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PRINCIPLES OF MARKETING
Definition of Marketing:
Marketing is the process of planning and executing the conception, pricing, promotion, and distribution (4 Ps) of ideas, goods and services to create exchanges (with customers) that satisfy individual and organi ational ob!ectives"# Marketing is the process of identifying and determining consumers$ needs, wants, demands and fulfillment of those needs, wants and demands through products and services with an aim to achieve organi ational goals#

Exchange an

%he criteria needed for an exchange to occur& Must have something of value to exchange 'eed to be able to communicate Must be able to exchange (under () drinking) Must want to exchange *t least ( people needed for an exchange to occur

!ti"it#

The exchange $roce%% create% !ti"it#:

!ti"it# is the satisfaction, value, or usefulness a user receives from a good or a service#

Conce$t% of Marketing & Nee %' (ant%' an De)an %*

+hat are the differences and relationships among needs, wants, and demands, Needs are the basic human re-uirements# People need food, air, water, clothing, and shelter to survive# People also have strong needs for creation, education, and entertainment#

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%he above needs become wants when they are directed to specific ob!ects that might satisfy the need# *n *merican needs food but may want a hamburger, .rench fries, and a soft drink# * person in Mauritius needs food but may want a mango, rice, lentils, and beans# +ants are shaped by one/s society#

Demands are wants for specific products backed by an ability to pay# Many people want a Mercedes0 only a few are willing and able to buy one# 1ompanies must measure not only how many people want their product but also how many would actually be willing and able to buy it# 2nderstanding customer needs and wants is not always simple# 3ome customers have needs of which they are not fully conscious, or they cannot articulate these needs, or they use words that re-uire some interpretation# 1onsider the customer who says he wants an 4inexpensive car#4# %he marketer must probe further# +e can distinguish among five types of needs, like the following&

C+%to)er :
*nyone who is in the market looking at a product 5 service for attention, stocking, use or consumption that satisfies a want or a need# 6e may or may not use that product for personal use# 7f he uses that then he becomes the consumer#

Con%+)er:
6e is the person or body who ultimately uses the product5services#

I)$ortance of Marketing

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Marketing Pro)ote% Pro +ct A,arene%% to the P+-"ic
8etting the product or service recogni ed by the market is the primary goal of marketing# 'o business possibly ever thought of !ust letting the people find out about the business themselves, unless you have already established a reputation in the industry# 9ut if you are a start:out company, the only means to be made known is to advertise and promote# ;our business may be spending on the advertising and promotional programs but the important thing is that product and company information is disseminated to the buying public# <arious types of marketing approaches can be utili ed by an organi ation# *ll forms of marketing promote product awareness to the market at large# =ffline and online marketing make it possible for the people to be educated with the various products and services that they can take advantage of# * company must invest in marketing so as not to miss the opportunity of being discovered#

Marketing .e"$% /oo%t Pro +ct Sa"e%

*part from public awareness about a company$s products and services, marketing helps boost sales and revenue growth# +hatever your business is selling, it will generate sales once the public learns about your product through %< advertisements, radio commercials, newspaper ads, online ads, and other forms of marketing# %he more people hear and see more of your advertisements, the more they will be interested to buy# 7f your company aims to increase the sales percentage and double the production, the marketing department must be able to come up with effective and strategic marketing plans#

Marketing /+i" % Co)$an# Re$+tation

7n order to con-uer the general market, marketers aim to create a brand name recognition or product recall# %his is a techni-ue for the consumers to easily associate the brand name with the images, logo, or caption that they hear and see in the advertisements#
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.or example, Mc>onalds is known for its arch design which attracts people and identifies the image as Mc>onalds# .or some companies, building a reputation to the public may take time but there are those who easily attract the people# +ith an established name in the industry, a business continues to grow and expand because more and more customers will purchase the products or take advantage of the services from a reputable company# Marketing plays a very essential role in the success of a company# 7t educates people on the latest market trends, helps boost a company$s sales and profit, and develops company reputation# 9ut marketers must be creative and wise enough to promote their products with the proper marketing tactics# *lthough marketing is important, if it is not conducted and researched well, the company might !ust be wasting on expenses and time on a failed marketing approach#

The Sco$e of Marketing:

Goods Physical goods constitute the bulk of most countries$ production and marketing effort# %he 2nited 3tates produces and markets billions of physical goods, from eggs to steel to hair dryers# 7n developing nations, goods?particularly food, commodities, clothing, and housing?are the mainstay of the economy# Services *s economies advance, a growing proportion of their activities are focused on the production of services# %he 2#3# economy today consists of a @ABCA services:to:goods mix# 3ervices include airlines, hotels, and maintenance and repair people, as well as professionals such as accountants, lawyers, engineers, and doctors# Many market offerings consist of a variable mix of goods and services# Experiences 9y orchestrating several services and goods, one can create, stage, and market experiences# +alt >isney +orld$s Magic Dingdom is an experience0 so is the 6ard Eock 1afe# Events
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Marketers promote time:based events, such as the =lympics, trade shows, sports events, and artistic performances# Persons 1elebrity marketing has become a ma!or business# *rtists, musicians, 1F=s, physicians, high:profile lawyers and financiers, and other professionals draw help from celebrity marketers# Places 1ities, states, regions, and nations compete to attract tourists, factories, company head-uarters, and new residents# Place marketers include economic development specialists, real estate agents, commercial banks, local business associations, and advertising and public relations agencies# Properties Properties are intangible rights of ownership of either real property (real estate) or financial property (stocks and bonds)# Properties are bought and sold, and this occasions a marketing effort by real estate agents (for real estate) and investment companies and banks (for securities)# Organizations =rgani ations actively work to build a strong, favorable image in the mind of their publics# Philips, the >utch electronics company, advertises with the tag line, Get$s Make %hings 9etter#" %he 9ody 3hop and 9en H Ierry$s also gain attention by promoting social causes# 2niversities, museums, and performing arts organi ations boost their public images to compete more successfully for audiences and funds# Information %he production, packaging, and distribution of information is one of society$s ma!or industries# *mong the marketers of information are schools and universities0 publishers of encyclopedias, nonfiction books, and speciali ed maga ines0 makers of 1>s0 and 7nternet +eb sites# Ideas

