Social Responsibility

A number of indicators have been designed which can be used in measuring the social role which is being played by the companies during its carrying out different social and economic activities related to nature of its work. Some of these criterion are presented as following:

a) Criteria to Measure the Size of Social Con-tribution of Company for the Community.

1) Criteria to Measure Cash Income of Workers of the Company: It includes salaries, wages, bonuses and cash in-centives which the company’s workers receiveduringaspecifiedperiod.

Criteria to Measure the Cash Income of Workers:

=

salaries and wages +Bonuses and Cash Incentives

Number of WWorkers .

4. Levels of Social Responsibility

In 1994 GC, London Benchmarking Group was established to measure investments in community by philanthropic group not the international companies. It aimed to measure thebenefitofexecutingdevelopmentalandvoluntarily projects for each of community and companies equally. According to this model, practices of social responsibility have been distributed to four following levels:

First Level: Basics of Institutional Work

Second Level: Trade Initiatives in the Commu-nity

Third Level: Investment in the Community

Fourth Level: Social Giving

From above, it’s clear that commercial bene-fits of companiesare thebiggest in the firstlevel as the participation is not allocated for purpose or motive of charity or humanity but it was designed as an integral part of objectives and policies of institutional work of company. The fourth level represents the apex of charitable and social giving.

5. Factors for Success of Social Responsibility

Concerning the adoption of social responsi-bility concept, the success of companies is linked to several following factors related to vision and organization:

• There is need to believe in the issue of re-sponsibility towards community/society.

• A company should design a very clear vi-sion for the social role it wants to play and the main issue which it wants to address.

• A company should allocate a person for this activity and specify for him all required objectives and plans.

• There should be concern to make these so-cial programs stand independently in the future and work to cover its expenses.

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6) Criteria for Worker’s Share in the Dis-tributionofAnnualProfitsoftheCom-pany: Average Share of Worker in the Profits

=

Value of Annual ProfitsDistributed to the WorkersTotal Nummber of Workers .

7) Criteria to Measure the Expenditures of the Company on Researches and De-velopment of its Products and Its Cus-tomer Services: Average Expenditure on Improvement

=

Expenditure on Researchesto Develop and Improve

the Qualityy of Productor Service (Service

or Product or Customer)Totaal Costs of Production

or Paid Services .

8) Criteria to Measure the Role of Com-pany in Responding to the Queries and Problems of Customers: Percentage of Number of Problems which were re-sponded by the Company

=

Number of problemsaddressed and responded

by the CompanyTottal number of problems

received from the customersand consuumers .

b) Criteria to Measure the Cost of Size of So-cial Contribution of the Company for the Community and Environment Protection. Following are some important Criteria:

1. Criteria to Measure the Contribution of the Company in achieving social, cul-tural and sport welfare and participa-tion in the educational and health ar-eas and in everything the individuals of the society need generally.

2) Criteria to Measure the Contribution of the Company to Solve some Social Problems of its Workers: The contribution means the company takes the burden of providing housing, transportation fa-cility, insurance, health care, sport trips, leisure trips and cultural trips.

Concerning workers:

=

Number of Workers who benefited from the contribution

of tthe company in solvingtheir social problemsNumber of Workeers

in the Company .

3) Criteria to Measure the Contribution of the Company in improving the level of skillandefficiencyofitsWorkers:Thisin-dicator explains what the company is spending on education and training of itsworkerstoimprovetheirscientificandtechnical level.

Percentage of workers’ share:

=

Cost of Company�scontribution on training

and developmentTootal value of salaries and

wages given to the workers.

4) Criteria to Measure the Contribution of the Company in providing industrial secu-rity for its Workers: Measurement Indicator:

=

Number of Accidents Occurring in a Year

Number of Actual WoorkingHours in a Year .

5) Criteria to Measure the Stability of Work in the Company: Measurement Indicator:

=

Number of WorkersResigned in a Year

Total Number of Workerss .

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The Company Contribution Rate= Cost of Company

contributionn on developmentof infrastructure

Total Cost of Company'sCoontribution working

in the Area

8. Social Responsibility and Marketing Ethics

There is no doubt that there is strong rela-tion between the social responsibility and marketing ethics. Mostly, this relation led to link and interrelation between the two as while talking about any of them means talking about another. Also, the modern literature of management contains a typical chapter which has a common title: “Social Responsibility and Ethics of Management”. So, how can we specify the relationship between them? Whether it a congruence relationship? (i.e. all what fall within the social responsibility of the company is from ethics of management and vice versa) or integration relationship? or something else?

In the beginning, it is necessary to stress on the fact that the ethics is an old tendency of society’s individuals than their social responsibility as well as it is older than social responsibility for individuals in the company. Undoubtedly, the ethical tendency is old. In past, they used to commend: “don’t steal” and it remained until our present time also. While most concepts and attitudes are rele-vant to the modern developments as is the case of socio-environmental call: “don’t pollute the environment” which represents a social attitude, a new awareness and a new social responsibility.

Despite the fact that the social responsi-bility has an ethical aspect which gives it a dimension deeper than labels and an extension beyond the emergence of terms appeared to circulate in the sixties but the companies’ carrying out their social respon-sibility limits the possibility of making the

Rate of Spending Cost= Cost of Contribution

of the Company iin SocialActivities of the CommunityTotal Cost of Social AActivities

the Company has contributed

2. Criteria to Measure the Contribution of the Company in Providing New Job Op-portunity.

The Company Operating Rate= Number of Workers

Recruited in ttheCompany Annually

Total Number of Manpowerin the Country

3. Criteria to Measure the Contribution of the Company in Protecting the Sur-rounding Environment. This indicator includes the cost which the company bearsonpreparationofscientificstud-ies and researches, building the parks, planting areas with trees, purchasing of necessary equipment’s and that is to prevent pollution and harms with the aim to maintain a clean and beautiful surrounding environment.

The Company Expending Rate= Cost of Company

contribution on protectionof surrounding environmentTotal budget of Compaany

for researches and development in the area

4. Criteria to Measure the Contribution of the Company in Development and Im-provement of Infrastructure in Surround-ing Area.

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2) Workers:

− Attractive Salaries and Wages.

− Progress and Promotion Opportunities.

− Continuous Training & Development.

− Justice (pertaining to Job)

− Suitable Working Atmosphere

− Health Care

− Paid Leaves

− Housing and Transportation for Workers

3) Customers:

− Good Quality Products.

− Appropriate Prices.

− High Quality and Easy Access to Items.

− True Advertising.

− Safe Products while using.

− Instruction to use the product and then get rid of it or its rest parts after use.

4) Competitors:

− Fair and Transparent Competition.

− True Information.

− Not to lure workers from other compa-nies to join you using unfair means.

5) Suppliers:

− Continuity in Supply.

− Fair and Acceptable Prices.

− Improvement in Uses of Supplied Mate-rials.

− Participation in Dealing.

− Payment of Financial Obligations and Honesty in Dealing.

6) Community:

− Contribution to support infrastructures.

− Employment of Disabled People.

social responsibility as old as ethics in the works and actions of individuals. The anal-ysis can come to an important conclusion which is: “the concept of social responsi-bility is the result of enlightened self-interest and not a direct product of socio-ethical vision”. So, this is the result of economic modelbasedonefficiencyi.e.maximizationofprofit.Quickly, itappeared in thismodelthat one dimension (efficiency only) withits all negative dimensions on other parties and the society will be more expensive for the company from the socio-economic model which is based on multi-dimensional vision that is balanced between economic and social considerations. Therefore, the emergence and development of concept of social responsibility lies in the economic model itself and the self-interest which is no longer capable of (with its old forms/shapes) keeping up with the development happening in the new concepts and prac-tices turned to the pattern of enlightened and more balanced self-interest.

