Professional Documents
Culture Documents
UNIT -- I
1. Introduction
2. Learning Objectives
3. Marketing Management
3.1. Evolution of marketing management
3.2. The Role of Marketing
3.3. Marketing concepts
3.4. The Marketing Mix (The 4 P's Of Marketing)
3.5. Corporate Social Responsibility (CSR) and Ethics in Marketing
4. Have you understood type questions
5. Summary
6. Exercises
7. References
1. INTRODUCTION:
The apex body in United States of America for the Marketing functions,
American Marketing Association (AMA) defines marketing as “Marketing consists of
those activities involved in the flow of goods and services from the point of production to
the point of consumption". The AMA has since amended its definition to read as:
“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 stakeholders."
2. LEARNING OBJECTIVES:
3. MARKETING MANAGEMENT:
Within this societal perspective, then (1) the makers (2) what they are marketing
and (3) their potential markets all assume broad dimensions. The category of
marketers might include, in addition to business firms, such diverse social units
as (a) a political party trying to market its candidate to the public (b) the director
of an art museum providing new exhibits to generate greater attendance and
financial support (c) a labor union marketing its idea to members and to company
management; and (d) professors trying to make their courses interesting for
students.
Definition of Marketing
As you already know there are many definitions for marketing. Some definitions focus on
marketing as the process involved in satisfying the needs of a particular market, while
other definitions lean more toward defining marketing in terms of its most visible
functional areas, such as advertising and product development. There probably is no one
best way to define marketing, though whatever definition is used should have an
orientation that focuses on satisfying customers. Therefore, we will define marketing as
follows:
Marketing consists of the strategies and tactics used to identify, create and maintain
satisfying relationships with customers that result in value for both the customer and the
marketer.
Let's examine this definition in a little more detail by focusing on a few of the key terms.
Strategies and Tactics - Strategies are best explained as the direction the marketing effort
will take over some period of time, while tactics are actionable steps or decisions made in
order to follow the strategies established. For instance, if a strategy is to enter a new
market, the tactics may involve the marketing decisions made to carry this out.
Performing strategic and tactical planning activities in advance of taking action is
considered critical for long-term marketing success.
Identify - Arguably the most important marketing function involves efforts needed to
gain knowledge of customers, competitors, and markets. We will see throughout this
course material how marketing research is utilized in all decision areas.
Create - Competition forces marketers to be creative people. When marketers begin new
ventures, such as building a new company, it is often based around something that is new
(e.g., new product, new way to distribute a product, new advertising approach, etc.). But
once the new venture is launched innovation does not end. Competitive pressure is
continually felt by the marketer, who must respond by devising new strategies and tactics
that help the organization remain successful.
Maintain - Today's marketers work hard to insure their customers return to purchase from
them again. Long gone (see History below) are the days when success for a marketer was
measured simply in how many sales they made each day. Now, in most marketing
situations, marketing success is evaluated not only in terms of sales figures but also by
how long a marketer can retain good customers. Consequently, marketers' efforts to
attract customers does not end when a customer makes a purchase. It continues in various
ways for, hopefully, a long time after the initial purchase.
Value for Both Customer and Marketer - Value refers to the perception of benefits
received for what someone must give up. For customers value is most often measured by
how much they feel they are getting for their money, though the value one customer feels
she/he obtains may differ from the perception of value from another customer even
though they purchase the same product. On the other side of the transaction, the marketer
may measure value in terms of how much profit they are making for the marketing efforts
and resources expended. For a successful marketing effort to take place both the customer
and the marketer must feel they are receiving something worth while in return for the
efforts. Without a strong perception of value it is unlikely a strong relationship can be
built. Throughout this tutorial we will emphasize value and show ways in which the
marketer builds value into the solutions they offer.
In order to reach the goal of creating a relationship that holds value for customers
and for the organization, marketers use a diverse set that includes (but is not
limited to) making decisions regarding:
Additionally, options within the toolkit are affected by factors that are not
controlled by the marketer. These factors include economic conditions, legal
issues, technological developments, social/cultural changes, and many more.
While not controllable, these external factors must be monitored and dealt with
since these can potentially cause considerable harm to the organization. Ignoring
outside elements also can lead to missed opportunities in the market especially if
competitors are the first to take advantage of the opportunities. As part of the
strategic and tactical planning process discussed above it would be wise for
marketers to pay close attention to the environment outside the organization.
But starting in the 1950s, companies began to see that old ways of selling were
wearing thin with customers. As competition grew stiffer across most industries,
organizations looked to the buyer side of the transaction for ways to improve. What they
found was an emerging philosophy suggesting that the key factor in successful marketing
is to understanding the needs of customers. This now famous “marketing concept”
suggests marketing decisions should flow from first knowing the customer and what they
want. Only then should an organization initiate the process of developing and marketing
products and services. The marketing concept continues to be at the root of most
marketing efforts, though the concept does have its own problems (e.g., doesn’t help
much with marketing new technologies) a discussion of which is beyond the scope of this
tutorial. But overall marketers have learned they can no longer limit their marketing
effort to just getting customers to purchase more. They must have an in-depth
understanding of who their customers are and what they want.
Marketing is also the organizational business area that interacts most frequently
with the public and, consequently, what the public knows about an organization is
determined by their interactions with marketers. For example, customers may
believe a company is dynamic and creative based on its advertising message.
The production concept prevailed from the time of the industrial revolution until
the early 1920's. The production concept was the idea that a firm should focus on
those products that it could produce most efficiently and that the creation of a
supply of low-cost products would in and of itself creates the demand for the
products. The key questions that a firm would ask before producing a product
were:
At the time, the production concept worked fairly well because the goods that
were produced were largely those of basic necessity and there was a relatively
high level of unfulfilled demand. Virtually everything that could be produced was
sold easily by a sales team whose job it was simply to execute transactions at a
price determined by the cost of production. The production concept prevailed into
the late 1920's.
The term "marketing mix" became popularized after Neil H. Borden published his 1964
article, The Concept of the Marketing Mix. Borden began using the term in his teaching
in the late 1940's after James Culliton had described the marketing manager as a "mixer
of ingredients". The ingredients in Borden's marketing mix included product planning,
pricing, branding, distribution channels, personal selling, advertising, promotions,
packaging, display, servicing, physical handling, and fact finding and analysis. E. Jerome
McCarthy later grouped these ingredients into the four categories that today are known as
the 4 P's of marketing, depicted below:
Marketing decisions generally fall into the following four controllable categories:
• Product
• Price
• Place (distribution)
• Promotion
Product Price
Target
Market
Place Promotion
These four P's are the parameters that the marketing manager can control, subject to the
internal and external constraints of the marketing environment. The goal is to make
decisions that center the four P's on the customers in the target market in order to create
perceived value and generate a positive response.
Product/Service
• What does the customer want from the product/service? What needs does
it satisfy?
• What features does it have to meet these needs?
• Are there any features you’ve missed out?
• Are you including costly features that the customer won’t actually use?
• How and where will the customer use it?
• What does it look like? How will customers experience it?
• What size(s), color(s), and so on, should it be?
• What is it to be called?
• How is it branded?
• How is it differentiated versus your competitors?
• What is the most it can cost to provide, and still be sold sufficiently
profitably? (See also Price, below).
Place
Price
Promotion
• Where and when can you get across your marketing messages to your
target market?
• Will you reach your audience by advertising in the press, or on TV, or
radio, or on billboards? By using direct marketing mailshot? Through PR?
On the Internet?
• When is the best time to promote? Is there seasonality in the market? Are
there any wider environmental issues that suggest or dictate the timing of
your market launch, or the timing of subsequent promotions?
• How do your competitors do their promotions? And how does that
influence your choice of promotional activity?
The marketing mix framework was particularly useful in the early days of the marketing
concept when physical products represented a larger portion of the economy. Today, with
marketing more integrated into organizations and with a wider variety of products and
markets, some authors have attempted to extend its usefulness by proposing a fifth P,
such as packaging, people, process, etc. Today however, the marketing mix most
commonly remains based on the 4 P's. Despite its limitations and perhaps because of its
simplicity, the use of this framework remains strong and many marketing textbooks have
been organized around it.
A socially – responsible firm will care about customers, employees, suppliers, the
local community, society, and the environment. CSR can be described as an
approach by which a company:-
(a) Recognizes that its activities have a wide impact on the society and that
development
in society in turn supports the company to pursue its business successfully .
(b) Actively manages the economic, social, environmental and human rights.
An example of the first type of conflict is the tobacco industry. Cigarettes have for
many decades been a lucrative business. So, cigarette and tobacco marketing
have been for companies and good for the tobacco industry. Many thousands of
people around the world are employed in the tobacco industry. So, the world
economy has been somewhat dependent on cigarettes and tobacco. However,
cigarettes are harmful to society. There is documented proof that cigarette
smoking is harmful to health. This is an ethical conflict for cigarette marketers.
An example of the second type of conflict, when one’s personal values conflict
with the organizations occurs when a leader in the company seeks personal gain
(usually financial profit) from false advertising. “Cures” for fatal diseases are
one type of product that falls into this category of ethical conflict: In their greed to
make a profit, a marketer convinces those who may be dying from an incurable
disease to buy a product that may not be a cure, but which a desperately ill
person (or members of his or her family) may choose to purchase in an effort to
save the dying family member suffering. Promoting and marketing such products
violates rules of marketing ethics. Ethical dilemmas facing marketing
professionals today fall into one of three categories: tobacco and alcohol
promoting, consumer privacy, and green marketing. Standards for ethical
marketing guide business in efforts to do the right thing. Such standards have
four functions:
To help identify acceptable practices, foster internal control, avoids confusion,
and facilitates a basis for discussion.
Consumerism
To introduce any product in any size and style they wish into the
marketplace, so long as it is
not hazardous to personal health or safety or if it is hazardous, to
introduce it with the proper
warnings and controls
To price the product at any level they wish, provided there is no
discrimination among similar
classes of buyers
To spend any amount of money they wish to promote the product, so long
as the promotion is
not defined as unfair competition
To formulate any message they wish about the product provided that it is
misleading or
dishonest in content or execution
To introduce any buying – incentive schemes they wish
In contrast, here are buyers’ rights and power:
To refuse to buy a product that is offered to them
To except the product to be safe
To expect the product to essentially match how the seller represented it
To receive adequate information about the product
Marketing managers should help to determine which products are produced, and
which products are indirectly affecting the environment:
• The natural resources and materials used
• The amount of energy required in the production process
• The residuals (e.g., waste water) that result from production
• The consumption of resources and energy that is required to use products
(cars, air conditioners)
• The generation of pollutants (e.g., exhaust fumes) in using products
• The amount of packaging material that may have to be discarded.
(packaging comprises less than 14 percent of collectible solid waste, but
consumers often estimate its share of that waste at 40 to 80 percent)
The next important area the marketer need to know about what is the relevance
of Social Marketing in order to protect the environment and to improve the quality
of life and are concerned with issues that include conservation of natural
resources, reducing environmental pollution, protecting endangered species, and
control of land use. Many companies are finding that consumers are willing to
pay more for a green product. The last three decades have seen a progressive
increase in worldwide environmental consciousness. This has been driven by a
number of factors from increased media coverage to rising evidence of
environmental problems such as the depletion of the ozone layer, acidification of
rivers and forest degradation, global warming, the rise of pressure group activity,
tougher legislation and major industrial disasters. Concern has moved from the
local scale to a national and increasingly global scale.
The rate of environmental degradation has intensified. The nineteenth century
brought the first large scale pollution as companies geared themselves to
produce goods as fast as possible, with virtual disregard for human or
environmental well-being. Nations battled for industrial supremacy using raw
materials and creating pollution at a staggering rate. As countries became
economically stronger, competition also grew. More efficient production methods
were employed, and few companies, if any, gave a thought to the impact they
were having on their surroundings. With the increase in water pollution from the
chemical works, and air pollution from the iron and steel industry, towns and
cities began to pay the price for high industrial productivity.
Ass the 1980s progressed, it became increasingly clear that, although the
starkest predictions of resource depletion and population explosion had failed to
materialize, all was far from well with the planet. A number of published analyses
of the environment showed that according to a wide range of indicators, the
environment was coming under increasing stress. Concern among consumers
and the electorate began to mount, with the inevitable consequence being that
environmental issues moved from the fringes to the center of the business and
political agenda.
It is now widely accepted that societies, economies, and the businesses within
them need to find a more sustainable path to for future development. In the
business world the vocabulary of management was suddenly expanded by the
discussion of ‘green consumers’, ‘green markets’ and ‘green products’ and the
practice of ‘environmental’ or ‘green marketing’. For majority of the companies
improving environmental performance has, until recently, been a question of
legislative compliance and occasional reactions to external events and
pressures. It has only been companies in the front-line sectors such as oil,
chemicals, power and cars that have gone beyond a reactive and tactical
approach to green issues. However, by early 1990s a shift away from a
technical-compliance oriented approach towards a more proactive green strategy
orientation was noticed. Companies were increasingly pursuing competitive
advantage and product differentiation by increasing investment in environmental
marketing, green design and improving overall corporate eco-performance. In
addition to these externally motivated changes, the realization is dawning within
industry that sustainability will not be reached simply by demand-pull from the
market and compliance-push from the regulators. The changes that are needed
to safeguard the future of the environment and the economy must partly be
driven from the business community, which means they must proactively
integrate eco-performance into the strategies, systems and cultures of the
organization.
Eg: Toyota has become quite successful with their hybrid cars.
Reduce
Reuse and
Recycle.
Research based studies on green marketing are very scanty. Whatever studies
available are those carried out in the West. Zinkhan & Carlson (1995) in a study
titled ‘Green Advertising and the Reluctant Consumer’ analyses the advertiser’s
dilemma from different perspectives of consumers having negative attitudes
about business and negative impressions of the advertising industry. The nature
of green marketing is clarified by Kilbourne (1995) in ‘Green Advertising:
Salvation or Oxymoron’, demonstrating that the concept is far more complex than
the existing marketing literature suggests. Green is characterized in this study as
a two dimensional concept with political and human dimensions. Banerjee et al
(1995) in a study on multi dimensional analysis of environmental advertising
suggests that environmental appeals are becoming increasingly common in
advertising. The results of a content analysis designed to uncover the underlying
structure of green advertising are presented. A majority of advertisers in the
sample attempted to project a green corporate image rather than focusing on the
environmental benefits of their product or service. Most of the studies focus on
the communication aspect of green marketing and studies that cover the entire
gamut of green marketing are woefully lacking and more so studies conducted in
an Indian context.
In the early to mid 1960s created concern about the social responsibility of
businesses and their impact on the natural environment and the health and
welfare of the planet. This concern was heightened during the early 1970s in
response to Limits to Growth and resulted in the emergence of both the ‘societal
marketing concept’ and the ‘ecological marketing concept’. In response to the
new green challenge that emerged during the early 1980s, these early concepts
have amalgamated to create an environmental marketing concept. Green
marketing is thus a form of socio-ecological marketing whereby the goods and
services sold, and the marketing practices involved in their sale take into account
the environmental ramifications of society as a whole. The marketing process
essentially involves matching the controllable internal variables of the marketing
mix with the demands of the marketing environment. Environmental marketing is
no different, in principle, although the internal variables and external demands
that must be reconciled are a little different.
Green marketing takes account of the wider relationship of the organization and
its products to the surroundings. It is about a more aware, open, targeted and
sensitive approach that integrates the strategic link between the company, the
environment, and marketing, rather than being primarily concerned with tactical
communications opportunities. The prime emphasis is on, developing
relationships and satisfying separate Stakeholders needs in an environmentally
and socially responsible manner. The key stakeholders are customers, investors,
parent company, directors, employees, the community, legislators, pressure
groups, suppliers, and the media
Green marketing differs from its societal and ecological predecessors in it’s
intertwining of ecological and social concerns, in the breadth of the ecological
agenda that it tackles, and in its potential application across all types and sectors
of business. Green marketing goes beyond societal marketing in four key ways:
1. State whether true or false? Marketing is defined as both a philosophy and set of
activities.
2. KY Systems is a company that uses computers to generate new product
prototypes. It has generated loyal business clients by providing the best
customer support in the industry. The company also provides direct sales
consultation that gives its salespeople intimate knowledge about what exactly its
customers want. This partnership between KY Systems and its customers entails
relationship marketing. State whether true or false?
5. Summary
In the current context, there is very high competition among the marketers in India and
that has been necessitated due to the fact that consumerism is on the high and the
importance of marketing is known to people. An interaction between business and
industry in a global perspective has become imperative because of the need to upgrade
regional technologies and maintain the competitive edge in the international markets.
Today's consumer is more demanding than yester-years'. He is not content with the
second best in technology and is reluctant to pay for a product or a service just because it
comes from a particular region or a country. This, understandably, has led to business and
industry across the world to make use of technologies and resources worldwide to
upgrade their products and services. In this Liberalisation-Privatisation-Globalisation era
to become an integral part of the global system, nations are opening up their economies at
a rapid rate, which were hitherto protected from world markets. The removal of artificial
barriers to trade has and should made it possible for innovative companies to go in search
of new markets across borders with improved efficiency and greater competitive strength.
This has forced the Indian companies to be competitive on the marketing front.
6. Exercises
7.References:
Marketing environment
Unit structure:
1. Introduction
2. Learning Objectives
3. Marketing Environment
3.1 Social environment
3.2 Cultural environment
3.3 Economic environment
3.4 Politico-legal environment
3.5 Lessons for marketers
4. Have you understood type questions
5. Summary
6. Exercises
7. References
1. Introduction:
The Business environment surrounds and impacts upon the organization. There
are three key perspectives on the environment, namely the 'macro-environment,' the
'micro-environment' and the 'internal environment'. Micro environment influences the
organization directly. It includes suppliers that deal directly or indirectly, consumers and
customers, and other local stakeholders. Micro tends to suggest small, but this can be
misleading. In this context, micro describes the relationship between firms and the
driving forces that control this relationship. It is a more local relationship, and the firm
may exercise a degree of influence. Macro environment includes all factors that can
influence and organization, but that are out of their direct control. A company does not
generally influence any laws (although it is accepted that they could lobby or be part of a
trade organization). It is continuously changing, and the company needs to be flexible to
adapt. There may be aggressive competition and rivalry in a market. Globalization means
that there is always the threat of substitute products and new entrants. The wider
environment is also ever changing, and the marketer needs to compensate for changes in
culture, politics, economics and technology. Keeping this in mind the environmental
influences needs to be studied and you will have the inputs in all the forces that influence
the organization in its quest for effective marketing.
2. Learning objectives:
3. MARKETING ENVIRONMENT:
Members of the highest priestly castes, the Brahmans, are generally vegetarians (although
some Bengali and Maharashtrian Brahmans eat fish) and avoid eating meat, the product
of violence and death. High-ranking Warrior castes (Kshatriyas), however, typically
consume nonvegetarian diets, considered appropriate for their traditions of valor and
physical strength. A Brahman born of proper Brahman parents retains his inherent purity
if he bathes and dresses himself properly, adheres to a vegetarian diet, eats meals
prepared only by persons of appropriate rank, and keeps his person away from the bodily
exuviae of others (except for necessary contact with the secretions of family infants and
small children).
If a Brahman happens to come into bodily contact with a polluting substance, he can
remove this pollution by bathing and changing his clothing. However, if he were to eat
meat or commit other transgressions of the rigid dietary codes of his particular caste, he
would be considered more deeply polluted and would have to undergo various purifying
rites and payment of fines imposed by his caste council in order to restore his inherent
purity.
Members of the Leatherworker (Chamar) caste are ascribed a very low status consonant
with their association with the caste occupation of skinning dead animals and tanning the
leather. Butchers (Khatiks, in Hindi), who kill and cut up the bodies of animals, also rank
low on the caste hierarchy because of their association with violence and death.
However, castes associated with ruling and warfare--and the killing and deaths of human
beings--are typically accorded high rank on the caste hierarchy. In these instances,
political power and wealth outrank association with violence as the key determinant of
caste rank.
But in the later period the position of women went on deteriorating due to Muslim
influence. During the Muslim period of history they were deprived of their rights of
equality with men. They were compelled to keep themselves within the four walls
of their houses with a long veil on their faces. This was definitely due to Islamic
influence. Even today in some Islamic countries women are not allowed to go out
freely. The conservative regimes of Iran and Pakistan, for example, have
withdrawn the liberties given to women folk by the previous liberal governments.
Even in India the Muslim women are far more backward than their Hindu,
Christian and Sikh counterparts. The sight of Muslim women walking with long
'Burkas' (veils) on their person is not very rare. The women are, as a matter of
fact, regarded as captive and saleable commodities in Muslim families. One man
is allowed to have so many wives with the easiest provision of divorce. The
husband can divorce a wife just by saying 'I divorce you' under the provision of
Muslim laws. This is what the emperors did hundred years back and the men are
doing it even now in almost all Islamic countries. Even in this last phase of the
twentieth century rich and prosperous men of Islamic countries keep scores of
wives in their harems. It was natural outcome of the Muslim subjugation of India
that woman was relegated to a plaything of man, an ornament to decorate the
drawing room. Serving, knitting, painting and music were her pastimes and
cooking and cleaning her business.
In the wake of Raja Ram Mohan Roy's movement against women's subjugation
to men and British influence on Indian culture and civilization the position of
women had once again undergone a change. However, it was only under the
enlightened leadership of Mahatma Gandhi that they re-asserted their equality
with men. In response to the call of Gandhi they discarded their veil and came
out of the four walls of their houses to fight the battle of freedom shoulder to
shoulder with their brothers. The result is that the Indian Constitution today has
given to women the equal status with men. There is no discrimination between
men and women. All professions are open to both of them with merit as the only
criterion of selection.
It is a fact that women are intelligent, hard-working and efficient in work. They put
heart and soul together in whatever they undertake. As typists and clerks they
are now competing successfully with men. There are many women working in the
Central Secretariat. They are striving very hard to reach highest efficiency and
perfection in the administrative work. Their integrity of character is probably
better than men. Generally it was found that women are less susceptible to
corruption in form of bribery and favouritism. They are not only sweet tongued
but also honest, efficient and punctual in their jobs as receptionists, air-hostesses
and booking clerks at railway reservation counters. As a matter of fact they are
gradually monopolising the jobs of receptionists and air-hostesses.
Another job in which Indian women are doing so well is that of teachers. In
country like India where millions are groping in the darkness of illiteracy and
ignorance efficient teaching to the children is most urgently needed. By virtue of
their love and affection for the children the women have proved the best teachers
in the primary and kindergarten schools. They can better understand the
psychology of a child than the male teachers. Small children in the kindergarten
schools get motherly affection from the lady teachers. It is probably significant
that the Montessori system of education is being conducted mostly by the women
in this country.
Women have been serving India admirably as doctors and nurses. Lady doctors
have been found to perform efficient surgery by virtue of their soft and accurate
fingers. They have monopolised as nurses in the hospitals and nursing homes.
Very few men have been able to compete with them in this sphere because the
women have natural tendency to serve and clean. It is thus natural tendency
found in women which motivated Florence Nightingale to make nursing popular
among the women of the upper classes in England and in Europe. She showed
the way to women kind how nobly they can serve humanity in the hours of
sufferings and agonies.
Women's contributions in politics and social services have also been quite
significant. We cannot fail to mention the name of Indira Gandhi who shone so
brilliantly and radiantly in the firmament of India's politics. She ruled this country
for more than a decade and took India victorious out of Pakistan-war which
resulted in the historic creation of a new country, Bangladesh. In the field of
social service Indian women have also done some excellent jobs. They have not
only served the cause of the suffering humanity but have also brought highest
laurels for the country. The name of Mother Teressa cannot but be mentioned.
She brought the Nobel Prize for India by her selfless services to the poor,
destitute and suffering people of our country in particular and the needy and
handicapped people of the world in general. Today, we need the services of the
educated women who can tour throughout the country and help in removing
human sufferings. The Government is alarmed at the rapid growth of population
in the rural areas in particular. Women volunteers can more easily take up the
task of canvassing the advantages of family planning among the rural
womenfolk. They can, more easily than men, carry on propaganda against
hazards of unhygienic conditions under which the villagers live. In urban areas
they can efficiently take up the task of visiting and teaching the orphans and the
helpless widows in the orphanages and the widow welfare centres. They can
train them in sewing, knitting, embroidery and nursing in which women by nature
excel. They can also train them in the art of music and dancing.
But all this should not lead us to conclude that the women should look down
upon domestic life. The main sphere of action for them who have not taken up
jobs outside should be essentially a happy home which is their real kingdom and
where their sweet manners and mature advices as wife, mother, sister and
daughter make tremendous effects on the male members of the family. The
progress of a nation depends upon the care and skill with which mothers rear up
their children. The first and foremost duty of Indian women should, therefore, be
to bring forth noble generations of patriots, warriors, scholars and statesmen.
Since child's education starts even in the womb and the impressions are formed
in the mind of a child while in mothers arms women have to play a role of vital
importance. They have to feel and realise at every step of their life that they are
builders of the fate of our nation since children grow mainly in mothers arms.
They should also discourage their husbands and sons from indulging in bribery
and other corrupt practices. This they can do only when they learn the art of
simple living by discarding their natural desires for ornaments and a living of
pomp and show. In many cases families have been running in deficit due to the
extravagance of the housewives in maintaining a high standard of living. The
result is that the earning male members of the family are forced to fill up the gap
in the budget by corrupt practices. Corruption has been so far the greatest
impediment in way to India's progress. Minus corruption India would have been
one of the most developed nations of the world.
There is no denying the fact that women in India have made a considerable
progress in the last fifty years but yet they have to struggle against many
handicaps and social evils in the male dominated society. The Hindu Code Bill
has given the daughter and the son equal share of the property. The Marriage
Act no longer regards woman as the property of man. Marriage is now
considered to be a personal affair and if a partner feels dissatisfied she or he has
the right of divorce. But passing of law is one thing and its absorption in the
collective thinking of society is quite a different matter. In order to prove
themselves equal to the dignity and status given to them in the Indian
Constitution they have to shake off the shackles of slavery and superstitions.
They should help the government and the society in eradicating the evils of
dowry, illiteracy and ignorance among the eves. The dowry problem has
assumed a dangerous form in this country. The parents of the girls have to pay
thousands and lacs to the bridegrooms and their greedy fathers and mothers. If
promised articles are not given by the parents of brides, the cruel and greedy
members of the bridegrooms' family take recourse to afflicting tortures on the
married women. Some women are murdered in such cases. The dowry deaths
are really heinous and barbarous crimes committed by the cruel and inhumane
persons. The young girls should be bold enough in not marrying the boys who
demand dowry through their parents. The boys should also refuse to marry if
their parents demand dowry. But unfortunately the number of such bold and
conscientious boys is very few. Even the doctors, engineers, teachers and the
administrative officers do not hesitate in allowing themselves to be sold to the
wealthy fathers of shy and timid girls. Such persons have really brought disgrace
to their cadres in particular and society in general.
A society's culture includes its values, its ethics and the material objects
produced by its people. It is the accumulation of shared meanings and traditions
among members of a society. A culture can be described in terms of its ecology
(the way people adapt to their habitat), its social structure and its ideology
(including people's moral and aesthetic principles). Culture refers to the set of
values, ideas and attitudes that are accepted by a homogeneous group of people
and transmitted to the next generation. Subculture refers to the norms and values
of subgroups within the larger or national culture. African American, Hispanics,
and Asians represent sizable subcultures. It is inappropriate to think in terms of
stereotypes when marketing to these subcultures. African Americans represent
the largest racial/ethnic subculture in the united states. While price-conscious,
they are motivated by product quality and choice. Indian consists of people who
are either Aryans and Dravidians to a large extent. Current research indicates
that stereotypes are misleading. Christians are the subculture in India where as
in United States, it is the culture by itself. Asians are the fastest growing
subculture in the United States. The growth of this subculture is due primarily to
immigration. Like Hispanics, Asians represent a diverse subculture including
Chinese, Japanese, Asian-Indians, and many other nationalities. Two groups of
Asians have been identified:
(1) assimilated
Assimilated Asians are conversant in English and exhibit buying patterns
very much like "typical" American consumers.
(2) Non-assimilated
Non-assimilated Asians cling to their native languages and customs.
Culture is part of the external influences that impact the consumer. That is,
culture represents influences that are imposed on the consumer by other
individuals.The definition of culture offered by Engel is "that complex whole which
includes knowledge, belief, art, morals, custom, and any other capabilities and
habits acquired by man person as a member of society." From this definition, the
following observations can be made:
(1) Culture is comprehensive. This means that all parts must fit together in
some logical fashion. For example, bowing and a strong desire to
avoid the loss of face are unified in their manifestation of the
importance of respect.
(2) Culture is learned rather than being something we are born with.
(3) Culture is manifested within boundaries of acceptable behavior. For
example, in American society, one cannot show up to class naked, but
wearing anything from a suit and tie to shorts and a T-shirt would
usually be acceptable. Failure to behave within the prescribed norms
may lead to sanctions, ranging from being hauled off by the police for
indecent exposure to being laughed at by others for wearing a suit at
the beach.
(4) Conscious awareness of cultural standards is limited. A hardcore
southindian can be easily distinguished when handling a fork and knife
in eating out in north India.
(5) Cultures fall somewhere on a continuum between static and dynamic
depending on how quickly they accept change. For example, Indian
culture has changed a great deal since the 1950s, while the culture of
Saudi Arabia has changed much less.
Known for their contribution in the field of creative work and academic
endeavours, by nature intellectual work rather than the work which will involve
physical labour. All though successful in creative persuits, Bengali business men
are not very common to find. Bengali houses are also proves of their artistic
inclination. Extremely fond of music and books, their main festival is durga
pooja. When Bengali spend a lot on new cloths, food including sweets and non-
vegetarian item. The fact that the Bengali consume non-vegetarian food during
the religious festival, shows the unorthodox lifestyle they follow. In most parts of
India people eat vegetarian food during religious festivals. Known all over India
for the variety of sweets they make, bengalies are knowns for making delicious
fish dishes. Bengalies likes to spend a lot on food and prefer to consume variety
of dishes. A typical Bengali menu is served in course, starting from shuckto
which is like a steew of vegetable going to two or three types of fishes, ‘ Payesh’
(Kheer) and ‘Mishti doi.’(sweets curd).
Known for their business acumen, Gujrathis are extremely traditional and
have very strong fellow feeling. Gujratis at the same time are friendly towards
other religional people and are extremely helpful to the people from their own
caste. They are famous for being one of the richest communities in the country
and at the same time maintain a Spartan lifestyle. It is not uncommon to find
rich diamond merchants travelling in the 2nd class compartment of the train or
by bus. There used to be saying, “If you see a Gujarati driving a car you should
know he is a karorepati.” Such simple is their life style. Gujarati businessmen
have been extremely successful in the motel business and diamond business in
the international market. Yet they will not forget their tradition. The author had a
chance to see one famous diamond exporter in Belgium who inside his palatial
house had a gujrati cook cooking “Dhollkq” and Srikhand”. The cook was flown
in from Ahmedabad. The family even after 25 years in Blgium maintained all the
traditions of their subculture. Ladies are also extremely traditional. The two
typical features in a Gujarati household are, there will bge a well cuishioned
swing in the drawing room and the kitchen is like a central palace, all the ladies
will be sitting. Even if you are a guest at somebody’s place, all the ladies will
jointly work. “Navaratri” and “Diwali” are their two main festivals. Navaratri is
marked by community dancing called ‘garba’ while ‘diwali’ marks the onset of
New Year, which is started with Laxmi Puja. Gujratis are generally vegetarian
and religious minded, although cosmoplitanness is coming in especially with the
new generation.
Tamilians are known both their intelligence and hard work. They shine in
engineering field, scientific research and governmental jobs. Traditional by
nature, a Tamilian professor will not mind going to college wearing his traditional
dress of a white shirt and dhoti wrapped around. A Tamilian women will not mind
going to her work place with flower in her hair; such is their attachment to their
culture. A Tamil household ia an example of hygienic living. Tamil households
are spic and span and decorated with traditional handicrafts, especially
brassware. Although Tamil Nadu is a hot place, people are very fond of wearing
rich silk sarees in deep colours, so are they fond of wearing heavy gold and
diamond ornaments. Tamil Nadu is known for its Kanjivaram silk and its food
whether is the ubiquitous dosa, idli or the tamrind rice, lemon rice, tomato rice.
They only eat rice and not difficult to find a renowned professor who is also
expert in Carnatic music or an engineer who is also a Bharatanatyam dancer.
Tamilians love to hold on to their rich traditional heritage. “Pongal” is their main
festival which literally means new cooked rich and held in the month of January
and marks the incoming of the new crop.
There are three ways to look at the level of economic activity. viz., the output,
income and expenditure. Depending upon the way we look at them, we call them
gross national product (GNP), gross national income (GNI) and gross national
expenditure (GNE), where.
• GNP – Sum of the market value of all final goods and service3s in
an economy during a given time period;
• GNI – Sum of the money incomes derived from activities involving
current production in an economy during a given time period; and
• GNE – Sum of all that is spent of currently produced goods and
services by all types of buyers in an economy during a given
period.
The national income data can also be quite helpful for business. In order to
undertake long-term investments and to formulate business policies it is quite
essential for a dynamic management to do a thorough analysis of changes
occurring in the national income. Since national income reveals, on the one
hand, the structure of the economy and, on the other, the possible directions of
change in the future economic policy of the government, national income data in
the hands of an expert managerial economist can prove a life-line for business. It
is quite vital for a firm aspiring to capture or retain leadership in business, as it is
perhaps one of the most essential ingredients for any business forecasting
exercise. The national income data can also be successfully used for determining
the product diversification programme and undertaking technological innovations.
National income statistics is, thus, a wealth of information, but its usefulness
depends on keenness to observe and probe as well as patience to analyse.
BUSINESS CYCLES:
Business cycles, the periodic booms and slumps in economic activities, are
generally compared to ‘ebb and flow’. The ups and downs in the economy are
reflected by the fluctuation in aggregate economic magnitudes, including
production, investment, prices, wages, bank credits, etc. The upward and
downward movement in these magnitudes show different phases of business
cycles. Basically, there are only two phases in cycle, viz., prosperity and
depression. However, considering the intermediate stages between prosperity
and depression, the various phases of trade cycle may be enumerated as
follows:
In a stagnated economy, depression begins when growth rate turns negative i.e.
total output, employment, prices, bank advances, etc., decline during the
subsequent periods. The span of depression spreads over a period during which
growth rate stays below the secular growth rate or below the zero growth rate in
a stagnated economy. Trough is the phase during which the down-trend in the
economy slows down and eventually stops, and the economic activities once
again register an upward movement with a lapse of time. Though is the period of
most sever strain on the economy. When the economy registers a continuous
and rapid upward trend in output, employment, etc., it enters the phase of
recovery though the growth rate may still remain below the steady growth rate.
And when the growth rate crosses the line of steady growth rate, the economy
once again enters the phase of expansion and prosperity,. If economic
fluctuations are not controlled by the government, business cycles continues to
recur.
Recovery
This is the phase of revival of demand for goods and services. The economic
activity as a whole increases slowly, although the general prices start rising. The
upward movement of business activity is slow, production picks up, construction
activity is revived and there is a gradual rise in employment. This is a period
when the industrialists and the businessmen repay the loans taken by them from
the banks earlier and the frozen stocks held by the banks are released. Stocks of
goods remain below the normal with the shopkeepers. Once the recovery starts,
it results in a snowballing process for investment. The result is that demand
orders pour in and the producers get stimulus and encouragement to produce
more. The sellers stop their conservative period in general favoring expansion in
business activity. The capital equipment is replaced. Banks are liberal in the
matter of advances. The prices recover and tend to reach the normal. The speed,
with which the expansion of business activity takes place in response to a given
initial increase in investment, would depend upon the multiplier effect.
Prosperity
When the business cycle takes a downward turn from the state of prosperity, the
state of recession is said to have set in. during the phase of prosperity,
production increases with every increase in commodity prices. As more and more
of unemployed labour, capital and raw material are employed, interest rate,
wages and other costs rise with increasing rapidity. Simultaneously, the banks
suddenly discover that they have expanded their deposits a little too far. The ratio
of cash reserves to total deposits falls. The banks become reluctant to advance
loans in the interest of their safety and statutory requirements. In order to meet
their obligations, the sellers would, therefore, have to unload their stocks in the
market. Due to unloading of stocks by many firms, the prices start declining.
Profit margins decline further because costs start overtaking prices. Business
psychology becomes depressed and the boom bursts. There is a struggle for
solvency among the businessmen. Some firms close down while others reduce
production, leading to reduction in investment, employment, income and
demand. This process is cumulative. This phase of business cycle is
characterized by fall in prices, commercial panic, restriction and calling back
loans by banks, a sharp increase in interest rate and fall in investment. Soon the
production falls, unemployment increases and inventory stocks get accumulated.
There is a collapse of confidence. If not controlled in the beginning by timely
monetary and fiscal measurers by government which can sustain investment at a
high level, recession may give way to even a more grave situation, called
depression .
Depression:
Inflation:
Inflation has attracted sufficient attention of economists and policy makers. India
is pursuing a policy of planned economic development. One of the prime considerations
in the strategy of growth has been to ensure that growth takes place in an environment of
price stability, which was considered crucial for both-steady growth and even distribution
of the gains of growth. Any increase in prices was likely to affect investment planning
and income distribution in the economy. Hence, efforts to contain and or avoid the same
were an integral part of the planning process. The transmission of inflation-ary impulses
in the economy is affected by various factors e.g. the differences in sectoral relations in
the economy, nature of markets, both of products and services, the extent of linkages
between these markets, the pattern of income and asset distribution, levels of
concentration of corporate and trade-union's power and the effectiveness of the
intermediation of financial institutions, rate of growth in nominal wages and labour
productivity, structure of capital formation and, finally, the rate of development, etc.
Inflation is defined as the persistent rise in the general price level. The question arises as
to what should constitute the appropriate measure to reflect the general price level. In
order to analyse the general price level, percentage annual changes in (i) Wholesale Price
Index (WPI), (ii) Gross Domestic Product (GDP) at market prices, deflator, (iii) GDP (at
factor cost) deflator and (iv) cost of living index (CLI) for industrial workers are usually
considered. Because of wide coverage, the GDP deflator (both at market prices and factor
cost) should be considered as the most appropriate index of inflation because the deflator
covers commodities as well as services, whereas the other two indices reflect movement
only in commodity prices with different 'Baskets'. Inflation rate has dropped from being
among 10% during 1991 to 5.91% during 2004.
The Indian middle class has been an enigma to most marketers who
have tried to assess its buying patterns. Although this market has not proved to
be the made-to-order goldmine that the global players originally viewed it as, it is
fast shedding the conservative tag. Increased disposable income levels, as well
as the shaking out of the taboo associated with consumer loans has resulted in
middle class families paying more and opting for CTVs. As the number of
channels increases, so does the strife amongst family members on which
programme to watch. TV manufacturers can convince them to go in for a second
TV set. Two colour TVs may seem too much of a luxury to bank balance-
conscious middle-class families, but a new B&W TV may do just fine. This could
be another market for the B&W makers to address. B&W manufacturers should
look at increasing production and cost efficiencies to sustain in the market. A
very low-priced B&W TV is sure to find a substantial market among the poorer
classes. With increased impetus on cost cutting, faster rotating models and a
little help from the Government on the duties front, the B&W industry can protect
itself from blackening out. The governements reform policies have already
started to pay off. $1.6 billion in U.S investment projects has been approved
since the introduction of economic reform – twice the amount of investment in
India during the preceding 40 years. This beginning of liberalization although so
very recent, has already meant an impetus and growth in the rise of the standard
of living among the middle class. By the year 2000, India is projected to have a
population of one billion, and while India’s per capita income average income is
quite low ($330USD), India has a growing middle class. An estimate 200 million
Indians have an annual incomes comparable to those in the United States and
Canada. Globally except for China nowhere will the new middle-class be larger
than in India. Amounting to hundreds of million of people, this new middle-class
(with a major political base and buying ability) while modern in many respect,
being entrepreneurial and professional, will also have the traditional caution of
their past generation towards the 21st century. The growth in the earning ability
and thus a rise in the standard of living amongst middle-class will also mean an
end to the "Brain Drain" phenomena happening in most developing countries.
Brain Drain being a phenomena when some of the best students and technicians
in a developing country after being subsidized in their education by their own
government migrate to a developed country, to seek a better standard of living. A
quick survey amongst numerous American Engineering and Technical
Universities would probably illustrate this "Brain Drain" both amongst faculties as
well as students.
With the birth of the new middle-class, their buying power and their technical saviness
and an almost virtual end to the "Brain Drain" phenomena, the third world will be the
place for the growth of new technology. Bleeding technologies once mainly a factor of
the developed world, will be happening in this so called once called third world, as the
third world will be where consumerism will abound. In this newfound consumer land will
be the rise of telecommunication. Since 1990s, India's $1.1 billion computer equipment
market has been growing at the rate of 31 percent annually more than any other
information technology sector. India already is the world’s leading exporter in software.
There will also be a major trend (already existing) in the rise of programming farms,
where Indian programmers would write the backend and the front end developed
elsewhere. This philosophy of outsourcing work would not only exist in programming
but amongst numerous technical and scientific endeavors. The scale of economic
expansion in India (as well as in China) cannot be underestimated. By the year 2025 India
could be in the top five, with an economy as large, or almost as large, as that of Japan and
Germany. Moreover it is estimated that across the third world two to three billion will
emerge from poverty to enjoy middle-class affluence in coming years. As we stand today
at the threshold of a new century, we stand at the beginning of a new industrial
revolution. An industrial revolution that will take place in the third world countries with
the help of developed countries by way of monetary investment, transfer of technology,
implementation of management and marketing strategies. As the dynamics of global
economics continue to change, so will major companies that will be at its core be an
agent of that change or be its very victim. Those that see and seize the opportunities will
win; those that fail to recognize the intensity of global competition will lose.