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Fvery market offering has a basic idea at its core# 7n essence, products and services are platforms for delivering some idea or benefit to satisfy a core need#

E0o"+tion of Marketing:
%he following stages represent the evolution of marketing& 12 Pro +ction Orientation Stage: The $ro +ction conce$t prevailed from the time of the industrial revolution until the early )J(A/s# %he 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# %he key -uestions that a firm would ask before producing a product were& 1an we produce the product, 1an we produce enough of it, *t 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# <irtually everything that could be produced was sold easily by a sales team whose !ob it was simply to execute transactions at a price determined by the cost of production# %he production concept prevailed into the late )J(A/s# %he 3ales 1oncept 9y the early )JCA/s however, mass production had become commonplace, competition had increased, and there was little unfulfilled demand# *round this time, firms began to practice the sales concept (or selling concept), under which companies not only would produce the products, but also would try to convince customers to buy them through advertising and personal selling# 9efore producing a product, the key -uestions were& 1an we sell the product, 1an we charge enough for it, 32 Sa"e% Orientation Stage:

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The %a"e% conce$t paid little attention to whether the product actually was needed0 the goal simply was to beat the competition to the sale with little regard to customer satisfaction# Marketing was a function that was performed after the product was developed and produced, and many people came to associate marketing with hard selling# Fven today, many people use the word 4marketing4 when they really mean sales# %he Marketing 1oncept *fter +orld +ar 77, the variety of products increased and hard selling no longer could be relied upon to generate sales# +ith increased discretionary income, customers could afford to be selective and buy only those products that precisely met their changing needs, and these needs were not immediately obvious# %he key -uestions became& +hat do customers want, 1an we develop it while they still want it, 6ow can we keep our customers satisfied, 7n response to these discerning customers, firms began to adopt the marketing concept, which involves& .ocusing on customer needs before developing the product *ligning all functions of the company to focus on those needs Eeali ing a profit by successfully satisfying customer needs over the long:term +hen firms first began to adopt the marketing concept, they typically set up separate marketing departments whose ob!ective it was to satisfy customer needs# =ften these departments were sales departments with expanded responsibilities# +hile this expanded sales department structure can be found in some companies today, many firms have structured themselves into marketing organi ations having a company:wide customer focus# 3ince the entire organi ation exists to satisfy customer needs, nobody can neglect a customer issue by declaring it a 4marketing problem4 : everybody must be concerned with customer satisfaction#

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%he marketing concept relies upon marketing research to define market segments, their si e, and their needs# %o satisfy those needs, the marketing team makes decisions about the controllable parameters of the marketing mix# 42 Marketing Orientation Stage: The )arketing conce$t is the philosophy that firms should analy e the needs of their customers and then make decisions to satisfy those needs, better than the competition# %oday most firms have adopted the marketing concept, but this has not always been the case# 7n )@@K in %he +ealth of 'ations, *dam 3mith wrote that the needs of producers should be considered only with regard to meeting the needs of consumers# +hile this philosophy is consistent with the marketing concept, it would not be adopted widely until nearly (AA years later# %o better understand the marketing concept, it is worthwhile to put it in perspective by reviewing other philosophies that once were predominant# +hile these alternative concepts prevailed during different historical time frames, they are not restricted to those periods and are still practiced by some firms today# %he Production 1oncept

52 Societa" Marketing Orientation Stage: Societa" Marketing Conce$t focuses on other stakeholders, as well as the business and its customers# 'eed to balance C items& o 1ompany profits o 1ustomer wants o 3ociety/s interests

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The Marketing Mix 6The 5 P7% of Marketing8

Fo+r P%9 or Marketing Mix

Flements of the marketing mix are often referred to as /the four Ps/&

Product : * tangible ob!ect or an intangible service that is mass produced or manufactured on a large scale with a specific volume of units# 7ntangible products are service based like the tourism industry H the hotel industry or codes:based products like cell phone load and credits# %ypical examples of a mass produced tangible ob!ect are the motor car and the disposable ra or# Packaging also needs to be taken into consideration#

Price B %he price is the amount a customer pays for the product# 7t is determined by a number of factors including market share, competition, material costs, product identity and the customer/s perceived value of the product# %he business may increase or decrease the price of product if other stores have the same product#

Place B Place represents the location where a product can be purchased# 7t is often referred to as the distribution channel# 7t can include any physical store as well as virtual stores on the 7nternet#

Promotion represents all of the communications that a marketer may use in the marketplace# Promotion has four distinct elements& advertising, public relations, word of
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mouth and point of sale# *dvertising includes cinema commercials, radio and 7nternet advertisement through print media and billboards# Public relations include press releases, sponsorship deals, exhibitions, conferences, seminars or trade fairs and events# +ord of mouth is any apparently informal communication about the product by ordinary individuals, satisfied customers or people specifically engaged to create word of mouth momentum# 3ales staff often plays an important role in word of mouth and Public Eelations#

Pro +ct
)) () C) 4) M) K) @) .unctions *ppearance Luality Packaging 9rand 3ervice5support +arranty or 8uarantee

Price
)) () C) 4) M) Gist Price >iscounts *llowances .inancing Geasing

Pro)otion
)) () C) 4) M) K) *dvertisement Personal 3elling Public relations Message Media 9udget

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P"ace
)) 1hannel Members () Market coverage C) Gocations
4) +arehousing M) %ransportation