9. Elements of Social Responsibility

After following up the writings concerning social responsibility, we find that theresearchershaveidentifiedalargenumberofelements which make up the content of social responsibility but they differ in prioritization of these elements as the differences emerged according to the study environment, time and the nature of industry the research was conducted for. Anyway, following elements can be adopted as indicators to the content of social responsibility:

1) Owners:

− Achievingmaximumpossibleprofit.

− Maximizing the value of share and the company as whole.

− Building a respectable image of the company in its environment.

− Protection of Company’s assets.

− Increasing the Sales Volume.

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10. Social Response

The way and method of responding adopted by the business organization regarding social responsibility is generally known as “social response”. In fact, this response varies from organization to organization depending on several factors but we can catalogue that response between the low and high in four basic points: -

1. Suffocation Management: This kind of man-agement doesn’t refuse its commitment to the responsibility toward community and society only but it carries out unethical and unmoral activities rejected by the society. It focuses only on collection of revenues at all cost. Trading and promotion of prohibit-ed items is a one example of it.

2. Sufficient Management: This kind of man-agement makes its organization to comply to a smaller extent with rules & regulations imposed by Law. It thinks that the business organizations should achieve the revenues andprofitsandhasnothingtodowithoth-er things.

3. Assistance Management: This kind of man-agement tells its organization to comply with all that is required by the laws and it asks the organization to make some contri-butions when requested by others.

4. Active Management: This kind of man-agement prepares the organization for highly positive social response to all the requirements of social responsibility. Also, it requires from all relevant parties in the organization to make contribution through its organization to serve and develop the community. It looks at the organization as a good citizen in its society.

11. Sources of Ethical Values in the Organization

There is a set of forces which constitute the managerialethics.Mr.Daftspecifiedasetofelements which work on forming managerial ethics which are as following: -

− Creating New Jobs.

− Supporting Social Activities.

− Contribution in Emergency and Disas-ters Cases.

− Respect of Prevailing Customs and Tra-ditions.

− Honesty in Dealing and Providing Cor-rect Information.

7. Environment:

− Reduce water, air and soil pollution.

− Development of resources and its main-tenance.

− Optimal and fair use of resources partic-ularly non-renewable resources.

− Planting areas with trees and increasing green zones.

8. Government:

− Abiding by laws, legislations and instruc-tions issued by the Government.

− Respect of equal opportunities for em-ployment.

− Payment of tax liabilities and other charges and not to evade the taxes.

− Spend money on research and devel-opment.

− Contribute to solve the social problems such as eliminating the unemployment.

− Provide assistances for rehabilitation and training.

9. Pressure Groups:

− Good dealing with Consumer Protec-tion Associations.

− Respect of activities carried out by “En-vironmental Protection Groups”.

− Respect the role of trade unions and deal with them in a good manner.

− Deal honestly with the Press.

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it doesn’t take ethics into consideration needs a strategic revision. It is true that there are some practices and cases of searchingforprofitatanycostbutitisnotnecessarily attached with the free eco-nomic activity. The system of communi-ty work, legislations and the evolution of public opinion can be ethical and moral ruleswhichwillincreasetheconfidenceonproducts, goods and services provided by the companies.

Laws and regulations, irrespective of its strong characteristic, don’t protect the commu-nities and its rights and don’t provide alone the security and confidence but when it issupported by an ethical environment only then itachievehighefficiency in thedevel-opment and reform. The ethics and morale have often a realistic and intellectual superi-ority over physical power.

The interests, which organize the relations of production as well as protection, create an ethical system of work, belonging, soli-darity, care and balance between the rights duties. So, to achieve success and long-term as well as short-term interests, we need to work on legal, political and ethical contexts without avoiding any of other contexts as each system has its own field and spontaneous interactions which an organization must pay its attention to.

Mr. Peter Eigen, president and founder of “Transparency International” Organization, noticed after a long work experience in the international bank that the combating corruption by establishing and promoting a system of economic action which orga-nize itself on the base of transparency and combating corruption without government and international interferences and moni-toring is the most successful and effective.

There is a point of view which says that the international community needs private sector after the inability of governments to tackle the corruption has been proved. Therefore, the big economic institutions need action programs stemmed from social responsibility.

1) Personal Ethics: Every person brings a bunch of personal beliefs and values to his work. The personal values and ethical con-clusions turn these values to a behavior in the important regions in decision making of the organization. So, the family back-ground and spiritual values of managers provide some principles through which they perform their works.

2) Culture of Organization: It is rare that the practices of ethical or unethical busi-nesses contribute completely to the per-sonal ethics of an individual and that is becausepracticesofbusinessreflectval-ues, trends and models of behavior for the culture of organization. The organi-zation must make the ethics an integral part for the culture of organization which generally starts with founder or leader who explain specific ideas and values.The leader or summit director is respon-sible for creating and supporting the cul-ture which stresses on the importance of ethical behavior and social responsibility in the organization.

3) Systems of Organization: These are formal systems and include the infrastructure of the organization such as: are ethical val-ues incorporated in the policies and laws? Is the law of ethics available and oriented towards workers?

4) External Stakeholders: The administrative ethics are affected by external stakehold-ers who are the groups outside of the orga-nization and affect its performance. While making ethical decision, the organization understands that it is a part of a great community and takes into consideration the effect of its decisions and is activities on all stakeholders. The most important stakeholders are government agencies, customers and special interest groups which have interest in the natural environ-ment and global market.

5) Ethical Principles in the Economic Activ-ity: Being capitalism an unethical is not necessary and the stereotypical idea that theprofit,privatizationandmarketsystemnecessarily involve moral transgressions or

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as introduce anti-corruption programs and put them into practice. This means that the ethics and morality is not a marginal issue in the economy but it is an essential component of markets, organizations and economic as well as trade relations.

The principles and ideas which are suggested by the institutions working in area of combating corruption propose that each economic institution should include in its systems and codes a commitment to prevent direct or indirect corruption as well

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1. Know about marketing ethics.

2. Understand the importance of adopting the marketing ethics by business organizations.

3. Analyze the different factors affecting the business organizations in adopting the concept of marketing ethics from its activity, And

4. Build a marketing ethics system.

Marketing EthicsCHAPTER

11

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• Moral Laws which sever as a guide for hu-manbehaviorandalso reflectscultureofthe community.

• The community which is an important ele-ment indefiningthepathofmorality,hu-man and organizational behavior, rules and social norms which set the actions of individuals with each other.

4. Reasons for the Study of Ethics for Individuals and Organizations

Following are the important reasons for the study of ethics whether for individuals or orga-nizations:

• Sometimes, people turn from doing good to doing evil and bad because of poor social conditions on one hand and lack of human and social values on the other hand.

• Prevalence of corruption in the communi-ty generally including business sectors and marketing activity.

• Prevalence of some undesired businesses which inconsistent with the objectives and policies of the organizations.

• Growing interest in teaching of concept of ethics for each of individual and organiza-tions of all levels.

• Needforethicalstandardsthatdefinethebehavioral pattern for individuals in accor-dance with the prevailing social values.

• Increasing level of education and culture among majority of community members increases the expectations and demands and thus the organizations have to adopt moral bases.

• Social responsibility which means that the organizations have responsibility towards the community.

• The ethics distinguish between good busi-nesses and bad businesses practiced by the individuals as well as distinguish be-tween individuals whether they are in for-mal or informal organizations.

