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Sales and Promotion ofAgricultural Machineries
Part I
Introduction to Marketing
1.1.MarketingIntroduction
Many large and small organizations seek success. Major factors contribute to making a business
successful - strategy, dedicated employees, good information systems, excellent implementation.
However, today's successful companies at all levels have one thing in common - they are
strongly customer-focused and heavily committed to marketing. These companies share an
absolute dedication to sensing, serving and satisfying the needs of customers in well-defined
target markets. They motivate everyone in the organization to deliver high quality and superior
value for their customers, leading to high levels of customer satisfaction. These organizations
know that if they take care of their customers, market share and profits will follow.
Marketing, more than any other business function, deals with customers. Creating customer
value and satisfaction are at the very heart of modern marketing thinking and practice. Althoughwe will explore more detailed definitions of marketing later in this chapter, perhaps the simplest
definition is this one: Marketing is the delivery of customer satisfaction at a profit. The goal of
marketing is to attract new customers by promising superior value, and to keep current customers
by delivering satisfaction.
Many people think that only large companies operating in highly developed economies use
marketing, but some marketing is critical to the success of every organization, whether large or
small, domestic or global. In the business sector, marketing first spread most rapidly in consumer
packaged-goods companies, consumer durables companies and industrial equipment companies.
Within the
past few decades, however, consumer service firms, especially airline, insurance and financial
services companies, have also adopted modern marketing practices. Business groups such aslawyers, accountants, physicians and architects, too have begun to take an interest in marketing
and to advertise and to price their
services aggressively.
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Figure 1.1 Core marketing concepts
What is Marketing?
What does the term marketing mean? Marketing must be understood not in the old sense of
making a sale - 'selling' - but in the new sense of satisfying customer needs. Many people think
of marketing only as selling and advertising. And no wonder, for every day we are bombarded
with television commercials, newspaper ads, direct mail and sales calls. Someone is always
trying to sell us something. It seems that we cannot escape death, taxes or selling!
Therefore, you may be surprised to learn that selling and advertising are only the tip of the
marketing iceberg. Although they are important, they are only two of many marketing functions,
and often not the most important ones. If the marketer does a good job of identifying customer
needs, develops products that provide superior value, distributes and promotes them effectively,
these goods will sell very easily.
Peter Drucker, a leading management thinker, has put it this way: 'The aim of marketing is to
make selling superfluous. The aim is to know and understand the customer so well that the
product or service fits ... and sells itself. This does not mean that selling and advertising are
unimportant. Rather, it means that they are part of a larger marketing mix - a set of marketing
tools that work together to affect the marketplace.
The American Marketing Association offers the following formal definition: Marketing is an
organizational function and a set of processes for creating, communicating, and delivering
value to customers and for managing customer relationships in ways that benefit the
organization and its stake holders.
Coping with exchange processes calls for a considerable
amount of work and skill. Marketing management takes place when at least one party to a
potential exchange thinks about the means of achieving desired responses from other parties. We
see marketing management as the art and science of choosing target markets and getting,
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keeping, and growing customers through creating, delivering, and communicating superior
customer value.
Marketing can be defined as: a social and managerial process by which individuals and groups
obtain what they need and wantthrough creating and exchanging products and value with
others:''To explain this definition, we examine the following important terms:needs, wants and
demands of products;Value and satisfaction; exchange, transactions and relationships; andmarkets.Figure 1.1 shows that these core marketing concepts are linked, with each conceptbuilding on the one before it.
Marketing Core Concepts
Needs
States of felt deprivation, part of human makeup
Physical and social needs
Wants
The form needs take (e.g. food => hamburger)Shaped by culture and personality
Demands
When wants are backed by buying power
Products
Aproductis any offering that can satisfy a need or want, such as one of the 10 basic offerings of
goods, services, experiences, events, persons, places, properties, organizations, information, and
ideas.
Service: Any activity or benefitthat one party can offerto another which isessentially intangible
and does not result inownership of anything.