India suffered political instability for a few years due to the failure of any party to win an
absolute majority in Parliament. However, political stability has returned since the
previous general elections in 1999. However, political instability did not change India's
economic course though it delayed certain decisions relating to the economy. The
political divide in India is not one of policy, but essentially of personalities. Economic
liberalisation (which is what foreign investors are interested in) has been accepted as a
necessity by all parties including the Communist Party of India (Marxist). Thus, political
instability in India, in practical terms, posed no risk to foreign direct investors because no
policy framed by a past government has been reversed by any successive government so
far. You can find a comparison in Italy which has had some 45 governments in 50 years,
yet overall economic policy remains unchanged. Even if political instability is to return in
the future, chances of a reversal in economic policy are next to nil.
As for terrorism, no terrorist outfit is strong enough to disturb the state. Except for
Kashmir in the north and parts of the north-east, terrorist activity is either non-existent or
too weak to be of any significance. It would take an extreme stretching of the imagination
to visualise a Bangladesh-type state-disrupting revolution in India or a Kuwait-type
annexation of India by a foreign power. Hence, political risk in India is practically non-
existent..
Among the critical contingencies faced by every business firm is the need
to manage its social and political environment. Both the social and the economic
performance of the firm can be affected in significant ways by managerial
strategies and tactics; firms and their managers can be active players in efforts to
improve their social and economic bottom lines. Thus, this course will examine
the public affairs environment of the firm and the methods used by managers to
navigate within it. The corporate social performance of a firm and its economic
results are characteristically intertwined: Both in the short and the long run,
failures to attend to social performance issues can produce less than optimal
economic results. Sometimes these issues present themselves in crises that
demand swift, effective managerial intervention. These very practical concerns
accompany the manager's role as a moral citizen who must successfully manage
a complex set of ethical issues.
Developing an appropriate public policy towards the industrial sector has been an
important task for Indian policy makers for a long time. When India moved away from an
inward looking industrialisation strategy to a more ‘open’ economy in 1991, industrial
firms needed to restructure themselves to retain competitiveness. Much of these
restructuring is needed to correct the inefficiencies created by operating in a protected
market. The Automobile sector has been a major candidate in the industrialisation
process since the beginning of planned development. Automobile industry in India has
been subjected to substantial policy changes over the last two decades. The policy
changes were in two doses and took the form of partial de regulations introduced in 1985
and liberalisation measures launched since 1991. The pre 1985 regime could be described
as an era of strict controls and regulations. The initial changes, introduced in 1985, eased
the licensing requirements, broad-based the classification of vehicles for issue of licenses,
allowed selective expansion of capacity and partially relaxed controls with regard to
foreign collaborations, imports of capital goods, raw materials and spares. Though these
measures represented a "domestic liberalisation", the policy environment continued being
geared towards imposing trade and investment regulations, constraining the growth of big
business houses and regulating exchange rates. It was only after 1991 that notable broad-
based changes in policy that had far reaching implications actually came into being.
These changes dispensed with the bulk of controls and regulations and for the first time
since independence assigned a central role to market forces. To list some of these
changes more explicitly - approval for foreign investment up to 51% equity holdings
came to be given automatically, most of the industries that comprise the manufacturing
sector were removed from the licensing network, the monopolies [MRTP] act was
amended - allowing big business houses to expand at will, domestic currency was made
convertible in the trade account, the exchange rate was allowed to be influenced by the
market and quantitative controls on imports of capital goods and components were
removed. In addition to these measures aimed specifically at the industrial sector, the
Government of India also adopted certain structural adjustment and macro stabilisation
policy measures during the post 1991 period. A growing body of literature has examined
the impact of liberalisation in industrial and trade policies on manufacturing sector
performance in different countries. While most of the studies focused on making inter
country comparisons, a few studies analyse the impact of trade liberalisation on
manufacturing productivity .It focuses on variables such as concentration, ownership,
size distribution, spatial distribution and total factor productivity growth, and their results
suggest that liberalisation does not have a major impact on the industrial structure under
examination explores changes in some key corporate strategies in response to economic
reforms introduced in India since 1991 and points out significant changes with respect to
mergers and acquisition activities of multinationals, foreign technology purchase, R & D
and manufacturing capabilities. Most of the earlier studies that attempted to analyse the
differential behaviour of firms in terms of conduct and performance variables have
brought out the differences between multinationals and local enterprises. Automobile
firms in India over the period 1987-88 to 1989-90, found that even within the
multinationals, Japanese affiliates differ from those of Western Countries.
For India to become a major player in world trade, an all encompassing, and
comprehensive view needs to be taken for the overall development of the country’s
foreign trade. While increase in exports is of vital importance, we have also to facilitate
those imports which are required to stimulate our economy. Coherence and consistency
among trade and other economic policies is important for maximizing the contribution of
such policies to development. It was felt that the Exim Policy with its limited focus may
not be able to meet our objectives. Thus, while incorporating the existing practice of
enunciating an annual Exim Policy, it is necessary to go much beyond and take an
integrated approach to the developmental requirements of India’s foreign trade. This is
the context of the new Foreign Trade Policy.
Trade is not an end in itself, but a means to economic growth and national
development. The primary purpose is not the mere earning of foreign exchange, but the
stimulation of greater economic activity. The Foreign Trade Policy is rooted in this belief
and built around two major objectives. These are:
To double our percentage share of global merchandise trade within the next five
years; and
To act as an effective instrument of economic growth by giving a thrust to
employment generation
The two-fold objective of the Policy is proposed to be achieved by adopting,
among others, the following strategies:
Unshackling of controls and creating an atmosphere of trust and transparency to
unleash the innate entrepreneurship of businessmen, industrialists and traders.
Simplifying procedures and bringing down transaction costs.
Neutralizing incidence of all levies and duties on inputs used in export products,
based on the fundamental principle that duties and levies should not be exported.
Facilitating development of India as a global hub for manufacturing, trading and
services.
Identifying and nurturing special focus areas which would generate additional
employment opportunities, particularly in semi-urban and rural areas, and
developing a series of ‘Initiatives’ for each of these.
Facilitating technological and infrastructural up gradation of all the sectors of the
Indian economy, especially through import of capital goods and equipment,
thereby increasing value addition and productivity, while attaining internationally
accepted standards of quality.
Avoiding inverted duty structures and ensuring that domestic sectors are not
disadvantaged in the Free Trade Agreements/Regional Trade
Agreements/Preferential Trade Agreements that enter into in order to enhance
exports.
Upgrading infrastructural network, both physical and virtual, related to the entire
Foreign Trade chain, to international standards.
Revitalising the Board of Trade by redefining its role, giving it due recognition
and inducting experts on Trade Policy.
Activating Embassies as key players in export strategy and linking Commercial
Wings abroad through an electronic platform for real time trade intelligence and
enquiry dissemination.
Procedural delays. In all developing countries --India is no exception-there are too many
regulations imposed by the Government on the private sector and too many procedural
delays. It is estimated on an average, it takes 7 years "from the conceptual stage to the
production stage for any significant investment to take place in India." Decisions which
used to be taken at one time at a low level of government bureaucracy are concentrated in
the hands of the top bureaucracy, or with the ministers and in some cases even with the
cabinet. There is no delegation of decision-making and in fact, even the smallest
decisions are taken at the top level, resulting in avoidable delay, cost escalation, and
higher burden on the consumers.
Reservation for the small sector. The Government has generally worked on the
assumption that small industries are in conflict with large ones which always stifle the
growth of the small and cottage sector. Accordingly, the Government has attempted to
help the small sector in many ways. One method is to provide excise exemption or
impose, a lower rate of excise duties for goods produced in the small sector. Another
method is to reserve certain products in the small sector and prevent the large sector from
producing such goods. As a result of such measures, the complementarity of the two
sectors in the process of growth has been lost. While it may not be desirable to continue
reservations or differential excise duties for all Government. Unfortunately, considerable
controversy has been created in the definition of the joint sector and the industries that
should be brought under this sector. Part of this blame goes to the Dutt Committee Report
which used the term "joint sector" for the first time and gave not one but three concepts
of joint sector :
(a) Existing private enterprises belonging to the large industrial houses should be brought
under the joint sector by public financial institutions converting their loans into equity.
"In that case we would like to emphasise that they should be clearly treated as belonging
to the joint sector and not to the private sector."
(b) The joint sector would include those industrial units in which both public and private
investment had already taken place and where the State has already been taking an active
part in direction and control.
(c) A large sized industrial unit in Schedule B and C categories, necessitated on account
of technical and economic advantages of large scale, should necessarily be in the joint
sector to prevent concentration of economic power. In this case, the joint sector should be
treated as belonging to the public sector, for a large portion of the cost would be provided
by the Government and public financial institutions though, of course, private parties too
would be permitted to have equity participation.
The most striking feature of contemporary India is the rise of a confident new
middle class. It is full of energy and drive and it is making things to happen. In terms of
political power, it is erstwhile middle class that has climbed to the top in the social
hierarchy of modern societies. It has transformed itself into the ruling class by acquiring
control over the levels of state power. Property no more rules, even indirectly, these days.
Nor does labour in the ”peasant and workers” states. It is the “knowledge” group
comprising not only politicians and bureaucrats but also business executives, company
directors, factory mangers, scientists engineers, technocrats, bankers, journalists,
intellectuals lawyers, doctors, teachers and many other belonging to liberal profession
and “services” sector, that does so. That group or class constitutes the political class and a
section of it the ruling elite. The two key attributes distinguishing the class from other
social classes are its possession of education or knowledge in the broad sense of the term
and leadership qualities that help to put the class at the top in all walks of social life.
The social climb that this class has experience has gone coincided with
metamorphical change that the society in Western countries has undergone in socio-
economic political and ideological fields. The concept of democracy secularism, human
rights, social security, social justice and welfare state all parts of middle class philosophy
and ideology. Since the thought and ideology of the middle class has come to acquire
universal appeal, this has help to put the class in commanding position vis-à-vis the rest
of society. It has cast that class in the leadership role and vested it with decision making
regulation coordination and controlling power in terms various types of social activity
and relations. This class has come to constitute the elite in the modern societies. A part of
it forms the governing elite, the rest becoming non-governing elite. The governing elite
by virtue of its control over the livers of power in the state machinery an exercise of all
political powers on behalf of the state is bale to influence production and distribution of
income and wealth class relation, social change, and the political and economic
development of the society it governs. This makes it and instrument of history, an arbiter
of destiny of nation. They are historical forces which are set into motion by the action of
the elite itself, there are others that are autonomous in character which the elite it self as
to content with. The elite itself, of course, does not have absolute freedom of action. It
exercise of power is moderated by the consideration of its continuing to be in possession
of power against the challenge that the non governing elite poses to it in the matter. The
struggle for power between the governing and non-governing elites is a constant feature
of the modern state and the society. The struggle is intra-class and not inter class. The
masses do not compete for power with the elite. It is the difference sections of the elite
who do so among themselves. The battles are fought and struggles waged in the name of
ideology, national interest and welfare of the masses. Professions about promoting these
interest no all masks worn by the elites contenting for political power; a degree of
genuineness is always there. That degree differs from one society to another depending
upon the level of consciousness reached among the masses. The mote developed that
consciousness is and more enlighten the masses are the more difficult it would be for the
elite to mislead them by catch phrases, empty slogan and ideological swearing. In
advanced society the class as well as self-interest of the elite will coalesce with those of
the society as a whole. The elite circulation will still be there and may even be more
pronounced than in a comparatively less developed society but it will waste on the
account that the governing elite gives of it self when in power that on the relative
manipulative abilities of the contenting elites. The competition for power among the elite
will thus become a of social instrument had material advancement. That gives the
democratic system of the government an edge over dictatorship and absolute monarchy in
which cases power is monopolised by a single individual assisted by his coterie or
collectively by a cohesive oligarchy. This will augur well for the marketers in the Indian
context.
Modern technology has made the job of the marketer easier. Here a few tools
that are in use today for improving marketing processes,and building brand
value:
SMS
One can locate the nearest pizza outlet or log on to a Web site to check out the
specifications of the new car you plan to buy.
i-Seminars
Seminars on the internet instead of physical seminars is better for the customer-
no travel time and expense.
E-marketing
No snail mailing,only e-mails;interactive Web information (no printing of
brouchers)and Web banners.
e-Surveys
Online market surveys of customers help in deciding product strategies,which
result in a greater possibility of acceptance of the final product or service,adding
to the the brand value of the organization.
Online billboards
Online billboards made of super-large plasma displays allow for time-sharing and
instant message revision.
Superior design tools
Better tools like Photoshop and illustrator allow a designer to do things that would
have required very expensive design workstations a decade or two ago.
Touch-screen kiosks
Touch sreen kiosks used to market and showcase brands at shopping mails
have changed the way a consumer can feel and experience a product on the
shop floor.
Analysis tools
Better data mining technologies coupled with cheaper storage has accelerated the pace of
research,so that one can narrow down on one’s target and focus better.At every point of
influence, not just marketing-
awareness,acquisition,education,conversion,sale,service,support-role of technology has
changed our processes and efficiencies.
The Indian electronics and hardware industry has been lagging behind the impressive
performance of the software sector. Most of the hardware requirements of the burgeoning
software and telecom sectors are met by imports. The Indian government has recognised
the need to increase domestic output and formulated the Electronic Hardware Technology
Park (EHTP) scheme that offers various concessions for companies that manufacture
either electronic goods or components.
A. Depression
B. Prosperity
C. Recovery
D. Austerity
E. Recession
3. Coca Cola markets its soft drink to members of Generation Y who love extreme sports
and are risk-takers. If Coca cola Dew began lobbying politicians and engaging in
advocacy advertising to support continued use of high fructose corn syrup and caffeine in
products targeted toward young people, the company would be engaging in:
A. Mass Marketing
B. Environmental Management
C. Target Marketing
D. Market Segmentation.
4. Ramji Systems have developed Movie Mask, a system that acts as a video censor by
interfering with the playback process so that supposedly offensive material never appears
on the television screen. For movie production companies, the Movie Mask is a(n)
________ factor in their external environment.
A. Technical
B. Economic
C. Social
D. Political
5. Summary:
There is a perceptible change in the mind set of the consuming class in India as is
evident from the social, cultural, political, technological and economic environments as
discussed in this unit. However, one change which is fast sweeping the country is the
advent of Internet. The medium of the Internet and the development of e-
commerce are progressing extremely fast on a global. However, while the
Internet acts as a faster and less costly platform for consumers and businesses it
has inadvertently increased the importance of customer satisfaction. By making
transactions faster and easier it had enabled the customer to switch just as
quickly between e-businesses, causing the element of competition to take on a
new diversion. It is very important to achieve customer satisfaction to get good
financial performance in services in the physical world, and the same can be said
of e-commerce where a customer can be lost if unable to access a Website or if
the experience proves unsatisfactory.
6. Exercises
7. References
Unit structure:
1. Introduction
2. Learning Objectives
3. Marketing Management
3.1 Nature of marketing
3.2 Scope and functions of marketing.
3.3 Significance of marketing.
3.4 Objectives of marketing.
3.5 Coordination between marketing and other functions.
4. Have you understood type questions
5. Summary
6. Exercises
7. References
1. Introduction:
2. Learning Objectives:
3. MARKETING MANAGEMENT
3.1.NATURE OF MARKETING
Benefits
CustomerValue =
Cost
The corporate strategy must be aimed at delivering greater customer value than
competitors. The corporate planning, processes, and people must be re-
configured around the customer.
Portable
Identification of Probable Features
Product
Customer Needs of Product
(Assisted
(by Marketing (Suggested by
by
D tt ) M k ti D tt )
Marketing
Final Product
(Presented Marketing Customer Suggests
Deptt.) Changes/Modifications
Fig.2 Marketing and Customer Needs.
5. Marketing is a part of Total Environment. Total environment may be
defined as the combination of all resources and institutions which are directly
related to the production and distribution of goods, services, ideas, places and
persons for the satisfaction of human needs. However, it is better to look at
remote and immediate environment of any marketing organization as shown
below in Fig.3
Immediate External
Suppliers
International Technical System
R & D System
Financial
Marketing Organisation
Financial
Economic Institutions
Customers
t
Functions of Marketing
(A) (B) (C) (D)
Functions of Functions of Functions of Functions
Research Exchange Physical
Facilitating
Treatment Exchange
The functions of marketing may be classified into four categories as shown in the
above Fig.6
A. FUNCTIONS OF RESEACH
A1. Marketing Research
It means the intelligence service of the organization. Marketing research
helps in analyzing the buyer’s habits, relative popularity of a product,
effectiveness of advertisement media, etc. its major task is to provide the
marketing manager with timely and accurate information so that better
decisions can be made. The scope of marketing research is very wide. It
may cover all the areas of business which have bearing on the marketing
function. In the words of W.J.Stanton, “Marketing research is the systematic
search for and analysis of facts related to a marketing problem. Its emphasis
is shifting from fact finding, information gathering activity to a problem solving
and action recommending function”.
A2. Product Planning and Development
A product is something which is offered by a business firm to customers to
satisfy their needs. It has great importance in all other areas of marketing
management. For instance, marketing research is mainly directed towards
knowing the needs of the customers and increasing the sale of the product;
and storage and transportation activities depend upon the nature of the
product. Therefore, it is necessary to plan and develop products which meet
the specifications of then customers. Products are the foundation of any
marketing programme. The success of marketing department depends upon
the nature of the product offered to the customers. The product must be so
designed and developed that it meets the requirements of the customers.
B. FUNCTIONS OF EXCHANGE
B1. Buying and Assembling
B2. Selling
This is an important aspect of marketing under which ownership of goods
is transferred from the seller to the buyer. Sale may take the form of : (i) a
negotiated sale, and (ii) an auction sale. In case of negotiated sale, the terms
and conditions between the buyer and the seller are arrived at by bargaining
or haggling. But in case of an auction sale, there is no scope for negotiation
between the seller and the buyer. The buyers assemble at the place of
auction and bid against one another for the goods on sale. The goods are
sold to the highest bidder.
Negotiated sale may take the following forms, namely, (a) sale by inspection
,(b) sale by sample, (c) sale by description, (d) sale by grade, and (e) sale by
brand.
C2. Packaging
Packaging is traditionally done to protect the goods from damage in transit
and to facilitate easy transfer of goods to customers. But now it is also used
by the manufacturer to establish his branded products as distinct from those
of his rivals.
C3. Storage
Goods are generally produced in anticipation of the demand. They have
to be stored properly in warehouses to protect them from any damage which
may be caused by ants, rats, moisture, sun, theft, etc.
Storage of goods in warehouses has become an indispensable service
these days. Producers, manufacturers, traders, mercantile agents, importers
and exporters engaged in business have to store their goods in warehouses.
Goods are produced or procured well in advance of the demand. They are
stored in warehouses till they are actually sold in the market. Thus,
warehousing creates time utility. In addition, modern warehouses perform
certain marketing services also such as grading, packaging, labeling, etc.
C4. Transportation
Modern organizations produce on a large scale to cater to the
requirements of customers scattered throughout the country. This calls for
transportation of goods from the place of production to the place of
consumption. Transportation provides the physical means which facilitate the
movement of persons, goods and services from one place to another.
D2. Advertising
Advertising has become an important function of marketing in the
competitive world. It helps to spread the message about the product and thus
promote its sale. It facilitates creation of a non-personal link between the
advertiser and the receivers of the message. The importance of advertising
has increased in the modern era of large scale production and tough
competition in the market. Business firms use several media of
advertisement to sell their products. These include newspapers, magazines,
radio, television, cinema halls, hoardings, window displays, etc.
D3. Pricing
Determination of price of a product in an important function of a marketing
manager. Price of product is influenced by the cost of product and services
offered, profit margin desired, prices fixed by the rival firms and Government
policy.
A sound pricing policy is an important factor for selling the products to the
customers. The price policy of a firm should be such that it attracts all types
of customers different means. A good price policy helps in determining the
varieties of a product to be made or procured so as to satisfy the demands of
various kinds of customers.
D4. Financing
Financing and marketing functions of a business are inter-linked with each
other. The marketing department has an important say on policies of the
finance department in regard to cash and credit sales. Financing of
customer-purchasing has become an integral part of modern marketing. The
provision of goods to the customers on credit basis is an important device to
increase th volume of sales. A manufacturer has also provide credit facilities
to wholesalers and retailers. As a matter of fact, credit is the lubricant that
facilitates the operation of the marketing machine.
D5. Insurance
A large number of risks are involved in exchange of goods and services.
Insurance helps to cover these risks. It facilitates the smooth exchange of
goods by covering risks in storage and transportation.
Loss or damage to goods or property may arise due to fire, theft, natural
calamities like flood or earthquake and so on. People employed in business
firms are also liable to the risks of injury or loss of life due to accidents in the
work-place. Business firms are able to provide for protection against these
risks by insurance companies. Thus can cover the risks on payment of a
nominal premium and recover the loss, if any, arising our of the risk.
1. Form Utility. Customer expects that their needs should be fulfilled with
appropriate goods or services with particular
features/attributes/style/shape/size etc. Form utility supplies them all by
converting the raw form of products into meaningful final products. Thus,
customers force marketers to direct production department in terms of
specific customer needs satisfaction. For example, Whirlpool advertises
its refrigerators by showing a man asking different customers to, explain
their requirements. The final product comes up as per the customer’s
requirements.
2. Person Utility. The marketers and ultimate customers are not always
situated at the same place, so that the customers could buy the products
and services for their consumption or usage. At times, there is a big gap
between the producers and the ultimate customer, marketing helps to
remove the hindrance of person by means of trade. Trade, as a part of
marketing, plays a major role in establishing contact between producers
as providers of goods and services and customers as users or consumers
of those goods and services to satisfy their needs. Various traders,
namely, wholesalers, retailer and mercantile agents operate to provide
person utility.
3. Exchange Utility. In case of goods and services, the person utility clears
the way for their proper exchange. Marketing helps to bring together the
producers of goods ready to ell their goods for money and the consumers
of those goods ready to part with their money (purchasing power), thus
removing the hindrance of exchange. Moreover, with money as the
medium of exchange, payment for goods and services is made through
banks. In this way, procure goods ion credit. Further, banks often finance
trade in ways more than one. Thus exchange utility is provided by money,
banking, and finance.
4. Place Utility. Goods may be produced at a place where advantages of
location other than the market may be available whereas the buyers of
such goods may be situated at a far off place. The barrier of distance
between the place of production and the market where these products can
be sold is removed by different means of transport. Besides transporting
goods from the place of production to that of consumption, the services of
insurance to cover the risk of loss during transit and storage and
packaging to protect goods against damage and pilferage are also aimed
at removing hindrance of place. Thus, place utility brings the producer of
goods and services closer to the customer.
5. Time Utility. Goods, in modern times, are produced in anticipation of
demand and as such they are to be stored as long as the demand for the
same comes up. Such stored goods are to be released as and when
demand materializes. This function of storage and preservation is
performed by warehouses which remove the hindrance of time by
balancing the time lag between production and consumption, thus creating
time utility. During this process of storage, insurance plays its role by
removing the risk of loss or damage through theft or fire.
6. Knowledge Utility. A producer may find it difficult to sell his products
unless and until he brings it to the knowledge of the prospective
consumers the utility and the distinctive features of his products.
Advertising and salesmanship help to remove the hindrance or lack of
knowledge on the part of the prospective buyers by bringing to the notice
of the customer the utility of buying the goods and services offered .
Marketing is the kingpin that sets the rate of progress of the economy.
The marketing organization, if more scientifically organized, makes the
economy strong and stable. The lesser the stress on the marketing function,
the weaker will the economy be. Underdeveloped marketing is a sign of
under-developed economy. An under-developed economy is characterized
by many shortages and is a seller’s market. Selling effort is not needed
much. As a result, business firms do not feel the need for changing their
marketing methods and practices. The other reasons for the unsystematic
marketing in an under-developed economy are heavy dependence upon
agriculture, old methods of production, over-population, lower income and
lower standard of living. Since marketing is consumer oriented, it can bring
about many positive changes in the underdeveloped economies.
The persons interacting with the customer are commonly known as Sales
Managers, Advertising managers, Sales promotion Managers, marketing
Researchers, product Managers, Brand Managers, Customer-Service
managers, etc. The person producing the product is known as Production
Manager. The person recruiting people into the organsiation is known as
Personnel Manager.
The person dealing with financial aspects is known as Finance Manager.
The task of the marketing management is to coordinate with other
departments and expect reciprocal coordination from other departments.
Thus, if sales people feel that the product is not up to the mark, the marketing
management should order a probe by the marketing research department
which invariably should include representation from production department.
Otherwise, it would mean that sales persons were unable to sell the product
and therefore put blame on the defects in the product. In essence, there
should be proper coordination between the marketing and other departments.
Achieving Coordination
Marketing concept forces business firms to use an integrated approach in
their operations. Each firm should coordinate the activities of purchase,
production, finance, personnel and marketing departments to satisfy the
needs and expectations of customers. Thus, marketing should not be
considered merely as a fragmented assortment of marketing functions. Each
and every department bas to contribute for the satisfaction of customers and
this needs proper coordination between the functioning of all departments.
Coordination with Purchase and Production Departments
A. market segment
B. target market
C. customer group
D. market
5. Summary
To sum up, an attempt should be made to develop integrated marketing in
the firm to serve the customers better. The marketing department can’t
achieve the marketing goals independently; it has to seek the cooperation of
all other departments, namely, purchase, production, finance, legal,
personnel, etc. All these departments must focus on the customer to achieve
integrated marketing.
6. Exercises
1. What according to you is the problem area between marketing and finance
department? Comment.
2. Explain the relevance of marketing concept to a monopoly organization?
Comment.
3. Discuss the provisions in the organizations’ policy which could prove to be a
benefit for an organization.
4. A company which is foraying into the states of Orissa, Bihar and Jharkhand for
marketing its toothpaste, what support the entire organization should give?
Explain.
7. References
1. Cundiff , E.W.Etol , Fundamentals of modern marketing, Prentice Hall of
India Pvt. Ltd. New Delhi.
2. De Bruicker , Stewart F., and Summe, Gregory., make sure your
customers keep coming back , Harward Business review, 1985.
3. Neelamegham, S., Marketing management and the Indian Economic,
Vikas Publishing (P) Ltd., New Delhi – 1987.
4. Neelamegham, S., Marketing in India, cases and Reading , Vikas (P) Pvt.
Ltd. New Delhi 1992.
Market segmentation
Unit structure:
1. Introduction
2. Learning Objectives
3. Market segmentation
3.1. Micromarketing
3.2. Steps involved in segmentation process
3.3. Bases for market segmentation
3.4. Bases for segmenting business markets
3.5. Benefits of segmentation
3.6. Market segmentation in various industries
3.7. How to implement market segmentation
4. Have you understood type questions
5. Summary
6. Exercises
7. References
1.Introduction:
Market segmentation is based on the generally true concept that the market for a
product is not homogenous as to its needs and wants. The opposite of market
segmentation is market aggregation, which is looking into one mass market. Coca-
Cola practiced mass marketing when it sold only one kind of coke in a 6.5 ounce
bottle. The arguments for mass marketing is that it creates the largest potential
market, which leads to the lowest costs, which in turn can lead to lower prices or
higher margins. Long run production runs are more economical than short runs.
However, many critics point to the increasing splintering of the market, which makes
mass marketing more difficult. The more that market may be aggregated, the lower
the cost per thousand in buying advertising to reach that mass market, at least within
the range of certain promotional budgets. However in order to attract more local and
specialised markets, it becomes necessary that the companies need to segment the
market. Thus segmentation involves substantial use of advertising and promotion.
This is to inform market segments of the availability of goods or services produced
for or presented as meeting their needs with precision.
Market segmentation is the process of disaggregating the total market for a given
product into a number of sub-markets. The heterogeneous market is broken up in the
process into a number of relatively homogenous units. The process is based on the
recognition that (a) any given market or consumer group is made up of a number of
subgroups distinguished by varying needs and buying behaviour; and (b) it is feasible
to disaggregate the consumers into suitable segments in such a manner that the
characteristics of the segmented groups would vary significantly AMONG segment
but would almost be identical WITHIN segments.
2. Learning Objectives:
3. Market Segmentation:
A company can segment its market in many different ways. And the bases for
segmentation vary from one product to another. However, the first step is to divide a
potential market into two broad categories; ultimate consumers and business users. The
sole criterion for this first cut at segmenting a market is the customer’s reason for buying.
Ultimate consumer buy goods or services for their own personal or household use
and are satisfying strictly non-business wants. Business users are business, industrial, or
institutional organizations that buy goods or services to use in their own organizations, to
resell, or to make other products.
3.1 Micromarketing:
Some of the possible micro segments, which are attractive for marketers,
include:
a. Segment Marketing
A market segment consists of a large identifiable group within a market with similar
wants, purchasing power, geographical location, buying attitudes, or buying habits. For
example, an auto company may identify four broad segment; car buyers who are
primarily seeking basic transportation, or high performance, or luxury, or safety.
Segment marketing offers several benefits over mass marketing. The company
can create a more fine-tuned product or service offering and price it appropriately for
target audience. The choice of distribution channels and communication channels
becomes easier. The company also may face fewer competitors in the particular segment.
B. Niche Marketing
A niche is a more narrowly defined group, typically a small market whose needs
are not well served. Marketers usually identify niches by dividing a segment into sub
segments or by defining a group seeking a distinctive mix of benefits. For example, the
segment of heavy smokers includes those who are trying to stop smoking and those who
don’t care.
An attractive niche is characterized as follows: the customers in the niche have a
distinct set of needs: they will pay premium to the firm that best satisfies their needs; the
niche is not likely to attract other companies (competitors); the niche gains certain
economics through specialization; and the niche has size, profit and growth potential.
Both small and large companies can practice niche marketing.
C. Local Marketing
Target marketing is leading to marketing programmes being tailored to the needs
and wants of local customers groups (trading areas, neighbourhoods, even individual
stores). Citibank provides different mixes of banking service in its branches depending on
neighbourhood demographics. Those favouring localizing a company’s marketing see
national advertising as wasteful because it fails to address local needs.
D. Individual Marketing
The ultimate level of segmentation leads to “segments of one”, “customized
marketing”, or “one-to-one marketing”. For centuries, consumers were served as
individuals. The tailor made the suit and the cobbler designed shoes for the individual.
Much business-to-business marketing today is customized, in that a manufacturer will
customize the offer, logistics, communication, and financial terms for each major
account.
3.2.Steps involved in segmentation process:
According to Philip Kotler, the main steps involved in the segmentation process are as
follows.
1. Asses the differences between one customer group and the other in terms of their
needs and their likely responses to the product and other marketing inputs of the firm.
2. Find out by what descriptive characteristics can consumers of a particular
disposition be tagged on to a specified segment.
3. Based on the above, disaggregate the consumers into suitable segments.
4. Analyse and establish whether it is desirable and possible to formulate separate
marketing programs and marketing mixes for the different segments.
5. Find out which segments would be happy with the offerings of the firm and could
therefore be considered as the natural targets of the firm.
6. Select those segment which offer high potential and which would be amenable to
the offerings of the firm.
Two broad groups of variables are used to segment consumer markets. Some researchers
try to form segments by working at “consumer characteristics”: geographic, demographic
and psycho graphic. Then they examine whether these customer segments exhibit
different needs or product responses. Other researchers try to form segments by looking
at consumer responses to benefits sought, use occasions, or brands. Once the segments
are formed, the researcher sees whether different characteristics are associated with each
consumer- response segment.
3.3.1.Geographic Segmentation:
Geographic segmentation calls for dividing the market into different geographical units
such as nations, states, regions, counties, cities or neighbourhoods. The company can
operate in one or few geographic areas or operate in all but pay attention to local
variations. For example, Godrej – Sara Lee identified two different geographical
segments, the south India and the other regions for its mosquito repellant products. For
South India, the brand “Jet” was popular and throughout India the “Good Knight” brand
was the popular brand. So ‘Good Knight’ was made the national brand while ‘Jet’ was
made a regional brand.
3.3.2.Demographic Segmentation:
Segmentation based on age of the customer group, sex, family size, race, religion,
community, language, occupation, educational level, social level, family life cycle,
nationality and income level comes under demographic segmentation. To consider an
example, the market for consumer goods in India has been segmented by marketers
broadly into three segments; the high-income group, the middle class and the lower
income group.
3.3.3.Psychographic Segmentation:
In psychographics segmentation, buyers are divided into different groups on the basis of
life style or personality and values. People within the same demographic group can
exhibit very different psychographic profiles.
3.3.4.Behavioural Segmentation:
In behavioural segmentation, buyers are divided into groups on the basis of their
knowledge of, attitude toward, use of, or response to a product. Many marketers believe
that behavioural variables-occasions, benefits, user status, usage rate, loyalty status,
buyer-readiness stage, and attitude-are the best starting points for consulting market
segments.
3.3.5.Multi-Attribute Segmentation (Geo-clustering):
Several variables are combined to identify smaller, better-defined target groups. Thus a
bank may not only identify a group of wealthy retired adults, but also within that group
distinguish several segments depending on current income, assets, savings, and risk
preferences. One of the most promising developments in multi attribute segmentation is
called geoclustering. Geo clustering yields richer descriptions of consumers and
neighbourhoods than traditional demographics. The groupings take into consideration 39
factors in 5 broad categories. (1) Education and affluence, (2) family life cycle, (3)
urbanization, (4) race and ethnicity and (5) mobility.
3.4. Bases for segmenting buisiness markets:
Some of the bases for segmenting the consumer markets are also useful bases for
segmenting business markets. For example, business markets can be segmented on the
geographic basis. Some industries are geographically concentrated. For example, firms
that process natural resources locate close to the source to minimize shipping costs. Also,
businesses can be segmented on the basis of demographics. For example, the size of the
firm, the firm’s type of business, firm’s method of buying, etc. Sellers also can segment
on the benefits desired by the buyer and on product usage rates. To get a feel for business
market segmentation, let’s look at segmenting by
1. Type of customer
2. Size of customer
3. Type of buying situation
For segmentation to be useful, the segments must be Relevant, Accessible, Sizeable,
Measurable, and Profitable.
1. One customer group can be distinguished from another with in a given market and
enables to decide which segment of the market should form as target market.
2. Facilitates in-depth study of the characteristics of the buyers.
3. Help marketing man to develop marketing programme on a predictable and reliable
base.
4. More suitable ‘marketing offers’ for a particular segment can be easily developed.
5. Suitable marketing mix can be achieved.
6. Due to concentrated efforts most productive and profitable segments of markets can
be achieved.
7. It helps to assess competitors’ stand in the market.
8. Customers and companies can choose each other for mutual benefit and satisfaction.
3.6.1.Soap industry:
Laundry soap: very expensive detergents to wash things. General application, broad
distribution, low cost and medium advertising. Examples: Nirma. OK, Rin
Special laundry soap: To wash fancy things with stress cleaning effect, and ‘will do not
harm the expensive garments’ as selling points. Distribution only to high-income
customers and retailers. High priced much advertising. Examples: Surf Excel, Tide
Low-grade toilet soap: For washing the body. Broad application, low price, low quality,
medium advertising and wide distribution. Examples: Nima, Lifebuoy
Premium toilet soap: For the luxury customer group, particularly women and high
bracket income-groups. Stress ‘beauty’ as a selling point. Distribution only to high-
income customers and retailers. High price, high quality and heavy advertising.
Examples: Dove, Aramusk, Lux international
Toilet soap for stores, offices and restaurants: For customers and employees to wash
their hands. Sell direct to the businesses. Packaged in large numbers per box, no
individual wrapping, no advertising and low priced.
Industrial soap: For washing hands after very dirty work. Higher cleansing power
than ‘commercial’ soap. Sold directly to industry. Packaged in large numbers per
3.6.2.Watch industry:
2. Life style pattern: Digital ‘fastrack’ is designed especially for the trendy and sporty.
So far digital watches have always had a stereotyped image either around specification of
sports. With 22 variants in four series, Titan’s new collection aim’s to provide a wide
choice for the fashion conscious 15-24 age group.
3. Based on age: Titan produces watches for children in the brand ‘ Dash” and youth.
4. Based on sex: Company produces variety of products aiming and beefing its presence
in the women market titan has launched variety of products like sonata, regalia, for, men
and has new range of fast track watches for woman aged 18-30 a fashion branch to match
the aspirations of woman.
5. Based on income: Titan launches variety of products based on the purchasing power
of people the titan sold it products for the range from 450/- on wards to 30,000.
Indian car industry can be classified based on the price of the car, into the small
car or the economy segment, mid-sized segment, luxury car segment and super
luxury car segment. The various models in the segments of the car market can
be classified as:
Economy segment : Maruti Omni, Maruti 800, Maruti Alto, Chevy Spark
Mid-sized segment : Ambassador Nova, Fiat Palio, Maruti Zen Estilo,
Hyundai Santro,
Tata Indica, Maruti Swift, Maruti Wagon R, Chevy
Aveo UVA,
Hyundai Getz
Luxury segment : Maruti SX4, Tata Estate, Tata Sierra, Chevy Aveo
Honda City, Mitsubishi Lancer, Ford Fiesta, Huyndai
Accent,
Hyundai Verna
Super Luxury segments: Grand Vitara, Mercedes Benz and other imported cars
1. Identify your market: What are the overall boundaries of the market that you
intend to segment? In many traditional marketing operations this is done at the product
development stage, in newer business (e.g. the software market) this is often not done at
all with many software products developed on a hunch or as a result of the drive of one
leading personality. However, get as much information about your intended target as
possible.
2. Establish a Segmentation Matrix: Establish key market segmentation drivers for
a product, this could be based on age, spending power, usage of other products,
demographics, geographic, preferred payment method, the list is endless. Use those,
which you consider to be most important to define a few 'master' segments.
3. Prioritize: prioritize in line with the resources that you are able to devote to your
marketing effort and the likely impact of addressing each segment on any support/spare
parts services.
1. Maruti knows that some people want vans, estate cars, or economy cars.
In this case Maruti has found its markets to be:
a. heterogeneous
b. undifferentiated
c. focused
d. homogeneous
2. The process of dividing a total market into market groups so that persons
within each group have relatively similar product needs is called:
a. segmenting
b. differentiating
c. target marketing
d. concentrating
3. If Audi cars focused all of its marketing efforts on professionals with over
Rs.2 lakh a month gross earnings, it would be using a ______ targeting
strategy.
a. homogeneous
b. undifferentiated
c. multisegment
d. concentration
4. Gillette was the first marketer of disposable razors to offer a product
specifically designed for women. This is an example of segmentation
using _______ variables:
a. Demographic
b. Psychographic
c. Geographic
d. Family life cycle
5. By offering Colgate for Kids (attractive taste for children), Regular
Colgate, Colgate Total and Colgate Herbal toothpastes, it is segmenting
the market based on:
a. benefits
b. psychographics
c. lifestyle
d. demographics
5.Summary
6. Exercises
7. References
1. Introduction
2. Learning Objectives
3. Positioning and Differentiation
3.1 Principles of positioning
3.2 Errors in positioning
3.3 Strategies for positioning
3.4 How to position a brand
3.5 Positioning strategies in consumer durables
3.6 Positioning paradigms
3.7 Advantages of positioning
3.8 Disadvantages of positioning
3.9 Examples of positioning
3.10Product differentiation variables
3.11Product differentiation strategies
4. Have you understood type questions
5. Summary
6. Exercises
7. References
1. Introduction:
2. Learning Objectives:
The product can be positioned for an exclusive well to do segment of the market,
it can be positioned for men, for children, for fun loving youth, for health conscious
market, it can be a claim on luxury, a claim on distinctiveness, a claim of convenience,
economy, novelty, usage. The marketer cannot invent a positioning theme when he is
ready to enter the market with his product. He should have already decided what his ‘cash
on’ point should be where he should introduce his product for whom and on what
distinctive claim he should go around and promote his product.
All products can be differentiated to some extent. But not all brand differences
worthwhile or meaningful. A difference is worth establishing to the extent that it satisfies
any of the following criteria.
1. It is better to be the first than to be late. The selectivity of the mind is such that the
pioneer will always have a presence in the mind-set of the consumers. Hence
companies like Thums up, Amul, Xerox etc., are still in the minds of the
consumers.
2. In case not the first, then the company should be able to create a new category by
making even a small change in the marketing mix elements. AIWA and AKAI
created a pricing strategy through replacement market and got into the minds of
the consumers. Maruti created a small car market through product innovation.
3. It is important to understand the position and strategies of the competitors. It is
clear that the competitors’ strengths and weaknesses should be known to the
company. Britannia did the repositioning exercise to overcome the competition
and similarly Tata Indica gave a scare to Maruti when they introduced their small
car in the market. Certain strategies usually adopted by competitors for
positioning
(1) Studying the ideal product perception – this involves studying both tangible and
intangible attributes that a customer looks for while buying a product. Among the
tangibles are product features, performance levels, style and aesthetics of the
product packaging, product components and even price and distribution. The
intangibles will include the services that a customer looks for, like after sales
service, training on how to use the product, financing assistance etc.
(2) Get the customers to rank these attributes in the order of importance to them.
(3) Customer’s knowledge of the competitors brands.
(4) How do the competitors brand favour in the ideal product map. Here the
customers are asked to assess competitor brands and specify how close or far they
are on each attribute to the ideal product.