1. Introduction to Marketing Ethics

This chapter aims to discuss the theoretical aspects related to marketing ethics and important standards, ethical and moral prin-ciples by all who are working in the indus-trial organizations generally and marketing organizations particularly. This is because the modern concept of marketing is based on the serviceofconsumerandfulfillinghisneedsanddesires instead of cheating and deceiving in ordertomakeprofitbyanymeans.

2. Definition of Ethics

The concept of ethics differs from one indi-vidual to another and from one position to another. Perhaps, this is due to background concepts that every individual believes in and which serve as a mentor and guide to act and deal with the required case. That is why, there is no definition agreed uponregarding concept of ethics. Following are thesummaryofdefinitionspresentedbyAraband Foreign Marketing Books:

Those are the good standards and princi-ples which every individual and every society should act accordingly so that the individ-uals can distinguish between right and wrong and can take appropriate decisions in light of these standards and principles which are considered as a common language under-stood by all nations and peoples regardless of their nationality.

3. Sources of Ethics

Generally, the following are the resources of good ethics:-

• The Holy Quran and the Bible as well as all Heavenly Books which are considered as thefirstsourceforallmoralvalues.

• The familywhich isconsideredas thefirstcell in building of the community and the individual of the society learns all good val-ues and behaviors from it.

• Good Human Conscience which is a gift from Allah.

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In view of marketing ethics which include a set of principles and standards which determine the practices accepted in the market as these principles and standards, which are practiced by the individuals in making their decisions, are approved by the businessmen and Ethical Envi-ronment Organization. Therefore, it has become necessary for marketers to pay their atten-tion to these ethical standards of accepted behavior from different aspects like (Organiza-tion, Industry, Government, Consumers, Interest Groups, and All Individuals of the Society). Consequently, when the marketing activities deviate from these standards, it will cause disruption exchange process, dissatisfaction of consumersandlossofconfidence.

In order to understand the marketing ethics, it is necessary to distinguish between legal aspects and ethical aspects in the marketing decisions. Theethics reflects right relationofindividuals with each other and it deals with the moral of person, his values and his princi-pleswhilethelegalaspectsreflectthewrittenlaws to protect individuals from non-ethical practices. The following table (11-1) explains the classification of marketing decisionsbased on the relation between legal and ethical aspects:

The above table shows that there are four casesfortheclassificationofmarketingdeci-sions which can be summarized as follow:

• The marketing decisions may contain many ethical standards (such asassisting

• Emergence of environment conservation societies which criticized the organizations responsible for pollution. This created as sense in organizations which feel that the criticisms leveled against it have distorted its image.

5. Nature of Marketing Ethics

Like the concept of ethics, there are different definitions of concept of marketing ethicswhich are as following:

• Make sure the nature and background of ethical judgments, ethical standards and rules of behavior and conduct related to marketing decisions and ethical issues.

• Ethical judgments, standards and rules re-lated to the marketing stands.

• Principles and standards which determine the behavior accepted in the marketing as it is determined by the general people, interest groups, competitors and the orga-nizations itself.

• Method of implementation of ethical stan-dards in the decisions, behaviors and mar-keting organizations.

• The standards which control the behavior and actions of marketers in the light of eth-ical values which they enjoy.

• The ethical standards which guide and ori-ent the marketing decisions and activities.

Table No (11-1) Nature of Marketing Ethics

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in regard to specifying the type of product, offered service, type of advertisement, its content, specifying the distribution channels and the method to deal with consumers.

Since all managers and responsible author-ities of different administrative levels don’t have the knowledge of same standards and values, a set of guiding rules and stan-dards has been developed which cover all marketing areas and activities. Following are some such important standards:

• Acknowledgment of individual’s responsi-bility towards the community as whole and wherever the organization (he belongs to) operates.

• To pledge that the organization will pro-vide the goods and the services accurate-ly and properly.

• To pledge that the organization will pro-vide marketing knowledge which will con-tribute to better serves the community.

• To support the freedom of consumer in se-lection of goods, he needs, according to thespecifiedstandardforeachgoods.

• The individuals (personnel) pledge that they will accomplish their tasks careful-ly and in a way which will strengthen the competitiveness of the organization.

7. Ethical Approach in Marketing

This concept is considered as an extension to the social approach in the marketing but it is newer, broader and more inclusive than that. This trend came into existence in the beginning of nineties of last century as there were many organizations which had distanced themselves from the principles of good business practices. This harms the community interests in the long term. It is known that the ethical approval of marketing focuses on following issues:

• Social and ethical responsibility of marketing.

• Behavior of marketers and their ethics.

• Accountability of stakeholders in the orga-nization.

consumers choose appropriate product) but may deviate from legalities for exam-ple, the marketers may adhere to the pric-esspecifiedalreadybytheGovernmentorthe Organization itself.

• The marketing decisions may contain eth-ical and marketing aspects both at the same time such as (marketers are com-mitted to the prices and instructions com-pletely in addition to the ethical aspect.

• The marketing decisions may come quite the opposite and may not be committed to the ethical standards and principles such as (marketers are manipulating with the expiry date of a particular production and are not committed to the rules which forbid to do such illegal acts in order to protect the community).

• The marketing decisions may contain many legal aspects for various reasons, for ex-ample, the fear of losing the job but there is weakness in implementing the ethical standards and that is because of lack of full knowledge of these standards (for exam-ple, marketers don’t inform the consumers about the improvement which occurred to the product by the organization and conse-quently the consumers think that this is a new product in the market while it is the same old product with some minor improvement.

6. Ethical Standards in Marketing

If the community and society judges that the marketing activities carried out by an orga-nization are wrong or unethical, it will cause negative results which will affect the capacity of organization to achieve its objectives. Also, if the organization is carrying out its marketing activities unethically, it will lose great rates of sales and the consumers will refuse to deal with such organization in the future as well as it will expose the organization to the legal responsibility. Therefore, the ethics is neces-sary in a marketing activity and this requires distinguishing between what is right and what is wrong, what is good and what is bad, what is moral and what is immoral, in addition to identifying the values and ethical principles which can be a guide for the organization

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work for the profession of marketing. This code can be defined as written standardsof behavior of any person involved in the marketing organization. This includes several topics which can be summarized as follow:

9.1. First: Responsibilities of the Marketer:

All works of the marketer must adopt following:

• Avoid the works which can harm any person.

• Work with sincerity to improve professional, ethical and marketing standards.

• Accurate application of aspects of knowl-edge, training and gained experience re-lated to the marketing activity.

• Adhere to the code of conduct of market-ing profession.

9.2. Second: Honesty and Equity:

Marketing responsible must support and show the transparency, honesty and equity during their practices of marketing profession and that is through:

• Honesty and integrity in the service of cus-tomers, workers, distributors and general people relevant to the marketing profession.

• While making an agreement, it must ex-plain the rights and responsibilities of each party concerned with marketing activity.

9.3. Third: Rights and Obligations of Parties of Marketing Exchange Process:

Bothe parties concerned with the exchange in marketing activity should be able to do following:

• The offered products and services should be safe and suitable for its purpose.

• The marketing communication for the products and the services should be very clear and should not be misleading.

• Each party must bear its obligations which were agreed upon in the exchange agreement.

8. Ethical Problems in Marketing

The marketing managers strive in different ways to practice the ethics of marketing in all activities which are carried out by different marketing administrations with the aim to create positive impact and improve the efficiency of marketing activity. Marketersface many ethical problems with regard to their performance.Some aspects of these bad marketing ethics can be summarized as follow:

• Cheating and deception of consumers by producer and marketer.

• Non-compliance with the profit marginwhichisspecifiedthroughmediators.

