DBA 1652 Marketing Management

UNIT -- I
Unit
No.
Unit Title Page No.
1 Marketing management an introduction
2 Marketing environment
3 Marketing with other functional areas of management
4 Market segmentation
5 Market targeting and positioning
6 Product management
7 rand management
! Pricing
" #hannel design and management
1$ %etailing and &holesaling
11 'ntegrated Marketing #ommunication
12 (dvertising management
13 )ales promotion
14 Personal selling
15 Pu*lic relations
16 +nderstanding individual consumer *ehaviour
17 +nderstanding industrial consumer *ehaviour
1! #ustomer satisfaction
1" #ustomer relationship management
2$ Marketing of services
21 %ural marketing
22 ,-pes of marketing research
23 Process of marketing research
24 ,ools and ,echni.ues of marketing research
25 (pplications of marketing research
26 Preparation of marketing research report
27 /nline marketing
2! 01commerce
2" ,rends in marketing
Marketing management an introduction
Unit tructure!
1. Introduction
2. "earning #$%ecti&e
'. 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 Ps !f Marketing"
3.#. $orporate %ocial Responsi&ilit' ($%R" an( Ethics in Marketing
(. )a&e *ou undertood t*+e ,uetion
5. -ummar*
6. ./ercie
0. 1e2erence
1. INT1#DU3TI#N!
,he ape2 *od- in +nited )tates of (merica for the Marketing functions3
(merican Marketing (ssociation 4(M(5 defines marketing as 6Marketing consists of
those activities involved in the flow of goods and services from the point of production to
the point of consumption78 ,he (M( has since amended its definition to read as9
6Marketing is an organi:ational function and a set of processes for creating3
communicating3 and delivering value to customers and for managing customer
relationships in wa-s that *enefit the organi:ation and its stakeholders87

;ence it can *e surmised that marketing is *asicall- meeting unmet needs for
target markets3 identif-ing those unmet needs and planning how to meet them through
products3 services3 and ideas8 #ommunicating the value to them along with pricing
which is afforda*le and profita*le and also distri*uting the products so that customers
have appropriate accessi*ilit- and have .uick and eas- deliver-8 Marketing is thus the
process of planning and e2ecuting the conception3 pricing3 promotion3 and distri*ution
of ideas3 goods and services to create e2changes 4with customers5 that satisf- individual
and organi:ational o*<ectives8
2. ".A1NIN4 #B5.3TI6.-!
)fter rea(ing the unit* 'ou +ill un(erstan( ho+,
,o learn the evolution of marketing as a discipline
,o understand the reasons wh- marketing is considered important in this era
,o assess the various marketing approaches and principles
'. MA17.TIN4 MANA4.M.NT!
Marketing has evolved into a ver- important functional area in management
*asicall- due to the increasing suppl- and lower demand over the -ears8 ,his is primaril-
through the competitive intensit- in ever- sphere of the market8 &hen competition
increases3 as -ou know3 ever- firm wants to *e heard in the market8 ,his will make the
firms to *e different than the competitors8 ;ence marketing *ecomes a ver- important
functional area for ever- firm where the competition is ver- high8
'n a *usiness firm3 marketing generates the revenues that are managed *- financial people
and used *- the productions people in creating products or services8 ,he challenge of
marketing is to generate that revenue *- satisf-ing consumers wants at a profit and in a
sociall- responsi*le manner8 Marketing is not limited to *usiness8 &henever -ou tr- to
persuade some*od- to do something -ou are engaging in marketing8 ,hus marketing has
a *road societal meaning8 'n fact3 the societal view is more trul- descriptive of marketing
toda-8 Moreover3 modern *usiness marketing activities are to a large e2tent3 a
conse.uence of the societal view of marketing8
,he essence of marketing is a transaction3 an e2change intended to satisf- human needs
or wants8 #onse.uentl-3 marketing occurs an- time on societal limit strive to e2change
something of value with another social unit8 Marketing consists of all the activities to
facilitate the e2change8
&ithin this societal perspective3 then 415 the makers 425 what the- are marketing and 435
their potential markets all assume *road dimensions8 ,he categor- of marketers might
include3 in addition to *usiness firms3 such diverse social units as 4a5 a political part-
tr-ing to market its candidate to the pu*lic 4*5 the director of an art museum providing
new e2hi*its to generate greater attendance and financial support 4c5 a la*or union
marketing its idea to mem*ers and to compan- management= and 4d5 professors tr-ing to
make their courses interesting for students8
'n addition to the range of items normall- considered as products and services3 what is
*eing marketed might include 4a5 ideas such as reducing air pollution or contri*uting to
the red cross 4*5 people3 such as new foot*all coach or a political candidate and 4c5
places3 such as industrial plant sites or a place to for a vocation8
'n a *road sense markets include more than the direct consumers of products services and
ideas8 ,hus a state universit->s market includes the legislators who provide funds3 the
citi:ens living near the universit- who ma- *e affected *- universit- activities and the
alumni8 ( *usiness firms market ma- include government regulator- agencies3
environmentalists3 and local ta2 assessors8
De2inition o2 Marketing
(s -ou alread- know there are man- definitions for marketing8 )ome definitions focus on
marketing as the process involved in satisf-ing the needs of a particular market3 while
other definitions lean more toward defining marketing in terms of its most visi*le
functional areas3 such as advertising and product development8 ,here pro*a*l- is no one
*est wa- to define marketing3 though whatever definition is used should have an
orientation that focuses on satisf-ing customers8 ,herefore3 we will define marketing as
follows9
Marketing consists of the strategies an( tactics use( to i(entif'* create an( maintain
satisf'ing relationships +ith customers that result in value for &oth the customer an( the
marketer.
?et@s e2amine this definition in a little more detail *- focusing on a few of the ke- terms8
)trategies and ,actics 1 )trategies are *est e2plained as the direction the marketing effort
will take over some period of time3 while tactics are actiona*le steps or decisions made in
order to follow the strategies esta*lished8 Aor instance3 if a strateg- is to enter a new
market3 the tactics ma- involve the marketing decisions made to carr- this out8
Performing strategic and tactical planning activities in advance of taking action is
considered critical for long1term marketing success8
'dentif- 1 (rgua*l- the most important marketing function involves efforts needed to
gain knowledge of customers3 competitors3 and markets8 &e will see throughout this
course material how marketing research is utili:ed in all decision areas8
#reate 1 #ompetition forces marketers to *e creative people8 &hen marketers *egin new
ventures3 such as *uilding a new compan-3 it is often *ased around something that is new
4e8g83 new product3 new wa- to distri*ute a product3 new advertising approach3 etc858 ut
once the new venture is launched innovation does not end8 #ompetitive pressure is
continuall- felt *- the marketer3 who must respond *- devising new strategies and tactics
that help the organi:ation remain successful8
Maintain 1 ,oda-@s marketers work hard to insure their customers return to purchase from
them again8 ?ong gone 4see ;istor- *elow5 are the da-s when success for a marketer was
measured simpl- in how man- sales the- made each da-8 Bow3 in most marketing
situations3 marketing success is evaluated not onl- in terms of sales figures *ut also *-
how long a marketer can retain good customers8 #onse.uentl-3 marketers@ efforts to
attract customers does not end when a customer makes a purchase8 't continues in various
wa-s for3 hopefull-3 a long time after the initial purchase8
)atisf-ing %elationships 1 ( ke- o*<ective of marketing is to provide products and
services that customers reall- want (BC to make customers feel their contact with the
marketer is helping to *uild a good relationship *etween the two8 'n this wa- the
customer is made to feel as if sheDhe is a partner in the transaction not <ust a source of
revenue for the marketer8 'n recent -ears this has lead to the concept of #ustomer
%elationship Management 4#%M53 which has emerged as a strategic approach that
insures that ever-one in an organi:ation3 not <ust the marketer3 understands the
importance of customers8 Maintaining close and consistent relationships with customers
through all points of customer contact is crucial *ut difficult to do well8 &e@ll see in later
sections technolog- pla-s a ke- role in carr-ing out #%M3 so that nearl- an-one in a
organi:ation that comes into contact with a customer 4e8g83 sales force3 service force3
customer service representatives3 accounts receiva*le3 etc85 has the necessar- information
and is well prepared to deal with the customer8
Ealue for oth #ustomer and Marketer 1 Ealue refers to the perception of *enefits
received for what someone must give up8 Aor customers value is most often measured *-
how much the- feel the- are getting for their mone-3 though the value one customer feels
sheDhe o*tains ma- differ from the perception of value from another customer even
though the- purchase the same product8 /n the other side of the transaction3 the marketer
ma- measure value in terms of how much profit the- are making for the marketing efforts
and resources e2pended8 Aor a successful marketing effort to take place *oth the customer
and the marketer must feel the- are receiving something worth while in return for the
efforts8 &ithout a strong perception of value it is unlikel- a strong relationship can *e
*uilt8 ,hroughout this tutorial we will emphasi:e value and show wa-s in which the
marketer *uilds value into the solutions the- offer8
/ther definitions for marketing include9
(merican Marketing (ssociation 4(M(59 7Marketing is the process of planning
and e2ecuting the conception3 pricing3 promotion and distri*ution of ideas3 goods
and services to create e2changes that satisf- individual and organi:ational goals87
&orld Marketing (ssociation 4&M(59 6Marketing is the core *usiness
philosoph- which directs the processes of identif-ing and fulfilling the needs of
individuals and organi:ations through e2changes which create superior value for
all parties8F
#hartered 'nstitute of Marketing 4#'M+5 G+nited HingdomI9 6Marketing is the
management process for identif-ing3 anticipating and satisf-ing customer
re.uirements profita*l-8F
T8e 2unction o2 marketer!
'n order to reach the goal of creating a relationship that holds value for customers and for
the organi:ation3 marketers use a diverse set that includes 4*ut is not limited to5 making
decisions regarding9
,arget Markets those markets identified as possessing needs the marketer
*elieves can *e addressed *- its marketing efforts
ProductsD)ervices a tangi*le or intangi*le solution to the market>s needs
Promotion a means for communicating information a*out the marketing
organi:ation>s solution to the market
Cistri*ution means used to allow the market to o*tain the solution
Pricing wa-s for the marketer to ad<ust the cost to the market for the solution
)ervices additional options that enhance the solution>s value
0ach option within the marketer>s set is tightl- integrated with all other options so that a
decision in one area could and often does impact decisions in other areas8 Aor instance3 a
change in the price of a product 4e8g83 lowering the price5 could impact the distri*ution
area 4e8g83 increases shipments3 generates higher traffic58
(dditionall-3 options within the toolkit are affected *- factors that are not controlled *-
the marketer8 ,hese factors include economic conditions3 legal issues3 technological
developments3 socialDcultural changes3 and man- more8 &hile not controlla*le3 these
e2ternal factors must *e monitored and dealt with since these can potentiall- cause
considera*le harm to the organi:ation8 'gnoring outside elements also can lead to missed
opportunities in the market especiall- if competitors are the first to take advantage of the
opportunities8 (s part of the strategic and tactical planning process discussed a*ove it
would *e wise for marketers to pa- close attention to the environment outside the
organi:ation8
'.1. .6#"UTI#N #9 MA17.TIN4 MANA4.M.NT!
,he evolution of marketing is composed of a series of responses to ma<or e2ternal
challenges8 Pre industrial marketing3 *ased around craft production and personal
relationships with local customers3 was challenged *- the ur*ani:ation and
mechani:ation of the industrial revolution8 ,he industrial era created e2panding markets
which re.uired an emphasis on production3 logistics and selling to get the goods to the
customer8 'n the late 1"5$s3 the challenge of increasingl- saturated and competitive
markets led to the *irth of an e2plicit marketing philosoph-8 Marketing is a relativel-
latest discipline having emerged in the earl- 1"$$s8 Prior to this time most issues that are
now commonl- associated with marketing were either assumed to fall within *asic
concepts of economics 4e8g83 price setting was viewed as a simple suppl-Ddemand issue53
advertising 4well developed *- 1"$$53 or in most cases were simpl- not -et e2plored
4e8g83 customer purchase *ehavior3 importance of distri*ution partners58 ?ead *-
marketing scholars from several ma<or universities3 the development of marketing was in
large part motivated *- the need to dissect in greater detail relationships and *ehaviors
that e2isted *etween sellers and *u-ers8 'n particular3 the stud- of marketing lead sellers
to recogni:e that adopting certain strategies and tactics could significantl- *enefit the
sellerD*u-er relationship8 'n the old da-s of marketing 4*efore the 1"5$s5 this often meant
identif-ing strategies and tactics for simpl- selling more products and services with little
regard for what customers reall- wanted8 /ften this lead companies to em*race a 6sell1as1
much1as1we1canF philosoph- with little concern for *uilding relationships for the long
term8
ut starting in the 1"5$s3 companies *egan to see that old wa-s of selling were
wearing thin with customers8 (s competition grew stiffer across most industries3
organi:ations looked to the *u-er side of the transaction for wa-s to improve8 &hat the-
found was an emerging philosoph- suggesting that the ke- factor in successful marketing
is to understanding the needs of customers8 ,his now famous 6marketing conceptF
suggests marketing decisions should flow from first knowing the customer and what the-
want8 /nl- then should an organi:ation initiate the process of developing and marketing
products and services8 ,he marketing concept continues to *e at the root of most
marketing efforts3 though the concept does have its own pro*lems 4e8g83 doesn>t help
much with marketing new technologies5 a discussion of which is *e-ond the scope of this
tutorial8 ut overall marketers have learned the- can no longer limit their marketing
effort to <ust getting customers to purchase more8 ,he- must have an in1depth
understanding of who their customers are and what the- want8
'.2 T). 1#". #9 MA17.TIN4
(s we>ve seen the ke- o*<ective of an organi:ation>s marketing efforts is to develop
satisf-ing relationships with customers that *enefit *oth the customer and the
organi:ation8 ,hese efforts lead marketing to serve an important role within most
organi:ations and within societ-8
(t the organi:ational level3 marketing is a vital *usiness function that is necessar- in
nearl- all industries whether the organi:ation operates as a for1profit or as a not1for1
profit8 Aor the for1profit organi:ation3 marketing is responsi*le for most tasks that *ring
revenue and3 hopefull-3 profits to an organi:ation8 Aor the not1for1profit organi:ation3
marketing is responsi*le for attracting customers needed to support the not1for1profit>s
mission3 such as raising donations or supporting a cause8 Aor *oth t-pes of organi:ations3
it is unlikel- the- can survive without a strong marketing effort8
Marketing is also the organi:ational *usiness area that interacts most fre.uentl- with the
pu*lic and3 conse.uentl-3 what the pu*lic knows a*out an organi:ation is determined *-
their interactions with marketers8 Aor e2ample3 customers ma- *elieve a compan- is
d-namic and creative *ased on its advertising message8
(t a *roader level marketing offers significant *enefits to societ-8 ,hese *enefits
include9
Ceveloping products that satisf- needs3 including products that enhance societ->s
.ualit- of life
#reating a competitive environment that helps lower product prices
Ceveloping product distri*ution s-stems that offer access to products to a large
num*er of customers and man- geographic regions
uilding demand for products that re.uire organi:ations to e2pand their la*or
force
/ffering techni.ues that have the a*ilit- to conve- messages that change societal
*ehavior in a positive wa- 4e8g83 anti1smoking advertising5
'.' T). MA17.TIN4 3#N3.PT
,he marketing concept is the philosoph- that firms should anal-:e the needs of their
customers and then make decisions to satisf- those needs3 *etter than the competition8
,oda- most firms have adopted the marketing concept3 *ut this has not alwa-s *een the
case8 'n 1776 in ,he &ealth of Bations3 (dam )mith wrote that the needs of producers
should *e considered onl- with regard to meeting the needs of consumers8 &hile this
philosoph- is consistent with the marketing concept3 it would not *e adopted widel- until
nearl- 2$$ -ears later8 ,o *etter understand the marketing concept3 it is worthwhile to put
it in perspective *- reviewing other philosophies that once were predominant8 &hile
these alternative concepts prevailed during different historical time frames3 the- are not
restricted to those periods and are still practiced *- some firms toda-8
T8e Production 3once+t
,he production concept prevailed from the time of the industrial revolution until the earl-
1"2$@s8 ,he production concept was the idea that a firm should focus on those products
that it could produce most efficientl- and that the creation of a suppl- of low1cost
products would in and of itself creates the demand for the products8 ,he ke- .uestions
that a firm would ask *efore producing a product were9
#an we produce the productJ
#an we produce enough of itJ
(t the time3 the production concept worked fairl- well *ecause the goods that were
produced were largel- those of *asic necessit- and there was a relativel- high level of
unfulfilled demand8 Eirtuall- ever-thing that could *e produced was sold easil- *- a
sales team whose <o* it was simpl- to e2ecute transactions at a price determined *- the
cost of production8 ,he production concept prevailed into the late 1"2$@s8
T8e -ale 3once+t
- the earl- 1"3$@s however3 mass production had *ecome commonplace3 competition
had increased3 and there was little unfulfilled demand8 (round this time3 firms *egan to
practice the sales concept 4or selling concept53 under which companies not onl- would
produce the products3 *ut also would tr- to convince customers to *u- them through
advertising and personal selling8 efore producing a product3 the ke- .uestions were9
#an we sell the productJ
#an we charge enough for itJ
,he sales concept paid little attention to whether the product actuall- was needed= the
goal simpl- was to *eat the competition to the sale with little regard to customer
satisfaction8 Marketing was a function that was performed after the product was
developed and produced3 and man- people came to associate marketing with hard selling8
0ven toda-3 man- people use the word 7marketing7 when the- reall- mean sales8
T8e Marketing 3once+t
(fter &orld &ar ''3 the variet- of products increased and hard selling no longer could *e
relied upon to generate sales8 &ith increased discretionar- income3 customers could
afford to *e selective and *u- onl- those products that precisel- met their changing
needs3 and these needs were not immediatel- o*vious8 ,he ke- .uestions *ecame9
&hat do customers wantJ
#an we develop it while the- still want itJ
;ow can we keep our customers satisfiedJ
'n response to these discerning customers3 firms *egan to adopt the marketing concept3
which involves9
Aocusing on customer needs *efore developing the product
(ligning all functions of the compan- to focus on those needs
%eali:ing a profit *- successfull- satisf-ing customer needs over the long1term when
firms first *egan to adopt the marketing concept3 the- t-picall- set up separate marketing
departments whose o*<ective it was to satisf- customer needs8 /ften these departments
were sales departments with e2panded responsi*ilities8 &hile this e2panded sales
department structure can *e found in some companies toda-3 man- firms have structured
themselves into marketing organi:ations having a compan-1wide customer focus8 )ince
the entire organi:ation e2ists to satisf- customer needs3 no*od- can neglect a customer
issue *- declaring it a 7marketing pro*lem7 1 ever-*od- must *e concerned with
customer satisfaction8 ,he marketing concept relies upon marketing research to define
market segments3 their si:e3 and their needs8 ,o satisf- those needs3 the marketing team
makes decisions a*out the controlla*le parameters of the marketing mi28
'.( T). MA17.TIN4 MI: 4T). ( P;- #9 MA17.TIN4<
,he term 7marketing mi27 *ecame populari:ed after Beil ;8 orden pu*lished his 1"64
article3 ,he #oncept of the Marketing Mi28 orden *egan using the term in his teaching
in the late 1"4$@s after Kames #ulliton had descri*ed the marketing manager as a 7mi2er
of ingredients78 ,he ingredients in orden@s marketing mi2 included product planning3
pricing3 *randing3 distri*ution channels3 personal selling3 advertising3 promotions3
packaging3 displa-3 servicing3 ph-sical handling3 and fact finding and anal-sis8 08 Kerome
Mc#arth- later grouped these ingredients into the four categories that toda- are known as
the 4 P@s of marketing3 depicted *elow9
Marketing decisions generall- fall into the following four controlla*le categories9
Product
Price
Place 4distri*ution5
Promotion
Product
Target
Market
Price
Promotion
Place
The marketing mix
,hese four P@s are the parameters that the marketing manager can control3 su*<ect to the
internal and e2ternal constraints of the marketing environment8 ,he 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 response8
Product=-er&ice
&hat does the customer want from the productDserviceJ &hat needs does it
satisf-J
&hat features does it have to meet these needsJ
(re there an- features -ou>ve missed outJ
(re -ou including costl- features that the customer won>t actuall- useJ
;ow and where will the customer use itJ
&hat does it look likeJ ;ow will customers e2perience itJ
&hat si:e4s53 color4s53 and so on3 should it *eJ
&hat is it to *e calledJ
;ow is it *randedJ
;ow is it differentiated versus -our competitorsJ
&hat is the most it can cost to provide3 and still *e sold sufficientl- profita*l-J
4)ee also Price3 *elow58
Place
&here do *u-ers look for -our product or serviceJ
'f the- look in a store3 what kindJ ( specialist *outi.ue or in a supermarket3 or
*othJ /r onlineJ /r direct3 via a catalogueJ
;ow can -ou access the right distri*ution channelsJ
Co -ou need to use a sales forceJ /r attend trade fairsJ /r make online
su*missionsJ /r send samples to catalogue companiesJ
&hat do -ou competitors do3 and how can -ou learn from that andDor
differentiateJ
Price
&hat is the value of the product or service to the *u-erJ
(re there esta*lished price points for products or services in this areaJ
's the customer price sensitiveJ &ill a small decrease in price gain -ou e2tra
market shareJ /r will a small increase *e indiscerni*le3 and so gain -ou e2tra
profit marginJ
&hat discounts should *e offered to trade customers3 or to other specific
segments of -our marketJ
;ow will -our price compare with -our competitorsJ
Promotion
&here and when can -ou get across -our marketing messages to -our target
marketJ
&ill -ou reach -our audience *- advertising in the press3 or on ,E3 or radio3 or on
*ill*oardsJ - using direct marketing mailshotJ ,hrough P%J /n the 'nternetJ
&hen is the *est time to promoteJ 's there seasonalit- in the marketJ (re there
an- wider environmental issues that suggest or dictate the timing of -our market
launch3 or the timing of su*se.uent promotionsJ
;ow do -our competitors do their promotionsJ (nd how does that influence -our
choice of promotional activit-J
"imitation o2 t8e Marketing Mi/ 9rame>ork
,he marketing mi2 framework was particularl- useful in the earl- da-s of the marketing
concept when ph-sical products represented a larger portion of the econom-8 ,oda-3 with
marketing more integrated into organi:ations and with a wider variet- of products and
markets3 some authors have attempted to e2tend its usefulness *- proposing a fifth P3
such as packaging3 people3 process3 etc8 ,oda- however3 the marketing mi2 most
commonl- remains *ased on the 4 P@s8 Cespite its limitations and perhaps *ecause of its
simplicit-3 the use of this framework remains strong and man- marketing te2t*ooks have
*een organi:ed around it8
'.53#1P#1AT. -#3IA" 1.-P#N-IBI"IT? @3-1< AND .T)I3- IN
MA17.TIN4
#orporate )ocial %esponsi*ilit- defines as 6a commitment to im+ro&e communit*
>ell-$eing t8roug8 dicretionar* $uine +ractice and contri$ution o2 cor+orate
reourceA.
)ome of the *enefits of *eing sociall- responsi*le include
4a5 0nhanced compan- and *rand image
4*5 0asier to attract and retain emplo-ees
4c5 'ncreased market share
4d5 ?ower operating costs and
4e5 0asier to attract investors8
( sociall- responsi*le firm will care a*out customers3 emplo-ees3 suppliers3 the local
communit-3 societ-3 and the environment8 #)% can *e descri*ed as an approach *-
which a compan-91
4a5 %ecogni:es that its activities have a wide impact on the societ- and that development
in societ- in turn supports the compan- to pursue its *usiness successfull- 8
4*5 (ctivel- manages the economic3 social3 environmental and human rights8
,his approach is derived from the principles of sustaina*le development and good
corporate governance8 Marketing managers within different firms will see some social
issues as more relevant than others8 ,he relevance of a given social issue is determined
*- the compan->s products3 promotional efforts3 and pricing and distri*ution policies *ut
also *- its philosoph- of social responsi*ilit-8
.t8ical 3on2lict 2aced $* t8e Marketer
Marketers must *e aware of ethical standards and accepta*le *ehavior8 ,his awareness
means that marketers must recogni:e the viewpoints of three ke- pla-ers9 the compan-3
the industr-3 and societ-8 )ince these three groups almost alwa-s have different needs
and wants3 ethical conflicts are likel- to arise8 0thical conflicts in marketing arise in two
conte2ts 9
Airst3 when there is a difference *etween the needs of the three aforementioned groups
4 the compan-3 the industr-3 and societ-5 a conflict ma- arise8
)econd and ethical conflict ma- arise when one>s personal values conflict with the
organi:ation8 'n either case3 a con2lict o2 interet is a possi*le outcome8
(n e2ample of the first t-pe of conflict is the to*acco industr-8 #igarettes have for man-
decades *een a lucrative *usiness8 )o3 cigarette and to*acco marketing have *een for
companies and good for the to*acco industr-8 Man- thousands of people around the
world are emplo-ed in the to*acco industr-8 )o3 the world econom- has *een somewhat
dependent on cigarettes and to*acco8 ;owever3 cigarettes are harmful to societ-8 ,here is
documented proof that cigarette smoking is harmful to health8 ,his is an ethical conflict
for cigarette marketers8
(n e2ample of the second t-pe of conflict3 when one>s personal values conflict with the
organi:ations occurs when a leader in the compan- seeks personal gain 4usuall- financial
profit5 from 2ale ad&ertiing. B#uresF for fatal diseases are one t-pe of product that falls
into this categor- of ethical conflict9 'n their greed to make a profit3 a marketer convinces
those who ma- *e d-ing from an incura*le disease to *u- a product that ma- not *e a
cure3 *ut which a desperatel- ill person 4or mem*ers of his or her famil-5 ma- choose to
purchase in an effort to save the d-ing famil- mem*er suffering8 Promoting and
marketing such products violates rules of marketing ethics8 0thical dilemmas facing
marketing professionals toda- fall into one of three categories9 to*acco and alcohol
promoting3 conumer +ri&ac*C and green marketing8 )tandards for ethical marketing
guide *usiness in efforts to do the right thing8 )uch standards have four functions9
,o help identif- accepta*le practices3 foster internal control3 avoids confusion3 and
facilitates a *asis for discussion8
3onumerim
#onsumerism is concerned with *roadening the rights of consumers8 ,he concepts of
social responsi*ilit- and consumerism go hand1in1hand8 'f ever- organi:ation practiced a
high level of social responsi*ilit- the consumer movement might never have *egun8
#onsumerism is a struggle for power *etween *u-ers and sellers= specificall-3 it is a
social movement seeking to increase the rights and powers of *u-ers in relation to sellers8
)eller>s rights and powers are presented in the following list9
,o introduce an- product in an- si:e and st-le the- wish into the marketplace3 so
long as it is
not ha:ardous to personal health or safet- or if it is ha:ardous3 to introduce it with
the proper
warnings and controls
,o price the product at an- level the- wish3 provided there is no discrimination
among similar
classes of *u-ers
,o spend an- amount of mone- the- wish to promote the product3 so long as the
promotion is
not defined as unfair competition
,o formulate an- message the- wish a*out the product provided that it is
misleading or
dishonest in content or e2ecution
,o introduce an- *u-ing incentive schemes the- wish
'n contrast3 here are *u-ers> rights and power9
,o refuse to *u- a product that is offered to them
,o e2cept the product to *e safe
,o e2pect the product to essentiall- match how the seller represented it
,o receive ade.uate information a*out the product
't is in the *est interest of marketers to understand the level of consumer standards and
the nature
of consumer perceptions3 as well as what is re.uired to foster realism and accurac-
among consumers8
Marketing and t8e Natural .n&ironment
(nother significant area of social concern is the environment8 Marketing is ultimatel-
dependent on the use of scarce resources to fulfill human needs3 without harming or
unnecessaril- using care resources8
Marketing managers should help to determine which products are produced3 and which
products are indirectl- affecting the environment9
,he natural resources and materials used
,he amount of energ- re.uired in the production process
,he residuals 4e8g83 waste water5 that result from production
,he consumption of resources and energ- that is re.uired to use products 4cars3
air conditioners5
,he generation of pollutants 4e8g83 e2haust fumes5 in using products
,he amount of packaging material that ma- have to *e discarded8 4packaging
comprises less than 14 percent of collecti*le solid waste3 *ut consumers often
estimate its share of that waste at 4$ to !$ percent5
1elation8i+ Marketing and .t8ic
Bowada-s3 most ethicists *elieve that %elationship Marketing is a reasona*le practice
leading to positive relationships *etween *u-ers and sellers8 %elationship marketing
re.uires that rules are not necessaril- contractual8 %elationship marketing allows *u-ers
and sellers to work together8 ;owever3 there are disadvantages to this approach that
means relationship marketing re.uires time to develop a list of e2pected conduct or 6rules
of *ehavior8F
4reen Marketing and .t8ical Iue
,he ne2t important area the marketer need to know a*out what is the relevance of )ocial
Marketing in order to protect the environment and to improve the .ualit- of life and are
concerned with issues that include conservation of natural resources3 reducing
environmental pollution3 protecting endangered species3 and control of land use8 Man-
companies are finding that consumers are willing to pa- more for a green product8 ,he
last three decades have seen a progressive increase in worldwide environmental
consciousness8 ,his has *een driven *- a num*er of factors from increased media
coverage to rising evidence of environmental pro*lems such as the depletion of the o:one
la-er3 acidification of rivers and forest degradation3 glo*al warming3 the rise of pressure
group activit-3 tougher legislation and ma<or industrial disasters8 #oncern has moved
from the local scale to a national and increasingl- glo*al scale8
,he rate of environmental degradation has intensified8 ,he nineteenth centur- *rought
the first large scale pollution as companies geared themselves to produce goods as fast as
possi*le3 with virtual disregard for human or environmental well1*eing8 Bations *attled
for industrial supremac- using raw materials and creating pollution at a staggering rate8
(s countries *ecame economicall- stronger3 competition also grew8 More efficient
production methods were emplo-ed3 and few companies3 if an-3 gave a thought to the
impact the- were having on their surroundings8 &ith the increase in water pollution from
the chemical works3 and air pollution from the iron and steel industr-3 towns and cities
*egan to pa- the price for high industrial productivit-8
,he seventies saw a resurgence of environmental concern8 'n 1"72 the historic +nited
Bations #onference on the ;uman 0nvironment took place in )tockholm3 leading to the
creation of the +nited Bations 0nvironment Programme 4+B0P58 'n 1"72 the L?imits to
Mrowth %eport> of the #lu* of %ome pro<ected a catastrophic future if growth continued
at the same rate3 and man- groups called for L:ero growth>8 ,he reaction of companies3
governments and academics to such gloom- environmental prophecies varied widel-8
'n 1"!7 the +nited Bations &orld #ommission on 0nvironment and Cevelopment
recogni:ed that :ero growth was no longer a via*le option if the needs and aspirations of
the industriali:ing nations were to *e fulfilled8 (s a result3 1"!7 saw the pu*lication of
L/ur #ommon Auture 4,he rundtland %eport5> which concluded that economic growth
had a role to pla- in improving the standards in the less industriali:ed world and also in
reducing environmental destruction8 't suggested that growth had to *e of a different
order3 and had to move the world awa- from viewing the environment as an unlimited
resource to *e e2ploited *- each incum*ent generation8
(ss the 1"!$s progressed3 it *ecame increasingl- clear that3 although the starkest
predictions of resource depletion and population e2plosion had failed to materiali:e3 all
was far from well with the planet8 ( num*er of pu*lished anal-ses of the environment
showed that according to a wide range of indicators3 the environment was coming under
increasing stress8 #oncern among consumers and the electorate *egan to mount3 with the
inevita*le conse.uence *eing that environmental issues moved from the fringes to the
center of the *usiness and political agenda8
,he environment>s role in *usiness is profoundl- o*vious3 *ut eas- to overlook8 't
provides ever- *usiness with its inputs3 and a destination for all its outputs8 't also
provides the *usiness with the ph-sical space within which its operations occur8 Aor
*usinesses dealing directl- with environmental resources3 such as agriculture3 tourism or
oil3 the importance of the ph-sical environment has alwa-s *een apparent8 )ociet- in its
present form and on its current tra<ector- of development3 however3 cannot *e sustained
indefinitel-8 ,he ph-sical environment has limited resources and limited capacit- to
a*sor* pollution and waste8 ,he underl-ing cause of societ->s current unsustaina*ilit-
relates to the wa- in which economics and technolog- have come to dominate our
thinking a*out *usiness and the environment8 #onventional marketing within industr- is
ver- much a product of this techno1economic perspective8 ,his has created a Lgre->
culture which is not sustaina*le and is therefore terminal8 ,o transform this into a Lgreen>
sustaina*le culture3 there is a need to *alance consideration of the economic and technical
impacts and aspects of *usinesses with understanding of their social and ph-sical
implications8
't is now widel- accepted that societies3 economies3 and the *usinesses within them need
to find a more sustaina*le path to for future development8 'n the *usiness world the
voca*ular- of management was suddenl- e2panded *- the discussion of Lgreen
consumers>3 Lgreen markets> and Lgreen products> and the practice of Lenvironmental> or
Lgreen marketing>8 Aor ma<orit- of the companies improving environmental performance
has3 until recentl-3 *een a .uestion of legislative compliance and occasional reactions to
e2ternal events and pressures8 't has onl- *een companies in the front1line sectors such as
oil3 chemicals3 power and cars that have gone *e-ond a reactive and tactical approach to
green issues8 ;owever3 *- earl- 1""$s a shift awa- from a technical1compliance oriented
approach towards a more proactive green strateg- orientation was noticed8 #ompanies
were increasingl- pursuing competitive advantage and product differentiation *-
increasing investment in environmental marketing3 green design and improving overall
corporate eco1performance8 'n addition to these e2ternall- motivated changes3 the
reali:ation is dawning within industr- that sustaina*ilit- will not *e reached simpl- *-
demand1pull from the market and compliance1push from the regulators8 ,he changes that
are needed to safeguard the future of the environment and the econom- must partl- *e
driven from the *usiness communit-3 which means the- must proactivel- integrate eco1
performance into the strategies3 s-stems and cultures of the organi:ation8
0g9 ,o-ota has *ecome .uite successful with their h-*rid cars8
T8e t8ree 1 o2 en&ironmentalim are!
%educe
%euse and
%ec-cle8
Mreen marketing refers to the development and distri*ution of ecologicall-1safe products8
't refers to products and packages that have one or more of the following characteristics9
415 (re less to2ic
425 (re more dura*le
435 #ontain reusa*le materials
445 (re made of rec-cla*le material8 'n short3 these are products considered
6environmentall- responsi*leF8
%esearch *ased studies on green marketing are ver- scant-8 &hatever studies availa*le
are those carried out in the &est8 Ninkhan O #arlson 41""55 in a stud- titled LMreen
(dvertising and the %eluctant #onsumer> anal-ses the advertiser>s dilemma from
different perspectives of consumers having negative attitudes a*out *usiness and negative
impressions of the advertising industr-8 ,he nature of green marketing is clarified *-
Hil*ourne 41""55 in LMreen (dvertising9 )alvation or /2-moron>3 demonstrating that the
concept is far more comple2 than the e2isting marketing literature suggests8 Mreen is
characteri:ed in this stud- as a two dimensional concept with political and human
dimensions8 aner<ee et al 41""55 in a stud- on multi dimensional anal-sis of
environmental advertising suggests that environmental appeals are *ecoming increasingl-
common in advertising8 ,he results of a content anal-sis designed to uncover the
underl-ing structure of green advertising are presented8 ( ma<orit- of advertisers in the
sample attempted to pro<ect a green corporate image rather than focusing on the
environmental *enefits of their product or service8 Most of the studies focus on the
communication aspect of green marketing and studies that cover the entire gamut of
green marketing are woefull- lacking and more so studies conducted in an 'ndian conte2t8
'n the earl- to mid 1"6$s created concern a*out the social responsi*ilit- of *usinesses
and their impact on the natural environment and the health and welfare of the planet8 ,his
concern was heightened during the earl- 1"7$s in response to ?imits to Mrowth and
resulted in the emergence of *oth the Lsocietal marketing concept> and the Lecological
marketing concept>8 'n response to the new green challenge that emerged during the earl-
1"!$s3 these earl- concepts have amalgamated to create an environmental marketing
concept8 Mreen marketing is thus a form of socio1ecological marketing where*- the
goods and services sold3 and the marketing practices involved in their sale take into
account the environmental ramifications of societ- as a whole8 ,he marketing process
essentiall- involves matching the controlla*le internal varia*les of the marketing mi2
with the demands of the marketing environment8 0nvironmental marketing is no
different3 in principle3 although the internal varia*les and e2ternal demands that must *e
reconciled are a little different8
Mreen marketing takes account of the wider relationship of the organi:ation and its
products to the surroundings8 't is a*out a more aware3 open3 targeted and sensitive
approach that integrates the strategic link *etween the compan-3 the environment3 and
marketing3 rather than *eing primaril- concerned with tactical communications
opportunities8 ,he prime emphasis is on3 developing relationships and satisf-ing separate
)takeholders needs in an environmentall- and sociall- responsi*le manner8 ,he ke-
stakeholders are customers3 investors3 parent compan-3 directors3 emplo-ees3 the
communit-3 legislators3 pressure groups3 suppliers3 and the media
Mreen marketing differs from its societal and ecological predecessors in it>s intertwining
of ecological and social concerns3 in the *readth of the ecological agenda that it tackles3
and in its potential application across all t-pes and sectors of *usiness8 Mreen marketing
goes *e-ond societal marketing in four ke- wa-s9
't is an open1ended rather than a long1term perspective8
't focuses more strongl- on the natural environment8
't treats the environment as something which has an intrinsic value over and
a*ove its usefulness to societ-8
't focuses on glo*al concerns rather than those of particular societies8
,he ke- elements of green marketing can *e summarised as under9
( *alanced approach to the social3 technological3 economic and ph-sical aspects
of *usinesses and societies8
(n emphasis on long term sustaina*le .ualitative development rather than short1
term unsustaina*le .uantitative growth8
( holistic approach aimed at reversing the reductionalist and fragmented
approach of previous *usiness theor- and practice8
( consideration of consumers as real human *eings rather than as h-pothetical
Lrational economic>entities8
(n emphasis on meeting the genuine needs of consumers3 rather than on
stimulating superficial desires8
( recognition that consumers and societ- have multiple and sometimes
conflicting wants and needs8
( view of the compan- and all its activities as part of the Lproduct> that is
consumed8
( recognition that the large scale long distance nature of the current econom- is
not sustaina*le3 and that in the future small and local will *e *eautiful8
0m*racing the concept of eco1performance which incorporates the non1market
outputs of the compan-3 with performance of the product during and after use and
the environmental impact of companies which contri*ute to the creation and
marketing of the product elsewhere in the suppl- chain8
,he pursuit of added socio1environmental value as well as added techno1
economic value8
3aue 1elated Marketing and .t8ic
#ause1related marketing should not *e confused with social marketing8 ( ke- difference
is that a ma<or purpose of cause1related marketing is to help a *usiness8 't might *e used
to improve the image of the firm or to increase market share8 ,he techni.ue involves
associating a *usiness with a cause8 )ocial marketing3 on the other hand3 is generall- not
associated with an- compan- and issued solel- to help societ- *- dealing with a social
pro*lem8 #ause1related marketing has to *e done correctl- or it can hurt a compan-8 (
firm ma- look like it is e2ploiting a charit-8 't is important for the firm to *e transparent
and honest a*out what it is doing8 ,here should also *e a fit *etween the compan- and the
cause8

-ocial Marketing and .t8ic
)ocial Marketing is defined as the use of marketing principles and techni.ues to
influence a target audience to voluntaril- accept3 re<ect3 modif-3 or a*andon a *ehavior
for the *enefit of individuals3 groups or societ- as a whole8 )ocial marketing is usuall-
done *- a non1profit organi:ation3 government3 or .uasi1government agenc-8 ,he goal is
either to steer the pu*lic awa- from products that are harmful to them and D or societ-
4e8g83 illegal drugs3 to*acco3 alcohol3 etc85 or to direct them towards *ehaviors or products
that are helpful to them and D or societ- 4e8g83 having famil- meals3 pra-ing together3 etc858

(. )a&e *ou undertood t*+e ,uetionD
18 )tate whether true or falseJ Marketing is defined as *oth a philosoph- and set of
activities8
28 HP )-stems is a compan- that uses computers to generate new product protot-pes8 't
has generated lo-al *usiness clients *- providing the *est customer support in the
industr-8 ,he compan- also provides direct sales consultation that gives its salespeople
intimate knowledge a*out what e2actl- its customers want8 ,his partnership *etween HP
)-stems and its customers entails relationship marketing8 )tate whether true or falseJ
38 &hich one of the following statements *- a compan- chairman *est reflects the
marketing conceptJ
(8 &e have organised our *usiness to make certain that we satisf- customer needs
8 &e *elieve that the marketing department must organise to sell what we produce8
#8 &e tr- to produce onl- high .ualit-3 technicall- efficient products
C8 &e tr- to encourage compan- growth8

48 &hich of the following is an e2ample of a pro*lem that ma- arise in the
implementation of the marketing conceptJ
(8 - satisf-ing one segment in societ-3 a firm contri*utes to the dissatisfaction of
other segments8
8 #onsumers do not understand what the marketing concept is8
#8 Cealers do not support the marketing concept8
C8 ( product ma- fit the needs of too man- segments8
58 ,he marketing concept is a philosoph- that states that an organisation should tr- to
satisf- customers@ needs and at the same time9