Marketing En0iron)enta" Cha""enge%:Force%:Factor%:Inf"+ence%:

Fnvironmental forces influence an organi ation$s marketing# 3ome of these forces are external to the firm, while others come from within# %here isn$t much that management can do about controlling the external forces, but it generally can control the internal ones# *n organi ation must manage its marketing program within its combined external and internal environment# *n organi ation operates within an external environment that it generally cannot control# *t the same time, there are marketing and nonmarketing resources within the organi ation that generally can be controlled by its executives# %here are two levels of external forces& A8 Macro En0iron)enta" Cha""enge%:Factor%:Force%:Inf"+ence%: %hey affect all firms which include demographics, economic conditions, cultures etc# /8 Micro En0iron)enta" Cha""enge%:Force%:Factor%:Inf"+ence%: %hey affect a particular firm which consists of suppliers, the market and customers# 18 Marketing Externa" Macro En0iron)enta" Force%:
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%he following external forces have considerable influence on any organi ation$s marketing system# %herefore, they are macro environmental forces# *nd a change in any one of them can cause changes in one or more of the others# 6ence, they are interrelated# =ne thing they all have in common is that they are dynamic forces:that is, they are sub!ect to change and at an increasing rate# 12 De)ogra$h#: %he statistical study of human population and its distribution is called demography# 7t is of special interest to marketing executives because people constitute markets# 6ere are a few examples of how demography factors influence marketing programs such as0 si e, gender, income, etc#

32 Po"itica" Factor% %he political situation has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses# ;ou must consider issues such as& 6ow stable is the political environment, +ill government policy influence laws that regulate or tax your business, >oes the government have a view on culture and religion, Political stability Eisk of military invasion Pricing regulations %axation : tax rates +age legislation 42 Econo)ic Factor% Marketers need to consider the state of a trading economy in the short and long:terms# %his is especially true when planning for international marketing# ;ou need to look at&

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7nterest rates# %ype of economic system in countries of operation Ffficiency of financial markets 3kill level of workforce Gabor costs 2n:employment rate 7nflation rate 7nterest rates 52 Socioc+"t+ra" Factor% %he social and cultural influences on business vary from country to country# 7t is very important that such factors are considered# .actors include& +hat is the dominant religion, +hat are attitudes to foreign products and services, >oes language impact upon the diffusion of products onto markets, 6ow much time do consumers have for leisure, +hat are the roles of men and women within society, 6ow long are the population living, *re the older generations wealthy, 1lass structure Fducation 1ulture (gender roles, etc#)

;2 Techno"ogica" Factor% %echnology is vital for competitive advantage, and is a ma!or driver of globali ation# 1onsider the following points& >oes technology allow for products and services to be made more cheaply and to a better standard of -uality, >o the technologies offer consumers and businesses more innovative products and services such as 7nternet banking, new generation mobile telephones, etc,

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6ow is distribution changed by new technologies e#g# books via the 7nternet, >oes technology offer companies a new way to communicate with consumers Eecent technological developments %echnology$s impact on product offering 7mpact on cost

38 Marketing Externa" Micro En0iron)enta" Force%:

%hree environmental forces that are external, but are a part of a company$s marketing system, are that firm$s market, its suppliers, and its marketing intermediaries# +hile they are generally uncontrollable, these external forces can be influenced more than the macro forces# 12 The Market: The )arket really is what marketing is all about:how to reach it and service it profitably and in a socially responsible manner# %he market should be the focus of all marketing decisions in an organi ation# 9ut !ust what is a market, * market may be defined as a place where buyers and sellers meet, goods or services are offered for sale, and transfers of ownership occur# * market may also be defined as the demand made by a certain group of potential buyers for a good or service# %hese definitions are not sufficiently precise to be useful to us here# .or business purposes we define a market as people or organi ations with wants (needs) to satisfy, money to spend, and the willingness to spend it# %hus, in the market demand for any given good or service, there are three factors to consider& People or organi ation with wants (needs) %heir purchasing power %heir buying behavior 32 S+$$"ier%: ;ou can$t sell a product if you can$t first make it or buy it# .or producing a product the suppliers provide us raw materials#
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%hat$s why the people or firms who supply the goods or services that we need to produce what we sell are critical to our marketing success# *nd that$s why we consider a firm$s suppliers as part of its marketing system# Marketing executives often are not concerned enough with the supply side of the marketing system# 9ut they do become very concerned when shortages occur# 3hortages make clear the need for cooperative relationships with suppliers# *s 8oodyear tires manufacturing company supply tires to %oyota Motors#

Organi<ation9% Interna" En0iron)ent En0iron)enta" Force%:Factor%

*n organi ation$s marketing system is also shaped by internal forces that are controllable by management# %hey are listed below& 12 32 42 52 ;2 >2 Pro +ction Faci"itie% Financia" Re%o+rce% .+)an Re%o+rce% Co)$an# I)age R=D Location

MARKET
(.AT IS A MARKET? People with the willingness, purchasing power, and the authority to buy# Target Market * market segment that a company chooses to serve# Po%itioning 3haping the product and developing a marketing program in such a way that the product is perceived to be (and actually is) different from competitors$ products#

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MARKET SEGMENTATION
Market Seg)entation Market segmentation can be defined as the process of dividing a market into different homogeneous groups of consumers# Market consists of buyers and buyers vary from each other in different ways# <ariation depends upon different factors like wants, resources, buying attitude, locations etc# 9y segmentation, large heterogeneous markets are divided into smaller segments that can be managed more efficiently and effectively with products and services that match to their uni-ue needs# 3o, market segmentation is beneficial for the companies serving larger markets#