(5) Based on the assessment of competitor brands on the ideal product map, product
managers identify vacant slots and then build the positioning strategy by filling
these up. It is important to note here that if an attribute sought by a customer is
not high on his/her priority and the firm feels it has the strength in it and should
be considered by the customers, the firm can adopt a strategy to help change this
perception. But the customer perceptions should be continued for, changing
customer perceptions in a long drawn out strategy involving substantial resources.
After this perceptual mapping is done, the marketer uses statistical techniques to
arrive at a position.
1. Benefit/use positioning:
The positioning strategies adopted by consumer durable depend a lot on ‘usage’,
‘economy’ and ‘corporate identity’ of which a well established brand surely projects
the identity of the product in terms of ‘ which corporate house the product is from’.
Benefit or usage is the next positioning strategy used. For e.g.: - BPL Converti
projects out the multi usage of the product. This strategy is based on identifying the
possible uses to which the firm’s brand can be put to. In a way it may appear same as
use situations but differs from it because this talks on all the possible uses of a
product or brand. For e.g.: - since video cassette recorders (VCRs) could be used in
playing, recording and regulating the pace at which the different scenes can be
watched (like pause, forward etc) most customers saw it as a distinct development
over the video cassette player and the demand for VCR boomed.
3. Lifestyle positioning:
A firm may even position the brand as a lifestyle contemporary or futuristic. Many of
today’s new kitchen appliances like microwave ovens are positioned accordingly.
6. Surrogate positioning:
In this kind of positioning the product can’t be positioned differently on the basis of
attributes but differentiated by positioning them on the surrogates for the attributes.
The claim would be that our product is better than or different from others. For e.g.: -
the Futura pressure cooker is advertised based on these surrogate ideas. It uses two
kinds of surrogate ideas – ‘predecessor’ – the popular and trusted Hawkins
association and ‘Endorsement’ because Indians admire Western designs and are
impressed by the western names.
3.6.Positioning paradigms:
It would seem that the company should go after cost or same to improve its
market appeal. However, other considerations arise. The first is how target consumers
feel about improvements in each of these attributes. Column 4 indicates that
improvements in cost and service would be of high performance to customers. But can
the company afford to make the improvements in cost and service, and how fast can it
provide them? Column 5 shows that improving service would have high affordability and
speed. But would the competitor be able to match the improved service? Column 6 shows
that the competitor’s ability to improve service is low. Based on this information, column
7 shows that the appropriate actions to take with respect to each attribute. The one that
makes the most sense is for the company to improve its service and promote this
improvement.
(1) (2) (3) (4) (5) (6) (7)
Competitive Company Competitor Importance Affordability Competitor’s Recomme
advantage standing standing of and speed ability to nded
improving improve action
H-M-L
standing standing
H-M-L H-M-L
Technology 8 8 L L M Hold
Cost 6 8 H M M Monitor
Quality 8 6 L L H Monitor
Service 4 3 H H L Invest
3.7.Advantages of positioning:
3.8.Disadvantages of positioning:
3.10.Perceptual mapping:
With the above features, the perceptual map can be constructed by taking the
two outstanding features in the two axes as in the following figure. Those
features can be Quality and Price.
From the perceptual map, it is clear that the brands bearing foreign impressions are
falling in the first quadrant where the features like Wrinkle free, fashion, quality fabric
etc., are found. Color plus, Provouge brands are lying in the second quadrant which
denotes the features like perfect fit, colour options, popularity etc. This quadrant gives
less consideration to quality. The features like economical is taken in fourth quadrant
where the brands like Excalibur and Parx are plotted. This plotting of the perceptual map
gives a direction for any new entrant in the readymade garments about the consumer
psyche. Features must essentially translate into benefits in the consumer’s mind, and be
offered at a price where the price-value equation meets, is the lesson for the new entrant
in this sector.
H ig h P ric e
W rin k le fre e
P e rfec t fit
F a sh io n
C o lo u r o p tio n s Q u a lity fab ric
. A rro w
. L o u is P h illip e
p o p u la rity C o lo u r p lu s . . V an H . Zuoese
d iac
n A ttrac tiv e n ess
S titch in g G o o d lo o k s
P ro v o u g e . . P e te r E n g la n d
o w q u a lity H ig h Q u ality
. P a rx
. C a m b rid g e
.E x c alib u r
. K u m ar
E co n o m ic a l
L o w p ric e
Form:
Many products can be differentiated in form, the size, shape or physical structure
of a product. Consider the many possible forms taken by products such as
aspirin. Although aspirin is essentially a commodity, it can be differntiated by
dosage size, shape, coating, action time and so on. The UPS as is being used in
Personal Computers and other electronic devices have undergone such changes
in size that from a vary bulky equipment, one cannot even see an UPS now. To
that extent miniaturisation has taken place in this sector.
Features:
Performance Quality:
Conformance Quality:
Conformance quality is the degree to which all the produced units are identical
and meet the promised specifications. The problem with low conformance
quality is that the product will disappoint some buyers. Maruti for instance offers
specific technological product differentiations based on the model bought by the
customers. Multi point fuel injections, All Aluminium Combustion Engine are only
available with specific models. IFB washing machines are still famous mainly
because of the fact that their front loading machines have been performing
without any defects.
Durability:
Reliability:
Repairability:
Style:
Style describes the product’s look and feel to the buyer. Buyers are normally willing to
pay a premium for products that are attractively styled. Car buyers pay a premium for
Weekender models because of their extraordinary look. We must include packaging as a
styling weapon, especially in food products, cosmetics, toiletries, and small consumer
appliances. The package is the buyers first encounter with the product and is capable of
turning the buyer on or off.
Design:
For example, for many people, brushing is a ritual to which they pay relatively
little attention. As a consequence, many brushes are used well past the point
when their bristles are worn and are no longer effective. Toothbrush maker Oral
– B discovered a way to capitalize on this widespread habit. The company, by
introducing a patented blue dye in the center bristles of its toothbrushes found a
way to have the brush itself communicate to the customer. As the brush is used,
the dye gradually fades. When the dye is gone, the brush is no longer effective
and should be replaced
Similarly, John Scully marketing team at Pepsi – cola used packaging as a way
to differentiate Pepsi from Coke. They created a distinct, if temporary advantage
for Pepsi by designing plastic bottles that where lighter and thus easier for
customers to carry, than the heavy glass bottles of the time. They called it the
beauty on the move and that it not only made carrying soda easier, but it also
reduced the advantage of Coke’s well known contoured bottle. At the time ,it
was difficult to produce plastic bottles in that shape.
There are a variety of ways to differentiate. Whatever the route, the successful
differentiation strategy should have three characteristics.
The perceived value problem is particularly acute when the customer is not
capable of evaluating the added value. Consider the airline safety or the skill of a dentist.
The customer is unable to evaluate them without investing a significant time and effort.
Rather than expand such effect, the customer will look for the signals such as the
appearance of the aircraft or the professionalism of the dentist’s front office. The task is
then to manage the signals or the cues of value added. User association and endorsements
can help. Oral B is the toothbrush recommended by the dentists and Air jordan is
endorsed by Michel jordan.
a. segment
b. position
c. attribute
d. image
5. Summary
Many kinds of efforts that were given to produce differentiation in the product
being offered have failed. For example Westin Stamford hotel in Singapore advertises
that it is the world’s tallest hotel. But the tourists were least bothered about the height of
the hotel. Hence each firm needs to develop a distinctive positioning for its market
offering which is very much relevant in the benefit being provided by the product. Take
the case of an excellent positioning strategy being used by Volvo (station wagon). They
are aiming at the safety conscious upscale families and the positioning strategy is very
much related with the benefits being offered which are durability and safety. They
position the product as the “safest, most durable wagon in which your family can ride.”
Differentiation is the act of designing a set of meaningful difference to distinguish the
company’s offering from competitor’s offerings. Most profitable strategies are built on
differentiation; offering customers something they value that competitors don’t have. But
most companies in seeking to differentiate them, focus their energy only on their products
or services. In fact, a company has the opportunity to differentiate itself at every point
where it comes in contact with its customers – from the moment customers realize that
they need a product or service to the time when they no longer want it and decide to
dispose of it. It is believed that if companies open up their creative thinking to their
customers entire experience with a product or service – what the company call
consumption chain – they can uncover opportunities to position their offerings in ways
that they, and their competitors, would never have thought possible. Physical products
vary in their potential for differentiation. Product differentiation has a close linkage with
product positioning. It is in a way a prelude to product positioning. At one extreme we
find products that allow little variation: salt, steel, paracetamol. Yet even here, some
differentiation is possible. HLL makes several brands of laundry detergent, each with a
separate brand identity. At the other extreme are products capable of high differentiation,
such as automobiles, commercial buildings, and furniture. Duplication by competitors
requires not only ability but will. Increasing the investment or risk involved will
discourage competitors. If, for example, multiple points of differentiation are involved,
duplication will be more expensive. Duplicating only one aspect of this differentiation
strategy would be inadequate. Over investment in a value added activity may pay off in
the long run by discouraging competitors from duplicating a strategy. For example , the
development of a superior service back up system might discourage competitors. The
same logic can apply to a broad product line. Some elements of that line might be
unprofitable, but if they plug holes that competitors could use to provide value, then the
analysis looks different.
6. Exercises
7. References
1. Adrian Slywotzky and Benson Shapiro, “ Leveraing to beat the odds: The new
marketing mindset”, Harvard Business Review, September- October 1993, pp.100-
107.
2. Claudio Romano, “Identifying factors which influence product innovation: a case
study approach”, Journal of Management Studies, January 1990, pp.78-92.
3. Devine Hugh and John Morton, “ How does the market really see your product?”,
Business Marketing, July 1984, pp.70-77.
4. Ian C. MacMillan and Rita Gunther McGrath, “Discovering New Points of
Differentiation”, Harward Business Review, July-August 1997, pp133-145.
5. J.Karel, “Brand strategy positions products worldwide”, Journal of Business Strategy,
May-June 1991, pp.16-19.
6. John Rockwell and Marc Particelli, “ New product strategy: How does the pros do
it?”, Industrial marketing, May 1982, pp.49-60.
Product management
Unit structure:
1. Introduction
2. Learning Objectives
3. Marketing mix element- Product
3.1 Product strategies
3.2 Rationale for product mix
3.3 Components of product plan
3.4 Product life cycle
3.5 Product portfolio Analysis
3.6 New product management
3.7 New Product Development
4. Have you understood type questions
5. Summary
6. Exercises
7. References
1. Introduction:
According to Philip Kotler, there are five levels of a product. Marketing managers need
to think their way around five different levels of product when working through the
essentials of the offer which is going to be made to the customers. They are:
The core benefit: The basic benefit which is what the customer really wants when
deciding on a particular product. For example, a toothpaste which is able to clean
the teeth.
The generic product: This is the basic version of the actual physical product, for
example, an electric cooker.
The expected product: A set of attributes and conditions that buyers normally
agree to when they purchase a product. For example, a soap is expected to last
long and at the same time does not wear away due to water.
The augmented product: The product includes additional services and benefits
which help to distinguish it from competitive offerings, for example, a
manufacturer of television might extend the normal warranty period from one
year to say three years. In fact, SHARP television offered seven years warranty.
The potential product: At the final level stands the product of the future, namely
all the transformations and augmentations that a particular product might
undergo in the future. This is where the companies search for new ways to
satisfy their customers and differentiate their products. The emergence of Hyper
markets is one example.
It is hence imperative that you are given a indepth information on what is product,
why product management is important to organizations, the ways of new product
development and its entry into the market etc. Let us learn them in detail.
2. Learning Objectives:
Product is any thing that can be offered to a market to satisfy a want or need. Products
that are marketed include physical goods, services, experiences, events, persons, places,
properties, organizations, information, and ideas. A product mix (also called product
assortment) is the set of all products and items that a particular seller offers for sale. For
example, Kodak’s product mix consists of two strong product lines: information products
and image products. A company’s product mix has a certain width, length, depth, and
consistency. These concepts are illustrated below.
Width:
The width of the product mix refers to how many different product lines the
company carries. Hindustan Unilever Limited (HUL) has different product lines. It
offers different products for the consumers. The product lines offered by HUL are
Home and Personal care, Food and Beverages and Industrial, Agricultural and
others.
Length:
The length of a product mix refers to the total number of items in the mix.
This is obtained by dividing the total length by the number lines. Procter and
Gamble offers different product line width. It offers different brands under
detergents like Tide, Ariel.
Depth:
The depth of a product mix refers to how many variants are offered of
each product in the line. Hindustan Unilever Limited offers tooth paste named
Close Up at different sizes like 20 grams, 50 grams, 150 grams etc. In this case
HTL had a product depth of three.
Consistency:
The consistency of the product mix refers to how closely related the
various product lines are in terms of the end use, production requirements,
distribution channels, or some other way. P&G’s product lines are consistent
insofar as they are consumer goods that go through the same distribution
channels. The lines are less consistent insofar as they perform different functions
for the buyers.
These four product mix dimensions permit the company to expand its
business in four ways. It can add new product lines, thus widening its product
mix. It can lengthen each product line. It can add more product variants to each
product and deepen its product mix. Finally, a company can pursue more
product-line consistency.
COMPANIES PRODUCT MIX
WIPRO Software, Hardware, Soaps, Baby Care,
Cooking media, lighting and Medical
equipments
RELIANCE Power projects, Telecom, Satellite and
Internet Services, Infrastructure (Roads, Oil
lines, Ports, Landscape business),
Petrochemicals, Textiles, Fibres, Plastics,
Refining and Marketing
UB Spirits, Media, Healthcare, Agro-chemicals,
Engineering and Media software
MODI Cements, Alkalies, Tyres, Cigarettes,
Telecom equipments, Cellular service,
Paper products, Hardware and Office
Automation equipments
TTK Cookery products, Undergarments,
Pharmaceuticals, Cleaning agents and
Personal care products
3.1.Product strategies:
Godrej offers different brands of refrigerators, soaps and other things to its
consumers. Did this diverse assortment of products developed by accident? No -
-- it reflects a planned strategy by the company. To be successful in marketing,
producers and middlemen need carefully planned strategies for managing their
product mixes.
Product-mix expansion
The product strategies of trading up and trading down involve a change in product
positioning and an expansion of the product line. Trading up means adding a higher price
product to a line to attract a broader market. Also, the seller intends that the new
product’s prestige will help the sale of its existing lower-price products. By adding
Adreno and Energy as new bikes to the saddle of LML scooters, the company has traded
up. Trading down means adding a lower-price product to a company’s product line. The
firm expects that people who cannot afford the original higher-price product or who see it
as too expensive will buy the new lower-price product. The reason: the lower-price
product carries some of the status and some of the other more substantive benefits (such
as performance) of the higher-price item. Nirma introduced Nima soap in the northern
market at Rs.5 when other low end soaps are sold at the lowest price of Rs.6.
Some times the effect of trading down can be achieved through advertising, without
introducing new, lower-priced products. A manufacturer of fine or chinaware might
accomplish this by advertising some of the lower-price in its existing product
lines.Trading up and trading down are perilous strategies because the new products may
confuse buyers, resulting in negligible net gain. It is equally undesirable if sales of the
new item or line are generated at the expense if the established products. When trading
down, the new offering may permanently hurt the firm’s reputation and that of its
established high-quality product. To reduce this possibility, new lower-price products
may be given brand names unlike the established brands. In trading up, on the other hand,
the problem depends on whether the new product or line carries the established brand or
is given a new name. If the same brand name is used, the firm must change its image
enough so that new customer will accept the higher-price product. At the same time, the
seller does not want to lose its present customers. The new offering may present a cloudy
image, not attracting new customers but driving away existing customers. If a different
brand name is used, the company must create awareness for it and then stimulate
consumers to buy the new product.
Another product strategy, product mix contraction, is carried out either by eliminating an
entire line or by simplifying the assortment with in a line. Thinner and/or shorter product
lines or mixes can weed out low-profit and unprofitable products. The intended result of
product-mix contraction is higher profits from fewer products. Hindustan Lever has
announced that it would prune its brand portfolio during the year 2001-2002. During the
early 1990’s most companies expanded – rather than contracted – their product mixes.
Numerous line extensions document this trend. As firms find that they have an
unmanageable number of products or that various items or lines are unprofitable, or both,
product-mix pruning is likely. The result in many organizations will be fewer product
lines, with the remaining lines thinner and shorter.
Internationally, brand rationalization has been on companies’ agendas for some time. In
September 1999, Unilever announced that it would prune its brand portfolio by 75% -
from 1600 to 400. The basket of 400 includes brands like Dove, Lux, and the Calvin
Klein range of fragrances. Extensions are a company’s way of responding to consumer’s
desires, which are often gauged through research. Still, many consumers cannot
differentiate across the numerous alternatives – and get frustrated or angry in the process.
The large number of new offerings also poses problems for many retailers. Under these
circumstances, it is important for a Product manager to look at the optimum mix of
products in the company’s portfolio. It is hence necessary that the Product Manager gives
due consideration to the financial aspects related to the products and concentrates on the
following:
By calculating the above, the Product Manager can look at the following as alternatives:
1. Concentrating on the true profitability of each product irrespective of the years of
reckoning
2. Pricing has to be reworked based on the total costs
3. Possible outsourcing products to augment the product mix
A product line if it is too short, then the Product manager can increase profits by adding
items in the similar line under the same brand name, usually with new features. This is
termed as product line extension. The line extension may be innovative, ‘me-too’,or
filling in using another package size like that of Bisleri (from one litre bottle, offered two
litre bottle). The vast majority of new product introductions consists of line extensions.
Bacardi white rum which entered India, soon realising the need for black rum, added the
brand into their line. In a study undertaken by Holak and Bhatt revealed the following
about line extensions:
Line extension of strong brands are more successful than weak brands
Line extension of symbolic brands enjoy greater market success than those of less
symbolic brands
Line extensions that receive strong advertising and promotional support are more
successful than those that receive less promotional support
Firm size and marketing competence plays a part in an extension success
Earlier line extensions have helped in the market expansion of the parentbrand
Incremental sales generated by line extension may more than compensate for the
loss in sales due to cannibalisation.
1. Dettol:
Dettol started off in the 1930’s with Dettol mouthwash, antiseptic cream, obstetrics cream
and liquid antiseptic. Over the years, the portfolio has expanded to soaps, liquid soap and
shaving cream, Dettol plaster and several other products are still to use the brand equity
of Dettol. This has been done mainly due to the threat of Savlon. All these products will
be positioned along Dettol’s core values – trust and protection.
2.Godrej:
Apart from their growing portfolio of soap brands, Godrej bought Key, Ezee and
Trilo from Cussons International. IT has since added many brands in the soap category
including Godrej Fairglow, Godrej Sandal, Fairever vanishing cream etc. Godrej also
added ‘Cooklite’, edible oil and later on added a small variant –Chota Cooklite. In the
FMCG sector, Godrej is trying to augment their portfolio with new brands from
competitors.
3.DS Groups:
During 1999, DS group conducted a study through McKinsey and decided to increase
their product mix by adding food and beverages, Salt and spices branded –Catch, Tea and
edible oils in the same brand name and also mothfreshners. This is done apart from their
major brands – Baba Zarda and Rajniganda paan masalas.
3.3.Components of Product plan:
Each product level within a business unit must develop a marketing plan
for achieving its goals. The marketing plan is one of the most important outputs
of the marketing process, and it should contain the following elements.
The marketing plan should open with a brief summary of the plan’s main
goals and recommendations. The executive summary permits senior
management to grasp the plan’s major thrust. A table of contents should follow
the executive summary.
4) Objectives:
Once the product manager has summarized the issues, he or she must
decide on the plan’s financial and marketing objectives.
5) Marketing Strategy:
6) Action Programs:
(viii) Control:
The last section of the market plan outlines the controls for monitoring the
plan. Typically the goals and budget are spelled out for each month or quarter.
Senior management can review the results each period. Some control sections
include Contingency plans. A Contingency plan outlines the steps management
would take in response to specific adverse developments, such as price war or
strikes.
Product life cycle as a concept has been an indicator by which companies decide the fate
of the products and the brands they posses or introduce as new products. It is only a toll
which can be used for taking marketing decisions based on the position of the
brand/product in the life cycle. Some of the important aspects of the life cycle strategies
are mentioned below:
According to PLC, sales following a product’s launch are initially slow but then
increase as awareness grows. Maturity is reached when the rate of sales growth levels
off and repeat purchasers account for the majority of sales. Ultimately, sales begin to
decline as new products and new technologies enter the market. Leading eventually to
the product being withdrawn. The literature available in this area have thrown
contradicting arguments. One school of thought is clear that PLC is a foundation for
an effective product management system, while Dhalla and Yuseph argued that the
PLC is conceptually and operationally flawed. The bases on which the arguments are
presented include:
The biological metaphors used to suggest that products are living entities is
misleading
Attempts to match empirical sales data to life-cycle curves have proved
difficult and the results are largely meaningless
The life cycle of a product and hence the shape of the curve is determined by
how the product is managed over time. It is not an independent variable as is
suggested by traditional PLC theory
The PLC is not equally valid for product class, product form and for brands as
often argued
The stages of the life cycles are difficult to define
Identifying where on the life cycle a product is at any particular time is difficult
to determine
The scope for using the concept as a planning tool is limited and
Evidence suggests that where companies have tried to use the PLC as a
planning tool, opportunities have been missed and costly mistakes made.
The passenger cars in the low end models are passing through a maturity stage. The
profits associated with a car follow the ‘S’ curve of its life cycle , and decline as the
product nears the end of the maturity phase. Maruti Udyog’s decision to drop prices
during December 1998 of all versions of the Maruti 800 came at this stage. The
respite that the price-cut is expected to provide is aimed at extending the maturity
phase of Maruti as seen from the following figure:
Every product comes to the market has to pass through a series of stages (i.e.)
which is studied under the head product life cycle. It may be a shorter (or) longer
life cycle depending upon the performance of the product. To say that a product
has a life cycle is to assert four things :
Products have a limited life.
Product sales pass through distinct stages, each posing different challenges,
and problems to the seller.
Profits rise and fall at different stages of the product life cycle.
Products require different marketing, financial, manufacturing, purchasing,
and human resource strategic in each stage of their life cycle.
The shape of the product life cycle curve are portrayed as bell-shaped.
This curve is typically divided into 4 stages:
Introduction
Growth
Majority
Decline
Sales Matur
Dec
Growt
Introducti
Introduction :
During the market introductory stage, there may not be ready market for the
product. Sales are low; the product undergoes teething troubles, profits seem a
remote possibility ; demand has to be created and developed ; and the
customers have to be prompted to try out the product. this stage posses several
problems for the marketer. This stage poses several problems for the marketer.
The complexity of the problems and the duration of the stage depend upon the
nature of the product, its price, its technological newness and the consumer’s
view of the product. One of the crucial decision to be taken in this stage is the
pricing decision so, the management can pursue one of the four strategies.
I. Rapid skimming :
Launching the new product at a high price and a high promotion level. It
will take advantage of early entry and the realitive novelty of the product in the
market introduction stage. Those who became aware of the product are eager to
have it and can pay the asking price and the firm faces potential competition and
wants to build brand preferences.
2. Slow skimming :
Launching the new product at a high and low promotion. This strategy
make sense when the market is limited sense, when the market is limited in size ;
most of the market is aware of the product, buyers are willing to pay a high price,
and potential competition is not imminent.
3.Rapid Penetration :
Launching the product at a low price and spending heavily on promotion. This
strategy make sense when the market is large, the market is unaware of the
product, most buyers are price sensitive, there is strong potential competition,
and the unit manufacturing costs fall with the company’s scale of production and
accumulated manufacturing experience.
4. Slow penetration :
Launching the product at a low price and low level of promotion. This
strategy make sense when the market is large, is highly aware of the product, is
price sensitive, and there is some potential competition. Another crucial area
demanding attention at this stage is market development and promotion. In this
stage, demand has to be created and developed. The firm has to invest heavily
in promotion and visit for the reward.
During this stage, the demand for the product increases and the size of
the market grows. There is a rapid increase in sales. Early adopters like the
product, and additional consumers start buying it. Now competitors enter,
attacked by the opportunities. They introduce new product features and expand
distribution. Prices remain where they are or fall slightly, depending on how fast
demand increases. Sales rise much faster than promotional expenditures,
causing a welcome decline in sales promotion ratio. Profits increase during this
stage as promotion costs are spread over a large volume and unit manufacturing
costs fall faster than price declines owing to the producer learning effect.
During this stage, the firm uses several strategies to sustain rapid market
growth as long as possible.
Marketing and distribution efficiency becomes the decisive factor at this stage.
The pioneer sales and profits keep increasing at this stage.
In the maturity stage, the demand for the product reach a saturation point.
Price competition become intense and the pioneer tries to distinguish his brand
by subtle product differentiation and exploits the brand loyalty built by the
company. Maturity divides into 3 phases :
i) Growth phase :
This is the first phase where the sales growth rate starts to decline.
Market Modification :
The company might try to expand the market for its mature brand by
working with the two factors that makeup sales volume.
Convert non-users.
Enter new market segments.
Win competitor’s customers.
The company can try to get customers to use the product more
frequently.
The company can try to interest users in using more of the product
on each occasion.
The company can try to discover new product uses and convince
people to use the product in more varied ways.
Product modification:
i) Price :
Regarding the price, the decisions should be made in a way to attract
buyers or the price should be lowered (or) sometimes it is highered to signal
higher quality.
ii) Distribution :
In the distribution element, the outlets where the products to be displayed
increased or not ; about the introduction of new distribution channels, the number
of outlets are to be decided.
iii) Advertising :
The factors to be considered in advertising is, the expenditures made, the
message of the present advertisement to be modified, and about the frequency,
size of advertisements.
v) Personal selling:
In this, the number of quality of sales people to be increased, basis for
sales force specialisation, sale territories revision, sales force incentives, sales –
call planning are to be properly planned.
vi) Services :
The technical assistance given by the company to the customers, credit
facilities, their delivery node are to be enhanced. So, the marketing mix
modifications should be done efficiently. The major problem is especially price
reductions and additional services is that they are early imitated.
IV Decline Stage :
In this stage, sales begin to fall. The demand for the product shrinks
probably due to new and functionally advanced products becoming available in
the market / market being more saturated to the product. In any case, prices and
margins get depressed ; total sales and profits diminish. Firms do perceive the
impounding total decline and prepare for the gradual phasing out of the product.
Successful firms quite often keep new products ready in the queue to fill the
vacum created by the decline of existing products.
Some firms will use several strategies to over come this decline stage like
that is to link up the sale of these products with some other premium products
they have developed and thus try to sketch the life of declining product. In a
study of company strategies in declining induction, five decline strategies
available to the firm :
Increasing the firm’s investment (to dominate the market / strengthen its
competitive position).
Maintaining the firm’s investment level until the uncertainties about the
industries are resolved.
Decreasing the firm’s investment level selectively, by dropping unprofitable
customer groups, while simultaneously strengthening the firm’s investment in
lucrative riches.
Harvesting (“milking”) the firm’s investment to recover cash quickly.
Divesting the business quickly by disposing its assets as advantageously as
possible.
In launching of a new product, many companies fail because of not knowing how
to handle the problems at various stages in PLC. With the help of PLC concept, it is
possible to foresee and predict the profile of the proposed product’s life, the events that
are likely to take place in the market, and the issues on pricing, channel and promotion
that are likely to come up. The elaborate Exercise at preplanning and the lead time
available for keeping strategic options ready in anticipation of certain events in the
market, make the marketing man better equipped to charter the course of a product.
Some products get into trouble in their maturity stage, the PLC concept
can be of help to the marketing man. Strategies are formulated at this stage to
prolong profitable phase to overcome the threat from competitors normally, the
following strategies are followed.
Finding out new users of the product.
Finding out new uses of the product.
Popularising more frequent use of product.
Making the product more distinctive to the consumers.
By adding real / psychological value to the product.
Entry as innovators
Entry as early followers
Entry as segmenters
Entry as Me-too’s
6) As a control tool :
PLC concept also helps the company as a control tool by measuring the
performance of the products of their company to the competitor’s product
launched in the past. A detailed comparison can be made at each stages of PLC
and an effective strategy can be implemented.
1. Product category :
3. Brand level :
At the brand level ; HCL, Wipro and Siva brands are having their own
paths.
So, when a company wants to project its life cycle (i.e.) Wipro wants to project
the life cycle of its PC, it cannot make a realistic analysis unless it studies the life cycle of
a product sub-category personal computers as a whole. Wipro’s life cycle at the brand
level cannot evolve totally independent of other PC’s in the market. So, when the life
cycle of brand is assessed, it is essential to study the life cycle of the product category
and the product sub category as well. However, an idea of the likely life cycle of the
main product category of computers is helpful in understanding the course of the sub
category personal computers. In concluding that, a meaningful picture of the path the
brand is taking, it has to be studied in the context of the life cycle of the product sub
category and product category.
Nylon was a product that was primarily used for the military purposes to make
parachutes, threads, and ropes. Then it was extended to circular knit market that
is women’s hosiery. At that stage, the necessity for the growth of nylon was
found. Then there are steps taken to vitalise nylon.
Frequent usage:
Then steps were taken to vitalise nylon. The usage of nylon was increased
and the convenience that nylon had created a market for itself. Frequent usage
of nylon was promoted the bare laggardness of the users were used. The
stockings were promoted using that.
Varied usage:
New users:
The users of the nylon products were first the military, the it was targeted
at hosiery function and fashion users, and younger teenagers and substitutes
were using those products.
New uses:
New uses were created for the nylon, it was stretched and socks, rugs,
tires and bearings there uses of the nylon which was created to promote it warp
knits were invented in 1945 and nylon tire cord was invented in 1948. Nylon
textured yarns were invented in 1955 and carpet yarns were invented in 1958.
As a result of this in 1962 the sales went up of to 500 million pounds which was
previously 50 million pounds.
In early 1930’s, vaccum tubes got into the usage in electronics industry, the
home entertainment industry. Till 1940, the product was in the introduction stage
in the time of World War II the product’s usage became high at the period of
1945 to 1950. the product sales grown from 90 to 280 after the period of the
1950 the use of TV and phonographic computers made its sales to 300 units due
to military usage the number rose to a height of 400 units. At the early 1960’s,
the semiconductors were invented and the vaccum tubes were out of the market.
After the innovation of semiconductors, the growth in the electronic industry was
triggered after 1954. In early 1950’s, the portable radios made the industry to
grow, then Germanium devices and Silicon devices had a separate PLC then the
other trigger like space, IC’s also triggered the growth of the industry. The
computers and the IC’s were acting as the catalyst for the growth of the
semiconductor industry. The industry growth can be explained using the diagram
as explained below.
3.5. Product portfolio Analysis
Portfolio planning is best advised for diversified companies than a more product
coherent ones. Portfolio planning hence recognises that diversified companies are a
collection of businesses, each of which makes a distinct contribution to the overall
corporate performance and which should be managed accordingly. Such companies are
expected to redefine businesses for strategic business units (SBU), which may or may not
differ from operating units. They then classify these SBUs on a portfolio grid according
to the competitive position and attractiveness of a particular product market. Based on
these, they use this framework to assign each a ‘strategic mission’ with respect to its
growth and financial objectives and allocate resources accordingly. Companies can thus
theoretically assess the strategic position of each of their enterprises and compare these
positions using cash flow as the common variable. The four components of strategy can
be seen as influences on the firm's effectiveness and efficiency. The firm's effectiveness
is determined by the combined influence of scope, distinctive competence and
competitive advantages.
Types Explanations
Analytic planning Portfolio planning is only in the stage
of planning tool and traditional
administrative tools are used
Process planning Portfolio planning as a central part of
the ongoing management process
and strategic mission is explicit in
activities
Since the road to portfolio planning is a long one, companies often get stuck
trying to implement it and cannot realise the full potential of the approach. In
implementing portfolio planning, companies often write in biases that block its
usefulness, including the tendency to focus on capital investment rather than
resource allocation. In spite of such limitations, portfolio planning is offering the
following benefits to companies if implemented properly:
Tomorrow’s breadwinners:
These are either modifications or improved versions of what one company
has got as their major products or new products.
Today’s breadwinners:
These may exist today but they really are the innovations of yesterday.
Yesterday’s breadwinners:
These are old hat but eat up all that they earn.
“Problem children”:
Difficult to live with perhaps but better parental control should make the
difference between a healthy child and a potential deviant child.
“Also-rans”:
These are otherwise known as ‘me-too’ products in the market whose
existence itself is a question mark.
High Low
Star
Star are high growth - High market share business which may or may not
be self sufficient in term of cash flow. This cell corresponds closely to the growth
phase or product life cycle
Cash cows
As the term indicates, cash cows are business which generate large amounts of
cash but their rate of growth is slow In terms of PLC, these are generally mature
business which are reaping the benefits of experience curve. The cash
generation exceeds the reinvestment that could profitably be made into 'cash
cows'.
Question Marks
Business with high industry growth but low market share for companies are
question marks or problem children. They required large amount of cash to
maintain or gain market share. Question mark is usually new products or
services, which have a good commercial potential
Dogs
Those businesses, which are related to slow growth industries and where
a company has a low relative market share, are termed as 'dogs'. They neither
generate nor require large amounts of cash. In terms of PLC, the 'dogs' are
usually products in the late maturity or declining stage.
The firm should hold its dominant market position by reducing prices and thus
keeping away the high cost competitors. Cash flows are likely to be negative during the
growth phase in a dominant market since the firm will have to keep in investing to
maintain its competitive edge. Dominant position generates positive cash flows, during
the mentioned stage of life cycle. The BCG matrix makes it very clear that a firm for its
ultimate success needs a balanced portfolio of products or businesses. The individual
businesses are analyzed to form a corporate portfolio, which should act as a guide to
commit the firm’s resource. Portfolio should be balanced in terms of profit, cash flows,
and overall corporate risk.
Industry attractiveness
The nine cells of the GE matrix are grouped on the basis of low to high
industry attractiveness and were to thrown business strength three zones of
three calls each are made denoting different conditions represented by green
yellow and red colours for this reason, the matrix is also known as the stoplight
strategy matrix. Based on the three zone, the signal is go ahead to grow and
build indicating expansion strategies business in the green zone attract major
investment for the yellow zone, the signal 'Wait and See' indicate hold and
maintain type of strategies aimed at stability and consolidation for the red zone
the signal is top indicate achievement strategies of divestment and liquidation or
rebuilding approach for adopting turnover strategies.
Advantages
It is compared to the BCG matrix it offers intermediate classification of
medium and average rating.
It incorporates a large variety of strategic variables like market there &
Industry size.
Draw back
It only provides broad strategic prescriptions rather than the specific or business
strategy.
Disinvest (1,1): Likely already losing money; net cash flow negative over time.
Losses may be minimized by divestiture or even liquidation.
Phased Withdrawal (1,2) and (2,1): Probably not generating sufficient cash to
justify continuation; assets can be redeployed.
Cash Generator (3,1): Equivalent to a "cash cow" in the GE planning grid. A
firm or product would occupy this cell in later stages of the life cycle that does
not warrant heavy investment, but can be "milked" of cash due to its strong
competitive position.
Proceed with Care (2,2): Similar to a "question mark;" firms falling in this
sector may require some investment support but heavy investment would be
extremely risky.
Growth (upper - 3.2) and (lower - 2.2): Similar to a GE planning grid "green-
light" strategy. A firm, product, or SBU in these sectors would call for
investment support to allow growth with the market. It should generate
sufficient cash on its own.
Double or Quit (1,3): Units in this sector should become "high fliers" in the not
too distant future. Consequently those in the upper rightmost corner of cell
(1,3) should be singled out for full support. Others should be abandoned.
Try Harder (2,3): External financing may be justified to push a unit in this
sector to a leadership position. However, such a move will require judicious
application of funds.
Leader (3,3) (lower - 3,2): The strategy for this segment is to protect this
position by external investment (funds beyond those generated by the unit
itself - occasionally); earnings should be quite strong and a major focus may
be maintaining sufficient capacity to capitalize on strong demand.
Leader
The DPM can thus be used to identify strategies for single businesses as well
as for plotting combinations of units in multi business or multi product firms.
Locating competitors on the DPM can provide useful insights into the nature of
corporate-level strategic configurations. However, there is room for error in the
positioning of a firm or product on the two axes, and thus DPM location should be
interpreted with an open mind and not in isolation. The Directional Policy Matrix
(DPM) developed by Shell Chemicals; U.K. uses the two parameters of “business
sector prospects” and “company’s competitive abilities.”
A number of factors such as market growth, market quality, market supply,
etc. are used to rate the business sector prospects as unattractive, attractive or
average. A company’s competitive abilities are similarly judged as weak,
average, or strong on the basis of several factors. The 3 x 3 matrix when plotted
form the basis for recommending baseline strategies. One advantage on DPM is
that one of its extension; “risk matrix” provides alternative way to analyse
environmental risk. In a risk matrix, environmental risk is taken as the third
dimension and is divided into four categories from low risk to very high risk. Each
risk position is determined on the basis of environmental threats and the
probability of their occurrence.
This matrix is more flexible than the growth/share matrix and uses
competitive position and industry maturity as the two dimensions. It uses twenty
cells for clarity of resource allocation. Empirical determination of the correlates of
the two dimensions is superior to the growth/share matrix.
Dominant
Strong
Competitiv Favourable
e Tenable
Position Weak
Designing a portfolio:
In order to design a portfolio, the following guidelines are suggested by Yoram Wind
and Vijay Mahajan:
Establishing the level and unit of analysis and determining what links connect
them
Identifying the relevant dimensions, including single-variable and composite
Determining the relative importance of the dimensions
To the extent that two or more dimensions are viewed as dominant,
constructing a matrix based on them
Locating the products or businesses on the relevant portfolio dimensions
Projecting the likely position of each product or business on the dimensions if
(a) no changes are expected in environmental conditions, competitive
activities, or the company’s strategies and if (b) changes are expected
Selecting the desired position for each existing and new product and
developing how resources might best be allocated among these products.
In order to establish a matrix out of the available information from both the
company and the market, the GE matrix can be constructed using the following
steps:
Using the above, a case of Digital Theatre System (dts) product to be sold in the
theatres of Mumbai, the following done to find out about the investment
proposition:
Current coverage No 2
Competition Yes 3
Current systems Yes 4
Social aspects No 5
Legal aspects No 6
Coverage 4 15 60
Competition 2 5 10
Current systems 4 10 40
Social aspects 2 5 10
Legal aspects 2 5 10
60 205
Possible total
Industry attractiveness
300 200 100
0
High Medium Low
High
350
+
Medium
233
Business
Strengths Low
117
The next stage was to use the matrix to compare the present markets with
Mumbai as a potential investment by using the same basis. Hence the + in the
matrix clearly gives evidence for investment in the market concerned.
Technological developments often provide the basis for such radical new products.
Those products like CD player, Personal computer, Internet, which have made a huge
impact on the life style of people, are examples. At the first instance, many customers
will not obtain the product for the want of reason to use the product. Hence it was
only appropriate to target the right audience who are not price-sensitive. Companies
will get lot of time to convince the customers since competition is less. Pond’s black
head remover is a new product for HLL and also new to the market.
Customers may be aware of the core concept but an improvement in the product
creates a market. Hence the companies need to only communicate the nature of
innovation and the added benefits it provides to the product. Consumers can compare
the new product with the old from their own experience and reach an opinion as to the
value of the innovation. Stain-free clothes, wrinkle free ready-made garments and
first car fitted with a catalytic converter are some examples.
A minor innovation for the market is always required to stay tuned to the vagaries of
the markets and hence many companies in the consumer durable, automobiles always
try to opt for minor innovations. AKAI introduced TV with VCR as combined
equipment but however due to the risk involved in the product, customers were not
interested and was withdrawn. Products like FMCG where the risk is less, minor
innovations can work out.
“Me-too” products come under this category. For small companies with limited
resources, it makes sense to let the big competitors spend the time, effort and money
developing the radical new concepts. When the market is established and known, it
can launch a slightly cheaper imitation and get a foothold in the lower end of the
market. Walkman now has as many as 100 brands of imitations. There are plethoras
of soap brands, which are me-too in the market.
Booz, Allen and Hamilton Consulting Company’s experience with more than 4,000
companies since 1914 has given the insights about the stages in the new product
development process. They are:
Exploration
Screening
Business Analysis
Development
Testing and
Commercialisation
No Company can survive on new products alone. It will also need to upgrade its
existing products on a continuous basis making incremental improvements. Sometimes
there are accident grades like microwave oven but without a good process in place it
cannot work. The above mentioned stages are sequential in nature and in each stage,
management should be gathering additional information to reduce uncertainty about
demand, product-company fit, or even cannibalization of its own products. The concept
of ‘stage-gate’ process involves the maintenance of control over the expenditures
involved in new product development by balancing the company’s investment against the
value of additional information. That is, by assessing each idea after each stage based on
the information acquired, management can reevaluate the idea’s prospects for success. In
this stage-gate system, managers can open the gate to the next stage in the process or can
kill the new product at that point, thus avoiding the further expenditure of time and
money if the demand or profit prospects for the new product seem unfavorable.
Stage 1: Exploration
This stage is the one, which decides the fate of a company in the process of its
commitment to new product development. Hence, companies need to first
determine the product fields of primary interest to the company. Here the
question of new products in-house or using acquisitions as a route to new
product development needs to be addressed. Companies have to analyse the
major problems confronting them. They have to evaluate the company’s principal
resources. At this stage, it is necessary that external growth opportunities like
expanding markets, technological breakthroughs, rising profit margins be
identified. If found acceptable, such a route needs to be planned. In order to do
so, companies have to establish a planned programme for idea generation. The
sources of new product ideas are many and varied. Following is the table of new
product idea generation possibilities:
Table 11.1.Sources of new product ideas
Companies have to identify the idea generating groups and give them a clear
concept of the company’s interest fields. It is important that the creative personnel are
exposed to idea generating facts. These people are kept away from the distractions from
the current problems the company might face. Some companies designate an idea
collection point. Many companies in India in the manufacturing sector have a suggestion
box or idea box in the factory/office premises. Some companies even provide incentives/
bonuses for the employees whose suggestions have been carried forward to the next
stage.