(8 increase market share8
8 increase sales8
#8 achieve the organisation@s goals8
C8 alwa-s produce high .ualit- products
5. -ummar*
'n the current conte2t3 there is ver- high competition among the marketers in 'ndia and
that has *een necessitated due to the fact that consumerism is on the high and the
importance of marketing is known to people8 (n interaction *etween *usiness and
industr- in a glo*al perspective has *ecome imperative *ecause of the need to upgrade
regional technologies and maintain the competitive edge in the international markets8
,oda-@s consumer is more demanding than -ester1-ears@8 ;e is not content with the
second *est in technolog- and is reluctant to pa- for a product or a service <ust *ecause it
comes from a particular region or a countr-8 ,his3 understanda*l-3 has led to *usiness and
industr- across the world to make use of technologies and resources worldwide to
upgrade their products and services8 'n this ?i*eralisation1Privatisation1Mlo*alisation era
to *ecome an integral part of the glo*al s-stem3 nations are opening up their economies at
a rapid rate3 which were hitherto protected from world markets8 ,he removal of artificial
*arriers to trade has and should made it possi*le for innovative companies to go in search
of new markets across *orders with improved efficienc- and greater competitive strength8
,his has forced the 'ndian companies to *e competitive on the marketing front8
6. ./ercie
18 ,oda- we have an unmanagea*le surplus of food grains3 *ut regretta*l-3 no
integrated approach to agriculture3 procurement O food processing3 to take
advantage of such *ount- or capa*ilities8 More worr-ing is the fact that pu*lic
investment in (griculture has *een declining in real terms through the 1"!$s O
most of the 1""$s8 0nhancement of pu*lic investment in agriculture is a catal-st
for private sector investment3 *ut cash strapped state Movts8 look to the centre for
financial support O polic- directives8 Pu*lic investment must go on a priorit-
*asis to non green revolution products O dr-land areas8 ,he private sector has
watched passivel- from the sidelines8 &ell known solutions to the pro*lems of
'ndian agriculture re.uire political will O a commitment to increase productivit-
*e-ond su*sistence8 Co -ou agreeJ 's there an- scope for marketingJ
28 %esearchers at %ohan 'ndustries spent considera*le time3 effort3 and mone-
developing a *luish windshield that would let in filtered sunlight *ut *lock out the
heat8 ?ittle market research was done3 *ut the scientists were convinced this new
product would *e significantl- *etter than e2isting windshields even though the-
were more e2pensive and of a different color than the current models on the
market8 &hat do -ou think is the orientation of the compan-J Co -ou think it is
rightJ Kustif-8
38 Humar owns a small la*orator- that makes *ifocal contact lenses8 ;is compan- is
growing fast3 and there are man- things he does not understand a*out his
customers8 )hould Humar who is 253 take a marketing courseJ )tate -es or noJ
<ustif- -our answer8
0.1e2erence!
18 Milestones of Marketing *- Meorge urton ;otchkiss3 ,he MacMillan #ompan-3
Bew Pork3 1"3!3 page vii
28 7Cictionar- of Marketing ,erms7 from marketingpower8com8
38 Ninkhan3 Meorge8 M= #arlson3 ?es9 Mreen (dversting and the %eluctant
#onsumer3 Kournal of (dvertising3 1""5
48 Hil*ourne3 &illiam 09 Mreen (dvertising9 )alvation or /2-moron3 Kournal of
(dvertising3 1""5
58 aner<ee3 )u*ha*rata9 Mulas3 #harles )= '-er3 0aswar9 )hades of Mreen9 ( multi1
dimensional (nal-sis of 0nvironmetnal (dvertising3 <ournal of (dvertising3 1""5
68 Humar3 Hrishna= 6Meeting the #hallenges of a orderless 0conom-9 -ee(e( a
Para(igm %hift.F9 &orking Paper Bo8 2$$1D43 'ndian 'nstitute of Management3
?ucknow 4'ndia53 presented in )eminar on &,/ O (llied 'ssues held at 'ndian
'nstitute of Management3 ?ucknow 3 Ae*ruar- 241253 2$$18
78 Conovan %= ;enle- B8 %ocial Marketing, Principles an( Practice8 Mel*ourne9 'P
#ommunications3 2$$38
Marketing en&ironment
+nit structure9
1. Introduction
2. "earning #$%ecti&e
'. Marketing .n&ironment
3.1 %ocial environment
3.2 $ultural environment
3.3 Economic environment
3.4 Politico/legal environment
3.# 0essons for marketers
(. )a&e *ou undertood t*+e ,uetion
5. -ummar*
6. ./ercie
0. 1e2erence
1. Introduction!
,he usiness environment surrounds and impacts upon the organi:ation8 ,here
are three ke- perspectives on the environment3 namel- the @macro1environment3@ the
@micro1environment@ and the @internal environment@8 Micro environment influences the
organi:ation directl-8 't includes suppliers that deal directl- or indirectl-3 consumers and
customers3 and other local stakeholders8 Micro tends to suggest small3 *ut this can *e
misleading8 'n this conte2t3 micro descri*es the relationship *etween firms and the
driving forces that control this relationship8 't is a more local relationship3 and the firm
ma- e2ercise a degree of influence8 Macro environment includes all factors that can
influence and organi:ation3 *ut that are out of their direct control8 ( compan- does not
generall- influence an- laws 4although it is accepted that the- could lo**- or *e part of a
trade organi:ation58 't is continuousl- changing3 and the compan- needs to *e fle2i*le to
adapt8 ,here ma- *e aggressive competition and rivalr- in a market8 Mlo*ali:ation means
that there is alwa-s the threat of su*stitute products and new entrants8 ,he wider
environment is also ever changing3 and the marketer needs to compensate for changes in
culture3 politics3 economics and technolog-8 Heeping this in mind the environmental
influences needs to *e studied and -ou will have the inputs in all the forces that influence
the organi:ation in its .uest for effective marketing8
2. "earning o$%ecti&e!
(fter reading the unit3 -ou will understand how9
,o learn the need for scanning the environment
,o understand the environmental influences and wh- marketing has to *e
proactive
,o assess the impact created *- each influence on the organi:ations
'. MA17.TIN4 .N6I1#NM.NT!
0nvironmental scanning helps in assessing the impact the environment could
create the *usiness8 /*servation pla-ed a minor3 *ut non1negligi*le role8 Eisits to the
premises3 including the factor- plants in some cases3 meals in the canteens of some of the
organi:ations3 attention paid to the wa-1of1doing1things in the several companies 1 how
visitors were announced3 how meetings were scheduled and cancelled3 a*sence or
fre.uenc- and t-pe of interruptions in the course of the interviews3 degree of formalit- or
informalit- in interpersonal relations 1 contri*uted to consolidate impressions or confirm
information *ased on documentar- evidence or on the interviews8 ,he grounded theor-
proposed comprises three main components9 the categories 4the core categor- and the
su*sidiar- categories5C the principal relationships among them3 and the contextual
factors that shape the categories and relationships8 Arom an internal perspective3 these
factors include corporate histor- and culture8 Arom an e2ternal perspective3 these
conte2tual factors include the overall economic3 social3 cultural and political conditions
that characeri:e modern 'ndia and shape3 at least to a certain e2tent3 the organi:ations
operating in that realit-8 ,he core categor- identified was that of environmental scanning3
to which a set of su*sidiar- categories was related8 (ccording to (guilar3environmental
scanning refers to the e2posure to and ac.uisition of 7information a*out events and
relationships in a compan-@s outside environment3 the knowledge of which would assist
top1management in its task of charting the compan-@s future course of action87 ,his
interrelated set of categories contri*utes to understanding how conte2tual factors 1
e2ternal and internal to the organi:ation3 influence the scanning activit-3 and also how
perceived environmental change affects strategic change8 ,he task of e2plaining variance
among companies resides with a few ke- relationships among those categories8 Bow let
us see each environment in detail8
'.1. -#3IA" .N6I1#NM.NT!
'ndian societ- is multifaceted to an e2tent perhaps unknown in an- other of the
world@s great civili:ations8 Eirtuall- no generali:ation made a*out 'ndian societ- is valid
for all of the nation@s multifarious groups8 #omprehending the comple2ities of 'ndian
social structure has challenged scholars and other o*servers over man- decades8 ,he
ethnic and linguistic diversit- of 'ndian civili:ation is more like the diversit- of an area as
varia*le as 0urope than like that of an- other single nation1state8 ?iving within the
em*race of the 'ndian nation are vast num*ers of different regional3 social3 and economic
groups3 each with different cultural practices8 Particularl- noteworth- are differences
*etween social structures in the north and the south3 especiall- in the realm of kinship
s-stems8 ,hroughout the countr-3 religious differences can *e significant3 especiall-
*etween the ;indu ma<orit- and the large Muslim minorit-= and other 'ndian groups11
uddhists3 #hristians3 Kains3 Kews3 Parsis3 )ikhs3 and practitioners of tri*al religions11all
pride themselves on *eing unlike mem*ers of other faiths8
+r*an1rural differences can *e immense in the 'ndian )ociet-8 Bearl- 74 percent
of 'ndia@s population dwells in villages3 with agriculture providing support for most of
these rural residents8 'n villages3 mud1plastered walls ornamented with traditional
designs3 dust- lanes3 herds of gra:ing cattle3 and the songs of *irds at sunset provide
t-pical settings for the social lives of most 'ndians8 'n 'ndia@s great cities3 however3
millions of people live amidst cacophon-11roaring vehicles3 surging crowds3 <ammed
apartment *uildings3 *us- commercial esta*lishments3 loudspeakers *laring movie
tunes11while *reathing the poisons of industrial and automotive pollution8
Indian cate *tem!
Mem*ers of the highest priestl- castes3 the rahmans3 are generall- vegetarians 4although
some engali and Maharashtrian rahmans eat fish5 and avoid eating meat3 the product
of violence and death8 ;igh1ranking &arrior castes 4Hshatri-as53 however3 t-picall-
consume nonvegetarian diets3 considered appropriate for their traditions of valor and
ph-sical strength8 ( rahman *orn of proper rahman parents retains his inherent purit-
if he *athes and dresses himself properl-3 adheres to a vegetarian diet3 eats meals
prepared onl- *- persons of appropriate rank3 and keeps his person awa- from the *odil-
e2uviae of others 4e2cept for necessar- contact with the secretions of famil- infants and
small children58
'f a rahman happens to come into *odil- contact with a polluting su*stance3 he can
remove this pollution *- *athing and changing his clothing8 ;owever3 if he were to eat
meat or commit other transgressions of the rigid dietar- codes of his particular caste3 he
would *e considered more deepl- polluted and would have to undergo various purif-ing
rites and pa-ment of fines imposed *- his caste council in order to restore his inherent
purit-8
'n sharp contrast to the purit- of a rahman3 a )weeper *orn of )weeper parents is
considered to *e *orn inherentl- polluted8 ,he touch of his *od- is polluting to those
higher on the caste hierarch- than he3 and the- will shrink from his touch3 whether or not
he has *athed recentl-8 )weepers are associated with the traditional occupation of
cleaning human feces from latrines and sweeping pu*lic lanes of all kinds of dirt8
,raditionall-3 )weepers remove these polluting materials in *askets carried atop the head
and dumped out in a gar*age pile at the edge of the village or neigh*orhood8 ,he
involvement of )weepers with such filth accords with their low1status position at the
*ottom of the ;indu caste hierarch-3 even as their services allow high1status people3 such
as rahmans3 to maintain their ritual purit-8
Mem*ers of the ?eatherworker 4#hamar5 caste are ascri*ed a ver- low status consonant
with their association with the caste occupation of skinning dead animals and tanning the
leather8 utchers 4Hhatiks3 in ;indi53 who kill and cut up the *odies of animals3 also rank
low on the caste hierarch- *ecause of their association with violence and death8
;owever3 castes associated with ruling and warfare11and the killing and deaths of human
*eings11are t-picall- accorded high rank on the caste hierarch-8 'n these instances3
political power and wealth outrank association with violence as the ke- determinant of
caste rank8
-tatu o2 Eomen in Indian ociet*!
(ccording to ancient ;indu scriptures no religious rite can *e performed with perfection
*- a man without the participation of his wife8 &ife@s participation is essential to an-
religious rite8 Married men along with their wives are allowed to perform sacred rites on
the occasion of various important festivals8 &ives are thus *efittingl- called @(rdhangani@
4*etterhalf58 ,he- are given not onl- important *ut e.ual position with men8
ut in the later period the position of women went on deteriorating due to Muslim
influence8 Curing the Muslim period of histor- the- were deprived of their rights of
e.ualit- with men8 ,he- were compelled to keep themselves within the four walls of their
houses with a long veil on their faces8 ,his was definitel- due to 'slamic influence8 0ven
toda- in some 'slamic countries women are not allowed to go out freel-8 ,he
conservative regimes of 'ran and Pakistan3 for e2ample3 have withdrawn the li*erties
given to women folk *- the previous li*eral governments8 0ven in 'ndia the Muslim
women are far more *ackward than their ;indu3 #hristian and )ikh counterparts8 ,he
sight of Muslim women walking with long @urkas@ 4veils5 on their person is not ver-
rare8 ,he women are3 as a matter of fact3 regarded as captive and salea*le commodities in
Muslim families8 /ne man is allowed to have so man- wives with the easiest provision of
divorce8 ,he hus*and can divorce a wife <ust *- sa-ing @' divorce -ou@ under the
provision of Muslim laws8 ,his is what the emperors did hundred -ears *ack and the men
are doing it even now in almost all 'slamic countries8 0ven in this last phase of the
twentieth centur- rich and prosperous men of 'slamic countries keep scores of wives in
their harems8 't was natural outcome of the Muslim su*<ugation of 'ndia that woman was
relegated to a pla-thing of man3 an ornament to decorate the drawing room8 )erving3
knitting3 painting and music were her pastimes and cooking and cleaning her *usiness8
'n the wake of %a<a %am Mohan %o-@s movement against women@s su*<ugation to men
and ritish influence on 'ndian culture and civili:ation the position of women had once
again undergone a change8 ;owever3 it was onl- under the enlightened leadership of
Mahatma Mandhi that the- re1asserted their e.ualit- with men8 'n response to the call of
Mandhi the- discarded their veil and came out of the four walls of their houses to fight
the *attle of freedom shoulder to shoulder with their *rothers8 ,he result is that the 'ndian
#onstitution toda- has given to women the e.ual status with men8 ,here is no
discrimination *etween men and women8 (ll professions are open to *oth of them with
merit as the onl- criterion of selection8
(s a result of their newl- gained freedom 'ndian woman have distinguished themselves
in various spheres of life as politicians3 orators3 law-ers3 doctors3 administrators and
diplomats8 ,he- are not onl- entrusted with work of responsi*ilit- *ut also the- perform
their duties ver- honestl- and sincerel-8 ,here is hardl- an- sphere of life in which 'ndian
women have not taken part and shown their worth8 &omen e2ercise their right to vote3
contest for Parliament and (ssem*l-3 seek appointment in pu*lic office and compete in
other spheres of life with men8 ,his shows that women in 'ndia en<o- toda- more li*ert-
and e.ualit- than *efore8 ,he- have ac.uired more li*ert- to participate in the affairs of
the countr-8 ,he- have *een given e.ualit- with men in shaping their future and sharing
responsi*ilities for themselves3 their famil- and their countr-8
't is a fact that women are intelligent3 hard1working and efficient in work8 ,he- put heart
and soul together in whatever the- undertake8 (s t-pists and clerks the- are now
competing successfull- with men8 ,here are man- women working in the #entral
)ecretariat8 ,he- are striving ver- hard to reach highest efficienc- and perfection in the
administrative work8 ,heir integrit- of character is pro*a*l- *etter than men8 Menerall- it
was found that women are less suscepti*le to corruption in form of *ri*er- and
favouritism8 ,he- are not onl- sweet tongued *ut also honest3 efficient and punctual in
their <o*s as receptionists3 air1hostesses and *ooking clerks at railwa- reservation
counters8 (s a matter of fact the- are graduall- monopolising the <o*s of receptionists
and air1hostesses8
(nother <o* in which 'ndian women are doing so well is that of teachers8 'n countr- like
'ndia where millions are groping in the darkness of illiterac- and ignorance efficient
teaching to the children is most urgentl- needed8 - virtue of their love and affection for
the children the women have proved the *est teachers in the primar- and kindergarten
schools8 ,he- can *etter understand the ps-cholog- of a child than the male teachers8
)mall children in the kindergarten schools get motherl- affection from the lad- teachers8
't is pro*a*l- significant that the Montessori s-stem of education is *eing conducted
mostl- *- the women in this countr-8
&omen have *een serving 'ndia admira*l- as doctors and nurses8 ?ad- doctors have
*een found to perform efficient surger- *- virtue of their soft and accurate fingers8 ,he-
have monopolised as nurses in the hospitals and nursing homes8 Eer- few men have *een
a*le to compete with them in this sphere *ecause the women have natural tendenc- to
serve and clean8 't is thus natural tendenc- found in women which motivated Alorence
Bightingale to make nursing popular among the women of the upper classes in 0ngland
and in 0urope8 )he showed the wa- to women kind how no*l- the- can serve humanit-
in the hours of sufferings and agonies8
&omen@s contri*utions in politics and social services have also *een .uite significant8 &e
cannot fail to mention the name of 'ndira Mandhi who shone so *rilliantl- and radiantl-
in the firmament of 'ndia@s politics8 )he ruled this countr- for more than a decade and
took 'ndia victorious out of Pakistan1war which resulted in the historic creation of a new
countr-3 angladesh8 'n the field of social service 'ndian women have also done some
e2cellent <o*s8 ,he- have not onl- served the cause of the suffering humanit- *ut have
also *rought highest laurels for the countr-8 ,he name of Mother ,eressa cannot *ut *e
mentioned8 )he *rought the Bo*el Pri:e for 'ndia *- her selfless services to the poor3
destitute and suffering people of our countr- in particular and the need- and handicapped
people of the world in general8 ,oda-3 we need the services of the educated women who
can tour throughout the countr- and help in removing human sufferings8 ,he Movernment
is alarmed at the rapid growth of population in the rural areas in particular8 &omen
volunteers can more easil- take up the task of canvassing the advantages of famil-
planning among the rural womenfolk8 ,he- can3 more easil- than men3 carr- on
propaganda against ha:ards of unh-gienic conditions under which the villagers live8 'n
ur*an areas the- can efficientl- take up the task of visiting and teaching the orphans and
the helpless widows in the orphanages and the widow welfare centres8 ,he- can train
them in sewing3 knitting3 em*roider- and nursing in which women *- nature e2cel8 ,he-
can also train them in the art of music and dancing8
ut all this should not lead us to conclude that the women should look down upon
domestic life8 ,he main sphere of action for them who have not taken up <o*s outside
should *e essentiall- a happ- home which is their real kingdom and where their sweet
manners and mature advices as wife3 mother3 sister and daughter make tremendous
effects on the male mem*ers of the famil-8 ,he progress of a nation depends upon the
care and skill with which mothers rear up their children8 ,he first and foremost dut- of
'ndian women should3 therefore3 *e to *ring forth no*le generations of patriots3 warriors3
scholars and statesmen8 )ince child@s education starts even in the wom* and the
impressions are formed in the mind of a child while in mothers arms women have to pla-
a role of vital importance8 ,he- have to feel and realise at ever- step of their life that the-
are *uilders of the fate of our nation since children grow mainl- in mothers arms8 ,he-
should also discourage their hus*ands and sons from indulging in *ri*er- and other
corrupt practices8 ,his the- can do onl- when the- learn the art of simple living *-
discarding their natural desires for ornaments and a living of pomp and show8 'n man-
cases families have *een running in deficit due to the e2travagance of the housewives in
maintaining a high standard of living8 ,he result is that the earning male mem*ers of the
famil- are forced to fill up the gap in the *udget *- corrupt practices8 #orruption has
*een so far the greatest impediment in wa- to 'ndia@s progress8 Minus corruption 'ndia
would have *een one of the most developed nations of the world8
,here is no den-ing the fact that women in 'ndia have made a considera*le progress in
the last fift- -ears *ut -et the- have to struggle against man- handicaps and social evils
in the male dominated societ-8 ,he ;indu #ode ill has given the daughter and the son
e.ual share of the propert-8 ,he Marriage (ct no longer regards woman as the propert-
of man8 Marriage is now considered to *e a personal affair and if a partner feels
dissatisfied she or he has the right of divorce8 ut passing of law is one thing and its
a*sorption in the collective thinking of societ- is .uite a different matter8 'n order to
prove themselves e.ual to the dignit- and status given to them in the 'ndian #onstitution
the- have to shake off the shackles of slaver- and superstitions8 ,he- should help the
government and the societ- in eradicating the evils of dowr-3 illiterac- and ignorance
among the eves8 ,he dowr- pro*lem has assumed a dangerous form in this countr-8 ,he
parents of the girls have to pa- thousands and lacs to the *ridegrooms and their greed-
fathers and mothers8 'f promised articles are not given *- the parents of *rides3 the cruel
and greed- mem*ers of the *ridegrooms@ famil- take recourse to afflicting tortures on the
married women8 )ome women are murdered in such cases8 ,he dowr- deaths are reall-
heinous and *ar*arous crimes committed *- the cruel and inhumane persons8 ,he -oung
girls should *e *old enough in not marr-ing the *o-s who demand dowr- through their
parents8 ,he *o-s should also refuse to marr- if their parents demand dowr-8 ut
unfortunatel- the num*er of such *old and conscientious *o-s is ver- few8 0ven the
doctors3 engineers3 teachers and the administrative officers do not hesitate in allowing
themselves to *e sold to the wealth- fathers of sh- and timid girls8 )uch persons have
reall- *rought disgrace to their cadres in particular and societ- in general8
'.2. 3ultural .n&ironment!
( societ-@s culture includes its values3 its ethics and the material o*<ects produced *-
its people8 't is the accumulation of shared meanings and traditions among mem*ers of a
societ-8 ( culture can *e descri*ed in terms of its ecolog- 4the wa- people adapt to their
ha*itat53 its social structure and its ideolog- 4including people@s moral and aesthetic
principles58 #ulture refers to the set of values3 ideas and attitudes that are accepted *- a
homogeneous group of people and transmitted to the ne2t generation8 )u*culture refers to
the norms and values of su*groups within the larger or national culture8 (frican
(merican3 ;ispanics3 and (sians represent si:a*le su*cultures8 't is inappropriate to think
in terms of stereot-pes when marketing to these su*cultures8 (frican (mericans represent
the largest racialDethnic su*culture in the united states8 &hile price1conscious3 the- are
motivated *- product .ualit- and choice8 'ndian consists of people who are either (r-ans
and Cravidians to a large e2tent8 #urrent research indicates that stereot-pes are
misleading8 #hristians are the su*culture in 'ndia where as in +nited )tates3 it is the
culture *- itself8 (sians are the fastest growing su*culture in the +nited )tates8 ,he
growth of this su*culture is due primaril- to immigration8 ?ike ;ispanics3 (sians
represent a diverse su*culture including #hinese3 Kapanese3 (sian1'ndians3 and man-
other nationalities8 ,wo groups of (sians have *een identified9
415 assimilated
(ssimilated (sians are conversant in 0nglish and e2hi*it *u-ing patterns ver-
much like 7t-pical7 (merican consumers8
425 Bon1assimilated
Bon1assimilated (sians cling to their native languages and customs8
#ulture is part of the e2ternal influences that impact the consumer8 ,hat is3 culture
represents influences that are imposed on the consumer *- other individuals8,he
definition of culture offered *- 0ngel is 7that comple2 whole which includes knowledge3
*elief3 art3 morals3 custom3 and an- other capa*ilities and ha*its ac.uired *- man person
as a mem*er of societ-87 Arom this definition3 the following o*servations can *e made9
#ulture3 as a 7comple2 whole37 is a s-stem of interdependent components8
Hnowledge and *eliefs are important parts8 'n the +8)83 we know and *elieve that a
person who is skilled and works hard will get ahead8 'n other countries3 it ma- *e
*elieved that differences in outcome result more from luck8 7#hunking37 the name for
#hina in #hinese3 literall- means 7,he Middle Hingdom87 ,he *elief among ancient
#hinese that the- were in the center of the universe greatl- influenced their thinking8
/ther issues are relevant8 (rt3 for e2ample3 ma- *e reflected in the rather ar*itrar-
practice of wearing ties in some countries and wearing tur*ans in others8 Moralit- ma- *e
e2hi*ited in the view in the +nited )tates that one should not *e naked in pu*lic8 'n
Kapan3 on the other hand3 groups of men and women ma- take steam *aths together
without perceived as improper8 /n the other e2treme3 women in some (ra* countries are
not even allowed to reveal their faces8 Botice3 *- the wa-3 that what at least some
countries view as moral ma- in fact *e highl- immoral *- the standards of another
countr-8 Aor e2ample3 the law that once *anned interracial marriages in )outh (frica was
named the 7'mmoralit- (ct37 even though in most civili:ed countries this law3 and an-
degree of e2plicit racial pre<udice3 would itself *e considered highl- immoral8
#ulture has several important characteristics9
415 #ulture is comprehensive8 ,his means that all parts must fit together in some
logical fashion8 Aor e2ample3 *owing and a strong desire to avoid the loss of
face are unified in their manifestation of the importance of respect8
425 #ulture is learned rather than *eing something we are *orn with8
435 #ulture is manifested within *oundaries of accepta*le *ehavior8 Aor e2ample3
in (merican societ-3 one cannot show up to class naked3 *ut wearing an-thing
from a suit and tie to shorts and a ,1shirt would usuall- *e accepta*le8 Aailure
to *ehave within the prescri*ed norms ma- lead to sanctions3 ranging from
*eing hauled off *- the police for indecent e2posure to *eing laughed at *-
others for wearing a suit at the *each8
445 #onscious awareness of cultural standards is limited8 ( hardcore southindian
can *e easil- distinguished when handling a fork and knife in eating out in
north 'ndia8
455 #ultures fall somewhere on a continuum *etween static and d-namic
depending on how .uickl- the- accept change8 Aor e2ample3 'ndian culture
has changed a great deal since the 1"5$s3 while the culture of )audi (ra*ia
has changed much less8
't should *e noted that there is a tendenc- of outsiders to a culture to overstate the
similarit- of mem*ers of that culture to each other8 'n 'ndia3 there is a great deal of
heterogeneit- within our culture= however3 people often underestimate the diversit-
within other cultures8 Aor e2ample3 in ?atin (merica3 there are great differences *etween
people who live in coastal and mountainous areas= there are also great differences
*etween social classes8
)u*culture refers to a culture within a culture8 Aor e2ample3 (frican (mericans
are3 as indicated in the group name3 (mericans= however3 a special influence of the
(frican (merican communit- is often also present8 Aor e2ample3 although this does not
appl- to ever-one3 (frican (mericans tend to worship in churches that have
predominantl- (frican (merican mem*ership3 and church is often a significant part of
famil- life8 Cifferent perspectives on the diversit- in +8)8 culture e2ist8 ,he 7melting
pot7 metaphor suggests that immigrants graduall- assimilate after the- arrive8 ,herefore3
in the long run3 there will *e few differences *etween ethnic groups and instead3 one
mainstream culture that incorporates elements from each will result8 ,he 7salad *owl7
metaphor3 in contrast3 suggests that although ethnic groups will interact as a whole
4through the whole mi2 of salad5 and contain some elements of the whole 4through the
dressing53 each group will maintain its own significant traits 4each vegeta*le is different
from the others58 ,he 7melting pot7 view suggests that one should run integrated
promotions aimed at all groups= the 7salad *owl7 approach suggests that each group
should *e approached separatel-8
)u*culture is often categori:ed on the *asis of demographics8 ,hus3 for e2ample3
there is the 7teenage7 su*culture and the 7Arench1 'ndian7 su*culture in Pondicherr- and
6Portugese1 'ndianF su*culture in Moa8 &hile part of the overall culture3 these groups
often have distinguishing characteristics8 (n important conse.uence is that a person who
is part of two su*cultures ma- e2perience some conflict8 Aor e2ample3 teenage native
'ndians e2perience a conflict *etween the mainstream teenage culture and the orthodo2
'ndian wa-s8 Ealues are often greatl- associated with age groups *ecause people within
an age1group have shared e2periences8 Aor e2ample3 it is *elieved that people old enough
to have e2perienced the (merican Cepression are more frugal *ecause of that e2perience8
%egional influence3 *oth in the +nited )tates and other areas3 is significant8 Man- food
manufacturers offer different product variations for different regions8 Koel Marreau3 in his
*ook ,he Bine Bations of Borth (merica3 proposed nine distinct regional su*cultures
that cut across state lines8 (lthough significant regional differences undou*tedl- e2ist3
research has failed to support Marreau>s specific characteri:ations8 ?et us look at some of
the su*cultures prevailing in 'ndia9
,he engali su*culture
Hnown for their contri*ution in the field of creative work and academic
endeavours3 *- nature intellectual work rather than the work which will involve ph-sical
la*our8 (ll though successful in creative persuits3 engali *usiness men are not ver-
common to find8 engali houses are also proves of their artistic inclination8 02tremel-
fond of music and *ooks3 their main festival is durga poo<a8 &hen engali spend a lot on
new cloths3 food including sweets and non1vegetarian item8 ,he fact that the engali
consume non1vegetarian food during the religious festival3 shows the unorthodo2 lifest-le
the- follow8 'n most parts of 'ndia people eat vegetarian food during religious festivals8
Hnown all over 'ndia for the variet- of sweets the- make3 *engalies are knowns for
making delicious fish dishes8 engalies likes to spend a lot on food and prefer to
consume variet- of dishes8 ( t-pical engali menu is served in course3 starting from
shuckto which is like a steew of vegeta*le going to two or three t-pes of fishes3 L Pa-esh>
4Hheer5 and LMishti doi8>4sweets curd58
,he Mu<rati )u*culture
Hnown for their *usiness acumen3 Mu<rathis are e2tremel- traditional and have
ver- strong fellow feeling8 Mu<ratis at the same time are friendl- towards other religional
people and are e2tremel- helpful to the people from their own caste8 ,he- are famous for
*eing one of the richest communities in the countr- and at the same time maintain a
)partan lifest-le8 't is not uncommon to find rich diamond merchants travelling in the
2nd class compartment of the train or *- *us8 ,here used to *e sa-ing3 6'f -ou see a
Mu<arati driving a car -ou should know he is a karorepati8F )uch simple is their life st-le8
Mu<arati *usinessmen have *een e2tremel- successful in the motel *usiness and diamond
*usiness in the international market8 Pet the- will not forget their tradition8 ,he author
had a chance to see one famous diamond e2porter in elgium who inside his palatial
house had a gu<rati cook cooking 6Chollk.F and )rikhandF8 ,he cook was flown in from
(hmeda*ad8 ,he famil- even after 25 -ears in lgium maintained all the traditions of
their su*culture8 ?adies are also e2tremel- traditional8 ,he two t-pical features in a
Mu<arati household are3 there will *ge a well cuishioned swing in the drawing room and
the kitchen is like a central palace3 all the ladies will *e sitting8 0ven if -ou are a guest
at some*od->s place3 all the ladies will <ointl- work8 6BavaratriF and 6CiwaliF are their
two main festivals8 Bavaratri is marked *- communit- dancing called Lgar*a> while
Ldiwali> marks the onset of Bew Pear3 which is started with ?a2mi Pu<a8 Mu<ratis are
generall- vegetarian and religious minded3 although cosmoplitanness is coming in
especiall- with the new generation8
,he Marwari )u*culture
Marwari communit- is known all over 'ndia as the *usiness communit-8
02tremel- traditional and religious minded3 the- are like Mu<ratis and do not displa- of
pompous life st-le8 Aond of sweets3 Marvari women are generall- non working3 and
Marwaris though lead a simple life st-le3 will spend lavishl- on the marriage8 ;ailing
from %a<asthan8 /ne will find a Marwari *usiness man settled in eastern states of Borth
engal3 (ssam3 /rissa8 Bon1aggressive and soft spoken *- nature3 Marwaris are
peaceful8
,he Pun<a*i )u*culture
Pun<a*is are distinct in terms of their lavish lifest-le3 whether it is in terms of food
ha*its3 dressing3 purchse of consumer dura*les and nondura*les8 ;ardworking *- nature3
the most distinct trait of a Pun<a*i is his adapta*ilit- in the new environment8 ,he author
had chance to visit a Pun<a*i household in Celhi3 the famil- for -ears of sta-ing in
#alcutta en<o-ed eating fish and sweet curd3 one of their daughters *eing married to a
Heralite3 the famil- was e.uall- at ease with Heralite dishes like (ppam and coconut
chicken8 ,r-ing new things is ver- common with Pun<a*is and the- like to spend a lot3
with an occation or without it8 ,-pical Pun<a*is food like their lifest-le is also ver- rich
consisting of 6>ra<ma chawal>3 Lshahi paneer>3 L*utter chicken>3 Lpatiala chicken>3 etc8
diwali is their main festival where *esides the pu<a of godess of wealth L?a2mi>3 people
e2ahange gifts8 ( t-pical Pun<a*i will *e hardworking8 (ggressive3 and am*itious8
eing cosmopolitan and livel- are some other traits of a Pun<a*i8 )ome is true with their3
music3 dance or their language3 it is full of life8
,he /ri-a )u*culture
Quite similar to engali su*culture is ori-a su*culture8 /ri-a people3 *- nature3 are
e2tremel- artistic8 /ri-a craftsmanship is known all over the countr- whether it is in
fa*ric3 philigri work3 stone work8 /ddissi dance is as famous as the Kagannath ,emple in
Honark8 02tremel- fond of sweets3 /ri-a people eat lot of Lpan> and Lpakal>= during
lunch hours one will find office goers standing on the road side and eating Lpakal>8 6%ath
PatraF of lord Kagannath is their main festival during which /ri-as eat vegetarian food
and generall- wear new cloths3 take leave from the office to have a darshan of Kagannath
and touch him as it is the onl- time common man can touch the lord8
,he ,amil su*culture
,amilians are known *oth their intelligence and hard work8 ,he- shine in
engineering field3 scientific research and governmental <o*s8 ,raditional *- nature3 a
,amilian professor will not mind going to college wearing his traditional dress of a white
shirt and dhoti wrapped around8 ( ,amilian women will not mind going to her work
place with flower in her hair= such is their attachment to their culture8 ( ,amil household
ia an e2ample of h-gienic living8 ,amil households are spic and span and decorated with
traditional handicrafts3 especiall- *rassware8 (lthough ,amil Badu is a hot place3 people
are ver- fond of wearing rich silk sarees in deep colours3 so are the- fond of wearing
heav- gold and diamond ornaments8 ,amil Badu is known for its Han<ivaram silk and its
food whether is the u*i.uitous dosa3 idli or the tamrind rice3 lemon rice3 tomato rice8
,he- onl- eat rice and not difficult to find a renowned professor who is also e2pert in
#arnatic music or an engineer who is also a haratanat-am dancer8 ,amilians love to
hold on to their rich traditional heritage8 6PongalF is their main festival which literall-
means new cooked rich and held in the month of Kanuar- and marks the incoming of the
new crop8
'.'. .conomic .n&ironment!
usiness fortunes and strategies are influenced *- the economic characteristics and
economic polic- dimensions8 ,he economic environment includes the structure and
nature of the econom-3 the stage of development of the econom-3 economic resources3
the level of income3 the distri*ution of income and assets3 glo*al economic linkages3
economic policies etc8 ( widel- used classification of economies is on the *asis of per
capital income3ie83the average annual income per person8 (ccordingl-3 countries are
*roadl- classified as low income3 high income economies and the middle income
economies8 ?ow income economies are those economies with ver- low per capital
income8 (ll economies with per capita R755 or less in2$$$ are regarded as low income
economies8 ,here are 63 low income economies in 2$$$8 ;igh income economies are
countries with ver- rich income per capital8 ,hose with a per capital MBP ofR "266 or
a*ove in2$$$ fall in the categor- of high in come economies8
,here are mainl- two categories of high income economies3 namel-3 industrial economies
and oil e2porters8 Middle income economies fall in *etween the low income and high
income economies8 ,he middle income economies are su*divided in to lower middle
income and upper middle income economies8 'n 2$$$3 there are "2 middle income
economies 454 lower middle incomes and 3! upper middle incomes8 ,he low income
economies are sometimes referred to as third world 4the high income and middle income
economies representing the first and second worlds858?ow income is <ust an indication of
deprivation people in developing countries8 ?ow income prevents access to *asic
necessities3 not onl- *etter and modern amenities8 ,he term recession is depression in an
econom- which leads to stagnation and poor incomes8 &ithin the categor- of low income
economies3 for e2ample3 sometimes a special categor- name least developed economies
is identified8 Most of the least developed economies suffer from one or more of the
following constraints9 a ver- low MBP per capita3 land locked remote insularit-3
desertification and e2posure to natural disasters8 (ccording to the ;uman Cevelopment
%eport there are more than 4$ least developed countries in 1"""8,here are on the other
hand developing economies such as the (sian countries8 ,he- are sometimes referred to
as newl- industrialising economies8 Bow Peoples %epu*lic of #hina is regarded as a
newl- industriali:ing econom-8
,he most comprehensive indicator of the level of economic activit- of an econom- is its
aggregate output3 i8e83 the total annual output of finished goods and services3 known as
gross national product 4MBP53 which is defined as the total market value of all final goods
and services produced in an econom- during a given time period 4usuall- a -ear58 MBP is
a monetar- measure of total output8 't e2cludes transfer pa-ments 4like *u-ing and selling
of *onds and securities3 gifts ta2es3 or welfare pa-ments5 and secondhand sale of goods3
as these are a part of current production8 'n order to avoid dou*le1counting8 MBP
e2cludes the production contri*ution of housewives3 the efforts of self1help in a
productive process *- mem*ers of households3 or improvement in product .ualit- not
reflected in price changes8 )imilarl-3 social cost of environmental pollution is not
deducted from total output8 Pet3 MBP is till the *est measure of nation>s total output8
,here are three wa-s to look at the level of economic activit-8 vi:83 the output3
income and e2penditure8 Cepending upon the wa- we look at them3 we call them gross
national product 4MBP53 gross national income 4MB'5 and gross national e2penditure
4MB053 where8
MBP )um of the market value of all final goods and service3s in an
econom- during a given time period=
MB' )um of the mone- incomes derived from activities involving
current production in an econom- during a given time period= and
MB0 )um of all that is spent of currentl- produced goods and
services *- all t-pes of *u-ers in an econom- during a given period8
,hus3 national income can *e measured *- either of the three wa-s 9
4i5 as an aggregate of goods and services produced during a -ear=
4ii5 as an aggregate cost of factor services in the econom- during a -ear= or
4iii5 as an aggregate of e2penditure on consumption3 saving and investment
during a -ear8
,he national income data can also *e .uite helpful for *usiness8 'n order to undertake
long1term investments and to formulate *usiness policies it is .uite essential for a
d-namic management to do a thorough anal-sis of changes occurring in the national
income8 )ince national income reveals3 on the one hand3 the structure of the econom-
and3 on the other3 the possi*le directions of change in the future economic polic- of the
government3 national income data in the hands of an e2pert managerial economist can
prove a life1line for *usiness8 't is .uite vital for a firm aspiring to capture or retain
leadership in *usiness3 as it is perhaps one of the most essential ingredients for an-
*usiness forecasting e2ercise8 ,he national income data can also *e successfull- used for
determining the product diversification programme and undertaking technological
innovations8 Bational income statistics is3 thus3 a wealth of information3 *ut its usefulness
depends on keenness to o*serve and pro*e as well as patience to anal-se8
BU-IN.-- 3?3".-!
,he effect of upswings and downswings in economic activit- is felt .uite
intensel- *ecause of the ever increasing *usiness activit- and the strong inter1relations
*etween different sectors of an econom- and *etween various economies8 ,he ill effects
of the wide swings in *usiness activit- were almost ravaging during the Mreat Cepression
of 1"3$s8 it was also noticed that after depression there was no Lnatural recover-> of the
economic activit-8 (rtificial measures to *e adopted for this purpose needed a scientific
understanding of the swings in the activit-8 usiness c-cle or trade c-cle refers to the
fluctuations in economic activit- occurring regularl- in the capitalist societies8 'n a
*usiness c-cle there are wave1like fluctuations in four inter1linked economic varia*les9
aggregate emplo-ment3 income3 output and price level8 &hen the values of these
economic varia*les over time are plotted on a graph3 we get a wave1like figure3 which is
given the name of a Lc-cle>8 (ccording to He-nes3 6( trade c-cle is composed of periods
of good trade characteri:ed *- rising prices and low unemplo-ment percentages8
(lternating with periods of *ad trade characteri:ed *- falling prices and high
unemplo-ment percentagesF8 Mitchell gives even a more e2plicit idea of what a *usiness
c-cle is when he sa-s3 6usiness c-cles are a t-pe of fluctuations found in the aggregate
economic activit- of nations that organi:e their work mainl- in *usiness enterprises8 (
c-cle consists of e2pansions3 and revivals which merge into the e2pansion phase of the
ne2t c-cle9 this se.uence of change is recurrent *ut not periodicSF in short one can
o*serve that9
415 usiness c-cles are the wave1like fluctuations in economic activit- as reflected in
the *asic economic varia*les like emplo-ment3 income3 output and price level8
425 ,hese fluctuations are c-clical in nature8 /ne must distinguish *etween secular
trend3 random fluctuations3 seasonal changes and c-clical fluctuations8 ,he
secular trend represents long run changes in *usiness activit- which occur slowl-
and are spread over a num*er of -ears8 )uch long1run changes are the results of
factors like improvement in production techni.ues3 change in population3 etc3
which occur suddenl- and are unpredicta*le8 0ffect of these events on the
econom- is limited to the period of occurrence of the event3 as there is no
regularit- in their occurrence8 ,hus3 neither the secular trend nor the random
variations in economic activit- can form the part of *usiness c-cle8 ,he seasonal
changes3 which are short1run oscillations with regularit-3 can *e confused with the
c-clical fluctuations8 ut the *asic difference *etween the two is that seasonal
variations repeat themselves each -ear 4e8g83 demand for heav- woolen clothes3
light woolen clothes and cotton clothes3 and so on3 depending on the season each
-ear53 while the c-clical fluctuations have a longer life span8 ,he seasonal
fluctuations3 therefore3 have easier predicta*ilit- and ad<usta*ilit- in *usiness than
the c-clical fluctuations8
435 ,he se.uence of changes in *usiness c-cle 4i8e83 recover-3 prosperit-3 depression
and recession5 recurs fre.uentl- and in a fairl- similar pattern8
445 ,he rh-thm or the periodicit- *etween the c-cles need not *e similar8
455 usiness c-cles are a t-pe of fluctuations found in the aggregate economic
activit- and not in an- single firm or industr-8 'n fact3 it connotes the c-clical
changes in overall economic environment affecting all the *usiness entities8
usiness c-cles3 the periodic *ooms and slumps in economic activities3 are generall-
compared to Le** and flow>8 ,he ups and downs in the econom- are reflected *- the
fluctuation in aggregate economic magnitudes3 including production3 investment3 prices3
wages3 *ank credits3 etc8 ,he upward and downward movement in these magnitudes
show different phases of *usiness c-cles8 asicall-3 there are onl- two phases in c-cle3
vi1.* prosperit' and depression8 ;owever3 considering the intermediate stages *etween
prosperit- and depression3 the various phases of trade c-cle ma- *e enumerated as
follows9
18 02pansion of economic activities3
28 Peak of *oom or prosperit-3
38 %ecession3 the downtrend3
48 ,rough3 the *ottom of depression3 and
58 %ecover- and e2pansion8
'n a stagnated econom-3 depression *egins when growth rate turns negative i8e8 total
output3 emplo-ment3 prices3 *ank advances3 etc83 decline during the su*se.uent periods8
,he span of depression spreads over a period during which growth rate sta-s *elow the
secular growth rate or *elow the :ero growth rate in a stagnated econom-8 ,rough is the
phase during which the down1trend in the econom- slows down and eventuall- stops3 and
the economic activities once again register an upward movement with a lapse of time8
,hough is the period of most sever strain on the econom-8 &hen the econom- registers a
continuous and rapid upward trend in output3 emplo-ment3 etc83 it enters the phase of
recover- though the growth rate ma- still remain *elow the stead- growth rate8 (nd
when the growth rate crosses the line of stead- growth rate3 the econom- once again
enters the phase of e2pansion and prosperit-38 'f economic fluctuations are not controlled
*- the government3 *usiness c-cles continues to recur8
%ecover-
,his is the phase of revival of demand for goods and services8 ,he economic activit- as a
whole increases slowl-3 although the general prices start rising8 ,he upward movement of
*usiness activit- is slow3 production picks up3 construction activit- is revived and there is
a gradual rise in emplo-ment8 ,his is a period when the industrialists and the
*usinessmen repa- the loans taken *- them from the *anks earlier and the fro:en stocks
held *- the *anks are released8 )tocks of goods remain *elow the normal with the
shopkeepers8 /nce the recover- starts3 it results in a snow*alling process for investment8
,he result is that demand orders pour in and the producers get stimulus and
encouragement to produce more8 ,he sellers stop their conservative period in general
favoring e2pansion in *usiness activit-8 ,he capital e.uipment is replaced8 anks are
li*eral in the matter of advances8 ,he prices recover and tend to reach the normal8 ,he
speed3 with which the e2pansion of *usiness activit- takes place in response to a given
initial increase in investment3 would depend upon the multiplier effect8
Prosperit-
Curing this phase there is a rapid cumulative movement of prices3 emplo-ment3 income
and production8 ,he prices and general *usiness activit- is a*ove the normal8 ,otal
output starts growing at a rapid pace due to higher investment and emplo-ment8 Prices of
finished products rise faster than the increase in wage1rate3 raw material prices and
interest rate8 #onse.uentl-3 producers stand to gain8 Prices of all the commodities do not
rise to the same e2tent8 ,he se.uence of general price rise generall- *egins with increase
in securit- prices3 which then passes on to raw material prices3 wholesale prices3 wages of
unskilled la*our3 retail prices and finall- the interest rates8
%ecession 9
&hen the *usiness c-cle takes a downward turn from the state of prosperit-3 the state of
recession is said to have set in8 during the phase of prosperit-3 production increases with
ever- increase in commodit- prices8 (s more and more of unemplo-ed la*our3 capital
and raw material are emplo-ed3 interest rate3 wages and other costs rise with increasing
rapidit-8 )imultaneousl-3 the *anks suddenl- discover that the- have e2panded their
deposits a little too far8 ,he ratio of cash reserves to total deposits falls8 ,he *anks
*ecome reluctant to advance loans in the interest of their safet- and statutor-
re.uirements8 'n order to meet their o*ligations3 the sellers would3 therefore3 have to
unload their stocks in the market8 Cue to unloading of stocks *- man- firms3 the prices
start declining8 Profit margins decline further *ecause costs start overtaking prices8
usiness ps-cholog- *ecomes depressed and the *oom *ursts8 ,here is a struggle for
solvenc- among the *usinessmen8 )ome firms close down while others reduce
production3 leading to reduction in investment3 emplo-ment3 income and demand8 ,his
process is cumulative8 ,his phase of *usiness c-cle is characteri:ed *- fall in prices3
commercial panic3 restriction and calling *ack loans *- *anks3 a sharp increase in interest
rate and fall in investment8 )oon the production falls3 unemplo-ment increases and
inventor- stocks get accumulated8 ,here is a collapse of confidence8 'f not controlled in
the *eginning *- timel- monetar- and fiscal measurers *- government which can sustain
investment at a high level3 recession ma- give wa- to even a more grave situation3 called
depression 8
Cepression9
'f unchecked3 depression is a natural conse.uence of the recessionar- crisis8 Mraduall-3
the process of falling prices3 demand and emplo-ment gather momentum8 Cecrease in
price follows the same se.uence as does the price increase in case of the state of *oom8 'n
this phase3 general demand for goods and services falls faster than the production of
goods3 though this is more in case of capital goods than consumer goods8 Producers find
selling prices falling faster than their costs8 Producers suffer losses *ecause *- the time
the goods are read- for sale the prices are found to have fallen further3 with the result that
producers are not a*le to recover their full cost8 usinessmen get panick-3 and start
releasing their stocks3 which hastens the decline in prices8 ,he phenomenon of over1
production appears and workers in large num*ers are thrown out of work8 ,here are
accumulated reserves with *anks8 Cemand for credit is at its lowest3 resulting in idle
funds with the *anks8 'n general3 the *ottom of depression is reached when li.uidation of
accumulated stocks is completed8 Cepression is3 thus3 characteri:ed *- low prices3 idle
funds with *anks3 mass unemplo-ment and slack trade8
"e&el o2 t8e econom*!
,wo t-pes of policies are pursued *- )tate to com*at the inflationar- and deflationar-
tendencies in the econom-8 ,hese are called sta*ili:ation policies3 which mainl- include 9
4i5 Monetar- polic- and 4ii5 Aiscal polic-8
1. Monetar* +olic*. 't refers to the credit control measures adopted *- the central *ank
of an econom- 4in 'ndia3 the %eserve ank of 'ndia58 ,hese are of two kinds 9
Quantitative or selective controls8 Quantitative or general controls include *ank rate
variations3 open market operations and var-ing reserve ratios8 ,he- aim at regulating the
overall level of credit in the econom- through the commercial *anks8 ank rate is the
minimum lending rate at which the central *ank discounts *ills and securities held *-
commercial *anks *orrow less from the #entral *ank8 /n the other hand3 commercial
*anks raise their lending rate8 ,his reduces the mone- suppl- in the econom-8 %eduction
in mone- suppl- reduces demand for goods and services in the econom-3 resulting in the
check on price rise8 /pen market operations refer to the sale and purchase of securities *-
the central *ank8 &hen the central *ank aims to control inflation it sells securities in the
open market3 there*- reducing reserves of commercial *anks8 &hen the central *ank
aims to control inflation it sells securities in the open market3 there*- reducing reserves
of commercial *anks8 ,his reduces credit in the market8 ,he reduction in mone- suppl-
helps in checking price rise8 #hanges in reserve ratio can help com*at inflation8 ,he
portion of deposits which a commercial *ank has statutoril- to keep with the central *ank
as deposit is called the reserve funds8 'n order to reduce credit *- the commercial *anks3
man- a time the central *ank increases the percentage of such deposits8 'ncrease in
reserve ratio reduces the *ank advances3 there*- reducing demand for goods and services3
and checks price rise8 )elective credit controls are used to encourage or discourage
specific t-pes of credit for particular purposes8 'n order to check the speculative activit-
in the econom-3 the central *ank changes the margin re.uirements to *e charged *- the
commercial *anks on those activities8
'n recessionar- conditions3 the )tate should use monetar- policies in the opposite
direction to control recessionar- forces8 ,he central *ank should lower the *ank rate3
thus3 making *orrowing *- commercial *anks cheaper8 #ommercial *anks in turn would
lower their lending rate3 resulting in greater demand for credit8 ,his would encourage
investment3 output3 emplo-ment3 income and demand8 #onse.uentl-3 prices would start
rising8 )imilarl-3 while operating in the open market3 the central *ank should *u-
securities3 there*- raising mone- suppl- in the econom-3 whose impact would also *e an
increase in investment3 output3 emplo-ment3 income and prices8 ,he central *ank can also
use the instrument of reserve ratio to com*at encourage greater lending3 thus reviving
economic activit-8 ?astl-3 when recession is in some specific sectors of econom- the
central *ank can use some selective credit control measures3 particularl- lowering margin
re.uirements3 which would help in encouraging greater *usiness activit-8
2. 9ical +olic*. Aiscal polic- refers to the deli*erate changing of ta2es and government
spending for the purpose of keeping the actual MBP close to the potential full
emplo-ment MBP8 'f the potential MBP is e2ceeded it causes inflation3 while if the actual
MBP falls short of the potential it causes recessionar- conditions8
&hen inflation is due to e2cess purchasing power in relation to the amount of
goods and services availa*le in the econom-3 the *asic remed- for controlling
inflationar- conditions is to drain awa- e2cess purchasing power8 'n such a case3 fiscal
polic- should aim at taking rupees out of the income1e2penditure stream8 (s a result of
this polic- the aggregate demand will reduce3 leading to control of price rise8 ,here are
two approaches for accomplishing this 9 415 ,o restrain or reduce government spending
and create a surplus *udget 4where ta2 revenue e2ceeds government e2penditure58 ,he
cut*ack on government e2penditures would reduce aggregate demand originating in the
pu*lic sector= and its spillover effect ' rest of the econom- would also dampen aggregate
demand8 425 ,o increase ta2es on *usiness and consumers without increasing government
e2penditure8 /*viousl-3 its impact would also *e to create surplus *udget and dampen the
aggregate demand8 Cepending on which of the approaches are used3 there will *e
differential impact on pu*lic and private sectors8 ;owever3 *oth these approaches can
also *e used simultaneousl-8
,o com*at recessionar- conditions3 <ust the opposite kind of fiscal polic-
measures need to *e adopted8 ,he government should aim to generate fiscal deficit *-
either increasing government e2penditure 4keeping ta2 revenues constant5 or decreasing
ta2es 4keeping government e2penditure constant5 or *oth8 &e know that in recession the
econom- suffers from unemplo-ment as well as low level of output and aggregate
demand8 ,o give *oost to aggregate demand3 there is a need to pump purchasing power in
the econom-8 - increasing aggregate demand3 the unused capacit- and unemplo-ed
la*our can *e emplo-ed8 (gain3 the impact of the increase in government e2penditure
will *e felt through resurgence of demand in the pu*lic sector and that of the cut*ack on
ta2es through the private sector8
Indicator o2 .conomic De&elo+ment!
In2lation!
'nflation has attracted sufficient attention of economists and polic- makers8 'ndia
is pursuing a polic- of planned economic development8 /ne of the prime considerations
in the strateg- of growth has *een to ensure that growth takes place in an environment of
price sta*ilit-3 which was considered crucial for *oth1stead- growth and even distri*ution
of the gains of growth8 (n- increase in prices was likel- to affect investment planning
and income distri*ution in the econom-8 ;ence3 efforts to contain and or avoid the same
were an integral part of the planning process8 ,he transmission of inflation1ar- impulses
in the econom- is affected *- various factors e8g8 the differences in sectoral relations in
the econom-3 nature of markets3 *oth of products and services3 the e2tent of linkages
*etween these markets3 the pattern of income and asset distri*ution3 levels of
concentration of corporate and trade1union@s power and the effectiveness of the
intermediation of financial institutions3 rate of growth in nominal wages and la*our
productivit-3 structure of capital formation and3 finall-3 the rate of development3 etc8
'nflation is defined as the persistent rise in the general price level8 ,he .uestion arises as
to what should constitute the appropriate measure to reflect the general price level8 'n
order to anal-se the general price level3 percentage annual changes in 4i5 &holesale Price
'nde2 4&P'53 4ii5 Mross Comestic Product 4MCP5 at market prices3 deflator3 4iii5 MCP 4at
factor cost5 deflator and 4iv5 cost of living inde2 4#?'5 for industrial workers are usuall-
considered8 ecause of wide coverage3 the MCP deflator 4*oth at market prices and factor
cost5 should *e considered as the most appropriate inde2 of inflation *ecause the deflator
covers commodities as well as services3 whereas the other two indices reflect movement
onl- in commodit- prices with different @askets@8 'nflation rate has dropped from *eing
among 1$T during 1""1 to 58"1T during 2$$48
.mergence o2 3onuming cla!
,he 'ndian middle class has *een an enigma to most marketers who have tried to
assess its *u-ing patterns8 (lthough this market has not proved to *e the made1to1order
goldmine that the glo*al pla-ers originall- viewed it as3 it is fast shedding the
conservative tag8 'ncreased disposa*le income levels3 as well as the shaking out of the
ta*oo associated with consumer loans has resulted in middle class families pa-ing more
and opting for #,Es8 (s the num*er of channels increases3 so does the strife amongst
famil- mem*ers on which programme to watch8 ,E manufacturers can convince them to
go in for a second ,E set8 ,wo colour ,Es ma- seem too much of a lu2ur- to *ank
*alance1conscious middle1class families3 *ut a new O& ,E ma- do <ust fine8 ,his
could *e another market for the O& makers to address8 O& manufacturers should
look at increasing production and cost efficiencies to sustain in the market8 ( ver- low1
priced O& ,E is sure to find a su*stantial market among the poorer classes8 &ith
increased impetus on cost cutting3 faster rotating models and a little help from the
Movernment on the duties front3 the O& industr- can protect itself from *lackening out8
,he governements reform policies have alread- started to pa- off8 R186 *illion in +8)
investment pro<ects has *een approved since the introduction of economic reform twice
the amount of investment in 'ndia during the preceding 4$ -ears8 ,his *eginning of
li*erali:ation although so ver- recent3 has alread- meant an impetus and growth in the
rise of the standard of living among the middle class8 - the -ear 2$$$3 'ndia is pro<ected
to have a population of one *illion3 and while 'ndia>s per capita income average income
is .uite low 4R33$+)C53 'ndia has a growing middle class8 (n estimate 2$$ million
'ndians have an annual incomes compara*le to those in the +nited )tates and #anada8
Mlo*all- e2cept for #hina nowhere will the new middle1class *e larger than in 'ndia8
(mounting to hundreds of million of people3 this new middle1class 4with a ma<or
political *ase and *u-ing a*ilit-5 while modern in man- respect3 *eing entrepreneurial
and professional3 will also have the traditional caution of their past generation towards
the 21
st
centur-8 ,he growth in the earning a*ilit- and thus a rise in the standard of living
amongst middle1class will also mean an end to the 7rain Crain7 phenomena happening
in most developing countries8 rain Crain *eing a phenomena when some of the *est
students and technicians in a developing countr- after *eing su*sidi:ed in their education
*- their own government migrate to a developed countr-3 to seek a *etter standard of
living8 ( .uick surve- amongst numerous (merican 0ngineering and ,echnical
+niversities would pro*a*l- illustrate this 7rain Crain7 *oth amongst faculties as well
as students8
&ith the *irth of the new middle1class3 their *u-ing power and their technical saviness
and an almost virtual end to the 7rain Crain7 phenomena3 the third world will *e the
place for the growth of new technolog-8 leeding technologies once mainl- a factor of
the developed world3 will *e happening in this so called once called third world3 as the
third world will *e where consumerism will a*ound8 'n this newfound consumer land will
*e the rise of telecommunication8 )ince 1""$s3 'ndia@s R181 *illion computer e.uipment
market has *een growing at the rate of 31 percent annuall- more than an- other
information technolog- sector8 'ndia alread- is the world>s leading e2porter in software8
,here will also *e a ma<or trend 4alread- e2isting5 in the rise of programming farms3
where 'ndian programmers would write the *ackend and the front end developed
elsewhere8 ,his philosoph- of outsourcing work would not onl- e2ist in programming
*ut amongst numerous technical and scientific endeavors8 ,he scale of economic
e2pansion in 'ndia 4as well as in #hina5 cannot *e underestimated8 - the -ear 2$25 'ndia
could *e in the top five3 with an econom- as large3 or almost as large3 as that of Kapan and
Merman-8 Moreover it is estimated that across the third world two to three *illion will
emerge from povert- to en<o- middle1class affluence in coming -ears8 (s we stand toda-
at the threshold of a new centur-3 we stand at the *eginning of a new industrial
revolution8 (n industrial revolution that will take place in the third world countries with
the help of developed countries *- wa- of monetar- investment3 transfer of technolog-3
implementation of management and marketing strategies8 (s the d-namics of glo*al
economics continue to change3 so will ma<or companies that will *e at its core *e an
agent of that change or *e its ver- victim8 ,hose that see and sei:e the opportunities will
win= those that fail to recogni:e the intensit- of glo*al competition will lose8
9oreign Direct In&etment!
Aoreign direct investment is a ke- ingredient in economic growth8 't can impact the host
econom- through a variet- of channels9 *- adding to investa*le resources and capital
formation= *- transferring technolog-3 skills3 innovative capacit-3 and organi:ational and
managerial practices *etween countries= and *- accessing international marketing
networks8 AC' contri*utes to a significant share of the domestic investment3 emplo-ment
generation3 e2ports etc8 AC' inflow into 'ndia touched R4826 *illion in 2$$3 as compared
to R3844 *illion in 2$$28 &ith a 24T increase in AC' inflow3 'ndia has *ecome one of the
top 1$ AC' destinations among the developing countries while it is fourth among the
(sian economies8 AC' inflow into the countr- would further increase with the recover- of
the glo*al econom-8
Aoreign Cirect 'nvestment 4AC'5 is permited as under the following forms of investments8
18 ,hrough financial colla*orations8
28 ,hrough <oint ventures and technical colla*orations8
38 ,hrough capital markets via 0uro issues8
48 ,hrough private placements or preferential allotments8
58 ,hrough MC%s4 Mlo*al Cepositor- %eceipt5 is treated as Aoreign Cirect
'nvestment 40+%/ issues58
AC' is not permitted in the following industrial sectors9
18 (rms and ammunition8
28 (tomic 0nerg-8
38 %ailwa- ,ransport8
48 #oal and lignite8
58 Mining of iron3 manganese3 chrome3 g-psum3 sulphur3 gold3 diamonds3 copper3
:inc8
'.(. Politico-legal en&ironment!
'ndia suffered political insta*ilit- for a few -ears due to the failure of an- part- to win an
a*solute ma<orit- in Parliament8 ;owever3 political sta*ilit- has returned since the
previous general elections in 1"""8 ;owever3 political insta*ilit- did not change 'ndia@s
economic course though it dela-ed certain decisions relating to the econom-8 ,he
political divide in 'ndia is not one of polic-3 *ut essentiall- of personalities8 0conomic
li*eralisation 4which is what foreign investors are interested in5 has *een accepted as a
necessit- *- all parties including the #ommunist Part- of 'ndia 4Mar2ist58 ,hus3 political
insta*ilit- in 'ndia3 in practical terms3 posed no risk to foreign direct investors *ecause no
polic- framed *- a past government has *een reversed *- an- successive government so
far8 Pou can find a comparison in 'tal- which has had some 45 governments in 5$ -ears3
-et overall economic polic- remains unchanged8 0ven if political insta*ilit- is to return in
the future3 chances of a reversal in economic polic- are ne2t to nil8
(s for terrorism3 no terrorist outfit is strong enough to distur* the state8 02cept for
Hashmir in the north and parts of the north1east3 terrorist activit- is either non1e2istent or
too weak to *e of an- significance8 't would take an e2treme stretching of the imagination
to visualise a angladesh1t-pe state1disrupting revolution in 'ndia or a Huwait1t-pe
anne2ation of 'ndia *- a foreign power8 ;ence3 political risk in 'ndia is practicall- non1
e2istent88
( countr-@s economic polic- environment must *e conducive for firms to achieve
efficiencies that will ena*le them to *e glo*all- competitive8 't is also widel- accepted
that ta2ation polic- can have strong incentive effects on corporate decisions8 #'' interacts
closel- with different levels of government to put forward industr-@s viewpoint8 #''@s
large mem*ership ena*les us to *e the most impartial and representative industr- *od-3
with a high level of credi*ilit- with the government and ke- regulator- *odies8 'n order to
achieve our o*<ective of influencing government polic-3 we undertake e2tensive research3
interact with ke- government officials and disseminate information through pu*lications3
seminars and events8 &ith a large network of offices across the countr-3 we are a*le to
track polic- issues in detail at the regional level8 #'' also interacts closel- with the
Mem*ers of Parliament 1 the polic- makers 1 across political parties to raise awareness
a*out the need for reforms3 the need for change to keep up with in an e2tremel-
competitive glo*al econom-8 ,his has helped to keep up the flow of economic legislation
passing through Parliament8
(mong the critical contingencies faced *- ever- *usiness firm is the need to
manage its social and political environment8 oth the social and the economic
performance of the firm can *e affected in significant wa-s *- managerial strategies and
tactics= firms and their managers can *e active pla-ers in efforts to improve their social
and economic *ottom lines8 ,hus3 this course will e2amine the pu*lic affairs environment
of the firm and the methods used *- managers to navigate within it8 ,he corporate social
performance of a firm and its economic results are characteristicall- intertwined9 oth in
the short and the long run3 failures to attend to social performance issues can produce less
than optimal economic results8 )ometimes these issues present themselves in crises that
demand swift3 effective managerial intervention8 ,hese ver- practical concerns
accompan- the manager@s role as a moral citi:en who must successfull- manage a
comple2 set of ethical issues8
,he private corporation is onl- one of the means *- which economic activit- and
social endeavor in general ma- *e organi:ed8 Private managers are likel- to have
significant interaction with their pu*lic counterparts3 not onl- in the conte2t of pu*lic
regulation3 as in the +nited )tates3 *ut also in the conte2ts of a variet- of pu*lic
enterprises8 )uch enterprises are far more common in the glo*al econom- than in our
domestic one8 &e shall therefore e2amine the characteristic *ehaviors of pu*lic and of
private enterprises8 ,he corporation is a relativel- recent invention8 0ver since it evolved
in the last centur-3 it has made active use of the *enefits that onl- government can
provide8 Aar from *eing seen purel- as a histor- of conflict3 the tradition of *usiness1
government relations should *e understood more often as a histor- of mutual *enefit8 (n
important focus in this course will *e on the management of the *usiness1government
interface8 &e shall look at the functioning of legislatures and the decision making
processes of regulator- agencies from the perspective of participation *- *usiness8
Participants in pu*lic polic-making t-picall- include a constellation of actors3 including
legislative committees3 regulator- agencies and other government *odies3 pu*lic and
private interest groups3 courts3 and so on8 &e shall e2amine the processes *- which
influence is e2erted in this s-stem3 including a look at the *ehaviors and strategiesDtactics
of interest groups and the means *- which firms make strategic use of the opportunities
presented to them in this s-stem8