• Rising prices in some seasons and decreasing itinotherseasonsinanunjustifiedmanner.

• Non-compliance to present the detailed data and the facts related to the products and the services which are marketed partic-ularly when advertising for these products.

• The absence of government’s role in get-ting rid of fraud,cheating and counterfeit-ing of some products without license.

• The producers are not committed to the conditions of production, industrial safety of its products and the risks & negative ef-fects.

From the above, we can conclude that there is no science which has no problem when applied and that the marketing administra-tion, likes other administrations, faces some problems and challenges. One of its prob-lems is related to the concept of marketing ethics, how to comprehend it and how it is implemented by those, who are carrying out marketing activities, during their business practices.

9. Ethical Marketing Charter [Code of conduct for Marketers]

In regard to the ethical charter of marketing activity, the American Marketing Association has developed a code or an ethical frame-

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4. In the area of pricing:

a. Don’t specify a fixedprice for thegoodswiththeaimtomaximizetheprofits.

b. Don’t apply and exercise the methods of illegal pricing which harms the consumer.

c. Reveal all the costs of goods with transpar-ency and clarity.

5. In the area of marketing research:

• There should be no fundraising under the cover of marketing researches.

• Preserve the unit of researches by avoid-ing facts distortion or deletion of some in-formation or data related to the market-ing research.

• There should be equity and fairness with all external agents.

6. Organizational Relations:

The marketers should know that their behav-iors will affect other employees of the orga-nization. Therefore, they must not demand or encourage others to do an unethical work and they must do following:

• Maintaintheconfidentialityofinformation.

• Fulfilltheirresponsibilities(mentionedintheagreements)atthespecifiedtime.

• Refrain from stealing the efforts of others without the consent of employer.

• Interest of work must take priority over your personal interest.

10. Understanding Ethical Marketing Behavior

In order to understand the ethical marketing behavior, it is necessary to point out that the organizations are striving very seriously to re-frain themselves from the unethical behavior to continue their businesses. The following is a set of fundamental factors which specify the general framework to understand the ethical behavior in marketing:

• Find appropriate ways for fair arrangement and look into the complaints related to the procurements.

9.3.1. Standards in the Code of Marketing Ethics

There are some standards in the code of marketing ethics which must be followed by the concerned persons (marketing activity) andthatisinthefieldsrelatedtothemarketingactivities. These are as following:

1. In the area of developing products and its management:

• Reveal all the risks that can accompany the marketing of the product.

• Indication to what all can affect product performance.

• Indication to the effects of additional cost ( if any).

2. In the area of promotion:

• Avoid the advertising about the deceptive or fake products which can cheat the con-sumer.

• Avoid excessive pressure on the customer or use of deceptive selling tactic.

• Avoid excessive promotion which uses deceptive and cheating tactics and which causes illegal and unfair compe-tition.

3. In the area of distribution:

• Don’t exploit the lack of supply of the prod-uct in the markets with the aim to raise the prices and exploit the consumer.

• Don’t use coercion or compulsion in mar-keting channels.

• Don’t exercise your influence on the de-cisions of mediators regarding freedom of product distribution.

• There should be no discrimination between the mediators of one category.

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fore, all marketing organizations make efforts to achieve “marketing citizenship” which means that the marketing management is committed to the social and ethical respon-sibility through combining the following four interests:

• Economic Aspect: It is represented in earn-ingtheprofits,maximizingrevenuesoftheinvestment for stakeholders, securing the suitable job for all workers within an appro-priate work environment and providing job opportunity for all individuals of the society.

• Legal Aspect: It is represented in abiding of marketing managements/administrations by the rules, regulations, laws and systems and ensuring that it adhere to the behav-ioracceptedofficiallyandsociallyaswellas its outputs don’t harm the community.

• Moral Aspect: It is adherence to the princi-ples and moral standards which determine the behavior accepted in the community from the point of views of stakeholders.

• Human Aspect: It is represented in achiev-ing the prosperity for the individuals of the society and contribution to solve the hu-man, social and ethical issues.

12. Elements of Social and Ethical Responsibility in Marketing

It contains a set of standards and principles which determine the behavior accepted in the organization from the point of views of businessmen.

The elements of social and ethical responsi-bilityinmarketingcanbespecifiedasfollow:

• Marketing Environment: The marketing en-vironment is defined as all power existedinside the organization and outside where it does its businesses. Also, it affects the marketing power of the organization and the effectiveness of the management in taking successful decisions in regard to the building and developing successful re-lations with the market. Undoubtedly, the marketing managers face ethical prob-lems emerge from the pressure arising from marketing environment.

• Personal Ethical Philosophy: It is a set of principles which determine the right direc-tion or ethical direction which all employ-ees should follow in the marketing field.There are sources for this philosophy in-cluding (family, social groups, educational utilities etc.) which undoubtedly affect the ethical philosophy of person.

• Organizational Factors: It is a set of ethical standards which represent the interaction between the culture of organization and its organizational structure through the or-ganizational relations existed between the members of the organization. These fac-tors itself affect the ethical behavior of the organization.

11. Social and Ethical Responsibility in Marketing

In regard to this responsibility, there are differ-ences in views regarding concept of social and ethical responsibility in the marketing and that is because flourishing in the social andethical activities related to the existence of a healthy society which can help to improve these activities for the common good. There-

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Table No (11-2) Elements of Social and Ethical Responsibility in the Marketing

Element The management should realize the social and ethical role towards:Owners -Earningmaximumpossiblebenefit.

- Maximizing the value of share and organization as whole.- Creating and maintaining healthy image of the organization.- Protection of Organization’s assets.- Increasing sales volume.

Workers -Attractive salaries and wages.- Opportunities for Career Advancement. - Continuous training and development. - Job Equity.- Appropriate Working Conditions.- Health Care.- Job Privileges.

Consumers (Customers) - Best Quality Products. - Appropriate Prices.- Easy Access to the Goods/Items.- Real Advertising.- Products are safe while using.- Instructions about the product (item).

Competitors - High and fair competition. - True Information.- Don’t attract the employees of other organizations in an unfair manner. - Adherence to the rules of competition.

Suppliers - Continue supplying.- Fair and Accepted Prices. - Payment of Financial Obligations.- Sincerity in Dealing.- Participation in Dealing.

Community - Contribution to building the infrastructure. - Provide and create appropriate work opportunity. - Support the community activities.- Respect of customs and traditions. - Credibility in dealing with social and ethical issues.- Employment of people of special needs.- Provide correct and complete information to the individuals of the society/community.

Environment - Reduce air, water and soil pollution. - Optimal use of resources.- Expanding the green areas. - Don’t present the harmful products. - Development of resources and its maintenance.

Government - Adherence to the rules, regulations and instructions issued by the Government. - Payment of Financial and Tax Obligations. - Contribution to support the research and development activities. - Contribution to solve the social problems such as unemployment etc. - Provide assistance in training and rehabilitation of workers.

Pressure Groups - Good dealing with the consumer protection associations. - Respect the activities of “Environmental Protection Organizations”. - Respect the role Trade Unions and deal with them in appropriate manner.++- Deal sincerely with the Press/Media.

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1. Know the latest trend in marketing.

2. Analyze latest marketing trends with special reference to Kingdom of Saudi Arabia.

3. Look into evolving marketing practices and products.

New Trends in MarketingCHAPTER

12

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2. New Trends in the Concept of Marketing

The concept of marketing went through big and fundamental developments over the century, from the production concept to product concept to selling concept to marketing concept to societal concept. The developmentsinmarketingfieldisinparallelwith the economic developments happened in the local and international economies, and from consumer centric approach we have now moved to social centric approach wherein the marketing activities are directed towards not only satisfying the needs of its consumers but also taking care of the society and beyond that calling for taking care of humanity in general irrespective of coun-tries, religion, race etc. We are witnessing the global fortune companies like Microsoft, Facebook, Google and many other corpo-rates changing their inward looks to having an outward approach even involving general masses around the globe as contributors and active participants in improving and evolving new technologies and products.