To find and nurture REALLY BIG ideas, organizations should
In addition, a company’s scientists and technicians often make discoveries that lead to
new products. Mahindra & Mahindra uses the nomenclature of “sandpit projects” where
the R&D staff is encouraged to act freely around with new concepts. This is the way they
had made Bijlee. At Titan, ideas can originate with the marketing brief on the shop floor
as a spin off from a new material or process, in a lab, as an R&D idea no matter where it
comes from. Blow Plast, in the first week of the month begins with a meeting headed by
the CEO and attended by the functional heads of manufacturing, sales, R&D and
marketing purely for the purpose of product development brain storming. They have the
policy of set the standards and the creativity will follow. The most common methods of
idea generation in companies are:
Brain storming:
This method developed by Alex Osborn uses the recognition that the
really new ideas often mix several ideas to produce something that is non-
obvious and exciting. Group discussions are held to generate as many new ideas
as possible. The group generally consists of six to ten people. The group
members are encouraged to be as wild as they want in suggesting solutions. No
idea is criticised and hence no ideas are held back. As ideas start to flow, one
leads to another. Within a short time, hundreds of ideas can be on the table. Only
after ideas are generated freely, the group can then look forward to critically
evaluate later on for the purposes of practicability. A specific problem or goal is
set at the beginning of the meeting, which is known as synectics.
Market Research:
Companies have to identify the needs of the customers through the use of market
research. Most of the companies rely on this method since the customer analysis is the
best way of offering a product to their need. Nowadays, there are many consultants and
agencies that provide the necessary support to companies. The Persona toothpaste from
Amway uses accu pressure point was developed based on market research. The research
revealed that people tend to apply excessive pressure while brushing. This adversely
impacts teeth and gums. The accupressure point in Persona toothbrushes allows the brush
to bend, absorbing excess pressure. In addition to the USP of accue pressure point, the
Persona toothbrush has an angular design, and a slender neck, which allow easy access to
all regions of the mouth. The toothbrush also has rounded bristles, which prevent gums
from being grazed. A non-slip grip helps support the thumb, providing for better control.
Often a long term forecasting by companies can yield the required results. The
customer life style changes over the years, the changing societal trend etc., can
be forecasted and products brought accordingly. Dishwashers, Microwave ovens
are examples to this category of research.
Gap analysis is a technique which plans maps of the market and used to determine how
various products are perceived by how they are positioned on the market map. This
method helps in understanding the flaws in the existing products and the need for a new
product. The advent of Satellite television showed the need of nearly 100 channels and
host of other attributes which was immediately worked upon by companies like BPL,
Onida etc. Dabur developed Lemoneez lemon juice using market research to identify the
gaps felt most keenly by its target customer, as the lady in a house worked in the kitchen.
From this process the idea for Lemoneez, the lemon substitute converted into a product
by its laboratories.
Think Tank:
Companies are now employing the use of think tanks that assess the company’s resources
and objectives and devise concepts. Some times, top managers of the companies often act
as the source of new product ideas by identifying the consumer needs and changing
society. They also act as the think tanks.
Activity Analysis:
This technique is used by companies in ascertaining the usage of a product. Maruti Omni
was intended as a cargo vehicle but however, the usage of the product showed that it was
more used as a passenger vehicle. Hence the positioning and the product itself was
changed to the requirement. P & G studied the washing habits of 3000 customers in the
target segment for its middle market laundry brand, Ariel Gain Super Soaker, to identify
the one critical need – removing grease stains – that the brand addresses.
Foreign Search:
Some times, many multi national companies translate their experience from another
country. Some Indian companies search the various products, which are not available in
India and offer this product after obtaining the necessary agreements. It is often found
that many products, which are successful in one country, may not succeed in another due
to the cultural and social differences. Soya bean milk was successful in USA but when in
India, it failed confirming the above reasons.
Morphological analysis:
This method analyses the structural dimensions of the product, which helps in getting to
the relationships between them. When a writing instrument is analysed, the extent of its
length, clarity and convenience become the relationship factors from where a new
product can be found out. Research on the old Ford Escort indicated that a three – box
design found favour than a hatchback. Apart from more space for luggage, consumers felt
the boot also provided more safety than a hatch. Indian customers also told Ford that rear
seats used for 70 % of the time. In other markets, the rear seat is used less than 10% of
the time, whereas in India it is used extensively to cram in people. So, the Ikon was to
have a roomier rear seat with full roll –down windows, reading lights and comfortable
centre seating as well. And the rear door openings were claimed to be the largest in the
industry while the height of the chassis was such that it will be easy to get in and out. The
new Ford Ikon car’s design had also taken care of the poor road conditions during the
monsoons in India.
Stage 2: Screening:
Screening is the second stage in the new product development model. During the
screening process, a company evaluates the commercial potential of a new product. The
commercial potential of a product includes such criteria as profitability, marketability,
and costs of production. Screening also calls for the participation of other departments
within the company in the development of new ideas. The ideas and advice of people at
different levels of production will aid the product in areas such as its eventual
effectiveness, ease of production, and production costs. Allowing all levels of employees
to be involved in the process increases the empowerment within the company.
After the necessary ideas are generated, the next stage is to reduce the number to a
manageable size. It is important to expand each idea into a full product concept. New
product ideas should fit into the company’s overall strategy. They should also build on
the company’s resources and skills. They have to collect facts and opinions, which are
quickly available, bearing on the product ideas as business propositions. This stage
should translate the idea into business terms. At this stage it is important to identify the
best sources of facts and qualified opinions. Quick and inexpensive fact gathering
methods using the principle of “diminishing returns” is better to be resorted. The
checklist for the screening of new product ideas is depicted in the following table.
At Titan Industries, every idea is made to pass through a stringent 5 – point test covering
Styling
Costing
Sourcing
Schedules and
Resource requirements
At HUL it was the sheer systematic approach to idea management that ensured the
development of Close up toothpaste sachet with a nozzle. The idea for the product, which
originated with a marketing team, was forwarded to one of the three innovation centres in
HUL. A cross-functional team examined it, approved it and allotted the required
resources.
In business analysis, the company decides whether the new product will fit well within
the company's product line, distribution methods, and promotion methods. Marketers
also further test the potential for sales, profits, market growth, and competitiveness.
Human welfare is also considered in the operation of the company. The ideas are made
more specific in this stage. Universal Air Technology, an Indian American firm in the
USA has developed an innovative new technology called Phototech using the concept- it
disinfects and cleans indoor air by photocatalytic oxidation. It is a revolutionary concept
that is effective against indoor air pollutants such as bacteria, viruses, and molds, dust
mite allergens and odors. It won the 1999 New Product Award in the small business
category by the National Society of Professional Engineers. This was made possible only
after the deluge of ideas were carefully screened and developed further into a business
proposition. This is the stage where the concept has to be further refined and made into
business terms. The aspects that need to be formulated for making an idea into a concept
are:
Based on these, once the concept has been developed, it has to be tested. Consumer
reactions are obtained by using a verbal description or a picture of the product and asking
for unbiased opinions. In the major manufacturing industry, the products are brought to
business or industrial consumers at a designated test sites, and developers work closely
with these consumers to spot the problems and refine the designs. After this, the company
has to project costs, profits, return on investment and cash flow if the product is placed on
the market. Projections of potential sales at various prices need to be made, as well as
detailed cost projections for different volumes of production. Start-up and continuing
costs, fixed and variable costs and the impact of economies of scale need to be
determined. Tentative marketing plans need to be set, along with the costs associated
with them. Lastly, a set of full-blown budgets is required to estimate the potential return
on the product. Thus business analysis must include an assessment of the amount of risk
the company will face if the new product is introduced. If the new product can be
produced using existing production and marketing capabilities, the risk is lower. Less
investment in new plant and equipment will be needed, and the marketer can benefit from
already acquired knowledge of the market. TVS Suzuki and Bajaj Auto use the technique
of target costing to determine the price of the product and working backwards to fix the
maximum acceptable cost to develop new products.
Stage 4: Development:
After the laboratory tests on the basic performance against specifications are over,
the new product should be released. At this stage it is important to note the commercial
rather than scientific standards to determine the product release point. TI Cycles of
Chennai put the Hercules top gear in shops, a product that has fuelled 20-fold growth in
the segment in quick time as a new product to overcome the depressing cycle sales. When
this was identified as the lack of reliability of gears, TI cycles decided to use the best and
safest gears and design its product around its component. Managing cost was a critical
issue, because the gears were being imported. This was achieved by maintaining best
control on material cost and cheaper outsourcing. Both the decision taken as a part of
product development and not as a production process. At Bajaj Auto, product
development is about five parallel activities like product definition and design,
manufacturing process development, marketing, planning and tooling. Different
departments work on different application areas, industrial design on styling, engineering
design on structural and engine components, product engineering on machine tool design
and systems on system configuration. A potent technique for ensuring product quality at
the development stage is benchmarking. For instance M&M is benchmarking Scorpio
against Tata Sumo for passenger comfort against its own vehicle for fuel economy,
against the Maruti Gypsy for comfort and ease of driving, against Tata Sierra for
acceleration. Philips applies the fault-mode effect analysis technique to check the various
things that could go wrong with a specified product and chalk out an optimum solution.
Test marketing is a tool for new product launch and new product development.
The company can develop new product in own laboratories and independent researcher
develops a new product. Test Marketing has been defined as a “research technique in
which the product under study is placed on sale in one are more selected localities or
areas, and its reception by customer and trade is observed, recorded and analysed”. This
test market will allow managers to see how the product might perform when released to
the entire market. From this information, managers can also decide if they have the right
target market, the right price, and the right level of advertising.
In this stage the new product and relevant marketing programme is tried out for
the first time in well selected market segments under representative marketing
environments. Hence test marketing is the process of introducing a new product or
service to a small “test market” (i.e.) considered to be representative of the large target
market. Test marketing have many alternative forever like advertisement with coupon
and samples. Launching the new product in the market is risky one, Because the product
development are variable to changing customer needs and taste, New technology,
shortage product life cycle, and lastly the increased domestic and foreign competition.
Seventh aspect of product development is launching the market product.
b. Where the cost and risk of product failure are high relative to the profit
and probability of success.
c. Where the difference in the scale of investment involved in the test versus
national launch route has an important bearing on deciding whether to test.
If the company investment for a national launch is far greater than the test
launch, testing should be preferred.
d. When the possibilities of and the speed with which copying of the test
product by competitors are great, testing may be avoided. This is
particularly relevant in soft technology industries.
1. City selection
2. Select the sales representatives.
3. Duration of the test.
4. Select suitable data.
5. Implementation
All available data should be carefully reviewed to make sure that the test-market is by
and large representative of the whole market in terms of social class, caste, age, and other
demographic variables. All available data should be reviewed also to make sure that the
test-market is representative in terms of consumption of similar or substitute products. It
is also advisable to be assured that competitive strength in the test-market is approximate
to those in the whole market. After having considered the above factors in test marketing,
it is also advisable to check up different components of the marketing-mix to be
employed in the test marketing and their probable future relationships. It is important
because distortion in any one component at the commercialization stage would bring
about distortion in the test results and the actual product performance. For example, if
testing is accompanied by an aggressive sales promotion campaign but not so in
commercialization stage then subsequent results would be different. Based on the
response in the test marketing, a company can follow any of the three options:
The controlled test marketing allows the company to the insure factors ((i.e.) Alpha
testing which means the testing for with in the company) and limited advertising on
buying behaviour. A sample of consumer can be tested or interviewed later to give their
impression of the product. However, the controlled test marketing provides no
information on how to sell the trade on carrying the new product. This technique also
exposes the product and product feature to competition. Even the company does not have
to use its own sales force, give trade allowances and buying distributions.
This testing means 30 and 40 qualified shoppers have to be selected and questioning
then about brand familiarity and preferences in specified consumer of product. This
testing involves the interviews with the shoppers about the product that is moving fast
and how to put the new product in the market. Consumers receive a small amount of
money and are invited in to a store where they may buy the product or any item of
product. Some weeks later, they are interviewed by phone to determined product
attribute, usage, satisfaction and repurchase frequently and are offered a opportunity for
repurchasing of the product, results are incorporated in forecasting to the sales levels.
Colgate Palmolive used a different marketing mix in each four cities like. Colgate
Palmolive after launching a new product in set of small “lead corners” and keeps rolling
it out if the proves successful, and general mills have launched new product area too large
for rivals to distribute.
An average amount of advertising coupled free samples.
Heavy advertising with free samples
Average amount of advertising linked with redeeming samples.
An average advertising with no the other special offers.
Stage 6: Commercialisation:
At this stage, complete final plans for production and marketing has to be done. The
product team if necessary needs to be expanded to cover all the departments of the
company. This is the stage where the right individuals are identified who would take over
the successful marketing of the product and who have the capacity to coordinate with
other departments of the company. A complete activity schedule has to be prepared. Feed
back mechanism has to be developed for effective control. The product has to be ready
for meeting any competitive pressures and changing internal problems. In terms of
launching or commercialising the product, there are two main alternatives.
This is one way to overcome the competition and to save on the costs of launch. If
considerable promotions are carried out, it will be difficult for the competition to
overcome the company. The risk of national launch is that it leaves the company with
many problems, which were not countered during the test marketing. Production routines
that work well on the schedules may not scale up as expected. Early problems of supply
may show poorly on the launch.
Rolling launch:
This is an alternative to the full national launch. It involves building towards full national
coverage by starting with one or two recognised distribution areas, then gradually adding
new regions to those already served as experience and success of the product further
increases. This helps the company to concentrate on getting the logistics and production
schedules in tune with the requirements. Coca-Cola, Kellogg’s’ and several other major
players including HLL use this strategy effectively.
In April 1999, Mahindra & Mahindra unveiled the Bijlee, the first ever
commercially viable electrically operated 3 wheeler, a classic skunk work project,
worked on by a 14 member team, without a deadline, budget or even assurance of
success. The project took exactly 6 months. For example, at Titan industries which
develops between 70 and 100 new watches every year every new model flows from 3
central strategic considerations viz., boosting brand value, increasing market share and
profit maximisation. HUL considered most Indians tend to oil their hair before they
shampoo and tried to tap this trend by introducing a ceramides based hot oil brand called
Ceramides sunsilk hot oil treatment. Though the company had already stretched the
equity of its largest selling shampoo, Clinic into oils, in the case of Sunsilk it is the
ceramides based hot oil concept it was trying out on its customers. It was initially test
marketed in Calcutta and the product poised for a national launch at the end of 1999.The
product was in the form of a blister pack in which the contents were visible .The oil was
to be immersed in warm water before use. Stretching the equity of a shampoo brand into
hair oils was not looked upon favorably by analysts. HUL after realising its market share
in the shampoo market has slipped from 18% in 1996 to 16.75% in 1998, in a move to
regain its position, launched two new variants to the brand Sunsilk- Fruitamins and
Ceramides as standalone brands in 1998.
1. Raman called several airlines to compare rates and chose a flight on Jet
airways as it had a better reputation for service and competitive prices. The
airline ticket is an example of which type of product?
A. convenience
B. shopping
C. specialty
D. unsought
2. Industrial products are :
A. accessory products.
B. component parts.
C. consumable supplies.
D. assembly components.
4. Hindustan Unilever Ltd., markets a number of different brands of laundry
detergents including Surf Excelmatic, Surf Excel, Rin, Ariel and Surf. Each of
these specific versions of laundry detergents can be described as:
A. a product item
B. a product line
C. a core product
D. a mix item
5. A product item can be best described as a
5. Summary:
As the competition becomes more intensified in years to come, companies are gearing
to face them by becoming more specialised. Hence the marketing department
becomes more professionalised and in this context, product management gains
prominence. The expanding markets based on liberalisation, privatisation and
globalisation needs a professional approach coupled with the sophistication in
technology and consumers becoming more educated, this development in product
management is inevitable. A product manager has to be in the current competitive
environment competent to handle diverse functions like:
Hence it is imperative that he should have a clarity over the new product
management and development along with the knowledge of product life cycle.
6. Exercises
1. Prepare a product mix depth for fast moving consumer goods of any company.
2. Identify and explain strategies for the following products in different product life cycle
stages:
a. Ceiling fans
b. Scooters
c. Palm top computers
d. Starch for laundry
e. Digital diary
f. Mobile phones
3. For a product like Vacuum cleaner, you want to conduct test marketing. This product is
to be launched on a national basis. Explain how will you proceed?
4. Describe the new product development process in a pharmaceutical industry.
5. Evaluate the methodology for launching the following products on a national basis:
a. Incense sticks
b. Digital note books
c. Mouthwash
d. Anti septic lotion
7. References
1. Dhalla and Yuseph, “Forget the Product Life Cycle”, Harvard Business
Review, 1976, pp.102-110.
2. John Smallwood, “The product life cycle: a key to strategic marketing
planning”, MSU business topics, winter 1973, pp.29-32.
3. Joseph Gullitinan, Gordon Paul and Thomas Madden, “Marketing
management- strategies and programs”, McGraw-Hill,1996, pp.182-85.
4. Glen Urban, Theresa Carter, Steven Gaskin and Zofia Mucha, “ Market share
rewards to pioneering brands: an empirical analysis and strategic
implications”, Management Science, June 1986, pp.645-57.
5. Ian Wilson, “Reforming the Strategic Planning Process: integration of social
and business needs”, Long Range Planning, October 1974, p.3.
6. Michel Allen,” Diagramming GE’s planning for what’s WATT “in Robert Allio
and Malcolm Pennington, editors,” Corporate planning Techniques and
applications”, New York, 1979.
7. Philippe Haspeslagh, “Portfolio planning: uses and limits”, Harvard Business
Review, January-February 1982, pp.61-63.
8. Dhawan Radhika, “How to develop the best new products “, Business Today, June
22,1999,pp.74 – 85.
9. Dobhal Shailesh & Gupta Indrajit, “David Vs Goliath ii: The soap opera”, Business
Today, October 7 1999, pp.23-24.
10. Hubert Gatington, Eric Anderson and Kristiaan Helsen, “ Competitive reactions to
market entry: explaining interfirm differences”, Journal of Marketing research,
February 1989, pp.44-55.
11. Albert Page, “ Assessing new product development practices and performances”,
Journal of product innovation and management, Spetember 1993, pp.136-145.
12. Bhushan Ratna, “Turning on the heat”, Businessline, October 12, 2000.Tom Gorman,
“What will our customers think of this product idea?” Business Marketing, September
1987, pp.76-78.
13. Chakraborthy Alokananda, “Donning the war paint”, Business India, November 3 –
16, 1997, pp. 97-98.
14. Challapalli Sravanthi, "Margo dishes out a new avatar”, Businessline, January 11,
2001
15. Robert Cooper, “The new product system: the industry experience”, Journal of
Product innovation and management, June 1992, pp.113-120.
16. Roger Calantone, Anthony Di Benendetto and Ted Haggblom, “ Principles of New
product Management: Exploring the beliefs of product practitioners”, Journal of
product innovation and management, June 1995, pp.235-240.
17. Salton, Gary J., Organizational Engineering: A New Method of Creating High
Performance Human Structures. Ann Arbor: Professional Communications
Inc., 1966.
Brand management
Unit structure:
1. Introduction
2. Learning Objectives
3. Branding
3.1. Branding decisions
3.2. Brand meaning
3.3. Brand platform
3.4. Brand Architecture
3.5. Brand Extensions
3.6. Brand Stretching
3.7. Brand equity
4. Have you understood type questions
5. Summary
6. Exercises
7. References
1. Introduction:
Attributes
Benefits to the customer
Producer’s values
Culture
Personality
User
2. Learning objectives:
3. Brand management:
Kevin Lane Keller, brand guru identified the following ten traits as the common aspect
behind the successful brands:
Benefits Of Branding:
1. Branding makes it causes for the seller to process orders and track down
problem.
2. The seller’s brand name and trademark provide legal protection of unique
product features.
3. Branding gives the seller the opportunity to attract a loyal profitable set of
customers. Brand loyalty gives some protection from competition.
4. Branding helps the seller segment markets
5. Strong brands help build the corporate image, making it easier to launch new
brands and gain acceptance by distributors and consumers.
3.1.Branding Decisions:
3.1.1.Brand name decisions:
The first decision is whether the company should develop a brand name for its
product. Branding is such a strong force that hardly anything goes unbranded. In some
cases however there has been ‘no branding’ of certain staple consumer goods and
pharmaceuticals. ‘generics’ are unbranded, plainly packaged, less expensive versions of
common products. They offer standard or low quality at a price that may be as much as
20 percent to 40 percent lower than nationally advertised brands and 10 percent to 20
percent lower than retailer private label brands. The lower price is made possible by
lower quality ingredients, lower cost labeling and packaging, minimal advertising. The
advantages of brand naming are:
Easier for the seller to process orders and track down problems
Provide legal protection against plagiarism
Gives the seller the opportunity to attract a loyal and profitable set of
customers
Helps build corporate image
The brand name is the most important element in the branding mix. It
identifies the product or service, and allows the consumers to specify, reject or
recommend brands. Through time and use, a name can therefore become a
valuable asset. Colgate- Palmolive company has systematically tried to
harmonise the naming of its products from country to country. In general, it uses
the Colgate name for oral care products, such as toothpaste, and the Palmolive
name for body care products, such as shampoos and conditioners. When Nissan
Motor Company introduced its cars into the United States, its management did
not have total confidence in the quality of its cars, so the name Datsun was used
for fear of losing face. However, after 20 years of promoting the Datsun name
and building a quality image, the company decided to phase out the Datsun
name and substitute the corporate name, Nissan. For a time, the company’s cars
carried both names, until the Nissan name was firmly established in consumers’
minds.
1. Decide what job the new name need to perform, now and in the future.
2. Isolate those naming themes that are relevant to the consumer and
appropriate in branding and positioning terms.
3. Use Delphi technique or focus groups, name development specialists,
computers and an existing name library to create names.
4. Once a vast list of names are identified, it needs to be pruned to manageable
proportions.
5. Names that have difficulty of pronounciation, legibility, memorability or
meaning need to be discarded.
6. Eliminate those names that are unregistrable as trade marks, that are too
close to existing competitive marks or that fail to meet other criteria like length
of the name etc.
7. Choose the name upon discussion with the top management, advertising
agency and the participants in the marketing system.
Initially, Mitsubishi sought to sell its four-wheel-drive utility wagon as the Pajero
until they learned it meant "straw man" in Spanish; it was renamed the Montero,
"Mountain Man." One firm tried to sell a de-icer in the U.S. by the name "Super-
Piss." The Spanish potato chip "Bum" did not do well for the same reason.
Nissan also sought to sell a sports car in the U.S. in the early '70s called the "Fair
Lady." It later sold better as the 240Z. In any naming process, hundreds of
potential names are eliminated by some of the steps already mentioned. In
coming up with a name for the old Bell Labs division of AT&T, San Francisco-
based firm Landor Associates went through 700 different names before they
came up with "Lucent Technologies." Finally, it makes sense to eliminate names
that do not sound well or make sense in other languages. During Coca-Cola's
first entrance in China, great care was taken to get the phonetics correct in
pronouncing Coca-Cola. However, the name manipulators forgot the meaning of
the symbols they selected only to learn they meant "kiss the wax tadpole."
There are several options with respect to brand sponsorship. The products
can be launched as any of the following types of brands.
Manufacturer brand-called sometimes as a national brand like the
Blowplast Industries’ VIP.
Distributor brand-also called reseller, store, house (or) private brand.
Licensed brand name. Although manufacturer brands dominate, large
retailers have been developing their own brands by contracting production
from willing manufacturers.
In years past, customers viewed brands in a category arranged in a ‘brand ladder’ with
their favorite brand at the top and remaining brands in descending order of preference.
Now the ‘brand ladder’ concept is being replaced by ‘brand parity’ that many
brands are equivalent.
A company has five choices with regards to brand strategy. They are,
1. Line extensions: existing brand name extended to new sizes or flavors in the
existing product category like Cinthol ‘cologne’, Cinthol ‘lime’. Extensions may
lead to the brand name losing in specific meaning. However there is a much
higher chance of survival than brand new products.
2. Brand extensions: where a company may use its existing brand name to
launch new products in other categories like the brand ‘Rin’ being extended to
both detergent powders, detergent cakes. The new product may disappoint
buyers and damage their report for the company’s other products. The brand
name may be in appropriate to the new product. The brand name may also
lose it’s special positioning in consumers’ mind trough over extension. ‘Brand
dilution’ occurs when consumers no longer associate a brand with a specific
product or highly similar products.
3. Multi-brands: a company will often introduce additional brands in the same
product category. Sometimes the company is trying to establish different
features or appeal to different buying motives. A multi-branding strategy also
enables the company to lock up more distributor shelf space and to protect its
major brand by setting up ‘flanker brands’. Hindustan lever limited produces
three different brands of detergent powders. Company inherits different brand
name in the process of acquiring competitors. SmithKline Beecham consumer
health care owns the acquired brand names like ‘Viva’, ’Malt ova’. Hindustan
Lever Ltd. Owns acquired brand names like Brook Bond, Hamam Kissan. A
major pitfall introducing multi-brand entries is that each might obtain only a
small market share and none may be particularly profitable. The company will
have dissipated its resources over several brands instead of building a few
highly profitable brands.
4. New Brands: New Brands are created when company launches products in a
new category it may find that none of its current brand names are appropriate.
Yet, the cost of establishing a new brand name in the market place is costly.
5. Co –Brands: A co-brand is a combination of two or more well known brands
in an offer like the combination of SBI and GE Capital in the issue of SBI
credit cards.
3.1.4.Brand Repositioning:However well a brand is currently positioned, the company
may have to reposition it later when facing new competitors or changing customer
preferences. The UB groups McDowell’s ‘Mera no.1’ brand was once positioned for
people with ecstatic moods but now it has been repositioned as a drink for socially
responsible individuals.
3.2.Brand meaning:
A brand can convey up to six levels of meaning. The challenge in branding is to develop
a deep set of these meanings for the brand. When the audience can visualise all the six
levels, then the brand can be deemed to be a success. The following are the six levels:
1. The key attributes based on its recognition, reputation, affinity and expertise
needs to be communicated to the customers. Hence if Maruti advertises on its
MPFI engine or Bajaj advertises on its resale value, then the attributes are put
across to the customers.
2. The second level is that the attributes should be translated into functional and
or emotional benefits. Thus Maruti advertises that every 2 out of 3 buy a
Maruti translates their key attributes across the customers.
3. The third level of meaning is about the producer’s values. By advertising that
even in Himalayas, Maruti has a service centre, they show that they care for
the customer and their concern to have as many service centers across the
country.
4. The fourth level is in its culture. Johnson and Johnson had always focussed
on the bondage between the mother and the child while advertising their child
care products, it represents their culture. Hyundai Santro focussed their
Korean culture intitally and then used a celebrity to drive home their product
differentiations. When Dabur Amla hair oil advertises, the non-chemical
requirements of the Indian women got translated in their culture.
5. The fifth level of meaning is on the brand personality. The brand is portraying
the personality of an individual who owns it. Hence if surf is to be related to
God Shiva, Nirma is related to Goddess Kali and their relationship will reflect
the true identity of the brands.
6. The last level is the kind of person who buys or uses the product. He/She
does it based on the product’s values, culture and personality. That is the
reason why Raymond advertises the ‘complete man’ factor to get the
premium-ness it expects from the market. “Three roses” tea portrays what the
totality of tea is all about. “Vim” bar is also an example which shows the
middle class women’s thriftiness and quality consciousness.
3.3.Brand Platform:
3.4.Brand Architecture:
Brand Architecture is the vehicle by which the brand team functions as a unit to
create synergy, clarity and leverage. How an organization structures and names
the brands within its portfolio is also known as the brand architecture. There are
three main types of brand architecture system:
monolithic, where the corporate name is used on all products and
services offered by the company;
endorsed, where all sub-brands are linked to the corporate brand by
means of either a verbal or visual endorsement; and
freestanding, where the corporate brand operates merely as a holding
company, and each product or service is individually branded for its
target market.
Brand architecture is an organizing structure of brand portfolio that specifies the
brand roles and relationship among the brands and different product market context. It is
mainly defined by the three major dimensions viz. Portfolio roles, Product market context
roles and the Portfolio structure.
Brand portfolio: Brand architecture involves the management of brand portfolio. Brand
portfolio includes all the types of brand viz. Brands and sub-brands as well as co-brands
with other firms. For example, the brand portfolio of HLL consisting of 110 brands with
950 of different types of packs which are operating under different market context like
healthcare, personal care, beverages, etc. During the annual year 2001-2002, HLL has
taken a decision to further prune down their 110 brands to 36 brands only over a three
year period. A brand portfolio can be strengthen by the addition of brand keeping in view
the portfolio perspective. Some international brands are being planned to be strengthened
in HLL.Similarly brands can be deleted by identifying the superfluous brands which are
contributing nothing to the brand portfolio. Some of the brands to be deleted by HLL
include Jai soap, Captain cook salt and Aim toothpaste.
Portfolio roles:
There are four steps of product market context roles that work together to define a
specific offering:
b) Benefit brands: The benefit brand is a brand which offers either features, component
ingredients or services which becomes the unique selling proposition (USP) of offering.
For example, Johnson and Johnson brand ‘Indicator’ toothbrush, has a branded feature
which shows the time to replace the toothbrush.
c) Co-Brands: Co- branding occurs when brands from different organizations combine to
create an offering in which each plays a driver role. The impact of co-branding can be
greater than expected when the associations of each brand are strong and complementary.
d) Driver role: Driver role is an extent to which a brand drives the purchase decision and
defines the use experience. Brand with a driver role will have some level of loyalty.
Nirma washing powder for Nirma Chemicals and Lifebuoy for HLL are driver brands.
The brands in the portfolio have a relationship with each other. Brand
architecture also involves designing a structure of all the brands, which will provide
clarity to the customer rather than complexity and confusion. It must provide a sense of
order, purpose and direction to the organization. Three approaches can be utilized to
present the portfolio structure.
For any firm the objectives behind designing and maintaining an effective brand
architecture are:
3.5.Brand Extension:
Line extensions and brand extensions are different as such. Line extensions should
refer only to additions to an existing product like new sizes, styles or related products
– to fill out the line. Thus, Fair Glow is an addition to the Godrej toilet soap line,
which already included Cinthol and Ganga. Wheel was a line extension to HLL’s line
of detergent bars, which already contained Rin and Surf. By contrast, brand extension
refers to using an existing brand name to enter another product market category
altogether viz., Dettol antiseptic liquid and Dettol soap.
Product line extension: Adding related products to an already established
brand. Arrow After hours shirts being added to business shirts.
The most common form of brand extension is family branding. A family brand is
assigned to an entire range or mix of all product items. Godrej makes soaps, locks,
furniture etc. In all these products, Godrej brand extensions are carried out. A
powerful name, however, is no guarantee that family branding will succeed. Xerox
tried to extend its powerful brand name to computers and printers but failed. Murphy
suggests that brand extensions constitute an estimated 95 per cent of the 16,000 new
products launched in the Untied States every year. Extensions are popular because
they can provide new products with a ready-made image while helping existing
products through increased brand exposure. However, extending a brand name to
inappropriate products may result in product failure and/or reduced brand value.
There are three key factors that a company must consider in the implementation of a
brand-extension strategy:
(1) competitive brands in the extension categories
(2) the attributes of the extension brand and
(3) The perceived fit between the brand and the extension.
Brand equity is a set of assets and liabilities linked to a brand’s name and symbol
that add to subtract from the value provided by a product or service to ad firm and / or
that firm’s customers. According to David A. Aaker, brand equity is "a set of brand assets
and liabilities linked to a brand, its name and symbol, that add to or subtract from the
value provided by a product or service to a firm and/or that firm's customers". Lance
Leuthesser, et al wrote that "Brand equity represents the value (to a consumer) of a
product, above that which would result for an otherwise identical product without the
brand's name. In other words, brand equity represents the degree to which a brand's name
alone contributes value to the offering (again, from the perspective of the consumer)". In
America, there is a now an influential body called the Coalition for Brand Equity
(founded 1991), which evangelists for the importance of building brand relationships and
brand loyalty. The Marketing Science Institute defines brand equity as, “The set of
associations and behaviors on the part of the brand's customers, channel members, and
parent corporations that permit the brand to earn greater volume or greater margins than it
could without the brand name and that gives the brand a strong, sustainable, and
differentiated advantage over competitors”. Joel Axelrod defines brand equity as ‘the
incremental amount your customer will pay to obtain your brand rather than a physically
comparable product without your brand name’.
The assets and liabilities on which brand equity is based differ from context to
context. They can be usefully grouped into four categories viz., Perceived quality, brand
awareness, brand identity, and brand loyalty. Brand equity refers to a “set of assets and
liabilities linked to a brand, its name and symbol that add to or subtract from the value
provided by a product or service to a firm and or to that firm’s competitors. In other
words brand equity provides (or negatively subtract) value to a firm in the form of price
premium or trade leverage or competitive advantage. The most important assets of any
business are intangible: its company name, brand, symbols, and slogans, and their
underlying associations, perceived quality, name awareness, customer base, and
proprietary resources such as patents, trademarks, and channel relationships. These
assets, which comprise brand equity, are a primary source of competitive advantage and
future earnings. The overall description of Brand Equity incorporates the ability to
provide added value to a company's products and services. This added value can be used
to the company's advantage to charge price premiums, lower marketing costs and offer
greater opportunities for customer purchase. In FMCG products, brand equities are
relatively stronger as the consumer is reluctant to try unknown brands and even
unbranded products as most of these products are for personal use. It is often difficult to
differentiate a product on technical or functional grounds and therefore there is little
reason to switch from a known brand. A successful brand generates strong cash flow,
which enables the company brand to reinvest a part of it in the form of aggressive
advertisement or promotion in order to reinforce the perceived superiority of the brand.
The worth of a brand is manifested in the consumers’ insistence on a particular brand or
willingness to pay a price premium for the preferred brand.
A badly mismanaged brand can actually have negative Brand Equity, meaning
that potential customers have such low perceptions of the brand. Many people may think
that building and maintaining brand equity is solely the responsibility of brand managers,
but it is actually a cross-functional team effort. Financial managers are important because
they can fully analyze the costs of maintaining and building brand equity. For example,
launching a new brand is extremely consuming in terms of money and time. It may be
more cost effective to extend a current brand than introduce a new brand. Marketing
research is critical for many obvious reasons. It develops most, if not all, of the research
and data that companies will use for deciding strategic issues. Marketing research can
also help determine how brand equity is actually measured. Once a definition of brand
equity is established, the responsibility of tracking and measuring it will belong to the
marketing research department. Brand managers ultimately bring all of the parts together
and decide the direction of the brand.
5. Summary:
A customer orientation will lead to concern for existing customers and programs to
generate brand loyalty. A prime enduring asset for some businesses is the loyalty of the
installed customer base. Competitors may duplicate or surpass a product or service, but
they still face the task of making customers switch brands. Switching costs would be a
consideration for a software user, for example, when a substantial investment has already
been made in training employees to learn a particular software system. Another
development is Co-Branding. It is also called ‘dual branding’. Here two or more well-
known brands are combined in an offer. It is a form of cooperation between two or more
brands with significant customer recognition, in which all the participant brand names are
retained. Co-branding lies between the two extreme points of marketing alliances. It is of
medium to long term duration and its shared value potential is not as low as a temporary
nature nor it is as high as to justify the culmination into a joint venture. Each brand
sponsor expects that the other brand name will strengthen preference or purchase
intention. If the two brands are such that the brand values are difficult to be shared, the
success of a co-branding exercise between them is remote. In case of co-packaged
products, each brand hopes it might be reaching a new audience by associating with other
brand. If an organization has a strong brand, it can last for years. If it is not having a
brand and only physical infrastructure, it is destined to be in loss.
6. Exercises:
1. There are certain characteristics for a brand. Keeping these characteristics, find out
whether the following brands have them or not. Justify your answer
a. Kitply
b. Close-up
c. Dabur
d. Maltova
e. Pepsodent
f. Style-Spa
7. References:
Pricing
Unit structure:
1. Introduction
2. Learning Objectives
3. Pricing
3.1. Basic principles of pricing
3.2. Importance of pricing
3.3. Factors influencing pricing decisions
3.4. Setting pricing
3.5. Pricing methods
4. Have you understood type questions
5. Summary
6. Exercises
7. References
1. Introduction:
Most people simply use the word price to indicate what it costs to acquire a
product. The pricing decision is a critical one for most marketers, yet the amount
of attention given to this key area is often much less than is given to other
marketing decisions. One reason for the lack of attention is that many believe
price setting is a mechanical process requiring the marketer to utilize financial
tools, such as spreadsheets, to build their case for setting price levels. While
financial tools are widely used to assist in setting price, marketers must consider
many other factors when arriving at the price for which their product will sell.
2. Learning Objectives:
3. Pricing:
Price is considered as a component of an exchange or transaction that
takes place between two parties and refers to what must be given up by one
party (i.e., buyer) in order to obtain something offered by another party (i.e.,
seller). Price means different things to different participants in an exchange. One
is the buyer. Their view for those making a purchase, price refers to what must
be given up to obtain benefits. In most cases what is given up is financial
consideration (e.g., money) in exchange for acquiring access to a good or
service. But financial consideration is not always what the buyer gives up.
Sometimes in a barter situation a buyer may acquire a product by giving up their
own product. For instance, two farmers may exchange chicken for crops. In the
case of the seller, price reflects the revenue generated for each product sold and,
thus, is an important factor in determining profit. For marketing organizations
price also serves as a marketing tool and is a key element in marketing
promotions. For example, most discount retailers highlight product pricing in
their advertising campaigns. Price is what a buyer pays to acquire products from
a seller. Cost concerns the seller’s investment (e.g., manufacturing expense) in
the product being exchanged with a buyer. For marketing organizations seeking
to make a profit the hope is that price will exceed cost so the organization can
see financial gain from the transaction. While product pricing is a main topic for
discussion when a company is examining its overall profitability, pricing decisions
are not limited to for-profit companies. Not-for-profit organizations, such as
charities, educational institutions and industry trade groups, also set prices,
though it is often not as apparent.
Before any discussion on pricing, it is important to know what really drives pricing.
Every organization is involved in a cost component before the ultimate product comes to
the market. Now we need to know how the cost is calculated. The components that are
considered in costing include cost of materials that you have issued for order, activity you
have performed in terms of labour hours that you entered while confirming the order (the
rates for the labour vary..) which is generally associated with a formula key and attached
to a work center that is linked to a cost center also and the overhead as applicable with
respect to that cost center based on a predetermined cost center planning and its rate.
3.2.Importance of Pricing:
For a buyer, value of a product will change as perceived price paid and/or
perceived benefits received change. But the price paid in a transaction is not only
financial it can also involve other things that a buyer may be giving up. For example, in
addition to paying money a customer may have to spend time learning to use a product,
pay to have an old product removed, and close down current operations while a product is
installed or incur other expenses. Pricing decisions can have important consequences for
the marketing organization and the attention given by the marketer to pricing is just as
important as the attention given to more recognizable marketing activities. In most
companies, prices are tactically derived based on internal costs and gut reaction to
competitive moves.
This is often the only element the marketer can change quickly in response to
demand shifts and it is directly related to total revenue. Profits can be made only
by knowing the difference between total revenue and total cost. Organizations
can use price symbolically, emphasize quality or bargain. The importance of
pricing depends on the image the organization wants to portray, competitive
activity in the market and the changing behaviour of the customer. From a
strategic aspect, pricing has more impact on positioning and ultimate profitability
than any other item in the overall marketing mix. Depending on market
sensitivities and current profit margins, a 1% increase in price could increase
profitability by up to 10%. The key to effective strategic pricing is to leverage
market based understanding of how customer's value new and existing offerings
in a competitive marketplace. Customers want the best value for their money,
and thus they will almost always do a quality comparison and make purchases
based on the best price for the best value. How customers view the product or
service and what they are willing to pay for it is based upon those perceptions. In
the end, customers will tell through their purchasing behavior whether or not the
prices are too high, too low or right on the money.
3.3.Factors Affecting Pricing Decision
There are both internal and external factors that affect pricing.
Costing is yet another area of concern. While variable costs are often determined on a
per-unit basis, applying fixed costs to individual products is less straightforward. For
example, if a company manufactures five different products in one manufacturing plant
how would it distribute the plant’s fixed costs (e.g., mortgage, production workers’ cost)
over the five products? In general, a company will assign fixed cost to individual
products if the company can clearly associate the cost with the product, such as assigning
the cost of operating production machines based on how much time it takes to produce
each item. Alternatively, if it is too difficult to associate to specific products the
company may simply divide the total fixed cost by production of each item and assign it
on percentage basis.
There are many influencing factors which are not controlled by the company but
will impact pricing decisions. Understanding these factors requires the marketer
conduct research to monitor what is happening in each market the company
serves since the effect of these factors can vary by market.
Marketing decisions are guided by the overall objectives of the company. The pricing
decision can be affected by factors that are not directly controlled by the marketing
organization.