Movernment in this countr- is often characteri:ed *- rigid hierarchies3 red1tapism3
complicated procedures3 sluggish decision1making and lack of accounta*ilit-8 ?ittle
wonder then3 interaction with Movernment usuall- turns out to *e cum*ersome3
perple2ing and patheticall- slow8 Pu*lic access to Movernment services is usuall- clums-
and complicated8 'n a paper1*ased s-stem3 locating a correspondence or file in a
Movernment department can *e a trul- frustrating e2perience8 ,he pro*lem gets further
compounded in case of multiplicit- of agencies8 ,he advent of 'nformation ,echnolog-
4',5 as a tool leveraging the deliver- of services is universall- acknowledged now8 'n
toda-@s world3 e1governance has actuall- given an opportunit- of a paradigm shift in the
process of deliver- of government services to the pu*lic8
)weeping transformations have taken place in ', with the convergence of computing and
communication technologies8 ,he advent of the 'nternet has thrown open numerous
possi*ilities8 Mroupware technolog- can also offer dramatic improvements in the intra1
government s-nchroni:ation3 optimisation of government resources3 and decision support
s-stems to *oost the efficienc- and efficac- of the pu*lic polic-8 ,he ma<or contri*utions
of groupware in improving organisational performance include on1line colla*orative
work3 electronic communit- development3 knowledge management and workflow
applications8 'n such a scenario3 information will *e more directl- accessi*le to decision1
makers and flow smoothl- across departments through a common data*ase and
compati*le s-stems inter1linked under a secure high1speed networked environment8 'n
addition to a tangi*le improvement in the functioning of the administration3 the
government1pu*lic interface shall undergo a radical change for the *etter8
,he near a*sence of ', in a large num*er of government departments toda- offers *oth a
massive challenge and an outstanding opportunit- to use state1of1the1art technologies to
shape the countr-@s future8 Cevelopments around the glo*e are taking place at a
*reathtaking pace3 and unless we urgentl- take steps to plan for this new world of
technolog- in this millennium3 the government itself ma- shortl- face the peril of
*ecoming lesser relevant8 &rapped in a m-stic enigma3 government processes at present
give enormous discretion and power to the administration3 with ample scope of its
misuse8 'n such a scenario3 a properl- conceived3 developed and deplo-ed model of e1
governance will provide a rare opportunit- to the government to reinvent itself and
evolve on an on1going *asis8 't will redefine the pu*lic1government relationship and the
*usiness1government interface8 - ena*ling improved connectivit- and communication
*etween all stakeholders3 e1governance trul- has the potential to propel the countr- on the
path of overall advancement8 )uch a thriving model of e1governance shall also reinforce
'ndia@s emergent status of a glo*al ', superpower8
&ith the rapid pace of change in the ', industr-3 there has *een a shift in focus from the
traditional inputs of a production process to the processes involved in the creation3
storage3 dissemination and use of information8 (n ',1driven s-stem of s1Movernance
works *etter3 costs less3 and is capa*le of servicing citi:ens@ needs as never *efore8
(nalogous to e1commerce3 which allows *usinesses to transact with each other more
efficientl- 425 and *rings customers closer to *usinesses 42#53 s1Movernance aims to
make the interaction *etween government and citi:ens 4M2#53 government and *usiness
enterprises 4M253 and inter1agenc- relationships 4M2M5 more friendl-3 convenient3
transparent and ine2pensive8 ,he resulting *enefits are a higher revenue growth and
reduced costs8 &ith the advent of the 'nternet3 the @citi:en as a shareholder@ can now
provide several inputs to the government@s polic-1making process3 while the @citi:en as a
customer@ can demand *etter services from his government8 Movernments across the
glo*e are tr-ing to make this a realit- through implementation of information technolog-
initiatives8 ;owever3 undertaking such initiatives without focusing on long1term goals
will result in @islands of e2cellence@ and render a m-opic vision of e1governance8

Pu$lic +olic* and it im+lication!
Ceveloping an appropriate pu*lic polic- towards the industrial sector has *een an
important task for 'ndian polic- makers for a long time8 &hen 'ndia moved awa- from an
inward looking industrialisation strateg- to a more Lopen> econom- in 1""13 industrial
firms needed to restructure themselves to retain competitiveness8 Much of these
restructuring is needed to correct the inefficiencies created *- operating in a protected
market8 ,he (utomo*ile sector has *een a ma<or candidate in the industrialisation
process since the *eginning of planned development8 (utomo*ile industr- in 'ndia has
*een su*<ected to su*stantial polic- changes over the last two decades8 ,he polic-
changes were in two doses and took the form of partial de regulations introduced in 1"!5
and li*eralisation measures launched since 1""18 ,he pre 1"!5 regime could *e descri*ed
as an era of strict controls and regulations8 ,he initial changes3 introduced in 1"!53 eased
the licensing re.uirements3 *road1*ased the classification of vehicles for issue of licenses3
allowed selective e2pansion of capacit- and partiall- rela2ed controls with regard to
foreign colla*orations3 imports of capital goods3 raw materials and spares8 ,hough these
measures represented a 7domestic li*eralisation73 the polic- environment continued *eing
geared towards imposing trade and investment regulations3 constraining the growth of *ig
*usiness houses and regulating e2change rates8 't was onl- after 1""1 that nota*le *road1
*ased changes in polic- that had far reaching implications actuall- came into *eing8
,hese changes dispensed with the *ulk of controls and regulations and for the first time
since independence assigned a central role to market forces8 ,o list some of these
changes more e2plicitl- 1 approval for foreign investment up to 51T e.uit- holdings
came to *e given automaticall-3 most of the industries that comprise the manufacturing
sector were removed from the licensing network3 the monopolies GM%,PI act was
amended 1 allowing *ig *usiness houses to e2pand at will3 domestic currenc- was made
converti*le in the trade account3 the e2change rate was allowed to *e influenced *- the
market and .uantitative controls on imports of capital goods and components were
removed8 'n addition to these measures aimed specificall- at the industrial sector3 the
Movernment of 'ndia also adopted certain structural ad<ustment and macro sta*ilisation
polic- measures during the post 1""1 period8 ( growing *od- of literature has e2amined
the impact of li*eralisation in industrial and trade policies on manufacturing sector
performance in different countries8 &hile most of the studies focused on making inter
countr- comparisons3 a few studies anal-se the impact of trade li*eralisation on
manufacturing productivit- 8't focuses on varia*les such as concentration3 ownership3
si:e distri*ution3 spatial distri*ution and total factor productivit- growth3 and their results
suggest that li*eralisation does not have a ma<or impact on the industrial structure under
e2amination e2plores changes in some ke- corporate strategies in response to economic
reforms introduced in 'ndia since 1""1 and points out significant changes with respect to
mergers and ac.uisition activities of multinationals3 foreign technolog- purchase3 % O C
and manufacturing capa*ilities8 Most of the earlier studies that attempted to anal-se the
differential *ehaviour of firms in terms of conduct and performance varia*les have
*rought out the differences *etween multinationals and local enterprises8 (utomo*ile
firms in 'ndia over the period 1"!71!! to 1"!"1"$3 found that even within the
multinationals3 Kapanese affiliates differ from those of &estern #ountries8
Aor 'ndia to *ecome a ma<or pla-er in world trade3 an all encompassing3 and
comprehensive view needs to *e taken for the overall development of the countr->s
foreign trade8 &hile increase in e2ports is of vital importance3 we have also to facilitate
those imports which are re.uired to stimulate our econom-8 #oherence and consistenc-
among trade and other economic policies is important for ma2imi:ing the contri*ution of
such policies to development8 't was felt that the 02im Polic- with its limited focus ma-
not *e a*le to meet our o*<ectives8 ,hus3 while incorporating the e2isting practice of
enunciating an annual 02im Polic-3 it is necessar- to go much *e-ond and take an
integrated approach to the developmental re.uirements of 'ndia>s foreign trade8 ,his is
the conte2t of the new Aoreign ,rade Polic-8
,rade is not an end in itself3 *ut a means to economic growth and national
development8 ,he primar- purpose is not the mere earning of foreign e2change3 *ut the
stimulation of greater economic activit-8 ,he Aoreign ,rade Polic- is rooted in this *elief
and *uilt around two ma<or o*<ectives8 ,hese are9
,o dou*le our percentage share of glo*al merchandise trade within the ne2t five
-ears= and
,o act as an effective instrument of economic growth *- giving a thrust to
emplo-ment generation
,he two1fold o*<ective of the Polic- is proposed to *e achieved *- adopting3
among others3 the following strategies9
+nshackling of controls and creating an atmosphere of trust and transparenc- to
unleash the innate entrepreneurship of *usinessmen3 industrialists and traders8
)implif-ing procedures and *ringing down transaction costs8
Beutrali:ing incidence of all levies and duties on inputs used in e2port products3
*ased on the fundamental principle that duties and levies should not *e e2ported8
Aacilitating development of 'ndia as a glo*al hu* for manufacturing3 trading and
services8
'dentif-ing and nurturing special focus areas which would generate additional
emplo-ment opportunities3 particularl- in semi1ur*an and rural areas3 and
developing a series of L'nitiatives> for each of these8
Aacilitating technological and infrastructural up gradation of all the sectors of the
'ndian econom-3 especiall- through import of capital goods and e.uipment3
there*- increasing value addition and productivit-3 while attaining internationall-
accepted standards of .ualit-8
(voiding inverted dut- structures and ensuring that domestic sectors are not
disadvantaged in the Aree ,rade (greementsD%egional ,rade
(greementsDPreferential ,rade (greements that enter into in order to enhance
e2ports8
+pgrading infrastructural network3 *oth ph-sical and virtual3 related to the entire
Aoreign ,rade chain3 to international standards8
%evitalising the oard of ,rade *- redefining its role3 giving it due recognition
and inducting e2perts on ,rade Polic-8
(ctivating 0m*assies as ke- pla-ers in e2port strateg- and linking #ommercial
&ings a*road through an electronic platform for real time trade intelligence and
en.uir- dissemination8
,here is an inherent contradiction in the (ttitude and polic- of the Movernment as
regards the private sector8 ,he Movernment has continuousl- emphasised the important
role assigned to the private sector in the mi2ed econom- of 'ndia and the steps it had
taken to encourage the private sector8 (t the same lime3 the Movernment had taken
various measures3 *oth direct and indirect3 which do not help the private sector to develop
freel- and rapidl- *ut which actuall- restrict and hamper its growth8 &e ma- highlight
here some of the pro*lems of the private sector8
Procedural dela-s 8 'n all developing countries 11'ndia is no e2ception1there are too man-
regulations imposed *- the Movernment on the private sector and too man- procedural
dela-s8 't is estimated on an average3 it takes 7 -ears 7from the conceptual stage to the
production stage for an- significant investment to take place in 'ndia87 Cecisions which
used to *e taken at one time at a low level of government *ureaucrac- are concentrated in
the hands of the top *ureaucrac-3 or with the ministers and in some cases even with the
ca*inet8 ,here is no delegation of decision1making and in fact3 even the smallest
decisions are taken at the top level3 resulting in avoida*le dela-3 cost escalation3 and
higher *urden on the consumers8
+nrealistic controls 8 ,he Movernment is influenced *- contradictor- motives3 as for
instance3 the protection of the consumers 4price controls5 and the prevention of
concentration of wealth and income 4capacit- restraint58 ,he price controls imposed *-
the government on man- of the goods do not give proper incentive for additional
production8 (ctuall-3 the Movernment should encourage competition among the rival
firms and increased production would automaticall- *ring down the prices8 /n the other
hand3 price controls under conditions of shortage tend to perpetuate shortage3 rise of
*lack markets and possi*le shifting of investment from controlled items to the production
of non1controlled items8 'n this #onnection3 the s-stem of dual pricing has *een found to
*e much *etter than unrealistic price controls8 (t one time3 licensing of capacit- was
meant to *ring a*out organised growth and prevent monopolistic tendencies3 hi
practice3 however3 it has emerged as something uni.ue in the whole world8 &hile attempt
is made to increase capacit- to create more emplo-ment and produce more3 'ndia is the
onl- countr- in the world which penali:es increase in production8 #apacit- restraint is
indeed anti1investor and anti1consumer8 )ince 1"!$3 and more recentl- after the
resumption of power *- Mr8 %a<iv Mandhi there has *een a welcome trend of regularising
e2cess capacit- in scheduled industries3 removal of restrictions on creation of new
capacities3 a*olition of unnecessar- controls and li*erali:ation of controls wherever the-
cannot *e a*olished8
%eservation for the small sector 8 ,he Movernment has generall- worked on the
assumption that small industries are in conflict with large ones which alwa-s stifle the
growth of the small and cottage sector8 (ccordingl-3 the Movernment has attempted to
help the small sector in man- wa-s8 /ne method is to provide e2cise e2emption or
impose3 a lower rate of e2cise duties for goods produced in the small sector8 (nother
method is to reserve certain products in the small sector and prevent the large sector from
producing such goods8 (s a result of such measures3 the complementarit- of the two
sectors in the process of growth has *een lost8 &hile it ma- not *e desira*le to continue
reservations or differential e2cise duties for all Movernment8 +nfortunatel-3 considera*le
controvers- has *een created in the definition of the <oint sector and the industries that
should *e *rought under this sector8 Part of this *lame goes to the Cutt #ommittee %eport
which used the term 7<oint sector7 for the first time and gave not one *ut three concepts
of <oint sector 9
4a5 02isting private enterprises *elonging to the large industrial houses should *e *rought
under the <oint sector *- pu*lic financial institutions converting their loans into e.uit-8
7'n that case we would like to emphasise that the- should *e clearl- treated as *elonging
to the <oint sector and not to the private sector87
4*5 ,he <oint sector would include those industrial units in which *oth pu*lic and private
investment had alread- taken place and where the )tate has alread- *een taking an active
part in direction and control8
(c5 ( large si:ed industrial unit in )chedule and # categories3 necessitated on account
of technical and economic advantages of large scale3 should necessaril- *e in the <oint
sector to prevent concentration of economic power8 'n this case3 the <oint sector should *e
treated as *elonging to the pu*lic sector3 for a large portion of the cost would *e provided
*- the Movernment and pu*lic financial institutions though3 of course3 private parties too
would *e permitted to have e.uit- participation.
'.5. "eon 2or marketer!
,he most striking feature of contemporar- 'ndia is the rise of a confident new
middle class8 't is full of energ- and drive and it is making things to happen8 'n terms of
political power3 it is erstwhile middle class that has clim*ed to the top in the social
hierarch- of modern societies8 't has transformed itself into the ruling class *- ac.uiring
control over the levels of state power8 Propert- no more rules3 even indirectl-3 these da-s8
Bor does la*our in the Fpeasant and workersF states8 't is the 6knowledgeF group
comprising not onl- politicians and *ureaucrats *ut also *usiness e2ecutives3 compan-
directors3 factor- mangers3 scientists engineers3 technocrats3 *ankers3 <ournalists3
intellectuals law-ers3 doctors3 teachers and man- other *elonging to li*eral profession
and 6servicesF sector3 that does so8 ,hat group or class constitutes the political class and a
section of it the ruling elite8 ,he two ke- attri*utes distinguishing the class from other
social classes are its possession of education or knowledge in the *road sense of the term
and leadership .ualities that help to put the class at the top in all walks of social life8
,he social clim* that this class has e2perience has gone coincided with
metamorphical change that the societ- in &estern countries has undergone in socio1
economic political and ideological fields8 ,he concept of democrac- secularism3 human
rights3 social securit-3 social <ustice and welfare state all parts of middle class philosoph-
and ideolog-8 )ince the thought and ideolog- of the middle class has come to ac.uire
universal appeal3 this has help to put the class in commanding position vis1U1vis the rest
of societ-8 't has cast that class in the leadership role and vested it with decision making
regulation coordination and controlling power in terms various t-pes of social activit-
and relations8 ,his class has come to constitute the elite in the modern societies8 ( part of
it forms the governing elite3 the rest *ecoming non1governing elite8 ,he governing elite
*- virtue of its control over the livers of power in the state machiner- an e2ercise of all
political powers on *ehalf of the state is *ale to influence production and distri*ution of
income and wealth class relation3 social change3 and the political and economic
development of the societ- it governs8 ,his makes it and instrument of histor-3 an ar*iter
of destin- of nation8 ,he- are historical forces which are set into motion *- the action of
the elite itself3 there are others that are autonomous in character which the elite it self as
to content with8 ,he elite itself3 of course3 does not have a*solute freedom of action8 't
e2ercise of power is moderated *- the consideration of its continuing to *e in possession
of power against the challenge that the non governing elite poses to it in the matter8 ,he
struggle for power *etween the governing and non1governing elites is a constant feature
of the modern state and the societ-8 ,he struggle is intra1class and not inter class8 ,he
masses do not compete for power with the elite8 't is the difference sections of the elite
who do so among themselves8 ,he *attles are fought and struggles waged in the name of
ideolog-3 national interest and welfare of the masses8 Professions a*out promoting these
interest no all masks worn *- the elites contenting for political power= a degree of
genuineness is alwa-s there8 ,hat degree differs from one societ- to another depending
upon the level of consciousness reached among the masses8 ,he mote developed that
consciousness is and more enlighten the masses are the more difficult it would *e for the
elite to mislead them *- catch phrases3 empt- slogan and ideological swearing8 'n
advanced societ- the class as well as self1interest of the elite will coalesce with those of
the societ- as a whole8 ,he elite circulation will still *e there and ma- even *e more
pronounced than in a comparativel- less developed societ- *ut it will waste on the
account that the governing elite gives of it self when in power that on the relative
manipulative a*ilities of the contenting elites8 ,he competition for power among the elite
will thus *ecome a of social instrument had material advancement8 ,hat gives the
democratic s-stem of the government an edge over dictatorship and a*solute monarch- in
which cases power is monopolised *- a single individual assisted *- his coterie or
collectivel- *- a cohesive oligarch-8 ,his will augur well for the marketers in the 'ndian
conte2t8
Modern technolog- has made the <o* of the marketer easier8 ;ere a few tools that are in
use toda- for improving marketing processes3and *uilding *rand value9
-M-
/ne can locate the nearest pi::a outlet or log on to a &e* site to check out the
specifications of the new car -ou plan to *u-8
i--eminar
)eminars on the internet instead of ph-sical seminars is *etter for the customer1no travel
time and e2pense8
.-marketing
Bo snail mailing3onl- e1mails=interactive &e* information 4no printing of *rouchers5and
&e* *anners8
e--ur&e*
/nline market surve-s of customers help in deciding product strategies3which result in a
greater possi*ilit- of acceptance of the final product or service3adding to the the *rand
value of the organi:ation8
#nline $ill$oard
/nline *ill*oards made of super1large plasma displa-s allow for time1sharing and instant
message revision8
-u+erior deign tool
etter tools like Photoshop and illustrator allow a designer to do things that would have
re.uired ver- e2pensive design workstations a decade or two ago8
Touc8-creen kiok
,ouch sreen kiosks used to market and showcase *rands at shopping mails
have changed the wa- a consumer can feel and e2perience a product on the shop floor8
Anal*i tool
etter data mining technologies coupled with cheaper storage has accelerated the pace of
research3so that one can narrow down on one>s target and focus *etter8(t ever- point of
influence3 not <ust marketing1
awareness3ac.uisition3education3conversion3sale3service3support1role of technolog- has
changed our processes and efficiencies8

,he 'ndian electronics and hardware industr- has *een lagging *ehind the impressive
performance of the software sector8 Most of the hardware re.uirements of the *urgeoning
software and telecom sectors are met *- imports8 ,he 'ndian government has recognised
the need to increase domestic output and formulated the 0lectronic ;ardware ,echnolog-
Park 40;,P5 scheme that offers various concessions for companies that manufacture
either electronic goods or components8
(. )a&e *ou undertood t*+e ,uetion!
18 ,he marketing environment is 0), descri*ed as *eing9
(8 #omposed of controlla*le varia*les8
8 #omposed of varia*les independent of one another8
#8 (n 'ndirect influence on marketing activit-8
C8 C-namic and #hanging
28 'f the Hellogg #ompan- decides to *uild a new cereal plant *ecause it anticipates the
ne2t five -ears will *ring low unemplo-ment and increases in *u-ing power3 it is
forecasting a period of9

(8 Cepression
8 Prosperit-
#8 %ecover-
C8 (usterit-
08 %ecession
38 #oca #ola markets its soft drink to mem*ers of Meneration P who love e2treme sports
and are risk1takers8 'f #oca cola Cew *egan lo**-ing politicians and engaging in
advocac- advertising to support continued use of high fructose corn s-rup and caffeine in
products targeted toward -oung people3 the compan- would *e engaging in9
(8 Mass Marketing
8 0nvironmental Management
#8 ,arget Marketing
C8 Market )egmentation8
48 %am<i )-stems have developed Movie Mask3 a s-stem that acts as a video censor *-
interfering with the pla-*ack process so that supposedl- offensive material never appears
on the television screen8 Aor movie production companies3 the Movie Mask is a4n5
VVVVVVVV factor in their e2ternal environment8
(8 ,echnical
8 0conomic
#8 )ocial
C8 Political
5. -ummar*!
,here is a percepti*le change in the mind set of the consuming class in 'ndia as is
evident from the social3 cultural3 political3 technological and economic environments as
discussed in this unit8 ;owever3 one change which is fast sweeping the countr- is the
advent of 'nternet8 ,he medium of the 'nternet and the development of e1commerce are
progressing e2tremel- fast on a glo*al8 ;owever3 while the 'nternet acts as a faster and
less costl- platform for consumers and *usinesses it has inadvertentl- increased the
importance of customer satisfaction8 - making transactions faster and easier it had
ena*led the customer to switch <ust as .uickl- *etween e1*usinesses3 causing the element
of competition to take on a new diversion8 't is ver- important to achieve customer
satisfaction to get good financial performance in services in the ph-sical world3 and the
same can *e said of e1commerce where a customer can *e lost if una*le to access a
&e*site or if the e2perience proves unsatisfactor-8
6. ./ercie
18 ( marketing manager for a small computer manufacturer is anal-sing the potential
effects of political3 legal3 social3 and economic forces on the firm@s operations8
Cevelop an environmental anal-sis for him8
28 ,o effectivel- monitor changes in the marketing environment3 marketers must engage
in what activitiesJ
38 #onduct an evaluation of the consumption pattern of the 'ndian middle class8
48 Co -ou think all these MB#>s rushing to 'ndia is *ased on the growing economic
clout of 'ndiaJ Kustif- -our answer8
0. 1e2erence
18 (808(83 %eadings in usiness #-cle ,heories3 (merican 0conomic (ssociation8
#?(%H3K8K8(BC #;0B3 M840C)853 usiness Aluctuations3 Mrowth and
0conomic )ta*ili:ation3 %andom ;ouse3 B8P831"638
28 Cauten3 #8(83 usiness #-cles and Aorecasting3 )outh1&estern Pu*lishing #o8
#inciantti3 1"6132
nd
0dn83 #chs83178
38 Mordon3 %8(83 usiness Aluctuations3 ;arper and rothers Pu*lishers3
BewPork31"523#hs8!1128
48 ;a*erler3M83 Prosperit- and Cepression3 +nited Bations3 Bew Pork3 1"523 3
rd
0dn83 Parts ' and ''8
58 ;am*er3M83 usiness #-cles3 ,he Macmillan #ompan-3 Bew Pork31"513 #hs831
!8
68 ;ansen883 usiness #-cle and Bational 'ncome8 &8&8 Borton and #ompan- 'nc833
Bew Pork31"518
78 ;icks3Kr83( #ontri*ution to the ,heor- of the ,rade #-cle3 /2ford +niversit-
Press3 ?ondon3 1"5$8
!8 ?ee3&83 0conomic Aluctuatio ns3 %ichard C8'rwin3 'nc83 'llionis3 1"558
"8 %ameshan3 P83 6#orporate Performance Curing1""$sF3 Productivit-3 Kan1
Mar82$$13 pp63116418
1$8 Humar3 Hrishna= 6Meeting the #hallenges of a orderless 0conom-9 -ee(e( a
Para(igm %hift.F9 &orking Paper Bo8 2$$1D43 'ndian 'nstitute of Management3
?ucknow 4'ndia53 presented in /pening )eminar on &,/ O (llied 'ssues held at
'ndian 'nstitute of Management3 ?ucknow 3 Ae*ruar- 241253 2$$18
118 Humar3 Hrishna O )rivastava %itu3 6( )tud- of 'ndian usiness Eentures
(*roadF=&orking Paper Bo8 2$$1D213 'ndian 'nstitute of Management3 ?ucknow
4'ndia53 presented in the 4th #onference of )trategic Management Aorum3 'ndian
'nstitute of Management3 (hmeda*ad 4'ndia53 Ma- 2612!3 2$$18
128 Murth-3 M8%83 and %anganathan3 H8E8H83 7Aoreign Private #apital9 Penetration
,hrough #olla*orations73 2oung 3n(ian3 Eol8 !3 Bo8 1$3 /cto*er 113 1""73 pp8 31
"8
138 6'ndia>s Aoreign 02change %eserves and Eulnera*le ?ia*ilitiesF3 #entre for
Monitoring'ndian 0conom-3 4Mum*ai53 Monthl- %eview of 'ndian 0conom-F3
Kul- 2$$13 p812!8
148 (swathappa3 H8 4Cr853F0ssentials of usiness 0nvironmentF3 46
th
edn853 4imala'a3
1""73 pp8 341418
158 #herunilam Arancis 4Cr853 6usiness 0nvironment ,e2t O #asesF3 414
th
edn853
4imala'a3 2$$33 pp862316248
168 Mo-al3 )8H83 et8 al83 70conomic Policies and 'ndian Cevelopment9 ( Ciscussion
Paper73 'nstitute for )tudies in 'ndustrial Cevelopment3 (pril 1""78
Marketing >it8 ot8er 2unctional area o2 management
+nit structure9
1. Introduction
2. "earning #$%ecti&e
'. Marketing Management
3.1 -ature of marketing
3.2 %cope an( functions of marketing.
3.3 %ignificance of marketing.
3.4 !&5ectives of marketing.
3.# $oor(ination &et+een marketing an( other functions.
(. )a&e *ou undertood t*+e ,uetion
5. -ummar*
6. ./ercie
0. 1e2erence
1. Introduction!
(s -ou aware3 marketing is a d-namic discipline8 ,he nature of marketing is such that it
will have to liaison with various departments and cannot function in isolation8 ,he
significance of marketing department has changed in 'ndia since the li*eralisation wave
was unleashed8 Marketing has certain o*<ectives and that will deliver the *est possi*le
results for the organi:ation8 ;ence it is important that there e2ists an e2cellent
coordination *etween marketing and other functions8
2. "earning #$%ecti&e!

6hen 'ou finish this unit* 'ou shoul( &e a&le to,
7n(erstan( the scope an( functions of marketing.
7n(erstan( the importance of marketing.
7n(erstan( the nature an( o&5ectives of Marketing Management.
7n(erstan( the coor(ination &et+een Marketing an( other (epartments.
'. MA17.TIN4 MANA4.M.NT
Marketing management is an important to operative function 4as distinct from managerial
function5 of management8 't performs all managerial functions in the field of marketing8
't is responsi*le for planning3 organi:ing3 directing and controlling the marketing
activities8 't is re.uired to *uild up appropriate marketing1mi2 to achieve the o*<ectives
of the *usiness8
(ccording to 08&8 #undiff and %8% still3 6Marketing management is concerned with the
direction of purposeful activities towards the attainment of marketing goals8F ,he *asic
goals of marketing are satisfaction of needs of customers and generation of revenue for
the *usiness8 Most of the *ig *usiness enterprises organi:e the marketing activities
separatel- under the charge of a marketing manager8 ,he marketing manager looks after
various aspects of marketing to achieve the o*<ectives of marketing3 vi:= creation of
customers and satisfaction of their wants and earning of profits8
Marketing management attempts to contri*ute to the organi:ational o*<ectives8 't deals
with planning3 organi:ing3 directing and controlling the activities related to the marketing
of goods3 ideas and services to satisf- the customer>s needs and contri*ute to
organi:ational o*<ectives8 ,he nature of marketing management is illustrated in the
following points8
4i5 Marketing management is a functional area of management8 (s a
managerial function3 it includes anal-sis3 planning3 implementation and
control of activities concerned with development and distri*ution of
products for satisf-ing the needs of the customers8
4ii5 Marketing management is goal directed8 't attempt to satisf- the needs of
customers *- offering them want satisf-ing products and generate revenue
for the *usiness8
4iii5 Marketing management determines the appropriate marketing mi2 of the
firm8 Product design3 its promotion3 its pricing and its distri*ution are
properl- harmoni:ed so that goods are accepted *- the customers8
4iv5 Marketing management is a speciali:ed <o*8 0fficient handling of
marketing activities re.uire speciali:ed knowledge of markets3 products3
consumer>s tastes and *ehaviour3 government policies3 and *usiness
environment8
4v5 Marketing management is the marketing concept in action8 't includes all
activities which are necessar- to know the needs of customers and
supplies goods and services to satisf- the needs of the customers8 ,he
marketing concept is *ased on the philosoph- that all activities of the
*usiness enterprises should *e oriented towards the satisfaction of
re.uirements or needs of the customers
'.1.NATU1. #9 MA17.TIN4
18 Marketing is Customer-focused. Marketing intends to satisf- and delight the
customer8 ,he activities of marketing must *e directed and focused at the customer8
Marketers can remain in customer mind if the- are provided value for what the- spend8
#ustomer focus can optimi:e costs for the customer while allowing the organi:ation to
focus on its core competencies8 ,oda->s customer makes constant trade1offs *etween
.ualit-3 price3 and *enefits8 ,hus3 marketers must allow customers to dictate product
specifications and .ualit- standards8 Marketing efforts must *e directed at meeting
customer needs3 not market shares8 Aor this3 marketers must track customer needs on a
continuous *asis8
28 Marketing must Deliver Value8 Marketer have to track customer needs and
deliver the product as per their re.uirements8 ,his is not an end in itself8 ,he compan-
must satisf- the following e.uation with resultant value a*ove 1 as seen in fig819
#ost
enefits
lue #ustomerEa =
,he corporate strateg- must *e aimed at delivering greater customer value than
competitors8 ,he corporate planning3 processes3 and people must *e re1configured
around the customer8
38 Marketing is Business8 &hen customer is the focus of all activities marketer has
not to search customers to seek response to his products8 #ustomer group is decided for
whom the product is prepared and presented8
48 Marketing i urrounded $* 3utomer Need8 Marketing starts with the
identification of customer needs and re.uirements8 ,hese are turned into pro*a*le
features that might satisf- the *asic needs8 ,he porta*le form of product is made out and
presented *efore the customer for approval8 ,he customer suggests changes or
improvements in the porta*le product and the final product is *rought *efore the
customer8 Aig 818illustrates the point8
Aig82 Marketing and #ustomer Beeds8
58 Marketing i a +art o2 Total .n&ironment. ,otal environment ma- *e defined
as the com*ination of all resources and institutions which are directl- related to the
production and distri*ution of goods3 services3 ideas3 places and persons for the
satisfaction of human needs8 ;owever3 it is *etter to look at remote and immediate
environment of an- marketing organi:ation as shown *elow in Aig83
'dentification of
#ustomer Beeds 4*-
Marketing Ceptt85
Pro*a*le Aeatures of
Product 4)uggested
*- Marketing Ceptt85
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4 P r e s e n t e d M a r k e t i n g C e p t t 8 5
# u s t o m e r ) u g g e s t s
# h a n g e s D M o d i f i c a t i o n s
4 , h r o u g h M a r k e t i n g C e p t t 8 5
,echnological
'nternational
0conomic
0ducational
0cological )ocio1cultural Politico1?egal
)uppliers
Ainancial
'nstitutions #ustomers
Movt8 (gencies #ompetitors ?a*our /rganisations
,echnical )-stem

Personnel )-stem
Marketing /rganisation
'mmediate 02ternal 0nvironment
%emote 02ternal 0nvironment
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Aig838 %emote and 'mmediate Marketing 0nvironment
68 Marketing -*tem A22ect 3om+an* -trateg*8 Marketing has its own su*1
s-stems which interact with each other to form complete marketing s-stem that is
responsive to compan- marketing strateg-8 ,hrough the su*1s-stems 4marketing
'nformation s-stem3 Marketing Planning s-stem3 Marketing /rganisation and
'mplementation )-stem and Marketing #ontrol )-stem5 shown in Aig843 the compan-
monitors and adapts to the total marketing environment8 ,he interaction *etween
marketing su*1s-stems and environment has *een discussed in detail in chapter 38
78 Marketing a a Dici+line. ,he su*<ect of marketing has emerged out of the
*usiness which has derived its e2istence from economics8 (fter emerging from *usiness3
marketing has got its strength from related areas1law3 ps-cholog-3 anthropolog-3
sociolog-3 statistics3 mathematics *ecause the related pro*lems impinge heavil- on
consumer *ehaviour3 legal aspects of marketing3 research on consumer needs3 advertising
media3 pricing3 promotion methods3 etc8 thus3 marketing as a disciplines stands tested as
an art and a science8 Aig8 4 illustrate the point8