(Customer) Value: a ratio between what the customer gets and what he gives. The customer gets
benefits and assumes costs.Is difference between value gained by owning and using a product
and cost of obtaining the product.Value gained not necessarily monetarySimilarly cost of obtaining not necessarily monetary
Customers act on perceived value [and perceived cost]
Customer satisfaction: The extent to -which aproduct's perceivedperformance matches a
buyers expectations. If the product's performance falls short, of expectations, the buyer is
dissatisfied. If performance matches or exceeds expectations the buyer is satisfied, or delighted.
Quality: Is closely related to satisfaction
Narrow definition: no defects
Broad definition: ability to satisfy customer needs [circular definition!]Exchange: The act of obtaining a desired object from someone by offering something in return.
Obtaining a desired object from someone by offering something in return
Offerings could be money, product, service, ...Transaction: A trade between two parties that involves at least two things of value, agreed-upon
conditions, a time of agreement and a place of agreement.
A trade of values between two parties; marketing's unit of measurement!
Monetary transactions and barter transactions
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Relationship marketing: The process recreating, maintaining and enhancing strong, valuable
relationships with customers and other stakeholders. Relationship marketing aims to build long-
term mutually satisfying relations with key partiescustomers, suppliers, distributorsin order
to earn and retain their long-termpreference and business.
Marketing networkcompany and all its supporting stakeholders
Market
Economist's definitionPlace (virtual or physical) where buyers and sellers meetMarketMarketer's definitionThe set ofactual and potential buyers of a productThesellers of a product are considered as the industry
IndustryMarketer's definition
The sellers of a product
1.2. Marketing Management
Marketing management can be defined as the analysis, planning, implementation and control of
programmes designed to create, build and maintain beneficial exchanges with target buyers for
the purpose of achieving organizational objectives.
Thus, marketing management involves managing demand, which in turn involves managingcustomer relationships.
Most people think of marketing management as finding enough customers for the company's
current output, but this is too limited a view. The organization has a desired level of demand for
its products. At any point in time, there may be no demand, adequate demand, irregular demand
or too much demand, and marketing management must find ways to deal with these different
demand states. Marketing management is concerned not only with finding and increasing
demand, but also with changing or even reducing it.
Managing demand means managing customers. A company's demand comes from two groups:
new customers and repeat customers. Beyond designing strategics to attractnew customers and
create transactions with them, companies are now going all out to retain current customers and
build lasting customer relationships.Companies today are facing some new marketing realities. Changing demographics, a slow-
growth economy, more sophisticated competitors and overcapacity in many industries - all of
these factors mean that there are fewer new customers to go around. Many companies are now
fighting for shares of flat or fading markets. Thus, the costs of attracting new customers are
rising. In fact, it costs five times as much to attract a new customer as it does to keep a current
customer satisfied.
Attracting new customers remains an important marketing management task. However, the focus
today is shifting towards retaining current customers and building profitable, long-term
relationships with them. The key to customer retention is superior customer value and
satisfaction.
1.3. Consumer and Organizational Buying Behavior
1.3.1. Customers
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Figure 1.2. Types of customer market
The company must study its customer markets closely. Figure 1.2 shows six types of customer
market.
i. Consumer marketsconsist of individuals and households that buy goods and services forpersonal consumption.
ii. Business marketsbuy goods and services for further processing or for use in theirproduction process, whereas
iii.Reseller marketsbuy goods and services to resell at a profit.iv.Institutionalmarketsare made up of schools, hospitals, nursing homes, prisons and other
institutions that provide goods and services to people in their care.
v. Governmentmarketsare made up of government agencies that buy goods and services inorder to produce public services or transfer the goods and services to others who need
them.
vi.International marketsconsist of buyers in other countries, including consumers,producers, resellers and governments.
Each market type has special characteristics Chat call for careful study by the seller. At anypoint in time, the firm may deal with one or more customer markets: for example, Unilever
has to communicate detergent brand benefits to consumers as well as maintaining a dialogue
with retailers that stock and resell its branded products.