We are now witnessing a paradigm change in the way marketers conceive and marketing is exercised, wherein we incorporate human rights, environmental sustainability, social responsibility, global diversity, green marketing, in marketing policies, practices and products.

3. New Developments in Strategies of Marketing

An effective marketing strategy formula-tion requires identifying the target market and piercing through the mind/brain of the prospect so that the prospect becomes a customer. For this marketing strategy to become effective, strategy formulation need to be perfectly in consonance with the dynamic and complex market and marketing environmental changes. At the present time, marketing strategy makers are facing a lot of challenges and hindrances which marketers must overcome for success and continuity of

1. Introduction to New Trends in Marketing

During last few years, the world has under-gone radical changes in terms of politics, society, economics, culture and technology that this world reality wouldn’t have been imagined few decades back and in this era we witness emergence of new global equations, multicultural work environment, cutting edge global competition, interna-tional acquisitions and mergers and the whole of planet earth becoming a global village.

Rapid technology revolution emerged in fields of communications, transportations,informationandexpansionof its fieldwhichled to high speed in gathering and storing the information. This helped to have “internation-alization of market” as no national or regional market remained but it merged in one global market.

These changes forced us to concentrate on innovation to cater to changing and emerging needs of global market and create marketing supra and infrastructure to plan and implement marketing strategies in consonance to this changing world. And due to this improvement and continuous momentum in several commercial, indus-trial, service and technological activities, the competitiveness is measured with capacity for innovation and creativity which is consis-tent with foreign markets’ requirements. This has opened door of growth and penetration in the international market in front of the busi-ness organizations. Therefore, the organiza-tions which are carrying out the advanced marketing activities can compete in the markets effectively and efficiently. This isreflected in the success of organizations ofdeveloped countries such as U.S.A, Germany and Japan etc.

So many local, regional and international changes have been witnessed which affected the marketing activity directly and indirectly. We will discuss together the new trends in the marketing environment.

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All the above strategies do have some accompanying risks like availability of exag-gerative information, transparency, non-con-fidentiality,internetfraud,hackingetc.

4. New Trends in Marketing with Special Emphasis to Kingdom of Saudi Arabia

In terms of customers, the organization (based on the modern concept of marketing which makes the customer a beginning point as well as the end of marketing process) should understand that the contemporary age is the age of consumption as the consumption itself has transferred to a value and the consumer started (even in the poor countries in the light of openness and access to information about the exiting and extravagant consump-tion patterns of advanced countries) to care about various types of consumption products and always want more and new products. So, the consumption is like sea water, the more you drink, the thirstier you become.

Saudi Arabia is fast becoming more envi-ronmentally friendly nation. With respect to environment the marketing strategy now is directed to serve the objective of protecting the environment and that is through exchange of products harmful for the envi-ronment with other products which are not harmful or less harmful. The contemporary scientific and technological developmentsdisclose everyday different harms of many products and the materials used in its manu-facturing on the one hand and possibility to use other products which are best environ-mentally friendly on the other hand. In terms of technology, the acceleration in achieve-ments of science and technology provides alternative which are best, cheap, effec-tive and providing more scare economic resources. This will speed up the obsolescence of old products and urge to exchange it or at least improve and update it technically or in shape.

Saudi Arabia is also witnessing increasingly shift toward E-Commerce. Globalization of the products and entering into international markets is not possible without shifting to

the organizations. The way that the product is marketed decide the success of strategies, policies, programs and plans whether in the area of management generally or in the areaofplanning,productionandfinancing.and whether the organization is commer-cial, industrial,serviceorit isnon-profitorga-nization. Appropriate strategies should be designed taking into account these circum-stances. Some of contemporary marketing strategy techniques include:

Remarketing in terms of reminding consumers who visited a store or site but did not make a purchase by displaying targeted advertise-ments in other stores or sites where consumers are likely to visit and could be done through using tools like, Google ads, ad rolls, Face-book ads etc.

Social media platform features like that of shares and tweets, likes and favorites inspires many consumers to positively change the way they evaluate and select products and brands.

Programmatic buying through the use of tools such as Rocket fuel, Sparc media etc. tries to identify which ad campaign, which geog-raphies, which market segments, when and whatinfluenceconsumers,helpsnarrowandfocustargetsthusincreasingpromotionaleffi-ciency and effectiveness.

Job to be done [JTBD] by your product framework tries to invade the souls of the consumer, tracking their activities to get to know what purpose they want to accomplish by doing what they are doing and aligning product to provide consumers the perfect solution.

Marketing strategy of conversion rate opti-mization technique uses data insights and feedbacks to create a three tier conversion funnel comprising of top of funnel wherein content of sites related to products, guides etc.generate trafficandfilter leads,middleof the funnel nurtures the leads through testi-monials, webinars etc. and bottom of the funnel acquires the customers through assess-ments and consultations.

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green marketing as a result of uncertainty about the feasibility of the latter in their devel-opment and the development of its business.

Kingdom of Saudi Arabiais all set to increase the non-oil sector income through increasing trend towards tourism and tourism marketing. The marketing in the tourism industry has dual importanceand significance from twobasic aspects: (1) the tourism marketing is a new concept which is based on following threepillars: It is directed to thebeneficiary(tourist), it depends on the satisfaction and fulfilling different needs, desires and tastesand it depends on the principle of integra-tion of workers’ efforts in tourism establish-ments. (2) It is related to the dual importance of marketing in the tourism industry as it is relevant to the nature of tourism industry. The tourism marketing takes care of “Social Marketing Orientation” because of its being the most important factor which controls the track, mechanisms and philosophies of tourism industry. Also, it takes care of displaying the social, environmental, behav-ioral and economical responsibilities of marketing. In fact, these responsibilities are pre-requisites for the success and growth of tourism industry. In addition, it is the core of service industry from the perspective of human and social activity. The mechanism of social marketing is the key to which has to be incorporated in marketing strategies to develop tourism industry.

It is known that the tourism industry has become an economic and social phenom-enon which deserves attention, study and analysis. Also, it occupies a distinguished position in the economic activities of most countries of the world in the 21st Century. Most of the latest statistics indicate that there is increase in the number of tourists at local, regional and international level and all stress the importance of this dynamic sector to support and improve the econo-mies of countries exporting and importing the tourism. Also, the final outcome of this vitalsector to improve the economies of countries exporting and importing the tourism depends ontheefficiencyandcapacityofmarketersin both tourism and hospitality sectors. It is

e-commerce particularly with the technology development which changes the methods of communication and reduces the time which the marketing process takes. E-commerce has made basic changes in the activity of organizations and its organizational structure and that is through creating the terms such as “Cyber Trade” and “Virtual Enterprises” which is the organization that doesn’t have physical existence but it works in Cyber Space through Internet. Naturally, such changes will have big and fundamental effects on dealing with this new pattern of organizations (organization-ally, structurally and in terms of marketing). It helps organizations to increase sales and reduce the costs of transactions.

E-commerce helps consumes to get informa-tion about the specifications of goods andenables them to compare very fast between the products of different companies around the world and purchase the items on Internet and pay the prices through the internet. If the purchased items are digital (books, consul-tations, songs, music, movies etc.), it can be delivered through the Internet.