Aig85 Marketing as )cience and (rt
!8 Marketing 3reate Mutuall*-$ene2icial 1elation8i+8 ,he customer is the
focus of all marketing activities8 ut3 during the last decade3 the focus has shifted to the
)trategiesD,actics for Product3 Pricing3
Promotion3 Cistri*ution3 #ompetitors3
02ternal 0nvironment
%esearch on #onsumer3 price3
Media3 #hannels3 product3
Market3 usiness
?aw
Ps-cholog-
(nthropolog-
)ociolog-
)tatistics
Mathematics
Marketing
as a su*<ect
(rt
)cience
wa- of doing *usiness3 i8e83 the strategic aspects of marketing8 ;ere the means of
marketers are their knowledge and e2perience3 and the end result is in the form of mutual
*eneficial relationship8 ,hus3 marketing is ever-thing that results in the mutuall-
*eneficial relationships with the customer8 Aor e2ample3 if social contri*ution can help
enhance compan- image3 help to aged3 children and disa*led would definitel- attract the
consumer confidence in the organi:ation *ecause of its assumption of social
responsi*ilit-8 ,hus3 customer might differentiate *etween #oke and Pepsi3 &hirlpool
and Modre< refrigerators3 etc8
'.2.-3#P. AND 9UN3TI#N- #9 MA17.TIN4
,he scope of marketing can *e understood in terms of functions that a marketing
managerDdirectorDdepartment performs8 'n most of the *usiness enterprises3 marketing
department is set up under supervision of the Marketing Manager8 ,he ma<or purpose of
this department is to generate revenue for the *usiness *- selling want satisf-ing goods
and services to the customers8 'n order to achieve this purpose3 the Marketing Manager
performs the following functions9
4i5 Marketing research
4ii5 Product planning and development
4iii5 u-ing and assem*ling
4iv5 )elling
4v5 )tandardisation3 grading and *randing
4vi5 Packaging
4vii5 )torage
4viii5 ,ransportation
4i25 )alesmanship
425 (dvertising
42i5 Pricing
42ii5 Ainancing
42iii5 'nsurance
Functions of Marketing
@A< @B< @3< @D<
Functions of Functions of Functions of Functions
Research Exchange Phsical Facilitating
!reatment Exchange
1. Marketing 1. Bu*ing and 1. -tandardiation 1. -aleman8i+
1eearc8 Aem$ling 4rading and 2. Ad&ertiing
Branding
2. Product 2. -elling 2. Packaging '. Pricing
Planning and '. -torage (. 9inancing
De&elo+ment (. Tran+ortation 5. Inurance
,he functions of marketing ma- *e classified into four categories as shown in the a*ove
Aig86
A. 9UN3TI#N- #9 1.-.A3)
A1. Marketing 1eearc8
't means the intelligence service of the organi:ation8 Marketing research helps in
anal-:ing the *u-er>s ha*its3 relative popularit- of a product3 effectiveness of
advertisement media3 etc8 its ma<or task is to provide the marketing manager with
timel- and accurate information so that *etter decisions can *e made8 ,he scope of
marketing research is ver- wide8 't ma- cover all the areas of *usiness which have
*earing on the marketing function8 'n the words of &8K8)tanton3 6Marketing research
is the s-stematic search for and anal-sis of facts related to a marketing pro*lem8 'ts
emphasis is shifting from fact finding3 information gathering activit- to a pro*lem
solving and action recommending functionF8
A2. Product Planning and De&elo+ment
( product is something which is offered *- a *usiness firm to customers to satisf-
their needs8 't has great importance in all other areas of marketing management8 Aor
instance3 marketing research is mainl- 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 product8 ,herefore3 it is necessar- to plan
and develop products which meet the specifications of then customers8 Products are
the foundation of an- marketing programme8 ,he success of marketing department
depends upon the nature of the product offered to the customers8 ,he product must
*e so designed and developed that it meets the re.uirements of the customers8
Product planning and development involves a num*er of decisions3 namel-3 what
to manufacture or *u-J ;ow to have its packagingJ ;ow to fi2 its price and how to
sell itJ ,he design3 .ualit-3 colours3 si:e and other features of the product can *e
determined *- conducting marketing research8 ,he product department will *e
guided *- the re.uirement of the users8
B. 9UN3TI#N- #9 .:3)AN4.
B1. Bu*ing and Aem$ling
Procurement of raw materials3 semi1finished or finished products has gained great
importance for the modern industrial and commercial enterprises8 %aw materials are
purchased for production *- the industrial enterprises and finished goods are
purchased for resale *- the commercial enterprises8 &hatever ma- *e the case3 the
marketing department pla-s an important role8 't is the marketing department which
will suppl- the information regarding the needs and tastes of the customers8
#oordination *etween purchasing officials and the marketing officials will help in
purchasing right t-pes of materials or goods at right time and in right .uantities8
Purchasing is different from assem*ling8 Purchasing involves determination of
re.uirements3 finding the sources of suppl-3 placing the order and receiving the
goods8 ut assem*ling means collection of goods alread- purchased from different
sources at a common point8 't is also used in another sense8 %aw materials are
purchased and assem*led in order to produce goods and services8
B2. -elling
,his is an important aspect of marketing under which ownership of goods is
transferred from the seller to the *u-er8 )ale ma- take the form of 9 4i5 a negotiated
sale3 and 4ii5 an auction sale8 'n case of negotiated sale3 the terms and conditions
*etween the *u-er and the seller are arrived at *- *argaining or haggling8 ut in case
of an auction sale3 there is no scope for negotiation *etween the seller and the *u-er8
,he *u-ers assem*le at the place of auction and *id against one another for the goods
on sale8 ,he goods are sold to the highest *idder8
Begotiated sale ma- take the following forms3 namel-3 4a5 sale *- inspection 34*5 sale
*- sample3 4c5 sale *- description3 4d5 sale *- grade3 and 4e5 sale *- *rand8
3. 9UN3TI#N- #9 P)?-I3A" T1.ATM.NT
31. -tandardiationC 4rading and Branding.
)tandardisation means setting up of specifications of a product8 Mrades of
agricultural products are *ased on these specifications and standards8 'ndustrial
goods are given *rand names *- their manufactures to conve- to the customers that
their goods conform to certain well1defined standards8 ,hese activities promote the
sale of products8
32. Packaging
Packaging is traditionall- done to protect the goods from damage in transit and to
facilitate eas- transfer of goods to customers8 ut now it is also used *- the
manufacturer to esta*lish his *randed products as distinct from those of his rivals8
(uthor activit- connected with packaging is la*eling8 ?a*eling means putting
identification marks on the package8 ,he la*el is an important feature of a product8 't
is that part of a product which contains information a*out the producer and the
product8 ( la*el ma- *e a part of a package or ma- *e a tag attached directl- to the
product8 ,he la*el is sued to communicate *rand3 grade and other information a*out
the product8
Packaging has *ecome one of the essential services f modern marketing8 't acts as
a multi1purpose arrangement8 't gives protection to goods on its route from
manufacturer to consumer8 't even protects the goods during its life with the user8
Packaged goods are generall- more convenient to handle8 Packaging also gives
individualit- to a product8 't makes easier for the consumer to identif- a product *-
looking at its package8
Packaging facilitates the sale of a product8 't acts as a silent salesman of the
manufacturer3 particularl- at a place where there is widespread use of self1services3
automatic vending and other self1selection methods of retail selling8 )ometimes3
packages are dul- sealed to ensure products of right .ualit- to the consumers8 'n the
a*sence of sealing3 duplicate products ma- *e distri*uted to the consumers *-
unscrupulous dealers8
3'. -torage
Moods are generall- produced in anticipation of the demand8 ,he- have to *e
stored properl- in warehouses to protect them from an- damage which ma- *e caused
*- ants3 rats3 moisture3 sun3 theft3 etc8
)torage of goods in warehouses has *ecome an indispensa*le service these da-s8
Producers3 manufacturers3 traders3 mercantile agents3 importers and e2porters
engaged in *usiness have to store their goods in warehouses8 Moods are produced or
procured well in advance of the demand8 ,he- are stored in warehouses till the- are
actuall- sold in the market8 ,hus3 warehousing creates time utilit-8 'n addition3
modern warehouses perform certain marketing services also such as grading3
packaging3 la*eling3 etc8
3(. Tran+ortation
Modern organi:ations produce on a large scale to cater to the re.uirements of
customers scattered throughout the countr-8 ,his calls for transportation of goods
from the place of production to the place of consumption8 ,ransportation provides
the ph-sical means which facilitate the movement of persons3 goods and services
from one place to another8
,ransport pla-s a significant part in the economic3 social and political
development of a countr-8 %apid industriali:ation and e2change of goods and
services cannot take place unless sufficient facilities for transportation are availa*le8
't is with the help of various means of transport that raw materials are transported
from the place of their production to the industrial centres where the- are converted
into finished products8 't is again transportation that facilitates the movement of
goods from the producers to the users8 - doing so3 transportation removes the
distance pro*lem and creates place utilit-8
,ransportation creates time utilit- in goods and services *ecause speed- transport
minimi:es the time of their transit8 ,ransport leads to regional speciali:ation8 (
region ma- speciali:e in the production of those goods and services for which it is
most suited8 ,his leads to production of goods and services in different regions at the
lowest possi*le cost8 ,ransportation also pla-s a crucial role in the price mechanism8
't tends to e.uali:e and sta*ili:e the prices of various commodities *- moving them
from the areas where the- are surplus to those areas where the- are in short suppl-8
D.9UN3TI#N- 9A3I"ITIN4 .:3)AN4.
D1. -aleman8i+
Personal selling in an important method of selling goods8 't is widel- used in
retail marketing8 )alesmanship or personal selling involves direct and personal
contact of the seller or his representative with the purchaser8 't is the oldest known
form of selling and is the most important and recogni:ed method of selling8
,he art of salesmanship has undergone a *ig change8 ,he attitude of salesman
towards the customers and vice versa has also changed8 ,his change has gone hand
in hand with the changing concept of ethical standard in *usiness8 0arlier3 caveat
emptor 4let the *u-er *eware5 ruled a sales transaction3 *ut now the satisfaction of
customer is more important8 ( salesman finds our what his customer needs and does
his *est to meet it from the merchandise at his disposal8 )elling has *ecome a science
of human relations and an art of getting along with people so effectivel- that sales
resistance ma- *e reduced to the minimum8
D2. Ad&ertiing
(dvertising has *ecome an important function of marketing in the competitive
world8 't helps to spread the message a*out the product and thus promote its sale8 't
facilitates creation of a non1personal link *etween the advertiser and the receivers of
the message8 ,he importance of advertising has increased in the modern era of large
scale production and tough competition in the market8 usiness firms use several
media of advertisement to sell their products8 ,hese include newspapers3 maga:ines3
radio3 television3 cinema halls3 hoardings3 window displa-s3 etc8
D'. Pricing
Cetermination of price of a product in an important function of a marketing
manager8 Price of product is influenced *- the cost of product and services offered3
profit margin desired3 prices fi2ed *- the rival firms and Movernment polic-8
( sound pricing polic- is an important factor for selling the products to the
customers8 ,he price polic- of a firm should *e such that it attracts all t-pes of
customers different means8 ( good price polic- helps in determining the varieties of
a product to *e made or procured so as to satisf- the demands of various kinds of
customers8
D(. 9inancing
Ainancing and marketing functions of a *usiness are inter1linked with each other8
,he marketing department has an important sa- on policies of the finance department
in regard to cash and credit sales8 Ainancing of customer1purchasing has *ecome an
integral part of modern marketing8 ,he provision of goods to the customers on credit
*asis is an important device to increase th volume of sales8 ( manufacturer has also
provide credit facilities to wholesalers and retailers8 (s a matter of fact3 credit is the
lu*ricant that facilitates the operation of the marketing machine8
D5. Inurance
( large num*er of risks are involved in e2change of goods and services8
'nsurance helps to cover these risks8 't facilitates the smooth e2change of goods *-
covering risks in storage and transportation8
?oss or damage to goods or propert- ma- arise due to fire3 theft3 natural
calamities like flood or earth.uake and so on8 People emplo-ed in *usiness firms are
also lia*le to the risks of in<ur- or loss of life due to accidents in the work1place8
usiness firms are a*le to provide for protection against these risks *- insurance
companies8 ,hus can cover the risks on pa-ment of a nominal premium and recover
the loss3 if an-3 arising our of the risk8
'.' -I4NI9I3AN3. #9 MA17.TIN4
Marketing A22ect #ur "i&e
#ustomer is the revolving force of marketing8 #ustomer decides what products
suit their needs8 ,he choice of one product over another sets the pace of marketing
action8 ,hus3 *ecause of changed social perception a*out the role of women3 higher
percentage of women tend to move out of their homes8 ,his changed role of women
has resulted into need for crWches3 household domestic help3 e2panded need for
communication facilities *ecause of separation of mother and child3 more securit-
inside house where child is mostl- alone3 home entertainment e.uipments like ,Es3
E#%s3 Eideo games3 Personal #omputers3 etc83 so that the child does not move out of
home and also the parents could entertain themselves when the- are *ack from work8
(s a result of women venturing out of home3 there is e2panded need for Ca- #are
#entres3 MaidsD%o*ots3 ,elephone3 )teel Mrills3 (larm )-stem3 Personal )ecurit-
Cevice3 ,E3 E#% Eideo games3 Personal #omputers3 etc83 ,a*le 3 helps to gauge as
to how marketing affects our lives8
Ta$le 2. .22ect o2 Marketing on #ur "i&e.
%easons
Promoting Beed
Beed ProductD)ervce %e.uired
18 Civision of
Koint Aamil-
28 Mreater
#omple2it- of
Products offered
)eparation
Buclear Aamil-
set1up
)pecialists
?awler3 Cocumentation3 /fficers to
(dminister separation3 ,E3 %adio3
conve-ance3 #oolers3 Mas stove3 Mas
c-linder refill3 #hair3 ,a*le3 ed3 (lmirah
etc8
4)eparate1si:ed product for each5
)pecial 'nstitutions to provide maintenance
for (ir conditioners3 cars3 scooters3
computers3 etc8
Marketing -ati2ie our Need.
/nce it is ascertained that marketing affects our lives in man- wa-s3 the
immediate .uestion arises9 ;ow it satisfies our needsJ ;ere the product is main
propeller of the marketing activities8 ;owever3 not onl- that the product should
satisf- customer needs and wants3 it should also remove hindrances *etween the
marketers and customers *- creating utilities for them *- adding value to the product8
- removing these hindrances3 marketing ensures free and smooth e2change of goods
and services from marketers to customers8
1. 9orm Utilit*8 #ustomer e2pects that their needs should *e fulfilled with
appropriate goods or services with particular featuresDattri*utesDst-leDshapeDsi:e
etc8 Aorm utilit- supplies them all *- converting the raw form of products into
meaningful final products8 ,hus3 customers force marketers to direct production
department in terms of specific customer needs satisfaction8 Aor e2ample3
&hirlpool advertises its refrigerators *- showing a man asking different
customers to3 e2plain their re.uirements8 ,he final product comes up as per the
customer>s re.uirements8
2. Peron Utilit*8 ,he marketers and ultimate customers are not alwa-s situated at
the same place3 so that the customers could *u- the products and services for their
consumption or usage8 (t times3 there is a *ig gap *etween the producers and the
ultimate customer3 marketing helps to remove the hindrance of person *- means
of trade8 ,rade3 as a part of marketing3 pla-s a ma<or role in esta*lishing contact
*etween producers as providers of goods and services and customers as users or
consumers of those goods and services to satisf- their needs8 Earious traders3
namel-3 wholesalers3 retailer and mercantile agents operate to provide person
utilit-8
'. ./c8ange Utilit*8 'n case of goods and services3 the person utilit- clears the wa-
for their proper e2change8 Marketing helps to *ring together the producers of
goods read- to ell their goods for mone- and the consumers of those goods read-
to part with their mone- 4purchasing power53 thus removing the hindrance of
e2change8 Moreover3 with mone- as the medium of e2change3 pa-ment for goods
and services is made through *anks8 'n this wa-3 procure goods ion credit8
Aurther3 *anks often finance trade in wa-s more than one8 ,hus e2change utilit-
is provided *- mone-3 *anking3 and finance8
(. Place Utilit*8 Moods ma- *e produced at a place where advantages of location
other than the market ma- *e availa*le whereas the *u-ers of such goods ma- *e
situated at a far off place8 ,he *arrier of distance *etween the place of
production and the market where these products can *e sold is removed *-
different means of transport8 esides transporting goods from the place of
production to that of consumption3 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 place8 ,hus3 place utilit-
*rings the producer of goods and services closer to the customer8
5. Time Utilit*8 Moods3 in modern times3 are produced in anticipation of demand
and as such the- are to *e stored as long as the demand for the same comes up8
)uch stored goods are to *e released as and when demand materiali:es8 ,his
function of storage and preservation is performed *- warehouses which remove
the hindrance of time *- *alancing the time lag *etween production and
consumption3 thus creating time utilit-8 Curing this process of storage3 insurance
pla-s its role *- removing the risk of loss or damage through theft or fire8
6. 7no>ledge Utilit*. ( producer ma- find it difficult to sell his products unless
and until he *rings it to the knowledge of the prospective consumers the utilit-
and the distinctive features of his products8 (dvertising and salesmanship help to
remove the hindrance or lack of knowledge on the part of the prospective *u-ers
*- *ringing to the notice of the customer the utilit- of *u-ing the goods and
services offered 8
Marketing 4enerate 1e&enue 2or t8e Buine 9irm.
Marketing is a *asic function of all *usiness firms8 (ccording to peter Crucker3
6't is in marketing that we satisf- individual and social values and needs3 *e it
through producing goods3 suppl-ing services3 fostering innovation for creating
satisfaction8F Marketing is an important activit- these da-s3 particularl- in the
competitive economies8 Marketing generates revenue for the *usiness enterprises8
Bo firm can survive in the long1run unless it is a*le to market its products8 'n fact3
marketing has *ecome the nerve1centre of all human activities8
0fficient marketing management is a pre1re.uisite for the successful operation of an-
*usiness enterprise8 ( *usiness organi:ation is differentiated from all other human
organi:ations *- the fact that it makes and sells products or service8 Marketing is the
*eating heart of the *usiness organsiation8 ,he chief e2ecutive of a *usiness
organisation cannot plan3 the production manager cannot produce3 the purchase
officer cannot purchase3 and the financial controller cannot *udget until the *asic
marketing decisions have *een taken8 Man- departments in a *usiness enterprise are
essential for its growth3 *ut marketing is still the sole revenue producing activit-8
Marketing function is rightl- considered to *e the most important operative function
of management8
1ole o2 marketing in .conomic De&elo+ment
Marketing is the kingpin that sets the rate of progress of the econom-8 ,he
marketing organi:ation3 if more scientificall- organi:ed3 makes the econom- strong
and sta*le8 ,he lesser the stress on the marketing function3 the weaker will the
econom- *e8 +nderdeveloped marketing is a sign of under1developed econom-8 (n
under1developed econom- is characteri:ed *- man- shortages and is a seller>s
market8 )elling effort is not needed much8 (s a result3 *usiness firms do not feel the
need for changing their marketing methods and practices8 ,he other reasons for the
uns-stematic marketing in an under1developed econom- are heav- dependence upon
agriculture3 old methods of production3 over1population3 lower income and lower
standard of living8 )ince marketing is consumer oriented3 it can *ring a*out man-
positive changes in the underdeveloped economies8
Marketing ena*les a nation to improve the standard of goods and services and
conse.uentl- *usiness values8 #onsumer gets the top1most priorit-8 Qualit- of
goods3 store displa-3 advertisement3 packaging3 etc8 are all directed towards the
satisfaction oft eh consumer8 Marketing helps in improving the standard of living8
Marketing provides *etter standard of living *- offering a wide variet- of goods and
services with freedom of choice3 and *- providing the customer a higher standard of
living3 *ecause it meets the consumer>s ph-sical as well as emotional needs8
Marketing generates emplo-ment *oth in production and in distri*ution area8 (
large num*er of people are emplo-ed *- modern *usiness houses to carr- out the
functions of marketing8 Marketing also gives an impetus to further emplo-ment
facilities8 'n order to ensure the finished product reach the customer3 it passes
through wholesalers and retailers and in order to man these numerous esta*lishments3
man- people get emplo-ed8 'n the a*sence of marketing3 the level of emplo-ment
should have not increased8
Marketing helps in developing economic resources8 )ince a *usiness firm
generates revenue and earns profits *- carr-ing out marketing functions3 it will
engage in e2ploiting more and more economic resources of the countr- to earn more
profits8 ,herefore3 marketing should *e given the greatest importance if the national
resources are to *e e2ploited full-8 Marketing determines the needs of the customers
and sets out the pattern of production of goods and services necessar- to satisf- the
needs of the customers8 Marketing also helps the traders to e2plore the e2port
market8
'.(. #B5.3TI6.- #9 MA17.TIN4
Marketing management is concerned with those activities which are necessar- to
determine and satisf- the needs of customers so as to achieve the o*<ectives of *usiness8
,hus3 the *asic goal of marketing management is to achieve the o*<ectives of the
*usiness8 ( *usiness aims at earning reasona*le long1term profits *- satisf-ing the needs
of customers8 'n the light of this statement3 we ma- state the o*<ectives of marketing
management as follows9
18 ,o create customers for the *usiness8 ,he marketing manager must attract
customers to *u- the firm>s products and services8 ,his will facilitate increased
sales8 Bew customers ma- *e attracted through advertisement and sales
promotion activities such as distri*ution of samples3 displa- of goods3 etc8
28 ,o satisf- the needs of the customers8 ,he marketing manager must stud- the
demands of customers *efore offering them an- goods or services8 )elling the
goods or services is not that important3 as the satisfaction of the customer>s needs8
Modern marketing *egins and ends with the needs of customers8
38 ,o determine marketing1mi2 that will satisf- the needs of the customers8 Product3
pricing3 promotion and ph-sical distri*ution should *e so planned as to meet the
re.uirements of different kinds of customers8
48 ,o generate ade.uate profits for the *usiness8 ,he marketing department is the
onl- department which generates revenue for the *usiness8 )ufficient profits must
*e earned as a result of sale of want1satisf-ing products8 'f the firm is not earning
profit3 it will not *e a*le to survive in the market8 Moreover3 profits are also
needed for the growth and diversification of the firm8
58 to earn goodwill for the *usiness8 ,o *uild up the pu*lic image of firm over a
period is another o*<ective of marketing8 ,he marketing department provides
.ualit- products to customers at reasona*le process and thus creates its impact on
the customers8 ,he marketing manager attempts to raise the goodwill of the
*usiness *- initiating image *uilding activities such as sales promotion3 pu*licit-
and advertisement3 high .ualit-3 reasona*le price3 convenient distri*ution outlets3
etc8 'f a firm en<o-s goodwill in the market3 it will increase the morale of its
sales1force8 ,he- will show greater lo-alt- and will develop a sense of service to
the customers8 ,his will further enhance the reputation of the *usiness8
68 ,o raise standard of living of the people8 Marketing management attempts to
raise the standard of living of the people *- providing them *etter products at
reasona*le prices8 't facilitates production and distri*ution of a wide variet- of
goods and services for use *- the customer8
'.5 3oordination Bet>een Marketing And #t8er 9unction!
,he persons interacting with the customer are commonl- known as )ales
Managers3 (dvertising managers3 )ales promotion Managers3 marketing %esearchers3
product Managers3 rand Managers3 #ustomer1)ervice managers3 etc8 ,he person
producing the product is known as Production Manager8 ,he person recruiting
people into the organsiation is known as Personnel Manager8
,he person dealing with financial aspects is known as Ainance Manager8 ,he task
of the marketing management is to coordinate with other departments and e2pect
reciprocal coordination from other departments8 ,hus3 if sales people feel that the
product is not up to the mark3 the marketing management should order a pro*e *- the
marketing research department which invaria*l- should include representation from
production department8 /therwise3 it would mean that sales persons were una*le to
sell the product and therefore put *lame on the defects in the product8 'n essence3
there should *e proper coordination *etween the marketing and other departments8
Ac8ie&ing 3oordination
Marketing concept forces *usiness firms to use an integrated approach in their
operations8 0ach firm should coordinate the activities of purchase3 production3
finance3 personnel and marketing departments to satisf- the needs and e2pectations of
customers8 ,hus3 marketing should not *e considered merel- as a fragmented
assortment of marketing functions8 0ach and ever- department *as to contri*ute for
the satisfaction of customers and this needs proper coordination *etween the
functioning of all departments8
#oordination with Purchase and Production Cepartments
Marketing department is responsi*le for sales forecasts which are communicated
to all the departments of the firm8 't has to prepare the time schedules for the
production and the purchase departments to inform them the dates *- which goods
are to *e manufactured and made read- for deliver-8 't informs the purchase and
production departments of the introduction of new su*stitutes and an- change in the
prices of competitive goods8 't also communicates a*out the .ualit- of goods
committed *- it to the customers8 'nformation is also to *e given in case of urgent
orders so that the purchase department is a*le to proceed immediatel- for the
purchase of materials re.uired to e2ecute the urgent orders8
)ince marketing department is in touch with the present and prospective
customers3 it should gather information a*out the change in taste or needs of the
people and pass it on to the purchase and production departments8 ,his will ena*le
the purchase department to purchase right t-pes of materials8 ,he purchase
department should inform the marketing department a*out the changes in the cost of
raw materials to facilitate the latter in fi2ing competitive prices8 ,here should alwa-s
*e harmonious relations *etween the purchasing and marketing departments8 ,he
marketing department must take assistance from the purchase department in
calculation of pricing of <o* contracts and in su*mitting *ids or .uotations so that
ade.uate profit margin is assured of such proposals8
3oordination >it8 9inance De+artment
0ver- enterprise maintains a separate department known as Ainance Cepartment
which is responsi*le for managing the funds of the enterprise8 ,here should *e
harmon- of relationship *etween the marketing and finance departments *ecause
marketing department can>t e2tend unlimited credit to the customers and credit
collections are to *e made *- the finance department8 ,he finance department should
help the marketing department to determine pricing3 cash discount and credit policies
under different conditions8 )o far as revenues are concerned3 finance is dependent on
the marketing policies and revenues are concerned3 finance is dependent on the
marketing policies and programmes3 and their administration8 ,otal sales revenues as
well as their timing significantl- affect the cash flow of the *usiness8 Product pricing3
customer credit policies3 terms and conditions of sales including trade3 cash and
.uantit- discount3 all have a vital *earing on the finances of the compan-8 /n the
other hand3 availa*ilit- of funds pla-s a crucial role in the planning and operation of
marketing programmes8 (ll promotional activities including advertising3 sales
promotion3 etc83 are dependent on the si:e of the *udget8 #ustomer credit and sales
administration policies are also closel- related to the firm>s financial policies8
3oordination >it8 )uman 1eource=Peronnel De+artment
#oordination *etween marketing and human resource departments is important
for matching the total organi:ation effort with market opportunit-8 ,he effectiveness
of marketing3 as of an- other function3 depends on the .ualit- of its personnel88
Marketing needs sincere3 aggressive and innovative kinds of people8 'ts personnel
should also *e adept in interpersonal and communication skills8 ,he personnel
specialist can *e of great assistance to the marketing manger in the recruitment3
selection3 training3 development and maintenance of a high .ualit- of sales force and
other marketing personal8 ( suita*le incentive scheme is also important to motivate
the sales1force8 ,he personnel manager can provide e2pert advice to the marketing
manager in designing an effective incentive scheme8
(. )a&e *ou undertood t*+e ,uetion!
18 (ll of the following are marketing management tasks 0X#0P,9
(8 marketing planning8
8 organising marketing activities8
#8 co1ordinating marketing activities8
C8 pro<ect development and anal-sis
28 &hich one of the following is an e2ample of a customer in an organisational
marketJ
(8 a homemaker who *u-s detergent
8 a consumer who hires a solicitor
#8 a shop owner who *u-s pencils for use in his shop
C8 a plant manager who *u-s petrol for her personal car
38 (n aggregate of people who3 as individuals3 have needs for products in a product
class and have the a*ilit-3 willingness and authorit- to purchase such products is
called a9

(8 market segment
8 target market
#8 customer group
C8 market
5. -ummar*
,o sum up3 an attempt should *e made to develop integrated marketing in the firm
to serve the customers *etter8 ,he marketing department can>t achieve the marketing
goals independentl-= it has to seek the cooperation of all other departments3 namel-3
purchase3 production3 finance3 legal3 personnel3 etc8 (ll these departments must focus
on the customer to achieve integrated marketing8
6. ./ercie
18 &hat according to -ou is the pro*lem area *etween marketing and finance
departmentJ #omment8
28 02plain the relevance of marketing concept to a monopol- organi:ationJ
#omment8
38 Ciscuss the provisions in the organi:ations> polic- which could prove to *e a
*enefit for an organi:ation8
48 ( compan- which is fora-ing into the states of /rissa3 ihar and Kharkhand for
marketing its toothpaste3 what support the entire organi:ation should giveJ
02plain8
0. 1e2erence
18 #undiff 3 08&80tol 3 Aundamentals of modern marketing3 Prentice ;all of 'ndia
Pvt8 ?td8 Bew Celhi8
28 Ce ruicker 3 )tewart A83 and )umme3 Mregor-83 make sure -our customers keep
coming *ack 3 ;arward usiness review3 1"!58
38 Beelamegham3 )83 Marketing management and the 'ndian 0conomic3 Eikas
Pu*lishing 4P5 ?td83 Bew Celhi 1"!78
48 Beelamegham3 )83 Marketing in 'ndia3 cases and %eading 3 Eikas 4P5 Pvt8 ?td8
Bew Celhi 1""28
Market egmentation
Unit tructure!
1. Introduction
2. "earning #$%ecti&e
'. Market egmentation
3.1. Micromarketing
3.2. %teps involve( in segmentation process
3.3. 8ases for market segmentation
3.4. 8ases for segmenting &usiness markets
3.#. 8enefits of segmentation
3.9. Market segmentation in various in(ustries
3.:. 4o+ to implement market segmentation
(. )a&e *ou undertood t*+e ,uetion
5. -ummar*
6. ./ercie
0. 1e2erence
1.Introduction!
Market segmentation is *ased on the generall- true concept that the market for a
product is not homogenous as to its needs and wants8 ,he opposite of market
segmentation is market aggregation3 which is looking into one mass market8 #oca1
#ola practiced mass marketing when it sold onl- one kind of coke in a 685 ounce
*ottle8 ,he arguments for mass marketing is that it creates the largest potential
market3 which leads to the lowest costs3 which in turn can lead to lower prices or
higher margins8 ?ong run production runs are more economical than short runs8
;owever3 man- critics point to the increasing splintering of the market3 which makes
mass marketing more difficult8 ,he more that market ma- *e aggregated3 the lower
the cost per thousand in *u-ing advertising to reach that mass market3 at least within
the range of certain promotional *udgets8 ;owever in order to attract more local and
specialised markets3 it *ecomes necessar- that the companies need to segment the
market8 ,hus segmentation involves su*stantial use of advertising and promotion8
,his is to inform market segments of the availa*ilit- of goods or services produced
for or presented as meeting their needs with precision8
Market segmentation is the process of disaggregating the total market for a given
product into a num*er of su*1markets8 ,he heterogeneous market is *roken up in the
process into a num*er of relativel- homogenous units8 ,he process is *ased on the
recognition that 4a5 an- given market or consumer group is made up of a num*er of
su*groups distinguished *- var-ing needs and *u-ing *ehaviour= and 4*5 it is feasi*le
to disaggregate the consumers into suita*le segments in such a manner that the
characteristics of the segmented groups would var- significantl- (M/BM segment
*ut would almost *e identical &',;'B segments8
)egmentation ma- also *e practised through specialisation in sales force in one
market or the greater diversification of distri*ution channels8 )egmentation is *ased
upon developments on the demand side of the market and represents a rational and
more precise ad<ustment of product and marketing effort to consumer or user
re.uirements8 (ccording to &endell )mith3 market segmentation consists of
heterogeneous market 4one characterised *- divergent demand5 as a num*er of
smaller homogenous markets in response to differing product preferences among
important market segments8
2. "earning #$%ecti&e!
6hen 'ou finish this unit* 'ou shoul( &e a&le to,
7n(erstan( the nee( for segmenting the markets.
7n(erstan( the importance of micro marketing.
7n(erstan( the steps an( process of market segmentation.
7n(erstan( the market segmentation in (ifferent in(ustries an(
0earn the (ifference &et+een consumer an( in(ustrial segmentation.
'. Market -egmentation!
( compan- can segment its market in man- different wa-s8 (nd the *ases for
segmentation var- from one product to another8 ;owever3 the first step is to divide a
potential market into two *road categories= ultimate consumers and *usiness users8 ,he
sole criterion for this first cut at segmenting a market is the customer>s reason for *u-ing8
+ltimate consumer *u- goods or services for their own personal or household use
and are satisf-ing strictl- non1*usiness wants8 usiness users are *usiness3 industrial3 or
institutional organi:ations that *u- goods or services to use in their own organi:ations3 to
resell3 or to make other products8
'.1 Micromarketing!
,he focus of mass marketing is on mainstream *rands8 ,-picall- these appeal to a
*road cross section of demographic groups8 ,he- are promoted using mass distri*ution
media using simple3 undifferentiated messages8 Promotional effort is shared evenl-
across the countr- and little effort is made to customise the product to reflect the
particular needs of individual consumers or the localities in which the- live8 ,he focus of
micromarketing is .uite different8 ?ess interested in market share than in customer
lifetime value3 the micromarketer uses profiling tools to *uild a careful picture of the
target audience for the product8
,he micromarketer is keen to recognise the different motivations that lead different
demographic segments to *u- each variant of the *rand and through different channels8
%eliance is on media3 which can *e highl- targetted 1 direct mail3 telephon-3 the 'nternet3
door1to1door distri*ution 1 man- of which can *e customised on a one1to1one *asis8
Micromarketers are completel- aware of differences in local culture and seek to
customise their proposition3 incentives and distri*ution mi2 *- location8 Quantitative
techni.ues such as profiling3 mapping3 scoring and clustering are used to define and reach
target audiences efficientl-8 ,he ma<or o*<ectives of micro marketing are9
+nderstand the characteristics of their customers
'dentif- the value and profita*ilit- of different customer segments
'dentif- the si:e and characteristics of the market in which the- operate8
)ome of the possi*le micro segments3 which are attractive for marketers3 include9
a. -egment Marketing
( market segment consists of a large identifia*le group within a market with similar
wants3 purchasing power3 geographical location3 *u-ing attitudes3 or *u-ing ha*its8 Aor
e2ample3 an auto compan- ma- identif- four *road segment= car *u-ers who are
primaril- seeking *asic transportation3 or high performance3 or lu2ur-3 or safet-8
)egment marketing offers several *enefits over mass marketing8 ,he compan-
can create a more fine1tuned product or service offering and price it appropriatel- for
target audience8 ,he choice of distri*ution channels and communication channels
*ecomes easier8 ,he compan- also ma- face fewer competitors in the particular segment8
B. Nic8e Marketing
( niche is a more narrowl- defined group3 t-picall- a small market whose needs
are not well served8 Marketers usuall- identif- niches *- dividing a segment into su*
segments or *- defining a group seeking a distinctive mi2 of *enefits8 Aor e2ample3 the
segment of heav- smokers includes those who are tr-ing to stop smoking and those who
don>t care8
(n attractive niche is characteri:ed as follows9 the customers in the niche have a
distinct set of needs9 the- will pa- premium to the firm that *est satisfies their needs= the
niche is not likel- to attract other companies 4competitors5= the niche gains certain
economics through speciali:ation= and the niche has si:e3 profit and growth potential8
oth small and large companies can practice niche marketing8
3. "ocal Marketing
,arget marketing is leading to marketing programmes *eing tailored to the needs
and wants of local customers groups 4trading areas3 neigh*ourhoods3 even individual
stores58 #iti*ank provides different mi2es of *anking service in its *ranches depending on
neigh*ourhood demographics8 ,hose favouring locali:ing a compan->s marketing see
national advertising as wasteful *ecause it fails to address local needs8
D. Indi&idual Marketing
,he ultimate level of segmentation leads to 6segments of oneF3 6customi:ed
marketingF3 or 6one1to1one marketingF8 Aor centuries3 consumers were served as
individuals8 ,he tailor made the suit and the co**ler designed shoes for the individual8
Much *usiness1to1*usiness marketing toda- is customi:ed3 in that a manufacturer will
customi:e the offer3 logistics3 communication3 and financial terms for each ma<or
account8
'.2.-te+ in&ol&ed in egmentation +roce!
(ccording to Philip Hotler3 the main steps involved in the segmentation process are as
follows8
18 (sses the differences *etween one customer group and the other in terms of their
needs and their likel- responses to the product and other marketing inputs of the firm8
28 Aind out *- what descriptive characteristics can consumers of a particular
disposition *e tagged on to a specified segment8
38 ased on the a*ove3 disaggregate the consumers into suita*le segments8
48 (nal-se and esta*lish whether it is desira*le and possi*le to formulate separate
marketing programs and marketing mi2es for the different segments8
58 Aind out which segments would *e happ- with the offerings of the firm and could
therefore *e considered as the natural targets of the firm8
68 )elect those segment which offer high potential and which would *e amena*le to
the offerings of the firm8
,hree stages are there for identif-ing market segments
a8 )urve-
*8 (nal-sis
c8 Profiling
a8 -ur&e* tage! ,he researcher conducts e2plorator- interviews and focus groups to
gain insight into consumer motivations3 attitudes3 and *ehaviour8 ,hen the researcher
prepares a .uestionnaire and collects data on attri*utes and their importance ratings=
*rand awareness and *rand ratings= product usage patterns= attitudes towards the products
categor-= and demographics3 geo graphics3 ps-chographics and media graphics of the
respondents8
*8 Anal*i tage! ,he researcher applies factor anal-sis to the data to remove highl-
correlated varia*les then applies cluster anal-sis to create a specified num*er of
ma2imall- different segments8
c8 Pro2iling tage! 0ach cluster is profiled in terms of its distinguishing attitudes3
*ehaviour3 demographics3 ps-chographics3 and media patterns8 0ach segment is given a
name *ased on its dominant characteristics8 /ne wa- to discover new segments is to
investigate the hierarch- of attri*utes that consumers e2amine in choosing a *rand8 15
rand1dominant hierarch-3 25 Bation1dominant hierarch-3 35 Price dominant3 and 45
,-pe dominant8

'.'. Bae 2or egmenting conumer market!
,wo *road groups of varia*les are used to segment consumer markets8 )ome researchers
tr- to form segments *- working at 6consumer characteristicsF9 geographic3 demographic
and ps-cho graphic8 ,hen the- e2amine whether these customer segments e2hi*it
different needs or product responses8 /ther researchers tr- to form segments *- looking
at consumer responses to *enefits sought3 use occasions3 or *rands8 /nce the segments
are formed3 the researcher sees whether different characteristics are associated with each
consumer1 response segment8
'.'.1.4eogra+8ic -egmentation!
Meographic segmentation calls for dividing the market into different geographical units
such as nations3 states3 regions3 counties3 cities or neigh*ourhoods8 ,he compan- can
operate in one or few geographic areas or operate in all *ut pa- attention to local
variations8 Aor e2ample3 Modre< )ara ?ee identified two different geographical
segments3 the south 'ndia and the other regions for its mos.uito repellant products8 Aor
)outh 'ndia3 the *rand 6KetF was popular and throughout 'ndia the 6Mood HnightF *rand
was the popular *rand8 )o LMood Hnight> was made the national *rand while LKet> was
made a regional *rand8
'.'.2.Demogra+8ic -egmentation!
)egmentation *ased on age of the customer group3 se23 famil- si:e3 race3 religion3
communit-3 language3 occupation3 educational level3 social level3 famil- life c-cle3
nationalit- and income level comes under demographic segmentation8 ,o consider an
e2ample3 the market for consumer goods in 'ndia has *een segmented *- marketers
*roadl- into three segments= the high1income group3 the middle class and the lower
income group8
'.'.'.P*c8ogra+8ic -egmentation!
'n ps-chographics segmentation3 *u-ers are divided into different groups on the *asis of
life st-le or personalit- and values8 People within the same demographic group can
e2hi*it ver- different ps-chographic profiles8
'.'.(.Be8a&ioural -egmentation!
'n *ehavioural segmentation3 *u-ers are divided into groups on the *asis of their
knowledge of3 attitude toward3 use of3 or response to a product8 Man- marketers *elieve
that *ehavioural varia*les1occasions3 *enefits3 user status3 usage rate3 lo-alt- status3
*u-er1readiness stage3 and attitude1are the *est starting points for consulting market
segments8
'.'.5.Multi-Attri$ute -egmentation @4eo-clutering<!
)everal varia*les are com*ined to identif- smaller3 *etter1defined target groups8 ,hus a
*ank ma- not onl- identif- a group of wealth- retired adults3 *ut also within that group
distinguish several segments depending on current income3 assets3 savings3 and risk
preferences8 /ne of the most promising developments in multi attri*ute segmentation is
called geoclustering8 Meo clustering -ields richer descriptions of consumers and
neigh*ourhoods than traditional demographics8 ,he groupings take into consideration 3"
factors in 5 *road categories8 415 0ducation and affluence3 425 famil- life c-cle3 435
ur*ani:ation3 445 race and ethnicit- and 455 mo*ilit-8
'.(. Bae 2or egmenting $uiine market!
)ome of the *ases for segmenting the consumer markets are also useful *ases for
segmenting *usiness markets8 Aor e2ample3 *usiness markets can *e segmented on the
geographic *asis8 )ome industries are geographicall- concentrated8 Aor e2ample3 firms
that process natural resources locate close to the source to minimi:e shipping costs8 (lso3
*usinesses can *e segmented on the *asis of demographics8 Aor e2ample3 the si:e of the
firm3 the firm>s t-pe of *usiness3 firm>s method of *u-ing3 etc8 )ellers also can segment
on the *enefits desired *- the *u-er and on product usage rates8 ,o get a feel for *usiness
market segmentation3 let>s look at segmenting *-
18 ,-pe of customer
28 )i:e of customer
38 ,-pe of *u-ing situation
Aor segmentation to *e useful3 the segments must *e %elevant3 (ccessi*le3 )i:ea*le3
Measura*le3 and Profita*le8
'.5. Bene2it o2 market egmentation!
18 /ne customer group can *e distinguished from another with in a given market and
ena*les to decide which segment of the market should form as target market8
28 Aacilitates in1depth stud- of the characteristics of the *u-ers8
38 ;elp marketing man to develop marketing programme on a predicta*le and relia*le
*ase8
48 More suita*le Lmarketing offers> for a particular segment can *e easil- developed8
58 )uita*le marketing mi2 can *e achieved8
68 Cue to concentrated efforts most productive and profita*le segments of markets can
*e achieved8
78 't helps to assess competitors> stand in the market8
!8 #ustomers and companies can choose each other for mutual *enefit and
satisfaction8
'.6.Market egmentation in &ariou indutrie!
'.6.1.-oa+ indutr*!
0aun(r' soap, ver- e2pensive detergents to wash things8 Meneral application3 *road
distri*ution3 low cost and medium advertising8 02amples9 Birma8 /H3 %in
%pecial laun(r' soap, ,o wash fanc- things with stress cleaning effect3 and Lwill do not
harm the e2pensive garments> as selling points8 Cistri*ution onl- to high1income
customers and retailers8 ;igh priced much advertising8 02amples9 )urf 02cel3 ,ide
0o+/gra(e toilet soap, Aor washing the *od-8 road application3 low price3 low .ualit-3
medium advertising and wide distri*ution8 02amples9 Bima3 ?ife*uo-
Premium toilet soap, Aor the lu2ur- customer group3 particularl- women and high
*racket income1groups8 )tress L*eaut-> as a selling point8 Cistri*ution onl- to high1
income customers and retailers8 ;igh price3 high .ualit- and heav- advertising8
02amples9 Cove3 (ramusk3 ?u2 international
Toilet soap for stores* offices an( restaurants, Aor customers and emplo-ees to wash
their hands8 )ell direct to the *usinesses8 Packaged in large num*ers per *o23 no
individual wrapping3 no advertising and low priced8
3n(ustrial soap, Aor washing hands after ver- dirt- work8 ;igher cleansing power than
Lcommercial> soap8 )old directl- to industr-8 Packaged in large num*ers per
'.6.2.Eatc8 indutr*!
,he ,itan #ompan- segments its market on the *asis of
18 ;eographic location of customers8 Quite common is the rural and ur*an divide in the
consumer market8 )onata range is segmented for smaller towns and rural areas where the
compan- is looking at *rand switches8
28 0ife st'le pattern9 Cigital Lfastrack> is designed especiall- for the trend- and sport-8
)o far digital watches have alwa-s had a stereot-ped image either around specification of
sports8 &ith 22 variants in four series3 ,itan>s new collection aim>s to provide a wide
choice for the fashion conscious 15124 age group8
38 8ase( on age, ,itan produces watches for children in the *rand L CashF and -outh8
48 8ase( on sex9 #ompan- produces variet- of products aiming and *eefing its presence
in the women market titan has launched variet- of products like sonata3 regalia3 for3 men
and has new range of fast track watches for woman aged 1!13$ a fashion *ranch to match
the aspirations of woman8
58 8ase( on income, ,itan launches variet- of products *ased on the purchasing power
of people the titan sold it products for the range from 45$D1 on wards to 3$3$$$8
'.6.'. Indian car indutr*!
'ndian car industr- can *e classified *ased on the price of the car3 into the small car or the
econom- segment3 mid1si:ed segment3 lu2ur- car segment and super lu2ur- car segment8
,he various models in the segments of the car market can *e classified as9
0conom- segment 9 Maruti /mni3 Maruti !$$3 Maruti (lto3 #hev- )park
Mid1si:ed segment 9 (m*assador Bova3 Aiat Palio3 Maruti Nen 0stilo3 ;-undai
)antro3
,ata 'ndica3 Maruti )wift3 Maruti &agon %3 #hev- (veo
+E(3
;-undai Met:
?u2ur- segment 9 Maruti )X43 ,ata 0state3 ,ata )ierra3 #hev- (veo
;onda #it-3 Mitsu*ishi ?ancer3 Aord Aiesta3 ;u-ndai
(ccent3
;-undai Eerna
)uper ?u2ur- segments9 Mrand Eitara3 Mercedes en: and other imported cars
'.0. )o> to im+lement market egmentation
Market segmentation is simpl- the process *- which we su*divide a large potential
market into smaller groups that have different *u-ing criteria and needs3 there*- ena*ling
marketing strategies which appeal to the needs of particular segments8
18 "dentif our market# &hat are the overall *oundaries of the market that -ou
intend to segmentJ 'n man- traditional marketing operations this is done at the product
development stage3 in newer *usiness 4e8g8 the software market5 this is often not done at
all with man- software products developed on a hunch or as a result of the drive of one
leading personalit-8 ;owever3 get as much information a*out -our intended target as
possi*le8
28 Esta$lish a %egmentation Matrix# 0sta*lish ke- market segmentation drivers for
a product3 this could *e *ased on age3 spending power3 usage of other products3
demographics3 geographic3 preferred pa-ment method3 the list is endless8 +se those3
which -ou consider to *e most important to define a few @master@ segments8
38 Prioriti&e# prioriti:e in line with the resources that -ou are a*le to devote to -our
marketing effort and the likel- impact of addressing each segment on an- supportDspare
parts services8
(. )a&e *ou undertood t*+e ,uetion!
18 Maruti knows that some people want vans3 estate cars3 or econom- cars8 'n this
case Maruti has found its markets to *e9
a8 heterogeneous
*8 undifferentiated
c8 focused
d8 homogeneous
28 ,he process of dividing a total market into market groups so that persons within
each group have relativel- similar product needs is called9

a8 segmenting
*8 differentiating
c8 target marketing
d8 concentrating
38 'f (udi cars focused all of its marketing efforts on professionals with over %s82
lakh a month gross earnings3 it would *e using a VVVVVV targeting strateg-8

a8 homogeneous
*8 undifferentiated
c8 multisegment
d8 concentration
48 Millette was the first marketer of disposa*le ra:ors to offer a product specificall-
designed for women8 ,his is an e2ample of segmentation using VVVVVVV
varia*les9

a8 Cemographic
*8 Ps-chographic
c8 Meographic
d8 Aamil- life c-cle
58 - offering #olgate for Hids 4attractive taste for children53 %egular #olgate3
#olgate ,otal and #olgate ;er*al toothpastes3 it is segmenting the market *ased
on9
a8 *enefits
*8 ps-chographics
c8 lifest-le
d8 demographics
5.-ummar*
)egmentation emphasi:es the importance of knowing and targeting current
customers8 Most companies do not have a proper *alance of targeting current
customers for retention and prospective customers for ac.uisition8 ecause of the
traditional emphasis on transactions rather than relationships and ac.uiring new
customers rather than retaining and growing current ones3 man- marketing programs
have not *een as cost1efficient as the- could *e8
6. ./ercie
18 Cevelop a market segmentation for the following9
a8 Cish washers
*8 Microwave ovens
c8 ?aptop computers
28 &hat are the factors that influence the development of a market segmentJ
02plain8
38 Cevelop a strateg- for segmenting industrial markets8 #ite e2amples8
48 #lassif- the lifest-les in 'ndia and *reak down the same for the *enefit of
manufacturers of consumer dura*les8
0. 1e2erence
18 Arank808%onald3 Mass-8A8&illiam3 Poram &ind3 6Market )egmentationF3 Prentice
4all of 3n(ia* 1"723 pp811311148
28 Cavar8)8%ustom3 6Modern Marketing ManagementF3 7niversal 8ookstall3 7
th
edition3
pp8147114"8
38 )tanton8K8&illiam3 0t:el8K8Michael3 &alker8K8rue3 6Aundamentals of MarketingF3
Mc ;ra+4ill 3nc83 1$
th
edition pp8 12311268
48 (lan8(8%o*erts3 6(ppl-ing the strateg- of market segmentationF3 8usiness 4ori1ons3
fall 1"613 #hicago8
58 &endell %8)mith3 6Product differentiation and market segmentation as alternative
marketing strategiesF3 <ournal of Marketing3 Bational Quarterl-3 Kul- 1"568
68 ucklin %03 )unil Mupta etal8 6 ( *rand>s e-e view of segmentation in consumer
*rand choice *ehaviourF3 <ournal of Marketing Research3 Eol8323 Ae*ruar- 1""53 pp8
6616"8
78 &-ner M(83 6)egmentation anal-sis3 ,hen and BowF3 <ournal of Marketing
Research3 Eol873 winter 1""53 pp84$1418
!8 %o-8 6Mrowth in financial servicesF3 8usiness To(a'3 Ae*ruar- 71213 1""!8
"8 Mishra %B8 6%ole of service sector in our econom-F3 3n(ian Management3 Eol83"3
Bo873 Kul- 2$$$3 pp8541558
1$8 Bara-an Hrishnamurth-3 6,his line is alwa-s *us-F3 )(vertising an( Marketing3 15
March 2$$$3 pp8"11"28
118 #handrasekar H8)3 6)trategic management in the 'ndian pharmaceutical industr-9
Aocus on marketing strategiesF3 (lagappa +niversit- 4unpu*lished thesis53 2$$18
Poitioning and Di22erentiation
Unit tructure!
1. Introduction
2. "earning #$%ecti&e
'. Poitioning and Di22erentiation
3.1 Principles of positioning
3.2 Errors in positioning
3.3 %trategies for positioning
3.4 4o+ to position a &ran(
3.# Positioning strategies in consumer (ura&les
3.9 Positioning para(igms
3.: )(vantages of positioning
3.= >isa(vantages of positioning
3.? Examples of positioning
3.1@Pro(uct (ifferentiation varia&les
3.11Pro(uct (ifferentiation strategies
(. )a&e *ou undertood t*+e ,uetion
5. -ummar*
6. ./ercie
0. 1e2erence
1. Introduction!
(l %ies and Kack ,rout3 proponents of the concept3 defined positioning as
6Positioning starts with a product8 ( piece of merchandise3 a service3 a compan-3 an
institution or even a person11118 ut positioning is not what -ou do to -our product8
Positioning is what -ou do to the mind of the prospect8 ,hat is3 -ou position the product
in the mind of the prospectF8 Positioning is the art of designing the compan->s offering
and image to occup- a distinctive place in the target markets> mind8 ,he end result of
positioning is the successful creation of a market1 a focused value proposition3 cogent
reasons wh- the target market should *u- the product8 ,he significance of product
positioning can *e understood from Cavid /gilv->s words9 6,he results of -our
campaign depend less on how we write -our advertising than on how -our product is
positioned8 /ften factors like lu2ur-3 econom-3 .ualit- and fashion form planks for
positioning8 &hile positioning a *rand the leaders position has to *e reckoned8 Product
differentiation in a wa- is the prelude to product positioning8 ,he- are interrelated
strategies and are emplo-ed in close alignment with each other8
2. "earning #$%ecti&e!