1.3.1. Consumer Buying Behavior
Consumer buying behavior: the buying behaviorof final consumers -individuals and
households "who buygoods and services forpersonal consumption.
Consumer market is a set of all the individuals andhouseholds who buy oracquire gvods and
services fire personalconsumption.
The central question for marketers is; how do consumers respond to various marketing stimulithat the company might use? The company that really understands how consumers will respond
to different product features, prices and advertising appeals has a great advantage over its
competitors. Therefore, companies and academies have researched heavily the relationship
between marketing stimuli and consumer response. Their starting point is the stimulus - response
model of buyer behavior. This shows that marketing and other stimuli enter the consumer's 'black
box1 and produce certain responses. Marketers must figure out what is in the buyer's black box.2
Marketing stimuli consist of the four Ps: product, price, place and promotion. Other stimuli
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include significant forces and events in the buyer's environment; economic, technological,
political and cultural. All these stimuli enter the buyer's black box, where they are turned into a
set of observable buyer responses product choice, brand choice, dealer choice, purchase timing
and purchase amount.
The marketer wants to understand how the stimuli are changed into responses inside the
consumer's black box, which has two parts. First, the buyer's characteristics influence how he orshe perceives and reacts to the stimuli.
Second, the buyer's decision process itself affects the buyer's behaviour. This chapter first looks
at buyer characteristics as they affect buying behaviour, and then examines the buyer decision
process. We will never know what exactly is in the black box or be able perfectly to predict
consumer behaviour, but the models can help us imderstand consumers, help us to ask the right
questions, and teach us how to influence them.
Figure 1.3Model of consumer behavior
Characteristics affecting consumer behavior
Cultural factors CultureMost basic cause of wants and behavior, largely learnedCultural influences on buying behavior
vary greatly
Cultural shiftse.g. shift to concern for health => new market opportunities
Subculture
Groups of people with shared value systems based on common life experiences and situationssuch as nationalities, religions, ractial groups, geographic location
Social class
Society's relative permanent and ordered divisionsMembers share similar values, interests,
and behavior
Class is defined by a combination of occupation, income, eduaction, wealth, and other
variablesSocial Factors
Groups
Membership groupsPerson belongs to, and has a direct influence on the person
Reference groupsServe as points of comparison in forming attitudes or behaviorDoes not
require membership in the group E.g. aspirational groupa group to which the person wants tobelong
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Opinion leadersPeople in a reference group who because of some characteristics exert
influence on others
Family-most important buying organization
Roles and statusRole = activities people are expected to perform according the the persons around themStatus = reflects the general esteem given to role by society
Personal factors
Age and life-cycle stageTastes in food, clothes, furniture etc are age related
OccupationBlue collar => more rugged clothes, white collar => more business suits
Economic situationBuying behavior affected by e.g. income/wealth and business cycle
Lifestyle
Activities (work, hobbies, shopping, sports, social events)
Interests (food, fashion, family recreation)
Opinions (about themselves, social issues, business, products), etc.Personality and self-conceptPersonality = unique psychologicla characteristics that lead to relatively consistentand lasting
responses to one's own environment
Self-concept = self-image = people's possessions contribute to and reflected their identities (weare what we have)
Psychological factors Motivation
Motive (drive) = need sufficiently pressing to direct the person to seek satisfaction
Drive = strong internal stimulus that calls for action
Motive = drive actualized towards a stimulus object
Cues = minor stimuli, determine where, when, and how persons responds
Beliefs and attitudes
Belief = descriptive thought that a person has about somethingcan be
Business Markets
The business market consists of all the organizations that buy goods and services to use in the
production of other products and services that are sold, rented or supplied to others. It also
includes retailing and wholesaling firms that acquire goods for the purpose of reselling or renting
them to others at a profit. The business buying process is the decision-making process by which
business buyers establish the need for purchased products and services, and identify, evaluate
and choose among alternative brands and suppliers.2 Companies that sell to other business
organizations must do their best to understand business markets and business buyer behaviour.