Saudi Arabia is fast incorporating concept of “Green Marketing. The Green Marketing have good role in the development of the competitiveness of business organizations and of the country in general. And it is consid-ered one of the concepts of modern practice in the business environment, business organi-zations has started to adopt this concept in a move to keep up with changes in market trends, particularly with regard to the growing environmental awareness among the various parties that deal with these organizations of consumers and associations of environ-ment protection, governments and others which can affect the future of their activities. Perhaps the aim of business organizations is how to harness such practices to exploit the new opportunities that arise in the market and the pursuit of excellence and the devel-opment of competitive advantages in order to serve its general competitiveness. So we findsomebusinessorganizationshavebegunto reap the fruits of their competitiveness through green marketing practices and other companies remain reluctant to embrace

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viduals. This behavior requires from those who are working in the area of health marketing gathering information and data about the target market identify actual needs, specify type of health services and the medicines needed by each target market.

The health marketing is of critical importance because of advantages and benefits of itsuse, the most vital of which is the improve-mentofefficiencyofmarketingactivitiesandthat through focusing on rational manage-ment pattern and coordination in order to improve the product, pricing, distribution and advertisement. The marketing equips themanagementwitha scientificentrancewhichmakes itexecutehighest levelofeffi-ciency and effectiveness in marketing activ-ities in addition to continuous coordination between them. Also, it makes the health organizations more sensitive towards needs of health community through its integration with the public. Thus, the process of taking views of patients and measure the degree of their satisfaction is the core of marketing function as well as it is considered as the key element for the process of feedback between the patients and health organizations.

Also, it is playing important role in improving the image of health organization and get it have a good position in the health market. The concept of marketing in the work of health organizations get it directed completely with all its ideas towards all individuals and search for the things which help those organizations to provide best services for needy. Also, it contributes to enable the management of health organizations through creating systems which are more effective in providing the services and making the appropriate pricing policy for its offered health services. The health marketing has a role to improve health awareness and medical education among beneficiariesfromthehealthservices.Atthesame time, it works to complete the processes of exchange between the patients and health organization through administrating the process of sale and purchase of services.

It is known that the health marketing stands on a set of bases such as making contacts

known also that the marketing is the main tool in improving the tourism by offering attractive tourism product to local, regional and inter-national markets.

Kingdom of Saudi Arabia is also seeing increased usage of social marketing. Social marketing is a process to use commercial marketing techniques to impact on general opinion and it aims to change people’s behavior. It is known that the techniques of social marketing are the same techniques of marketing which are used by the commer-cial companies for marketing of its products through targeting the consumers with the aim to make them purchase these items. The social marketing is a typical process to improve the program of marketing of items but for a purpose which is more human. The basic key which distinguishes the social marketing is objective and goals expected fromthisas thebenefit sought toachieve isfor the welfare of individual and society. Also, there are a number of bodies which depend on the social marketing such as Ministry of Health, Ministry of Environment, Medical Associations, Academic Associations, Primary Health Care Centers, Associations of Civil Society, Universities, Social Service Agen-cies and Private Institutions. Also, it contains several topics such as diseases, epidemics, family planning, reproductive health, nutri-tion, respiratory diseases, asthma, depression, anxiety, fear, prevention of drug addiction, environmental subjects, smoking, volun-teering, physical activity and child abuse.

Kingdom of Saudi Arabia giving emphasis on Health Marketing: Many specialists think that one of the causes behind decreasing level of health services in different countries is the absence of “health marketing” which tries achieve good health through green environ-ment and precautionary steps to preserve the healthy environment by creating aware-ness among individuals and motivating them to be away from the consumptions which are harmful to environment. Health marketing is about activities and events which aim to make contact with target people, get their information and identify their needs with the aim to create a healthy behavior among indi-

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understand consumers more accurately and marketingbeingmoreresponsiveflexibleandefficient. Marketing still would depend onneedfulfillmentthroughproductinnovations,products which are really useful to market, product which makes life more comfortable and future more bright. In this marketing technology era, MARTECH, we witness the rise of marketing technologists. We further see a march a “Smart era” to a “Wise era” of marketing practices. Following represents of some of the interesting future products which could completely transform marketing envi-ronment and practices.

5.1. Exoskeleton:

Imagine the depth of Marketing, from Marketing Calcium tablets to marketing an exoskeleton. Exoskeleton is an external skeleton that worn outside body which not only gives protec-tion and support to body but exponentially increase the strength of the body. For a normal person to lift a mass of 30 kg is not easy but with exoskeleton we can easily lift 100 kg of weight”. We are now seeing even countries are devel-oping exoskeleton armies, people with incur-able disabilities also living a normal life with help of exoskeletons, used for rescue operations etc. We are seeing new kind of equipment multi-plying energy exponentially and the marketing systems should so be aligned to accommodate these types of future gadgets. Exoskeletons are to hit the market very soon.

5.2. Space Tourism

We have been spending our vacations in some beautiful cities, locations or countries but now going beyond this kind of tourism we are target space as a tourist destination. Space tourism is going to become a reality and already a private company “Virgin Galactic”hasannounced thefirstcommer-cial flight to space. People have alreadyoverbooked for this space travel and are undergoing training in California though the firstspaceportearthwouldbe inMexico.Anumber of private companies such as XCOR Aerospace also are now making up sub-or-bital space tourism industry.

withthefuturebeneficiariesofhealthservice,getting information which form the corner-stone in identifying and directing the activi-ties of health marketing and that is through conducting researches, studies and neces-sary surveys to specify the activities which help the workers to launch successful health campaigns.Also,thecustomerorbeneficiaryof health service is the axis of activities in the health marketing as the concerned persons make every effort to motivate them and teach them that how they can get health services and that is through creating health awareness. The strategy of health marketing is planned which focus on creating voluntary behavior among individuals who are making target market using marketing strategies and activities. Creating health awareness among individuals is not possible without successful promotional activities and extensive aware-ness campaigns which work to develop voluntary health behavior.

5. Evolving Marketing Practices and Products

As of today, when we try to glance through the window towards the future of marketing and marketing trends in terms of marketing innovation, we tend to see some interesting marketing facts and events, innovation with which we see a different futuristic world where we see so much technological devel-opments, consumer becoming technology reliant rather than people reliant. Digital marketing techniques, marketing automa-tion, content marketing, predictive analytics, mobile marketing, social media marketing, advocate marketing, digital markers such as cloud connectors, application program inter-faces etc., world is going to witness so many digital application softwares and these to become successful and reliant companies have to protect their market from phishing and spoofing by using domain based messageauthentication, reporting and conformance standards. Coming times may witness much more customization whether it be product or message customization. When we talk about all these latest trends, lets simply say theseareallways,meansand influence to

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domestic and professional fields. A large number of marketers around the world are offering advanced Humanoid Robots, which could help people with domestic work such as tidying up the house, assist in kitchen, play music, dance, sing, guide visi-tors in Museum. Humanoid Robots can also assist physicians with surgical treatments. Robotics industry is currently dominated by Japan, Korea, USA, United Kingdom etc. Saudi Arabia has gone up to the extent of giving citizenship to one of the robots called “Sophia”. It is now possible to purchase some Robots straight from Amazon in Japan. Coming times may see reduced costs and high applicability of robotics even for daily household purposes and may be they become an indispens-able companion and as times progress intelligent self-learning robots may appear which may even pose threat for humanity, who knows?

Many other new products are coming to the marketincludingthatofflyingcars,commer-cial driverless cabs, ultra hypersonic aircrafts, death insurance,missionmars one, floatingcities, 5-G wireless technologies etc. to name a few which would radically change the way people live and the way marketing is done.