6hen 'ou finish this unit* 'ou shoul( &e a&le to,
7n(erstan( the principles an( some errors in positioning .
7n(erstan( the positioning a(vantages an( (isa(vantages.
7n(erstan( the examples of positioning in the 3n(ian context
7n(erstan( the pro(uct (ifferentiation varia&les an(
0earn the effective strategies to &e applie( +ith respect to (ifferentiation .
'. Product +oitioning and Di22erentiation!
,he product can *e positioned for an e2clusive well to do segment of the market3
it can *e positioned for men3 for children3 for fun loving -outh3 for health conscious
market3 it can *e a claim on lu2ur-3 a claim on distinctiveness3 a claim of convenience3
econom-3 novelt-3 usage8 ,he marketer cannot invent a positioning theme when he is
read- to enter the market with his product8 ;e should have alread- decided what his Lcash
on> point should *e where he should introduce his product for whom and on what
distinctive claim he should go around and promote his product8
,hus as a comprehensive definition positioning can *e viewed as
,he position of a *rand is the perception it *rings a*out in the mind of the
target customer8
,his perception reflects the essence of the *rand in terms of functional and
non1functional *enefits in the <udgement of that consumer8
(ll products can *e differentiated to some e2tent8 ut not all *rand differences
worthwhile or meaningful8 ( difference is worth esta*lishing to the e2tent that it satisfies
an- of the following criteria8
Im+ortant1 the difference delivers a highl- valued *enefit to a sufficient
num*er of *u-ers8
Ditincti&e1 the difference is delivered in a distinctive wa-8
-u+erior the difference is superior to other wa-s of o*taining the *enefit8
Preem+ti&e1 the difference cannot *e easil- copied *- competitors8
A22orda$le- the *u-er can afford to pa- for the difference8
Pro2ita$le the compan- will find it profita*le to introduce he difference8
'.1.-ome o2 t8e +rinci+le o2 +oitioning are!
18 't is *etter to *e the first than to *e late8 ,he selectivit- of the mind is such that the
pioneer will alwa-s have a presence in the mind1set of the consumers8 ;ence
companies like ,hums up3 (mul3 Xero2 etc83 are still in the minds of the
consumers8
28 'n case not the first3 then the compan- should *e a*le to create a new categor- *-
making even a small change in the marketing mi2 elements8 ('&( and (H('
created a pricing strateg- through replacement market and got into the minds of
the consumers8 Maruti created a small car market through product innovation8
38 't is important to understand the position and strategies of the competitors8 't is
clear that the competitors> strengths and weaknesses should *e known to the
compan-8 ritannia did the repositioning e2ercise to overcome the competition
and similarl- ,ata 'ndica gave a scare to Maruti when the- introduced their small
car in the market8 #ertain strategies usuall- adopted *- competitors for
positioning
)trengthen its own current position in the customer>s mind8
,he famous advertising line from (vis acknowledged its position in the car
rental *usiness and claimed 6 &e are num*er two8 &e tr- harder8F
Mra* an unoccupied position8
#omplan is advertised as the 6complete food for the growing childrenF8
Ceposition or reposition the competition
02clusive clu* strateg- which is the ,hree ig idea and implies that those in
the clu* are the *est8
48 Positioning using an eas- name is ver- important in this conte2t8 Bames like ?M
is eas- to pronounce as compared to the earlier name3 6MoldstarF8 )imilarl-3 ata
is found to *e recalled *etter than ?ee#ooper8
'.2. Poitioning error!
(s companies increase3 the num*er of claims for their *rand3 the- risk dis*elief and a
loss of clear positioning8 'n general3 a compan- must avoid four ma<or positioning errors8
18 Under +oitioning ! )ome companies discover that *u-ers have onl- a vague idea of
the *rand8 ,he *rand is seen as <ust another entr- in crowed market place8
28 #&er +oitioning! u-ers ma- have too narrow an image of the *rand8 ,hus a
consumer might think that diamond rings at ,iffan- start at R5$$$ when in fact
,iffan- now offers afforda*le diamond rings starting at R1$$$8
38 3on2ued +oitioning ! u-ers might have a confused image of the *rand resulting
from the compan->s making too man- claims or changing the *rand>s positioning too
fre.uentl-8
48 Dou$t2ul +oitioning ! u-ers ma- find it hard to *elieve the *rand claims in view of
the product>s features3 price3 or manufacturer8
'.'. Di22erent t*+e o2 +oitioning trategie!
18 Attri$ute +oitioning! ( compan- position itself on an attri*ute3 such as si:e or
num*er of -ears in e2istence8 %a-mond>s and other companies3 with long period of
service3 appealing to the customer that the- had *een serving the customer for .uite a
long time8 Philips launched tu*e lights stating that it will consume onl- less
electricit-8 )ome having an attractive attri*ute3 such as 6environmentall- friendl-3F
e8g83 ;ero ;onda launched its two wheeler vehicle stating that it is environment
friendl-8 ,his strateg- is widel- used now for food products8 Aor e2ample )unflower
and )affola introduced oil with one common denominator the- contain no
cholesterol
28 Bene2it +oitioning! ,he product is positioned as the leader in a certain *enefit8
Earious automo*ile products like ;ero ;onda position themselves as *etter in
mileage8 ;ero ;onda>s advertisement 6Aill it3 )hut it and forget itF is evidence to the
*enefit offered to the customers8
38 Ue or a++lication Poitioning! Positioning the product as *est for some use or
application8 ,he )u:uki )amurai 6no pro*lem *ikeF is a classic e2ample in this
categor-8 CL#old was positioned as a vapouru* for adults8
48 Uer +oitioning 9 Aocussing the product as *est for some user group8 usiness toda-
position itself as a *usiness maga:ine used *- the top managers8
58 3om+etitor $aed +oitioning! ,he product claims to *e *etter in some wa- than a
named competitor8 Aor e2ample3 Pepsodent position itself as *eing a*le to reduce the
num*er of germs in the teeth of the users when compared to the other *rands of
toothpaste8 Pepsi used 6nothing official a*out itF to counter the official drink status of
#oca1#ola during the #ricket &orld #up in 1""68
68 Product categor* +oitioning! ,he product is positioned3 as the leader in a certain
product categor-8 (.uafresh position its dental paste not as toothpaste *ut rather a
mouth paste8
78 Fualit* or Price +oitioning! ,he product is positioned as offering the *est value8
a<a< scooters position itself as a product that offers value to the customers> mone-8
'n the automotive field3 positioning *- price and .ualit- is common8 'n recent -ears3
6lu2ur-F cars that accentuate .ualit- and carr- comparativel- high prices have
proliferated= 'nfiniti and ?e2us are the latest noteworth- entries8 ;owever3 the makers
of lu2ur- cars are having trou*le differentiating themselves from each other with
respect to important attri*utes such as performance3 comfort3 and safet-8 (s a result3
consumers are confused8
!8 Poitioning in relation to a target market 9 %egardless of which positioning strateg-
is used3 the needs of the target market alwa-s must *e considered8 ,his positioning
strateg- doesn>t suggest that the other ones ignore target markets8 %ather3 with this
strateg-3 the target market rather than another factor such as competition is the
focal point in positioning product8 Bestle offers different products using this strateg-
those address different consumers> desires regarding taste3 calories and price8
'.(.)o> to +oition t8e $rand!
,o position the *rand a techni.ue called perceptual mapping is commonl-
used8 ,his techni.ue involves stud-ing the consumers@ perception of the product and
competitors *rands and *ased on it identif-ing vacant slots8 )pecificall- this involves the
following9
415 )tud-ing the ideal product perception this involves stud-ing *oth tangi*le and
intangi*le attri*utes that a customer looks for while *u-ing a product8 (mong the
tangi*les are product features3 performance levels3 st-le and aesthetics of the
product packaging3 product components and even price and distri*ution8 ,he
intangi*les will include the services that a customer looks for3 like after sales
service3 training on how to use the product3 financing assistance etc8
425 Met the customers to rank these attri*utes in the order of importance to them8
435 #ustomer>s knowledge of the competitors *rands8
445 ;ow do the competitors *rand favour in the ideal product map8 ;ere the
customers are asked to assess competitor *rands and specif- how close or far the-
are on each attri*ute to the ideal product8
455 ased on the assessment of competitor *rands on the ideal product map3 product
managers identif- vacant slots and then *uild the positioning strateg- *- filling
these up8 't is important to note here that if an attri*ute sought *- a customer is
not high on hisDher priorit- and the firm feels it has the strength in it and should
*e considered *- the customers3 the firm can adopt a strateg- to help change this
perception8 ut the customer perceptions should *e continued for3 changing
customer perceptions in a long drawn out strateg- involving su*stantial resources8
(fter this perceptual mapping is done3 the marketer uses statistical techni.ues to
arrive at a position8
'.5.Mot common +oitioning trategie in t8e conumer dura$le ector!
1. Bene2it=ue +oitioning!
,he positioning strategies adopted *- consumer dura*le depend a lot on Lusage>3
Leconom-> and Lcorporate identit-> of which a well esta*lished *rand surel- pro<ects
the identit- of the product in terms of L which corporate house the product is from>8
enefit or usage is the ne2t positioning strateg- used8 Aor e8g89 1 P? #onverti
pro<ects out the multi usage of the product8 ,his strateg- is *ased on identif-ing the
possi*le uses to which the firm>s *rand can *e put to8 'n a wa- it ma- appear same as
use situations *ut differs from it *ecause this talks on all the possi*le uses of a
product or *rand8 Aor e8g89 1 since video cassette recorders 4E#%s5 could *e used in
pla-ing3 recording and regulating the pace at which the different scenes can *e
watched 4like pause3 forward etc5 most customers saw it as a distinct development
over the video cassette pla-er and the demand for E#% *oomed8
2. 3om+etitor related +oitioning!
,his is the strateg- of placing a firm>s *rand ne2t to the leader in the market and
tr-ing to uproot it on a specific tangi*le varia*le8 8 ,o fend off rival makers of
microprocessors3 'ntel corp8 launched a campaign to convince *u-ers that its product
is superior to competitors8 ,he compan- even paid computer makers to include the
slogan3 6'ntel insideF3 in their ads8 #oca1#ola and Pepsi1#ola compete directl- with
each other in virtuall- ever- element of the marketing mi2 4even cele*rit- endorsers58
Aor e8g89 1 /nida was positioned against the giants in television industr- through this
strateg-8 Aor /nida colour ,E was launched on the message that all others were
clones and onl- /nida was the leader and the message said 6 the *oss wasn>t late= it
was others who arrived in a hurr-F and later followed it with the env- concept8 ,oda-
/nida has *een a*le to uproot all the -ester-ears leaders in the ,E market8
'. "i2et*le +oitioning!
( firm ma- even position the *rand as a lifest-le contemporar- or futuristic8 Man- of
toda->s new kitchen appliances like microwave ovens are positioned accordingl-8
(. Poitioning $* cor+orate identit*!
,his t-pe of positioning is seen ver- much with consumer dura*les when a tried and
trusted corporate identit- or source which has *ecome a household name for products
like Philips for radios and lamps is used to impl- the competitive superiorit- of newer
products *earing that name9 Philips mi2ies3 Philips electric irons3 Philips refrigerator8
Modre< #ompan- also often uses this strateg- in positioning their product8 -
stressing on the 6Modre< productF8 P? too uses this corporate identit-8 't sa-s 6Arom
P?F8
5. Poitioning $* &eratilit* o2 uage!
Man- consumer dura*les are positioned on the *asis of the versatilit- of usage8 Aor
e8g89 1 the Prestige pressure pan is positioned in such a wa- that the product is
designed specificall- to give the *enefit of versatile usage to the consumer8
6. -urrogate +oitioning!
'n this kind of positioning the product can>t *e positioned differentl- on the *asis of
attri*utes *ut differentiated *- positioning them on the surrogates for the attri*utes8
,he claim would *e that our product is *etter than or different from others8 Aor e8g89 1
the Autura pressure cooker is advertised *ased on these surrogate ideas8 't uses two
kinds of surrogate ideas Lpredecessor> the popular and trusted ;awkins
association and L0ndorsement> *ecause 'ndians admire &estern designs and are
impressed *- the western names8
'.6.Poitioning +aradigm!
Monopolistic competition is prevailing in the contemporar- markets8 Product
differentiation and price differentiation are the main features of the monopolistic
competition8 ,he marketer must reinterpret the product differentiation as a meaningful
consumer *enefit8 )uppose a compan- has identified four alternative positioning
platforms technolog-3 cost .ualit- and service as shown in following ta*le5818 't has one
ma<or competitor8 oth companies stand at ! as technolog- 41Ylow score3 1$Yhigh
score53 which means the- *oth have good technolog-8 ,he competitor has a *etter
standing on cost 4! instead of 658 ,he compan- offers higher .ualit- than its competitor
4! compared to 658 Ainall-3 *oth companies provide *elow average service8
't would seem that the compan- should go after cost or same to improve its
market appeal8 ;owever3 other considerations arise8 ,he first is how target consumers
feel a*out improvements in each of these attri*utes8 #olumn 4 indicates that
improvements in cost and service would *e of high performance to customers8 ut can
the compan- afford to make the improvements in cost and service3 and how fast can it
provide themJ #olumn 5 shows that improving service would have high afforda*ilit- and
speed8 ut would the competitor *e a*le to match the improved serviceJ #olumn 6 shows
that the competitor>s a*ilit- to improve service is low8 ased on this information3 column
7 shows that the appropriate actions to take with respect to each attri*ute8 ,he one that
makes the most sense is for the compan- to improve its service and promote this
improvement8
Positioning through differentiation
Z;1high M1medium ?1low
'.0.Ad&antage o2 +oitioning!
't helps to focus the product on a specific target customer8
't offers the product a new appeal in the market8
a distinctive place can *e occupied in the target markets> mind8
)uccessful creation of the market8
'.G.Diad&antage o2 +oitioning!
't is not possi*le to offer a product wholl- for a specific t-pe of customers8
,he wrong positioning has affected a num*er of products8
'.H../am+le o2 +oitioning in t8e Indian conte/t!
415
#ompetitive
advantage
425
#ompan-
standing
435
#ompetitor
standing
445
'mportance
of
improving
standing
;1M1?
455
(fforda*ilit-
and speed
;1M1?
465
#ompetitor>s
a*ilit- to
improve
standing
;1M1?
475
%ecomme
nded
action
,echnolog-
#ost
Qualit-
)ervice
!
6
!
4
!
!
6
3
?
;
?
;
?
M
?
;
M
M
;
?
;old
Monitor
Monitor
'nvest
,he Positioning of Mreat shake
1;ealth drink3
1(gainst milk
1)o-a milk was positioned against a universal product= milk3 appealing to a
health conscious market8 ;owever unpalata*ilit- to 'ndian tastes made the
product a failure8
,he Positioning of #omplan9
(gainst milk and as a health *uilder 3 )uperior over milk
,he Positioning of (mul Milk powder9
1(gainst milk3
1#onvenient and read- su*stitute to milk and not as one superior to milk
,he Positioning of Maruti +d-og9
- (s a vehicle that displa-s the customers personalit-
- ( car which is Poung and 0nergetic
1 ( vehicle which had comfort and relia*ilit- and a ?ow cost of /peration
'.1I.Perce+tual ma++ing!
Perception is the meaning added *- an individual to the information that has *een
o*tained from the environment8 ,his forces a consumer to create his own ideas or sa-3
perception a*out a *randDproduct8 'f consumer feels that *randed footwear are costl-3
heDshe will alwa-s tr- to *u- from unorganised market8 )imilarl-3 a customer might feel
that %a-mond>s products are of high .ualit- without even having an e2perience of the
product8 &hen a *rand creates a proposition3 it chooses a position3 which will ena*le it to
differentiate itself from other *rands8 (s consumers get used to this position3 a close
association develops *etween the *rand and the proposition8 )u*se.uentl-3 this
association defines what the *rand stands for and it is important for a *rand to continue
and nurture that proposition or develop on it8 ,his can *e done through mapping the
perceptual thinking of the prospective customers8 ,his method is known as perceptual
mapping8
'n order to construct a perceptual map for sa- read-made garments= it is necessar-
first to identif- the features that are more widel- e2pected *- the customer8 ased on the
market research and from the inputs of the e2pertsDe2ecutives3 following ten dominant
features have *een identified9
&rinkle free
Aashion
Perfect fit
Qualit- fa*ric
Mood looks
(ttractiveness
#olor options
Popularit-
)titching and
0conomical
&ith the a*ove features3 the perceptual map can *e constructed *- taking the two
outstanding features in the two a2es as in the following figure8 ,hose features can *e
Qualit- and Price8

Arom the perceptual map3 it is clear that the *rands *earing foreign impressions are
falling in the first .uadrant where the features like &rinkle free3 fashion3 .ualit- fa*ric
etc83 are found8 #olor plus3 Provouge *rands are l-ing in the second .uadrant which
denotes the features like perfect fit3 colour options3 popularit- etc8 ,his .uadrant gives
less consideration to .ualit-8 ,he features like economical is taken in fourth .uadrant
where the *rands like 02cali*ur and Par2 are plotted8 ,his plotting of the perceptual map
gives a direction for an- new entrant in the read-made garments a*out the consumer
ps-che8 Aeatures must essentiall- translate into *enefits in the consumer>s mind3 and *e
offered at a price where the price1value e.uation meets3 is the lesson for the new entrant
in this sector8
;igh Price
;igh Qualit-
?ow price
?ow .ualit-
&rinkle free
Aashion
Qualit- fa*ric
(ttractiveness
Mood looks
Perfect fit
#olour options
popularit-
)titching
Provouge .
#olour plus .
. Peter 0ngland
. Nodiac
. Ean ;uesen
. Par2
0conomical
.02cali*ur
. #am*ridge
. Humar
. (rrow
. ?ouis Phillipe
Perceptual map for read-made garments
'.11. Product di22erentiation 6aria$le!
Product differentiation has man- differentiation varia*les3 the- are
Aorm
Aeatures
Performance
#onformance
Cura*ilit-
%elia*ilit-
%epaira*ilit-
)t-le
Cesign
9orm!
Man- products can *e differentiated in form3 the si:e3 shape or ph-sical structure of a
product8 #onsider the man- possi*le forms taken *- products such as aspirin8 (lthough
aspirin is essentiall- a commodit-3 it can *e differntiated *- dosage si:e3 shape3 coating3
action time and so on8 ,he +P) as is *eing used in Personal #omputers and other
electronic devices have undergone such changes in si:e that from a var- *ulk-
e.uipment3 one cannot even see an +P) now8 ,o that e2tent miniaturisation has taken
place in this sector8
9eature!
Most product can *e offered with var-ing features3 characteristics that supplement the
products *asic function8 eing the first to introduce valued new features is one of the
mose effective wa-s to compete8 #ompanies must also think in terms of feature *undles
or packages8 Curing 1""21"33 when Hinetic ;onda conducted market research3 it showed
that most of the e2isting two1wheelers were not user friendl-8 )tarting was the pro*lem to
the user8 Hinetic ;onda *rought in a scooter which had an electronic ignition dispensed
awa- with the *oring kick1start routine as a stand1*-8 'n addition the new model
contained a whole new range oof features including automatic gear shifting3 choke3 *uilt1
in indicators and a stream lined aerod-namic design8
,he ma<or differentiation through features as evident from #olour ,elevision industr-
are9
)creens are modified into super flat ones from the ususal tinted screens8
'nteractive picture set modes
ass3 tre*le3 3C )urround effects3 Col*- noise reduction3 pitch ad<ustments
Bum*er of channels nearing 21$ in ('&( and 2$$ in Honka8
;igh Cefinition ,elevisions3 Plasma televisions
Per2ormance Fualit*!
Performance .ualit- refers to the level at which the products> primar- characteristics
operate8 ,his is to *e focussed onl- when the compan- is certain that offering higher
product performance produce higher profita*ilit-8 Qualit- link to profita*ilit- does not
mean that the firm should design the highest performance level possi*le8 ,here are
diminishing returns to ever1increasing performance8 ,he manufacturer must design a
performance level appropriate to the target market and competitors performance levels8
3on2ormance Fualit*!
#onformance .ualit- is the degree to which all the produced units are identical and meet
the promised specifications8 ,he pro*lem with low conformance .ualit- is that the
product will disappoint some *u-ers8 Maruti for instance offers specific technological
product differentiations *ased on the model *ought *- the customers8 Multi point fuel
in<ections3 (ll (luminium #om*ustion 0ngine are onl- availa*le with specific models8
'A washing machines are still famous mainl- *ecause of the fact that their front loading
machines have *een performing without an- defects8
Dura$ilit*!
't is the measure of the products>s e2pected operating life under natural or streeful
conditions3 is a valued attri*ute for certain products8 u-ers will generall- pa- more for
vehicles and kitchen appliances that have a long1lasting reputation8 ,inting machines are
*eing introduced *- (sian Paints to differentiate their shades since actual handling is not
possi*le to show the dura*ilit- of the paints8 ,his has also helped solve the logistics
pro*lem as the dealers can now stock onl- the *ase material and thus save almost 2$125T
in the working capital c-cle8
1elia$ilit*!
%elia*ilit- is a measure of the pro*a*ilit- that a product will not malfunction or fail3
within a specified time period8 u-ers normall- will pa- a premium for more relia*le
products8 Cunlop car t-res showed their relia*ilit- *- advertising the special kind of
t-res for each *rand8 Aor a Maruti3 a t-re was speciall- desinged for its front wheel drive8
(n e2tra wide t-re was desinged for Premier Padmini *ecause it goes through a lot of
wear and tear on cit- roads and for the (m*assador3 the t-re walls with e2tra ru**e to
take the e2tra weight8
1e+aira$ilit*!
%epaira*ilit- is a measure of the ease of fi2ing a product when it malfunctions or fails8
u-ers prefer products that are eas- to repair8 (n automo*ile made with standard parts
that are easil- replaced has high repaira*ilit-8 #hannel differentiation in terms of num*er
of Maruti service centres made Maruti a successful one8
-t*le9
)t-le descri*es the product>s look and feel to the *u-er8 u-ers are normall- willing to
pa- a premium for products that are attractivel- st-led8 #ar *u-ers pa- a premium for
&eekender models *ecause of their e2traordinar- look8 &e must include packaging as a
st-ling weapon3 especiall- in food products3 cosmetics3 toiletries3 and small consumer
appliances8 ,he package is the *u-ers first encounter with the product and is capa*le of
turning the *u-er on or off8
Deign!
(s competition intensifies3 design offers a potent wa- to differentiate and position a
compan->s products and services8 Cesign is the factor that will often give a compan- its
competitive edge8 Cesign is the totalit- of features that affect how a product looks and
functions in terms of customer re.uirements8 Cesign is particularl- important in making
and marketing dura*le e.uipment3 apparel3 retail services3 and packaged goods8 )ome
companies confuse design with st-ling and think that design is a matter of enclosing an
average product in a st-lish casting8 /r the- think that relia*ilit- is something to catch
during inspections rather than designing it into the manufacturing process8
Aor e2ample3 for man- people3 *rushing is a ritual to which the- pa- relativel- little
attention8 (s a conse.uence3 man- *rushes are used well past the point when their
*ristles are worn and are no longer effective8 ,ooth*rush maker /ral discovered a
wa- to capitali:e on this widespread ha*it8 ,he compan-3 *- introducing a patented *lue
d-e in the center *ristles of its tooth*rushes found a wa- to have the *rush itself
communicate to the customer8 (s the *rush is used3 the d-e graduall- fades8 &hen the
d-e is gone3 the *rush is no longer effective and should *e replaced
)imilarl-3 Kohn )cull- marketing team at Pepsi cola used packaging as a wa- to
differentiate Pepsi from #oke8 ,he- created a distinct3 if temporar- advantage for Pepsi
*- designing plastic *ottles that where lighter and thus easier for customers to carr-3 than
the heav- glass *ottles of the time8 ,he- called it the *eaut- on the move and that it not
onl- made carr-ing soda easier3 *ut it also reduced the advantage of #oke>s well known
contoured *ottle8 (t the time 3it was difficult to produce plastic *ottles in that shape8
'.12.38aracteritic o2 di22erentiation trategie
,here are a variet- of wa-s to differentiate8 &hatever the route3 the successful
differentiation strateg- should have three characteristics8
Menerate customer value
Provide perceived value
e difficult to cop-
Cifferentiation strateg- needs to add value for the customer8 ( distinction is
needed *etween apparent value and actual value8 ,oo often a point of difference with
apparent value is not valued *- the customer8 ,he one stop financial service vision was
not valued *- customers the- wanted e2cellence and competence from investment
managers3 and aspirin products had much less value in the market than was hoped8 ,he
value of the a-er name did not transfer to new product classes8 /ne ke- to a successful
differentiation strateg- is to develop the point of differentiation from the customer>s
perspective rather than from the perspective of the *usiness operation8 ;ow does the
point of differentiation affect the customer>s e2perience of *u-ing and using the productJ
Coes it serve to reduce cost3 add performance3 or increase satisfactionJ
(nother method for differentiating a product is to emplo- market research to
s-stematicall- understand the customer and to test ideas and assumptions8 /ne role of
market research is to insure that the value added will <ustif- the price premium involved8
( differentiation strateg- is often associated with higher price3 *ecause it usuall- makes
price less critical to the customer and *ecause differentiation usuall- costs something8
,he .uestion is whether that price premium works in the marketplace8
,he perceived value pro*lem is particularl- acute when the customer is not
capa*le of evaluating the added value8 #onsider the airline safet- or the skill of a dentist8
,he customer is una*le to evaluate them without investing a significant time and effort8
%ather than e2pand such effect3 the customer will look for the signals such as the
appearance of the aircraft or the professionalism of the dentist>s front office8 ,he task is
then to manage the signals or the cues of value added8 +ser association and endorsements
can help8 /ral is the tooth*rush recommended *- the dentists and (ir <ordan is
endorsed *- Michel <ordan8
,he point of differentiation needs to *e sustaina*le8 ( value added such as 241
hour support is relativel- eas- to cop- if it proves successful8 ,he challenge is to create
differentiation strategies that are difficult to cop-8 /ne reason to identif- two strategic
thrusts s-nerg- from the previous chapter and first mover advantage in the ne2t is that
when the- are com*ined with a differentiation thrust3 sustaina*ilit- is more likel-8 &hen
the point of differentiation involves a total organisational effort with a comple2 set of
assets and skills3 it will *e difficult and costl- to cop-3 especiall- if there is a d-namic
constantl- evolving .ualit- to it8 ( creative organisation with heav- %OC investment3
such as that of Microsoft3 will inhi*it duplication8 ,he .ualit- option and *uilding strong
*rands can also re.uire a total organisational effort8

(. )a&e *ou undertood t*+e ,uetion!
18 (n attri*ute of a product that is desired *- customers in a target market and which
competing products cannot match is termed VVVVVVVVVVVV
a8 a strength
*8 a differential advantage
c8 a selling point
d8 a *enefit
28 )oft )have is a shaving cream aimed particularl- at women8 ,he activities and
decisions involved an developing and maintaining the product concept in *u-ers
minds is called9
a8 the promotion mi2
*8 the product mi2
c8 product positioning
d8 product promotion
38 ( product@s VVVVVVVVV is the place it occupies in the minds of consumers relative
to competing *rands9
a8 segment
*8 position
c8 attri*ute
d8 image
5. -ummar*
Man- kinds of efforts that were given to produce differentiation in the product
*eing offered have failed8 Aor e2ample &estin )tamford hotel in )ingapore advertises
that it is the world>s tallest hotel8 ut the tourists were least *othered a*out the height of
the hotel8 ;ence each firm needs to develop a distinctive positioning for its market
offering which is ver- much relevant in the *enefit *eing provided *- the product8 ,ake
the case of an e2cellent positioning strateg- *eing used *- Eolvo 4station wagon58 ,he-
are aiming at the safet- conscious upscale families and the positioning strateg- is ver-
much related with the *enefits *eing offered which are dura*ilit- and safet-8 ,he-
position the product as the 6safest3 most dura*le wagon in which -our famil- can ride8F
Cifferentiation is the act of designing a set of meaningful difference to distinguish the
compan->s offering from competitor>s offerings8 Most profita*le strategies are *uilt on
differentiation= offering customers something the- value that competitors don>t have8 ut
most companies in seeking to differentiate them3 focus their energ- onl- on their products
or services8 'n fact3 a compan- has the opportunit- to differentiate itself at ever- point
where it comes in contact with its customers from the moment customers reali:e that
the- need a product or service to the time when the- no longer want it and decide to
dispose of it8 't is *elieved that if companies open up their creative thinking to their
customers entire e2perience with a product or service what the compan- call
consumption chain the- can uncover opportunities to position their offerings in wa-s
that the-3 and their competitors3 would never have thought possi*le8 Ph-sical products
var- in their potential for differentiation8 Product differentiation has a close linkage with
product positioning8 't is in a wa- a prelude to product positioning8 (t one e2treme we
find products that allow little variation9 salt3 steel3 paracetamol8 Pet even here3 some
differentiation is possi*le8 ;?? makes several *rands of laundr- detergent3 each with a
separate *rand identit-8 (t the other e2treme are products capa*le of high differentiation3
such as automo*iles3 commercial *uildings3 and furniture8 Cuplication *- competitors
re.uires not onl- a*ilit- *ut will8 'ncreasing the investment or risk involved will
discourage competitors8 'f3 for e2ample3 multiple points of differentiation are involved3
duplication will *e more e2pensive8 Cuplicating onl- one aspect of this differentiation
strateg- would *e inade.uate8 /ver investment in a value added activit- ma- pa- off in
the long run *- discouraging competitors from duplicating a strateg-8 Aor e2ample 3 the
development of a superior service *ack up s-stem might discourage competitors8 ,he
same logic can appl- to a *road product line8 )ome elements of that line might *e
unprofita*le3 *ut if the- plug holes that competitors could use to provide value3 then the
anal-sis looks different8
6. ./ercie
18 Cevelop a perceptual map for automo*iles 4cars5 in the 'ndian conte2t8
28 &hat is positioning errorsJ #an -ou identif- during the last one -ear in selected
industries8
38 &hat is the role of advertising agenc- in making positioning statementsJ 'dentif- the
same from two agencies 4national5 of -our choice8
48 02plain the positioning of )urf 02cel and ,ide and <ustif- -our answer8
58 &hat is the difference *etween product positioning and *rand positioningJ 02plain
with e2amples8
0. 1e2erence
18 (drian )l-wot:k- and enson )hapiro3 6 ?everaing to *eat the odds9 ,he new
marketing mindsetF3 4arvar( 8usiness Revie+3 )eptem*er1 /cto*er 1""33 pp81$$1
1$78
28 #laudio %omano3 6'dentif-ing factors which influence product innovation9 a case
stud- approachF3 <ournal of Management %tu(ies3 Kanuar- 1""$3 pp87!1"28
38 Cevine ;ugh and Kohn Morton3 6 ;ow does the market reall- see -our productJF3
8usiness Marketing3 Kul- 1"!43 pp87$1778
48 'an #8 MacMillan and %ita Munther McMrath3 6Ciscovering Bew Points of
CifferentiationF3 4ar+ar( 8usiness Revie+3 Kul-1(ugust 1""73 pp13311458
58 K8Harel3 6rand strateg- positions products worldwideF3 <ournal of 8usiness %trateg'3
Ma-1Kune 1""13 pp81611"8
68 Kohn %ockwell and Marc Particelli3 6 Bew product strateg-9 ;ow does the pros do
itJF3 3n(ustrial marketing3 Ma- 1"!23 pp84"16$8
Product management
Unit tructure!
1. Introduction
2. "earning #$%ecti&e
'. Marketing mi/ element- Product
3.1 Pro(uct strategies
3.2 Rationale for pro(uct mix
3.3 $omponents of pro(uct plan
3.4 Pro(uct life c'cle
3.# Pro(uct portfolio )nal'sis
3.9 -e+ pro(uct management
3.: -e+ Pro(uct >evelopment
(. )a&e *ou undertood t*+e ,uetion
5. -ummar*
6. ./ercie
0. 1e2erence
1. Introduction!
Comini.ue: conceives product management as a he2agon and found to have the
following as the important aspects9
Product
Aorecasting
Planning
Market
Profit and
#oordination
(ccording to Philip Hotler3 there are five levels of a product8 Marketing managers need
to think their wa- around five different levels of product when working
through the essentials of the offer which is going to *e made to the
customers8 ,he- are9
The core &enefit9 ,he *asic *enefit which is what the customer reall- wants when
deciding on a particular product8 Aor e2ample3 a toothpaste which is a*le to clean the
teeth8
The generic pro(uct, ,his is the *asic version of the actual ph-sical product3 for e2ample3
an electric cooker8
The expecte( pro(uct, ( set of attri*utes and conditions that *u-ers normall- agree to
when the- purchase a product8 Aor e2ample3 a soap is e2pected to last long and at the
same time does not wear awa- due to water8
The augmente( pro(uct9 ,he product includes additional services and *enefits which help
to distinguish it from competitive offerings3 for e2ample3 a manufacturer of television
might e2tend the normal warrant- period from one -ear to sa- three -ears8 'n fact3
);(%P television offered seven -ears warrant-8
The potential pro(uct, (t the final level stands the product of the future3 namel- all the
transformations and augmentations that a particular product might undergo in the future8
,his is where the companies search for new wa-s to satisf- their customers and
differentiate their products8 ,he emergence of ;-per markets is one e2ample8
't is hence imperative that -ou are given a indepth information on what is product3 wh-
product management is important to organi:ations3 the wa-s of new product development
and its entr- into the market etc8 ?et us learn them in detail8
2. "earning #$%ecti&e!

6hen 'ou finish this unit* 'ou shoul( &e a&le to,
7n(erstan( the various pro(uct levels an( their importance .
7n(erstan( the (ifferent aspects of pro(uct life c'cle
7n(erstan( the pro(uct management issues an( pro&lems .
7n(erstan( the +a's of ne+ pro(uct management an( their steps .
'. Product management!
Product is an- thing that can *e offered to a market to satisf- a want or need8 Products
that are marketed include ph-sical goods3 services3 e2periences3 events3 persons3 places3
properties3 organi:ations3 information3 and ideas8 ( product mi2 4also called product
assortment5 is the set of all products and items that a particular seller offers for sale8 Aor
e2ample3 Hodak>s product mi2 consists of two strong product lines9 information products
and image products8 ( compan->s product mi2 has a certain width3 length3 depth3 and
consistenc-8 ,hese concepts are illustrated *elow8
Eidt8!
,he width of the product mi2 refers to how man- different product lines the
compan- carries8 ;industan +nilever ?imited 4;+?5 has different product lines8 't offers
different products for the consumers8 ,he product lines offered *- ;+? are ;ome and
Personal care3 Aood and everages and 'ndustrial3 (gricultural and others8
"engt8!
,he length of a product mi2 refers to the total num*er of items in the mi28 ,his is
o*tained *- dividing the total length *- the num*er lines8 Procter and Mam*le offers
different product line width8 't offers different *rands under detergents like ,ide3 (riel8
De+t8!
,he depth of a product mi2 refers to how man- variants are offered of each
product in the line8 ;industan +nilever ?imited offers tooth paste named #lose +p at
different si:es like 2$ grams3 5$ grams3 15$ grams etc8 'n this case ;,? had a product
depth of three8
3onitenc*!
,he consistenc- of the product mi2 refers to how closel- related the various
product lines are in terms of the end use3 production re.uirements3 distri*ution channels3
or some other wa-8 POM>s product lines are consistent insofar as the- are consumer
goods that go through the same distri*ution channels8 ,he lines are less consistent insofar
as the- perform different functions for the *u-ers8
,hese four product mi2 dimensions permit the compan- to e2pand its *usiness in
four wa-s8 't can add new product lines3 thus widening its product mi28 't can lengthen
each product line8 't can add more product variants to each product and deepen its
product mi28 Ainall-3 a compan- can pursue more product1line consistenc-8
3#MPANI.-
PR!>7$T M3A
&'P%/ )oftware3 ;ardware3 )oaps3 a*- #are3 #ooking
media3 lighting and Medical e.uipments
%0?'(B#0 Power pro<ects3 ,elecom3 )atellite and 'nternet
)ervices3 'nfrastructure 4%oads3 /il lines3 Ports3
?andscape *usiness53 Petrochemicals3 ,e2tiles3
Ai*res3 Plastics3 %efining and Marketing
+ )pirits3 Media3 ;ealthcare3 (gro1chemicals3
0ngineering and Media software
M/C' #ements3 (lkalies3 ,-res3 #igarettes3 ,elecom
e.uipments3 #ellular service3 Paper products3
;ardware and /ffice (utomation e.uipments
,,H #ooker- products3 +ndergarments3
Pharmaceuticals3 #leaning agents and Personal
care products
Product mi2 of select companies
'.1.Product trategie!
Modre< offers different *rands of refrigerators3 soaps and other things to its
consumers8 Cid this diverse assortment of products developed *- accidentJ Bo 111 it
reflects a planned strateg- *- the compan-8 ,o *e successful in marketing3 producers and
middlemen need carefull- planned strategies for managing their product mi2es8
Product1mi2 e2pansion
Product1mi2 e2pansion is accomplished *- increasing the depth within a
particular line andDor the num*er of lines a firm offers to consumers8 ?et>s look at
these options8 &hen a compan- adds a similar item to an e2isting product line
with the same *rand name3 this termed a line e2tension8 Aor illustrations3 pull the
coupons insert out of -our )unda- newspaper8 Aor e2ample Pepsi1cola compan-
introduced man- new flavors for its drink like Ciet Pepsi3 ?ehar ,eam etc8 ?ike
wise #oca1#ola #ompan- introduced news flavors like sprite3 diet coke etc8 ,he
line e2tension strateg- is also used *- organi:ations in service fields8 Aor
e2ample3 universities now offer programs to appeal to prospective older students3
and the %oman #atholic #hurch *roadened its line of religious services *- adding
)aturda- and )unda- evening masses8 ,here are man- reasons for line e2tensions8
,he main one is that the firm wants to appeal to more market segments *-
offering a wider range of choices for a particular product8 ?ine e2tensions might
*e the most pronounced trend in marketing during the earl- 1""$s8 (s discussed
in the near*- *o23 line e2tensions have *ecome so common as to raise .uestions
a*out their effectiveness8 (nother wa- to e2pand the product mi23 referred to as
mi2 e2tension3 is to add a new product line to the compan->s present assortment8
,o illustrate3 when Kohnson O Kohnson introduced a line of (cuvue disposa*le
contact lenses3 that was mi2 e2tension *ecause it added another product to the
compan->s product mi28 'n contrast3 line e2tension adds more items within the
same product line8 &hen KOK adds new version of *a*- soaps3 that>s line
e2tension8 +nder a mi21e2tension strateg-3 the new line ma- *e related or
unrelated to current products8 Aurthermore3 it ma- carr- one of the compan->s
e2isting *rand names or ma- *e given an entirel- new name8 ;ere are e2amples
of these four alternatives8 Most often3 the new line is related to the e2isting
product mi2 *ecause the compan- wants to capitali:e in its e2pertise and
e2perience8
Relate( pro(uct* same &ran(,
Pepsi cola>s Pepsi3 Miranda3 ?ehar 7+P3 Ciet Pepsi3 etc8
)mithHline eecham>s ;orlicks3 oost etc8
7nrelate( pro(uct* same &ran( 9
Modre< produces man- unrelated products like refrigerators3 soaps
etc8
Relate( pro(uct* (ifferent &ran( 9
Procter O Mam*le introduces ?uvs as a companion to its disposa*le
diapers8
7nrelate( pro(uct* (ifferent &ran(,
Eeegaland3 an amusement park at Hochi from the well known voltage
sta*iliser maker E1Muard8
McConald>s testing leaps and *ounds3 an indoor pla-ground for children
and their parents8
,rading up and trading down9
,he product strategies of trading up and trading down involve a change in product
positioning and an e2pansion of the product line8 ,rading up means adding a
higher price product to a line to attract a *roader market8 (lso3 the seller intends
that the new product>s prestige will help the sale of its e2isting lower1price
products8 - adding (dreno and 0nerg- as new *ikes to the saddle of ?M?
scooters3 the compan- has traded up8 ,rading down means adding a lower1price
product to a compan->s product line8 ,he firm e2pects that people who cannot
afford the original higher1price product or who see it as too e2pensive will *u- the
new lower1price product8 ,he reason9 the lower1price product carries some of the
status and some of the other more su*stantive *enefits 4such as performance5 of
the higher1price item8 Birma introduced Bima soap in the northern market at %s85
when other low end soaps are sold at the lowest price of %s868
)ome times the effect of trading down can *e achieved through advertising3
without introducing new3 lower1priced products8 ( manufacturer of fine or
chinaware might accomplish this *- advertising some of the lower1price in its
e2isting product lines8,rading up and trading down are perilous strategies *ecause
the new products ma- confuse *u-ers3 resulting in negligi*le net gain8 't is
e.uall- undesira*le if sales of the new item or line are generated at the e2pense if
the esta*lished products8 &hen trading down3 the new offering ma- permanentl-
hurt the firm>s reputation and that of its esta*lished high1.ualit- product8 ,o
reduce this possi*ilit-3 new lower1price products ma- *e given *rand names
unlike the esta*lished *rands8 'n trading up3 on the other hand3 the pro*lem
depends on whether the new product or line carries the esta*lished *rand or is
given a new name8 'f the same *rand name is used3 the firm must change its image
enough so that new customer will accept the higher1price product8 (t the same
time3 the seller does not want to lose its present customers8 ,he new offering ma-
present a cloud- image3 not attracting new customers *ut driving awa- e2isting
customers8 'f a different *rand name is used3 the compan- must create awareness
for it and then stimulate consumers to *u- the new product8
(lteration of e2isting products9
(s an alternative to developing a completel- new product3 management should
take a fresh look at the organi:ations e2isting products8 /ften3 improving an
esta*lished product product alteration can *e more profita*le and less risk- than
developing a completel- a new one8 ;owever product alteration is not with out
risks8 &hen #oca1#ola co8 modified the formula for its leading product and
changed its name to new coke3 sales suffered so much that the old formula was
*rought *ack 3 months later under the #oca1#ola classic name8
Product mi2 contraction9
(nother product strateg-3 product mi2 contraction3 is carried out either *-
eliminating an entire line or *- simplif-ing the assortment with in a line8 ,hinner
andDor shorter product lines or mi2es can weed out low1profit and unprofita*le
products8 ,he intended result of product1mi2 contraction is higher profits from
fewer products8 ;industan ?ever has announced that it would prune its *rand
portfolio during the -ear 2$$112$$28 Curing the earl- 1""$>s most companies
e2panded rather than contracted their product mi2es8 Bumerous line
e2tensions document this trend8 (s firms find that the- have an unmanagea*le
num*er of products or that various items or lines are unprofita*le3 or *oth3
product1mi2 pruning is likel-8 ,he result in man- organi:ations will *e fewer
product lines3 with the remaining lines thinner and shorter8
'.2.1ationale 2or +roduct mi/!
'nternationall-3 *rand rationali:ation has *een on companies> agendas for some
time8 'n )eptem*er 1"""3 +nilever announced that it would prune its *rand
portfolio *- 75T 1 from 16$$ to 4$$8 ,he *asket of 4$$ includes *rands like
Cove3 ?u23 and the #alvin Hlein range of fragrances8 02tensions are a compan->s
wa- of responding to consumer>s desires3 which are often gauged through
research8 )till3 man- consumers cannot differentiate across the numerous
alternatives and get frustrated or angr- in the process8 ,he large num*er of new
offerings also poses pro*lems for man- retailers8 +nder these circumstances3 it is
important for a Product manager to look at the optimum mi2 of products in the
compan->s portfolio8 't is hence necessar- that the Product Manager gives due
consideration to the financial aspects related to the products and concentrates on
the following9
18 #umulative annual sales revenue
28 #umulative support costs
38 #umulative asset use including that of *uildings3 machiner-3 inventories and
receiva*les
48 #umulative profit contri*ution and finall-
58 #umulative return on assets contri*ution *- the product
- calculating the a*ove3 the Product Manager can look at the following as
alternatives9
18 #oncentrating on the true profita*ilit- of each product irrespective of the -ears of
reckoning
28 Pricing has to *e reworked *ased on the total costs
38 Possi*le outsourcing products to augment the product mi2
Product line e2tensions9
( product line if it is too short3 then the Product manager can increase profits *-
adding items in the similar line under the same *rand name3 usuall- with new
features8 ,his is termed as product line e2tension8 ,he line e2tension ma- *e
innovative3 Lme1too>3or filling in using another package si:e like that of isleri
4from one litre *ottle3 offered two litre *ottle58 ,he vast ma<orit- of new product
introductions consists of line e2tensions8 acardi white rum which entered 'ndia3
soon realising the need for *lack rum3 added the *rand into their line8 'n a stud-
undertaken *- ;olak and hatt revealed the following a*out line e2tensions9
?ine e2tension of strong *rands are more successful than weak *rands
?ine e2tension of s-m*olic *rands en<o- greater market success than those of less
s-m*olic *rands
?ine e2tensions that receive strong advertising and promotional support are more
successful than those that receive less promotional support
Airm si:e and marketing competence pla-s a part in an e2tension success
0arlier line e2tensions have helped in the market e2pansion of the parent*rand
'ncremental sales generated *- line e2tension ma- more than compensate for the
loss in sales due to canni*alisation8
)ome of the e2amples of product line e2tensions are9
18 ,E) Eictor scooter from motorc-cle manufacturer ,E)1)u:uki
28 Hinle- clu* soda from #oca1#ola
38 0lf 0.uitaine has launched 0lf )uper )porti ) 15&4$ through 0lf ?u*ricants
48 %ee*ok has widened their CMX range with the launch of CMX 6 series
58 %eckitt and #oleman launched their line e2tension ;arpic Plus leach
68 Parker pens introduced a line e2tension Parker Nodiac pens
78 Pepsi came out with their Mirinda ?ime drink as the Mirinda e2tension
!8 Kohnson and Kohnson introduced Bew )ta-free )ecure sanitar- napkins
"8 ;?? launched the new variant of )urf )urf with e2cel power
1$8 POM intorduced Pantene Pro1E anti1dandruff and ;ead O )houlders Menthol
shampoo
118 Ca*ur e2tended Eatika to Eatika ;enna #ream conditioning shampoo
128 Marico introduced Parachute ?ite3 Parachute Butrisheen grooming cream3 Parachute
Butrisheen (fter wash li.uid for woman
138 rittania introduced dair- products like rittania utter and rittania #heese )pread
148 Mercedes en: introduced Mercedes 0 23$ and M 25$1C
158 'ode2 came out with 'ode2 power cream for the lower waist area pro*lems
168 'ode2 )port was launched for people with a sport- attitude
178 a<a< scooters introduced a<a< Pulsar C,)i
Product mi2 width e2pansion9
18 Cettol9
Cettol started off in the 1"3$>s with Cettol mouthwash3 antiseptic cream3
o*stetrics cream and li.uid antiseptic8 /ver the -ears3 the portfolio has e2panded
to soaps3 li.uid soap and shaving cream3 Cettol plaster and several other products
are still to use the *rand e.uit- of Cettol8 ,his has *een done mainl- due to the
threat of )avlon8 (ll these products will *e positioned along Cettol>s core values
trust and protection8
28Modre<9
(part from their growing portfolio of soap *rands3 Modre< *ought He-3
0:ee and ,rilo from #ussons 'nternational8 ', has since added man- *rands in the
soap categor- including Modre< Aairglow3 Modre< )andal3 Aairever vanishing
cream etc8 Modre< also added L#ooklite>3 edi*le oil and later on added a small
variant #hota #ooklite8 'n the AM#M sector3 Modre< is tr-ing to augment their
portfolio with new *rands from competitors8
38C) Mroups9
Curing 1"""3 C) group conducted a stud- through McHinse- and decided to
increase their product mi2 *- adding food and *everages3 )alt and spices *randed
#atch3 ,ea and edi*le oils in the same *rand name and also mothfreshners8 ,his
is done apart from their ma<or *rands a*a Narda and %a<niganda paan masalas8
'.'.3om+onent o2 Product +lan!