Characteristics of Business Markets
In some ways, business markets are similar to consumer markets. Roth involve people who
assume buying roles and make purchase decisions to satisfy needs. However, business markets
differ in many ways from consumer markets. The main differences are in market structure and
demand, the nature of the buying unit, and the types of decision and the decision process
involved.
Market Structure and Demand
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The business marketer normally deals with far fewer but far larger buyers than theconsumer marketer does.
Business markets are also more geographically concentrated. Further, business demand is derived demand - it ultimately derives from the demand for
consumer goods. Mercedes buys steel because consumers buy cars.
Many business markets have inelastic demand: that is, total demand for many businessproducts is not affected much by price changes, especially in the short run. Finally, business markets have morefluctuating demand. The demand for many business
goods and services tends to change more
Nature, of the Buying Unit
Compared with consumer purchases, a business purchase usually involves more buyers and a
more professional purchasing effort. Often, business buying is done by trained purchasing
agents, who spend their working lives learning how to buy well. The more complex the purchase,
the more likely that several people will participate in the decision-making process. Buying
committees made up of technical experts and top management are common in the buying of
primary goods. Therefore, business marketers must have well-trained salespeople to deal with
well-trained buyers.
Figure 7.2 A model of business buyer behavior
Model for buying behavior
The environmentMarketing stimuli
Product, price, place, promotionOther stimuli
Economic, technological, political, cultural, competetive
The buying organizationThe buying center = people participating in buying processBuying decision process
Influences from the rest of the organization
Buyer responses
Product or service choice
Supplier choice
Order quantities
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Delivery terms and times
Service terms
Payment
Major types of buying situations
i. Straight rebuybuyer reorders without modification, based on past satisfaction =>very few participants
ii. Modified rebuybuyer wants to modify product specifications, price, terms, orsuppliers => involves more participants
iii. New-taskfirst time purchase => the riskier and larger the purchase, the moreparticipants
Participants in the business buying process
Userswho will use the product or service
Influencershelp define specifications, e.g. technical personnel Buyersformal authority, major role in selecting and negotiating, influence
specifications slightly
Decidersformal or informal power to select or approve final suppliers; in routinebuying often same as buyers
Gatekeeperscontrol the flow of information between participants, e.g. purchasingagents have authority to prevent seller from seeing the buyer
Major challenge
Roles sometimes difficult to recognize
Highest rank not necessarily same as highest influence
1.3.1 Marketing mixes
Marketing Mix
Marketers use numerous tools to elicit the desired responses from their target markets. These
tools constitute a marketing mix: Marketing mix is the set of marketing tools that the firm uses
to pursue its marketing objectives in the target market. Ps of marketing: product, price, place,
and promotion.
Marketing-mix decisions must be made to influence the trade channels as well as the final
consumers. Typically, the firm can change its price, sales-force size, and advertising
expenditures in the short run. However, it can develop new products and modify its distribution
channels only in the long run. Thus, the firm typically makes fewer period-to-period marketing-
mix changes in the short run than the number of marketing- mix decision variables mightsuggest.
Robert Lauterborn suggested that the sellers four Ps correspond to the customers four Cs.
Four Ps Four Cs
Product Customer solution
Price Customer cost
Place Convenience
Promotion Communication
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Winning companies are those that meet customer needs economically and conveniently and with
effective communication.
1.1.1. Market Segmentation, Targeting and Positioning
Market segmentation
The traditional argument for mass marketing is that it creates the largest potentialmarket, which
leads to the lowest costs, which in turn can translate into eitherlower prices or higher margins.
However, many factors now make mass marketingmore because...Customers too scattered
Customers too varied in buying practicesCompanies vary in their ability to serve a segment
Firms are focusing on the buyers who have greater interest in the values they create best (rifle
approach in contrast to shotgun approach)Market segmentation means dividing a market into distinct groups of buyers with different
needs,characteristics or behaviours, who might require separate products or marketingmixes.