Criteria for %e"ecting Market Seg)ent%

Mea%+ra-"e * segment should be measurable# 7t means you should be able to tell how many potential customers and how many businesses are out there in the segment# Acce%%i-"e * segment should be accessible through channels of communication and distribution like& sales force, transportation, distributors, telecom, or internet# D+ra-"e 3egment should not have fre-uent changes attribute in it# S+-%tantia" Make sure that si e of your segment is large enough to warrant as a segment and large enough to be profitable

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!ni@+e Nee % 3egments should be different in their response to different marketing efforts (Marketing Mix)#

Market Segmentation: Finding a Base to Start

Bases for Market Segmentation

Descriptive
Demographic Segmentation Gender Age Family life cycle Race Education Income Occupation Family size Religion
Geographic Segmentation Country Region Urban/Suburban/Rural Climate

Behavioural
Psychographic Segmentation ifestyles !ersonality

Potential Markets

Behavioral Segmentation E"pected benefits from product use Usage Rate #ea$y users %rand loyalty

/a%e% for Con%+)er Market Seg)entation

%here are number of variables involved in consumer market segmentation, alone and in combination# %hese variables are& 8eographic variables >emographic variables Psychographic variables 9ehavioral variables 8eographic 3egmentation

12 Geogra$hic 0aria-"e%:

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7n geographical segmentation, market is divided into different geographical units like& N#Eegions (by country, nation, state, neighborhood) N##Population >ensity (2rban, suburban, rural) N##1ity si e (3i e of area, population si e and growth rate) N##1limate (Eegions having similar climate pattern) * company, either serving a few or all geographic segments, needs to put attention on variability of geographic needs and wants# *fter segmenting consumer market on geographic bases, companies locali e their marketing efforts (product, advertising, promotion and sales efforts)# 32 De)ogra$hic Seg)entation: 7n demographic segmentation, market is divided into small segments based on demographic variables like& ##*ge ##8ender ##7ncome ##=ccupation ##Fducation ##3ocial 1lass ##8eneration ##.amily si e ##.amily life cycle ##6ome =wnership ##Eeligion ##Fthnic group5Eace >emographic factors are most important factors for segmenting the customers groups# 1onsumer needs, wants, usage rate these all depend upon demographic variables# 3o, considering demographic factors, while defining marketing strategy, is crucial#

42 P%#chogra$hic Seg)entation: 7n Psychographic 3egmentation, segments are defined on the basis of social class, lifestyle and personality characteristics##

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52 /eha0iora" Seg)entation: 7n this segmentation market is divided into segments based on consumer knowledge, attitude, use or response to product# 9ehavioral variables include& ##2sage Eate ##9enefits >esired ##=ccasions (holidays like mother$s day, 'ew ;ear and Fid) ##2ser 3tatus (.irst %ime, Eegular or Potential) 9ehavioral segmentation is considered most favorable segmentation tool as it uses those variables that are closely related to the product itself#

CONS!MER /E.AAIO!R
Definition of Con%+)er /eha0ior: %he activities of individuals in obtaining, using, and disposing of goods and services, including the decision processes that precede and follow these actions#

Or
Con%+)er -eha0ior is the study of when, why, how, and where people do or do not buy product#

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Determinants of Consumer Behavior

Environmental factors Consumer behaviour Individual factors and psychological processes

Environmental Factors That Affect Consumer Behavior

Cultural Influences Social Influences eference groups Social class Family influences C!S"#ME $ECISI#%S

)# C+"t+re: %he complex of values, ideas, attitudes, institutions, and other meaningful symbols created by people that shape human behavior, and the artifacts of that behavior, transmitted from one generation to the next# 32 Reference Gro+$:
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* group whose value structures and standards influence a person$s behavior# Gike friends, neighbors etc 42 Socia" C"a%%: %he relatively permanent divisions in a society into which individuals or families are categori ed based on prestige and community status# 52 Per%ona" People buy different goods and services over a life time# %aste in food, cloths, furniture, entertainment is often age based, like ;oung people purchase things for different reasons than older people# ;2 Fa)i"# Inf"+ence%: .amily is the most basic group a person belongs to# Marketers must understand& %hat many family decisions are made by the family unit 1onsumer behavior starts in the family unit .amily roles and preferences are the model for children/s future family .amily buying decisions are a mixture of family interactions and individual decision making .amily acts an interpreter of social and cultural values for the individual# /+%ine%% P+rcha%ing Sit+ation% %he following are the different situations of a buyer& 12 Straight Re-+# * recurring purchase decision involving an item that has performed satisfactorily and is therefore purchased again by a customer# 32 Ne, Ta%k /+#ing .irst:time or uni-ue purchase situations that re-uire considerable effort on the part of the decision makers#

Stage% of the Con%+)er /+#ing Proce%%:

The %tage% are&

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)# Pro-"e) Recognition 6a,arene%% of nee 8B%his is the first stage in which a person becomes aware of his need, like 6unger::.ood# 6unger stimulates5directs your need to eat# 7t 1an be stimulated by the marketer through product information 7#F#, see a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes# 7t consist of& etc 7nternal stimuli& person/s normal needs like hunger, thirst

Fxternal stimuli& like when your relative buy a car so that stimulates your power to purchase that car as well#

(# Infor)ation %earch: 7f a person has not enough information to decide about the product5service to buy or not, %hen he looks and search for the information# 6e may obtain the information from the following sources of information# 3ources of information& )) () C) 4) Personal &family, friends ,neighbors etc 1ommercials& websites, advertisement, dealers etc Public& 1onsumer rating organi ation Fxperimental& examining, using the product himself

* successful information search leaves a buyer with possible alternatives# 1hinese food 7ndian food 9urger, fast food