0ach product level within a *usiness unit must develop a marketing plan for
achieving its goals8 ,he marketing plan is one of the most important outputs of the
marketing process3 and it should contain the following elements8
1< ./ecuti&e ummar* and ta$le o2 content.
,he marketing plan should open with a *rief summar- of the plan>s main goals
and recommendations8 ,he e2ecutive summar- permits senior management to grasp the
plan>s ma<or thrust8 ( ta*le of contents should follow the e2ecutive summar-8
2< 3urrent marketing ituation!
,his section presents relevant *ackground data on sales3 costs3 profits3 the
market3 competitors3 distri*ution and the macro environment8 ,he data are drawn from a
product fact *ook maintained *- the product manager8
'< #++ortunit* and iue anal*i!
(fter summari:ing the current marketing situation the product manager proceeds
to identif- the ma<or opportunitiesD threats strengthsD weakness and issues facing the
product line8
(< #$%ecti&e!
/nce the product manager has summari:ed the issues3 he or she must decide on
the plan>s financial and marketing o*<ectives8
5< Marketing -trateg*!
,he product manager is responsi*le for the *road marketing strateg- or 6game
planF to accomplish the plan>s o*<ectives8 'n developing the strateg-3 the coordination of
product manager3 production manager and *u-ers are needed8 ,he product manager also
needs to talk to the sales manager to o*tain sufficient sales force support and to the
financial officer to o*tain sufficient funds for advertising and promotion8
6< Action Program!
,he marketing plans should specif- the *road marketing programs for
achieving the *usiness o*<ectives8 0ach marketing strateg- should *e focussed in such a
wa- that the action to *e done3 when and how it is to *e done should *e planned8
0< Pro%ected Pro2it and "o tatement!
(ction plans allow the product manager to *uild a supporting *udget8 /n the
revenue side3 this *udget shows the forecasted sales volumes in units and the average
price8 /n the e2pense side3 it shows the cost of production3 ph-sical distri*ution3 and
marketing3 *roken into finer categories8 ,he difference *etween revenue and sales is
pro<ected profit8 /nce approved3 the *udget is the *asis for developing plans and
schedules for material procurement3 production schedule3 emplo-ee recruitment3 and
marketing operations8
@&iii< 3ontrol!
,he last section of the market plan outlines the controls for monitoring the plan8
,-picall- the goals and *udget are spelled out for each month or .uarter8 )enior
management can review the results each period8 )ome control sections include
#ontingenc- plans8 ( #ontingenc- plan outlines the steps management would take in
response to specific adverse developments3 such as price war or strikes8
'.(.Product "i2e 3*cle
Product life c-cle as a concept has *een an indicator *- which companies decide the fate
of the products and the *rands the- posses or introduce as new products8 't is onl- a
toll which can *e used for taking marketing decisions *ased on the position of the
*randDproduct in the life c-cle8 )ome of the important aspects of the life c-cle
strategies are mentioned *elow9
)tages Main strateg- Price (dvertising and sales
promotions
'ntroduction
(im to get the
innovators tr- the
product
,r- to have a higher
price to cover the
launch costs
Menerate awareness=
)amples3 test drives etc8
Mrowth
(im at the weaker
market
Heep price up to take
advantage of market
growth
%einforce success=
%educed sales promotions
Maturit-
Aight off the
increasing competition
and support lo-al
customers
(void price wars )tress the differential
advantages= use sales
promotions to attract users
to the *rand
Cecline
18%evamp
28Promotion
38)u*stitution
#hange price levels
%educe price
Price down to clear
stocks
)tress and inform change
)pend more3 special offers
Co nothing
Product life c-cle strategies
Argument againt P"3!
(ccording to P?#3 sales following a product>s launch are initiall- slow *ut then
increase as awareness grows8 Maturit- is reached when the rate of sales growth levels
off and repeat purchasers account for the ma<orit- of sales8 +ltimatel-3 sales *egin to
decline as new products and new technologies enter the market8 ?eading eventuall- to
the product *eing withdrawn8 ,he literature availa*le in this area have thrown
contradicting arguments8 /ne school of thought is clear that P?# is a foundation for
an effective product management s-stem3 while Challa and Puseph argued that the
P?# is conceptuall- and operationall- flawed8 ,he *ases on which the arguments are
presented include9
,he *iological metaphors used to suggest that products are living entities is
misleading
(ttempts to match empirical sales data to life1c-cle curves have proved difficult and
the results are largel- meaningless
,he life c-cle of a product and hence the shape of the curve is determined *- how the
product is managed over time8 't is not an independent varia*le as is suggested *-
traditional P?# theor-
,he P?# is not e.uall- valid for product class3 product form and for *rands as often
argued
,he stages of the life c-cles are difficult to define
'dentif-ing where on the life c-cle a product is at an- particular time is difficult to
determine
,he scope for using the concept as a planning tool is limited and
0vidence suggests that where companies have tried to use the P?# as a planning tool3
opportunities have *een missed and costl- mistakes made8
T8e +roduct li2e c*cle o2 Maruti!
,he passenger cars in the low end models are passing through a maturit- stage8 ,he
profits associated with a car follow the L)> curve of its life c-cle 3 and decline as the
product nears the end of the maturit- phase8 Maruti +d-og>s decision to drop prices
during Cecem*er 1""! of all versions of the Maruti !$$ came at this stage8 ,he
respite that the price1cut is e2pected to provide is aimed at e2tending the maturit-
phase of Maruti as seen from the following figure9
0ver- product comes to the market has to pass through a series of stages 4i8e85 which is
studied under the head product life c-cle8 't ma- *e a shorter 4or5 longer life c-cle
depending upon the performance of the product8 ,o sa- that a product has a life c-cle is
to assert four things 9
Products have a limited life8
Product sales pass through distinct stages3 each posing different challenges3 and
pro*lems to the seller8
Profits rise and fall at different stages of the product life c-cle8
Products re.uire different marketing3 financial3 manufacturing3 purchasing3 and
human resource strategic in each stage of their life c-cle8
-tage In Product "i2e 3*cle !
,he shape of the product life c-cle curve are portra-ed as *ell1shaped8 ,his curve
is t-picall- divided into 4 stages9
'ntroduction
Mrowth
Ma<orit-
Cecline
,'M0
'ntroductio
n
Mrowt
h
Maturi
t-
Ceclin
e
)ales
)ales
Introduction !
Curing the market introductor- stage3 there ma- not *e read- market for the product8
)ales are low= the product undergoes teething trou*les3 profits seem a remote possi*ilit- =
demand has to *e created and developed = and the customers have to *e prompted to tr-
out the product8 this stage posses several pro*lems for the marketer8 ,his stage poses
several pro*lems for the marketer8 ,he comple2it- of the pro*lems and the duration of
the stage depend upon the nature of the product3 its price3 its technological newness and
the consumer>s view of the product8 /ne of the crucial decision to *e taken in this stage
is the pricing decision so3 the management can pursue one of the four strategies8
I. 1a+id kimming !
?aunching the new product at a high price and a high promotion level8 't will take
advantage of earl- entr- and the realitive novelt- of the product in the market
introduction stage8 ,hose who *ecame aware of the product are eager to have it and can
pa- the asking price and the firm faces potential competition and wants to *uild *rand
preferences8
2. -lo> kimming !
?aunching the new product at a high and low promotion8 ,his strateg- make
sense when the market is limited sense3 when the market is limited in si:e = most of the
market is aware of the product3 *u-ers are willing to pa- a high price3 and potential
competition is not imminent8
'.1a+id Penetration !
?aunching the product at a low price and spending heavil- on promotion8 ,his strateg-
make sense when the market is large3 the market is unaware of the product3 most *u-ers
are price sensitive3 there is strong potential competition3 and the unit manufacturing costs
fall with the compan->s scale of production and accumulated manufacturing e2perience8
(. -lo> +enetration !
?aunching the product at a low price and low level of promotion8 ,his strateg-
make sense when the market is large3 is highl- aware of the product3 is price sensitive3
and there is some potential competition8 (nother crucial area demanding attention at this
stage is market development and promotion8 'n this stage3 demand has to *e created and
developed8 ,he firm has to invest heavil- in promotion and visit for the reward8
)everal e2amples of this introductor- phase illustrates the different core strategies
availa*le8 #onsumer electronics and industrial product companies almost alwa-s pursue a
skimming strateg-8 &hen &ashing machines3 %efrigerators3 #amcorders3 digital tape
pla-ers were first introduced3 the- were priced heavil- intitall- and then fell in price over
time8 (t the same time3 penetration pricing is done usuall- in the Aast Moving #onsumer
Moods 4AM#M5 *ecause market share is ver- important for retaining the )pace Heeping
+nits in the retail outlets8
II. 4ro>t8 -tage !
Curing this stage3 the demand for the product increases and the si:e of the market
grows8 ,here is a rapid increase in sales8 0arl- adopters like the product3 and additional
consumers start *u-ing it8 Bow competitors enter3 attacked *- the opportunities8 ,he-
introduce new product features and e2pand distri*ution8 Prices remain where the- are or
fall slightl-3 depending on how fast demand increases8 )ales rise much faster than
promotional e2penditures3 causing a welcome decline in sales promotion ratio8 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 effect8
Curing this stage3 the firm uses several strategies to sustain rapid market growth
as long as possi*le8
't improves product .ualit- and adds new features and improved st-ling8
't adds new models and flanker products 4i8e8 products of different si:es3
flavours3 etc85
't enters new market segments8
't increases its distri*ution coverage and enters new distri*ution channels8
't shifts from product awareness advertising to product preference advertising8
't lowers price to attract the ne2t la-er of price sensitive *u-ers8
Marketing and distri*ution efficienc- *ecomes the decisive factor at this stage8 ,he
pioneer sales and profits keep increasing at this stage8
III Maturit* -tage !
'n the maturit- stage3 the demand for the product reach a saturation point8 Price
competition *ecome intense and the pioneer tries to distinguish his *rand *- su*tle
product differentiation and e2ploits the *rand lo-alt- *uilt *- the compan-8 Maturit-
divides into 3 phases 9
i5 Mrowth phase 9
,his is the first phase where the sales growth rate starts to decline8
ii5 )ta*le phase 9
'n the second phase3 sales flatten on a per capita *asis *ecause of market
saturation8 Most potential consumers have tried the product3 and the future sales ar
governed *- population growth and replacement demand8
iii5 Ceca-ing maturit- 9
'n the third phase3 the a*solute level of sales starts to decline3 and customers *egin
switching to other products and su*stitutes8
Market Modification 9
,he compan- might tr- to e2pand the market for its mature *rand *- working
with the two factors that makeup sales volume8
Eolume Y num*er of *rand users 2 usage rate per user8
,he compan- can tr- to e2pand the num*er of *rand users in three wa-s8
#onvert non1users8
0nter new market segments8
&in competitor>s customers8
Eolume can *e used adopting the following three strategies8
,he compan- can tr- to get customers to use the product more fre.uentl-8
,he compan- can tr- to interest users in using more of the product on each
occasion8
,he compan- can tr- to discover new product uses and convince people to
use the product in more varied wa-s8
Product modi2ication!
Managers also tr- to stimulate sales *- modif-ing the product>s characteristics
through .ualit- improvement3 feature improvement3 or st-le improvement8 ,his strateg-
has several advantages8 Bew features *uild the compan->s image as innovator and win
the lo-alt- of market segments that value these features8 ,he- provide a opportunit- for
free pu*licit- and the- generate sales and distri*utor enthusiasm8 ,he chief disadvantage
is that feature improvements are earl- imitated = unless there is a permanent gain from
*eing first3 the feature improvement might not pa- off in the long run8
Marketing Mi2 Modification 9
Product managers might also tr- to stimulate sales *- modif-ing other marketing
mi2 elements8
i5 Price 9
%egarding the price3 the decisions should *e made in a wa- to attract *u-ers or the
price should *e lowered 4or5 sometimes it is highered to signal higher .ualit-8
ii5 Cistri*ution 9
'n the distri*ution element3 the outlets where the products to *e displa-ed
increased or not = a*out the introduction of new distri*ution channels3 the num*er of
outlets are to *e decided8
iii5 (dvertising 9
,he factors to *e considered in advertising is3 the e2penditures made3 the message
of the present advertisement to *e modified3 and a*out the fre.uenc-3 si:e of
advertisements8
iv5 )ales Promotion 9
)hould the compan- set up sales promotion trade deals3 cents off coupons3
re*ates3 warranties3 gifts and contests are to *e decided8
v5 Personal selling9
'n this3 the num*er of .ualit- of sales people to *e increased3 *asis for sales force
specialisation3 sale territories revision3 sales force incentives3 sales call planning are to
*e properl- planned8
vi5 )ervices 9
,he technical assistance given *- the compan- to the customers3 credit facilities3
their deliver- node are to *e enhanced8 )o3 the marketing mi2 modifications should *e
done efficientl-8 ,he ma<or pro*lem is especiall- price reductions and additional
services is that the- are earl- imitated8
I6 Decline -tage !
'n this stage3 sales *egin to fall8 ,he demand for the product shrinks pro*a*l- due
to new and functionall- advanced products *ecoming availa*le in the market D market
*eing more saturated to the product8 'n an- case3 prices and margins get depressed = total
sales and profits diminish8 Airms do perceive the impounding total decline and prepare
for the gradual phasing out of the product8 )uccessful firms .uite often keep new
products read- in the .ueue to fill the vacum created *- the decline of e2isting products8
)ome 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 the- have
developed and thus tr- to sketch the life of declining product8 'n a stud- of compan-
strategies in declining induction3 five decline strategies availa*le to the firm 9
'ncreasing the firm>s investment 4to dominate the market D strengthen its competitive
position58
Maintaining the firm>s investment level until the uncertainties a*out the industries are
resolved8
Cecreasing the firm>s investment level selectivel-3 *- dropping unprofita*le customer
groups3 while simultaneousl- strengthening the firm>s investment in lucrative riches8
;arvesting 46milkingF5 the firm>s investment to recover cash .uickl-8
Civesting the *usiness .uickl- *- disposing its assets as advantageousl- as possi*le8
Managing t8e +roduct mi/ t8roug8out t8e +roduct li2e c*cle
0ffects and
%esponses
)tages of the Product life c-cle
'ntroduction Mrowth Maturit- Cecline
#ompetition Bone of
importance
)ome emulators Man- rivals
competing for a
small piece of
pie
Aew in num*er with a
rapid shakeout of
weak mem*ers
Profits Profits are
negligi*le
*ecause of
high
production
and
marketing
costs
Profits reach
peak levels as a
result of high
prices and
growing
demand
'ncreasing
competition
cuts into profit
margins and
ultimatel- into
total profits
Ceclining volumes
pushes costs up to
levels that eliminate
profits entirel-
Cistri*ution )elective3 as
distri*ution
is slowl-
*uilt up
'ntensive=
emplo- small
trade discounts
since dealers
are eager to
store
'ntensive= use
heav- trade
allowances to
retain shelf
space
)elective= slowl-
phase out
unprofita*le outlets
(dvertising
strateg-
(im at the
needs of
earl-
adopters
Make the mass
market aware of
*rand *enefits
+se advertising
as a vehicle for
differentiation
among
otherwise
similar *rands
0mphasise low price
to reduce stock
/verall
)trateg-
Market
esta*lishme
nt= persuade
earl-
adopters to
tr- the
product
Market
penetration=
persuade mass
market to prefer
the *rand
Cefence of
*rand position=
check the
inroads of
competition
Preparations for
removal= milk the
*rand dr- of all
possi*le *enefits
Ad&antage o2 Product "i2e 3*cle!
1< 9acilitate +re+lanning t8e +roduct launc8!
'n launching of a new product3 man- companies fail *ecause of not knowing how
to handle the pro*lems at various stages in P?#8 &ith the help of P?# concept3 it is
possi*le to foresee and predict the profile of the proposed product>s life3 the events that
are likel- to take place in the market3 and the issues on pricing3 channel and promotion
that are likel- to come up8 ,he ela*orate 02ercise at preplanning and the lead time
availa*le for keeping strategic options read- in anticipation of certain events in the
market3 make the marketing man *etter e.uipped to charter the course of a product8
2< 9acilitate +rolonging o2 +ro2ita$le +8ae !
)ome products get into trou*le in their maturit- stage3 the P?# concept can *e of
help to the marketing man8 )trategies are formulated at this stage to prolong profita*le
phase to overcome the threat from competitors normall-3 the following strategies are
followed8
Ainding out new users of the product8
Ainding out new uses of the product8
Popularising more fre.uent use of product8
Making the product more distinctive to the consumers8
- adding real D ps-chological value to the product8
'< 9acilitate in&etment deciion on +roduct !
Product portfolio planning is *ecoming a crucial su*<ect3 and the P?# as a tool
can help in long term planning8 ,his inturn facilitates investment decisions on products =
investment can *e given to the right products and committing heav- resources on wrong
products can *e avoided8 'n short3 practicing the P?# concept means that one is
su*stituting stop1gap arrangements in product management with a structured long term
product monitoring plan8
(< "inkage $et>een t8e P"3 conce+t and t8e entr* trateg* !
(s a new product travels through its life3 different firms <oin the market8 &ith
their respective versions of the product3 at different stages8 ,he specific stage in the P?#
of the product at which a given firm enter with its *rand3 will influence the entr- strateg-
of the firm8 asicall-3 four distinct entr- postures are possi*le for a firm seeking entr-
into the market8
0ntr- as innovators
0ntr- as earl- followers
0ntr- as segmenters
0ntr- as Me1too>s
5< .22ecti&e tool in managing cutomer !
#ustomers e2perience with the compan- changes as the product passes through
the P?# stages8 (s the e2perience level of customer changes3 the *enefits the- seek from
the compan- also keep changing8 ,he seller of the product has to understand when and
how a transition is taking place in the e2perience level of the customer3 as his product
moves along its life c-cle8 ,he changing e2pectations and demands of the customers can
*e handles through different strateg- routes strengthening the compan- customer
relationship3 augmenting the product3 improving service support or modif-ing the pricing
approaches8
6< A a control tool !
P?# concept also helps the compan- as a control tool *- measuring the
performance of the products of their compan- to the competitor>s product launched in the
past8 ( detailed comparison can *e made at each stages of P?# and an effective strateg-
can *e implemented8
"e&el o2 Product "i2e 3*cle!9
Product life c-cle operates a three levels8
Product level
Product su*1categor- level8
rand level8
't can *e e2plained with the help of an e2ample 9 B$omputersC
18 Product categor- 9
't involves all configuration of computers super computers3 mainframes3
microDmini and personal computers8
25 Product su* categor- 9
,he su*1categor- is personal computers within computers8 &ithin the su*
categor- of P#3 it involves *rands like ;#?3 &ipro and )iva8
38 rand level 9
(t the *rand level = ;#?3 &ipro and )iva *rands are having their own paths8
)o3 when a compan- wants to pro<ect its life c-cle 4i8e85 &ipro wants to pro<ect
the life c-cle of its P#3 it cannot make a realistic anal-sis unless it studies the life c-cle of
a product su*1categor- personal computers as a whole8 &ipro>s life c-cle at the *rand
level cannot evolve totall- independent of other P#>s in the market8 )o3 when the life
c-cle of *rand is assessed3 it is essential to stud- the life c-cle of the product categor-
and the product su* categor- as well8 ;owever3 an idea of the likel- life c-cle of the
main product categor- of computers is helpful in understanding the course of the su*
categor- personal computers8 'n concluding that3 a meaningful picture of the path the
*rand is taking3 it has to *e studied in the conte2t of the life c-cle of the product su*
categor- and product categor-8
P"3 trategie o2 N*lon!
B-lon was a product that was primaril- used for the militar- purposes to make
parachutes3 threads3 and ropes8 ,hen it was e2tended to circular knit market that is
women>s hosier-8 (t that stage3 the necessit- for the growth of n-lon was found8 ,hen
there are steps taken to vitalise n-lon8
-te+ Taken To 6italie N*lon!
9re,uent uage!
,hen steps were taken to vitalise n-lon8 ,he usage of n-lon was increased and the
convenience that n-lon had created a market for itself8 Are.uent usage of n-lon was
promoted the *are laggardness of the users were used8 ,he stockings were promoted
using that8
6aried uage!
B-lon was promoted as a fashion product8 ,his product is perceived as a hosier-
functional product8 ,he clothing function of it was to promote as a large e2tent8 ,here the
varied usage of the n-lon was stressed to the users and was promoted in the market8
Ne> uer!
,he users of the n-lon products were first the militar-3 the it was targeted at
hosier- function and fashion users3 and -ounger teenagers and su*stitutes were using
those products8
Ne> ue!
Bew uses were created for the n-lon3 it was stretched and socks3 rugs3 tires and
*earings there uses of the n-lon which was created to promote it warp knits were
invented in 1"45 and n-lon tire cord was invented in 1"4!8 B-lon te2tured -arns were
invented in 1"55 and carpet -arns were invented in 1"5!8 (s a result of this in 1"62 the
sales went up of to 5$$ million pounds which was previousl- 5$ million pounds8
P"3 trategie $* 6accum Tu$e Indutr* And -emiconductor Indutr*!
'n earl- 1"3$>s3 vaccum tu*es got into the usage in electronics industr-3 the home
entertainment industr-8 ,ill 1"4$3 the product was in the introduction stage in the time of
&orld &ar '' the product>s usage *ecame high at the period of 1"45 to 1"5$8 the product
sales grown from "$ to 2!$ after the period of the 1"5$ the use of ,E and phonographic
computers made its sales to 3$$ units due to militar- usage the num*er rose to a height of
4$$ units8 (t the earl- 1"6$>s3 the semiconductors were invented and the vaccum tu*es
were out of the market8 (fter the innovation of semiconductors3 the growth in the
electronic industr- was triggered after 1"548 'n earl- 1"5$>s3 the porta*le radios made the
industr- to grow3 then Mermanium devices and )ilicon devices had a separate P?# then
the other trigger like space3 '#>s also triggered the growth of the industr-8 ,he computers
and the '#>s were acting as the catal-st for the growth of the semiconductor industr-8 ,he
industr- growth can *e e2plained using the diagram as e2plained *elow8
'.5. Product +ort2olio Anal*i
Portfolio planning is *est advised for diversified companies than a more product
coherent ones8 Portfolio planning hence recognises that diversified companies are a
collection of *usinesses3 each of which makes a distinct contri*ution to the overall
corporate performance and which should *e managed accordingl-8 )uch companies are
e2pected to redefine *usinesses for strategic *usiness units 4)+53 which ma- or ma- not
differ from operating units8 ,he- then classif- these )+s on a portfolio grid according
to the competitive position and attractiveness of a particular product market8 ased on
these3 the- use this framework to assign each a Lstrategic mission> with respect to its
growth and financial o*<ectives and allocate resources accordingl-8 #ompanies can thus
theoreticall- assess the strategic position of each of their enterprises and compare these
positions using cash flow as the common varia*le8 ,he four components of strateg- can
*e seen as influences on the firm@s effectiveness and efficienc-8 ,he firm@s effectiveness
is determined *- the com*ined influence of scope3 distinctive competence and
competitive advantages8
#$%ecti&e o2 1eource De&elo+ment!
'mplementing #orporate ?evel )trateg-
%esource development is ver- helpful implement corporate level strateg-8
#orporate level strateg- is to determine what *usiness to go into and relative allocation of
resource and management of s-nergies among them8
Cirect 'nteraction with )cope and %esources Ceplo-ment
,he- should there fore *e considered at the corporate level and should not *e
treated as functional area polic- decisions to *e decided at lower levels8 usiness level
strateg- focuses on how to compete in a particular product D market segment or industr-8
#ompetitive advent ages and distinctive competencies thus *ecome dominant strategic
concerns at this level8 (t functional level3 the primar- focus of strateg- is efficienc-8
T*+e o2 +ort2olio +lanning!
Aollowing are the possi*ilities of various t-pes of portfolio planning undertaken *-
companies9
,-pes 02planations
(nal-tic planning Portfolio planning is onl- 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 e2plicit in activities
,-pes of portfolio planning
Bene2it o2 +ort2olio +lanning!
)ince the road to portfolio planning is a long one3 companies often get stuck tr-ing to
implement it and cannot realise the full potential of the approach8 'n implementing
portfolio planning3 companies often write in *iases that *lock its usefulness3 including the
tendenc- to focus on capital investment rather than resource allocation8 'n spite of such
limitations3 portfolio planning is offering the following *enefits to companies if
implemented properl-9
18 't promotes su*stantial improvement in the .ualit- of strategies developed at *oth the
*usiness and the corporate level8
28 't provides a guideline for adopting their overall management process to the needs of
each *usiness8
38 't provides selective resource allocation to the various )+s8
48 't furnishes companies with a greatl- improved capacit- for strategic control when
portfolio planning is applied intelligentl- and with attention to its limitations and
pro*lems8
Peter Drucker on +ort2olio +lanning!
Peter Crucker suggests a mechanism of portfolio anal-sis of products within the
compan-8 ;e suggests that all products can *e classified into five groups as follows9
Tomorro+Ds &rea(+inners,
,hese are either modifications or improved versions of what one compan- has got
as their ma<or products or new products8
To(a'Ds &rea(+inners,
,hese ma- e2ist toda- *ut the- reall- are the innovations of -esterda-8
2ester(a'Ds &rea(+inners,
,hese are old hat *ut eat up all that the- earn8
BPro&lem chil(renC,
Cifficult to live with perhaps *ut *etter parental control should make the
difference *etween a health- child and a potential deviant child8
B)lso/ransC,
,hese are otherwise known as Lme1too> products in the market whose e2istence
itself is a .uestion mark8
Boton 3onulting 4rou+ Matri/!
,he *usiness polic- portfolio models are most popular useful to understand the
firms strategic concerns and choices8 ,he- defined the firm@s scope or domain *-
highlighting the inter 1 relatedness of diverse factors such as
18 Market growth
28 Market share
38 #ash and #ash flow patterns
48 #apital intensit-
58 Product maturit- etc8
%elative market share
Market
growth
;igh ?ow
;igh
)tar Question mark
?ow
#ash cow Cog
#M MrowthD)hare Matri2
-tar
)tar are high growth 1 ;igh market share *usiness which ma- or ma- not *e self
sufficient in term of cash flow8 ,his cell corresponds closel- to the growth phase or
product life c-cle
3a8 co>
(s the term indicates3 cash cows are *usiness which generate large amounts of cash *ut
their rate of growth is slow 'n terms of P?#3 these are generall- mature *usiness which
are reaping the *enefits of e2perience curve8 ,he cash generation e2ceeds the
reinvestment that could profita*l- *e made into @cash cows@8
Fuetion Mark
usiness with high industr- growth *ut low market share for companies are .uestion
marks or pro*lem children8 ,he- re.uired large amount of cash to maintain or gain
market share8 Question mark is usuall- new products or services3 which have a good
commercial potential
Dog
,hose *usinesses3 which are related to slow growth industries and where a
compan- has a low relative market share3 are termed as @dogs@8 ,he- neither generate nor
re.uire large amounts of cash8 'n terms of P?#3 the @dogs@ are usuall- products in the late
maturit- or declining stage8
,he firm should hold its dominant market position *- reducing prices and thus
keeping awa- the high cost competitors8 #ash flows are likel- to *e negative during the
growth phase in a dominant market since the firm will have to keep in investing to
maintain its competitive edge8 Cominant position generates positive cash flows3 during
the mentioned stage of life c-cle8 ,he #M matri2 makes it ver- clear that a firm for its
ultimate success needs a *alanced portfolio of products or *usinesses8 ,he individual
*usinesses are anal-:ed to form a corporate portfolio3 which should act as a guide to
commit the firm>s resource8 Portfolio should *e *alanced in terms of profit3 cash flows3
and overall corporate risk8
4. Nine 3ell Matri/!
(nother corporate portfolio anal-sis techni.ue is *ased on the pioneering effort of
general electric 4M05 compan- of the united state supported *- the consulting firm of
Mckinse- O #ompan-8
,he vertical a2is represents industr- attractiveness3 which is a weighted composite rating
*ased on eight different factors8 ,hese factors are9 1
18 Market si:e and growth rate
28 'ndustr- profit margins
38 #ompetitive intensit-
48 )easona*l-
58 #-clicall-
68 0conomics of )cale
78 ,echnolog- and
!8 )ocial3 environmental3 legal and human impacts8
,he hori:ontal a2is represents *usiness strength competitive position3 which is again= a
weighted composite rating *ased on seven factors8 ,hese factors are
18 %elative market share
28 Profit margins
38 (*ilit- to compete on price and .ualit-
48 Hnowledge of customer O market
58 #ompetitive strength and weakness
68 ,echnological capa*ilit- and
78 #ali*er of management
'ndustr- attractiveness
usiness
)trengths
;igh Medium ?ow
;igh 'nvestment
Mrowth
)elective
growth
)electivit-
Medium )elective
growth
)electivit- ;arvest
?ow )electivit- ;arvest ;arvest
4. Nine 3ell Matri/
,he two composite values for industr- attractiveness and *usiness
strengthDcompetitive position are plotted for each *usiness in a compan-@s portfolio8 ,he
P'0 charts 4#ircles5 denote the proportional si:e of the industr- and the dark segments
represent the compan-@s market share8
,he nine cells of the M0 matri2 are grouped on the *asis of low to high industr-
attractiveness and were to thrown *usiness strength three :ones of three calls each are
made denoting different conditions represented *- green -ellow and red colours for this
reason3 the matri2 is also known as the stoplight strateg- matri28 ased on the three :one3
the signal is go ahead to grow and *uild indicating e2pansion strategies *usiness in the
green :one attract ma<or investment for the -ellow :one3 the signal @&ait and )ee@
indicate hold and maintain t-pe of strategies aimed at sta*ilit- and consolidation for the
red :one the signal is top indicate achievement strategies of divestment and li.uidation or
re*uilding approach for adopting turnover strategies8
Ad&antage
't is compared to the #M matri2 it offers intermediate classification of medium
and average rating8
't incorporates a large variet- of strategic varia*les like market there O 'ndustr-
si:e8
Dra> $ack
't onl- provides *road strategic prescriptions rather than the specific or *usiness strateg-8
Directional +olic* matri/ @DPM< 9
,he CPM is a method of *usiness portfolio anal-sis formulated *- )hell
'nternational #hemical #ompan-8 't has nine cells in which *usinesses are located
depending upon their scores on each of the two a2es9 02pected market profita*ilit- and
competitive positions8 ,he hori:ontal a2is3 la*eled 7*usiness sector prospects7 or
7prospects for market sector profita*ilit-37 is a measure similar to industr- attractiveness
used in the M0 planning grid8
( firm is rated on a scale from 7unattractive37 through 7average37 to 7attractive7
depending upon an evaluation of its industr-@s market growth3 market .ualit-3 and
environmental aspects8 )imilarl-3 its location on a scale that runs from a 7weak37 through
7average37 to 7strong7 competitive position is determined *- answering .uestions a*out
its market share position3 production capa*ilities3 and %OC strengths8
,he cell la*els represent possi*le strategic choices or t-pes of resource deplo-ments
most appropriate for the firm3 given its score on each of the two a2es8 More specificall-
these cell la*els have the following implications9
Cisinvest 413159 ?ikel- alread- losing mone-= net cash flow negative over time8
?osses ma- *e minimi:ed *- divestiture or even li.uidation8
Phased &ithdrawal 41325 and 423159 Pro*a*l- not generating sufficient cash to <ustif-
continuation= assets can *e redeplo-ed8
#ash Menerator 433159 0.uivalent to a 7cash cow7 in the M0 planning grid8 ( firm or
product would occup- this cell in later stages of the life c-cle that does not warrant
heav- investment3 *ut can *e 7milked7 of cash due to its strong competitive position8
Proceed with #are 423259 )imilar to a 7.uestion mark=7 firms falling in this sector ma-
re.uire some investment support *ut heav- investment would *e e2tremel- risk-8
Mrowth 4upper 1 3825 and 4lower 1 28259 )imilar to a M0 planning grid 7green1light7
strateg-8 ( firm3 product3 or )+ in these sectors would call for investment support
to allow growth with the market8 't should generate sufficient cash on its own8
Cou*le or Quit 413359 +nits in this sector should *ecome 7high fliers7 in the not too
distant future8 #onse.uentl- those in the upper rightmost corner of cell 41335 should
*e singled out for full support8 /thers should *e a*andoned8
,r- ;arder 423359 02ternal financing ma- *e <ustified to push a unit in this sector to a
leadership position8 ;owever3 such a move will re.uire <udicious application of
funds8
?eader 43335 4lower 1 33259 ,he strateg- for this segment is to protect this position *-
e2ternal investment 4funds *e-ond those generated *- the unit itself 1 occasionall-5=
earnings should *e .uite strong and a ma<or focus ma- *e maintaining sufficient
capacit- to capitali:e on strong demand8
Prospects for sector profita*ilit-
#ompan->s
#ompetitive
#apa*ilities
+nattractive (verage (ttractive
&eak Cisinvest Phased
&ithdrawal
Cou*le or
Quit
(verage Phased
&ithdrawal
#ustodial
Mrowth
,r- harder
)trong #ash
generation
Mrowth
?eader
?eader
Cirectional Polic- Matri2
,he CPM can thus *e used to identif- strategies for single *usinesses as well as for
plotting com*inations of units in multi *usiness or multi product firms8 ?ocating
competitors on the CPM can provide useful insights into the nature of corporate1level
strategic configurations8 ;owever3 there is room for error in the positioning of a firm or
product on the two a2es3 and thus CPM location should *e interpreted with an open mind
and not in isolation8 ,he Cirectional Polic- Matri2 4CPM5 developed *- )hell
#hemicals= +8H8 uses the two parameters of 6*usiness sector prospectsF and 6compan->s
competitive a*ilities8F
( num*er of factors such as market growth3 market .ualit-3 market suppl-3 etc8 are
used to rate the *usiness sector prospects as unattractive3 attractive or average8 (
compan->s competitive a*ilities are similarl- <udged as weak3 average3 or strong on the
*asis of several factors8 ,he 3 2 3 matri2 when plotted form the *asis for recommending
*aseline strategies8 /ne advantage on CPM is that one of its e2tension= 6risk matri2F
provides alternative wa- to anal-se environmental risk8 'n a risk matri23 environmental
risk is taken as the third dimension and is divided into four categories from low risk to
ver- high risk8 0ach risk position is determined on the *asis of environmental threats and
the pro*a*ilit- of their occurrence8
Buine Pro2ile matri/!
,his matri2 is more fle2i*le than the growthDshare matri2 and uses competitive
position and industr- maturit- as the two dimensions8 't uses twent- cells for clarit- of
resource allocation8 0mpirical determination of the correlates of the two dimensions is
superior to the growthDshare matri28
)tage of 'ndustr- maturit-
#ompetitive
Position
0m*r-onic Mrowth Maturit- (ging
Cominant
)trong
Aavoura*le
,ena*le
&eak
usiness Profile Matri2
Deigning a +ort2olio!
'n order to design a portfolio3 the following guidelines are suggested *- Poram &ind
and Ei<a- Maha<an9
0sta*lishing the level and unit of anal-sis and determining what links connect them
'dentif-ing the relevant dimensions3 including single1varia*le and composite
Cetermining the relative importance of the dimensions
,o the e2tent that two or more dimensions are viewed as dominant3 constructing a
matri2 *ased on them
?ocating the products or *usinesses on the relevant portfolio dimensions
Pro<ecting the likel- position of each product or *usiness on the dimensions if 4a5 no
changes are e2pected in environmental conditions3 competitive activities3 or the
compan->s strategies and if 4*5 changes are e2pected
)electing the desired position for each e2isting and new product and developing how
resources might *est *e allocated among these products8
'n order to esta*lish a matri2 out of the availa*le information from *oth the compan-
and the market3 the M0 matri2 can *e constructed using the following steps9
18 'dentif- the factors making for an attractive market
28 0sta*lish the *usiness position factors
38 Mive agreement among managers to factors
48 Make a priorit- list and give each a weightage as in the following ta*le "868
58 Measure each factor1 *- market research3 internal discussion or e2ternal information
68 (ppl- the weightage to the measurement and arrive at a total
78 (ppl- the totals to the matri2 and
!8 )tart a discussion on what the figures show8
Aactors &eight
4T5
Measurement Ealue
Market attractiveness
/verall si:e
(nnual growth
#ompetitive intensit-
,echnological re.uirements
'nflationar- pressures
0nerg- need
;istorical margins
)ocialD?egalD0conomicD
PoliticalD,echnological impact
82$
82$
815
815
815
8$5
81$
must *e
accepta*le
48$$
58$$
48$$
28$$
38$$
28$$
18$$
$8!$
18$$
$86$
$83$
$845
$81$
$81$
18$$ 3835
Business %trength
Market share
)hare growth
Product .ualit-
rand reputation
Cistri*ution strength
Promotional effectiveness
Production capa*ilit-
+nit costs
% O C strength
Management effectiveness
$81$
$815
$81$
$81$
$8$5
$8$5
$815
$815
$81$
$8$5
28$$
48$$
48$$
58$$
38$$
28$$
38$$
58$$
48$$
48$$
$82$
$86$
$84$
$85$
$815
$81$
$845
$875
$84$
$86$
18$$ 4815
Market attractiveness and *usiness position measurement
+sing the a*ove3 a case of Cigital ,heatre )-stem 4dts5 product to *e sold in the theatres
of Mum*ai3 the following done to find out a*out the investment proposition9
Product 9 Cigital theatre s-stem
Market 9 %ecommended for investment1 Mum*ai theatres
Attracti&ene 2actor In2ormation
a&aila$l
e
Im+ortance cale
Market si:e Pes 1
#urrent coverage Bo 2
#ompetition Pes 3
#urrent s-stems Pes 4
)ocial aspects Bo 5
?egal aspects Bo 6
Buine trengt8 2actor 9i&e-+oint Eeig8tage 6alue
Market share 2 5 1$
Product .ualit- 4 15 6$
rand reputation 5 1$ 5$
Cistri*ution network 5 15 75
Promotional effectiveness 2 1$ 2$
#osts 3 5 15
Managerial personnel 2 1$ 2$
7$ 25$
Possi*le total9 35$
Market
attr
acti
&en
e
2act
or
9i&e-+oint Eeig8tage 6alue
Market si:e 5 15 75
#overage 4 15 6$
#ompetition 2 5 1$
#urrent s-stems 4 1$ 4$
)ocial aspects 2 5 1$
?egal aspects 2 5 1$
6$ 2$5
Possi*le total
'nvestment matri2 scales
'ndustr- attractiveness
3$$ 2$$ 1$$ $

35$
233
usiness
)trengths

117
;igh Medium ?ow
;igh
J
Medium
?ow
,he ne2t stage was to use the matri2 to compare the present markets with Mum*ai
as a potential investment *- using the same *asis8 ;ence the [ in the matri2 clearl- gives
evidence for investment in the market concerned8
'.6. Ne> Product Management
Bew products provide new life for otherwise aging organi:ations and propel
entrepreneurs to the top of new industries8 ,he rate of new product introductions varies
across industries3 *ut new and *etter wa-s to serve needs and wants are ultimatel-
introduced in all industries8 'ntroducing a product can mean moving into an industr-
leadership position8 ,hus3 few decisions in an organi:ation are fundamental3 pervasive3
and long lasting as those concerning products8 )till3 the num*er of new products each
-ear is striking8 Kust in the food industr-3 it is common to see over 23$$$ new product
introductions in a -ear and such that in pharmaceutical industr- also8 ,he risks3
opportunities and strategies associated with a product will partl- depend on the t-pe of
newness in .uestion8 (t one e2treme3 newness could simpl- involve a new pack si:e or
colour3 while at the other e2treme3 the product could represent a *reak through
innovation8 ;ence it is pertinent to note the t-pe of newness as follows9
18 Bew to the compan-= new to the market 9
,echnological developments often provide the *asis for such radical new products8
,hose products like #C pla-er3 Personal computer3 'nternet3 which have made a huge
impact on the life st-le of people3 are e2amples8 (t the first instance3 man- customers
will not o*tain the product for the want of reason to use the product8 ;ence it was
onl- appropriate to target the right audience who are not price1sensitive8 #ompanies
will get lot of time to convince the customers since competition is less8 Pond>s *lack
head remover is a new product for ;?? and also new to the market8
28 Bew to the compan-= a significant innovation for the market 9
#ustomers ma- *e aware of the core concept *ut an improvement in the product
creates a market8 ;ence the companies need to onl- communicate the nature of
innovation and the added *enefits it provides to the product8 #onsumers can compare
the new product with the old from their own e2perience and reach an opinion as to the
value of the innovation8 )tain1free clothes3 wrinkle free read-1made garments and
first car fitted with a catal-tic converter are some e2amples8
38 Bew to the compan-= a minor innovation for the market9
( minor innovation for the market is alwa-s re.uired to sta- tuned to the vagaries of
the markets and hence man- companies in the consumer dura*le3 automo*iles alwa-s
tr- to opt for minor innovations8 (H(' introduced ,E with E#% as com*ined
e.uipment *ut however due to the risk involved in the product3 customers were not
interested and was withdrawn8 Products like AM#M where the risk is less3 minor
innovations can work out8
48 Bew to the compan-= no innovation for the market 9
6Me1tooF products come under this categor-8 Aor small companies with limited
resources3 it makes sense to let the *ig competitors spend the time3 effort and mone-
developing the radical new concepts8 &hen the market is esta*lished and known3 it
can launch a slightl- cheaper imitation and get a foothold in the lower end of the
market8 &alkman now has as man- as 1$$ *rands of imitations8 ,here are plethoras
of soap *rands3 which are me1too in the market8
3ategorie o2 ne> +roduct!
oo:3 (llen O ;amilton3 'nc83 an international management and technolog-1
consulting firm with e2tensive e2perience in new product development conducted a
ma<or stud- manufacturing companies8 't identified si2 categories of new products in
terms of their newness *oth to the compan- and to the customers in the market place8
18 (dditions to the e2isting product lines9 Products that supplement a compan->s
esta*lished lines 426T of total58 ?akme ?ever ltd8 +nveiled a new *rand identit-8 't
launched a range of premium skin care products3 reconstituted its e2isting range3 and
got itself a new logo and a new positioning statement9 6,he source of radiant *eaut-F8
Margo Batural Moisturi:er was launched in Bovem*er 2$$$3apart from Margo
original Beem8 ,he variant is pale green3 translucent soap retaining the Beem3 *ut
with gl-cerin and the scent of lime8 %esearch had revealed that Margo tended to dr-
skin in the winter and the variant sought to redress this complaint well8
28 'mprovement inDrevisions to e2isting products9 Products that provide improved
performance or greater perceived value and replace e2isting products 426T of total58 5
Bew upgraded version of Pentium 4 from 'ntel inside8 ;?? considered most 'ndians
tend to oil their hair *efore the- shampoo and tried to tap this trend *- introducing a
#eramides *ased oil *rand called 6#eramics )unsilk hot oil treatmentF8
38 Bew product lines9 Products that allow a compan- to enter an esta*lished market for
the first time 42$T of total58 al Pharma is all set to launched @Hetovate@ a novel anti
dandruff and se*orrhoeic dermatitis of the scalp8 ,he product is e2pected stand out in
the crowded anti1dandruff market with its uni.ue formulation and competitive
pricing8 'nitiall-3 the product will *e introduced through the dermatologists8 ut the
compan- will slowl- *ring it to the /,# segment3 considering the consumer
awareness on the anti1dandruff shampoo market8
48 #ost reductions9 Bew products that provide similar performance at lower cost 411T
of total58 +sha group launched a fan which will save 5$ per cent electricit- 4the
compan- alread- has a model1&indsor1which consumes 25 per cent less energ-5= a
shank1less fan3 where the *lades wrapped around a triangular shaped motor= a fan
with propeller1like *lades3 each revolving at 36$1degree3 giving a two1wa- *ree:e=
58 Bew to the world products9 Products that create an entirel- new market 41$T of
total58 Miner&a 3a miniature mineral water machine launched *- )oftel was
commerciall- launched almost three -ears after the concept stage
%epositioning9 02isting products that are targeted to new markets or market segments
47T of total58 ,he mid1 market #,E *rand of ?M3 L)ampoorna>3 directed at rural and
semi ur*an consumers3 was repositioned to appeal to middle and lower middle income
ur*an consumers too8 ;??>s lime soap L%ainfresh> does not highlight an- natural
ingredient8 't was *asicall- a perfumistic soap3 which smells fresh8 %ainfresh does not
connote lime freshness= hence it was decided to change to *lue colour a new
repositioning8
'.0. Ne> Product De&elo+ment
oo:3 (llen and ;amilton #onsulting #ompan->s e2perience with more than 43$$$
companies since 1"14 has given the insights a*out the stages in the new product
development process8 ,he- are9
02ploration
)creening
usiness (nal-sis
Cevelopment
,esting and
#ommercialisation
Bo #ompan- can survive on new products alone8 't will also need to upgrade its
e2isting products on a continuous *asis making incremental improvements8 )ometimes
there are accident grades like microwave oven *ut without a good process in place it
cannot work8 ,he a*ove mentioned stages are se.uential in nature and in each stage3
management should *e gathering additional information to reduce uncertaint- a*out
demand3 product1compan- fit3 or even canni*ali:ation of its own products8 ,he concept
of Lstage1gate> process involves the maintenance of control over the e2penditures
involved in new product development *- *alancing the compan->s investment against the
value of additional information8 ,hat is3 *- assessing each idea after each stage *ased on
the information ac.uired3 management can reevaluate the idea>s prospects for success8 'n
this stage1gate s-stem3 managers can open the gate to the ne2t stage in the process or can
kill the new product at that point3 thus avoiding the further e2penditure of time and
mone- if the demand or profit prospects for the new product seem unfavora*le8
)tage 19 02ploration
,his stage is the one3 which decides the fate of a compan- in the process of its
commitment to new product development8 ;ence3 companies need to first determine the
product fields of primar- interest to the compan-8 ;ere the .uestion of new products in1
house or using ac.uisitions as a route to new product development needs to *e addressed8
#ompanies have to anal-se the ma<or pro*lems confronting them8 ,he- have to evaluate
the compan->s principal resources8 (t this stage3 it is necessar- that e2ternal growth
opportunities like e2panding markets3 technological *reakthroughs3 rising profit margins
*e identified8 'f found accepta*le3 such a route needs to *e planned8 'n order to do so3
companies have to esta*lish a planned programme for idea generation8 ,he sources of
new product ideas are man- and varied8 Aollowing is the ta*le of new product idea
generation possi*ilities9
Ta$le 11.1.-ource o2 ne> +roduct idea