Apart from the above developments man has already began thinking of how future of the world would be a century later. According to, “Smart Things Future Living” report by Samsung, foresee super skyscrapers, underwater cities (Bubble cities), downloadable meals, 3D Printed houses could become reality in a century’s time. In addition to the these, group of academi-cians (including lecturers from University of Westminster), Space Scientists, Futurologists, Architects, Industrialists and urbanists also foresee human colonization of Moon and Mars,commercialflightstodifferentplanets,virtual meetings through holographics etc. We are transiting from an era of “Smart Prod-ucts” to an era of “Wise Products”.All these and further are ushering us to a seismic shift towards possibly a better life and all these are just the BEGINNING……

5.3. Virtual Reality

Virtual Reality is soon to feast consumer market as a shopper-marketing research tool. Virtual reality is shortly to be adopted by Business to Business marketers and those offering High-involvement products online. Virtual reality will hit the mainstream with it being offered with cell-phone contracts. Busi-nesses are now planning to conduct all there meetings in VR conditions where though it may look as persons are there but people not being really present. Retailers planning to sell products through virtual reality for example garments, in VR the retailer would be able to show how you would look like wearing the particular garment etc. VR gives a real look, a make believe demonstration of the product without really experiencing it. VR would be game changer beyond imagination.

5.4. Three Dimensional [3D] Bio printing

It is in the evolutionary stage of develop-ment. Though 3D printing has already taken commercial shape with 3D printers available in retails but right now the cartridge used is the three primary colored plastic or nylon or some companies even use some other mate-rial. Using these 3D printer, shapes of any types can be printed. Now man is trying to make use of this 3D printer for medical appli-cations including bio regenerative purposes. Man is trying to print live tissues and organs for transplantation purposes by using living tissues as sources of cartridge. 3D bio printing involves many complexities and technical challenges including compatibilities, sensitiv-ities etc. But the world could witness an alto-gether different medical solutions in future using 3D bio printing technologies. Though just in the its evolutionary stage but marketers such as “Organovo” is already into offering the technology which could print live human organs such as liver and tissues.

5.5. Robotics and artificial intelligence

Recent advance in robotic and artificial intelligencetechnology enabled applica-tions of roboticsand artificial intelligence in

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• Mohiuddin Al-Azhari,(1998), Effective Mar-keting (Principles and Planning), College of Commerce, Cairo University, Egypt.

• Morgan, N., Clark, B., and Gooner, R. (2002). “Marketing productivity, Market-ing audits and system for marketing per-formance assessment”, Journal of Business Research. 55 (5): 363-376.

• N. Piercy & N. Morgan, (1991), Internal Mar-keting, The Missing Half of the Marketing Program, Long Range Planning, Vol. 24, NO.2, PP. 82-93.

• Nabilah Abbas, etal, Marketing,(2006), College of Commerce, Alexandria Uni-versity, Alikas for Information Technology, Al-Ibrahimiyah, Alexandria, Egypt.

• Naeem Abu Jumuah,(1999) Basics and Management of Marketing, Dubai, Dar- el-Qalam, Egypt.

• Nagle, T. and R.K. Holden(2006), The strate-gy and tactics of pricing: a guide to grow-ingmore profitably. (Upper Saddle River,NJ: Prentice Hall,).

• NajamAboudNajam (2006), Ethics of Man-agement and Business Responsibility in the Companies, Moassasah Al-Warraque for Publication and Distribution, Amman – Jordan.

• NajamAboudNajam, (2006), Management Ethics and Business Responsibility in the Companies, First Edition, Oman, Moassasa-hAlwarraque For Publication and Distribu-tion, PP. 201.

• NajiMoallah,RaefTaufique,(2005)RulesofMarketing, Amman, Dar-e-Wael for Publi-cation.

• Mahmoud Al-Sumaidai, RadinahYou-suf,(2001), Quantitative Methods in Market-ing, Amman, Dar-el-Manahij..

• Mahmoud Bazarah,(2007), Marketing Management, Cairo University, Egypt .

• Man Mitchell, ‘Changing channels’,(1995), Marketing Business, pp. 10-13.Alexander Jarrett, .

• Martin Wroe, ‘Ministries, missions and mar-kets’(1993), Marketing , Business, pp. 8-11.

• Martin Wroe,(1993), ‘Ministries, missions and markets’. Marketing Business, pp. 8-11.

• Matthew A. Gana, (2008) ,principles of Marketing, National Open University of Ni-geria, Headquarters 14/16 Ahmadu Bello Way,Victoria Island ,Lagos

• Michael Porter, (1985), Competitive Ad-vantage (New York: Free Press,, pp. 4-8, 234-6.

• Michael R, Cuinkota and llkka A. Ronka-incn, (1990), International Marketing, 2nd cdn (Chicago, IL: Dryden,), p. 679.

• Mohammad Al-Sairafi,(2007) ,Social Re-sponsibility of Administration, First Edition, Dar-el-Wafa for Publication and Distribu-tion, Alexandria, Egypt, pp. 17.

• Mohammad Farid Al-Sahan, Mohammad Ismail Al-Syed,(2000), Marketing, Al-Dar-el-Jamiah, Alexandria, Egypt.

• Mohammad Ibrahim,(2002) Marketing Man-agement,Cairo,MenoufiaUniversity,Egypt.

• Mohammad Jassem Al-Sumaidi, (2000.), In-troduction to Advanced Marketing, Daar-Zahran, Jordan.

• Mohammad Mohammad Ibrahim, etal (2007) Marketing Management, Ainshams Library, Egypt .

• Mohammad Saeed Abdul Fattah, (1990), Marketing Management, Al-Dar-el-Jamiah for publication, Beirut,

• Mohammad Saeed Abdul Fattah, (1991) ,Marketing Management, Al-Dar-el-Jami-ah for publication, Beirut.

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• Rein Rijkens, European Advertising Strate-gies (London: Casseil, 1992), pp. 121-32.

• Rizkalla, Aida N., (2000), “A Pardigm Shift from Traditional to Interactive Marketing”, The Sec-ondAnnualScientificConference,April.

• Rizqullah, AayedahNakhlah, (2000) ,In-ternational E-Marketing: Challenges and Review, Scientific Committee for BusinessAdministration, Second Annual ScientificConference, New Trends in Business Ad-ministration, 6-7 April.

• Rohm, Alexander W. and Gunther Pernul, (2000), “CDPS: A Model and Infrastructure For Secure and Fair Electronic Markets”, Decision Support Systems, 29, 343-355.

• Rom, Markin, Marketing (2003), Strategy and Management, New York, John Willey & Sons.

• Sharma, Arun, (2000), “Trends in Interna-tional Business – to Business Marketing”, In-dustrial Marketing Management, 31, 77-84.

• Stern, L.W. and A.I.El-Ansary (1996), Market-ing Channels, 5th ed., NJ: Prentice-Hall.

• Taken from Jens Maier and John Saunders, (1990), “The implementation of segmenta-tion in sales management’.

• TalatAbdulhamid,(2005), Effective Market-ing, Al-Riyadh, Al-Shaqri Bookstore, 2005.

• TarekAlkhteeb, Saji George,(2012), Mar-keting Research - concepts & Application - LAMBERT Academic Publishing, available on: http://www.amazon.com/Market-ing-Research-Applications-Tarek-Kha-teeb/dp/3659226793

• Theodore Levitt, (1970), The Morality of Advertising, Harvard Business Review, July-August 1970, PP. 84-92.

• Theodore Levitt,(1960), “Marketing Myo-pia” Harvard Business Review, July – Au-gust, 1960 pp. 45-56.