C# E0a"+ation of A"ternati0e%: consumer first wants to satisfy a need from the product or service, (nd benefits he receive, price he paid and -uality he receives from product5service,etc F#g#, .ote": Gocation, cleanliness, price
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etc, Tire% & Gife , Luality, price etc, Foo & price , -uality, taste, healthy etc 4# P+rcha%e eci%ion?in this stage the customer 1hooses buying alternative, that includes product, package, store, method of purchase( credit card, cash, on account), -uantity, timing (weekend) # M# Po%t&P+rcha%e /eha0ior& 7t consists of the following& Post purchase satisfaction and purchase actions& performance is less than expectations, the consumer is dissatisfied and he will not buy it again, if it meets expectation then he is satisfied and will buy it again, if performance is more than expectations then he is delighted and talks to others also about the product# Post purchase use and disposal& the more likely buyers use a product, the sooner they may be back to purchase it again# %he marketers should pay attention to this strategy that to enable the users to consume more and more, or new methods of use, or to replace it after sometime as =ral:9 tooth brush do#

PROD!CT
Definition of Pro +ct: *nything that can be offered to the market for use, consumption, attention, ac-uisition, that might satisfy a need or want#" Ter)ino"ogie% a-o+t Pro +ct%:Ser0ice%: (arrantee:

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* guarantee (surety) to the buyer that the supplier will replace a defective product (or part of a product) or refund its purchases price during a specified period of time# /ran : * name, term, sign, symbol, or design (or some combination of these) used to identify the products of one firm5company and to differentiate them from competitive offerings5products5services# A Goo )# (# C# 4# /ran Na)e ha% the fo""o,ing feat+re%:

Fasy to pronounce Eecogni e Eemember Gegally protectable

Tra e)ark * brand that has been given legal protection and has been granted solely to its owner# Generic Na)e: * brand over which the original owner has lost exclusive claim because all offerings in the associated class of products have become generally known by the brand name (usually that of the first or leading brand in that product class)#

/ran

Fa)i"iarit# %he first stage of brand loyalty, when a firm has developed enough publicity for a brand that its name is familiar to consumers# /ran Preference

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%he second stage of brand loyalty, when based on previous experience, consumers will choose a product rather than one of its competitors :: if it is available# /ran In%i%tence %he ultimate stage of brand loyalty, when consumers will accept no alternatives and will search extensively for the product# Fa)i"# /ran 9rand name used for several related products# In i0i +a" /ran 9rand that is known by its own brand name rather than by the name of the company producing it or an umbrella covering similar items# Nationa" /ran 6Man+fact+rer9% /ran 8 * brand promoted and distributed by a manufacturer# Pri0ate * brand promoted and distributed by a wholesaler or retailer# Generic Pro +ct% .ood and household staples characteri ed by plan labels, little or no advertising, and no brand names# P+r$o%e% for Packaging Protection against damage, spoilage, *ssistance in marketing the product 1ost : Fffectiveness La-e" %he part of the package that contains& %he brand name or symbol %he name and address of the manufacturer or distributor 7nformation about product composition and si e 7nformation about recommended uses of the product#

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MAP Group of Colleges Con%+)er Goo % C"a%%ification:

)# (# C# 4# M# 1onvenience Preference 3hopping 3pecialty 2nsought

Con0enience Pro +ct% Products those are lowest in terms of both effort and risk# >aily use products or food items are convenience goods, ketchup, toothpaste, bulb0 batteries etc are called convenience goods or products# Preference Pro +ct% Products those are slightly higher on the effort dimension and much higher on risk than convenience products# Gike when you go to a shop and ask for Philips energy saver, if it is not there then asks for other good one#

Sho$$ing Pro +ct% Products that are usually purchased only after the consumer has compared competing products2 * tangible product for which consumer wants to compare -uality, price, style in several stores before making a purchase decision, e#g# ma!or appliances, automobile, software etc# S$ecia"t# Pro +ct% Products those are highest in both effort and risk, due to some uni-ue characteristics that cause the buyer to pri e that particular brand# %hose products for which a consumer has strong brand preference 3uits, camera, 3tereo, Guxury *utomobiles etc# !n%o+ght Pro +ct% Products that people may know about but normally do not purchase# %hey are those products about which the consumers don$t have information or consumers don$t want to buy them now#
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/+%ine%% Goo %:Pro +ct% T#$e%:

%hose products which are used by the organi ations for producing other products# T#$e% of /+%ine%% Pro +ct%:Goo %: 18 Ra, Materia"%: Eaw materials are basic items which are used in the production of goods by the business firms# 38 Se)i&)an+fact+re Goo %:

%hose goods which are processed but are sold to other business concerns for further processing, are called semi manufactured goods# 48 Part%: %he goods which are manufactured, finished, and serve as components of large articles, are named parts# 58 S+$$"ie%: %he items which are essential to the operation of a business are called as supplies#

Pro +ct Inno0ation

Definition of Pro +ct Inno0ation:
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Product 7nnovation means to bring improvement, addition or changes in the existing product#

I)$ortance of Pro +ct Inno0ation:

%he following points show the importance of product innovation& 18 Re@+ire)ent for Gro,th: Fvery company$s present products eventually become obsolete as their sales volume and market share are reduced by changing consumer desires and or superior competing products# 'ow it is important to bring changes in the products which can meet the desires of consumers# 38 Increa%e Con%+)er Se"ecti0it#:

7n recent years, consumers have become more selective in their choices of products# Many consumers$ disposable income and many organi ation$s resources were dissipated by the recent recession# +ith reduced buying power, these individuals, households, and organi ations have to be very careful in their purchases# 48 .igh Fai"+re Rate%: +hy do new products fail, Most fail because they are no different than existing products# =ther factors contributing to failures include poor positioning and lack of marketing support# *nother reason a new product fails is that it is perceived as offering poor value in relation to its price# >espite high failure rates, there is still a torrent of product introductions# %hat$s why product innovation is important here in order to reduce the failure rates#

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The Proce%% or Stage% of De0e"o$ing a Ne, Pro +ct:

* new product is best developed through a series of six stages given below& 18 Generating Ne,&$ro +ct i ea%: %he ob!ective of idea generation research is to come up with completely new ideas for products, or new attributes for current products, or new use for current products# 7deas may come from different sources through various company personnel, for example salespersons, dealers, maintenance people and customer service personnel# *ll of these have direct contact with the customers who are good source of ideas about the new products# %he market researcher can rely on the opinions of such personnel or may plan to accompany these people and listen to their ideas and subse-uently refine them#

38 Screening I ea%: *t this stage, new:product ideas are evaluated to determine which ones warrant further study# %ypically, a management team screens the pool of ideas#

48 /+%ine%% Ana"#%i%: * surviving idea is expanded into a concrete business proposal# %hat means management a) identifies product features, b) estimates market demand, c) establishes a program to develop the product, and d) further study of the product$s feasibility#

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58 Protot#$e De0e"o$)ent: %his stage means to develop a prototype or sample# 7n the case of goods, a small -uantity of the trial model is manufactured to designated specifications# Gaboratory tests and other technical evaluations are carried out to determine whether it is practical to produce the product# ;8 Market Te%t%: 2nlike the internal tests conducted during prototype development, these tests involve actual consumers# * new tangible product may be given to a sample of people for use in their households# >8 Co))ercia"i<ation: 7n this stage, full:scale production and marketing programs are planned and finally, implemented# 2p to this point in development, management has virtually complete control over the product#

Stage% in the A o$tion Proce%%:

* prospective user goes through six stages in the adoption process:deciding whether to purchase something new& 18 A,arene%%: 7ndividual is exposed to the innovation0 becomes a prospect# 38 Intere%t: Prospect is interested enough to seek information

48 E0a"+ation:

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Prospect !udges the advantages and disadvantages of a product# 58 Tria": Prospect adopts the innovation on a limited basis# * consumer buys a sample, if the product can be sampled# ;8 A o$tion: Prospect decides whether to use the innovation on a full: scale basis# >8 Confir)ation: *fter adopting the innovation, prospect becomes a user who immediately seeks assurances that decision to purchase the product was correct# Organi<ing For Pro +ct Inno0ation: .or new product program to be successful, they must be supported by a strong, long term commitment from top management# %his commitment must be maintained even when some new products fail# %o implement this commitment to innovation effectively, new product programs must be soundly organi ed#

Pro +ct Life C#c"e:

%he Product Gife 1ycle consists of four stages, they are discussed below& 18 Intro +ction Stage: >uring this stage a product is launched into the market in a full:scale marketing program# 7t has gone through product development, including idea screening, prototype and market tests, the entire product may be new or it may be well known but
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have a significant new feature that in effect, creates a new product category# 38 Gro,th Stage: 7t is also called market acceptance stage, sales and profits rise, often at a rapid rate# 48 Mat+rit# Stage: >uring the first part of maturity stage, sales continue to increase, but at a decreasing rate#

58 Dec"ine Stage: +hen the sales volume of the product for a company is decreased or the profit rate is decreased of a company due to some factors is called declining stage#

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PRICING
DEFINTION OF PRICING: %he amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service"#

I)$ortance of Price:
Price is significant in our economy, to an individual firm, and in the consumer$s mind# Get$s consider each situation# 12 In The Econo)#: * product$s price influences wages, rent, interest, and profits# %hat is, a product$s price influences the amounts paid for the factors of production& labor, land, capital and entrepreneurship# Price thus is a basic regulator of the economic system because it influences that allocation of the factors of production# 6igh wages attract labor0 high interest rates attract

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capital, and so on# *s an allocator of resources, price determines what will be produced (supply) and who will get the goods and services produced (demand)# 32 In the In i0i +a" Fir): * product$s price is a ma!or determinant of the market demand for it# Price affects a firm$s competitive position and its market share# *s a result, price has a considerable bearing on a company$s revenues and net profits# %hrough prices, money comes into an organi ation# 42 In the Con%+)er Min : 3ome consumers$ perceptions of product -uality vary directly with price# %ypically, the higher the price, the better the -uality is perceived to be# 6aven$t you been concerned about product -uality:such as when you are looking at ads for compact disc players:if the price is unexpectedly low, =r, at the other extreme, have you selected a restaurant for a special dinner because you heard it was fairly high priced so you though it would be very nice,

Factor% Affecting Pricing Deci%ion:

Internal Factors ffecting Pricing Decisions!

7nternal factors affecting pricing include the company$s marketing ob!ectives, marketing mix strategy, costs, and organi ational considerations# A8 Co%t%: 1osts set the floor for the price that the company can charge for its product# %he company wants to charge a price that both covers all its costs for producing, distributing and selling the product and delivers a fair rate of return for its effort and risk# * company$s costs may be an important element in its pricing strategy# 1ompanies with lower costs can set lower prices that result in greater sales and profits# T#$e% of Co%t%:
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a2 Fixe Co%t: .ixed costs (also known as overhead) are costs that do not vary with production or sales level# .or example, a company must pay each month/s bills for rent, heat, interest, and executive salaries, whatever the company/s output#
-2 Aaria-"e Co%t%:

<ariable costs vary directly with the level of production# Fach personal computer produced involves a cost of computer chips, wires, plastic, packaging, and other inputs# %hese costs tend to be the same for each unit produced# /8 Marketing O-Cecti0e%: 9efore setting price, the company must decide on its strategy for the product# 7f the company has selected its target market and positioning carefully, then its marketing mix strategy, including price, will be fairly straightforward# Pricing strategy is largely determined by decisions on market positioning# *t the same time, the company may seek additional ob!ectives# %he clearer a firm is about its ob!ectives, the easier it is to set price# C8 Organi<ationa" Con%i eration%: Management must decide who within the organi ation should set prices# 1ompanies handle pricing in a variety of ways# 7n small companies, prices are often set by top management rather than by the marketing or sales departments# 7n large companies, pricing is typically handled by divisional or product managers#

External Factors

ffecting Pricing Decisions!