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The company identifies different ways to segment the market and developsprofiles of the
resulting market segments. Market targeting involves evaluatingeach market segment's
attractiveness and selecting one or more of the marketsegments to enter. Market positioning is
setting the competitive positioning forthe product and creating a detailed marketing mix. We
discuss each of these stepsin turn.
Markets consist of buyers, and buyers differ in one or more ways. They may differ in their wants,resources, locations, buying attitudes and buying practices. Through market segmentation,
companies divide large, heterogeneous markets into smaller segments that can be reached more
efficiently with products and services that match their unique needs. In this section, we discuss
seven important segmentation topics: levels of market segmentation, segmenting consumer
markets, segmenting business markets, segmenting international markets, multivariate
segmentation, developing market segments and requirements for effective segmentation.
Levels of segmentation
Mass marketing
Mass producing, distributing, and promoting the same product to all consumers Argument: largest potential market => lowest costs => low prices or high profits Nowadays problematic because of (a) splintering of consumer segments and (b)
proliferation of distribution channels and advertising media
Segment marketing
Broad segment, adapt offering to closely match the needs of the market
Benefitsmarket more efficiently, only consumers it can serve best, fine-tuneproducts/prices/programs, face fewer competitors
Niche marketing
Focus on subgroups within segments = Narrowly defined segment, or a sub segment of asegment
Normally only one or a few competitorsOpportunity for small companies Customers need to be willing to pay a price premium In todya's markets, niches are the norm
Segmentation Targeting positioning
3. Identify bases forsegmenting the
market
4. Develop profile ofresulting segments
5. Develop measures ofsegments
attractiveness
6. Select the targetsegment(s)
1.Develop positioning foreach target segment
2.Develop marketing mixfor each target
segment
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Micromarketing
Local marketingCities, neighborhoods, specific stores E.g. Citibank offers customized banking services to different neighborhoods
May have problemsreduce economies of scale, logistics problems, dilution of brandimage
Individual marketing = one-to-one or customized marketing, markets-of-one marketing Mass customizationmoden technology allows for efficient production of customized
products, e.g. Dell Computer
Market targeting
Evaluating market segments
Segment size and segment growth Right size and growth rate Structural factorscompetitors and substitutes Relative power of buyers and suppliers Note: largest size or growth not necessarily most desirablea small company might aim
for a segment with less absolute size or growth if it has less competitorsCompany objectives and resourcesCompany should have strengths that can provide basis for competing in the segment => offer
superior value and gain advantage over competitors
Selecting market segmentsTarget market = set of buyers who share common needs or characteristics that the companydecidesto serve
Market coverage strategies
Undifferentiated marketing = mass marketingFocus on what is common in all buyers, appeal to that Mass distribution, mass marketing, etc
Often difficult to compete with focused competitorsDifferentiated marketing
Target several segments and design separate offers for eachClaimdeveloping a stronger position within several segments creates more total sales than
undifferentiated marketing across all segments
Concentrated marketing
Firm goes after a large share of one or a few segments / niches
Shared marketing mix for all segments
Attractive when resources are limited
Choosing a coverage strategy is based on:
Company resourceslimited => concentrated Product variabilitylow => undifferentiated Product life cycle stage => undifferentiated in the beginning Market variability (how differentiated market?) - low => undifferentiated Competitors' marketing strategy => if competitors already using differentiated or
concentrated marketing, undifferentiated may be suicidal
Positioning
Product position = The way the product is defined by consumers on important attributes
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The place the product occupies in the consumers' minds relative to competingproducts
Consumers simplify their buying process by categorizing => positioningChoosing a positioning strategy
1) Identifying a set of possible competitive advantages to build on
2) Choosing the right competitive advantages3) Selecting an overall positioning strategy
The company must then communicate and deliver the chosen position to the market