'B,0%B(? )/+%#0) 0X,0%B(? )/+%#0)
%esearch and engineering
)ales3 marketing and planning
Production
/ther e2ecutives and *oard of
directors
#ustomers and prospects
#ontract research companies and
consultants
,echnical pu*lications
#ompetitors
+niversities
'nventors
+nsolicited sources
(dvertising agenc-
)uppliers
Movernment agencies
#ompanies have to identif- the idea generating groups and give them a clear
concept of the compan->s interest fields8 't is important that the creative personnel are
e2posed to idea generating facts8 ,hese people are kept awa- from the distractions from
the current pro*lems the compan- might face8 )ome companies designate an idea
collection point8 Man- companies in 'ndia in the manufacturing sector have a suggestion
*o2 or idea *o2 in the factor-Doffice premises8 )ome companies even provide incentivesD
*onuses for the emplo-ees whose suggestions have *een carried forward to the ne2t
stage8
,o find and nurture %0(??P 'M ideas3 organi:ations should
)tart with a clear strategic imperative
(dd a culture conducive to cross1functional creativit-
Aeed in forecasting from trends3 technolog- mapping3 and outside learning
'nvite customer wisdom3 intuition3 understanding and input
'aunch (idea engine( along the tra)ector of %tage *ate
(nticipate success
'n addition3 a compan->s scientists and technicians often make discoveries that lead to
new products8 Mahindra O Mahindra uses the nomenclature of 6sandpit pro<ectsF where
the %OC staff is encouraged to act freel- around with new concepts8 ,his is the wa- the-
had made i<lee8 (t ,itan3 ideas can originate with the marketing *rief on the shop floor
as a spin off from a new material or process3 in a la*3 as an %OC idea no matter where it
comes from8 low Plast3 in the first week of the month *egins with a meeting headed *-
the #0/ and attended *- the functional heads of manufacturing3 sales3 %OC and
marketing purel- for the purpose of product development *rain storming8 ,he- have the
polic- of set the standards and the creativit- will follow8 ,he most common methods of
idea generation in companies are9
Brain torming!
,his method developed *- (le2 /s*orn uses the recognition that the reall- new
ideas often mi2 several ideas to produce something that is non1o*vious and e2citing8
Mroup discussions are held to generate as man- new ideas as possi*le8 ,he group
generall- consists of si2 to ten people8 ,he group mem*ers are encouraged to *e as wild
as the- want in suggesting solutions8 Bo idea is criticised and hence no ideas are held
*ack8 (s ideas start to flow3 one leads to another8 &ithin a short time3 hundreds of ideas
can *e on the ta*le8 /nl- after ideas are generated freel-3 the group can then look forward
to criticall- evaluate later on for the purposes of practica*ilit-8 ( specific pro*lem or goal
is set at the *eginning of the meeting3 which is known as s-nectics8
Market 1eearc8!
#ompanies have to identif- the needs of the customers through the use of market
research8 Most of the companies rel- on this method since the customer anal-sis is the
*est wa- of offering a product to their need8 Bowada-s3 there are man- consultants and
agencies that provide the necessar- support to companies8 ,he Persona toothpaste from
(mwa- uses accu pressure point was developed *ased on market research8 ,he research
revealed that people tend to appl- e2cessive pressure while *rushing8 ,his adversel-
impacts teeth and gums8 ,he accupressure point in Persona tooth*rushes allows the *rush
to *end3 a*sor*ing e2cess pressure8 'n addition to the +)P of accue pressure point3 the
Persona tooth*rush has an angular design3 and a slender neck3 which allow eas- access to
all regions of the mouth8 ,he tooth*rush also has rounded *ristles3 which prevent gums
from *eing gra:ed8 ( non1slip grip helps support the thum*3 providing for *etter control8
"ong range +lanning tudie!
/ften a long term forecasting *- companies can -ield the re.uired results8 ,he customer
life st-le changes over the -ears3 the changing societal trend etc83 can *e forecasted and
products *rought accordingl-8 Cishwashers3 Microwave ovens are e2amples to this
categor- of research8
Market 4a+ Anal*i!
Map anal-sis is a techni.ue which plans maps of the market and used to determine how
various products are perceived *- how the- are positioned on the market map8 ,his
method helps in understanding the flaws in the e2isting products and the need for a new
product8 ,he advent of )atellite television showed the need of nearl- 1$$ channels and
host of other attri*utes which was immediatel- worked upon *- companies like P?3
/nida etc8 Ca*ur developed ?emonee: lemon <uice using market research to identif- the
gaps felt most keenl- *- its target customer3 as the lad- in a house worked in the kitchen8
Arom this process the idea for ?emonee:3 the lemon su*stitute converted into a product
*- its la*oratories8
T8ink Tank!
#ompanies are now emplo-ing the use of think tanks that assess the compan->s resources
and o*<ectives and devise concepts8 )ome times3 top managers of the companies often act
as the source of new product ideas *- identif-ing the consumer needs and changing
societ-8 ,he- also act as the think tanks8
Acti&it* Anal*i!
,his techni.ue is used *- companies in ascertaining the usage of a product8 Maruti /mni
was intended as a cargo vehicle *ut however3 the usage of the product showed that it was
more used as a passenger vehicle8 ;ence the positioning and the product itself was
changed to the re.uirement8 P O M studied the washing ha*its of 3$$$ customers in the
target segment for its middle market laundr- *rand3 (riel Main )uper )oaker3 to identif-
the one critical need removing grease stains that the *rand addresses8
9oreign -earc8!
)ome times3 man- multi national companies translate their e2perience from another
countr-8 )ome 'ndian companies search the various products3 which are not availa*le in
'ndia and offer this product after o*taining the necessar- agreements8 't is often found
that man- products3 which are successful in one countr-3 ma- not succeed in another due
to the cultural and social differences8 )o-a *ean milk was successful in +)( *ut when in
'ndia3 it failed confirming the a*ove reasons8
Mor+8ological anal*i!
,his method anal-ses the structural dimensions of the product3 which helps in getting to
the relationships *etween them8 &hen a writing instrument is anal-sed3 the e2tent of its
length3 clarit- and convenience *ecome the relationship factors from where a new
product can *e found out8 %esearch on the old Aord 0scort indicated that a three *o2
design found favour than a hatch*ack8 (part from more space for luggage3 consumers felt
the *oot also provided more safet- than a hatch8 'ndian customers also told Aord that rear
seats used for 7$ T of the time8 'n other markets3 the rear seat is used less than 1$T of
the time3 whereas in 'ndia it is used e2tensivel- to cram in people8 )o3 the 'kon was to
have a roomier rear seat with full roll down windows3 reading lights and comforta*le
centre seating as well8 (nd the rear door openings were claimed to *e the largest in the
industr- while the height of the chassis was such that it will *e eas- to get in and out8 ,he
new Aord 'kon car>s design had also taken care of the poor road conditions during the
monsoons in 'ndia8
-tage 2! -creening!
)creening is the second stage in the new product development model8 Curing the
screening process3 a compan- evaluates the commercial potential of a new product8 ,he
commercial potential of a product includes such criteria as profita*ilit-3 marketa*ilit-3
and costs of production8 )creening also calls for the participation of other departments
within the compan- in the development of new ideas8 ,he ideas and advice of people at
different levels of production will aid the product in areas such as its eventual
effectiveness3 ease of production3 and production costs8 (llowing all levels of emplo-ees
to *e involved in the process increases the empowerment within the compan-8
(fter the necessar- ideas are generated3 the ne2t stage is to reduce the num*er to a
managea*le si:e8 't is important to e2pand each idea into a full product concept8 Bew
product ideas should fit into the compan->s overall strateg-8 ,he- should also *uild on
the compan->s resources and skills8 ,he- have to collect facts and opinions3 which are
.uickl- availa*le3 *earing on the product ideas as *usiness propositions8 ,his stage
should translate the idea into *usiness terms8 (t this stage it is important to identif- the
*est sources of facts and .ualified opinions8 Quick and ine2pensive fact gathering
methods using the principle of 6diminishing returnsF is *etter to *e resorted8 ,he
checklist for the screening of new product ideas is depicted in the following ta*le8
Bo8 0lement ?e No
1 ,he idea represents high value1added products3 not
commodit- products
2 't re.uires consumer1oriented development and
presentation of products utilising e2isting marketing
capa*ilities
3 ,he idea has high advertising or promotional content
that allows for intensive communication of products
4 't is not a ma<or capital investment for the consumer
5 ,here is opportunit- for logical e2tensions to *e
developed
6 ,he product offers a significant Lplus> that is
discerni*le *- a large ma<orit- of consumers
7 ,here is an opportunit- to e2pand into man- overseas
markets
! ,he idea ties in with e2isting compan- functions1
technolog-3 marketing3 sales force
" ?a*our will *e of average or lower intensit- relative
to national standards
1$ #apital will *e of average or lower intensit- relative
to national standards
11 ,he product is compati*le with compan->s ph-sical
packaging capa*ilities
12 ,he product is prefera*l- non1perisha*le
13 ,he idea is related to the area of operation of the
compan-
14 ,he product utilises e2isting distri*ution channels
15 ,here is an e2tended product life c-cle
16 ,he product can *e a *uilding *lock for a multi1
products line or *usiness
,he #hecklist for screening new product ideas
(t ,itan 'ndustries3 ever- idea is made to pass through a stringent 5 point test covering
)t-ling
#osting
)ourcing
)chedules and
%esource re.uirements
(t ;+? it was the sheer s-stematic approach to idea management that ensured the
development of #lose up toothpaste sachet with a no::le8 ,he idea for the product3 which
originated with a marketing team3 was forwarded to one of the three innovation centres in
;+?8 ( cross1functional team e2amined it3 approved it and allotted the re.uired
resources8
-tage '! Buine Anal*i
'n *usiness anal-sis3 the compan- decides whether the new product will fit well within
the compan-@s product line3 distri*ution methods3 and promotion methods8 Marketers
also further test the potential for sales3 profits3 market growth3 and competitiveness8
;uman welfare is also considered in the operation of the compan-8 ,he ideas are made
more specific in this stage8 +niversal (ir ,echnolog-3 an 'ndian (merican firm in the
+)( has developed an innovative new technolog- called Phototech using the concept1 it
disinfects and cleans indoor air *- photocatal-tic o2idation8 't is a revolutionar- concept
that is effective against indoor air pollutants such as *acteria3 viruses3 and molds3 dust
mite allergens and odors8 't won the 1""" Bew Product (ward in the small *usiness
categor- *- the Bational )ociet- of Professional 0ngineers8 ,his was made possi*le onl-
after the deluge of ideas were carefull- screened and developed further into a *usiness
proposition8 ,his is the stage where the concept has to *e further refined and made into
*usiness terms8 ,he aspects that need to *e formulated for making an idea into a concept
are9
,arget audience of the new product
,he primar- *enefit of the new product
,he usage pattern of the new product
ased on these3 once the concept has *een developed3 it has to *e tested8 #onsumer
reactions are o*tained *- using a ver*al description or a picture of the product and asking
for un*iased opinions8 'n the ma<or manufacturing industr-3 the products are *rought to
*usiness or industrial consumers at a designated test sites3 and developers work closel-
with these consumers to spot the pro*lems and refine the designs8 (fter this3 the compan-
has to pro<ect costs3 profits3 return on investment and cash flow if the product is placed on
the market8 Pro<ections of potential sales at various prices need to *e made3 as well as
detailed cost pro<ections for different volumes of production8 )tart1up and continuing
costs3 fi2ed and varia*le costs and the impact of economies of scale need to *e
determined8 ,entative marketing plans need to *e set3 along with the costs associated
with them8 ?astl-3 a set of full1*lown *udgets is re.uired to estimate the potential return
on the product8 ,hus *usiness anal-sis must include an assessment of the amount of risk
the compan- will face if the new product is introduced8 'f the new product can *e
produced using e2isting production and marketing capa*ilities3 the risk is lower8 ?ess
investment in new plant and e.uipment will *e needed3 and the marketer can *enefit from
alread- ac.uired knowledge of the market8 ,E) )u:uki and a<a< (uto use the techni.ue
of target costing to determine the price of the product and working *ackwards to fi2 the
ma2imum accepta*le cost to develop new products8
-tage (! De&elo+ment!
/nce a compan- reaches protot-pe process development1the fourth stage of new1
product development1the- are committing to spend a lot of mone- on the initial
production of a still unproven product8 Product development aimed at *etter serving
through a disciplined process3 with clearl- defined targets for ever- stage3 continuous
interaction with other functions and more than one e-e on costs3 dela-s and the e2tent of
manufactura*lit-8 Curing this stage3 man- companies implement computer1aided
production programs8 Bot onl- do these reduce overall costs in production3 *ut also
should a flaw *e found with either the product or the production process3 computer1aided
production s-stems can easil- correct the pro*lem8 ,his saves valua*le time in redesign
and production restructuring8 - getting the product to the market more .uickl-3 a
compan- can turn potential profit into reali:ed profit8 Production engineers and %OC
specialists construct a model= the marketing department develops a *rand name to match
the idea or concept= packaging is designed= and the ma<or elements of the marketing mi2
are put together8 ,he positioning strateg- is also identified8 (t this stage3 man- different
functional areas of the compan- are called upon to cooperate in the creation of protot-pes
and development of production or deliver- processes3 marketing plans and other elements
re.uired to make the idea a realit-8
(fter the la*orator- tests on the *asic performance against specifications are over3
the new product should *e released8 (t this stage it is important to note the commercial
rather than scientific standards to determine the product release point8 ,' #-cles of
#hennai put the ;ercules top gear in shops3 a product that has fuelled 2$1fold growth in
the segment in .uick time as a new product to overcome the depressing c-cle sales8 &hen
this was identified as the lack of relia*ilit- of gears3 ,' c-cles decided to use the *est and
safest gears and design its product around its component8 Managing cost was a critical
issue3 *ecause the gears were *eing imported8 ,his was achieved *- maintaining *est
control on material cost and cheaper outsourcing8 oth the decision taken as a part of
product development and not as a production process8 (t a<a< (uto3 product
development is a*out five parallel activities like product definition and design3
manufacturing process development3 marketing3 planning and tooling8 Cifferent
departments work on different application areas3 industrial design on st-ling3 engineering
design on structural and engine components3 product engineering on machine tool design
and s-stems on s-stem configuration8 ( potent techni.ue for ensuring product .ualit- at
the development stage is *enchmarking8 Aor instance MOM is *enchmarking )corpio
against ,ata )umo for passenger comfort against its own vehicle for fuel econom-3
against the Maruti M-ps- for comfort and ease of driving3 against ,ata )ierra for
acceleration8 Philips applies the fault1mode effect anal-sis techni.ue to check the various
things that could go wrong with a specified product and chalk out an optimum solution8
-tage 5! Tet Marketing!
,est marketing is a tool for new product launch and new product development8
,he compan- can develop new product in own la*oratories and independent researcher
develops a new product8 ,est Marketing has *een defined as a 6research techni.ue in
which the product under stud- is placed on sale in one are more selected localities or
areas3 and its reception *- customer and trade is o*served3 recorded and anal-sedF8 ,his
test market will allow managers to see how the product might perform when released to
the entire market8 Arom this information3 managers can also decide if the- have the right
target market3 the right price3 and the right level of advertising8
'n this stage the new product and relevant marketing programme is tried out for
the first time in well selected market segments under representative marketing
environments8 ;ence test marketing is the process of introducing a new product or
service to a small 6test marketF 4i8e85 considered to *e representative of the large target
market8 ,est marketing have man- alternative forever like advertisement with coupon
and samples8 ?aunching the new product in the market is risk- one3 ecause the product
development are varia*le to changing customer needs and taste3 Bew technolog-3
shortage product life c-cle3 and lastl- the increased domestic and foreign competition8
)eventh aspect of product development is launching the market product8
,est marketing is done mainl- to identif- the following9
Potential sales volume generation8
'dentification of innovative *u-ers8
#omparison of target and actual num*erDt-pes of *u-ers8
%ecognition of strong points of product *- *u-ers8
(*ilit- of advertising message to transmit products strong points8
#ompetence to attain planned distri*ution8
Potentials for repeat purchases8
1ationale 2or tet marketing!
a8 ,est marketing should *e conducted when the potential financial loss to
the compan- through new product failure3 or though the failure of market
plan or approach is significantl- greater than the cost of the proposed test
marketing procedure8
*8 &here the cost and risk of product failure are high relative to the profit
and pro*a*ilit- of success8
c8 &here the difference in the scale of investment involved in the test versus
national launch route has an important *earing on deciding whether to test8
'f the compan- investment for a national launch is far greater than the test
launch3 testing should *e preferred8
d8 &hen the possi*ilities of and the speed with which cop-ing of the test
product *- competitors are great3 testing ma- *e avoided8 ,his is
particularl- relevant in soft technolog- industries8
#$%ecti&e o2 tet marketing!
Aind out the consumer needs of *u-ing
0valuate impact of local advertising and promotion during the test8
0valuate the market potential for other competition product
Aind out the area coverage for sales
Aind the consumer a*ilit- to *u- the product *ased on price8
Proce #2 Tet Marketing!
18 #it- selection
28 )elect the sales representatives8
38 Curation of the test8
48 )elect suita*le data8
58 'mplementation
,he test market to *e selected should *e a restricted geographical area3 which
represents the national market8 'n 'ndia3 cities like angalore3 Mum*ai3 #handigarh3
Celhi and #alcutta are usuall- selected *- companies to test market their products8 ,here
should not *e fewer than two markets for each variation to *e tested8 ;owever3 where the
purpose of the test is to estimate the sales potential of a product to *e nationall- marketed
markets in3 at least3 four geographic areas should *e used8 Pepsodent failed in the first test
marketing mainl- *ecause it was test marketed onl- at #alcutta8 (s the significance of
the varia*les to *e tested decreases3 the num*er of markets necessar- to reflect the effect
of these varia*les increases8 Marketing achievements in the test1market should *e
recorded and then pro<ected nation1wide8 Aor e2ample3 if monthl- volume in 2 per cent
of the countr- were %s84$$$3 then the total volume pro<ected would *e %s84$$$D8
$2Y%s823 $$3$$$8
(ll availa*le data should *e carefull- reviewed to make sure that the test1market is *-
and large representative of the whole market in terms of social class3 caste3 age3 and other
demographic varia*les8 (ll availa*le data should *e reviewed also to make sure that the
test1market is representative in terms of consumption of similar or su*stitute products8 't
is also advisa*le to *e assured that competitive strength in the test1market is appro2imate
to those in the whole market8 (fter having considered the a*ove factors in test marketing3
it is also advisa*le to check up different components of the marketing1mi2 to *e
emplo-ed in the test marketing and their pro*a*le future relationships8 't is important
*ecause distortion in an- one component at the commerciali:ation stage would *ring
a*out distortion in the test results and the actual product performance8 Aor e2ample3 if
testing is accompanied *- an aggressive sales promotion campaign *ut not so in
commerciali:ation stage then su*se.uent results would *e different8 ased on the
response in the test marketing3 a compan- can follow an- of the three options9
(*andonment of the product3
(dditional testing3 and
#ommerciali:ation8
,he test marketing needs to incorporate the following as the tools9
18 )ales personal demonstrations
28 Aree samples
38 #ouples
48 ?ocal advertisement = and
58 Coor to1door distri*utions
3ontrolling T8e Tet Market!
,he controlled test marketing allows the compan- to the insure factors 44i8e85 (lpha
testing which means the testing for with in the compan-5 and limited advertising on
*u-ing *ehaviour8 ( sample of consumer can *e tested or interviewed later to give their
impression of the product8 ;owever3 the controlled test marketing provides no
information on how to sell the trade on carr-ing the new product8 ,his techni.ue also
e2poses the product and product feature to competition8 0ven the compan- does not have
to use its own sales force3 give trade allowances and *u-ing distri*utions8
-imulated Tet Marketing!
,his testing means 3$ and 4$ .ualified shoppers have to *e selected and .uestioning
then a*out *rand familiarit- and preferences in specified consumer of product8 ,his
testing involves the interviews with the shoppers a*out the product that is moving fast
and how to put the new product in the market8 #onsumers receive a small amount of
mone- and are invited in to a store where the- ma- *u- the product or an- item of
product8 )ome weeks later3 the- are interviewed *- phone to determined product
attri*ute3 usage3 satisfaction and repurchase fre.uentl- and are offered a opportunit- for
repurchasing of the product3 results are incorporated in forecasting to the sales levels8
#olgate Palmolive used a different marketing mi2 in each four cities like8 #olgate
Palmolive after launching a new product in set of small 6lead cornersF and keeps rolling
it out if the proves successful3 and general mills have launched new product area too large
for rivals to distri*ute8
(n average amount of advertising coupled free samples8
;eav- advertising with free samples
(verage amount of advertising linked with redeeming samples8
(n average advertising with no the other special offers8
-tage 6! 3ommercialiation!
(t this stage3 complete final plans for production and marketing has to *e done8 ,he
product team if necessar- needs to *e e2panded to cover all the departments of the
compan-8 ,his is the stage where the right individuals are identified who would take over
the successful marketing of the product and who have the capacit- to coordinate with
other departments of the compan-8 ( complete activit- schedule has to *e prepared8 Aeed
*ack mechanism has to *e developed for effective control8 ,he product has to *e read-
for meeting an- competitive pressures and changing internal pro*lems8 'n terms of
launching or commercialising the product3 there are two main alternatives8
Immediate national launc8!
,his is one wa- to overcome the competition and to save on the costs of launch8 'f
considera*le promotions are carried out3 it will *e difficult for the competition to
overcome the compan-8 ,he risk of national launch is that it leaves the compan- with
man- pro*lems3 which were not countered during the test marketing8 Production routines
that work well on the schedules ma- not scale up as e2pected8 0arl- pro*lems of suppl-
ma- show poorl- on the launch8
1olling launc8!
,his is an alternative to the full national launch8 't involves *uilding towards full national
coverage *- starting with one or two recognised distri*ution areas3 then graduall-
adding new regions to those alread- served as e2perience and success of the product
further increases8 ,his helps the compan- to concentrate on getting the logistics and
production schedules in tune with the re.uirements8 #oca1#ola3 Hellogg>s> and
several other ma<or pla-ers including ;?? use this strateg- effectivel-8
N.E P1#DU3T D.6."#PM.NT IN T). INDIAN -3.NA1I#!
'n (pril 1"""3 Mahindra O Mahindra unveiled the i<lee3 the first ever
commerciall- via*le electricall- operated 3 wheeler3 a classic skunk work pro<ect3
worked on *- a 14 mem*er team3 without a deadline3 *udget or even assurance of
success8 ,he pro<ect took e2actl- 6 months8 Aor e2ample3 at ,itan industries which
develops *etween 7$ and 1$$ new watches ever- -ear ever- new model flows from 3
central strategic considerations vi:83 *oosting *rand value3 increasing market share and
profit ma2imisation8 ;+? considered most 'ndians tend to oil their hair *efore the-
shampoo and tried to tap this trend *- introducing a ceramides *ased hot oil *rand called
#eramides sunsilk hot oil treatment8 ,hough the compan- had alread- stretched the
e.uit- of its largest selling shampoo3 #linic into oils3 in the case of )unsilk it is the
ceramides *ased hot oil concept it was tr-ing out on its customers8 't was initiall- test
marketed in #alcutta and the product poised for a national launch at the end of 1"""8,he
product was in the form of a *lister pack in which the contents were visi*le 8,he oil was
to *e immersed in warm water *efore use8 )tretching the e.uit- of a shampoo *rand into
hair oils was not looked upon favora*l- *- anal-sts8 ;+? after realising its market share
in the shampoo market has slipped from 1!T in 1""6 to 16875T in 1""!3 in a move to
regain its position3 launched two new variants to the *rand )unsilk1 Aruitamins and
#eramides as standalone *rands in 1""!8
(. )a&e *ou undertood t*+e ,uetion!
18 %aman called several airlines to compare rates and chose a flight on Ket airwa-s as it
had a *etter reputation for service and competitive prices8 ,he airline ticket is an e2ample
of which t-pe of productJ

(8 convenience
8 shopping
#8 specialt-
C8 unsought
28 'ndustrial products are 9
(8 purchased for personal consumption8
8 fre.uentl- purchased for *oth their functional aspects and their ps-chological
rewards8
#8 traditionall- classified according to their characteristics and intended uses8
C8 not purchased *- non*usiness organisations8
38 Products that are used directl- in the production of a final product *ut are not easil-
identifia*le are categorised as
(8 accessor- products8
8 component parts8
#8 consuma*le supplies8
C8 assem*l- components8
48 ;industan +nilever ?td83 markets a num*er of different *rands of laundr- detergents
including )urf 02celmatic3 )urf 02cel3 %in3 (riel and )urf8 0ach of these specific
versions of laundr- detergents can *e descri*ed as9
(8 a product item
8 a product line
#8 a core product
C8 a mi2 item
58 ( product item can *e *est descri*ed as a

(8 component of a marketing mi28
8 particular t-pe of *rand8
#8 specific characteristics of a compan-@s product8
C8 specific version of a product8
5. -ummar*!
(s the competition *ecomes more intensified in -ears to come3 companies are gearing
to face them *- *ecoming more specialised8 ;ence the marketing department
*ecomes more professionalised and in this conte2t3 product management gains
prominence8 ,he e2panding markets *ased on li*eralisation3 privatisation and
glo*alisation needs a professional approach coupled with the sophistication in
technolog- and consumers *ecoming more educated3 this development in product
management is inevita*le8 ( product manager has to *e in the current competitive
environment competent to handle diverse functions like9
)trateg- development9 oversee the long1term strateg- for the product categor-3 like
specific competitive strategies for different market segments as well as develop
product line e2tensions and pro<ect demand8
#onsumer understanding9 maintain close contact with the consumer and develop an
intimate knowledge of consumer attitudes and *ehavior8 champion the cause of the
consumer in the *usiness8
Product innovation9 awareness of consumer needs gaps and appreciation of
technological possi*ilities will impact the product development team and help *ring
a*out innovations with tangi*le *enefits to the consumer8
rand e.uit- management and communication9 (s a custodian of the *rand3 the
product manager will *uild the image and personalit- of the *rand and communicate
it consistentl- through advertising over different media8 ;e will *e responsi*le for
optimising advertising spends and the selection of the right media mi2 to reach the
specific target audience8
,eam leadership9 (n e2cellent team leader and team pla-er3 he will co1ordinate with
the sales and product development teams to facilitate and implement *usiness
initiatives in these areas8
;ence it is imperative that he should have a clarit- over the new product
management and development along with the knowledge of product life c-cle8
6. ./ercie
18 Prepare a product mi2 depth for fast moving consumer goods of an- compan-8
28 'dentif- and e2plain strategies for the following products in different product life c-cle
stages9
a8 #eiling fans
*8 )cooters
c8 Palm top computers
d8 )tarch for laundr-
e8 Cigital diar-
f8 Mo*ile phones
38 Aor a product like Eacuum cleaner3 -ou want to conduct test marketing8 ,his product is
to *e launched on a national *asis8 02plain how will -ou proceedJ
48 Cescri*e the new product development process in a pharmaceutical industr-8
58 0valuate the methodolog- for launching the following products on a national *asis9
a8 'ncense sticks
*8 Cigital note *ooks
c8 Mouthwash
d8 (nti septic lotion
0. 1e2erence
18 Challa and Puseph3 6Aorget the Product ?ife #-cleF3 4arvar( 8usiness Revie+3
1"763 pp81$2111$8
28 Kohn )mallwood3 6,he product life c-cle9 a ke- to strategic marketing planningF3
M%7 &usiness topics3 winter 1"733 pp82"1328
38 Koseph Mullitinan3 Mordon Paul and ,homas Madden3 6Marketing management1
strategies and programsF3 Mc;ra+/4ill31""63 pp81!21!58
48 Mlen +r*an3 ,heresa #arter3 )teven Maskin and Nofia Mucha3 6 Market share rewards
to pioneering *rands9 an empirical anal-sis and strategic implicationsC* Management
%cience3 Kune 1"!63 pp86451578
58 'an &ilson3 6%eforming the )trategic Planning Process9 integration of social and
*usiness needsF3 0ong Range Planning3 /cto*er 1"743 p838
68 Michel (llen3F Ciagramming M0>s planning for what>s &(,, 6in %o*ert (llio and
Malcolm Pennington3 editors3F $orporate planning TechniEues an( applicationsF3
Bew Pork3 1"7"8
78 Philippe ;aspeslagh3 6Portfolio planning9 uses and limitsF3 4arvar( 8usiness Revie+3
Kanuar-1Ae*ruar- 1"!23 pp8611638
!8 Chawan %adhika3 6;ow to develop the *est new products 63 8usiness To(a'3 Kune
2231"""3pp874 !58
"8 Co*hal )hailesh O Mupta 'ndra<it3 6Cavid Es Moliath ii9 ,he soap operaF3 8usiness
To(a'3 /cto*er 7 1"""3 pp8231248
1$8 ;u*ert Matington3 0ric (nderson and Hristiaan ;elsen3 6 #ompetitive reactions to
market entr-9 e2plaining interfirm differencesF3 <ournal of Marketing research3
Ae*ruar- 1"!"3 pp8441558
118 (l*ert Page3 6 (ssessing new product development practices and performancesF3
<ournal of pro(uct innovation an( management3 )petem*er 1""33 pp813611458
128 hushan %atna3 6,urning on the heatF3 8usinessline3 /cto*er 123 2$$$8,om Morman3
6&hat will our customers think of this product ideaJF 8usiness Marketing3 )eptem*er
1"!73 pp87617!8
138 #hakra*orth- (lokananda3 6Conning the war paintF3 8usiness 3n(ia3 Bovem*er 3
163 1""73 pp8 "71"!8
148 #hallapalli )ravanthi3 7Margo dishes out a new avatarF3 8usinessline3 Kanuar- 113
2$$1
158 %o*ert #ooper3 6,he new product s-stem9 the industr- e2perienceC* <ournal of
Pro(uct innovation an( management3 Kune 1""23 pp8113112$8
168 %oger #alantone3 (nthon- Ci enendetto and ,ed ;agg*lom3 6 Principles of Bew
product Management9 02ploring the *eliefs of product practitionersF3 <ournal of
pro(uct innovation an( management3 Kune 1""53 pp8235124$8
178 )alton3 Mar- K83 /rgani:ational 0ngineering9 ( Bew Method of #reating ;igh
Performance ;uman )tructures8 )nn )r&or, Professional $ommunications 3nc83
1"668
Brand management
Unit tructure!
1. Introduction
2. "earning #$%ecti&e
'. Branding
3.1. 8ran(ing (ecisions
3.2. 8ran( meaning
3.3. 8ran( platform
3.4. 8ran( )rchitecture
3.#. 8ran( Extensions
3.9. 8ran( %tretching
3.:. 8ran( eEuit'
(. )a&e *ou undertood t*+e ,uetion
5. -ummar*
6. ./ercie
0. 1e2erence
1. Introduction!
rand is a name term3 sign3 s-m*ol3 or design or a com*ination of them intended
to identif- the goods or services of one seller or group of sellers and to differentiate them
from those of competitors8 'n essence the *rand identifies the seller 4or5 maker8 rand is
considered to *e a trademark or distinctive name identif-ing a product or manufacturer8
,he *rand must *e a *ridge *etween the customer and the owner of the *rand8 oth
functional and emotional satisfaction is attained through *randing8 ( *rand has the
power to create interest and command an immediate second look8 ,he value of a *usiness
is directl- related to the strength of its *rand8 ( strong *rand will evoke a num*er of
images in the mind of the prospects8
randing is a ma<or issue in product strateg- on the one hand3 developing a
*randed product re.uires a great deal of long term investment especiall- for promotion3
advertising and packaging8 /n the other hand manufacturers eventuall- learn market
power lies with *uilding their own *rands8 0ven when the companies can no longer
afford to manufacture their products in their homelands3 the *rand name continues to
command customer lo-alt-8
( *rand is essentiall- a seller>s promise to deliver a specific set of features=
*enefits services consistentl- to the *u-ers8 ,he *est *rand conve-s warrant- of .ualit-8
rands conve- even more meanings up to si2 levels8
(ttri*utes
enefits to the customer
Producer>s values
#ulture
Personalit-
+ser
2. "earning o$%ecti&e!
)fter stu('ing this unit* 'ou +ill un(erstan(,
The traits of successful &ran(s
The &ran( management aspects an( strategies
The &ran( eEuit' issues an( +h' is it important etc..
'. Brand management!
Hevin ?ane Heller3 *rand guru identified the following ten traits as the common aspect
*ehind the successful *rands9
18 ,he *rand e2cels at delivering the *enefits customers trul- desire8
28 ,he *rand sta-s relevant8
38 ,he pricing strateg- is *ased on consumers> perceptions of value8
48 ,he *rand is properl- positioned8
58 ,he *rand is consistent8
68 ,he *rand portfolio and hierarch- make sense8
78 ,he *rand makes use of and coordinates a full repertoire of marketing activities to
*uild e.uit-8
!8 ,he *rand>s managers understand what the *rand means to consumers8
"8 ,he *rand is given proper support3 and that support is sustained over the long run8
1$8 ,he compan- monitors sources of *rand e.uit-8
Bene2it #2 Branding!
18 randing makes it causes for the seller to process orders and track down pro*lem8
28 ,he seller>s *rand name and trademark provide legal protection of uni.ue product
features8
38 randing gives the seller the opportunit- to attract a lo-al profita*le set of customers8
rand lo-alt- gives some protection from competition8
48 randing helps the seller segment markets
58 )trong *rands help *uild the corporate image3 making it easier to launch new *rands
and gain acceptance *- distri*utors and consumers8
Ue o2 a ucce2ul $rand!
&ith a successful *rand3 a compan- will usuall- have9
18 'mproved margins through higher realisations leading to higher profits8
28 Menerated *etter cash flows= and improved management and productivit- of assets8
38 %educed or even eliminated the need for regular infusion of fresh capital investment
needs can *e met out of internal accruals3 and e2tensions of a successful *rand can
give the *enefits of a new product launch at reduced cost8
48 #reated an entr- *arrier for would *e rivals3 who must now spend heavil- to counter
the *rand and
58 'nsulated the *rand from economic c-cles3 since a successful *rand immediatel-
reduces the impact of price alone on demand8
'.1.Branding Deciion!
381818rand name decisions9
,he first decision is whether the compan- should develop a *rand name for its
product8 randing is such a strong force that hardl- an-thing goes un*randed8 'n some
cases however there has *een Lno *randing> of certain staple consumer goods and
pharmaceuticals8 Lgenerics> are un*randed3 plainl- packaged3 less e2pensive versions of
common products8 ,he- offer standard or low .ualit- at a price that ma- *e as much as
2$ percent to 4$ percent lower than nationall- advertised *rands and 1$ percent to 2$
percent lower than retailer private la*el *rands8 ,he lower price is made possi*le *-
lower .ualit- ingredients3 lower cost la*eling and packaging3 minimal advertising8 ,he
advantages of *rand naming are9
0asier for the seller to process orders and track down pro*lems
Provide legal protection against plagiarism
Mives the seller the opportunit- to attract a lo-al and profita*le set of customers
;elps *uild corporate image
Qualities of a *rand name are as follows
)hould suggest something a*out products *enefits like Lfairever> or Lfair Olovel->
)hould suggest product .ualities such as action or color like Lsunsilk>3 @;ead and
)houlders>
)hould *e eas- to pronounce like L,ide L3>surf>
)hould *e distinctive like %in3 ?u2
)hould not carr- poor meanings in other countries and languages8
,here are certain *asic categories of *rand 4or corporate5 name9
Decri+ti&e name ( name which descri*es the product or service for which it is
intended3 e8g83 M'?M( *rand of milk availa*le in Herala8
Aociati&e name ( name which alludes to an aspect or *enefit of the product or
service3 often *- means of an original or striking image or idea3 e8g83 E')(8
9reetanding name ( name which has no link to the product or service *ut
which might have meaning of its own3 e8g83 P0BM+'B8
A$tract name ( name which is entirel- invented and has no meaning of its
own3 e8g83/B'C(8 (*stract names are a su*1set of freestanding names *ecause
the- also have no link to the product of service8
3oined name (n- name which is in some wa- invented8 #oined names can *e
descriptive 43M53 associative 4,(B#0M ,amil nadu cements5 and
freestandingDa*stract 40?0#,%/?+X58
,he *rand name is the most important element in the *randing mi28 't identifies the
product or service3 and allows the consumers to specif-3 re<ect or recommend *rands8
,hrough time and use3 a name can therefore *ecome a valua*le asset8 #olgate1 Palmolive
compan- has s-stematicall- tried to harmonise the naming of its products from countr- to
countr-8 'n general3 it uses the #olgate name for oral care products3 such as toothpaste3
and the Palmolive name for *od- care products3 such as shampoos and conditioners8
&hen Bissan Motor #ompan- introduced its cars into the +nited )tates3 its management
did not have total confidence in the .ualit- of its cars3 so the name Catsun was used for
fear of losing face8 ;owever3 after 2$ -ears of promoting the Catsun name and *uilding a
.ualit- image3 the compan- decided to phase out the Catsun name and su*stitute the
corporate name3 Bissan8 Aor a time3 the compan->s cars carried *oth names3 until the
Bissan name was firml- esta*lished in consumers> minds8
'nter *rand in the 1"!$s helped pioneer a shift in pharmaceutical naming trends
through the creation of the name Pro:ac for 0li ?ill->s anti1depressant8 Prior to this3
pharmaceuticals names were scientific sounding with usuall- some reference to the
chemical compound8 Pro:ac was coined from 6ProF for professional3 pro1active and
6NacF for the a*ilit- of the medication to target e2actl- the area needing treatment8 't was
one of the first names to suggest a *enefit in a wa- that was approacha*le to consumers8
/ver 1$ -ears later3 Pro:ac still remains the world>s leading antidepressant with over R3
*illion in annual sales8 ;ence naming a *rand is ver- important8 ,he various stages in
naming a *rand are9
18 Cecide what <o* the new name need to perform3 now and in the future8
28 'solate those naming themes that are relevant to the consumer and appropriate in
*randing and positioning terms8
38 +se Celphi techni.ue or focus groups3 name development specialists3 computers and
an e2isting name li*rar- to create names8
48 /nce a vast list of names are identified3 it needs to *e pruned to managea*le
proportions8
58 Bames that have difficult- of pronounciation3 legi*ilit-3 memora*ilit- or meaning
need to *e discarded8
68 0liminate those names that are unregistra*le as trade marks3 that are too close to
e2isting competitive marks or that fail to meet other criteria like length of the name
etc8
78 #hoose the name upon discussion with the top management3 advertising agenc- and
the participants in the marketing s-stem8
'nitiall-3 Mitsu*ishi sought to sell its four1wheel1drive utilit- wagon as the Pa<ero until
the- learned it meant 7straw man7 in )panish= it was renamed the Montero3 7Mountain
Man87 /ne firm tried to sell a de1icer in the +8)8 *- the name 7)uper1Piss87 ,he )panish
potato chip 7um7 did not do well for the same reason8 Bissan also sought to sell a sports
car in the +8)8 in the earl- @7$s called the 7Aair ?ad-87 't later sold *etter as the 24$N8 'n
an- naming process3 hundreds of potential names are eliminated *- some of the steps
alread- mentioned8 'n coming up with a name for the old ell ?a*s division of (,O,3
)an Arancisco1*ased firm ?andor (ssociates went through 7$$ different names *efore
the- came up with 7?ucent ,echnologies87 Ainall-3 it makes sense to eliminate names that
do not sound well or make sense in other languages8 Curing #oca1#ola@s first entrance in
#hina3 great care was taken to get the phonetics correct in pronouncing #oca1#ola8
;owever3 the name manipulators forgot the meaning of the s-m*ols the- selected onl- to
learn the- meant 7kiss the wa2 tadpole87
Qualities of a *rand name are as follows
)hould suggest something a*out products *enefits like Lfairever> or Lfair Olovel->
)hould suggest product .ualities such as action or color like Lsunsilk>3 @;ead and
)houlders>
)hould *e eas- to pronounce like L,ide L3>surf>
)hould *e distinctive like %in3 ?u2
)hould not carr- poor meanings in other countries and languages8
'.1.2.Brand -+onor Deciion!
,here are several options with respect to *rand sponsorship8 ,he products can *e
launched as an- of the following t-pes of *rands8
Manufacturer *rand1called sometimes as a national *rand like the lowplast
'ndustries> E'P8
Cistri*utor *rand1also called reseller3 store3 house 4or5 private *rand8
?icensed *rand name8 (lthough manufacturer *rands dominate3 large retailers
have *een developing their own *rands *- contracting production from willing
manufacturers8
'n -ears past3 customers viewed *rands in a categor- arranged in a L*rand ladder> with
their favorite *rand at the top and remaining *rands in descending order of preference8
Bow the L*rand ladder> concept is *eing replaced *- L*rand parit-> that man- *rands are
e.uivalent8
'.1.'.Brand -trateg* Deciion!
( compan- has five choices with regards to *rand strateg-8 ,he- are3
18 ?ine e2tensions! e2isting *rand name e2tended to new si:es or flavors in the e2isting
product categor- like #inthol Lcologne>3 #inthol Llime>8 02tensions ma- lead to the
*rand name losing in specific meaning8 ;owever there is a much higher chance of
survival than *rand new products8
28 rand e2tensions9 where a compan- ma- use its e2isting *rand name to launch new
products in other categories like the *rand L%in> *eing e2tended to *oth detergent
powders3 detergent cakes8 ,he new product ma- disappoint *u-ers and damage their
report for the compan->s other products8 ,he *rand name ma- *e in appropriate to the
new product8 ,he *rand name ma- also lose it>s special positioning in consumers>
mind trough over e2tension8 Lrand dilution> occurs when consumers no longer
associate a *rand with a specific product or highl- similar products8
38 Multi1*rands9 a compan- will often introduce additional *rands in the same product
categor-8 )ometimes the compan- is tr-ing to esta*lish different features or appeal to
different *u-ing motives8 ( multi1*randing strateg- also ena*les the compan- to lock
up more distri*utor shelf space and to protect its ma<or *rand *- setting up Lflanker
*rands>8 ;industan lever limited produces three different *rands of detergent
powders8 #ompan- inherits different *rand name in the process of ac.uiring
competitors8 )mithHline eecham consumer health care owns the ac.uired *rand
names like LEiva>3 >Malt ova>8 ;industan ?ever ?td8 /wns ac.uired *rand names like
rook ond3 ;amam Hissan8 ( ma<or pitfall introducing multi1*rand entries is that
each might o*tain onl- a small market share and none ma- *e particularl- profita*le8
,he compan- will have dissipated its resources over several *rands instead of
*uilding a few highl- profita*le *rands8
48 Bew rands9 Bew rands are created when compan- launches products in a new
categor- it ma- find that none of its current *rand names are appropriate8 Pet3 the
cost of esta*lishing a new *rand name in the market place is costl-8
58 #o rands9 ( co1*rand is a com*ination of two or more well known *rands in an
offer like the com*ination of )' and M0 #apital in the issue of )' credit cards8
'.1.(.Brand 1e+oitioning!;owever well a *rand is currentl- positioned3 the compan-
ma- have to reposition it later when facing new competitors or changing customer
preferences8 ,he + groups McCowell>s LMera no81> *rand was once positioned for
people with ecstatic moods *ut now it has *een repositioned as a drink for sociall-
responsi*le individuals8
,he *randing strategies for read-made garments and general lighting segments are
depicted in the following figure 9
Aigure9 randing strategies some e2amples
)trateg-Ddecision %ead-made Marments Meneral lighting
,o *rand or not to *rand (lwa-s *randing is
advantageous8
e8g8 (rrow3 ?ouis Phillipe3
(lwa-s *etter to *rand
e8g8 Philips3 M03 )ur-a
Peter 0ngland3 #am*ridge
rand1sponsor decision ?icensed *rand name is
most common
e8g8 (rrow 4#luett Pea*od-3
+)(5
?ouis Phillipe 4 Ean
;eusen3 +H5
Manufacturer>s *rand
e8g88 Philips3 a<a<
rand name decision 'ndividual *rand names
e8g8 (rvind mills owns
02cali*ur3 (rrow3 %uf and
,uf
irla group owns ?ouis
Phillipe3 Ean ;eusen3 Peter
0ngland
)i-arams own1 /2em*urg3 K
;ampstead
lanket famil- name
e8g8 M03 Philips3 )ur-a
rand strateg- decision Multi *rands e8g88 'ndus
?eague>s multi *rand shirts
)chullers3 'ndigo nation
(rvindMills 1 02cali*ur3
(rrow3 %uf and ,uf
rand e2tensions used
*- all the pla-ers
'.2.Brand meaning!
( *rand can conve- up to si2 levels of meaning8 ,he challenge in *randing is to develop
a deep set of these meanings for the *rand8 &hen the audience can visualise all the si2
levels3 then the *rand can *e deemed to *e a success8 ,he following are the si2 levels9
18 ,he ke- attri*utes *ased on its recognition3 reputation3 affinit- and e2pertise needs to
*e communicated to the customers8 ;ence if Maruti advertises on its MPA' engine or
a<a< advertises on its resale value3 then the attri*utes are put across to the customers8
28 ,he second level is that the attri*utes should *e translated into functional and or
emotional *enefits8 ,hus Maruti advertises that ever- 2 out of 3 *u- a Maruti
translates their ke- attri*utes across the customers8
38 ,he third level of meaning is a*out the producer>s values8 - advertising that even in
;imala-as3 Maruti has a service centre3 the- show that the- care for the customer and
their concern to have as man- service centers across the countr-8
48 ,he fourth level is in its culture8 Kohnson and Kohnson had alwa-s focussed on the
*ondage *etween the mother and the child while advertising their child care products3
it represents their culture8 ;-undai )antro focussed their Horean culture intitall- and
then used a cele*rit- to drive home their product differentiations8 &hen Ca*ur (mla
hair oil advertises3 the non1chemical re.uirements of the 'ndian women got translated
in their culture8
58 ,he fifth level of meaning is on the *rand personalit-8 ,he *rand is portra-ing the
personalit- of an individual who owns it8 ;ence if surf is to *e related to Mod )hiva3
Birma is related to Moddess Hali and their relationship will reflect the true identit- of
the *rands8
68 ,he last level is the kind of person who *u-s or uses the product8 ;eD)he does it
*ased on the product>s values3 culture and personalit-8 ,hat is the reason wh-
%a-mond advertises the Lcomplete man> factor to get the premium1ness it e2pects
from the market8 6,hree rosesF tea portra-s what the totalit- of tea is all a*out8 6EimF
*ar is also an e2ample which shows the middle class women>s thriftiness and .ualit-
consciousness8
'.'.Brand Plat2orm9
'nter*rand@s proprietar- model for defining *rands8 ,he rand Platform consists of
the following elements9
Brand 6iion! ,he *rand@s guiding insight into its world8
Brand Miion! ;ow the *rand will act on its insight8
Brand 6alue! ,he code *- which the *rand lives8 ,he *rand values act as a
*enchmark to measure *ehaviors and performance8
Brand Peronalit*! ,he *rand@s personalit- traits
Brand Tone9 ,hat of voice8 ;ow the *rand speaks to its audiences8
'.(.Brand Arc8itecture!
Brand +rchitecture is the vehicle *- which the *rand team functions as a unit to create
s-nerg-3 clarit- and leverage8 ;ow an organi:ation structures and names the *rands
within its portfolio is also known as the *rand architecture8 ,here are three main t-pes of
*rand architecture s-stem9
monolithic3 where the corporate name is used on all products and services
offered *- the compan-=
en(orse(3 where all su*1*rands are linked to the corporate *rand *- means of
either a ver*al or visual endorsement= and
freestan(ing3 where the corporate *rand operates merel- as a holding
compan-3 and each product or service is individuall- *randed for its target
market8
rand architecture is an organi:ing structure of *rand portfolio that specifies the
*rand roles and relationship among the *rands and different product market conte2t8 't is
mainl- defined *- the three ma<or dimensions vi:8 Portfolio roles3 Product market conte2t
roles and the Portfolio structure8

Brand +ort2olio! rand architecture involves the management of *rand portfolio8 rand
portfolio includes all the t-pes of *rand vi:8 rands and su*1*rands as well as co1*rands
with other firms8 Aor e2ample3 the *rand portfolio of ;?? consisting of 11$ *rands with
"5$ of different t-pes of packs which are operating under different market conte2t like
healthcare3 personal care3 *everages3 etc8 Curing the annual -ear 2$$112$$23 ;?? has
taken a decision to further prune down their 11$ *rands to 36 *rands onl- over a three
-ear period8 ( *rand portfolio can *e strengthen *- the addition of *rand keeping in view
the portfolio perspective8 )ome international *rands are *eing planned to *e strengthened
in ;??8)imilarl- *rands can *e deleted *- identif-ing the superfluous *rands which are
contri*uting nothing to the *rand portfolio8 )ome of the *rands to *e deleted *- ;??
include Kai soap3 #aptain cook salt and (im toothpaste8
Port2olio role!
Aor *uilding effective *rand architecture it is necessar- to identif- the portfolio
roles of each *rand8 ( strategic *rand or a mega *rand is a currentl- dominating *rand
that represents a meaningful future level of sales and profit8 Aor e29 ?u2 and ?ife*uo- are
strategic *rands for ;??3 T)T) consultanc' services 4,#)5 is a strategic *rand of ,(,(
group of cos8 *ecause the vision of the firm is to move *e-ond traditional steel and
automo*ile *usiness8 ( linchpin *rand unlike strategic *rand does not necessaril-
represent a meaningful future level of sales and profit *ut it is a leverage point of a ma<or
*usiness area8 't indirectl- influences a *usiness *- providing a *asis for customer
lo-alt-8 Aor e28 FPremiumD* a *rand e2tension of KH8't is a linchpin *rand for KH *ecause
it has e2tended the KH>s credi*ilit- in different *usinesses from chemicals to men>s
toiletaries8 ( silver *ullet is a *rand or su*1*rand that positivel- influence the image of
another *rand8it can *e a powerful force in creating3 changing and maintaining a *rand
image8 Aor e2ample3 when iMa# was launched it has provided a significant *oast in
pu*lic perception of the (pple *rand8 )trategic3 ?inchpin and )ilver *ullet *rands
involves investments and active management for fulfilling their strategic mission8 ,he
cash cow *rands on contrast does not re.uire an- investment *ecause it has a significant
lo-al customer *ase8 ,he role of a cash cow *rand is to generate marginal resources that
can *e invested in other *rands3 which will help for future growth and vitalit- of *rand
portfolio8 Aor e2= Aair and ?ovel- fairness cream the core product of ;??3 a *rand that
has *een e2tended to soaps8 )imilarl-3 Cettol as a cash cow *rand has *een e2tended in
order to gain the ma2imum out of the e.uit-8

Product market conte/t role
,here are four steps of product market conte2t roles that work together to define a
specific offering9
a" En(orser an( su&/&ran(s roles, (n endorser *rand is an esta*lished *rand that
provides credi*ilit- and su*stance to the offering8 0ndorser *rands usuall- represents
organi:ations rather than products *ecause organi:ational associations such as
innovation3 leadership and trust are particularl- relevant in endorsement conte2t for
e2ample3 ,ata has !$ different companies operating in seven *usiness sectors3 which are
endorsed under the mega *rand T)T)8 ,he su* *rands on the other hand stretches
endorser *rands that add associations3 a *rand personalit- or an- other .ualit- which
creates *rand identit- of it for e28 Bestle>s $erelac3 Millette>s Mach 3 and #ad*ur->s
8ournvita8 ,he understanding and use of endorser *rand and su* *rands is a ke- in
achieving clarit-3 s-nerg- and leverage in the *rand portfolio8
&5 enefit *rands, ,he *enefit *rand is a *rand which offers either features3 component
ingredients or services which *ecomes the uni.ue selling proposition 4+)P5 of offering8
Aor e2ample3 Kohnson and Kohnson *rand L'ndicator> tooth*rush3 has a *randed feature
which shows the time to replace the tooth*rush8
c" $o/rands9 #o1 *randing occurs when *rands from different organi:ations com*ine to
create an offering in which each pla-s a driver role8 ,he impact of co1*randing can *e
greater than e2pected when the associations of each *rand are strong and complementar-8
(" >river role, Criver role is an e2tent to which a *rand drives the purchase decision and
defines the use e2perience8 rand with a driver role will have some level of lo-alt-8
Birma washing powder for Birma #hemicals and ?ife*uo- for ;?? are driver *rands8
Brand +ort2olio tructure!
,he *rands in the portfolio have a relationship with each other8 rand
architecture also involves designing a structure of all the *rands3 which will provide
clarit- to the customer rather than comple2it- and confusion8 't must provide a sense of
order3 purpose and direction to the organi:ation8 ,hree approaches can *e utili:ed to
present the portfolio structure8
Aor an- firm the o*<ectives *ehind designing and maintaining an effective *rand
architecture are9
#reate effective and powerful *rands8
+nderstand the portfolio roles of each *rand 4strategic3 silver *ullet3 linchpin and
cash cow5 and allocate the *rand *uilding resources in that manner8
#reate s-nerg- *etween *rands *- enhancing visi*ilit-3 creating and reinforcing
associations and cost efficiencies8
(dvance clarit- of product offering to the customers and organi:ation8
?everaging the *rand e.uit- *- proper *rand and line e2tensions e2ercise8
Provide a platform for future growth option to the organisation8