When it comes to adjusting price, the marketer must understand what effect a change in
price is likely to have on target market demand for a product. Understanding how price
changes impact the market requires the marketer have a firm understanding of the
concept economists call elasticity of demand, which relates to how purchase quantity
changes as prices change. Elasticity is evaluated under the assumption that no other
changes are being made (i.e., “all things being equal”) and only price is adjusted. For
example, competitors may react to the marketer’s price change by changing the price on
their product. Despite this, elasticity analysis does serve as a useful tool for estimating
market reaction.
Firms within the marketer’s channels of distribution also must be considered when
determining price. Distribution partners expect to receive financial compensation for
their efforts, which usually means they will receive a percentage of the final selling
price. This percentage or margin between what they pay the marketer to acquire the
product and the price they charge their customers must be sufficient for the distributor to
cover their costs and also earn a desired profit. Marketers will undoubtedly look to
market competitors for indications of how price should be set. For many marketers of
consumer products researching competitive pricing is relatively easy, particularly when
Internet search tools are used. Price analysis can be somewhat more complicated for
products sold to the business market since final price may be affected by a number of
factors including if competitors allow customers to negotiate their final price.
Marketers must be aware of regulations that impact how price is set in the markets in
which their products are sold. These regulations are primarily government enacted
meaning that there may be legal ramifications if the rules are not followed. Price
regulations can come from any level of government and vary widely in their
requirements. For instance, in some industries, government regulation may set price
ceilings (how high price may be set) while in other industries there may be price floors
(how low price may be set). Additional areas of potential regulation include: deceptive
pricing, price discrimination, predatory pricing and price fixing.
Price setting process starts with understanding the company and marketing objectives.
Then an initial price is to be readied. We need to also understand the standard price
adjustments along with determining promotional pricing and looking for payment
options. First, the overall objectives of the company guide all decisions for all functional
areas (e.g., marketing, production, human resources, finance, etc.). Guided by these
objectives the marketing department will set its own objectives which may include return
on investment, cash flow, market share and maximize profits to name a few as stated in
3.2. Pricing decisions like all other marketing decisions will be used to help the
department meet its objectives. For instance, if the marketing objective is to build market
share it is likely the marketer will set the product price at a level that is at or below the
price of similar products offered by competitors.
For companies selling to consumers, this price also leads to a projection of the
recommended selling price at the retail level often called the manufacturer’s retail price
(MRP). The MRP may or may not be the final price for which products are sold. For
strong brands that are highly sought by consumers the MRP may in fact be the price at
which the product will be sold. But in many other cases, as we will see, the price setting
process results in the price being different based on adjustments made by the marketer
and others in the channel of distributions. This will lead to which of the pricing methods
best suited for the brand. That will be discussed in 3.5. In most cases standard
adjustments are made to reduce the list price in an effort to either stimulate interest in the
product or to indirectly pay channel partners for the services they offer when handling the
product. It should be noted that many companies do not make adjustments to their list
price, particularly those selling directly to final customers. There are two key reasons for
this. First, the product is in high demand and therefore the marketer sees little reason to
lower the price. Second, the marketer believes the product holds sufficient value for
customers at its current list price and the marketer feels reducing the price may actually
lead buyers to question the quality of the product.
For firms that do make standard price adjustments, the possibilities include:
• Quantity Discounts
• Trade Allowances
• Geographic Pricing
• Special Segment Discounts
Quantity Discounts
This adjustment offers buyers an incentive of lower per-unit pricing as more
products are purchased. Most quantity or volume discounts are triggered when a
buyer reaches certain purchase levels. For instance, a buyer may pay the list
price when they purchase between 1-99 units but receive a 5% discount off the
list price when the purchase exceeds 100 units. The most common quantity
discounts exist when a buyer places an order that exceeds a certain minimum
level. While quantity discounts are used by marketers to stimulate higher
purchase levels, the rational for using these often rests in the cost of product
shipment. There can be discounts offered to the products. This method allows
the buyer to receive a discount as more products are purchased over time. For
instance, if a buyer regularly purchases from a supplier they may see a discount
once the buyer has reached predetermined monetary or quantity levels. The key
reason to use this adjustment is to create an incentive for buyers to remain loyal
and purchase again.
Trade Discounts
Manufacturers who rely on channel partners to distribute their products (e.g., retailers,
wholesalers) offer trade discounts off of list price. Essentially the difference between the
trade discounted prices paid by the reseller and the price the reseller charges its customer
will be the reseller’s profit.
In some industries special classes of customers within a target market are offered pricing
that differs from the rest of the market. The main reasons for doing this include: building
future demand by appealing to new or younger customers; improving the brand’s image
as being sensitive to customer’s needs; and rewarding long time customers with price
breaks. For instance, many companies including railways, airways offer lower prices to
senior citizens. Some marketers offer non-profit customers lower prices compared to that
charged to for-profit firms. Other industries may offer lower prices to students or
children.
Geographic Pricing
Products requiring marketers to pay higher costs that are affected by geographic area in
which a product is sold may result in adjustments to compensate for the higher expense.
The most likely cause for charging a different price rests with the cost of transporting a
product from the supplier’s distribution location to the buyer’s place of business.
Transportation expense is not the only cost that may raise a product’s price. Special taxes
or tariffs may be imposed on certain products by local, regional or international
governments which a seller passes along in the form of higher prices. Now with the
advent of VAT, these issues will be overcome.
The final price may be further adjusted through promotional pricing. Unlike standard
adjustments, which are often permanently part of a marketer’s pricing strategy and may
include either a decrease or increase in price, promotional pricing is a temporary
adjustment that only involves price reductions. They are:
Markdowns:
The most common method for stimulating customer interest using price is the
promotional markdown method, which offers the product at a price that is lower than the
product’s normal selling price. There are several types of markdowns including:
Loss Leaders:
An important type of pricing program used primarily by retailers is the loss leader.
Under this method a product is intentionally sold at or below the cost the retailer pays to
acquire the product from suppliers. The idea is that offering such a low price will entice
a high level of customer traffic to visit a retailer’s store or website.
Sales Promotions:
Sales Promotion may offer several types of pricing promotions to simulate demand.
These include rebates, coupons, trade-in, and loyalty programs. There is a separate unit
on Sales promotions later on.
Bundle Pricing:
Another pricing adjustment designed to increase sales is to offer discounted pricing when
customers purchase several different products at the same time. Termed bundle pricing,
the technique is often used to sell products that are complementary to a main product.
For buyers, the overall cost of the purchase shows a savings compared to purchasing each
product individually. For example, a TV retailer may offer a discounted price when
customers purchase both 29’ TV and DVD that is lower than if both items were
purchased separately.
With the price decided, the final step for the marketer is to determine in what form and in
what timeframe customers will make payment. As one would expect payment is most
often in a monetary form though in certain situations the payment may be part of a barter
arrangement in which products or services are exchanged.
Dynamic Pricing
The concept of dynamic pricing has received a great deal of attention in recent years due
to its prevalent use by Internet retailers. But the basic idea of dynamic pricing has been
around since the dawn commerce. Essentially dynamic pricing allows for the point-of-
sale (i.e., at the time and place of purchase) price adjustments to take place for customers
meeting certain criteria established by the seller. The most common and oldest form of
dynamic pricing is haggling; the give-and-take that takes place between buyer and seller
as they settle on a price.
Finally marketers must decide in what form payments will be accepted. These options
include cash; check, money orders, credit card, online payment systems (e.g., PayPal) or,
for international purchases, bank drafts, letters of credit, and international reply coupons,
to name a few. They can also offer the following:
• Ownership Options
• Early Payment Incentives
• Auction Pricing
Ownership Options:
• Buyer Owns Product Outright – The most common ownership option is for
the buyer to make payment and then obtain full ownership.
• Buyer Has Right to Use but Does Not Have Ownership – Many products,
especially those labeled as services, permit customers to make payment in
exchange for the right to use a product but not to own it.
For many years marketers operating primarily in the business market offered incentives
to encourage their customers to pay early. Typically, business customers are given a
certain period of time, normally 30 or 60 days, before payment is due. To encourage
customers to pay earlier, and thus allow the seller to obtain the money quicker, marketers
have offered early payment discounts often referred to as “cash terms”. This discount is
expressed in a form that indicates how much discount is being offered and in what
timeframe. For example, the cash terms 2/10 net 30 indicates that if the buyer makes
payment within 10 days of the date of the bill then they can take a 2% discount off some
or all of the items on the invoice, otherwise the full amount is due in 30 days.
Auction Pricing:
Auction pricing is the reverse of bid pricing, which we discussed earlier, since it is the
buyer who in large part sets the final price. This pricing method has been around for
hundreds of years, but today it is most well known for its use in the auction marketplace
business models such as eBay and business-to-business marketplaces. While marketers
selling through auctions do not have control over final price, it is possible to control the
minimum price by establishing a price floor or reserve price. In this way the product is
only sold if someone’s bid is at least equal to the floor price.
Cost Pricing
Under cost pricing the marketer primarily looks at production costs as the key factor in
determining the initial price. This method offers the advantage of being easy to
implement as long as costs are known. But one major disadvantage is that it does not
take into consideration the target market’s demand for the product. There are several
types of cost pricing including:
Markup Pricing
This pricing method used by many resellers, who acquire products from suppliers, is one
in which final price is determined by adding a certain percentage to the cost of the
product. For many resellers, such as retailers, who purchase thousands of products it is
far easier to use a markup pricing approach due to its simplicity than it would be to
determine what the market is willing to pay for each product.
Resellers differ in how they use markup pricing with some using the markup on cost
method and others using the markup on selling price method.
The astute reader should recognize that the information in markup of selling price
contains the same information in markup of cost.
Cost-Plus Pricing
In the same way markup pricing arrives at price by adding a certain percentage
to the product’s cost, cost-plus pricing also adds to the cost by using a fixed
monetary amount rather than percentage. For instance, a contractor hired to
renovate a homeowner’s bathroom will estimate the cost of doing the job by
adding their total labor cost to the cost of the materials used in the renovation.
Breakeven Pricing
Market Pricing
Under the market pricing method cost is not the main factor driving price decisions;
rather initial price is based on analysis of market research in which customer expectations
are measured. The main goal is to learn what customers in an organization’s target
market are likely to perceive as an acceptable price. Of course this price should also help
the organization meet its marketing objectives. Market pricing is one of the most
common methods for setting price, and the one that seems most logical given marketing’s
focus on satisfying customers. For those marketers who use market pricing, options
include:
• Backward Pricing
• Psychological Pricing
• Price Lining
Backward Pricing
In situations where a price range is ingrained in the market, the marketer may need to use
this price as the starting point for many decisions and work backwards to develop
product, promotion and distribution plans.
Psychological Pricing
Certain pricing tactics “may” have a psychological effect since the results of
some studies have suggested otherwise.
• Odd-Even Pricing - Many times a buyer will pass along the price as being
lower than it is either because they recall it being lower than the even
number or they want to impress others with their success in obtaining a
good value. For instance, in our example a buyer who pays Rs.299.95
may tell a friend they paid “a little more than Rs.200” for the product when
in fact it was much closer to Rs.300.
Price Lining
Price lining or product line pricing is a method that primarily uses price to create
the separation between the different models. With this approach, even if
customers possess little knowledge about a set of products, customers may
perceive they are different based on price alone. Price lining can also be
effective as a method for increasing profitability. In many cases the cost to the
marketer for adding different features to create different models or service
options does not alone justify a big price difference. For instance, an upgraded
model may cost 10% more to produce than a base model but using the price
lining method the upgraded product price may be 20% higher and thus more
profitable than the base model. The increase in profitability offered by price lining
is one reason marketers introduce multiple models, since it allows the company
to not only satisfy the needs of different segments but also presents an option for
a customer to “buy up” to a higher priced and more profitable model.
Competitive Pricing
For some, competitor’s price serves as an important reference point from which they set
their price. In some industries, particularly those in which there are a few dominant
competitors and many small companies, the top companies are in the position of holding
price leadership roles where they are often the first in the industry to change price.
Smaller companies must then assume a price follower role and react once the big
companies adjust their price.
When basing pricing decisions on how competitors are setting their price, firms may
follow one of the following approaches:
Bid Pricing
Not all selling situations allow the marketer to have advanced knowledge of the prices
offered by competitors. While the Internet has made researching competitor pricing a
relatively routine exercise, this is not the case in markets where bid pricing occurs. Bid
pricing typically requires a marketer to submit a price to a potential buyer that is sealed or
unseen by competitors. It is not until all bids are obtained and unsealed that the marketer
is informed of the price listed by competitors.
Bid pricing occurs in several industries though it is a standard requirement when selling
to local, national and international governments. In these situations the marketer’s
pricing strategy depends on the projected winning bid price, which is generally the lowest
price. However, price alone is only the deciding factor if the bidder meets certain
qualifications. The fact that marketers often operate in the dark in terms of available
competitor research, makes this type pricing one of the most challenging of all pricing
setting methods.
1. You've just invented an innovative new product and are ready to launch it into
the market. You will most likely price the product high. Your pricing strategy is
probably based on:
A. Distribution strategy
B. Promotion strategy
C. Lack of relevant competition
D. Quality image
2. One of the advantages of break-even analysis is the ease with which costs
can be verified to be fixed or variable
True/ False
4. When Indian oil reduces the price, immediately Essar group lowers the price of petrol
and diesel. This strategy is called:
A. Predatory pricing
B. Cost plus pricing
C. Market share pricing
D. Status quo pricing
5. Economies of scale will help in lowering pricing by:
5. Summary
Customers want the best value for their money, and thus they will almost always
do a quality comparison and make purchases based on the best price for the
best value. While the beat-the-competition pricing approach may work for some,
there are many other complexities involved in establishing a pricing strategy.
Many players have started to use multiple pricing methodology for getting across
to variety of customers. Hence pricing is a major aspect of decision to be made
by organizations.
6. Exercises
1. Now a days, retailers are resorting to EDLP pricing. What is this pricing? Conduct a
study and explain the same.
2. Trace the role of Break even analysis in price fixation.
3. Do you think cost plus pricing will help organizations? Comment.
4. Elucidate the steps to be taken for pricing strategies for services in the current context
with examples.
7. References
1. Everett Rogers, “ Diffusion of innovations”, Free Press, New York, 1996.
2. Geoffery Moore, “Crossing the chasm”, Harper Business, New York, 1991.
3. Laurence P. Feldman, “Buy In and Get Well' as a Product Launch Strategy”,
University of Illinois at Chicago, Journal of Product Development and Management,
1996.
4. Govindarajan, V. and Anthony, R. (1983), How Firms Use Cost Data in Price
Decisions, Management Accounting, July pp. 30-36.
5. Abrams, J. (1964). A New Method for Testing Pricing Decisions. Journal of
Marketing, 28(1).
6. Fürderer, R., Hermann, A., and Wübker, G. (1999). In R. Fürderer, A.
Hermann, amd G. Wübker (Eds.), Optimal Bundle Pricing: Marketing
Strategies for Improving Economic Performance, chapter “Introduction to
Price Bundling”. Berlin, Heidelberg: Springer Verlag.
CASE STUDIES
1. CATHOLIC SYRIAN BANK:
In a study of SWOT analysis conducted at some branches of CSB, the following was
found:
Strengths
Branches
Bank deliver products and services through a variety of channels ranging from extensive
branch network, extension counters, ATM centre, Internet banking and Mobile banking.
There are 344 branches all over India. Non performing assets of the bank is reduced. i.e,
Amount of Bad & doubtful debts reduced. Supreme customer services. Employees are
shareholders hence more commitment from employees. Technology Implementation
Weaknesses
A major part of bank’s branch network is concentrated in southern India. More than 90%
of the total branches are located in Southern India. Any disruption, disturbance or
breakdown in the economy of these areas could adversely affect the result of bank’s
business and operations. CSB does not have any trademark for the name ‘The Catholic
Syrian Bank” along with the logo and the tag line ‘support all the way’ associated with
the Bank. Bank may not be able to prohibit persons from using the said trademark to their
advantage and any unfavorable use of such trademark may adversely affect bank’s
goodwill and business. Human resource profile is weak. Cost involved in adopting
technology. Reducing Spreads. CBS is not started yet
Opportunities
Bank may undertake mergers or acquisitions. Bank may make acquisitions and
investments to expand customer base, acquire new service or product offerings or to
enhance technical capabilities. The Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act 2002 (The Securitisation Act). With the
enactment of The Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act 2002 (The Securitisation Act), banks have been empowered to
attach assets of the defaulters without intervention of lengthy and time-consuming court
procedures. This has suddenly turned the tables in favour of banks. Till recently, debt
recovery was one of the most hopeless jobs in India due to archaic laws, which were
totally tilted towards borrowers. Banks were in fact at the mercy of borrowers'
willingness to pay. Thus in spite of the fact that most borrowing is against security, the
value of which is often higher than the loan, banks still could not do much except cajole
and tempt borrowers to pay up. Huge NPAs were burdening the entire banking sector.
Due to the fear of increasing NPAs, their willingness to lend and expand business was
also adversely affected. It is expected that over the next couple of years, banks will be
able to significantly clean up their NPA mess due to the Securitisation Act.
Threats
Delay in the rollout of bank’s core banking solutions. CSB is in the process of
implementing Core Banking Solution (“CBS”) and has already succeeded in bringing a
substantial number of branches under the CBS system. This technology initiative will
allow to increase interconnectivity among branches and to provide many of the products
and service. In the event of any delay in the roll-out of the CBS across entire branch
network, it may be difficult to expand products and services. Competition. Regulatory
System Cost.
Questions:
1. Do you think the SWOT gives an option for improvement by the bank? Justify.
2. Develop a SWOT for another bank and compare the same with CSB.
"There's no need to ask the price - it's a penny" was the proud claim of Marks
and Spencer a hundred years ago. From the start, it had developed a unique
position in its market - an emphasis on low price, wide range and good quality.
Over time, the Marks and Spencer position has been steadily developed, along
with its profitability. By the 1990s it looked unstoppable as a retailer, as it
progressively expanded its product range from clothing to food, furnishings and
financial services. The world seemed to be waiting for M&S to exploit, and
despite disappointing starts in the US and Canada, it developed steadily
throughout Europe and the Far East. Then, just like any star who has been put
on a pedestal, the media began to savage the company. After a sudden drop in
profits and sales during 1998, critics claimed that the company had lost its
position in the market place. It appeared to be like a super tanker, ploughing
straight ahead with a management that had become much less adaptable to
change than its nimbler competitors. Many observers had commented on the fact
that the company did not have a marketing department until 1998. Marketing, at
least in terms of advertising the brand, had become so important to its
competitors, but had never been high on Marks & Spencer's agenda. According
to Media Monitoring Services, M&S's total media spending between Dec 1997-
Nov 1998 was just £4.7 million, almost a drop in the ocean compared to the
spending of Sainsburys (£42.1m); Tesco (£27.5m); and Woolworths (£21.5m).
While other retailers had worked hard on building a brand image, M&S has relied
on the quality of its stock to do the talking. The argument was that everyone
knew what they were getting with M&S underwear or shirts - good quality at fair,
but not cheap, prices. Similarly with food, M&S's offering was about quality
rather than price. M&S believed its customers knew what the brand stood for and
advertising was much less important than ensuring that it could obtain the right
products at the right price.
In response to its pledge to listen to what its customers wanted, new designers
were brought in to try and give the company's ranges more sparkle. The
company even thought the previously unthinkable by proposing to stock
manufacturers' own branded products, instead of relying entirely on M&S's own
label products. If customers wanted to obtain variety at M&S, the new thinking
was that the company must adapt and offer it. Another area identified for
development was direct marketing of fashion products - an area where the
company had begun to lag behind its rivals who had developed interactive web
sites. Serious questions remained about the company. How quickly could it
change in response to its changed environment? The company had not been
known for speedy decision making, so probably a major structural overhaul was
essential before it could get down to the serious business of adapting to
customers' changing needs. Also, there was a great danger of changing the
company's position too far and too fast, thereby alienating its traditional
customers without gaining sufficient new ones. As a warning of how not to
change, M&S's rival Laura Ashley had repositioned itself so radically from its
original format that it now failed to gain the support of any major group. M&S had
itself tried to become more fashion conscious during the mid-1980s with similar
effect, and had to make a hasty retreat to its traditional, more staid image.
QUESTIONS
1. What do you understand by positioning, and what tools are available to Marks
and Spencer to give it a positioning advantage?
2. There has been a lot of debate bout whether the existence of a marketing
department can actually be harmful to services companies because it absolves
everybody else of marketing responsibilities. What then, do you make of M&S's
decision to introduce a marketing department.
One of the oldest principles of marketing is that sellers may sell features, but
buyers essentially buy benefits. This is a distinction sometimes lost on
technology led organisations, and the service sector is no exception. Recent
experience of the UK’s largest telecommunications company, Vodafone Airtouch,
illustrates how crucial it is to see service offers in terms of the benefits they bring
to customers. The company was aware of extensive research which had found
high levels of confusion among purchasers of mobile phones, with a seemingly
infinite permutation of features and prices. With four main networks to choose
from, dozens of tariffs and hundreds of handsets, it easy to see why buyers
sought means of simplifying their buying process. Throughout the 1990s,
Vodafone had positioned its UK network as superior technically to its
competitors. Advertising focused on high coverage rates and call reliability.
Vodafone was the UK's most popular mobile phone operator, with almost eight
million customers, including 4.2 million Pay as you Talk customers. It had opened
the UK's first cellular network on 1 January 1985and was the market leader since
1986. Vodafone's networks in the UK - analogue and digital - between them
carried over 100 million calls each week. It took Vodafone more than 13 years to
connect its first three million subscribers but only 12 months to connect the next
three million. Vodafone had the largest share of the UK cellular market with 33%
and had more international roaming agreements than any other UK mobile
operator. It could offer its subscribers roaming with 220 networks in 104
countries.
Despite all of the above, Vodafone was aware that although it was recognised
as an extremely strong business in the corporate marketplace, it was not so
strong in the market for personal customers. Research indicated that personal
buyers bought Vodafone for essentially rational reasons rather than having any
emotional attachment to the brand. The success of the competing Orange
network, which had developed a very strong image, was a lesson to Vodafone
that many people did not understand many of the product features on offer, but
instead identified with a brand whose values they could share. Vodafone
recognised that it needed to be perceived as adding value to a consumer’s
lifestyle?. Given the increasing complexity of product features, positioning on
technical features was likely to make life more confusing for personal customers.
An alternative approach was needed which focused on image and lifestyle
benefits. The company decided to hire Identica – the consultancy that originally
created the One 2 One brand – to revamp its brand communications and
advertising strategy in an effort to make Vodafone more appealing to personal
customers. Identica created a new ‘visual language’ for the Vodafone brand.
Vodafone became involved in the biggest ever TV, press, poster and radio
advertising campaign in its 15 year history. Employing a completely new style,
the new advertising centred around the theme: 'You are now truly mobile. Let the
world come to you' and featured a new end-line - Vodafone YOU ARE HERE.
The campaign demonstrated how Vodafone's products and services were
designed to make life easier for its customers.
The campaign, created by BMP DDB, was worth £20 million over two months
alone and ran for the whole year. Bringing meaning to the Vodafone brand and
what it represented, a series of advertisements, through a range of media,
showed how Vodafone let the world come to its customers, enabling them to be
truly mobile. This portrayed how Vodafone always pioneered to make things
more possible for its customers in a wire-free world. In press and poster
executions, Vodafone used arrows photographed in various real life situations to
depict its flagship services, e.g. a weather vane was used to illustrate the
Vodafone Interactive weather service showing how weather information could be
brought to customers through their mobile. Each advertisement again had the
Vodafone YOU ARE HERE end-line. The arrows indicated the directional
approach of Vodafone, letting the world come to the customer. Other executions
illustrated cinema listing information, sports updates, share price information,
international roaming and the Vodafone Personal Roadwatch 1800 service.
QUESTIONS
1. Introduction
2. Learning Objectives
3. Channels of distribution
3.1. Types of channel members
3.2. Importance of channel management
3.3. Channel arrangements
3.4. Selection of channel members
3.5. Channel members Relationship
4. Have you understood type questions
5. Summary
6. Exercises
7. References
1.Introduction:
Distribution decisions are taken by companies basically to allow customers to gain access
and purchase a marketer’s product. However, marketers may find that getting to the
point at which a customer can acquire a product is complicated, time consuming, and
expensive. Distribution decisions are relevant for nearly all types of products. In fact,
while the Internet is playing a major role in changing product distribution and is
perceived to offer more opportunities for reaching customers, online marketers still face
the same distribution issues and obstacles as those faced by offline marketers.
2. Learning Objectives:
3. Channels of Distribution:
Channel activities may be carried out by the marketer or the marketer may seek
specialist organizations to assist with certain functions. We can classify
specialist organizations into two broad categories: resellers and specialty service
firms.
Resellers
These are organizations that provide additional services to help with the
exchange of products but generally do not purchase the product (i.e., do not take
ownership of the product):
• Agents and Brokers – Organizations that mainly work to bring suppliers
and buyers together in exchange for a fee.
• Distribution Service Firms – Offer services aiding in the movement of
products such as assistance with transportation, storage, and order
processing.
• Others – This category includes firms that provide additional services to
aid in the distribution process such as insurance companies and firms
offering transportation routing assistance.
3.2.Importance of Distribution Channels
Distribution channels often require the assistance of others in order for the
marketer to reach its target market. While on the surface it may seem to make
sense for a company to operate its own distribution channel (i.e., handling all
aspects of distribution) there are many factors preventing companies from doing
so. While companies can do without the assistance of certain channel members,
for many marketers some level of channel partnership is needed. For example,
marketers who are successful without utilizing resellers to sell their product (e.g.,
Dell Computers sells mostly through the Internet and not in retail stores) may still
need assistance with certain parts of the distribution process (e.g., Dell uses
parcel post shippers such as FedEx and UPS). In Dell’s case creating their own
transportation system makes little sense given how large such a system would
need to be in order to service Dell’s customer base. Thus, by using shipping
companies Dell is taking advantage of the benefits these services offer to Dell
and to Dell’s customers.
The distribution channel consists of many parties each seeking to meet their own
business objectives. Clearly for the channel to work well, relationships between
channel members must be strong with each member understanding and trusting
others on whom they depend for product distribution to flow smoothly. For
instance, a small sporting goods retailer that purchases products from a
wholesaler trusts the wholesaler to deliver required items on-time in order to
meet customer demand, while the wholesaler counts on the retailer to place
regular orders and to make on-time payments.
Under this arrangement a channel member negotiates deals with others that do
not result in binding relationships. In other words, a channel member is free to
make whatever arrangements they feel is in their best interest. This so-called
“conventional” distribution arrangement often leads to significant conflict as
individual members decide what is best for them and not necessarily for the
entire channel. On the other hand, an independent channel arrangement is less
restrictive than dependent arrangements and makes it easier for a channel
members to move away from relationships they feel are not working to their
benefit.
Under this arrangement a channel member feels tied to one or more members of
the distribution channel. Sometimes referred to as “vertical marketing systems”
this approach makes it more difficult for an individual member to make changes
to how products are distributed. However, the dependent approach provides
much more stability and consistency since members are united in their goals.
The dependent channel arrangement can be broken down into three types:
• Corporate – Under this arrangement a supplier operates its own
distribution system in a manor that produces an integrated channel. This
occurs most frequently in the retail industry where a supplier operates a
chain of retail stores. Starbucks is a company that does this. They import
and process coffee and then sell it under their own brand name in their own
stores. It should be mentioned that Starbucks also distributes their products
in other ways, such as through grocery stores and mail order. As we will see
in more detail later, Starbucks is using a multi-channel structure to market
their products.
• Contractual – Under this arrangement a legal document obligates
members to agree on how a product is distributed. Often times the
agreement specifically spells out which activities each member is permitted
to perform or not perform. This type of arrangement can occur in several
formats including:
o Wholesaler-sponsored – where a wholesaler brings together and
manages many independent retailers including having the retailers use
the same name
o Retailer-sponsored – this format also brings together retailers but
the retailers are responsible for managing the relationship
o Franchised – where a central organization controls nearly all
activities of other members
• Administrative Arrangement – In certain channel arrangements a single
member may dominate the decisions that occur within the channel. These
situations occur when one channel member has achieved a significant power
position. This most likely occurs if a manufacturer has significant power due
to brands in strong demand by target markets (e.g., Procter &Gamble) or if a
retailer has significant power due to size and market coverage (e.g.,
Shoppers-stop or Reliance Fresh). In most cases the arrangement is
understood to occur and is not bound by legal or financial arrangements.
3.4. Factors involved in creating Distribution Channels
Like most marketing decisions, a great deal of research and thought must go
into determining how to carry out distribution activities in a way that meets a
marketer’s objectives. The marketer must consider many factors when
establishing a distribution system. Some factors are directly related to marketing
decisions while others are affected by relationships that exist with members of
the channel. Let us examine the key factors to consider when designing a
distribution strategy.
Product Issues
The nature of the product often dictates the distribution options available
especially if the product requires special handling. For instance, companies
selling delicate or fragile products, such as flowers, look for shipping
arrangements that are different than those sought for companies selling
extremely tough or durable products, such as steel beams.
Promotion Issues
Pricing Issues
The desired price at which a marketer seeks to sell their product can impact how
they choose to distribute. As previously mentioned, the inclusion of resellers in a
marketer’s distribution strategy may affect a product’s pricing since each member
of the channel seeks to make a profit for their contribution to the sale of the
product. If too many channel members are involved the eventual selling price
may be too high to meet sales targets in which case the marketer may explore
other distribution options.
Target Market Issues
As we will see the marketer must take into consideration many factors when
choosing the right level of distribution coverage. However, all marketers should
understand that distribution creates costs to the organization. Some of these
expenses can be passed along to customers (e.g., shipping costs) but others
cannot (e.g., need for additional salespeople to handle more distributors). Thus,
the process for determining the right level of distribution coverage often comes
down to an analysis of the benefits (e.g., more sales) versus the cost associated
with gain the benefits.
There are three main levels of distribution coverage - mass coverage, selective
and exclusive.
3.5.Relationship Issues
A good distribution strategy takes into account not only marketing decisions, but
also considers how relationships within the channel of distribution can impact the
marketer’s product. In this section we examine three such issues:
Channel Power
A channel can be made up of many parties each adding value to the product
purchased by customers. However, some parties within the channel may carry
greater weight than others. In marketing terms this is called channel power,
which refers to the influence one party within a channel has over other channel
members. When power is exerted by a channel member they are often in the
position to make demands of others. For instance, they may demand better
financial terms (e.g., will only buy if prices are lowered, will only sell if price is
higher) or demand others members perform certain tasks (e.g., do more
marketing to customers, perform more product services). Channel power can be
seen in several ways:
Channel Conflict
In an effort to increase product sales, marketers are often attracted by the notion
that sales can grow if the marketer expands distribution by adding additional
resellers. Such decisions must be handled carefully, however, so that existing
dealers do not feel threatened by the new distributors who they may feel are
encroaching on their customers and siphoning potential business. For
marketers, channel strategy designed to expand product distribution may in fact
do the opposite if existing members feel there is a conflict in the decisions made
by the marketer. If existing members sense a conflict and feel the marketer is
not sensitive to their needs they may choose to stop handling the marketer’s
products.
With a direct distribution system the marketer reaches the intended final user of
their product by distributing the product directly to the customer. That is, there
are no other parties involved in the distribution process that take ownership of the
product. The direct system can be further divided by the method of
communication that takes place when a sale occurs. These methods are:
• Direct Marketing Systems – With this system the customer places the
order either through information gained from non-personal contact with the
marketer, such as by visiting the marketer’s website or ordering from the
marketer’s catalog, or through personal communication with a customer
representative who is not a salesperson, such as through toll-free telephone
ordering.
• Direct Retail Systems – This type of system exists when a product
marketer also operates their own retail outlets. Arrow, Zodiac and others are
examples in this category.
• Personal Selling Systems – The key to this direct distribution system is
that a person whose main responsibility involves creating and managing
sales (e.g., salesperson) is involved in the distribution process, generally by
persuading the buyer to place an order. While the order itself may not be
handled by the salesperson (e.g., buyer physically places the order online or
by phone) the salesperson plays a role in generating the sales.
• Assisted Marketing Systems – Under the assisted marketing system, the
marketer relies on others to help communicate the marketer’s products but
handles distribution directly to the customer. The classic example of
assisted marketing systems is eBay which helps bring buyers and sellers
together for a fee. Other agents and brokers would also fall into this
category.
Indirect Distribution System
With an indirect distribution system the marketer reaches the intended final user
with the help of others. These resellers generally take ownership of the product,
though in the some cases they may sell products on a consignment basis (i.e.,
only pay the supplying company if the product is sold). Under this system
intermediaries may be expected to assume many responsibilities to help sell the
product. Indirect methods include:
• Single-Party Selling System - Under this system the marketer engages
another party who then sells and distributes directly to the final customer.
This is most likely to occur when the product is sold through large store-
based retail chains or through online retailers, in which case it is often
referred to as a trade selling system.
• Multiple-Party Selling System – This indirect distribution system has the
product passing through two or more distributors before reaching the final
customer. The most likely scenario is when a wholesaler purchases from the
manufacturer and sells the product to retailers.
In cases where a marketer utilizes more than one distribution design the
marketer is following a multi-channel or hybrid distribution system. The multi-
channel approach expands distribution and allows the marketer to reach a wider
market, however, as we discussed under Channel Relationships, the marketer
must be careful with this approach due to the potential for channel conflict. Since
channel members must be convinced to handle a marketer’s product it makes
sense to consider channel partner’s needs in the same way the marketer
considers the final user’s needs. However, the needs of channel members are
much different than those of the final customer. They are:
• Delivery – Resellers want the product delivered on-time and in good
condition in order to meet customer demand and avoid inventory out-of-
stocks.
• Profit Margin – Resellers are in business to make money so a key factor in
their decision to handle a product is how much money they will make on
each product sold. They expect that the difference (i.e., margin) between
their cost for acquiring the product from a supplier and the price they charge
to sell the product to their customers will be sufficient to meet their profit
objectives.
• Other Incentives – Besides profit margin, resellers may want other
incentives to entice them especially if they are required to give extra effort
selling the product. These incentives may be in the form of additional free
products or even bonuses (e.g., bonus, free trips) for achieving sales goals.
• Packaging – Resellers want to handle products as easily as possible and
want their suppliers to ship and sell products in packages that fit within their
system. For example, products may need to be a certain size or design in
order to fit on a store’s shelf, or the shipping package must fit within the
reseller’s warehouse or receiving dock space. Also, many resellers are now
requiring marketers to consider adding identification tags to products (e.g.,
RFID tags) to allow for easier inventory tracking when the product is received
and also when it is sold.
• Training – Some products require the reseller to have strong knowledge of
the product including demonstrating the product to customers. Marketers
must consider offering training to resellers to insure the reseller has the
knowledge to present the product accurately.
• Promotional Help – Resellers often seek additional help from the product
supplier to promote the product to customers. Such help may come in the
form of funding for advertisements, point-of-purchase product materials, or
in-store demonstrations.
4. Louis Phillipe shirts are sold through department stores as well as in its own
specialty shops. The company uses __________ as a channel strategy.
A. channel extension
B. intermediary exclusion
C. broker utilisation
D. dual distribution
5. NIIT follows the franchising route. State whether it is True of False.
5. Summary
India is home to six million retail outlets, including 2 million in 5,160 towns
and four million in 627,000 villages. Reaching all these markets will be a
stupendous task for the marketer. Hence he has to rely heavily on the
middlemen. In spite of the difficulties and problems posed by the middlemen, it is
imperative to keep them and have now become more organised. This makes
logistics particularly for new players extremely difficult. It also makes new product
launches difficult since retailers are reluctant to allocate resources and time to
slow moving products. Critical factors for success are the ability to build, develop,
and maintain a robust distribution network. An organised retail chain which is
explained in the next section have set up systems for inventory management and
quick servicing, thereby offering the opportunity for a company/supplier to reduce
distribution cost by reducing intermediaries such as wholesalers/distributors and
supplying directly to the warehouse of retail chain.
6. Exercises
1. What do you think of the distribution strategies adopted by the following companies?
Comment on their strategies.
A. Bata
B. VIP luggages
C. TI Cycles
D. Essar Oil
E. Cease Fire
F. Zodiac garments
2. Explain the need for Franchising with some Indian examples.
3. Classify the vertical integration that is done by some of the Indian companies and
explain the same.
4. Evaluate the role of company like VOLTAS in the distribution chain.
5. Describe the importance of player like Shopppers stop in the distribution system.
7. References
1. Rebecca Gardyn , “There’s No Place Like Home”, American Demographics,
22 (March 2000), pp. 40–42, 44–45.
2. Coughlan, Anne T., E. Anderson, Louis W. Stern and Adel I. El-Ansary. 2006.
Marketing channels. 7th ed. Upper Saddle River, N.J.: Pearson Prentice Hall.
3. Van den Poel, D., Leunis, J. (1999), "Consumer acceptance of the Internet as
a channel of distribution", Journal of Business Research, Vol. 45 pp.249-56.
4. Ford, D. - Understanding business marketing and purchasing (3rd ed.) :
Thomson Learning, 2001
Unit structure:
1. Introduction
2. Learning Objectives
3. Retailing and Wholesaling
3.1. Retailer types
3.2. Concerns of Retailers
3.3. Retailer formats
3.4. Wholesalers benefits
3.5. Categorisation of Wholesalers
4. Have you understood type questions
5. Summary
6. Exercises
7. References
1. Introduction:
2. Learning objectives:
3. Retailing:
Currently, India does not possess a very high percentage of organized retail segments.
Even by the most optimistic estimates, the figure stands at less than 3%. But suddenly the
biggest business houses of India have woken up to the great potential of this Rs. 1 lakh
crore retail sector. Today the likes of Wal-Mart and Tesco are all set to debut in India.
The rising per capita income of middle and lower middle class has propelled the growth
of retail in India. They form a large chunk of people visiting the malls and food joints on
any day. The emergence of many Tier-2 and Tier-3 cities has given the fillip to the
development of organized retailing in India. The concepts of malls and super-stores have
now gripped the entire nation and the number is increasing. The organized retail sector is
expected to grow at 6% by 2010 and touch a retail business of $ 17 billion as against its
current growth level of 3% which at present is estimated to be $ 6 billion, according to
the study undertaken by The Associated Chambers of Commerce and Industry of India
(ASSOCHAM). It has emerged as one of the most dynamic and fast-paced industries
with several players entering the market. Retailing in India is gradually inching its way
toward becoming the next boom industry. The whole concept of shopping has altered in
terms of format and consumer buying behavior, ushering in a revolution in shopping in
India. Modern retail has entered India as seen in sprawling shopping centers, multi-
storied malls and huge complexes offering shopping, entertainment and food all under
one roof.
• ownership
The first classification looks at the type of markets a retailer intends to target.
These categories are identical to the classification scheme we saw in Part 8
when we discussed the levels of distribution coverage.
• Mass Market – Mass market retailers appeal to the largest market
possible by selling products of interest to nearly all consumers. With such a
large market from which to draw customers, the competition among these
retailers is often fierce.
• Specialty Market – Retailers categorized as servicing the specialty market
are likely to target buyers looking for products having certain features that go
beyond mass marketed products, such as customers who require more
advanced product options or higher level of customer service. While not as
large as the mass market, the target market serviced by specialty retailers
can be sizable.
• Exclusive Market – Appealing to this market means appealing to
discriminating customers who are often willing to pay a premium for features
found in very few products and for highly personalized services. Since this
target market is small, the number of retailers addressing this market within a
given geographic area may also be small.
3.1.2.Products Carried
Under this classification retailers are divided based on the width (i.e., number of
different product lines) and depth (i.e., number of different products within a
product line) of the products they carry.
3.1.3.Pricing Strategy
3.1.4.Promotional Focus
Retailers sell in many different formats with some requiring consumers visit a
physical location while others sell to customers in a virtual space. It should be
noted that many retailers are not tied to a single distribution method but operate
using multiple methods.
• Store-Based Sellers – By far the predominant method consumers use to
obtain products is to acquire these by physically visiting retail outlets (aka
brick-and-mortar). Store outlets can be further divided into several
categories. One key characteristic that distinguishes categories is whether
retail outlets are physically connected to one or more others stores:
o Stand-Alone – These are retail outlets that do not have other retail
outlets connected.
o Strip-Shopping Center – A retail arrangement with two or more
outlets physically connected or that share physical resources (e.g., share
parking lot).
o Shopping Area – A local center of retail operations containing many
retail outlets that may or may not be physically connected but are in
close proximity to each other such as a city shopping district.
o Regional Shopping Mall – Consists of a large self-contained
shopping area with many connected outlets.
• Non-Store Sellers – A fast growing method used by retailers to sell
products is through methods that do not have customers physically visiting a
retail outlet. In fact, in many cases customers make their purchase from
within their own homes.
o Online Sellers – The fastest growing retail distribution method
allows consumer to purchase products via the Internet. In most cases
delivery is then handled by a third-party shipping service.
o Direct Marketers – Retailers that are principally selling via direct
methods may have a primary location that receives orders but does not
host shopping visits. Rather, orders are received via mail or phone.
o Vending – While purchasing through vending machines does
require the consumer to physically visit a location, this type of retailing is
considered as non-store retailing as the vending operations are not
located at the vending company’s place of business.
3.1.6. Service Level
Retailers attract customers not only with desirable products and affordable
prices, but also by offering services that enhance the purchase experience.
There are at least three levels of retail service:
• Self-Service – This service level allows consumers to perform most or all
of the services associated with retail purchasing. For some consumers self-
service is considered a benefit while others may view it as an
inconvenience. Self-service can be seen with: 1) self-selection services,
such as online purchasing and vending machine purchases, and 2) self-
checkout services where the consumer may get help selecting the product
but they use self-checkout stations to process the purchase including
scanning and payment.