• Thomas E. Caruso, ‘Kotler(1992), future mar-keters will focus on customer data base to compete globally”, Marketing JVetos 27., pp. 21-2.

• NourNael, An Study about Marketing Com-munication,(2010), Arab Academy in Den-mark, College of Graduate Studies, Sec-ond Chapter, Gaza, Palestine.

• P.O. Walters. (1997), “Global market seg-mentation and challenges’, Journal of Marketing Management, 13, 1-3, 39. pp. 163-80.

• Pasahow, Ed (2000), “How can you im-prove the Odds for successful ERP imple-mentation”, Digital Systems Report, Spring, PP. 24-26.

• Perrault, W.D. and E.J. CcCarthy (2002), Basic Marketing, McGraw- Hill, PP. 305-332.

• Peter, J.P. and J.C. Olson(2010), Consum-er behavior and marketing strategy. (New York: McGraw-Hill,) and (McGraw-Hill,) ninth edition [ISBN 9780071267816].

• Peter. F. Drawker (1995), Management, Translated by Mohammad Abdulkarim, Al-Dar-el-Duwaliah for Publication and Distribution, First Chapter, PP. 453 and on-wards.

• Philip K, (2011), Principles of Marketing, Book is Available on following link: www.amazon.com/Principles-Marketing

• Philip Kolter& Gary Arnstrong, (1990), Mar-keting: An Introduction, Prentic Hall Inc., Englewood Cliffs, N.J. Ch. 8 PP. 200-223.

• Philip Kolter,(1991), Marketing Manage-ment: Analysis, Planning, Implementation and Control, Prentic Hall Inc., Englewood Cliffs, N.J, pp. 12-25.

• Philip R. Cateora, (1990), International Marketing, 7th edn (Homewood, 1L: Irwin,), p. 540; see also 8. Tamer

• practice Exams, (2015) principles of Mar-keting, UExcel, Study, Learn, Succeed, the most current contents Guides are Available at:http://www.excelsior.edu/ex-am-content-guides

• Rao, Bharat, (1999), “The Internet and The Revolution in Distribution: A Cross-Industry Examination”, Technology in Society, 21, 287-306.

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Essential journal articles• Anjos, M., R.C.H. Cheng and C.S.M. Cur-

rie ‘Optimal pricing policies for perishable products’, European Journal of Operation-al Research 166 2005, pp.246–54.

• Beane, T.P. and D.M. Ennis ‘Market seg-mentation: a review’, European Journal of Marketing 21(5) 1987, pp.20–42.

• Buil I. L. de Chernatony and E. Martinez ‘Examining the role of advertising and sales promotions in brand equity creation’, Journal of Business Research 66(1) 2013, pp.115–22. 4. Chakravorti, B. ‘Stakeholder marketing 2.0’, Journal of Public Policy & Marketing 29(1) 2010, pp.97–102.

• Dibb, S. ‘Market segmentation: strategies for success’, Marketing Intelligence and Planning 16(7) 1998, pp.394–406.

• Kyoung-Nan, K. and D.W. Schumann ‘Con-sumers’ expectations on value percep-tion and purchase intention’, Advances in Consumer Research 28 2006, pp.316–22.

• Philip Kolter,(1973), The Major Tasks of Mar-keting Management, Journal of Market-ing,, PP. 42-49.

• Robert L. Gluekman, ‘A consumer ap-proach to branded, wines’, European Journal nf Marketing, 24, 4 (1990), pp. 27-46.

Websites:

http://www.ofv.sa.gov.au/data/assets/pdf_file/0007/8458/introduction-to-marketing- presentation-notes.pdf

• Thomas E. Caruso,(1992), ‘Kotler: future marketers will focus on customer data base to compete globally”, Marketing JVetos 27. (8 June 1992), pp. 21-2.

• Trott, P.(2012), Innovation manage-ment and new product development. (Harlow: Pearson,) fifth edition [ISBN9780273736561].

• W. Taylor,(1991), ‘The lojjic of global busi-ness’,, Harvard Business, Review, pp. 90-105. 20.

• Webb, Kevinl., (2002), “Managing Chan-nels of Distribution In the Age of Electronic Commerce”, Industrial Marketing Man-agement, 31, 95-102.

• Westland, J. Christopher, (2002) “Transac-tion Risk In Electronic Commerce”, Deci-sion Support Systems, 33,PP, 87 – 103.

• William C. Nickels, (1987).“Marketing Princi-ples”, Prentice-Hall Inc., Englewood Cliffs, N.J. 1978 PP. 56-64.

• William Satantonetal,(1991), Fundamen-tals of Marketing, McGraw-Hill, Inc., 9th ed. 1991, ch. 5, pp. 110-126.

• Wilson, Berry. Translated by Dr. NevinG-harab (2002). New Trends in Marketing, Al-Daar Al-Duwaliah for Publication and Distribution, Cairo, Egypt .

• ZiyarahFaridFahmi,(2009), Functions of Business Organizations, Contemporary En-trance, Oman, Dar-el-yazoori-el-Ilmiyah for Publication and Distribution, p. 273.

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Index

A

Administrative Concept 123

Almarai 92

B

Business Mission 20

Business Strategic Marketing

Planning 20

C

Channel-Design Decisions 91

Classical Concept 123

Command criteria 93

competitive scopes 15

Concepts of Marketing 2

ConflictManagementTechniques 97

Core Concepts of Marketing 3

Cultural Factors 27

Culture 27

Customer retention 3

D

Declining Demand 10

demand management 9

Demographic Environment 9

Direct Marketing 112

DiversificationStrategy 20

Division Level Planning 15

E

Economic Environment 9

Elements of Promotional Mix 103

Ethical Marketing Charter 136

Exoskeleton 145

External Environment Analysis 21

F

Financial criteria 93

Formulating Corporate Mission 15

Formulating Goals 21

G

General Electric Model 18

General View Model 123

growth-share 16

H

haram 27

Hard Sell 119

Historical criteria 94

Holistic Concept 3

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O

Organize Promotion Activity 119

P

Planning New Businesses 19

Political-Legal Environment 9

Product Concept 2

Product Development 20

Production Concept 2

ProjectedProfitandlossStatement 24

Promotional Mix 103

Promotion Budget 116

Promotion Methods 119

Promotion Objectives 102

Public Relations 111

Pull Strategy 118

Push (Defense) Strategy 118

Q

Queuing time 92

R

Remodeling criteria 93

S

Sales Program Planning 109

Sales Promotion 110

Selling Concept 2

Social-Cultural Environment 9

Holy Quran 133

Horizontal Marketing Systems 95

Hybrid Marketing Systems 96

I

Implementation & Control 24

InfluencingConsumerbehaviour 26

Internal Environment Analysis 21

Irregular Demand 10

L

Latent Demand 9

M

Macro Environment

[Broad Environment] 9

Market Development 19

Marketing Channel 89

Marketing Concept 3

Marketing Ethics 127

Marketing management 9

Marketing Mix 11

marketing myopia 2

Market Penetration 19

Microenvironment [Task Environment] 7

Modern Promotion 120

N

Natural Environment 9

Negative Demand 9

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T

Tactical Objectives 102

Technological Environment 9

Tools of Public Relation 112

V

Vertical Marketing Systems (VMS) 95

Social Responsibility Concept 123

Soft Sell 119

Space Tourism 145

Strategic Business Units (SBUs) 15

Strategic Marketing Planning 14

Strategic Objectives 102

Strategy Formulation 21

Swot Analysis 20

Symbiotic terms 93

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Principles of Marketing - psau.edu.sa

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Transcript of Principles of Marketing - psau.edu.sa