Fxternal factors that affect pricing decisions include the nature of the market and demand, competition, and other environmental elements# A8 The Market an De)an : %he market and demand set the price limit# 9oth consumer and industrial buyers balance the price of a product or service against the benefits of owning it# %hus, before setting prices, the

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marketer must understand the relationship between price and demand for its product, the priceBdemand relationship varies for different types of markets and buyer perceptions of price affect the pricing decision# /8 Pricing in Different T#$e% of Market% %he seller/s pricing freedom varies with different types of markets# Fconomists recogni e four types of markets, each presenting a different pricing challenge# 2nder pure competition, the market consists of many buyers and sellers trading in a uniform commodity such as wheat, copper# 'o single buyer or seller has much effect on the going market price# * seller cannot charge more than the going price because buyers can obtain as much as they need at the going price# 'or would sellers charge less than the market price because they can sell all they want at this price# 7f price and profits rise, new sellers can easily enter the market# 7n a purely competitive market, marketing research, product development, pricing, advertising, and sales promotion play little or no role# %hus, sellers in these markets do not spend much time on marketing strategy# 2nder monopolistic competition, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price# * range of prices occurs because sellers can differentiate their offers to buyers# Fither the physical product can be varied in -uality, features, or style or the accompanying services can be varied# 9uyers see differences in sellers/ products and will pay different prices for them# 3ellers try to develop differentiated offers for different customer segments and, in addition to price, freely use branding, advertising, and personal selling to set their offers apart# 9ecause there are many competitors in such markets, each firm is less affected by competitors/ marketing strategies than in oligopolistic markets# 2nder oligopolistic competition, the market consists of a few sellers who are highly sensitive to each other/s pricing and marketing strategies# %he product can be uniform (steel, aluminum) or differentiated (cars, computers)# %here are few sellers because it is difficult for new sellers to enter the market# Fach seller is alert to competitors/ strategies and moves# 7f a steel company slashes its price by )A percent, buyers will -uickly switch to this supplier# %he other steelmakers must respond by lowering their prices or increasing their services# *n oligopolist is never sure that it will gain anything permanent through a price

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cut# 7n contrast, if an oligopolist raises its price, its competitors might not follow this lead# %he oligopolist then would have to retract its price increase or risk losing customers to competitors# 7n a pure monopoly, the market consists of one seller# Pricing is handled differently in each case# * government monopoly can pursue a variety of pricing ob!ectives# 7t might set a price below cost because the product is important to buyers who cannot afford to pay full cost# =r the price might be set either to cover costs or to produce good revenue# 7t can even be set -uite high to slow down consumption# 7n a regulated monopoly, the government permits the company to set rates that will yield a 4fair return,4 one that will let the company maintain and expand its operations as needed# 2nregulated monopolies are free to price at what the market will bear# 6owever, they do not always charge the full price for a number of reasons& a desire to not attract competition, a desire to penetrate the market faster with a low price, or a fear of government regulation# C8 Con%+)er Perce$tion% of Price an Aa"+e 7n the end, the consumer will decide whether a product/s price is right# Pricing decisions, like other marketing mix decisions, must be buyer oriented# +hen consumers buy a product, they exchange something of value (the price) to get something of value (the benefits of having or using the product)# Fffective, buyer:oriented pricing involves understanding how much value consumers place on the benefits they receive from the product and setting a price that fits this value#

Metho % of Pricing:

%he following are the different methods through which an organi ation can set the prices for its products# %hey are discussed below& a8 Co%t&/a%e Pricing : Co%t&P"+% Pricing: %he simplest pricing method is cost:plus pricing?adding a standard markup to the cost of the product# -8 Aa"+e&/a%e Pricing: *n increasing number of companies are basing their prices on the product/s perceived value# <alue:based pricing uses
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buyers/ perceptions of value, not the seller/s cost, as the key to pricing#sss c8 Co)$etition&/a%e Pricing: 1onsumers will base their !udgments of a product/s value on the prices that competitors charge for similar products# =ne form of competition:based pricing is going:rate pricing, in which a firm bases its price largely on competitors/ prices, with less attention paid to its own costs or to demand# %he firm might charge the same, more, or less than its ma!or competitors#

Ne,&Pro +ct Pricing Strategie%

Pricing strategies usually change as the product passes through its life cycle# %he introductory stage is especially challenging# 1ompanies bringing out a new product face the challenge of setting prices for the first time# %hey can choose between two broad strategies& market:skimming pricing and market:penetration pricing# a8 Market&Ski))ing Pricing: Many companies that invent new products initially set high prices to 4skim4 revenues layer by layer from the market# 7ntel is a prime user of this strategy, called market:skimming pricing# Market skimming makes sense only under certain conditions# .irst, the product/s -uality and image must support its higher price, and enough buyers must want the product at that price# 3econd, the costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more# .inally, competitors should not be able to enter the market easily and undercut the high price# -8 Market&Penetration Pricing: Eather than setting a high initial price to skim off small but profitable market segments, some companies use market: penetration pricing# %hey set a low initial price in order to penetrate the market -uickly and deeply?to attract a large number of buyers -uickly and win a large market share# %he high sales volume results in falling costs, allowing the company to cut its price even further# 3everal conditions must be met for this low:price strategy to work# .irst, the market must be highly price sensitive so that a low price produces more market growth#
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3econd, production and distribution costs must fall as sales volume increases# .inally, the low price must help keep out the competition, and the penetration pricer must maintain its low: price position?otherwise, the price advantage may be only temporary#

Di%co+nt% an Di%co+nt%:

A""o,nce%

Tra e Di%co+nt' given by a producer to an intermediary for performing certain functions (in terms of O off list prices) D+antit# Di%co+nt' due to economies of purchasing large -uantity# Ca%h Di%co+nt, for prompt payment, (5)A net CA, means (O discount allowed if payment is made within )A days, entire balance is due within CA days, no discount, after that interest will be charged# Sea%ona" >iscount, purchase out of season

A""o,ance%:
Allowances refers to amount given to retailers in exchange for either favorable placement of a product in their stores, or sometimes even the initial or continued stocking of a product# Marketing Channe" Definition of Marketing Channe": * set of interdependent organi ations involved in the process of making a product or service available for use or consumption by the consumer or business user# Marketing Inter)e iar#: * business firm5person operating between the producer and the consumer# (ho"e%a"ing: %he activities of intermediaries who sell to retailers (to small wholesalers also) but not in significant amounts to ultimate consumers#
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Retai"er: * store that sells products purchased by individuals# Di%tri-+tion Channe"% Perfor) I)$ortant F+nction%: .acilitating the exchange process 3orting to alleviate imbalances between outputs and consumer needs 6olding inventories *ssisting the search process %ransporting materials and products

Alternative Distribution Channels

Consumer &oods Direct channel #ne$step channel T%o$step channel Multistep channel Producer Consumer

Producer

etailer

Consumer

Producer

!holesaler

etailer

Consumer

Producer

Agent"broker

!holesaler

etailer

Consumer

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Alternative Distribution Channels

Business &oods

Direct channel #ne$step

'%holesaler(

Producer

Business user !holesaler Business user Business user !holesaler Business user

Producer

channel T%o$step 'agent( channel Multistep channel Producer Agent"broker

Producer

Agent"broker

Deter)ine Di%tri-+tion Inten%it# 7ntensive 3elective Fxclusive 12 Inten%i0e Di%tri-+tion * form of distribution that attempts to provide saturation coverage of the potential market# (# Se"ecti0e Di%tri-+tion %he selection of a small number of retailers to handle the firm$s product line# 42 Exc"+%i0e Di%tri-+tion %he granting of exclusive rights by manufacturers to a wholesaler or retailer to sell in a geographic region#
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T#$e% of Retai"ing:

%he following are the main types of retailing&

S+$er)arket Garge:scale, departmentali ed retail store offering a large variety of food products# S$ecia"t# Store Eetailer that handles only part of a single line of products# De$art)ent Store Garge retailer that handles a variety of merchandise# Aariet# Store Eetailer that offers an extensive range and assortment of low:priced merchandise# Di%co+nt .o+%e Eetailer that, in exchange for reduced price such traditional retail services as credit, etc etc

/2 (ho"e%a"ing
+holesaling includes all activities involved in selling goods and services to those buying for resale or business use# +e call wholesalers those firms engaged primarily in wholesaling activity#
+holesalers buy mostly from producers and sell mostly to retailers, industrial consumers, and other wholesalers#

T#$e% of (ho"e%a"er%: +holesalers fall into three ma!or groups& merchant wholesalers, brokers and agents, and manufacturers/ sales branches and offices# i2 Merchant ,ho"e%a"er% 7ndependently owned businesses that take title to the merchandise they handle# 7n different trades they are called !obbers, distributors, or mill supply houses# 7nclude full:service wholesalers and limited:service wholesalers#

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T#$e% of Merchant (ho"e%a"er%: a2 F+""&%er0ice ,ho"e%a"er% Provide a full line of services& carrying stock, maintaining a sales force, offering credit, making deliveries, and providing management assistance# -2 Li)ite &%er0ice ,ho"e%a"er%: =ffer fewer services than full:service wholesalers# ii2 /roker% an agent% >o not take title to goods# Main function is to facilitate buying and selling, for which they earn a commission on the selling price# 8enerally, speciali e by product line or customer types# P /roker%: 1hief function is bringing buyers and sellers together and assisting in negotiation# %hey are paid by the party who hired them, and do not carry inventory, get involved in financing, or assume risk# Fxamples& real estate brokers, insurance brokers, and security brokers# P Agent%: Eepresent either buyers or sellers on a more permanent basis than brokers do#

PROMOTION
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The Marketing Co))+nication% Modern marketing calls for more than !ust developing a good product, pricing it attractively, and making it available to target customers# 1ompanies must also communicate with current and prospective customers, and what they communicate should not be left to chance# .or most companies, the -uestion is not whether to communicate, but how much to spend and in what ways# The Marketing Co))+nication% Mix2 * company/s total marketing communications mix?also called its promotion mix consists of the specific blend of advertising, personal selling, sales promotion, public relations, and direct:marketing tools that the company uses to pursue its advertising and marketing ob!ectives# Definition% of the fi0e )aCor $ro)otion too"% fo""o,:

A 0erti%ing:

Paid form of non personal communication about an organi ation or its products that is transmitted to a target audience through a mass5broadcast medium#

Per%ona" %e""ing:
Personal presentation by the firm/s sales force for the purpose of making sales and building customer relationships#

Sa"e% $ro)otion:

3hort:term incentives to encourage the purchase or sale of a product or service#

P+-"ic re"ation%:
9uilding good relations with the company/s various publics by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories, and events#

Direct )arketing:

>irect connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships?the use of telephone, mail, fax, e:

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mail, the 7nternet, and other tools to communicate directly with specific consumers# Fach category involves specific tools# .or example, advertising includes print, broadcast, outdoor, and other forms# Personal selling includes sales presentations, trade shows, and incentive programs# 3ales promotion includes discounts, coupons, specialty advertising etc# >irect marketing includes telemarketing, fax, the 7nternet, and more# %hanks to technological breakthroughs, people can now communicate through traditional media (newspapers, radio, telephone, television), as well as through newer media forms (fax machines, cellular phones, and computers)#

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