• Assorted-Service – The majority of retailers offer some level of service to
consumers. Service includes handling the point-of-purchase transaction;
product selection assistance; arrange payment plans; offer delivery; and
many more.
• Full-Service – The full-service retailer attempts to handle nearly all
aspects of the purchase to the point where all the consumer does is select
the item they wish to purchase. Retailers that follow a full-price strategy
often follow the full-service approach as a way of adding value to a
customer’s purchase.
3.2.Concerns of Retailers
Retailers are faced with many issues as they attempt to be successful. The key
issues include:
• Even though India has well over 5 million retail outlets of all sizes and styles (or
non-styles), the country sorely lacks anything that can resemble a retailing
industry in the modern sense of the term. This presents international retailing
specialists with a great opportunity.
• Retailing in India is thoroughly unorganised. There is no supply chain
management perspective. According to a survey by AT Kearney, an
overwhelming proportion of the Rs. 400,000 crore retail market is
UNORGANISED. In fact, only a Rs. 20,000 crore segment of the market is
organised. As much as 96 per cent of the 5 million-plus outlets are smaller than
500 square feet in area. This means that India per capita retailing space is about
2 square feet (compared to 16 square feet in the United States). India's per
capita retailing space is thus the lowest in the world.
• Just over 8 per cent of India's population is engaged in retailing (compared to
20 per cent in the United States). There is no data on this sector's contribution to
the GDP. From a size of only Rs.20,000 crore, the ORGANISED retail industry
will grow to Rs. 160,000 crore by 2005. According to AT Kerney, the total
retail market, however, as indicated above will grow 20 per cent annually from
Rs. 400,000 crore in 2000 to Rs. 800,000 crore by 2005
• Given the size, and the geographical, cultural and socio-economic diversity of
India, there is no role model for Indian suppliers and retailers to adapt or
expand in the Indian context. The first challenge facing the organised retail
industry in India is: competition from the unorganised sector. Traditional
retailing has established in India for some centuries. It is a low cost structure,
mostly owner-operated, has negligible real estate and labour costs and little or
no taxes to pay. Consumer familiarity that runs from generation to generation is
one big advantage for the traditional retailing sector.
• In contrast, players in the organised sector have big expenses to meet, and yet
have to keep prices low enough to be able to compete with the traditional
sector. High costs for the organised sector arises from: higher labour costs,
social security to employees, high quality real estate, much bigger premises,
comfort facilities such as air-conditioning, back-up power supply, taxes etc.
Organised retailing also has to cope with the middle class psychology that the
bigger and brighter a sales outlet is, the more expensive it will be. The above
should not be seen as a gloomy foreboding from global retail operators.
International retail majors such as Benetton, Dairy Farm and Levis have already
entered the market. Lifestyles in India are changing and the concept of "value
for money" is picking up.
These categories are designed to identify the primary format a retailer follows. In
some cases, particular with the advent of the Internet, a retailer will be involved in
more than one formats.
• Mom-and-Pop – Represent the small, individually owned and operated
retail outlet. In many cases these are family-run businesses catering to the
local community.
• Mass Discounters - These retailers can be either general or specialty
merchandisers but either way their main focus is on offering discount
pricing. Compared to department stores, mass discounters offer fewer
services and lower quality products.
• Warehouse Stores – This is a form of mass discounter that often provides
even lower prices than traditional mass discounters. In addition, they often
require buyers to make purchases in quantities that are greater than what
can be purchased at mass discount stores. These retail outlets provide few
services and product selection can be limited. Furthermore, the retail design
and layout is as the name suggests, warehouse style, with consumers often
selecting products off the ground from the shipping package. Some forms of
warehouse stores, called warehouse clubs, require customers purchase
memberships in order to gain access to the outlet.
• Category Killers – Many major retail chains have taken what were
previously narrowly focused, small specialty store concepts and have
expanded them to create large specialty stores.
• Department Stores – These retailers are general merchandisers offering
mid-to-high quality products and strong level of services, though in most
cases these retailers would not fall into the full-service category. While
department stores are classified as general merchandisers some carry a
more selective product line.
• Boutique – This retail format is best represented by a small store carrying
very specialized and often high-end merchandise. In many cases a boutique
is a full-service retailer following a full-pricing strategy.
• Catalog Retailers – Retailers like Otto Burlington’s have built their
business by having customers place orders after seeing products that
appear in a mailed catalog. Orders are then delivered by a third-party
shipper.
• e-tailers - Possibly the most publicized retail model to evolve in the last 50
years is the retailer that principally sells via the Internet. There are
thousands of online-only retail sellers of which Amazon.com is the most
famous. These retailers offer shopping convenience including being open
for business all day, every day. Electronic retailers or e-tailers also have the
ability to offer a wide selection of product since all they really need in order to
attract orders is a picture and description of the product. That is, they may
not need to have the product on-hand the way physical stores do. Instead
an e-tailer can wait until an order is received from their customers before
placing their own order with their suppliers. This cuts down significantly on
the cost of maintaining products in-stock.
• Franchise – franchise is a form of contractual channel in which one party,
the franchisor, controls the business activities of another party, the
franchisee. Under these arrangements, an eligible franchisee agrees to pay
for the right to use the franchisor’s business methods and other important
business aspects, such as the franchise name. For instance, NIIT is a well-
known franchisor that allows individuals to use the NIIT name and methods
to deliver food to consumers. Payment is usually in the form of a one-time,
upfront franchise fee and also on-going percentage of revenue. While the
cost to the franchisee may be quite high, this form of retailing offers several
advantages including: 1) allowing the franchisee to open a retail outlet that
may already be known to local customers, and 2) being trained in how to
operate the business, which may allow the franchisee to be successful much
faster than if they attempted to start a business on their own. For the
franchisor, in addition to added revenue, the franchise model allows for
faster expansion since funds needed to expand the business (e.g., acquiring
retail space, local advertising) are often supported by the franchisee’s up-
front franchise fee.
• Convenience – As the name implies these general merchandise retailers
cater to offering customers an easy purchase experience. Convenience is
offered in many ways including through easily accessible store locations,
small store size that allows for quick shopping, and fast checkout. The
product selection offered by these retailers is very limited and pricing can be
high.
• Vending – Within this category are automated methods for allowing
consumers to make purchases and quickly acquire products. While most
consumers are well aware of vending machines allowing customers to
purchase smaller items, such as beverages and snack food, newer devices
are entering the market containing more expensive and bulkier products.
These systems require the vending machine have either Internet or
telecommunications access to permit purchase using credit cards.
4. After shopping in the same store for nearly two hours, members of a family
indulge in activities that they like viz., lunch, play and watch cinema and engage
in these activities without leaving the store in which they have been shopping.
They are most likely in a:
A. superstore.
B. hypermarket.
C. department store.
D. general merchandise retailer
8. A retailer mails brochures and coupons to potential consumers who can then
purchase products by mail or by phone. This illustrates which of the following
methods of selling retail products?
A. Direct-response marketing
B. Party plan
C. Catalogue marketing
D. Speciality retailing
5. Summary
6. Exercises
1. Identify the issues wholesaling by visiting a nearby wholesaler and explain the future
of wholesalers.
2. Wholesalers will not perish in India- comment.
3. Explain the steps to be taken in making a wholesalers mover forward to a retailer
status.
4. Enumerate the functions done by a cash and carry outlet.
5. With suitable examples, explain the various retail formats in India.
6. Prakash has a group of farmers who provide him with a regular supply of fresh
vegetables. He picks up their produce and has a regular route of grocers and
restaurants who inspect and purchase quantities of the items he has on any
given day. Prakash’s operation belongs to a specific type of wholesaler. Explain.
7. Compare and contrast Shoppers Stop with Big Bazzar.
7. References
1. Knapp Duane E. ( 2000 ) The Brand Mindset, McGraw Hill New York NY.
2. Christopher Knee (2002) Learning from experience: five challenges for
retailers, International Journal of Retail and Distribution Management, Vol.30
No. 11, pp. 519-29.
3. ‘What’s eating Indian retailing?’ Business Standard , 10 July 2001.
4. Betancourt, R. & Gautschi, D. (1988) The economics of retail firms,
Managerial and Decision Economics, 9, June, 133–142.
5. Macintosh, G. & Lockshin, L. S. (1997) Retail relationships and store loyalty:
a multilevel perspective, International Journal of Research in Marketing, 14,
pp. 487–497.
INTEGRATED MARKETING COMMUNICATION
Unit structure:
1. Introduction
2. Learning Objectives
3. Integrated Marketing Communication
3.1. The need for IMC
3.2. Future of IMC
3.3. IMC Campigns
4. Have you understood type questions
5. Summary
6. Exercises
7. References
1. Introduction:
2. Learning Objectives:
Advocates of IMC argue that it is one of the easiest ways a company can
maximize the return on its investment in marketing and promotion. This is
achieved by building long-term relationship with the customers. The media both
deliver the messages and provide ways for customers to send messages to the
company. Customers respond to the brand messages by buying its products,
asking questions, placing complaints, having repairs made and so on. Thus,
brand experiences are created. Each brand experience either strengthens or
weakens the brand relationship. Strengthened relationships lead to increased
sales and profits, enhancing brand equity. Weakened relationships result in lost
sales and lost customers, undermining brand equity. All through the years, the
clients were leading the advertising agencies and the role of consumers was
relatively insignificant in designing the brand communication. Also the agencies
are doing what they feel comfortable to do. It is high time the agencies need to
follow customers and create competencies in the customer’s preferences. If the
customer is more convinced with the online information about the brand then the
agency should focus on that media and should take the lead to integrate all other
brand communications.
Kellogg India Ltd. was having their toughest time during their initial period.
Through the pricing and availability in premium retail stores, Kellogg tried to
convey the product quality to the target market. But there was lack of integration
of the marketing variables which resulted in rejection of the product because of
bad taste, in spite of the managerial, technical and financial support from the
parent company. Their frantic media activity proved to be a failure when the
consumers referred to their wheat and rice varieties as rice corn flakes and
wheat corn flakes. Learning from these mistakes Kellogg restructured their
marketing activities by integrating all the marketing elements. Indianised versions
of the product were launched; different packs of varying quantities were
introduced; media advertising along with symposiums, community oriented
programmes, etc. were organized; sales inducers were identified as children and
free gifts for them were offered; price reduction without compromising on the
quality but by changing the packaging was made; products were made available
in premium and small retail stores; one-serving sample packs were distributed.
All these resulted in converting the experimenters to regular users and Kellogg
made the India Cereal Breakfast market to grow to almost tribled its size in five
years.
MESSAGE AS
NOISE MESSAGE AS
INTENDED Competing RECEIVED
Sales idea or advertisements, Knowledge,
USP other sales people beliefs, or
feelings
distractions
Start
FEEDBACK RESPONSE
Sales reports, Interest, desire,
attitude or purchase
research
For years, even for companies with good market shares, advertisement was the
other name for marketing. Firms in the FMCG sector, including those who have
understood the concept of marketing were practicing mass production and hence
adopted mass marketing strategies. For selling highly standardized products to
masses of consumers, these marketers developed effective mass media
advertising techniques. It was their routine practice to invest huge amounts in the
mass media with a single advertisement for a big number of customers. Mass
media advertising enjoyed a dominant role among the promotion mixes of
consumer product companies those times. And only companies which were
financially sound used expensive media to reach the market. This was sufficient
in producing satisfactory results to the companies those times. But almost all of
them faced the problem of the message getting lost because of the
advertisement reaching the non-targeted people also. In spite of this, many
companies proved themselves to be experts in mass marketing.
With the increase of competition and when the customers tend to gain more and
more importance, marketers felt the necessity of maintaining healthy customer
relationship. To enhance better relationship with their customers marketers
advanced their objective from customer satisfaction to customer delight.
Researches on consumer behaviour show the tendency of the consumer to stick
on to the company which treats him individually. The consumer, as he is a
human being, needs to be cared personally by the marketer. There are always
prospects and customers who have question, complaints and suggestions which
must be heard and given a timely and satisfying response. If this is the trend in
the market, the marketers have to definitely tune their marketing activities
accordingly. So, in order to delight their customers through building closer
relationships with them, marketers are now moving away from mass markets
and are focusing on more narrowly defined micro markets. This trend in
marketing is supported by the improvements in information technology by
providing more information about consumers at the individual and house hold
levels. Also new technologies provide new communication avenues for reaching
smaller customer segments with more tailored messages.
Advertising
It is a paid form of non-personal mass -communication by an identified
sponsor. The mass media used include print media, direct mail, audio visual
media, bill boards etc. Sponsors may be non-profit organization, a political
candidate, a company or an individual. Advertising is used when sponsors want
to communicate with a number of people who cannot be reached economically
and effectively through personal means.
Merits
- Can reach many consumers simultaneously
- relatively low cost per exposure.
- Excellent for creating brand images.
- High degree of flexibility and variety of media to choose from
- Can accomplish many different types of promotion objectives.
Demerits
- Many consumers reached are not potential buyers (waste of promotion money)
- High visibility makes advertising a major target of marketing critics.
- Advertising exposure time is usually brief
- Advertisements are often quickly and easily screened out by consumers.
Personal Selling
Personal selling is face to face contact between a seller’s representative
and those people with whom the seller wants to communicate. Non-profit
organization, political candidates, firms and individuals use personal selling to
communicate with the public.
Merits
- Can be the most persuasive promotion tool; sales people can directly influence
purchase behaviours.
- Allows two way communication.
- Often necessary for technically complex products.
- Allows direct one-on-one targeting of promotional effort.
Demerits
- High cost per contact.
- Sales training and motivation can be expensive and difficult.
- Personal selling often has a poor image, making sales force recruitment
difficult.
- Poorly done sales presentations can hurt sales as well as company, product
and brand images.
Sales Promotion
Sales promotion includes activities that seek to directly induce or indirectly
serve as incentives to motivate, a desired response on the part of the target
customers company sales people and middle men and their sales force. These
activities add value to the product. In sales promotion the activities like discounts,
gifts, contests, premiums, displays and coupons are included.
Public Relations
It is a planned effort by an organization to influence the attitudes and
opinions of a specific group by developing a long term relationship. The target
may be customers, stock holders, a government agency or a special interest
group.
Characteristics of Promotional Types
Factor Advertising Publicity Personal selling Sales promotion
Audience Mass Mass Small (one-to-one) Varies
Message Uniform Uniform Specific Varies
Cost Low per viewer or None for media High per customer Moderate per
reader space and time; customer
can be moderate
costs for press
releases and
promotional
materials but not
met by the
advertiser
Sponsor Company No formal sponsor Company Company
Flexibility Low Low High Moderate
Control over High None (controlled High High
content and by media)
placement
Credibility Moderate High Moderate Moderate
Major goal To appeal to a To reach a mass To deal with To stimulate
mass audience at audience with an individual Short-run sales, to
a reasonable cost, independently consumers, to increase impulse
and create reported message resolve questions, purchases
awareness and to close sales
favourable
attitudes
1. A mature product like Tide detergent should use ________ promotion to keep the
brand name in the public's mind.
A. Influence
B. Reminder
C. Informative
D. persuasive
2. A brand like Tide detergent should use ________ promotion to keep the brand
name in the public's mind
A. informative
B. influencive
C. reminder
D. persuasive
3. Public relations will have its greatest impact in the ________ stage of the AIDA
model.
A. Attention
B. Desire
C. Impact
D. Action
4. Do you think above the line promotion will alone work in IMC? Yes/ no
5. Firms in the FMCG sector, including those who have understood the concept
of marketing were practicing mass production and hence adopted mass
marketing strategies. Yes /No
5. Summary
The success story of Samsung India Electronics Ltd. speaks the benefit of
integrating wide variety of electronic items and innovation with the marketing mix
elements. In 2002, ICC sold the marketing rights of cricket matches from 2002-
2007 to LG Electronics, Hero Honda, Pepsi and South African Airlines.
Consequently, Samsung was barred from using cricket celebrities in its ad
campaigns during cricket tournaments to be conducted between 2002 and 2007,
as it is the direct competitor of LG Electronics. This was a major setback for the
company, since they have already signed seven celebrity cricketers as their
brand ambassadors (Team Samsung). But Samsung proved to keep up its
growth in the Indian market through its integrated efforts. They offer almost all
electronic items (unlike their LG and Whirlpool) from audio music players to air
conditioners. They launched the ‘Bio’ range of home appliances. The company
have with them products in the premium range as well as for price-conscious
customers. Promotional efforts such as phod ke dekho (during deepawali 2001),
dabake jeeto (during World Cup 2002) were supported by media advertisements
with brand ambassador Tabu. Also they conducted road show showcasing their
latest high tech digital products and customer relations based direct marketing
programmes. All these integrated communication efforts helped Samsung in
creating a strong brand image in the market. This indicates the importance of
IMC.
6. Exercises
1. You are the brand manager of a national consumer brand whose very large
target market is dispersed around the country. You have ample resources to
communicate with the consumer. What will be your integrated marketing
communication methodology?
2. As a brand manager of LG in India, devise a IMC strategy for them.
3. Do you think IMC will replace the major promotional tools? Justify.
4. What according to you is the most favourable campaign for consumer
durables? Cite examples.
5. Discuss the evolution of IMC in India. There are many agencies which have
become full fledged MNC agencies like Grey World wide which have done
enough of IMC campaigns. Identify any three such campaigns and explain
their benefits to organizations.
7. References
1. C. Raja Rajeshwari , “TajGVK Hotels: Buy”, The Hindu businessline, July
27, 2003
2. Devkamal Dutta, “Building and sustaining competitive advantage in the
knowledge-era –can information technology help?”, The journal of Indian
Management and Strategy, July- September, 1999, pp.10-12.
3. Simon George, “Lifestyle marketing”, Indian Management, March 2000,
pp.81-85.
4. Bangalore Bureau, “ Karnataka Govt, BIAL to sign pacts for land lease
tomorrow”, The Hindu businessline ,Jan. 19, 2005
5. Kerala Bureau, “Kerala tourism Web site to be updated”, The Hindu
businessline, June 19, 2003.
6. Delhi Bureau, “A silver lining for tourism sector”, The Hindu businessline
,Feb 27, 2003.
7. Jim Bessen, “Riding the marketing information wave”, Harvard Business Review,
September-October 1993, pp.156-160.
8. Robert Blatberg and John Deighton, “Interactive marketing: exploiting the
age of addressability”, Sloan Management Review, Fall 1991, pp.10-14.
9. Vinita Chawla, “Indian IT industry”, Computer World, No.17, 1998, pp. 5-
12.
10. Prathajit, :LG launches integrated marketing communication”, DM Asia,
03/05/2007.
ADVERTISING
Unit structure:
1. Introduction
2. Learning Objectives
3. Advertising Management
3.1. History of advertising
3.2. Benefits of advertising
3.3. Advertising classification
3.4. Ethical and social issues in advertising
3.5.Five M’s of advertising
3.6. Advertising agencies
4. Have you understood type questions
5. Summary
6. Exercises
7. References
1. Introduction:
Advertising is one of the form of mass selling, employed when the use of direct,
person-to-person selling is not at all practical, impossible, or simply inefficient. It is to be
distinguished from other activities intended to persuade the public, such as propaganda,
publicity, and public relations. Advertising techniques range in complexity from the
publishing of simple, straightforward notices in the classified advertisement columns of
newspapers to the concerted use of newspapers, magazines, television, radio, direct mail,
and other communications media in the course of a single advertising campaign. From its
unsophisticated beginnings in ancient times, advertising has burgeoned into a worldwide
industry. Modern advertising is an integral segment of urban industrial civilization,
mirroring contemporary life in its best and worst aspects. Advertising is an indicator of
the growth of civilisation and a pointer of attempts at its betterment and perfection. It is a
part of our social, cultural and business environment. Not only advertising mirrors this
environment but also it affects and gets affected by our style of living. In today's
environment, not only are advertisers closely examined by the target audiences for whom
the advertisements are meant, but by society in general. Advertising is considered to be
costly but with its reach, it gives the return to the employer in a very short span of time.
2. Learning Objectives:
3. Advertising management:
Advertising is the one of the major industries across the world. As long as media is there,
advertising, advertisers and advertising agencies will be there.
1. American Marketing Association proposed the following definition of
advertising :
"Advertising is any paid form of non-personal presentation and promotion of
ideas, goods, and services by an identified sponsor."
1. John S Wright, Willis L Winter, and Sherilyn K Zeigler defined Advertising as :
"Advertising is controlled, identifiable information and persuasion by means
of mass communications media."
2. John J Burnett defined Advertising as :
"Advertising is the non-personal communication of marketing related
information to a target audience, usually paid for by the advertiser, and
delivered through mass media in order to reach the specific objectives of the
sponsor."
These definitions have used certain words or phrases that need some
elaboration.
"Any paid form": The paid aspect of the definition reflects the fact that the space
or time for an advertising message generally must be bought.
"Non-personal presentation and promotion": In case of personal selling, there is
face-to-face presentation and promotion of product or service by the
salesperson. Advertising is totally non-personal, offering no personal interaction,
delivered through media and often viewed as intrusion. Of course, advertising
may help the salesperson in his/her selling efforts.
"Ideas, goods, and services": Advertising, being a powerful mass communication
tool, is used not only to present and promote goods and services with the intent
of selling them, it is also increasingly used to further the goals of public interest
and social causes.
"An identified sponsor": These words clarify the difference between advertising
and propaganda. Just like advertising, propaganda attempts to present certain
opinions and ideas, which may influence the attitudes and actions of people.
However, the source of propaganda mostly remains unknown and hence its
authenticity is often doubtful. People in general do not know who the originator of
these opinions and ideas is. In case of advertising, the sponsor of ideas or
opinions is known.
"Controlled": The advertiser controls the content of advertising message, its time,
and direction. In case of publicity, it is not under the control of the advertiser. The
story may be presented in a manner not to the liking of the advertiser, or not at a
time chosen by the advertiser.
"Mass communications media": The broad group of audience can best be
reached by mass media such as newspapers, magazines, television, radio and
outdoor displays. This qualification separates advertising and personal selling.
The multiple messages are delivered to thousands of people simultaneously.
There exists a general feeling that advertisers have the raw power to manipulate
consumers. Many companies have the capacity to obtain large numbers of
advertisement exposures. Some believe that these companies can utilize highly
sophisticated, scientific techniques to make such advertising effective. Some
critics feel that advertising is objectionable because the creative effort behind it is
not in good taste. Advertisements may be annoying and offensive. Annoying
advertisements are too loud, too long, too repetitious, or involved unpleasant
voices, music, or people and may be inappropriate for children. To some people,
advertising, especially television advertising, is often like a visitor who has
overstayed his welcome. It becomes an intrusion. Greyser postulates a life cycle
wherein an advertising campaign moves with repetition from a period of
effectiveness, and presumably audience acceptance, to a period of irritation. The
cycle contains the following stages :
i. Exposure to the message on several occasions prior to serious attention (given
some basic interest in the product)
ii. Interest in the advertisement on either substantive (informative) or stimulus
(enjoyment) grounds
iii. Continued but declining attention to the advertisement on such grounds
iv. Mental tune-out of the advertisement on grounds of familiarity
v. Increasing re-awareness of the advertisement, now as a negative stimulus (an
irritant)
vi. Growing irritation.
The number of exposures between the start of a campaign and the stage of
growing irritation is obviously a key variable. Advertising by its very nature
receives wide exposure. Furthermore, it presumably has an effect on what
people buy and thus on their activities. Because of this exposure and because of
its role as a persuasive vehicle, it is argued that it has an impact on the values
and life-styles of society and that this impact has its negative as well as positive
side. The key issues are what values and life-styles are to be encouraged as
healthy, which are to be avoided, and what relative impact or influence
advertising has on them. Three issues that have attracted particular attention are
the relationship of advertising to materialism, the role that advertising has played
in creating harmful stereotypes of women and ethnic minorities, and the possible
contribution of advertising in promoting harmful products. Materialism is defined
as the tendency to give undue importance to material interests. There is a
corresponding lessening of importance to non-material interests such as love,
freedom, and intellectual pursuits. Bauer and Greyser argue that although people
do spend their resources on material things, they do so in the pursuit of
nonmaterial goals. The distinctive aspect of our society is not the possession of
material goods, but the extent to which material goods are used to attain
nonmaterial goals. Bauer and Greyser thus raise the issue of whether material
goods are a means to an end rather than an end in themselves. In making, such
an evaluation it is useful to consider how people in other cultures fulfill non-
material goals. The leader in a primitive culture may satisfy a need for status in a
different away from someone in our culture. Associating advertising with
materialism does not demonstrate a causal link. Such a link is impossible to
prove or disprove. It is true that advertising and the products advertised are a
part of our culture and thus contribute to it in some way. It is also true; however,
that advertising does not have the power to dominate other forces (family,
literature, and so on) that contribute to the values of society.
3.5.1. Mission:
(i) Advertisine goals are virtually always communication goals : Colley pointed
out that advertising is only one part of the marketing mix for all companies. He
assumed that specific goal for advertising in virtually all situations would have to
be represented in terms of some communication objective.
(ii) Goals should be written down : The goals should be made very clear in form
of writing, so that every one understands what is being done.
(iii) Advertising should be measured in terms of effects, not exposures : Colley
pointed out that in reaching out a certain number of potential consumers, no
matter how astronomical that number seems to be, is meaningless unless there
is some effect in terms of communication goals.
(iv) Advertising operates through a hierarchy of communication effects : There is
a series of mental step through which a brand or objects must climb to gain
acceptance. The initial task of the brand is to gain awareness to advance one
step up in the hierarchy. The next step is brand comprehension, which involves
the audience member learning something about the brand. The next step is the
attitude and conviction step and intervenes between comprehension and final
action. The action phase involves some overt move on the part of the buyer like
trying the brand for the first time, visiting a show room or requesting information.
(v) Creative planning considerations should come before media decisions in the
advertising planning process : When media considerations come first, there is a
tendency to be concerned about the amount of reach an advertising campaign
can develop rather than the effects that are to be generated. The creative or
message strategy decision is always intimately related to the communication
effects that are intended. Therefore, the creative planning decision should occur
first.
(vi) Benchmark measurements should be developed before the campaign is
implemented : Colley suggested a particular research procedure for measuring
advertising effectiveness. This involved developing a measurement of the level of
an objective before the campaign and then measuring deviations from the
measurement as an indicator of communication effect.
(vi) Specific criteria must be developed : It is impossible to develop benchmarks
unless the objectives are stated specifically in terms of some operational
measurement. This means that the advertising objective should state the specific
target market segment, the marketing goal in some percentage terms over
sometime period and the advertising goals, in terms of a percentage attainment
in a particular time period.
Colley identified following advertising tasks or advertising objectives that a firm
can pursue :
- Perform the complete selling function (take the product through all the
necessary steps toward a sale).
- Announce a special reason for "buying now" (price, premium, etc.).
- Remind people to buy.
- Stimulate impulse sales.
- Tie in with some special buying event.
3.5.2. Money:
Budgetary process
The advertising budgeting process involves the following steps :
- Step 1. Preparation of Budget : It is generally prepared by advertising manager
in consultation with marketing manager. The advertising budget made is based
on inputs provided by marketing research people. The budget is generally made
on annual basis. Primary input would depend upon type of product, new or
established one, target market, demographic composition, advertising copy and
media selection etc.
- Step 2. Presentation and approval of Budget : After the budget is made, it is
presented to top management for the approval of the budget.
- Step 3. Execution of the Budget : After the budget is approved by the top
management, it is executed. Various channels and media for budget allocation
are considered. The task of preparing advertising messages and acquiring
advertising time and space is given to advertising agency.
- Step 4. Control of Budget: After the budget is executed, the results come out.
Control of budgets involves comparing the desired advertising objectives and
actual advertising objectives. The purpose is to know the effectiveness of
advertising in terms of money allocated to advertising. If it is found that the
allocated budget is on the higher side or on the lower side, the appropriate
corrective action can be taken.
i. The Percentage of Sales Method : This method is most widely used method
of setting the appropriation. In the past, the method enjoyed wide spread use.
Today, although many firms use a combination of methods, they frequently report
their advertising expenditures as a percentage of sales. Percentage of sales
method is based on previous year's sales, on estimated sales of coming year or
on some combination of these two. If virtually all conditions in the firm's market
including the general economic conditions and the competitive activity, remain
rather constant, then it is quite possible that the same correlations will remain
between the advertising and other sales and promotional activity expenditures
and the resulting sales volume.
Merits
- There is a consistency between this approach and the standard accounting
practice of handling advertising as one of the "operating expenses" that are
usually analyzed in terms of the ratio to total sales volume. When the total
marketing budget is determined in the over all marketing plan this method
assigns a fixed proportion of that budget to advertising.
- Percentage of sales is simple to calculate, and it is almost the nature of
management to think of costs in percentage terms. Moreover, when it is wide
spread throughout the industry, it results in advertising becoming proportional to
market shares.
Demerits
- This method also presents a static approach to advertising rather than one that
responds to the particular needs of market conditions. With a fixed multiplier,
advertising expenditure increases as sales increases, and the tendency is to
spend the exact ear marked amount, which may or may not be profitable.
- As sales decline the expenditures of advertising decline, despite the possibility
that it is at this point the demand may require that extra effort toward stimulation.
- The percentage of sales method is not consistent with the basic marketing
principle that advertising is an important factor in stimulating demand, and, as
such precedes sales rather than being determined by sales.
ii. Unit of Sales Method : A variation of the percentage of sales method is the
"fixed-sum-per-unit" appropriation technique. This method is also based on the
premise that a specific amount of advertising is related to the marketing cost of
each unit produced rather than total sales volume. It does not reflect price
changes as does the percentage-of-sales method and it assumes that the
amount of advertising effort needed to move a unit of merchandise is not closely
related to increase or decrease in price. The advantage is that the manufacturer
will know in advance how much the advertising cost of each unit of the product
will be, which is especially useful in price determination.
iii. Competitive Parity Method : In this method, a manager establish budget amount by
matching the percentage sales expenditure of the competitors. This method consists of
setting the appropriation by relating it in some manner to the expenditures of the firm's
major competitor or competitors. It leads to stability at the market place by minimizing
marketing warfare. If companies know that competitors are unlikely to match their
increases in promotional spending, they are less likely to take an aggressive posture to
attempt to gain market share. This minimizes unrealistic advertising expenditure.
The demerits of this method are :
- It is a defensive strategy.
- It is difficult to determine the competitor's budget.
- It assumes that because firms have similar expenditures, their programmes will be
equally effective.
- It ignores the fact that advertising and promotions are designed to accomplish specific
objectives by addressing certain problems and opportunities.
- It ignores possible advantages of the firm itself.
- There is no guarantee that competitors will continue to pursue their existing strategies.
iv. Objective task method : Most often, the funds for promotional efforts are
decided upon, before the preparation of detailed plans on how these funds are to
be spent. But in this approach such plans are worked out before funds are
allocated. In this method objective setting and budgeting go hand in hand rather
than sequentially. Objective task method is a build up approach. Here, the funds
are allocated to different advertising functions and media. The major problem
with this method is the difficulty of determining which tasks will be required and
the cost associated with each task. With the present available methods of
measuring the effectiveness of advertising, it is difficult to say with any real
certainty just how much and what kind of advertising is required to achieve a
certain result. But an experienced advertiser uses the research methods
available to answer such questions. The objective task method offers advantages
over other budgeting methods, but it has more difficulty in implementing when
there is no track record for the product. So this method cannot be applicable for
deciding advertising budget for the product, which is in the introductory stage of
the Product life cycle.
vi. Affordable Method : Also called as ‘all you can afford’ method and the
budget is
based upon what the company can afford and. is generally related to company's
profits or company assets. This approach is common among small firms.
vii. Sales response & Decay Model : The model is based on the assumption
that the shape of advertising sales response function is known and the objective
is to determine such a point that would optimise the advertising out lay/sales
response ratio. The model measures the incremental changes in revenues at a
given time relative to changes in the advertising budget at a time under a given
set of situations.
The change in the rate of the sales with time is function of following factors :
- The sales response constant ( sales generated per advertising rupee)
- Sales decay constant (fraction of sales lost per time unit)
- The advertising budget
- Saturation level of sales.
viii. Communication Stage Model : Designed by G. Ole, the model takes into
consideration the impact of several variables that effect advertising expenditures
to ultimate sales while formulating the size of the budget.
ix. Pay out planning Method : This method is widely used for making
advertising budget for the new product. A pay out plan is developed to determine
how much to spend. The basic idea is to project the revenues the product will
generate over two or three years, as well as the costs it will incur. This method is
based on the expected rate of return. This method will assist in determining how
much advertising expenditures will be necessary when the return might be
expected. Though the payment plan is not always perfect, it guide the manager
in establishing the budget. When used in conjunction with the objective and task
method, it provides a much more logical approach to budget setting than the
other budgeting approaches.
3.5.3. Message:
Rational Appeals
Here the functional benefits of a product are highlighted. Industrial buyers are
most responsive to rational appeals. Buying motives are normally considered
rational under the following circumstances :
- High quality appeal
- Low price appeal
- Long life appeal
- Performance minted appeal
- Ease to use oriented appeal
Emotional appeals
Emotional appeals are those appeals, which are not preceded by careful analysis
of merits and demerits of making a buying decision. Emotions are those mental
agitations or excited states of feeling, which prompt to make a purchase.
Emotional appeals are designed to stir up some negative or positive emotions,
which will motivate product interest. An advertiser may try to induce a particular
behavioural change by emphasising either positive or negative appeals or a
combination of both.
Moral Appeals
Moral appeals are those appeals to the audience, which are directed to their
sense of right and wrong. These are often used in messages to arouse a
favourable response to social causes such as adult literacy, social forestry, anti
smuggling, consumer protection, equal rights for women, rural development etc.
Copy writing
Copy writing is a specialized form of communicating ideas that are meant
to serve the requirements of modern marketing. The purpose is to inform or
persuade or remind or collective. But before copy writing, the objective of the
copy should to well defined. The copywriter must be familiar with the marketing
goals of the advertiser and specific advertising objectives. Copy writing skill
requires command over language.
Step 1 Abstracting : Relevant data are obtained from the market situation,
prospects and relevant media.
Step 2 Synthesizing : Elements are blended and combined, ideas and
approaches accepted, rejected, revised etc.
Copy structure
The total advertising copy can be classified into :
- Headline
- Body copy
- Close of the copy
Head line : The head line is that part of the copy which has been made to stand
out in the advertisement by the size or style of type in which it has been set. The
function of a head line is to attract the favourable attention of prospective
purchasers and to interest them so that they will read the advertisement. The
head line style and content will vary according to the product and the purpose
may be presented in the following way :
Head line : Presents the selling idea. Primary function is to catch the eye of the reader.
Head line need not always contain special message. Company or brand name could be
used as a head line.
Sub- head line : Important facts may be conveyed. It requires more space than the head
line. All advertisements do not require sub-head lines.
Body copy : Refers to the text in the advertisement. Contains details regarding the
functions of the product/service and its benefits. Body copy can be short or long.
Captions : Used with illustrations, coupons and special offers.
Blurb : Display arrangement where words appear from the mouth.
Boxes and panels : Special display positions to get greater attention.
Slogan, logotypes & signatures : Logotype - company name, seal or trade mark also refer
to signature. Logotype is an important aid in quick recognition.
In composing a script for television, the writer must include both audio and
video instructions. There is no layout, but there is a script, and ultimately, there is
a storyboard. In writing a script, the general practice is to use the right side of the
sheet(s) for audio instructions, which include the dialogue, narration, sound
effects, and/ or music. The left side is used for video instructions, which include
scene and character descriptions, movement and action instructions, camera
movement, scene changes and other edits, and any graphics. In both the audio
and video instructions, there are a number of abbreviations. These are common
symbols recognized by everyone who will be working on the commercials. The
script is the equivalent of the rough layout of the print advertisement. Its purpose
is to allow the creative and account groups to discuss the proposed commercial
without investing a great deal of expense in artwork or production.
After the script has been agreed upon within the agency, a storyboard is
developed for presentation to the client and to serve as a blueprint for later
production. The storyboard is comparable to the comprehensive layout for the
print advertisement. A storyboard has three components: (1) pictures that show
the main scenes and action, (2) a written description of what occurs, and (3) the
audio. The most common way to present a storyboard is with all scenes mounted
on a large poster board. Alternatives might include (1) putting the scenes on
slides and synchronizing these to an audio track or (2) creating an animatic. An
animatic is an animated form of the commercial that would show some of the
movements, camera work, and edits of the commercial, again including a rough
sound track. Of these formats, the straight storyboard is most common when
working with an existing client, while the other formats are more likely to be used
during a presentation to a prospective new client. Television, with sight, sound,
and motion, is hard to capture in a static storyboard, yet the storyboard must
often be used because the production alternatives are too expensive at this
stage. One purpose of the storyboard is to help the agency sell its creative work
to the client.
After approval of the storyboard by the client, it goes through one more
stage similar to the mechanical layout. Here, the board is given as much
specificity as the agency would like the producer to have. Sets are designed and
actors are cast on the basis of this board. At this stage, more scenes may be
added to the board to show more detail. The final level of specificity must evolve
between the creative department and the production company. Because it is
difficult to visualize the entire commercial on paper, there should be some
flexibility remaining for the production team, but too much flexibility means that
the director may miss the essence of the story. This is a fine line, requiring a
good storyboard as well as good communications between writer and director.
The writer, who has been involved throughout the development of the script, is
usually also around when the commercial is shot to ensure that the main issues
are properly portrayed.
Copy testing
3.5.4. Media:
The selection of media has become quite intricate because of the nature
of media themselves. The characteristics of each alternative must be considered
carefully. For example, TV can show action, combining both sight and sound,
and can produce an impact that simply is not possible in other media.
Newspapers can carry ads containing much more detailed information than TV or
radio. Magazines can convey detailed information, which remains available to a
potential buyer for a longer time. The process of choosing between alternatives
becomes even more complicated considering the wide range of alternatives
within the same medium. New and evolving media have further contributed to the
difficulty of planning when, where, and how the advertising message will be
delivered. Media planning refers to a series of decisions required in delivering the
advertising message to the target audience. The plan specifies media objectives
and media strategies to accomplish the objectives. The basic goal of media plan
is to formulate a particular combination of media that would enable the advertiser
to communicate the message successfully and effectively to the maximum
number of potential and existing customers in the target market at the lowest
cost. Any mistakes in this function may result in wastage of substantial amounts
of money.
1. continuity,
2. flighting,
3. pulsing.
Media Reach and Frequency : Media planners face the essential tasks that
concern the optimal use of media budget while deciding about the reach,
frequency, and the number of advertising cycles affordable for the year. There is
no known way to determine how much reach is required to achieve desired levels
of awareness, attitude change, or purchase intentions. Also, there is no certainty
that an advertisement placed in a particular media vehicle will actually reach the
target audience. For example, if an advertiser buys 30 or 60 seconds of TV time
during a certain programme, everyone who is tuned to this programme will not
necessarily see the commercial for a number of reasons.
Frequency refers to the average number of times audience individuals or
households are exposed to a medium in an advertising cycle, not necessarily to
the advertisement itself. An advertisement may be placed in a media vehicle and
the fact that an individual has been exposed to it does not mean that the
advertisement has been seen. For this reason media buyers refer to the reach of
media vehicle as opportunity to see (OTS) an advertisement rather than actual
exposure to it.
Total exposures
Frequency = ______________________
Reach
Media options:
An advertising medium is the vehicle used to carry the advertising message from the
sender to the intended receiver. Generally, no single medium will be sufficient in
reaching all potential customers and as a result, it is often necessary to use a combination
of several media in an advertising campaign.
Print Media
Print media includes newspapers and magazines
Newspapers
Demerits
Magazine
Magazine is the other form of print media. The Newspaper appeals to all people
in a particular community; the magazine appeals to particular people in all kinds of
communities. The life of a daily newspaper is short-rarely more than a day. A magazine
advertisement continues to live and produce results. for a week, a month, or longer as the
periodical is read and re-read not only by those who buy it, but by others who come in
contact with it. Most magazines offer high quality paper and printing. The dead line for
newspaper insertions is usually two or three days in advance of publication, but such
flexibility is impossible with a magazine advertisement. The increased quality that goes
into magazine production slows down the insertion process. The newspaper is primarily
a local medium and the magazine is mainly national one. Different types of magazines
are published for different types of customers e.g., women magazines, professional
magazines, trade magazines general consumer magazines etc. Magazines are published in
English as well as in all Indian languages from different geographical areas for meeting
the needs of various sections of the society.
Magazines are unique in their service in that they communicate to a distinct group
of common interest, even if the member of this group are widely dispersed. For example,
Photography magazine reaches most camera enthusiasts, no matter where they are,
nationally or even internationally. Thus, the advertisement about a new and unique
camera would be observed and noticed by prospective customers, wherever they are.
Merits
- Due to the high quality paper and improved printing, magazines offer the
advertisers with the merits of quality printing, excellent pictorial reproduction and
colour display.
- Advertisements may be read more carefully and with greater depth of interest in
magazine than elsewhere, both because magazines tend to be kept longer and
some times read repeatedly and because of the specialized character of their
contents.
- Magazines usually have a well defined target market. They are considered largely a
class media rather than the mass media as newspapers.
- Magazines have a long life and the readers read it at leisure.
- Magazines has a secondary and further readership or pass along readership as
magazines are kept at home for the longer period than the newspaper.
- Magazines generally have an aura of prestige, expertise and credibility because of
the editorial support.
- Magazines buying families are normally above average prospect and they are loyal
to magazines to such an extent that they feel and identify themselves a distinct
class.
- Because of the high quality of paper in magazines, it is possible to use a variety of
colours and printing techniques.
Demerits
- There is a necessity of buying space and preparing copy well in advance of the date
on which it is to appear.
- Since there is no daily news nor any urgent sales of products advertised in
magazines people tend to read them at their leisure and thus reach tends to build
up slowly.
- For advertisers who do not have national distribution or wide differences in
distribution and sales strength in different markets of the country, magazine
advertising is a sheer waste.
- As magazines are published weekly, fortnightly, monthly, quarterly and annually,
the advertiser cannot communicate his message to the prospects frequently as he
can in case of other media like newspapers, radio, television, cinema etc.
Broadcast Media
It includes :
Radio or Audio media & Television media.
Radio
Radio is widely used by people to listen news, music and other programmes and
radio is the medium, which reaches now to every nook and corner of the country. Main
advantage of the radio is that it can be carried every where. Because of its portable
character, it is possessed by more than 90% of the population approximately. Because of
the nature of broadcasting and the distances radio waves travel, there can be many radio
stations in different areas so that every owner of a radio has many signals available to
him and depending upon the technical features of the radio receiver equipment, the
signals from long distances can also be caught. The advertiser using radio must decide
whether or not to use a sponsored programme. However, in recent years, the number of
sponsored programmes on radio has declined drastically. Though a very large share of
radio listening is done outside the home, it is difficult to measure the actual amount of
listening. This audience can be measured by the use of personal interviews but it still
makes extremely difficult to accurately determine the size of the radio audience.
Merits
- Radio advertising is much less costly than most of the advertising media.
- Radio is flexible and timely. The advertiser can run as many commercials in an area
or during a time period and news events and special occurrences can be aired on
radio almost as soon as they happen.
- Radio is a selective medium in the sense that the advertiser can advertise in only
those markets he desires. He can vary his messages and the intensity of coverage
of different markets to meet local conditions.
- It permeates all economic and social strata, thereby reaching the masses.
- In country like India, where literacy rates are low and so newspapers have limited
significance, radio is popular both with advertisers and audience.
- Radio is a personal medium that gives human touch as human voice is the most
natural way for the people to communicate with each other which has warmth,
persuasiveness, liveliness and dramatisation.
Demerits
- Commercial time available is limited. Only 10 seconds time for the commercials is
too less to retain and understand the message in one time.
- Message is perishable. If the person is not listening to advertising message at the
time of the broadcast, the message is lost for ever.
- Radio advertisement is of little use to products that had to be seen and
demonstrated.
- Short commercials in the succeeding order, form a commercial clutter, making it
difficult to have an impact on the listeners.
- There are possibilities of distortion in communication. Precision of script writing is
very challenging task.
Television
Television has exhibited the most rapid growth of any advertising medium. A
major portion of the promotion budget is spend to advertise on television as now it has
become a leading medium for national advertiser. Television is intense in nature, in the
sense that it commands undivided attention and programme dedication of viewers and an
eye - catching commercial is easily noticed thus creating product awareness among TV
viewers. Because of an inherent life-like quality, the advertiser has almost infinite
creative flexibility for this medium. That is one of the reasons why it is the medium of
national advertisers. TV appeals to both the senses - sound as well as sight. As a result, it
combines the two to produce high impact commercials. The fact that a product or service
is promoted on TV may build a prestigious image of the product and its sponsor. The
pleasure derived from watching TV is at least transferable to the advertising messages
delivered through the medium.
Merits
- Television has a broad reach. It has the power to reach a great number of people.
- Television has a deep impact. Television is a scientific synchronization of sound,
sight, motion and colour.
- It is the personal medium that tries to involve the viewer by direct person-to- person
selling.
- Like radio, television is becoming a vehicle of mass communication.
- Television has the unique characteristics of the ability to demonstrate the operations
and the utility of the product. This makes it the closest medium to personal
selling.
- Television has a great frequency. Unlike magazines, where the message cannot be
repeated until the next issue of the magazine comes out, there is no limit to
message repetition.
- Television has more prestige than its competitive media.
- Even though the TV media is very expensive media in terms of commercial
production and air time, the cost per thousand viewers can be very low given the
advantage of sight, sound, colour, and action. Thus, new products can be
introduced, corporate images can be built and brand names can be established at
the very low cost per viewer.
- Like radio and newspapers, television is highly flexible and selective medium. It can
be used locally, regionally and nationally.
Demerits
- Even though some demographic selection of TV coverage is possible, it is still
basically a mass media. The result is a lot of wasted coverage as the message
reaches people who are not the potential buyers.
- Similar to radio advertising, the TV commercial is also highly perishable. It is not
possible to go back and look at the commercial again as it is possible with
magazine and newspaper advertising.
- High cost of television advertising is another serious limitation. In recent years the
rates have risen much faster and sharper than the newspapers, magazines, radio
and outdoor media.
- Television has been aptly described as 'Idiot Box'. Unlike other media, except
screen, it makes the prospects to sit and concentrate on the television screen and
does not allow to do other work.
- TV restricts itself to typical purchases. Detailed enquiries cannot come. It is difficult
to note either the telephone number or the address.
- TV commercials have to conform to a broadcast code strictly.
- Television commercials are shown back to back and most commercials are about 30
seconds long, so that if there are ten or fifteen consecutive commercials, no one
commercial really stand out. Thus, retention of the message becomes a real
problem.
Other than the mainstream media options, there are a number of support
media referred to as non-traditional media, or alternative media, such as outdoor,
transit, movie theatres skywriting, etc.
Outdoor media
Merits
Demerits
Outdoor advertising has become a useful medium with the increase in the
number of automobiles and improved road network. Roadside and market area
billboards are increasingly in demand by advertisers, particularly, on prime
locations.
Transit advertising
Transit advertising is similar to outdoor advertising as it also uses
billboards, neon signs and electronic messages. Transit advertising is targeted at
millions of people who are exposed to various modes of transportation such as
buses, subways, trains, or air travel. Of the many variations of transit advertising,
the airline ticket holder is a very effective form of advertising communication. It
reaches a very captive audience and keeps the message in front of the air
passenger for as long as the ticket is retained. There is an extensive public
transport system in India because most people cannot afford private
transportation. A very large number of commuters travel every day to their place
of work and back home. A large number of people, including those who come to
see off passengers, visit railway stations, bus terminals, and airports every day
and are exposed to a variety of ad messages on posters, neon signs, electronic
boards, etc. Posters also appear on the sides and backs of buses, commuter
trains, trams and delivery vans.
Merits
Demerits
i. Waste Coverage : A significant number of exposed audiences to transit
advertising do not fall under the category of potential customers. In the absence
of specific geographic segments for products, this form of advertising leads to
considerable waste coverage.
ii. Creative Limitations : The message on the outside of vehicles is fleeting and
only short copy points are appropriate. This does not allow for any colourful and
attractive advertisements and limits any creativity.
iii. Audience Mood : Sitting or standing on a commuter train, station, or bus stand
may not really be helpful to reading advertisements. The audience is likely to be
engaged in other thoughts and may not be in the right mood to pay attention to
advertising. Hurrying through a station or airport often causes anxiety and
advertisements are unlikely to attract attention.
Merits
Demerit
i. Audience Irritation : Most people perhaps do not like to see advertisements in
these media. This is particularly the case with videotapes and DVDs and for this
reason zipping is a very common occurrence. Audience irritation can lead to the
development of negative feelings towards the film as well as the advertised
product.
3.5.5. Measurement:
There should not be any mistake in setting the advertising objective. Lack of
clarity in setting advertising objectives may arise due to the following factors :
The overall purpose of advertising in any situation must be defined first and then
broken down in various stages. The type of copy used in the advertisement is
clearly influenced by the medium in which it is to be used. Hence both the
selection of the copy to be used and the medium or media to be used call for
research to determine the best copy and the best medium and to attempt to
measure the effectiveness of the advertising. Because of the large sums of
money invested in advertising and the highly competitive nature of today's
market, advertisers, media owners and advertising agencies are all vitally,
interested in determining the effectiveness of advertising. Because of the
complexities of testing advertising effectiveness, many advertisements are not
tested. That is, some people engaged in advertising doubt the validity of tests
designed to measure advertising effectiveness or they feel the qualities of
advertising that can be tested do not truly measure the value of the
advertisement to achieve its ultimate goal - the sale of the product or service -
and so it is not worthwhile to test. However the use of testing and measuring of
advertising effectiveness has increased in recent years due to several factors.
One factor is that the increased interest by top executives in getting the best
possible results with the larger advertising appropriations required today causes
them to support expenditures for testing. The development of scientific methods
of testing has also helped convince more agencies and advertisers to budget
sufficient funds for the proper testing of their advertising.
Advertising agencies can range in size from one or two person operation
to large organisations with over 1,000 employees. Accordingly, the services
offered and functions performed will vary. There can be following types of
advertising agencies :
Full service agency : Full service agency offers its clients a full range of
marketing, communications and promotion services including planning, creating
the advertisement, performing research and selecting media. A full service
agency may also offer non advertising services such as strategic market
planning, design of sales promotions, sales training and trade show materials,
package design and public relations. The full service agency is made up of
departments that provide the activities needed to perform the various advertising
functions and serve the client.
In-House Agency : Even though most companies use full service advertising
agencies, an organisation may decide to establish its own operation for all
services of an advertising agency within its own structure. The in-house agency
as its name implies is owned by and operated under the direct supervision of the
advertiser. It performs all the creative and media services provided by the
traditional full- service agency. A major goal in adopting this approach is to
reduce the total cost of the advertising.
Creative Boutique : It is an agency that provides only creative services. The client
may seek outside creative talent because it believes that an extra creative effort
is required or because its own employees do not have sufficient skill in this
regard. Full-service agency often subcontract work to creative boutiques when
they are very busy or want to avoid adding full time employees to their payroll.
Creative boutiques are usually founded by members of the creative departments
of full service agencies who leave the firm and take with them clients who want to
retain their creative talent.
Media Buying Services: There are independent companies specialize in the buying of
media, particularly radio and TV time. Media buying is a niche service and these
agencies are specialized in the analysis and purchase of advertising time & space. Both
agencies and clients utilize their services for developing their own media strategies and
using the buying service to execute them. Because media buying services purchase such
large amounts of time and space, they receive large discounts and can save the small
agency or client money on media purchases. Media buying services are paid a fee or
commission for their work.
A La Carte Agency: Some advertisers prefer to order a la carte rather than using all of an
agency's services. Services can be purchased from a full service agency or from an
individual firm that specializes only in creative work, media, production, research, or new
product development. The two requirements most frequently obtained by a la carte are
creative and media services.
Special Service Agency (Group): Some agencies focus their efforts only in
some selected areas and then become specialists in those areas. There is great
multiplicity of firms whose objective is to provide advertisers, advertising
agencies and the advertising media with a host of specialized services. These
firms collectively are called special service groups and they are the least known
component of the advertising industry.
3. Which of the following is the advertising appropriation method that is most effective?
a. Affordable method
b. Percentage of sales
c. Percentage of turnover
d. Objective and task method
4. What is the expansion of LINTAS?
5. Media scheduling has become cumbersome due to advent of satellite channels. Yes/No
6. Portfolio method is one of a advertising measurement method. Yes/ No
5. Summary
6. Exercises
7. References
SALES PROMOTION
Unit structure:
1. Introduction
2. Learning Objectives
3. Sales promotions
3.1. Obejctives of sales promotions
3.2. Importance of sales promotions
3.3. Strengths and weaknesses of sales promotions
3.4. Comparison between sales promotions and advertising
3.5. Sales promotion methods
3.6. Developing sales promotion methods
3.7. Evaluation of sales promotions
3.8. Sales promotion campaigns in India
4. Have you understood type questions
5. Summary
6. Exercises
7. References
1. Introduction:
Every marketer has to think about sales promotion at one stage or the other of the
product life cycle. In modern business world, sales promotion is considered as an
important instrument to lubricate the marketing efforts. The marketers have realised that
it is not expenditure but it is an investment because it will pay rich dividends. This does
not compete with advertising or personal selling. Sales promotion activities are
complementary to them. Advertising is frequently used to make sales promotion
activities, such as sweepstakes, coupons, premiums etc., known to consumers. Sales
people often use sales promotion to help sell their product lines to intermediaries.
2. Learning Objectives:
3. Sales Promotions:
The goals of sales promotion must confirm to the overall objectives of promotion
efforts. There are five broad sales promotional objectives. They are:
Exposure:
The important objective is simply to expose an adequate number of target
consumers to the message. Managers must choose promotional media that will
reach adequate numbers of target consumers. In planning for exposure,
marketers should take the following steps:
1. Define target consumers
2. Determine their number
3. Chose the promotion media
4. Determine the promotion budget needed to acquire the number of exposures
Attention:
The term attention refers to the state of focusing one’s mind upon
something. Marketers are faced with the need to take steps to make their
promotion stand out and say or do something to attract consumer attention.
Comprehension:
To comprehend is to understand, or to receive communicated knowledge.
The objective is achieved when consumers interpret the message in the manner
intended by the marketer. Consumers often fail to comprehend promotional
message when the messages are poorly designed or simply not interested.
Attitude change:
Attitude change involves readiness to respond in a particular way. When
the message promises a reward that is strong cleaning power in a detergent, that
may target consumers’ value.
Behaviour/Action:
In recent years, expenditure on sales promotion has been increasing more rapidly than the
outlays for advertising. Changes in the marketing environment are exerting upward
pressure on the demand for sales promotion. As the number of brands increases, for
example, the competitive pressure for display space in retailer store or Stock keeping unit
(SKU) intensifies. These forces increase retailer’s demand for more sales promotional
efforts from their suppliers.
/ With the help of promotional efforts, the consumers get latest information
regarding the new goods or services to be initiated or sold in the market.
/ Consumers get effective incentives in the shape of off-season discount ,
gifts, samples etc.,
/ Consumers get the opportunity to participate in contests
/ Upgrade the standard of living of the consumers
/ Reduction in prices make certain products affordable
Strengths Weaknesses
A push promotion offers consumers an extra incentive to choose the brand. For new
products, a pull promotion is designed to create a demand. One advantage of a pull
promotion is that once a brand has developed consumer demand, that demand will last as
long as the brand remains competitive. Further more once a brand has created a strong
brand franchise, it can spend little on trade promotion. A disadvantage of using push
promotion is that most discounts apply to everyone who buys – regular brand users who
would have bought the brand with out the discount benefit as well as new buyers.
Coupons:
A certificate offered by either manufacturers or retailers that grants specified
savings on specific brands when presented for redemption at the point of
purchase. Manufactured sponsored coupons can be redeemed at any outlet
distributing the manufacturer brands. Retailer sponsored coupons must be
redeemed at the sponsoring retail store or chain.
Sampling:
This allows the consumer to experience the product or service either free or at a
reduced price. The primary tool for new-product introductions because it
stimulates trial, sampling is also effective for introducing modified products, for
dislodging an entrenched market leader, and for demonstrating the brand
superiority. Ariel and Pantene are examples.
Merchandising materials:
Every promotion needs communication support if customers are to know it. Such
merchandising materials include:
♠ banners
♠ signs
♠ window posters
♠ shelf strips and tags
♠ racks
♠ stack cards
♠ end aisle displays and
♠ shelf extenders
Tie-ins:
Two products are promoted together.
Cross –promotions:
Sometimes one brand is used as a carrier to promote another, non-competitive
brand.
Trade promotions:
Trade allowances:
To achieve the authorisation objective explained above often requires
slotting allowances. These are fees paid to a retail chain to stock in its
warehouses and make it available in its stores. Originally, slotting allowances
were modest sums meant to cover the costs of physically placing the product on
the shelves and entering it into the store’s computer ordering system?
Dealer Loaders:
To help encourage the retailer to put up a special display or POP display
for a promotion, the marketer will sometimes design a display to include an
attractive item of value to the retailer.
Trade shows:
Manufacturers, suppliers and vendors in a particular industry gather to
display and review new product developments at trade shows. Manufacturers
have exhibits or booths where they can demonstrate the product, provide
informations, answer questions and write orders.
After deciding the objectives and tools of sales promotion, the marketer has to
make a few more decisions to ensure effective results. The following are a few
such aspects:
1.Size of incentive:
The marketer has to determine how much incentive should be offered. A certain
minimum incentive is necessary if the promotion is to succeed. A higher incentive
level will produce more sales response but at a diminishing rate. The marketers
may usually decide the quantum of incentives on the basis of effectiveness of
part promotion plans.
3.Distribution Pattern:
The marketer must also decide the mode and media of distribution of incentives.
The cost of distribution should not be more than the results that are expected
from the promotional efforts.
7.Pretesting:
Sales promotion scheme should be pre-tested if possible. The purpose is to
determine whether the scheme is appropriate or not. It is also helpful to test the
suitability of the size of the incentive in the context of a particular target group.
Manufacturers can use various methods to measure the effectiveness of sales promotion
schemes. Some of them are:
♠ The most common method is to compare sales before, during and after a
promotion. Suppose a company has 6% market share, in the pre-promotion
period, which jumps to 10% during the promotion, falls to 5% immediately
after and rises to 7% after some time. The promotion evidently attracted new
buyers as well as more purchasing by existing customers. After the
promotion, the sales fell as consumers worked down their inventories. The
long run rise to 7% indicates that the company gained some new users.
♠ Consumer panel data would reveal the kind of people who responded with the
promotion and what they did after the promotion. If more information is
needed, the consumer surveys can be conducted to learn how many recall
the promotions, what they think about it, how many took advantage of it, how
it affected their subsequent branded choice behaviour.
♠ Sales promotion can also be evaluated through experiments that differ such
attributes as incentive value, duration and distribution media.
A. Advertising
B. Personal selling
C. Sales promotion
D. Publicity
2. Do you agree that sales promotion is a below the line promotion? Yes/ No
3. State whether True or False. “Sales promotion aimed at the sales promotion normally
do not provide the results intended and discourages the entire field force”
4. Which sales promotion is quite often used by the retailers?
A. Premiums
B. Couponing
C. Tie-ins
D. Discounts
5. State whether True or false. “Sales intended across the traders necessarily need to be
discounts either as cash or in quantity”.
5. Summary
Marketers who employ sales promotion as a key component in their
promotional strategy should be aware of how the climate for these types of
promotions is changing. The onslaught of sales promotion activity over the last
several decades has eroded the value of the short-term requirement to act on
sales promotions. Many customers are conditioned to expect a promotion at the
time of purchase otherwise they may withhold or even alter their purchase if a
promotion is not present. For instance, food shoppers are inundated on a weekly
basis with such a wide variety of sales promotions that their loyalty to certain
products has been replaced by their loyalty to current value items (i.e., products
with a sales promotion). For marketers the challenge is to balance the
advantages short-term promotions offer versus the potential to erode loyalty to
the product. Sales promotions are delivered to customers in many ways such as
by mail, in-person or within print media. However, the Internet and mobile
technologies, such as cell-phones, present marketers with a number of new
delivery options. For example, the combination of mobile devices and
geographic positioning technology will soon permit marketers to target
promotions to a customer’s physical location. This will allow retailers and other
businesses to issue sales promotions, such as electronic coupons, to a
customer’s mobile device when they are near the location where the coupon can
be used.
6. Exercises
1. There are number of products designed for consumption by children but the
purchases are made by mothers. Such products must appeal to children and
have the mother's approval too. In what way sales promotion by these
companies be effective? Give examples.
2. Manufacturers, suppliers and vendors in a particular industry gather to display
and review new product developments at trade shows. Manufacturers have
exhibits or booths where they can demonstrate the product, provide
informations, answer questions and write orders. Explain how you will
conduct these exhibitions as an event manager.
3. An offer of merchandise, either frees or at a reduced price, for responding in
same way is called a premium. Many companies also use premiums to
encourage consumers to switch brands or to reward customer loyalty.
Conduct a study to find the latest measures in the Indian market.
4. “Advertising is a must to show cause the sales promotion efforts” –Discuss with
recent examples.
7. References
1. Julian Cummins, Sales Promotion, Universal Book Stall, New Delhi
PERSONAL SELLING
Unit structure:
1. Introduction
2. Learning Objectives
3. Personal Selling
3.1. Relevance of selling to modern marketers
3.2. Selling steps
3.3. Sales force objectives
3.4 Sales force structure
3.5. Purpose of sales territories
3.6. Sales force management
4. Have you understood type questions
5. Summary
6. Exercises
7. References
1. Introduction:
3. Personal selling:
Personal selling’s greatest strength is its personal touch. Of all the marketing
communication functions, personal selling involves the most human contact and
interaction, qualities that are indispensable to building lasting relationship between
buyers and sellers. A related strength is the flexibility of personal sales thereby making
necessary changes in the specific needs of each potential customer, highlighting the
characteristics of a product that are most likely to meet those needs. Personal selling is
most likely to persuade some one to buy a product than other promotional tools. The one-
to-one situation facilitates instant feedback with the result that the sales person can
address customer’s objections. Salespeople are part of the corporate team, and their
relationships with other areas and functions within their own company are important
factors affecting the company’s image and ultimately the sales. A weakness of personal
selling is that one person can sometimes spoil a relationship between a company and one
or more of its customers. Because the salesperson is the company’s main representative
to customers, anything this person does that is out of line will reflect negatively on the
entire company. Another weakness is that if a salesperson leaves the company to work
for a competitor, he or she takes along all the company’s selling strategies, important
accounts and also other inside information. Personal selling is very costly due to the
labour intensiveness. A highly qualified professional sales person calling on corporate
headquarters and selling high-tech products or large volume products can make only a
few calls a day because customers are rarely geographically close. Consumers often
complain about high pressure and dishonesty among sales people, an image that
competent sales people are continually trying to dispel.
Prospecting
Prospecting refers to identifying and developing a list of potential clients. Salespeople
can seek the names of prospects from a variety of sources including trade shows,
commercially-available databases or mail lists, company sales records and in-house
databases, public records, referrals, directories, and a wide variety of other sources.
Prospecting activities should be clearly structured so that they identify only potential
clients who fit the profile and are able, willing, and authorized to buy the product or
service. Once prospecting is underway, it then is up to the sales professional to qualify
those prospects to further identify likely customers and screen out poor leads.
Pre-approach
Before engaging in the actual personal selling process, sales professionals first analyze all
the information they have available to them about a prospect to understand as much about
the prospect as possible. During the Pre-approach phase of the personal selling process,
sales professionals try to understand the prospect's current needs, current use of brands
and feelings about all available brands, as well as identify key decision makers, review
account histories (if any), assess product needs, plan/create a sales presentation to address
the identified and likely concerns of the prospect, and set call objectives. The sales
professional also develops a preliminary overall strategy for the sales process during this
phase, keeping in mind that the strategy may have to be refined as he or she learns more
about the prospect.
Approach
The approach is the actual contact the sales professional has with the prospect. This is the
point of the selling process where the sales professional meets and greets the prospect,
provides an introduction, establishes rapport that sets the foundation of the relationship,
and asks open-ended questions to learn more about the prospect and his or her needs.
During the presentation portion of the selling process, the sales professional tells that
product "story" in a way that speaks directly to the identified needs and wants of the
prospect. A highly customized presentation is the key component of this step. At this
point in the process, prospects are often allowed to hold and/or inspect the product and
the sales professional may also actually demonstrate the product. Audio visual
presentations may be incorporated such as slide presentations or product videos and this
is usually when sales brochures or booklets are presented to the prospect. Sales
professionals should strive to let the prospect do most of the talking during the
presentation and address the needs of the prospect as fully as possible by showing that he
or she truly understands and cares about the needs of the prospect.
Overcoming Objections
Professional salespeople seek out prospect objections in order to try to address and
overcome them. When prospects offers objections, it often signals that they need and
want to hear more in order to make a fully-informed decision. If objections are not
uncovered and identified, then sales professionals cannot effectively manage them.
Uncovering objections, asking clarifying questions, and overcoming objections is a
critical part of training for professional sellers and is a skill area that must be continually
developed because there will always be objections. Trust me when I tell you that as soon
as a sales professional finds a way to successfully handle "all" his or her prospects'
objections, some prospect will find a new, unanticipated objection-- if for no other reason
than to test the mettle of the salesperson.
Although technically "closing" a sale happens when products or services are delivered to
the customer's satisfaction and payment is received, for the purposes of our discussion I
will define closing as asking for the order and adequately addressing any final objections
or obstacles. There are many closing techniques as well as many ways to ask trial closing
questions. A trail question might take the form of, "Now that I've addressed your
concerns, what other questions do you have that might impact your decision to
purchase?" Closing does not always mean that the sales professional literally asks for the
order, it could be asking the prospect how many they would like, what color they would
prefer, when they would like to take delivery, etc. Too many sales professions are either
weak or too aggressive when it comes to closing. If you are closing a sale, be sure to ask
for the order. If the prospect gives an answer other than "yes", it may be a good
opportunity to identify new objections and continue selling.
Follow-up
Follow-up is an often overlooked but important part of the selling process. After an order
is received, it is in the best interest of everyone involved for the salesperson to follow-up
with the prospect to make sure the product was received in the proper condition, at the
right time, installed properly, proper training delivered, and that the entire process was
acceptable to the customer. This is a critical step in creating customer satisfaction and
building long-term relationships with customers. If the customer experienced any
problems whatsoever, the sales professional can intervene and become a customer
advocate to ensure 100% satisfaction. Diligent follow-up can also lead to uncovering new
needs, additional purchases, and also referrals and testimonials which can be used as
sales tools.
Sales objectives must be based on the character of the company’s target markets and the
company’s desired position in these markets. Companies typically set objectives for their
sales force. For example, a computer sales person is responsible for selling, installing and
upgrading customer computer equipments. Sales representatives perform one or more of
the following tasks for their companies:
Prospecting
Targeting
Communication
Selling
Administration
Information gathering and
Allocating
The sales force strategy will have implications for structuring the sales force. If
the company sells many products to many types of customers, it might need a product or
market sales force structure. If the company sells one product line to one end- using
industry with customers in many locations, the company would use a territorial sales
force structure.
Territorial structure:
This is needed where the products are technically complex, highly unrelated or
very numerous. Kodak uses different sales force for its film products and industrial
products. Cipla uses different executives stationed at one area to cater to different
products.
Market structure:
Here a company’s sales force can often specialise in industry or customer lines.
Separate sales force can be set up for different industries and even different companies or
customers. Say a book publisher can set up sales force for retail trade and as well have
another one for institutional sales.
Complex salesforce:
When a company sells a wide range of products to many types of customers over
a broad geographical area, it can often combine several principles of sales structures.
Sales force can be speicalised by territory-product, territory-market, product-market etc.
A sales representative then report to one or more line managers and staff managers.
Once the company decided about its sales force strategy and structure, it is ready
to consider sales force size. Increasing the number of sales representatives will increase
both the sales and cost. Some of the methods of sales force size are:
Here the company establishes the number of customers it wants to reach, then it
can use a work load method to establish sales force size. This method consists of the
following steps:
Customers are grouped into size classes according to their sales volume.
The desirable call frequencies are established for each class.
The total work load is achieved by multiplying the number of accounts in
each class by the call frequency.
The average number of calls a sales representative can make per year is
determined.
The number of sales representatives needed is determined by dividing the
total annual calls required by the average annual calls made by a sales
representative.
Incremental method:
Budgetary method:
The company’s financial resources will often circumscribe the number of sales
people that are required. The steps involved in the process are:
Breakdown method:
Thus the number of sales personnel a company employs in the field derives from the
fundamental considerations as:
The number of prospective customers for the company’s products
The sales potential of each of these prospective customers
The geographical concentration or dispersion of these customers and
The financial resources available to the company.
1.Shared territories:
Every business defines sales territories in some fashion. Usually several sales persons of
the same company work in a given geographic area. Some firms use this shared territory
strategy to deliberately cause competition among their own sales representative.
2.Exclusive territories:
The rationale for exclusive territories is that all prospects can be covered in an orderly
and efficient manner. The risk of duplication of effort is virtually eliminated. The
customer may be better served because each sales person will be responsible and reap the
rewards of happy customers and all that means in terms of repeat business. This type
generally thought to encourage more loyalty from the sales person toward the company.
3.Territory planning:
Everyone involved must understand the plan and thus aid in its implementation.
By the same token the plan should provide direction and reduce the tendency to
drift without working toward a desirable objective. To be useful, it must be written
in simple plain language. Such issues as market penetration, geographic
concentration, sales blitzes, new account emphasis, and product strategy,
among other factors, will affect how the territory is divided.
4.Return on Assets Managed:
Some companies study the sales function and set performance criteria in terms
of ROAM. It refers to two types of items, first it can mean the actual assets
needed to support the sales effort, particularly inventories and accounts
receivable. Second, it can refer to the customers within the territory, who are
after all the most valuable resource for which the sales person is responsible.
Determining these criteria before hiring or reassigning salespeople will aid in the
deployment process itself. Specifically defining the area served is a start.
Focusing on the geographic limits, the sales manager should write down the area
for which he is responsible. In some case it the top management who defines the
target area for the company. Even if it has not this is a necessary and obvious
starting point.
5.Sales forecast:
Once the area to be served is defined the next step is relatively easy. From the sales
forecast for the following year and the estimates projected for future years, the sales
manager should be able to determine how many sales people will be required to attain the
projections. This involves analysing the sales forecast in terms of the number of sales
persons needed to make the predicted sales. One of the considerations is the commission
level expected for each sales person. The sales manager should also decide how many
territories will be required. Again it is a function of the forecast. In fact, a complete and
scientific forecast, in-depth and well documented, will be the best spring board from
which the sales manger can build the territory design for profitable sales.
3.6.1. Recruitment:
The major sources of recruiting sales representative are:
1. Internal applications
2. Advertising
National newspapers
Local newspapers
Trade journals
Commercial television
Radio
3. Manpower Consultants
4. Employment agencies
5. Educational establishments
Universities
Engineering/ Technical institutions
1. The emergence of specialised trade journals and magazines like Express Pharma
pulse, IT magazine, PC quest, Hotelier& Caterer, Auto India, Retailing magazine etc.,
has helped the recruiter to zoom down to the right candidates.
2. Many business magazines are offering recruitment services for the benefit of the
advertisers.
3. The evolution of Inter net has opened the opportunities section with confidentiality
being maintained. Portals like Naukri.com, JobsDB.com, indiainfo.com, rediff.com,
mafoi.com etc are offering placement services
4. The outdoor media has also become useful to conduct walk in interviews by
advertising for a single day.
6. The developments of e-mail has helped the companies to write separately to the
prospective candidates. By sourcing the information bank of say Rediff.com,
companies can sent in mail to whom they think will fit into their position.
On-the-job-training (OJT):
Formal training for learning the skills and knowledge to perform a job that takes place in
the actual work environment.
Case study:
A printed description of a problem situation that contains enough detail to enable the
learners to recommend a solution. The learners encounter a real-life situation under the
guidance of an instructor or computer in order to achieve an instructional objective.
Control of the discussion comes through by the amount of the detail provided.
Multimedia training:
An instructional system that incorporates all or various instructional methods and media.
It describes any application that uses multiple media (graphics, text, animation, audio,
video), but multimedia is primarily thought of as any application that uses high-
bandwidth media (audio and video) and is most often delivered on CD-ROM.
Performance-oriented training :
Training in which learning is accomplished through performance of the tasks or
supporting learning objectives under specific conditions until an established standard is
met.
Simulation :
Any representation or imitation of reality. An instructional strategy used to teach problem
solving, procedures, or operations by immersing learners in situations resembling reality.
The learners actions can be analyzed, feedback about specific errors provided, and
performance can be scored. They provide safe environments for users to practice real-
world skills. They can be especially important in situations where real errors would be
too dangerous or too expensive.
3.6.4.Methods of compensation:
Straight salary:
This method is used by many start-up companies and those companies in the fledgling or
new industries. This method makes the staff confident about his earnings and also
provides a sense of security to him. This method works on the basis of the following:
The components of salary are:
Basic salary
Dearness allowance as decided by the company
House Rent Allowance
Medical allowance and
Provident fund , gratuity and employee insurance schemes where the
employee needs to contribute.
Straight commission:
The commission schemes are followed only in those industries which are very
old. There are lot of individuals who are experienced who can understand the
riguors of the industry and would be able to provide the company what they
expect. The following are the methods followed in this straight commission:
Simple Percentage
Company pays its salespeople 10 per cent of whatever they sell.
The details of this method are provided in the next lesson.
Incentives:
Incentives are motivators. Over and above the salary, these incentives
play a vital role in the overall growth of the company as well the sales personnel.
Incentives provide the extra money for the employee and motivates him to
perform better. A study by Ralph & Affliates among the companies and sales
people revealed that, incentives are used to
1. The ESOP operates through a trust, setup by the company, that accepts tax
deductible contributions from the company to purchase company stock.
2. The contributions made by the company are distributed to individual
employee accounts within the trust.
3. The amount of stock each individual receives may vary according to pre-
established formulas based on salary, service, or position.
4. The employees may ‘cash out’ after vesting in the program or when they
leave the company. The amount they may cash out may depend on the
vesting requirements.
5. Summary
Personal selling is different for different industries. The sales people require to
have certain unique skills and traits that force them to face the harsh realities of the
market. The most important personality traits for sales people are empathy and focus,
ego-drive, optimism and attitude toward responsibility. There is a need to have personal
introspection before venturing into selling. An introvert can hardly be able to sell
anything. It is hence important that the individual is outgoing, gregarious and also an
extrovert, talkative person. Apart from selling, the sales person has to perform many
other tasks, such that the percentage of calling time is only about 33 per cent. The
potential customers have to be first identified from databases/company sources/primary
information available. The sales person has to plan on which prospect needs to be called
with what priority. Then, the sales person has to decide how to approach a customer.
Thus the selling techniques have to be constantly followed up. In addition, the sales
person’s company will request administrative work such as providing all kinds of data on
customers, reporting activities, participating in sales meetings and conferences and
visiting trade shows as seen earlier. In order to constantly improve the competence, the
sales person has to take part in product as well as sales training.
6. Exercises
7. References
1. NANZ
When Nanz hit the market in 1993, it was considered a bold step into what was
then a sunrise industry. In 1997, the chain had projected a turnover Rs100 crore
by 1999. But by the appointed date, turnover was less than a fifth of that level,
and profits were nowhere visible on the horizon. Nanz appears to have got it just
right. It had the right stores in the right places - places where well-heeled
customers would come to buy things at a premium; places like South Extension
and Greater Kailash, representing some of New Delhi uppercrust areas. But
Nanz is out for the count today, after struggling for nearly a decade with low
business volumes and turnover. Why did a chain with three high-profile backers
fail in an industry that has seen a boom in the last decade? The answer, in one
sentence, is simple: getting a couple of rules of the game right is not enough if
you get the rest of them horribly wrong. With 20/20 hindsight one can say that the
Nanz management failed on almost every count. It failed to do its homework, a
fact that affected both its cost structures and its target market. It also failed in
building effective partnerships with its vendors to ensure an efficient supply
chain. The problem began right from the groundwork. Nanz chose to start its
chain in Delhi, where its Indian promoters, the Nandas, are based. But this
proved to be a bad decision because of crippling real estate prices. In contrast,
RPG group’s Foodworld opened in Bangalore, Hyderabad, Chennai and Pune,
where real estate prices are almost a quarter of those in Delhi. For one of its first
outlets in Delhi’s Greater Kailash locality, Nanz was paying as much as Rs 5 lakh
for its 10,000 square feet space in 1993. Thus at Nanz, rent accounted for as
much as 4 to 5 per cent of gross margins. But real estate proved to be a bigger
killer than Nanz had bargained for. The first Nanz outlet was opened in May 1993
in South Extension in Delhi. Within a year, it was attracting 2,000 customers per
day. But the dream run came to a sudden halt when the Municipal Corporation of
Delhi razed the building. Apparently, Nanz had violated building by-laws by
taking a lease on residential property. Kapoor claims that the Nanz management
was unaware of these irregularities; it had merely leased the property from
parties who owned the real estate. Then in 1998, a part of another Nanz outlet on
Pusa Road was demolished because the builder had taken up more are than
what was permitted. Meanwhile, Nanz had another, bigger problem on its hands
- the lack of a market. When Nanz Food Products was formed in 1993, the
supermarket concept was in its infancy.
Though retail activity started in the mid-eighties, players like Nilgiri and
Foodworld were restricted to the south and west. The first Shoppers’ Stop outlet
opened in Mumbai in 1991. Nanz was the first major food and grocery retail store
chain in northern India. It was, therefore, in direct competition with the kirana
shops, which have three distinctive advantages - proximity, service (they offer
such convenience as home delivery) and high margins due to low infrastructure
costs. Nanz’s ambiance may have been in keeping with the promoters’ aim of
providing an international shopping experience, but it failed to lure middle class
and lower middle class consumers who would help generate volumes to partially
neutralise the high overheads. Nanz made sure it targets the low turnover
customers by setting up ‘LoBill” stores - no-frills stores of 1,000 to 2,000 square
feet to increase its consumer base. These stores were opened in such middle
class “catchment areas” like Noida and Shahdara in 1994. This format was
extended in December 1996 when Nanz established six sub-1,000 square food
stores called “Kiryana from Nanz”. However, by 1997, two of these had shut
shop. The reason: Nanz Kiryana stores did not offer sufficient price differentials
from the neighborhood shops. Moreover, Nanz did little to strengthen customer
relationships in a durable manner. Where, for instance, Shoppers Stop has an
energetic loyalty program, Nanz launched special promos and went in for some
aggressive advertising. But the problem was that these efforts were rarely
consistent. Nanz would step up its media presence during the fag end of one
month and the beginning of another (from the 25th of one month to the 10th of
the next). Such measures only brought temporary relief. Typically, retailers
source directly from manufacturers instead of distributors. By cutting one link in
the chain, they are able to negotiate better bulk discounts.In the case of Nanz,
they could not leverage the same. The lax standards at the store level were a
direct reflection of the management, which was constantly in flux. In eight years,
Nanz Food Products has had six CEOs.
(source: Ronita Chattopadhyay)
Questions:
1. What were the problems as seen by the company and perceived by the
customers?
2. Nanz was also trying to fight the general perception that a supermarket or
branded store need not necessarily charge higher prices. Do you think this is
the right strategy? Explain.
UNIT - III
Marketing of services
Unit structure:
1. Introduction
2. Learning Objectives
3. Services marketing
3.1. Characteristics of services
3.2. Segmentation, positioning and differentiation
3.3. Service quality
3.4. Marketing mix for services
4. Have you understood type questions?
5. Summary
6. Exercises
7. References
1. Introduction:
Services permeate every aspect of our lives; consequently the need for
services marketing knowledge is greater than ever before. The distinction
between goods and services is often unclear. In general goods are defined as
objects, devices or things, where as services are defined as deeds, efforts, or
performances. Very few products can be classified as pure products or pure
services. When a customer purchases a service, he or she purchases an
experience. The four components of the servicing system create the experience
for the customer-the inanimate environment, service providers/contact personnel,
other customers, and the invisible organization and systems. In turn, the service
experience that is created delivers a bundle of benefits to the consumer. This
service sector which is now a major component of the Indian economy will thrive
for years to come and the marketers should know how to make the most of this
sector.
2. Learning Objectives:
People often try to overcome some of these difficulties by ensuring that the
physical manifestations of the service (the people running it, the library building,
printed search results, airline tags, hotel material, web pages etc) indicate the
quality of the service. The people running the service are more likely to inspire
confidence in the service if they are responsive, reliable, courteous, and
competent. If the hotel lobby looks shabby and disorganised, or if the website is
difficult to navigate with broken links, then users may assume that the services
provided by the respective hotel or provider is bad.
Market segmentation is used as a strategic marketing tool for defining markets and
thereby allocating resources. Market segmentation is the act of dividing a market into
distinct groups who might be attracted to different products or services. This technique is
widely accepted as one of the requirements for successful marketing. By dividing the
market into relatively homogenous subgroups or target markets, both strategy
formulation and tactical decision making can be more effective. Market segmentation is
concerned with individual or group differences in response to specific market variables
(e.g. preferences, lifestyles, media habits, etc.). The strategic presumption is that if these
response differences exist, can be identified, and are reasonably stable over time, and if
the segments can be efficiently reached, the company may increase its market share
beyond that obtained by assuming market homogeneity. Apart from the normal market
segmentation possibilities that are mentioned earlier in this study material, one major
segmentation that is needed in services is customer segmentation. Customer segmentation
is a good thing. It helps to recognize how customers are different and it should draw the
attention to needs of different segments, prompting you to better meet those needs.
Segment by need rather than profit or revenue. A low-profit customer today could be
high-profit tomorrow if you offer products and services that fill her/his needs. Look for
ways some customer segments can effectively be more "self- service," which cuts costs
for the company while meeting customer service needs. Build in ways to create
exceptions in automated customer service processes, so as not to alienate those with
special situations. If offering promotions, rewards, or other incentives to some segments
but not others, "spell it out" for customer service representatives and structure your Web
site and promotional mailings accordingly. By taking steps to assure customers receive
consistent information across all channels of communication, you avoid customers being
exposed to offers for which they do not qualify. There are ways to segment customers
without lowering customer service.
Positioning applies to all products and services. Positioning is about making products
available at the right time, to the right people, and at the right place. Thus, it is in the
hands of marketers how well they play with positioning by adopting innovative methods.
It is imperative for an organization to clearly differentiate its product or service from that
of its competitors. This enables the firm to gain sustainable competitive advantage in the
market. Positioning is the strategy by which the firm does the aforesaid endeavor. Some
of the methods include getting into the mind of consumers, avoiding overload of
information to customers, and sustaining the leadership position. There are perceptual
mapping that can be done so that the desired service can be offered to the customers. It
has been used as a strategic management tool for about thirty years now. Perceptual
mapping helps to communicate the relationship between competitors and the criteria used
by your consumers while making purchase decisions. Perceptual maps, being simple
graphic figures, can pave the path for all types of organizations.to think in strategic terms.
A study conducted by Nargundkar brings out the perceptual map of the Indian
airline sector where the respondents were A)Jet airways, B)Indian Airlines, C)Air
Deccan and D) Kingfisher in this order. The study was based on perceived
service quality. This study shows that customers of Jet Airways rate it as an
airline that provides very good service quality across the fourteen service
variables. Kingfisher ranks second and its customers have reported that usually
the airline provides good service quality. Indian Airlines was rated as providing
good in-flight food, waiting time for baggage, good ground service,
accommodation on delay and a few other elements such as price, online booking
and benefits for frequent fliers. Indian Airlines was rated as average or below
average on the rest of the service variables. Baggage loss has been reported as
a problem faced by some of the Indian Airlines customers. Air Deccan has been
rated by its customers as providing good service quality in informing customer
about delay. Air Deccan customers are happy with its provision for online
booking, discounted fare and real benefits for frequent fliers. The travelers
of Air Deccan seem to rate it to be a bad service provider even though they were
flying on low fares. Differentiation can occur only by adding new service
elements along with providing better quality in delivering quality service which
now Kingfisher and Jet airways have started to do so.
3.3. Service Quality:
Perceived service quality can be defined according to Parasuraman, Zeithaml & Berry
as "a global judgment or attitude relating to the superiority of a service." Over the past
three decades, researchers have attempted to discover the global or standard attributes of
a service that are important to the customer and that contribute significantly to customers'
quality assessment. Sasser, Olsen, and Wyckoff reported seven major attributes in the
context of the service industry: security, consistency, attitude, completeness, conditions,
availability, and training. Later, ten dimensions were revealed in an exploratory study
conducted by Parasuraman, Zeithaml & Berry : tangibles, reliability, responsiveness,
communication, credibility, security, competence, courtesy, understanding the customer,
and access. Based on these ten dimensions, Parasuraman et al. further purified and
distilled these ten dimensions of service quality to five: tangibles, reliability,
responsibility, assurance, and empathy. These five service quality attributes constitute the
basis for global measurement of service quality, namely, SERVQUAL. The various gaps
that can arise out of service continuum between customer and the employee are:
SERVQUAL in KTDC:
This study is based on primary and secondary data. The primary data is
collected from 100 members of the management staff of the KTDC Ltd and
secondary data is collected from the published annual reports and from other
documents and from the website of the company. The study is mainly carried out
in Trivandrum (dist) and KTDC hotels at Trivandrum, Hotel Mascot, Hotel
Samudra, and Hotel Chaitram. For the study mainly primary and secondary data
were used. The Primary data was collected through questionnaire and interview
method and secondary data was collected from annual reports, brochures, and
websites. In the findings it was found that majority of respondents were
professionals and businessmen. The purpose of visit by most of the respondents
in the hotel was for leisure. A good majority of the respondents visit not only
Trivandrum but other places in Kerala as well. Most of the respondents plan to
visit Kerala yearly. Majority of the respondents prefer premium hotel for their
stay. A high level of satisfaction exists among the respondents regarding the
level of services offered. The respondent rated the information availability and
thanking provided as excellent at the reception. The respondents rated the
welcome, verbal introduction, non-verbal introduction and other conversations at
the reception as very good. The respondents have rated room service as
excellent, food and beverages, cleanliness, overall atmosphere as very good and
room facilities as good. The respondents rated the transportation and guiding as
excellent, ticket booking, foreign exchange as very good. The majority of the
respondents are not aware whether their suggestions have been implemented or
not. More than 90% of the respondents are loyal as they would use the same
hotel on their next visit and would also recommend it to others.
Some of the suggestions put forward include provision for few separate
rooms with all the facilities, which the businessmen/professional might need to
stay connected with his business. Examples may the personal computer with
broadband connection, printer, tax etc. this is because there is a growing number
of businessmen and professionals who visit Kerala. Setup help desk at each
hotel, which would provide assistance and guidance to the tourists in planning
their trip in Kerala. This could be done in co-ordination with the events organized
and places highlighted by Kerala tourism department. The main aim would be to
promote the packages of hotels of KTDC. Set up a data bank consisting of
information regarding preferences of regular customers. This would help them in
providing better service to the customers and building brand loyalty. This would
translate in repeat usage of the hotel and it getting recommended by way of word
of mouth communication. The hotels should keep up regular communication with
the clients and keep them up to date with the new packages being offered to
sending greetings on the special occasions in the clients country, so that KTDC
remains in their minds long after their visit, with the minimum effort on the part of
KTDC in terms of cost. The front desk and the hotel staff should be provided with
training regarding customer relationship and they should be kept up to date wit
the changing global preferences trends in service since most of the clients are
foreigners. Implement the changes and show it in the service provided to the
customer so that the customer feels that his suggestions have been
implemented. Provide compliments to the customers who had taken interest in
providing those suggestions. A roof top hotel could be constructed at hotel
Chaitram as was mentioned by many of the customers.
The service marketing mix has 7Ps consists of Product, Price, Promotion, Place,
People, Physical evidence and Process. There are 3P’s in addition to the 4P’s of
product keeping in mind the characteristics of services. Let us now look at the
three additional P’s:
Physical evidence is the material part of a service. Strictly speaking there are
no physical attributes to a service, so a consumer tends to rely on material cues.
They are:
• Building
• Catalougues
• Brochures
• Furnishings
• Signages
• Pacakging
• Internet web presentation
• Uniforms
4. Marketers for the airline industry sometimes find it difficult to promote their
product because unused aeroplane seats cannot be stored. This problem
illustrates which one of the following unique features of services?
A. Intangibility
B. Inseparability
C. Perishability
D. Heterogeneity
5. Summary
In the present CRM era where the customer is the decision maker, the increase
in competition has made the differentiation in product range and services of an
organization more important in any industry. Considering the fact that services
are growing and are expected to be 75% of the Indian GDP, the importance can
be seen. The growth in IT and software are one of the primary indicators. Hence
organisations entering the service sector need to be competitive and updated.
6. Exercises
2. Explain the service quality that is needed from a retail store. Visit the nearest retailer
and explain the same.
3. Describe the need for people in services with examples from Hotel and Hospital sector.
4. Explain the relevance of marketing mix in the following aspects:
a. Courier services
b. Software services
c. Consultancy services
7. References
Rural marketing
Unit structure:
1. Introduction
2. Learning Objectives
3. Indian rural sector
3.1. Rural marketing profile
3.2. Rural consumer behaviour
3.3. Strategies for rural marketing
3.4. Rural retailing
3.5. Rural marketing initatives
4. Have you understood type questions?
5. Summary
6. Exercises
7. References
1. Introduction:
2. Learning Objectives:
3. Rural marketing:
The rural market comprises of 74 per cent of the country's population, 41 per
cent of its middle class, 58 per cent of its disposable income and a large
consuming class. Today, real growth is taking place in the rural-urban markets or
in the 13,113 villages with a population of more than 5,000. Of these, 9,988
villages are in seven states -- Uttar Pradesh, Bihar, West Bengal, Maharashtra,
Andhra Pradesh, Kerala and Tamil Nadu. According to the National Council for
Applied Economic Research, the millennium belongs to the Class III and IV rural-
urban towns. In order to efficiently and cost-effectively target the rural markets,
the companies will have to cover many independent retailers since in these
areas, the retailer influences purchase decisions and stock a single brand in a
product category. Most of the companies have started tinkering with pack sizes
and creating new price points in order to reach out to rural consumers since a
significant portion of the rural population are daily wage workers. Hence it
becomes important to have a deeper insight into this emerging market.
There are about 285 million live in urban India whereas 742 million reside in
rural areas, constituting 72% of India's population resides in its 6, 00,000 villages.
The number of middle income and high income households in rural India is
expected to grow from 80 million to 111 million by 2007 while urban India is
expected to grow from 46 million to 59 million. In fact according to a recent
survey, there are more crorepatis in rural Punjab than in a few big urban cities.
Size of rural market is estimated to be 42 million households and rural market
has been growing at five times the pace of the urban market. There is increasing
agricultural productivity leading to growth of rural disposable income. There is
also lowering of difference between taste of urban and rural customers. There
has been good monsoons during the years 2005-06. Many companies like
Colgate-Palmolive, HLL, Godrej, etc., have already made forays into rural
households but still capturing the markets is a distant dream. Most marketers still
lack in-depth knowledge to analyze the complex rural market.
Rural market has an annual size of Rs.65,000 Crore for FMCG, Rs.5000 Crores
for Durables, Rs.45,000 Crores for Agri-inputs and Rs.8000 Crore for two and
four wheelers according to NCAER study. Of two million BSNL mobile
connections, 50% are in small towns / villages. Of the 6.0 lakh villages, 5.22 lakh
have a Village Public Telephone (VPT). 41 million Kisan Credit Cards have been
issued (against 22 million credit-plus-debit cards in urban), with cumulative credit
of Rs. 977 billion resulting in tremendous liquidity. Of the 20 million Rediffmail
sign-ups, 60% are from small towns. 50% of transactions from these towns are
on Rediff online shopping site. 42 million rural households (HHs) are availing
banking services in comparison to 27 million urban HHs. Investment in formal
savings instruments is 6.6 million HHs in rural and 6.7 million HHs in urban. The
rural market is expected to poise towards a greater jump as the infrastructure is
improving rapidly. In 50 years only, 40% villages have been connected by road,
in next 10 years another 30% would be connected. More than 90% villages are
electrified, though only 44% rural homes have electric connections. Rural
telephone density has gone up by 300% in the last 10 years; every 1000+ pop is
connected by STD. Social indicators have improved a lot between 1981 and
2001. Number of "pucca" houses doubled from 22% to 41% and "kuccha" houses
halved (41% to 23%). Percentage of BPL families declined from 46% to 27%.
Rural literacy level improved from 36% to 59%. Marketers can make effective
use of the large available infrastructure like 1,38,000 post offices, 42,000 of
haats, 25,000 melas, 7,000 mandis, 3,80,000 public distribution shops and
32,000 bank branches. Some of the companies that have used the rural
distribution have started their own centres like DSCL Haryali Stores, M & M
Shubh Labh Stores, TATA / Rallis Kisan Kendras, Escorts Rural Stores and
Warnabazaar, Maharashtra (Annual Sale Rs. 40 crore).
In a nutshell the rural market profile is large and scattered in the sense that it consists of
over 63 Crore consumers from 5, 70,000 villages spread throughout the country.
Nearly 60 % of the rural income is from agriculture. Hence rural prosperity is tied with
agricultural prosperity. Consumer in the village area do have a low standard of living
because of low literacy, low per capita income, social backwardness, low savings, etc.
The rural consumer values old customs and tradition. They do not prefer changes. Rural
system, and financial facilities are inadequate in rural areas. Hence physical distribution
Rural consumer buys products more often (mostly weekly). He buys small packs,
low unit price more important than economy. In rural India, brands rarely fight
with each other; they just have to be present at the right place. Many brands are
building strong rural base without much advertising support. Chik shampoo,
second largest shampoo brand. Ghadi detergent, third largest brand. Both of
them have had concerted effort in the north Indian rural market and have
benefited. The gap between the urban and rural spend is huge. Though there is
no authenticated figure, it is found that rural marketing currently must be
accounting for only Rs. 5 billion out of a total estimated advertising budget of
over Rs. 100 billion a year. There is a vast difference in the lifestyles of the
people. The kind of choices of brands that an urban customer enjoys is different
from the choices available to the rural customer. The rural customer usually has
2 or 3 brands to choose from whereas the urban one has multiple choices. The
difference is also in the way of thinking. The rural customer has a fairly simple
thinking as compared to the urban counterpart. With low disposable incomes,
products need to be affordable to the rural consumer, most of whom are on daily
wages.
Traditional methods of rural marketing make an interesting study and they ought
to be analyzed carefully to draw relevant conclusions. Conventionally, marketers
have used the following tools to make rural inroads: -
• Use of few select rural distributors and retailers to stock their goods but no
direct interaction with prospective consumer.
• Use of print media or radio but no alternate form of advertising for
promoting their brands.
• More focus on price of product but less attention devoted to quality or
durability.
• Same product features for urban and rural setting with no customization
for rural areas despite differences in the market environment.
• Low frequency of marketing campaigns.
• Little uses of village congregations like haats and melas to sell the
products.
• More focus on men as decision makers and buyers.
The past practices of treating rural markets as appendages of the urban market
is not correct, since rural markets have their own independent existence, and if
cultivated well could turn into a generator of profit for the marketers. But the rural
markets can be exploited by realizing them, rather than treating them as
convenient extensions of the urban market. Considering the magnitude of the
task at hand with the companies, it makes sense for non-competitive companies
like HLL and LG to make a joint effort to penetrate the market. They can use
each other's distribution channels to leverage their brands. Also considering the
poor awareness levels of the people, competitors like HLL and P&G should join
hands to avoid the product proliferation, which results in confusing the consumer.
Rural consumers have a very high level of ethos so all the care should be taken
not to hurt them in any form of advertising. Moreover, every effort should be
made by the companies to promote the "my brand" feel in the minds of
consumers. This can be achieved by connecting the local industries of that place
and, if possible, use it in packaging or graphics of the product.
Marketers need to understand the psyche of the rural consumers and then act
accordingly. Rural marketing involves more intensive personal selling efforts
compared to urban marketing. Firms should refrain from designing goods for the
urban markets and subsequently pushing them in the rural areas. To effectively
tap the rural market, a brand must associate it with the same things the rural
folks do. This can be done by utilizing the various rural folk media to reach them
in their own language and in large numbers so that the brand can be associated
with the myriad rituals, celebrations, festivals, "melas", and other activities where
they assemble. One of the ways could be using company delivery van which can
serve two purposes - it can take the products to the customers in every nook and
corner of the market, and it also enables the firm to establish direct contact with
them, and thereby facilitate sales promotion. However, only the bigwigs can
adopt this channel. The companies with relatively fewer resources can go in for
syndicated distribution where a tie-up between non-competitive marketers can be
established to facilitate distribution. Annual "melas" organized are quite popular
and provide a very good platform for distribution because people visit them to
make several purchases. According to the Indian Market Research Bureau,
around 8000 such melas are held in rural India every year. Rural markets have
the practice of fixing specific days in a week as Market Days (often called
"Haats') when exchange of goods and services are carried out. This is another
potential low cost distribution channel available to the marketers. Also, every
region consisting of several villages is generally served by one satellite town
(termed as "Mandis" or Agri-markets) where people prefer to go to buy their
durable commodities. If marketing managers use these feeder towns, they will
easily be able to cover a large section of the rural population. Firms must be very
careful in choosing the vehicle to be used for communication. Only 16% of the
rural population has access to a vernacular newspaper. So, the audio visuals
must be planned to convey a right message to the rural folk. The rich, traditional
media forms like folk dances, puppet shows, etc., with which the rural consumers
are familiar and comfortable, can be used for high impact product campaigns.
The Indian rural market with its vast size and demand base offers a huge opportunity that
MNCs cannot afford to ignore. With 128 million households, the rural population is
nearly three times the urban. The rural market accounts for half the total market for TV
sets, fans, pressure cookers, bicycles, washing soap, blades, tea, salt and toothpowder,
What is more, the rural market for FMCG products is growing much faster than the urban
counterpart. This is where rural retailing really takes off. Study on buying behaviour of
rural consumer indicates that the rural retailers influences 35% of purchase decisions.
Therefore sheer product availability can affect decision of brand choice, volumes and
market share. India offers a huge, sustainable and growing rural market which can be
tapped effectively through innovative distribution channels with retailing being the most
critical element of this strategy as it is the final touch point and the actual touch point
with the customer which can be the most critical influence in the buying process. From
the time HLL's new distribution model, named Project Shakti, was piloted in Nalgonda
district in 2001, it has been scaled up and extended to over 5,000 villages in 52 districts
in AP, Karnataka, Gujarat and Madhya Pradesh with around 1,000 women entrepreneurs
in its fold. The vision is ambitious: to create by 2010 about 11,000 Shakti entrepreneurs
covering one lakh villages and touching the lives of 100 million rural consumers. HLL
has operated Project Shakti through these self-help groups; AP was chosen for the pilot
project as its has the most number and better established SHGs - there are about 4.36 lakh
SHGs in AP covering nearly 58.29 lakh rural women. The Shakti model trains women
from SHGs to distribute HLL products of daily consumption such as detergents, toilet
soaps and shampoos - the latter's penetration being only 30 per cent in rural areas. The
women avail of micro-credit through banks. Mr Sehgal explained that some of the
established Shakti dealers are now selling Rs 10,000-Rs15,000 worth of products a month
and making a gross profit of Rs 700-Rs1,000 a month. Each Shakti dealer covers 6-10
villages which have a population of less 2,000. The company is creating demand for its
products by having its Shakti dealers educating consumers on aspects like health and
hygiene. Similarly ITC has already set up over 700 choupals covering 3,800 villages in
four States — which include Madhya Pradesh, Uttar Pradesh, Karnataka and Andhra
Pradesh — dealing with products ranging from soya bean, coffee, aquaculture and wheat.
Now there is re-emergence of mandis in the form of portals or virtual bazaars like that
EID Parry, Amul and ITC e-choupals etc. After all, the concept of mandis cannot be
written off that easily. They have evolved over a period of time and have lasted for
several centuries. They lost their prominence temporarily due to the brand marketing
strategies adopted by companies. The basic problem with brand marketing is its high
cost. Mandis offer a cost-effective method of marketing. With the virtual mandis the cost
saving is still better. Consider for example the case of marketing farm inputs like
fertilisers, seeds and pesticides. In the brand marketing approach, the same information is
provided by several marketers through different media and methods. In the virtual
mandis, several people can join hands and provide best possible information in a most
cost effective manner to the farmers.
5. Summary
According to the United Nations, the richest 20 percent in the world accounted for
about 70 percent of total income in 1960. In 2000, that figure reached 85 percent.
Over the same period, the fraction of income accruing to the poorest 20 percent
in the world fell from 2.3 percent to 1.1 percent. According to CK Prahlad,
contrary to popular assumptions, the poor can be a very profitable market
especially if MNCs change their business models. Specifically, Tier 4 is not a
market that allows for the traditional pursuit of high margins; instead, profits are
driven by volume and capital efficiency. Margins are likely to be low (by current
norms), but unit sales can be extremely high. Managers who focus on gross
margins will miss the opportunity at the bottom of the pyramid; managers who
innovate and focus on economic profit will be rewarded. Considering the
discussions mentioned above, it is imperative that marketers start realizing the
need for giving attention to the rural markets. Thus, looking at the challenges and
the opportunities, which rural markets offer to the marketers, it can be said that
the future is very promising for those who can understand the dynamics of rural
markets and exploit them to their best advantage. A radical change in attitudes of
marketers towards the vibrant and burgeoning rural markets is called for, so they
can successfully impress on the 230 million rural consumers spread over
approximately six hundred thousand villages in rural India.
6. Exercises
1. Nirma has become one of the largest branded detergent makers in the
world. Meanwhile, HLL, stimulated by its emergent rival and its changed
business model, registered a 20 percent growth in revenues per year and
a 25 percent growth in profits per year between 1995 and 2000. How was
this possible?
2. With large parts of rural India inaccessible to conventional advertising
media — only 41 per cent rural households have access to TV — building
awareness is a challenge. Explain how a consumer durable company can
do it?
3. Explain the relevance of hub and spoke model of Coca cola for rural
markets. Visit the nearest Coca-cola dealer and find out.
4. Do you think this will work- “a mobile van with complete Thums Up branding
tours villages and invites people to buy any Coca-Cola product and play a game
free. The van comes complete with a magician, speakers/promoters, and invites
all consumers to participate in various games in rural markets”
5. The agri-portal of EID Parry, www.indiagriline.com, has been designed to address
the specific needs of the rural farming community and is an attempt to catalyse e-
commerce in agricultural and non-farm products by offering a network of
partnerships. Do you think this will address the rural reach problem?
7. References
1. Rethinking marketing programs for emerging markets, Chattopadhyay, A., and
Dawar. N., Insead R&D, 2000.
2. Growing brand awareness, Joseph, Sophie, The Hindu Survey of Indian Industry,
1999
3. Backcountry Business, Business Today, November 11, 2001.
4. The Consumer, Business Today, January 20, 2002
5. Alternative Nation, Baxi, Sachin, Brand Equity, The Economic Times, 15 May,
2002.
6. I’ll play the game my way, Vindi Banga’s interview with Rahul Joshi and alika
Rodrigues, Brand Equity, The Economic Times, May 22, 2002.
7. Advertising in Rural India: Language, Marketing Communication, and
Consumerism. Institute for the Study of Languages and Cultures of Asia and
Africa, Tokyo University of Foreign Studies. Tokyo Press, Tokyo, Japan. 2000.
Marketing Research
Unit structure:
1. Introduction
2. Learning Objectives
3. Marketing research
3.1. Marketing research process
3.2. Marketing research analysis
3.3. Marketing research methods
3.4. Preparation of marketing research reports
4. Have you understood type questions?
5. Summary
6. Exercises
7. References
1. Introduction:
2. Learning Objectives:
3. Marketing research
Eg: Sales force who have training show greater productivity than the
employees who do not receive training.
(a) The sampling design which deals with the method of selecting
items.
(b) The observation design which deals with the conditions under
which observations are made.
(c) The statistical design concerned with the methods of data analysis,
and
(d) The operational design which deals with the techniques by the
procedures specified for the above can be carried out.
So a research design contains (a) Statement of the research problem; (b) Procedure and
techniques to be used for data collection. (c) The population to be studied and (d)
Methods to be used for processing and analyzing data. The entire group of study is called
the population. These may be people, organisations, geographical areas, products etc. If
the entire population is investigated, it is a census. Normally, it is not possible to study
the entire population. So the researcher, quite often, select only a few items from the
universe for the study. The items so selected are called a sample. The problem of
sampling is to ensure that the sample is fair representation of the underlying population.
So the researcher has to select an appropriate sampling method which answers two
questions:
Raw data does not make any sense and only when it is analysed, we get
information, which is meaningful. Before anlaysis, the raw data is processed to
ensure that we have all the relevant data. Processing implies four activities:
Editing
Coding
Classification and
Tabulation
The process of examining the raw data to detect errors and omissions and
to correct these when possible is called Editing. Coding is the process of
assigning numerals or other symbols to the data in order to put them in limited
number of categories. Putting larger volume of data into homogenous groups is
termed as classification. The tabulation deals with the process of summarising
raw data and displaying the same in correct form for further analysis. Analysis
work after tabulation is based on the computation of various percentages,
coefficiencies, etc. by applying appropriate statistical tools and techniques. The
data analysis provides the researcher some logical insights into the problem at
hand and enable him arrive at generalisation, i.e., to built a theory. The effort
undertaken by the researcher to explain his findings is known as interpretation.
The process of interpretation quite often trigger off new questions and thus saw
the seeds for further researches. It is important that the results of the study are
properly presented and communicated. Otherwise, all the efforts hitherto
undertaken by the researcher would be in vain. So writing a report and making
an oral presentation on the same is of extreme importance.
There are many analytical tools used in marketing research. SPSS is the
software which is used effectively for analysing the tabulated data. Apart from
SPSS, there are few other packages like SSP are used for the analysis.
Multivariate techniques are those that involve more than variables at the same
time. They can be categorised into essentially three broad areas which depend
on the nature of the variables examined and their relationship with each other.
The categories are based on certain questions being posed when designing
surveys for primary data and analysing primary and secondary data. In
Marketing Analysis multivariate techniques are employed for a variety of reasons
i.e. establishing relationships between variables in order to explain and/or
predict examination and analyses of differences in groups or populations. The
various approaches are:
Cluster Analysis can help us to identify groups of people. The idea is quite
simple, and is based upon the idea of drawing a graph of particular peoples
scores, known as factor scores, looking at them, and noticing where there are
clusters of people, that is, a lot of people with similar scores on the factors.
Computer packages allow us a variety of options in this procedure, in a later case
example we will concentrate on trying to find easily identifiable groups. We can
actually record peoples’ group membership allocation in the data file, too, so you
can observe this, and see how useful it becomes. The key piece of output,
however, is the dendogram, which helps us to identify the number of groups that
may be useful to us. Perceptual mapping is concerned with describing the
consumers perceptions of objects on one or a series of spatial maps, in order
that the relationship(s) between objects can be easily seen. These methods can:
• identify the number of dimensions that consumers use to distinguish objects;
• determine a preferred location of an object on each of the dimensions;
• provide information on the nature and characteristics of these dimensions.
There may be few or many linked variables in a data set as a result of these
marketing analysts try to group responses from tests into basic clusters. This
technique is known as factor analysis and can be used in conjunction with other
techniques, such as cluster analysis. The analysis is usually undertaken on
responses to a questionnaire. It is used to reduce the questionnaire to those
questions that are really measuring different attitudes or traits of the respondent.
The starting point of the analysis is to obtain a matrix of the correlations between
variables, gained from answers to questions. The analysis identifies patterns
from correlations. It does not indicate variable dependence directly but offer
guidance for the analyst in what patterns predominate. Discriminant analysis
seeks to generate dimensions that will separate objects as much as possible.
The procedure for this is analogous to factor analysis. Like multiple regression
analysis, this technique has one dependent variable and a set of
independent variables. Based on measurements for the independent
variables, discriminant analysis can be used to classify people or objects into one
of two or more groups. Both factor and discriminant analysis require that attribute
evaluations be interval data. Correspondence analysis allows the creation of
visual perceptual maps using categorical data as well as mixed data sets
(nominal, ordinal, and/or interval).
Market demand
Company demand
Market demand for a product is the total volume that would be bought by a
defined customer group in a defined geographical area in a defined period of
time in a defined marketing environment under a defined marketing programme.
Company demand is the company’s estimated share of market demand at
alternative levels of company marketing effort. One major reason for undertaking
marketing research is to identify market opportunities. Once the research is
complete, the company must measure and forecast the size, growth, and profit
potential of each market opportunity. Sales forecasts are used by finance to raise
the needed cash for investment and operations; by the manufacturing
department to establish capacity and output levels; by purchasing to acquire the
right amount of supplies; and by human resources to hire the needed number of
workers. Marketing is responsible for preparing the sales forecasts. If its forecast
is far off the mark, the company will be saddled with excess inventory or have
inadequate inventory. Sales forecasts are based on estimates of demand.
Managers need to define what they mean by market demand. Companies can
prepare as many as 90 different types of demand estimates. Demand can be
measured for six different product levels, five different space levels, and three
different time levels. Each demand measure serves a specific purpose. A
company might forecast short run demand for a particular product for the
purpose of ordering raw materials, planning production, and borrowing cash. It
might forecast regional demand for its major product line to decide whether to set
up regional distribution.
The market for refrigerators, is now expected to reach 7.5 million by 2004-05, at a CAGR
of 12 per cent. Excise structures, if rationalized, could raise growth in the entry-level
segment. Meanwhile, this category is ripe for a wave of replacement, for which marketers
are already geared. Refrigerators with 300-litre capacity and above are likely to grow
faster than the rest of the market. If Indian food habits start to change, demand for greater
freezer capacity might also grow. The market for air-conditioners (ACs) is also
prominent among those that have failed to reach the expected figure for 1999-2000. A
likely reason could be excise duties. The fact is that this product is still treated as a luxury
by the Government, and ACs are outrageously priced in India (because of high duties).
Assembled ACs, put together by corner shops that pay no duties, are thriving - much to
the dismay of the organized sector.
Price range for consumer electronics products has increased many times over the
years. This enables manufacturers to focus on niche markets or specific market segments.
India imports a relatively higher proportion of video and audio equipment.
The main demand drivers for consumer electronics products in the future include the
following:
• Growth in per capita income, disposable income of
households and growth in entertainment sector;
• Increasing consumerism, changing aspirations and higher
affordability will drive demand further; and
• Product penetration currently low - immense potential exists
in smaller towns and rural markets.
New product launch is the most crucial aspect in the new product
management. The new product launch can be on a national basis or a rolling launch as
seen in the earlier chapter. The success and failure of a product heavily depends on the
new product launch. It is a known fact that the launch strategy of Microsoft, in the case of
Windows 95 using Michael Jackson contributed heavily to the success of the product. It
is important to be innovative in the launch strategies. Core teams are critical for speeding
up product development and creating exciting products. Rogers has suggested the use of
diffusion of innovation method for launching a new product. Not all-potential users of a
new product or a new generation of a technology adopt the new product at the same time.
Consequently, on the basis of the stage at which they adopt the new product, adopters
traditionally are classified into five categories: innovators, early adopters, early majority,
late majority and laggards. Rogers has suggested that for every new product, 2.5% of the
adopters are innovators, 13.5% are early adopters, 34% are early majority, 34% are late
majority and 16% are laggards. However, a later study done by Mahajan et al reveals that
the relative size of the various segments depends on the product type and ranges. Hence
the same categories will have .2% to .3% of innovators, 9% to 20% of early adopters,
29% o 32% of early majority, 29% to 32% of late majority and 21% to 23% for laggards.
In order to do the same, marketing research to assess the success or failure of new
product launches. Studies have shown that in many industries 35-40% of new product
efforts fail. 46% of new product funding is wasted on failed or canceled projects. Failures
are different from FADS (which have a naturally short life cycle). Failures are not
necessarily financial failures, although bankruptcy may be a subsequent event. Failure is
through a flaw in the design/selection process, such as not enough or misdirected product
research or market research. Failures include, but are not limited to, products and services
which pose health and safety hazards. Failures are not necessarily 'bad' technical ideas.
The study of failures is important in that it can help us prevent future failures. Looking at
a variety of past product failures may generate some insight into what aspects of the
design process might warrant special attention in failure prevention. What went wrong
with product X? Was there something that the manufacturer/designer should have
foreseen that would have avoided the failure? Should the manufacturer have discovered
that failure was inevitable and abandoned the product, not spending any more money on
it?
To develop an effective positioning strategy for the brand, the advertiser needs to
know how consumers perceive his brand and those of the competitors. They also
need information on what qualities, features, or benefits associated with the
product or service lead to initial purchases and ultimately to brand loyalty.
Advertising can shape and enhance a brand's position and image over time. This
is one of the most important long-term benefits of advertising. Advertising
strategy research is important to develop a blueprint for creative specialists to
follow.
The American Association for Advertising Agencies has suggested that the
advertiser ask the following questions when considering a magazine buy:
1. Does the magazine reach the type of reader to whom expected to reach?
2. How does distribution of circulation compare with the product distribution?
3. What is the cost of reaching the thousand prospects?
4. How do readers regard the magazine?
5. Will the advertisement be in acceptable association?
6. How co-operative is the publisher in giving good position?
7. How important are merchandising aids, availability of aids?
8. How do other magazines compare with the said one on the above
comparing points?
There was a study conducted for the Canadian Centre for Occupational Health
and Safety. CCOHS council fulfils the Centre’s mandate by operating as “a
source for unbiased technical information and expertise to support the efforts of
governments, labour organizations, employers, and individual Canadians to
improve workplace safety and health”.[1] CCOHS fulfils this mandate through a
portfolio of free and priced products and services that draw upon a core
collection of occupational safety and health information and the application of
information management technologies. The key products and services offered by
the Centre are the free Inquiries Service and web site and information products
and services for which it charges.
CCOHS provided two Access data files for the survey. One file contained contact
information for individuals who had used the Inquiries Service. The second file
contained coded information of purchasers of products and other services (such
as subscriptions). Records with incomplete mailing addresses were removed.
The files were checked for duplicates, cleaned and a sample selected of
Canadian and US clients. A language preference (English/French) was available
in CCOHS’s sample file.
1. Inquiries
2. Web Services
3. CD/DVD
4. Publications
Clients who purchased more than one type of product had more than one entry in
the sample file. Our sampling department randomly selected a product for
individuals with more than one. The product names in the data file were used as
provided, so there was a possibility that, in some instances, a French respondent
could get an English product name, or vice versa. Product names were
occasionally abbreviated and always capitalized in the original file, and thus
appeared as such in the survey and the letter.
Web-site visitor survey: 603 visitors to the CCOHS/CCHST web site completed
the survey over the course of the field period.
The CCOHS web site is unique in many ways, as it provides a great deal of
technical information to a wide audience of varying levels of knowledge, much of
it free or at low cost. Although predominantly designed for the needs of Canadian
business and individuals, it is used by a worldwide audience to answer an
astonishing variety of occupational health and safety queries. Visitors mainly
learn about the site via a search engine and, for half of respondents, it was their
first visit to the site. Two-thirds of these first-time visitors indicate they are
satisfied with the site, and satisfaction increases with more frequent visits. The
majority indicates that they found the information they came to the site to seek,
even though the site is structurally quite complex.
Visitors express a rather high level of satisfaction with how the site performed in
all areas, however, areas where there is the most gap between satisfaction and
importance are “ease of finding information” and “scope of information.” Visitors
would also like to see more free information provided. Overall, more than three-
quarters of visitors express satisfaction with the site. Very few suggested
improvements were offered. CCOHS customers represent a mix of organization
types and sizes, but a typical customer would be someone in a safety role of a
manufacturing company of medium to large size. Despite the sizes of the
organizations, most indicate that from 1 to 10 people will use or benefit from a
specific CCOHS product or service. Close of half (43%) of customers have used
the free web services, such as OSH Answers and INCHEM, in the past year.
There is room for expansion in awareness and use of the HS Canada internet
mailing list and the Health and Safety Report newsletter. A quarter of customers
indicate the product or service is used once a month, although pay for use
services are used more frequently. There is a growing preference for electronic
media for provision of products. In product attributes, reliability and clarity are the
most valued qualities, and coverage/comprehensiveness and currency (being up-
to-date) are the qualities customers would most like to see improved. While the
majority of customers are either satisfied or very satisfied with all rated attributes
of the product or service they received, they are most satisfied with usefulness
and relevance, and least with cost and assistance provided for solving a problem.
Gaps between perceived importance and performance for CCOHS product and
service attributes are small (0.5 or less) and show that CCOHS is very close to
meeting customer expectations for most of its offerings, including the important
measure of time required to receive products and services. CCOHS meets its
customers’ expectations regarding the number of service staff and contacts
required to obtain products and services. Gaps in service attribute importance
and performance are also small and there is a high level of customer satisfaction
with the service provided by CCOHS staff on all measures. Very few errors are
being made in provision of products and/or services. Close to three-quarters of
customer report that, in the end, they got what they needed, and over 80%
indicate they would purchase the product or service again.
3.3.5. Retail stores image research:
Researchers have studied a multitude of retailer attributes that influence overall image,
e.g., the variety and quality of products, services, and brands sold; the physical store
appearance; the appearance, behavior and service quality of employees; the price levels,
depth and frequency of promotions; and so on. According to Kevin Lane Keller, it can be
further categorized into a smaller set of location, merchandise, service, and store
atmosphere related dimensions. The five dimensions we use to review past research are:
1) access, 2) in-store atmosphere, and 3) price & promotion, 4) cross-category
product/service assortment, and 5) within-category brand/item assortment. A detailed
presentation on this is available in the unit – Retailing.
The study has been now divided into supply chain research and also on logistics
research. In the case of supply chain, following are included for research:
1 - Alignment of markets with supply
2 - Linking Demand Chain and Firm performance
3 - Outsourcing
4 - Reverse Logistics
5 - RFID
6 - Supply Chain Agility
7 - Supply Chain Collaboration
8 - Supply Chain Costing
9 - Supply Chain Information Systems
10 - Supply Chain Risk & Resilience
11 - Supply Chain Strategy
12 - Service Supply Chains
13 - Stock loss
Logistics plays a crucial role in business as it is involved in the entire supply chain
starting from purchase of materials to supply of finished products. Logistics costs account
for 15- 25% of the cost of the final product in India, which is much higher than 7-9% in
developed countries. Logistics contributes 13-14% of GDP in India, when compared with
10% in US. The relative inefficiencies in logistics in India can be attributed to inadequate
logistics infrastructure (both physical infrastructure and technological), laborious paper --
based and manual processes and fragmented supply chains.. Currently logistics in India
does not have an industry status. The absence of a uniform tax structure and procedures
in all the states often leaves the transporters to face delays at check posts, creating
bottlenecks in transportation. These frequent delays also result in enormous increase in
transportation costs, which go up to 40 % of the total logistics costs. Hence it becomes
important that logistics research is undertaken also.
A multiple case study methodology is being used for the research, in which each
of the studies has its own specific objectives:
The project covers two essential aspects of supply chain management, one
refers to the ‘hard’ elements of the process (i.e. activities, times and inventories),
the other to the ‘soft’ elements, this is, the personal and organisational
relationships in the chain. These two aspects were analysed using different tools:
Process Mapping: It is a pencil and paper tool that helps to visualise and
understand the flow of material and information as a product makes its way
through the supply chain. Some of the main benefits of this tool are that it helps
to identify waste in the process, supporting the analysis of the linkages between
information and material flows and serving as a basis for the implementation
plan.
1. Feature level - Find out how your product stacks up against the
competition, feature-by-feature. Learn what features customers think are
important, how much they are worth, and how to focus your efforts on
getting the most from your product development efforts.
2. Solution level - We can help you understand the overall solution
characteristics that create competitive advantage. Go beyond features to
leverage options including delivery, support, and complementary services
that differentiate your offering from the competition.
3. Hidden competition - Your customers' perceptions determine who your
competitors are, and it might not be who you think. Sometimes the
competition comes from the customers themselves: internal departments,
legacy techniques, or lack of awareness. We can help you identify what
your marketing efforts are really competing with.
• Literature search
• Company annual reports (see library)
• Business directories
• Observation - mystery shopper visits to competitors
• Media - advertising
• Trade fairs, exhibitions, etc
• Trade press
• Collateral material (corporate brochures, Internet sites)
• Exclusive reliance on online sources is to be discouraged
Consider the audience: The information resulting from the study is ultimately of
importance to marketing managers, who will use the results to make decisions. Thus, the
report has to be understood by them; the report should not be too technical and not too
much jargon should be used. This is a particular difficulty when reporting the results of
statistical analysis where there is a high probability that few, if any, of the target audience
have a grasp of statistical concepts. Hence, for example, there is a need to translate such
terms as standard deviation, significance level, confidence interval etc. into everyday
language. This is sometimes not an easy task but it may be the case that researchers who
find it impossible do not themselves have a sufficiently good grasp of the statistical
methods they have been using.
Be concise, but precise: On the one hand, a written report should be complete in the
sense that it stands by itself and that no additional clarification is needed. On the other
hand, the report must be concise and must focus on the critical elements of the project
and must exclude unimportant issues. There is a great temptation, on the part of
inexperienced researchers, to seek to convey all that they did in order to obtain
information and to complete the research. This is done almost as if the researcher is afraid
that the audience will not other wise appreciate the time, effort and intellectual
difficulties involved. What the researcher has to come to realise is that he/she will be
judged by the contribution towards solving the marketing problem and not by the
elegance or effort involved in the research methodology.
Understand the results and drawing conclusions: The managers who read the report
are expecting to see interpretive conclusions in the report. The researcher must therefore
understand the results and be able to interpret these. Simply reiterating facts will not do,
and the researcher must ask him/herself all the time "So what?"; what are the
implications. If the researcher is comparing the client's product with that of a competitor,
for example, and reports that 60 percent of respondents preferred brand A to brand B,
then this is a description of the results and not an interpretation of them. Such a statement
does not answer the 'So what?' question.
The following outline is the suggested format for writing the research report:
· Title page
· Summary of findings
· Table of contents
· List of tables
· List of figures
Introduction
· Background to the research problem
· Objectives
· Hypotheses
Methodology-Data collection
· Sample and sampling method
· Statistical or qualitative methods used for data analysis
· Sample description
Findings
1. Identification number corresponding to the list of tables and the list of figures
2. A title that conveys the content of the table or figure, also corresponding to the list of
tables and the list of figures, and
3. Appropriate column labels and row labels for tables, and figure legends defining
specific elements in the figure.
5. State whether true or false: The need for marketing research is basically from
the lacuna in framing wrong marketing strategies.
5. Summary
6. Exercises
1. The shoe market in India can be divided into two major segments, namely the
formal leather shoes and the casual wear shoes. There has been a rapid
change in the casual shoes market in the past few years in India. It is no more
a distinctive possession of the elite only. It has now become a ubiquitous, all
purpose shoe as the outlook of people towards casual shoes has also
changed. The market is now set for a boom. This is also owing to the launch
of many new range of casual shoes by Bata and Carona in technical
collaboration with the world famous leading manufactures of shoes like
Adidas and Puma respectively. In a study of casual shoes we found that top
of the mind awareness for various brands were North Star (33%), Nike (38%),
Puma (17%) and Adidas (15%). Although Bata and Carona have been
existing in the market for a long time, there have been scores of new entrants
such as Liberty, Dawood etc. and even some foreign brands. This has led to
an increased competition. It would be worthwhile to do an exploratory study of
the casual shoe market with the aim of understanding consumer behaviour,
buying criterion, awareness and preference and brands, attitudes of
consumers etc. Conduct a research study to see the demand for shoes in
South India.
2. Assume a situation where there is a retail mart which want to understand the
potential in a town, outline the advice you would give to your client on:
a. How to plan the research
b. Which literature to search first
3. “The problem definition stage is more critical in research process than the
problem solution stage.” Discuss.
4. If Proctor and Gamble, the makers of Ariel, need to know what percentage of
customers examine product labels before making a product selection in the
supermarket, what is the best methodology to do so?
7. References