'.5.Brand ./tenion!
'n toda->s fiercel- competitive marketplace3 *rand e2tensions have *ecome a
standard strateg- for new product introductions8 rand e2tensions have proliferated over
the past decade3 and the rationale *ehind endowing a new product with a well1known
*rand name is to provide consumers11and the trade11with a sense of familiarit- and
securit- *- leveraging positive *rand characteristics in a new product categor-8 rand
e2tensions have *ecome a standard strateg- for new product introductions in toda->s
fiercel- competitive marketplace8 't is considered as a marketing strateg- in which a
compan- uses one of its esta*lished *rand names on a modified product i8e83 a new line3
or on an entirel- related new product8 't is done so *ecause the new products entering the
market place are well supported and well recognised8 #ore *rands are *eing referred to
as assets with profit generating capa*ilities8 ( #ompan- ma- decide not to position the
*rand e2plicitl- against an- competitor8 'n implementing this strateg-3 the firm ma-
advertise the *rand and its *enefits on its own grounds rather than in a comparative
fashion8 'n this respect3 *rand1e2tension research has shown that the positive affect of a
*rand ma- *e transferred to the e2tension8 Moreover3 affect transfer is most likel- to
occur when the *rand>s old and the new categories are perceived to *e similar8 Ainall-3
*rand1specific associations are another important factor to consider= the- ma- dominate
the effects of *rand affect and categor- similarit-3 especiall- when consumers are
knowledgea*le a*out the *rand8
?ine e2tensions and *rand e2tensions are different as such8 ?ine e2tensions should
refer onl- to additions to an e2isting product like new si:es3 st-les or related products
to fill out the line8 ,hus3 Aair Mlow is an addition to the Modre< toilet soap line3
which alread- included #inthol and Manga8 &heel was a line e2tension to ;??>s line
of detergent *ars3 which alread- contained %in and )urf8 - contrast3 *rand e2tension
refers to using an e2isting *rand name to enter another product market categor-
altogether vi:83 Cettol antiseptic li.uid and Cettol soap8
Product line e2tension9 (dding related products to an alread- esta*lished *rand8
(rrow (fter hours shirts *eing added to *usiness shirts8
Product form e2tension9 Providing the same product in another forms variant8
Pond>s soap cake offered as a li.uid soap is an e2ample8
Product categor- e2tension9 ?aunching a different product under an alread-
successful product>s *rand name8 i# disposa*le ra:ors under the same *rand
name as i# disposa*le *all pens8 )hivaki watches after entering ,E market as
)hivaki ,E8 (mul 'ce creams after the success of (mul utter8
,he most common form of *rand e2tension is famil- *randing8 ( famil- *rand is
assigned to an entire range or mi2 of all product items8 Modre< makes soaps3 locks3
furniture etc8 'n all these products3 Modre< *rand e2tensions are carried out8 (
powerful name3 however3 is no guarantee that famil- *randing will succeed8 Xero2
tried to e2tend its powerful *rand name to computers and printers *ut failed8 Murph-
suggests that *rand e2tensions constitute an estimated "5 per cent of the 163$$$ new
products launched in the +ntied )tates ever- -ear8 02tensions are popular *ecause
the- can provide new products with a read-1made image while helping e2isting
products through increased *rand e2posure8 ;owever3 e2tending a *rand name to
inappropriate products ma- result in product failure andDor reduced *rand value8
,here are three ke- factors that a compan- must consider in the implementation of a
*rand1e2tension strateg-9
415 competitive *rands in the e2tension categories
425 the attri*utes of the e2tension *rand and
435 ,he perceived fit *etween the *rand and the e2tension8
'.6. Brand -tretc8ing!
rand stretching is appl-ing an e2isting *rand to a completel- different *usiness
area or a new product or service1 such as #ad*ur->s entr- into cola market8 ,he risk
attached to *rand stretching is that failure in the new field ma- affect the core product8
B0P# is one such e2ample8 'ts failure in the ,elevision3 aviation and agricultural
*usinesses affected the ver- credi*ilit- of B0P# *rand8 /ne aspect of *rand stretching is
that3 once a *rand personalit- *ecomes strongl- associated with a product categor-3 it
*ecomes difficult to stretch the *rand to another categor- like ;ero ;onda shampoo8
'.0. Brand e,uit*!
rand e.uit- is a set of assets and lia*ilities linked to a *rand>s name and s-m*ol
that add to su*tract from the value provided *- a product or service to ad firm and D or
that firm>s customers8 (ccording to Cavid (8 (aker3 *rand e.uit- is 7a set of *rand assets
and lia*ilities linked to a *rand3 its name and s-m*ol3 that add to or su*tract from the
value provided *- a product or service to a firm andDor that firm@s customers78 ?ance
?euthesser3 et al wrote that 7rand e.uit- represents the value 4to a consumer5 of a
product3 a*ove that which would result for an otherwise identical product without the
*rand@s name8 'n other words3 *rand e.uit- represents the degree to which a *rand@s name
alone contri*utes value to the offering 4again3 from the perspective of the consumer578 'n
(merica3 there is a now an influential *od- called the #oalition for rand 0.uit-
4founded 1""153 which evangelists for the importance of *uilding *rand relationships and
*rand lo-alt-8 ,he Marketing )cience 'nstitute defines *rand e.uit- as3 6,he set of
associations and *ehaviors on the part of the *rand@s customers3 channel mem*ers3 and
parent corporations that permit the *rand to earn greater volume or greater margins than it
could without the *rand name and that gives the *rand a strong3 sustaina*le3 and
differentiated advantage over competitorsF8 Koel (2elrod defines *rand e.uit- as Lthe
incremental amount -our customer will pa- to o*tain -our *rand rather than a ph-sicall-
compara*le product without -our *rand name>8
,he assets and lia*ilities on which *rand e.uit- is *ased differ from conte2t to
conte2t8 ,he- can *e usefull- grouped into four categories vi:83 Perceived .ualit-3 *rand
awareness3 *rand identit-3 and *rand lo-alt-8 rand e.uit- refers to a 6set of assets and
lia*ilities linked to a *rand3 its name and s-m*ol that add to or su*tract from the value
provided *- a product or service to a firm and or to that firm>s competitors8 'n other
words *rand e.uit- provides 4or negativel- su*tract5 value to a firm in the form of price
premium or trade leverage or competitive advantage8 ,he most important assets of an-
*usiness are intangi*le9 its compan- name3 *rand3 s-m*ols3 and slogans3 and their
underl-ing associations3 perceived .ualit-3 name awareness3 customer *ase3 and
proprietar- resources such as patents3 trademarks3 and channel relationships8 ,hese
assets3 which comprise *rand e.uit-3 are a primar- source of competitive advantage and
future earnings8 ,he overall description of rand 0.uit- incorporates the a*ilit- to
provide added value to a compan-@s products and services8 ,his added value can *e used
to the compan-@s advantage to charge price premiums3 lower marketing costs and offer
greater opportunities for customer purchase8 'n AM#M products3 *rand e.uities are
relativel- stronger as the consumer is reluctant to tr- unknown *rands and even
un*randed products as most of these products are for personal use8 't is often difficult to
differentiate a product on technical or functional grounds and therefore there is little
reason to switch from a known *rand8 ( successful *rand generates strong cash flow3
which ena*les the compan- *rand to reinvest a part of it in the form of aggressive
advertisement or promotion in order to reinforce the perceived superiorit- of the *rand8
,he worth of a *rand is manifested in the consumers> insistence on a particular *rand or
willingness to pa- a price premium for the preferred *rand8
( *adl- mismanaged *rand can actuall- have negative rand 0.uit-3 meaning
that potential customers have such low perceptions of the *rand8 Man- people ma- think
that *uilding and maintaining *rand e.uit- is solel- the responsi*ilit- of *rand managers3
*ut it is actuall- a cross1functional team effort8 Ainancial managers are important *ecause
the- can full- anal-:e the costs of maintaining and *uilding *rand e.uit-8 Aor e2ample3
launching a new *rand is e2tremel- consuming in terms of mone- and time8 't ma- *e
more cost effective to e2tend a current *rand than introduce a new *rand8 Marketing
research is critical for man- o*vious reasons8 't develops most3 if not all3 of the research
and data that companies will use for deciding strategic issues8 Marketing research can
also help determine how *rand e.uit- is actuall- measured8 /nce a definition of *rand
e.uit- is esta*lished3 the responsi*ilit- of tracking and measuring it will *elong to the
marketing research department8 rand managers ultimatel- *ring all of the parts together
and decide the direction of the *rand8
(. )a&e *ou undertood t*+e ,uetion!
18 &hich of the following is B/, a desira*le feature for a *rand nameJ
(8 it can facilitate the introduction of new products
8 it can *ecome used as the generic name for all products in the categor-
#8 it can make it possi*le for the firm to engage in non price competition
C8 it can help develop *rand lo-alt- amongst *u-ers
28 /wn la*el *rands are initiated and owned *-
(8 manufacturers onl-8
8 manufacturers and retailers8
#8 wholesalers onl-8
C8 wholesalers or retailers8
38 Airms that use 11111 are less likel- to damage their reputations if a new product fails8
(8 individual *randing
8 overall famil- *randing
#8 line famil- *randing
C8 *rand e2tension *randing
48 Co -ou think *rands can create companies or vice1versaJ Kustif-8
58 6rand naming is a scientific process8 ;owever3 it is found that "$T of the
organi:ations do on
their own without looking into the scientific processF1 's the statement true or falseJ
Kustif-8
5. -ummar*!
( customer orientation will lead to concern for e2isting customers and programs to
generate *rand lo-alt-8 ( prime enduring asset for some *usinesses is the lo-alt- of the
installed customer *ase8 #ompetitors ma- duplicate or surpass a product or service3 *ut
the- still face the task of making customers switch *rands8 )witching costs would *e a
consideration for a software user3 for e2ample3 when a su*stantial investment has alread-
*een made in training emplo-ees to learn a particular software s-stem8 (nother
development is #o1randing8 't is also called Ldual *randing>8 ;ere two or more well1
known *rands are com*ined in an offer8 't is a form of cooperation *etween two or more
*rands with significant customer recognition3 in which all the participant *rand names are
retained8 #o1*randing lies *etween the two e2treme points of marketing alliances8 't is of
medium to long term duration and its shared value potential is not as low as a temporar-
nature nor it is as high as to <ustif- the culmination into a <oint venture8 0ach *rand
sponsor e2pects that the other *rand name will strengthen preference or purchase
intention8 'f the two *rands are such that the *rand values are difficult to *e shared3 the
success of a co1*randing e2ercise *etween them is remote8 'n case of co1packaged
products3 each *rand hopes it might *e reaching a new audience *- associating with other
*rand8 'f an organi:ation has a strong *rand3 it can last for -ears8 'f it is not having a
*rand and onl- ph-sical infrastructure3 it is destined to *e in loss8
6. ./ercie!
18 ,here are certain characteristics for a *rand8 Heeping these characteristics3 find out
whether the following *rands have them or not8 Kustif- -our answer
a8 Hitpl-
*8 #lose1up
c8 Ca*ur
d8 Maltova
e8 Pepsodent
f8 )t-le1)pa
28 02plain the *rand e2tensions done *- companies in 'ndia8
38 6rand stretching will damage the companies in the long runF1 02plain with e2amples8
48 Co -ou think *rand e.uit- is needed for short run gainsJ 02plain8
58 rand dilution can lead to *rand deletion1 with e2amples e2plain8
0. 1e2erence!
18 ala<i Prasad O M8#handrasekhar3 6 ,he power of *randF3 3n(ian management3
(ugust 1""!3 pp8!!1!"8
28 ruce ;orovit: and Melanie &ells3 6 ?ong after their sales stop si::ling3 some *rand
names linger inS product purgator-F3 7%) To(a'3 Ma- 23 1""53 p818
38 #hris %oush3 6 (t ,ime23 the- are positivel- glowingF3 8usiness 6eek3 Kul- 123 1""33
p81418
48 de#hatnaton- and McConald3 6#reating powerful *randsF3 !xfor( 8utter+orth3
1""!8
58 Kohn (8Quelch O Cavid ;arding3 6rands versus private la*els9 fighting to winF3
4arvar( 8usiness Revie+3 Kan1Ae*3 1""63 pp81$511$"8
68 Hevin Moldman3 6 /ld )pice>s familiar sailor is lost at seaF3 6all %treet 5ournal3
)eptem*er 1$3 1""33 p828
78 Hevin ?ane Heller3 6 Managing rands for the long run9 rand reinforcement and
revitalisation strategiesF3 $alifornia Management Revie+3 spring 1"""3 pp812$11228
!8 Hevin ?ane Heller3 )usan ;eckler and Michael ;ouston3 6 ,he effects of *rand name
suggestions on advertising recallF3 <ournal of marketing3 Kanuar- 1""!3 pp84!1568
"8 Hotler3 Philip= LMarketing Management>3 Prentice 4all of 3n(ia private limite(3 Bew
Celhi3 1"""3 pp8 414 4178
1$8 Humar3 8)8 %amesh 3 6'mportance of ,echno1*randingF3 8usiness 0ine $atal'st3
,hursda-3 March 1632$$$8
118 ?aura ird3 6,am*rands plans glo*al advertising campaignF3 6all %treet <ournal3
Kune 223 1""33 p8!8
128 Mahaswetha Mhosh %o-3 6 )econd comingF3 8usiness 6orl(3 2$ March12(pril 1""63
pp8441468
138 Michael Mc#arth-3 6 Pepsi is returning to -ounger generationF3 6all %treet 5ournal3
Kanuar- 223 1""43 p828
148 Mohan %amamurth-3 6)weet taste of victor-F3 8usiness 3n(ia3 Ma- 1!1213 1""!8
158 Mukul Mupta3 6 ,ug of warF3 3n(ian management3 )eptem*er 1""73 pp83713"8
168 Bielson3 6rand stretching can *e fun1 and dangerousF3 The Economist3 5 Ma-3 p81$58
178 Pratap %avindran3 6 rands3 ,he corporate Ltrust mark>F3 8usiness 0ine3 Kanuar- "3
1"""8
Pricing
Unit tructure!
1. Introduction
2. "earning #$%ecti&e
'. Pricing
3.1. 8asic principles of pricing
3.2. 3mportance of pricing
3.3. Gactors influencing pricing (ecisions
3.4. %etting pricing
3.#. Pricing metho(s
(. )a&e *ou undertood t*+e ,uetion
5. -ummar*
6. ./ercie
0. 1e2erence
1. Introduction!
Most people simpl- use the word price to indicate what it costs to ac.uire a product8 ,he
pricing decision is a critical one for most marketers3 -et the amount of attention given to
this ke- area is often much less than is given to other marketing decisions8 /ne reason
for the lack of attention is that man- *elieve price setting is a mechanical process
re.uiring the marketer to utili:e financial tools3 such as spreadsheets3 to *uild their case
for setting price levels8 &hile financial tools are widel- used to assist in setting price3
marketers must consider man- other factors when arriving at the price for which their
product will sell8
2. "earning #$%ecti&e!

6hen 'ou finish this unit* 'ou shoul( &e a&le to,
7n(erstan( the &asic principles of pricing
7n(erstan( the importance of pricing
7n(erstan( the factors influencing pricing &' organisations
7n(erstan( the price setting process
7n(erstan( the various metho(s of pricing.
'. Pricing!
Price is considered as a component of an e2change or transaction that takes place
*etween two parties and refers to what must *e given up *- one part- 4i8e83 *u-er5 in
order to o*tain something offered *- another part- 4i8e83 seller58 Price means different
things to different participants in an e2change8 /ne is the *u-er8 ,heir view for those
making a purchase3 price refers to what must *e given up to o*tain *enefits8 'n most
cases what is given up is financial consideration 4e8g83 mone-5 in e2change for ac.uiring
access to a good or service8 ut financial consideration is not alwa-s what the *u-er
gives up8 )ometimes in a *arter situation a *u-er ma- ac.uire a product *- giving up
their own product8 Aor instance3 two farmers ma- e2change chicken for crops8 'n the
case of the seller3 price reflects the revenue generated for each product sold and3 thus3 is
an important factor in determining profit8 Aor marketing organi:ations price also serves
as a marketing tool and is a ke- element in marketing promotions8 Aor e2ample3 most
discount retailers highlight product pricing in their advertising campaigns8 Price is what a
*u-er pa-s to ac.uire products from a seller8 #ost concerns the seller>s investment 4e8g83
manufacturing e2pense5 in the product *eing e2changed with a *u-er8 Aor marketing
organi:ations seeking to make a profit the hope is that price will e2ceed cost so the
organi:ation can see financial gain from the transaction8 &hile product pricing is a main
topic for discussion when a compan- is e2amining its overall profita*ilit-3 pricing
decisions are not limited to for1profit companies8 Bot1for1profit organi:ations3 such as
charities3 educational institutions and industr- trade groups3 also set prices3 though it is
often not as apparent8
'.1. Baic +rinci+le o2 +ricing!
efore an- discussion on pricing3 it is important to know what reall- drives pricing8
0ver- organi:ation is involved in a cost component *efore the ultimate product comes to
the market8 Bow we need to know how the cost is calculated8 ,he components that are
considered in costing include cost of materials that -ou have issued for order3 activit- -ou
have performed in terms of la*our hours that -ou entered while confirming the order 4the
rates for the la*our var-885 which is generall- associated with a formula ke- and attached
to a work center that is linked to a cost center also and the overhead as applica*le with
respect to that cost center *ased on a predetermined cost center planning and its rate8
( *reak1even anal-sis e2amines the interaction among fi2ed costs3 varia*le costs3
prices3 and unit volume to determine that com*ination of elements in which revenues and
total costs are e.ual8 Ai2ed costs are those e2penses necessar- to keep the *usiness open3
and are not impacted *- sales volume8 ,he- will include such things as rent3 *asic
telephone e2penses and utilities3 wages for core emplo-ees3 loan or lease pa-ments3 and
other necessar- e2penditures8 (n entrepreneur should also include a living wage for
himselfDherself as a fi2ed cost8 Earia*le costs include those e2penses that change as a
result of sales volume8 Earia*le costs can also *e ver- comple2= for e2ample3 higher sales
in one area of our *usiness ma- increase long distance charges8 ?a*or costs ma- *e fi2ed
for full1time emplo-ees3 then3 as sales increase3 some overtime is incurred until additional
personnel can *e <ustified8 Menerall-3 an initial *reak1even anal-sis focuses on a
relativel- narrow range of sales volume in which varia*le costs are simple to calculate8 (
general term often used for the difference *etween selling price and varia*le cost is
7contri*ution margin37 or the amount that the unit sale contri*utes to the margin availa*le
to pa- fi2ed costs3 and generate profit8 )elling price is determined *ased on all this a*ove
considerations8 ,he e2tent of contri*ution margin will decide the pricing of the product8
'.2.Im+ortance o2 Pricing!
Aor a *u-er3 value of a product will change as perceived price paid andDor
perceived *enefits received change8 ut the price paid in a transaction is not onl-
financial it can also involve other things that a *u-er ma- *e giving up8 Aor e2ample3 in
addition to pa-ing mone- a customer ma- have to spend time learning to use a product3
pa- to have an old product removed3 and close down current operations while a product is
installed or incur other e2penses8 Pricing decisions can have important conse.uences for
the marketing organi:ation and the attention given *- the marketer to pricing is <ust as
important as the attention given to more recogni:a*le marketing activities8 'n most
companies3 prices are tacticall- derived *ased on internal costs and gut reaction to
competitive moves8
,his is often the onl- element the marketer can change .uickl- in response to demand
shifts and it is directl- related to total revenue8 Profits can *e made onl- *- knowing the
difference *etween total revenue and total cost8 /rgani:ations can use price s-m*olicall-3
emphasi:e .ualit- or *argain8 ,he importance of pricing depends on the image the
organi:ation wants to portra-3 competitive activit- in the market and the changing
*ehaviour of the customer8 Arom a strategic aspect3 pricing has more impact on
positioning and ultimate profita*ilit- than an- other item in the overall marketing mi28
Cepending on market sensitivities and current profit margins3 a 1T increase in price
could increase profita*ilit- *- up to 1$T8 ,he ke- to effective strategic pricing is to
leverage market *ased understanding of how customer@s value new and e2isting offerings
in a competitive marketplace8 #ustomers want the *est value for their mone-3 and thus
the- will almost alwa-s do a .ualit- comparison and make purchases *ased on the *est
price for the *est value8 ;ow customers view the product or service and what the- are
willing to pa- for it is *ased upon those perceptions8 'n the end3 customers will tell
through their purchasing *ehavior whether or not the prices are too high3 too low or right
on the mone-8
'.'.9actor A22ecting Pricing Deciion
,here are *oth internal and e2ternal factors that affect pricing8
'.'.1. Internal 9actor !
,hese internal factors are controlla*le *- the compan- and3 if necessar-3 can *e altered8
;owever3 while the organi:ation ma- have control over these factors making a .uick
change is not alwa-s realistic8 Aor instance3 product pricing ma- depend heavil- on the
productivit- of a manufacturing facilit-8 ,he marketer knows that increasing productivit-
can reduce the cost of producing each product and thus allow the marketer to potentiall-
lower the product>s price8 ut increasing productivit- ma- re.uire ma<or changes at the
manufacturing facilit- that will take time and will not translate into lower price products
for a considera*le period of time8 #orporate o*<ectives can *e wide1ranging and include
different o*<ectives for different functional areas 4e8g83 o*<ectives for production3 human
resources3 etc58 &hile pricing decisions are influenced *- man- t-pes of o*<ectives set
up for the marketing functional area3 there are four ke- o*<ectives in which price pla-s a
central role8 'n most situations onl- one of these o*<ectives will *e followed3 though the
marketer ma- have different o*<ectives for different products8 ,he four main marketing
o*<ectives affecting price include9
%eturn on 'nvestment 9 ( firm ma- set as a marketing o*<ective the re.uirement
that all products attain a certain percentage return on the organi:ation>s spending on
marketing the product8
#ash Alow9 Airms ma- seek to set prices at a level that will insure that sales
revenue will at least cover product production and marketing costs8 ,his o*<ective
allows the marketer to worr- less a*out product profita*ilit- and instead directs
energies to *uilding a market for the product8 ,his is most likel- to occur with new
products where the organi:ational o*<ectives allow a new product to simpl- meet its
e2penses while efforts are made to esta*lish the product in the market8
Market )hare9 ,he pricing decision ma- *e important when the firm has an
o*<ective of gaining a hold in a new market or retaining a certain percent of an
e2isting market8 Aor new products under this o*<ective the price is set artificiall-
low in order to capture a si:ea*le portion of the market and will *e increased as the
product *ecomes more accepted *- the target market8 Aor e2isting products3 firms
ma- use price decisions to insure the- retain market share in instances where there is
a high level of market competition and competitors who are willing to compete on
price8
Profit ma2imi:ation9 /lder products that appeal to a market that is no longer
growing ma- have a compan- o*<ective re.uiring the price *e set at a level that
optimi:es profits8 ,his is often the case when the marketer has little incentive to
introduce improvements to the product and will continue to sell the same product at
a price premium for as long as some in the market is willing to *u-8
Marketing strateg- concerns the decisions marketers make to help the compan- satisf- its
target market and attain its *usiness and marketing o*<ectives8 Price3 of course3 is one of
the ke- marketing mi2 decisions and since all marketing mi2 decisions must work
together3 the final price will *e impacted *- how other marketing decisions are made8
Aor instance3 marketers selling high .ualit- products would *e e2pected to price their
products in a range that will add to the perception of the product *eing at a high1level8
#osting is -et another area of concern8 &hile varia*le costs are often determined on a
per1unit *asis3 appl-ing fi2ed costs to individual products is less straightforward8 Aor
e2ample3 if a compan- manufactures five different products in one manufacturing plant
how would it distri*ute the plant>s fi2ed costs 4e8g83 mortgage3 production workers> cost5
over the five productsJ 'n general3 a compan- will assign fi2ed cost to individual
products if the compan- can clearl- associate the cost with the product3 such as assigning
the cost of operating production machines *ased on how much time it takes to produce
each item8 (lternativel-3 if it is too difficult to associate to specific products the
compan- ma- simpl- divide the total fi2ed cost *- production of each item and assign it
on percentage *asis8
'.'.2. ./ternal 9actor!
,here are man- influencing factors which are not controlled *- the compan- *ut will
impact pricing decisions8 +nderstanding these factors re.uires the marketer conduct
research to monitor what is happening in each market the compan- serves since the effect
of these factors can var- *- market8

Marketing decisions are guided *- the overall o*<ectives of the compan-8 ,he pricing
decision can *e affected *- factors that are not directl- controlled *- the marketing
organi:ation8
&hen it comes to ad<usting price3 the marketer must understand what effect a change in
price is likel- to have on target market demand for a product8 +nderstanding how price
changes impact the market re.uires the marketer have a firm understanding of the
concept economists call elasticit- of demand3 which relates to how purchase .uantit-
changes as prices change8 0lasticit- is evaluated under the assumption that no other
changes are *eing made 4i8e83 6all things *eing e.ualF5 and onl- price is ad<usted8 Aor
e2ample3 competitors ma- react to the marketer>s price change *- changing the price on
their product8 Cespite this3 elasticit- anal-sis does serve as a useful tool for estimating
market reaction8
0lasticit- deals with three t-pes of demand scenarios9
18 0lastic Cemand Products are considered to e2ist in a market that
e2hi*its elastic demand when a certain percentage change in price
results in a larger percentage change in demand8 Aor e2ample3 if
the price of a product increases 4decreases5 *- 1$T3 the demand
for the product is likel- to decline 4rise5 *- greater than 1$T8
28 'nelastic Cemand Products are considered to e2ists in an inelastic
market when a certain percentage change in price results in a
smaller percentage change in demand8 Aor e2ample3 if the price of
a product increases 4decreases5 *- 1$T3 the demand for the
product is likel- to decline 4rise5 *- less than 1$T8
38 +nitar- Cemand ,his demand occurs when a percentage change
in price results in an e.ual percentage change in demand8 Aor
e2ample3 if the price of a product increases 4decreases5 *- 1$T3
the demand for the product is likel- to decline 4rise5 *- 1$T8

Airms within the marketer>s channels of distri*ution also must *e considered when
determining price8 Cistri*ution partners e2pect to receive financial compensation for
their efforts3 which usuall- means the- will receive a percentage of the final selling
price8 ,his percentage or margin *etween what the- pa- the marketer to ac.uire the
product and the price the- charge their customers must *e sufficient for the distri*utor to
cover their costs and also earn a desired profit8 Marketers will undou*tedl- look to
market competitors for indications of how price should *e set8 Aor man- marketers of
consumer products researching competitive pricing is relativel- eas-3 particularl- when
'nternet search tools are used8 Price anal-sis can *e somewhat more complicated for
products sold to the *usiness market since final price ma- *e affected *- a num*er of
factors including if competitors allow customers to negotiate their final price8

Marketers must *e aware of regulations that impact how price is set in the markets in
which their products are sold8 ,hese regulations are primaril- government enacted
meaning that there ma- *e legal ramifications if the rules are not followed8 Price
regulations can come from an- level of government and var- widel- in their
re.uirements8 Aor instance3 in some industries3 government regulation ma- set price
ceilings 4how high price ma- *e set5 while in other industries there ma- *e price floors
4how low price ma- *e set58 (dditional areas of potential regulation include9 deceptive
pricing3 price discrimination3 predator- pricing and price fi2ing8
'.'. Pricing etting +roce!
Price setting process starts with understanding the compan- and marketing o*<ectives8
,hen an initial price is to *e readied8 &e need to also understand the standard price
ad<ustments along with determining promotional pricing and looking for pa-ment
options8 Airst3 the overall o*<ectives of the compan- guide all decisions for all
functional areas 4e8g83 marketing3 production3 human resources3 finance3 etc858
Muided *- these o*<ectives the marketing department will set its own o*<ectives
which ma- include return on investment3 cash flow3 market share and ma2imi:e
profits to name a few as stated in 3828 Pricing decisions like all other marketing
decisions will *e used to help the department meet its o*<ectives8 Aor instance3 if
the marketing o*<ective is to *uild market share it is likel- the marketer will set the
product price at a level that is at or *elow the price of similar products offered *-
competitors8
Aor companies selling to consumers3 this price also leads to a pro<ection of the
recommended selling price at the retail level often called the manufacturer>s retail
price 4M%P58 ,he M%P ma- or ma- not *e the final price for which products are
sold8 Aor strong *rands that are highl- sought *- consumers the M%P ma- in fact
*e the price at which the product will *e sold8 ut in man- other cases3 as we will
see3 the price setting process results in the price *eing different *ased on
ad<ustments made *- the marketer and others in the channel of distri*utions8 ,his
will lead to which of the pricing methods *est suited for the *rand8 ,hat will *e
discussed in 3858 'n most cases standard ad<ustments are made to reduce the list
price in an effort to either stimulate interest in the product or to indirectl- pa-
channel partners for the services the- offer when handling the product8 't should *e
noted that man- companies do not make ad<ustments to their list price3 particularl-
those selling directl- to final customers8 ,here are two ke- reasons for this8 Airst3
the product is in high demand and therefore the marketer sees little reason to lower
the price8 )econd3 the marketer *elieves the product holds sufficient value for
customers at its current list price and the marketer feels reducing the price ma-
actuall- lead *u-ers to .uestion the .ualit- of the product8
Aor firms that do make standard price ad<ustments3 the possi*ilities include9
Quantit- Ciscounts
,rade (llowances
Meographic Pricing
)pecial )egment Ciscounts
Quantit- Ciscounts
,his ad<ustment offers *u-ers an incentive of lower per1unit pricing as more products are
purchased8 Most .uantit- or volume discounts are triggered when a *u-er reaches certain
purchase levels8 Aor instance3 a *u-er ma- pa- the list price when the- purchase *etween
11"" units *ut receive a 5T discount off the list price when the purchase e2ceeds 1$$
units8 ,he most common .uantit- discounts e2ist when a *u-er places an order that
e2ceeds a certain minimum level8 &hile .uantit- discounts are used *- marketers to
stimulate higher purchase levels3 the rational for using these often rests in the cost of
product shipment8 ,here can *e discounts offered to the products8 ,his method allows
the *u-er to receive a discount as more products are purchased over time8 Aor instance3 if
a *u-er regularl- purchases from a supplier the- ma- see a discount once the *u-er has
reached predetermined monetar- or .uantit- levels8 ,he ke- reason to use this
ad<ustment is to create an incentive for *u-ers to remain lo-al and purchase again8
,rade Ciscounts
Manufacturers who rel- on channel partners to distri*ute their products 4e8g83 retailers3
wholesalers5 offer trade discounts off of list price8 0ssentiall- the difference *etween the
trade discounted prices paid *- the reseller and the price the reseller charges its customer
will *e the reseller>s profit8
)pecial )egment Pricing
'n some industries special classes of customers within a target market are offered pricing
that differs from the rest of the market8 ,he main reasons for doing this include9 *uilding
future demand *- appealing to new or -ounger customers= improving the *rand>s image
as *eing sensitive to customer>s needs= and rewarding long time customers with price
*reaks8 Aor instance3 man- companies including railwa-s3 airwa-s offer lower prices to
senior citi:ens8 )ome marketers offer non1profit customers lower prices compared to that
charged to for1profit firms8 /ther industries ma- offer lower prices to students or
children8
Meographic Pricing
Products re.uiring marketers to pa- higher costs that are affected *- geographic area in
which a product is sold ma- result in ad<ustments to compensate for the higher e2pense8
,he most likel- cause for charging a different price rests with the cost of transporting a
product from the supplier>s distri*ution location to the *u-er>s place of *usiness8
,ransportation e2pense is not the onl- cost that ma- raise a product>s price8 )pecial ta2es
or tariffs ma- *e imposed on certain products *- local3 regional or international
governments which a seller passes along in the form of higher prices8 Bow with the
advent of E(,3 these issues will *e overcome8
,he final price ma- *e further ad<usted through promotional pricing8 +nlike standard
ad<ustments3 which are often permanentl- part of a marketer>s pricing strateg- and ma-
include either a decrease or increase in price3 promotional pricing is a temporar-
ad<ustment that onl- involves price reductions8 ,he- are9
Markdowns9
,he most common method for stimulating customer interest using price is the
promotional markdown method3 which offers the product at a price that is lower than the
product>s normal selling price8 ,here are several t-pes of markdowns including9
,emporar- Markdown Possi*l- the most familiar pricing method marketers use
to generate sales is to offer a temporar- markdown or 6sale> pricing8 ,hese
markdowns are normall- for a specified period of time the conclusion of which will
result in the product *eing raised *ack to the normal selling price8
Permanent Markdown +nlike the temporar- markdown where the price will
eventuall- *e raised *ack to a higher price3 the permanent markdown is intended to
move the product out of inventor-8
)easonal Products that are primaril- sold during a particular time of the -ear3
such as clothing3 gardening products3 sporting goods and holida-1specific items3 ma-
see price reductions at the conclusion of its prime selling season8
?oss ?eaders9
(n important t-pe of pricing program used primaril- *- retailers is the loss leader8
+nder this method a product is intentionall- sold at or *elow the cost the retailer pa-s to
ac.uire the product from suppliers8 ,he idea is that offering such a low price will entice
a high level of customer traffic to visit a retailer>s store or we*site8
)ales Promotions9
)ales Promotion ma- offer several t-pes of pricing promotions to simulate demand8
,hese include re*ates3 coupons3 trade1in3 and lo-alt- programs8 ,here is a separate unit
on )ales promotions later on8
undle Pricing9
(nother pricing ad<ustment designed to increase sales is to offer discounted pricing when
customers purchase several different products at the same time8 ,ermed *undle pricing3
the techni.ue is often used to sell products that are complementar- to a main product8
Aor *u-ers3 the overall cost of the purchase shows a savings compared to purchasing each
product individuall-8 Aor e2ample3 a ,E retailer ma- offer a discounted price when
customers purchase *oth 2"> ,E and CEC that is lower than if *oth items were
purchased separatel-8
&ith the price decided3 the final step for the marketer is to determine in what form and in
what timeframe customers will make pa-ment8 (s one would e2pect pa-ment is most
often in a monetar- form though in certain situations the pa-ment ma- *e part of a *arter
arrangement in which products or services are e2changed8
C-namic Pricing
,he concept of d-namic pricing has received a great deal of attention in recent -ears due
to its prevalent use *- 'nternet retailers8 ut the *asic idea of d-namic pricing has *een
around since the dawn commerce8 0ssentiall- d-namic pricing allows for the point1of1
sale 4i8e83 at the time and place of purchase5 price ad<ustments to take place for customers
meeting certain criteria esta*lished *- the seller8 ,he most common and oldest form of
d-namic pricing is haggling= the give1and1take that takes place *etween *u-er and seller
as the- settle on a price8
Ainall- marketers must decide in what form pa-ments will *e accepted8 ,hese options
include cash= check3 mone- orders3 credit card3 online pa-ment s-stems 4e8g83 Pa-Pal5 or3
for international purchases3 *ank drafts3 letters of credit3 and international repl- coupons3
to name a few8 ,he- can also offer the following9
/wnership /ptions
0arl- Pa-ment 'ncentives
(uction Pricing
/wnership /ptions9
(n important decision faced *- marketers as the- are formulating their marketing
strateg- deals with who will have ownership of the product 4i8e83 holds legal title5 once an
e2change has taken place8 ,he options availa*le include9
u-er /wns Product /utright ,he most common ownership option is for the
*u-er to make pa-ment and then o*tain full ownership8
u-er ;as %ight to +se *ut Coes Bot ;ave /wnership Man- products3
especiall- those la*eled as services3 permit customers to make pa-ment in e2change
for the right to use a product *ut not to own it8
0arl- Pa-ment 'ncentives
Aor man- -ears marketers operating primaril- in the *usiness market offered incentives
to encourage their customers to pa- earl-8 ,-picall-3 *usiness customers are given a
certain period of time3 normall- 3$ or 6$ da-s3 *efore pa-ment is due8 ,o encourage
customers to pa- earlier3 and thus allow the seller to o*tain the mone- .uicker3 marketers
have offered earl- pa-ment discounts often referred to as 6cash termsF8 ,his discount is
e2pressed in a form that indicates how much discount is *eing offered and in what
timeframe8 Aor e2ample3 the cash terms 2D1$ net 3$ indicates that if the *u-er makes
pa-ment within 1$ da-s of the date of the *ill then the- can take a 2T discount off some
or all of the items on the invoice3 otherwise the full amount is due in 3$ da-s8
(uction Pricing9
(uction pricing is the reverse of *id pricing3 which we discussed earlier3 since it is the
*u-er who in large part sets the final price8 ,his pricing method has *een around for
hundreds of -ears3 *ut toda- it is most well known for its use in the auction marketplace
*usiness models such as ea- and *usiness1to1*usiness marketplaces8 &hile marketers
selling through auctions do not have control over final price3 it is possi*le to control the
minimum price *- esta*lishing a price floor or reserve price8 'n this wa- the product is
onl- sold if someone>s *id is at least e.ual to the floor price8
'.5. Pricing met8od!
Aollowing are the pricing methods *efore the manufacturer8
3ot Pricing
+nder cost pricing the marketer primaril- looks at production costs as the ke- factor in
determining the initial price8 ,his method offers the advantage of *eing eas- to
implement as long as costs are known8 ut one ma<or disadvantage is that it does not
take into consideration the target market>s demand for the product8 ,here are several
t-pes of cost pricing including9
Marku, Pricing
,his pricing method used *- man- resellers3 who ac.uire products from suppliers3 is one
in which final price is determined *- adding a certain percentage to the cost of the
product8 Aor man- resellers3 such as retailers3 who purchase thousands of products it is
far easier to use a markup pricing approach due to its simplicit- than it would *e to
determine what the market is willing to pa- for each product8
%esellers differ in how the- use markup pricing with some using the markup on cost
method and others using the markup on selling price method8
Markup on #ost +sing this method price is determined *- simpl- multipl-ing
the cost of each item *- a predetermined percentage then adding the result to the
cost8 ( ma<or general retailer3 such as ig*a::ar3 ma- appl- a set percentage for
each product categor- 4e8g83 women>s clothing3 automotive3 garden supplies3 etc85
making the pricing consistent for all like1products8 (lternativel-3 the predetermined
percentage ma- *e a num*er that is identified with the marketing o*<ectives 4e8g83
re.uired 2$T %/'58 ,he calculation for markup on cost is9
'tem #ost [ 4'tem #ost 2 Markup Percentage5 Y Price
%s85$$ [ 45$$ 2 83$5 Y %s865$
Markup on )elling Price Man- resellers3 and in particular retailers3 discusses
their markup not in terms of markup on product cost *ut as a reflection of price8 ,he
calculation for markup on selling price is9
'tem #ost Y Price
418$$ Markup Percentage5
%s85$$ Y %s8 71483
418$$ 83$5
,he astute reader should recogni:e that the information in markup of selling price
contains the same information in markup of cost8
Cost-Plus Pricing
'n the same wa- markup pricing arrives at price *- adding a certain percentage to the
product>s cost3 cost1plus pricing also adds to the cost *- using a fi2ed monetar- amount
rather than percentage8 Aor instance3 a contractor hired to renovate a homeowner>s
*athroom will estimate the cost of doing the <o* *- adding their total la*or cost to the
cost of the materials used in the renovation8
Breakeven Pricing
reakeven pricing is associated with *reakeven anal-sis3 which is a forecasting tool used
*- marketers to determine how man- products must *e sold *efore the compan- starts
reali:ing a profit8 ?ike the markup method3 *reakeven pricing does not directl- consider
market demand when determining price3 however it does indicate the minimum level of
demand that is needed *efore a product will show a profit8 Arom this the marketer can
then assess whether the product can realisticall- achieve these levels8
Market Pricing
+nder the market pricing method cost is not the main factor driving price decisions=
rather initial price is *ased on anal-sis of market research in which customer e2pectations
are measured8 ,he main goal is to learn what customers in an organi:ation>s target
market are likel- to perceive as an accepta*le price8 /f course this price should also help
the organi:ation meet its marketing o*<ectives8 Market pricing is one of the most
common methods for setting price3 and the one that seems most logical given marketing>s
focus on satisf-ing customers8 Aor those marketers who use market pricing3 options
include9
ackward Pricing
Ps-chological Pricing
Price ?ining
Back-ard Pricing
'n situations where a price range is ingrained in the market3 the marketer ma- need to use
this price as the starting point for man- decisions and work *ackwards to develop
product3 promotion and distri*ution plans8
Pschological Pricing
#ertain pricing tactics 6ma-F have a ps-chological effect since the results of some studies
have suggested otherwise8
/dd10ven Pricing 1 Man- times a *u-er will pass along the price as *eing lower
than it is either *ecause the- recall it *eing lower than the even num*er or the-
want to impress others with their success in o*taining a good value8 Aor instance3
in our e2ample a *u-er who pa-s %s82""8"5 ma- tell a friend the- paid 6a little
more than %s82$$F for the product when in fact it was much closer to %s83$$8
Prestige Pricing 1 (nother ps-chological effect3 called prestige pricing3 points to a
strong correlation *etween perceived product .ualit- and price8 ,he higher the price
the more likel- customers are to perceive it has *eing higher .ualit- compared to a
lower priced product8
Price 'ining
Price lining or product line pricing is a method that primaril- uses price to create the
separation *etween the different models8 &ith this approach3 even if customers possess
little knowledge a*out a set of products3 customers ma- perceive the- are different *ased
on price alone8 Price lining can also *e effective as a method for increasing profita*ilit-8
'n man- cases the cost to the marketer for adding different features to create different
models or service options does not alone <ustif- a *ig price difference8 Aor instance3 an
upgraded model ma- cost 1$T more to produce than a *ase model *ut using the price
lining method the upgraded product price ma- *e 2$T higher and thus more profita*le
than the *ase model8 ,he increase in profita*ilit- offered *- price lining is one reason
marketers introduce multiple models3 since it allows the compan- to not onl- satisf- the
needs of different segments *ut also presents an option for a customer to 6*u- upF to a
higher priced and more profita*le model8
3om+etiti&e Pricing
Aor some3 competitor>s price serves as an important reference point from which the- set
their price8 'n some industries3 particularl- those in which there are a few dominant
competitors and man- small companies3 the top companies are in the position of holding
price leadership roles where the- are often the first in the industr- to change price8
)maller companies must then assume a price follower role and react once the *ig
companies ad<ust their price8
&hen *asing pricing decisions on how competitors are setting their price3 firms ma-
follow one of the following approaches9
elow #ompetition Pricing 1 ( marketer attempting to reach o*<ectives that
re.uire high sales levels 4e8g83 market share o*<ective5 ma- monitor the market to
insure their price remains *elow competitors8
(*ove #ompetition Pricing 1 Marketers using this approach are likel- to *e
perceived as market leaders in terms of product features3 *rand image or other
characteristics that support a price that is higher than what competitors offer8
Parit- Pricing 1 ( simple method for setting the initial price is to price the product
at the same level competitors price their product8
Bid Pricing
Bot all selling situations allow the marketer to have advanced knowledge of the prices
offered *- competitors8 &hile the 'nternet has made researching competitor pricing a
relativel- routine e2ercise3 this is not the case in markets where *id pricing occurs8 id
pricing t-picall- re.uires a marketer to su*mit a price to a potential *u-er that is sealed or
unseen *- competitors8 't is not until all *ids are o*tained and unsealed that the marketer
is informed of the price listed *- competitors8
id pricing occurs in several industries though it is a standard re.uirement when selling
to local3 national and international governments8 'n these situations the marketer>s
pricing strateg- depends on the pro<ected winning *id price3 which is generall- the lowest
price8 ;owever3 price alone is onl- the deciding factor if the *idder meets certain
.ualifications8 ,he fact that marketers often operate in the dark in terms of availa*le
competitor research3 makes this t-pe pricing one of the most challenging of all pricing
setting methods8
(. )a&e *ou undertood t*+e ,uetion!
18 Pou@ve <ust invented an innovative new product and are read- to launch it into the
market8 Pou will most likel- price the product high8 Pour pricing strateg- is pro*a*l-
*ased on9
(8 Cistri*ution strateg-
8 Promotion strateg-
#8 ?ack of relevant competition
C8 Qualit- image
28 /ne of the advantages of *reak1even anal-sis is the ease with which costs can *e
verified to *e fi2ed or varia*le
,rueD Aalse
38 'f the formula for elasticit- results in a measure of elasticit- 405 e.ual to 13 an increase
in sales will e2actl- offset a decrease in price3 and total revenue will remain the same
,rueD Aalse
48 &hen 'ndian oil reduces the price3 immediatel- 0ssar group lowers the price of petrol
and diesel8 ,his strateg- is called9
(8 Predator- pricing
8 #ost plus pricing
#8 Market share pricing
C8 )tatus .uo pricing
58 0conomies of scale will help in lowering pricing *-9
(8 ?arge scale companies
8 )mall scale companies
#8 oth of them
C8 Beither of them
5. -ummar*
#ustomers want the *est value for their mone-3 and thus the- will almost alwa-s do a
.ualit- comparison and make purchases *ased on the *est price for the *est value8 &hile
the *eat1the1competition pricing approach ma- work for some3 there are man- other
comple2ities involved in esta*lishing a pricing strateg-8 Man- pla-ers have started to use
multiple pricing methodolog- for getting across to variet- of customers8 ;ence pricing is
a ma<or aspect of decision to *e made *- organi:ations8
6. ./ercie
18 Bow a da-s3 retailers are resorting to 0C?P pricing8 &hat is this pricingJ #onduct a
stud- and e2plain the same8
28 ,race the role of reak even anal-sis in price fi2ation8
38 Co -ou think cost plus pricing will help organi:ationsJ #omment8
48 0lucidate the steps to *e taken for pricing strategies for services in the current conte2t
with e2amples8
0. 1e2erence
18 0verett %ogers3 6 Ciffusion of innovationsF3 Gree Press3 Bew Pork3 1""68
28 Meoffer- Moore3 6#rossing the chasmF3 4arper 8usiness3 Bew Pork3 1""18
38 ?aurence P8 Aeldman3 6u- 'n and Met &ell@ as a Product ?aunch )trateg-F3
+niversit- of 'llinois at #hicago3 <ournal of Pro(uct >evelopment an( Management3
1""68
48 Movindara<an3 E8 and (nthon-3 %8 41"!353 ;ow Airms +se #ost Cata in Price
Cecisions3 Management (ccounting3 Kul- pp8 3$1368
58 (*rams3 K8 41"6458 ( Bew Method for ,esting Pricing Cecisions8 Kournal of
Marketing3 2!4158
68 A\rderer3 %83 ;ermann3 (83 and &\*ker3 M8 41"""58 'n %8 A\rderer3 (8 ;ermann3 amd
M8 &\*ker 40ds853 /ptimal undle Pricing9 Marketing )trategies for 'mproving
0conomic Performance3 chapter 6'ntroduction to Price undlingF8 erlin3 ;eidel*erg9
)pringer Eerlag8
#()0 ),+C'0)
1. 3AT)#"I3 -?1IAN BAN7!
'n a stud- of )&/, anal-sis conducted at some *ranches of #)3 the following was
found9
)trengths
ranches
ank deliver products and services through a variet- of channels ranging from e2tensive
*ranch network3 e2tension counters3 (,M centre3 'nternet *anking and Mo*ile *anking8
,here are 344 *ranches all over 'ndia8 Bon performing assets of the *ank is reduced8 i8e3
(mount of ad O dou*tful de*ts reduced8 )upreme customer services8 0mplo-ees are
shareholders hence more commitment from emplo-ees8 ,echnolog- 'mplementation
&eaknesses
( ma<or part of *ank>s *ranch network is concentrated in southern 'ndia8 More than "$T
of the total *ranches are located in )outhern 'ndia8 (n- disruption3 distur*ance or
*reakdown in the econom- of these areas could adversel- affect the result of *ank>s
*usiness and operations8 #) does not have an- trademark for the name L,he #atholic
)-rian ankF along with the logo and the tag line Lsupport all the wa-> associated with
the ank8 ank ma- not *e a*le to prohi*it persons from using the said trademark to their
advantage and an- unfavora*le use of such trademark ma- adversel- affect *ank>s
goodwill and *usiness8 ;uman resource profile is weak8 #ost involved in adopting
technolog-8 %educing )preads8 #) is not started -et
/pportunities
ank ma- undertake mergers or ac.uisitions8 ank ma- make ac.uisitions and
investments to e2pand customer *ase3 ac.uire new service or product offerings or to
enhance technical capa*ilities8 ,he )ecuritisation and %econstruction of Ainancial (ssets
and 0nforcement of )ecurit- 'nterest (ct 2$$2 4,he )ecuritisation (ct58 &ith the
enactment of ,he )ecuritisation and %econstruction of Ainancial (ssets and 0nforcement
of )ecurit- 'nterest (ct 2$$2 4,he )ecuritisation (ct53 *anks have *een empowered to
attach assets of the defaulters without intervention of length- and time1consuming court
procedures8 ,his has suddenl- turned the ta*les in favour of *anks8 ,ill recentl-3 de*t
recover- was one of the most hopeless <o*s in 'ndia due to archaic laws3 which were
totall- tilted towards *orrowers8 anks were in fact at the merc- of *orrowers@
willingness to pa-8 ,hus in spite of the fact that most *orrowing is against securit-3 the
value of which is often higher than the loan3 *anks still could not do much e2cept ca<ole
and tempt *orrowers to pa- up8 ;uge BP(s were *urdening the entire *anking sector8
Cue to the fear of increasing BP(s3 their willingness to lend and e2pand *usiness was
also adversel- affected8 't is e2pected that over the ne2t couple of -ears3 *anks will *e
a*le to significantl- clean up their BP( mess due to the )ecuritisation (ct8
,hreats
Cela- in the rollout of *ank>s core *anking solutions8 #) is in the process of
implementing #ore anking )olution 46#)F5 and has alread- succeeded in *ringing a
su*stantial num*er of *ranches under the #) s-stem8 ,his technolog- initiative will
allow to increase interconnectivit- among *ranches and to provide man- of the products
and service8 'n the event of an- dela- in the roll1out of the #) across entire *ranch
network3 it ma- *e difficult to e2pand products and services8 #ompetition8 %egulator-
)-stem #ost8
Questions9
18 Co -ou think the )&/, gives an option for improvement *- the *ankJ Kustif-8
28 Cevelop a )&/, for another *ank and compare the same with #)8
2.MA17- AND -P.N3.1
7,here@s no need to ask the price 1 it@s a penn-7 was the proud claim of Marks and
)pencer a hundred -ears ago8 Arom the start3 it had developed a uni.ue position in its
market 1 an emphasis on low price3 wide range and good .ualit-8 /ver time3 the Marks
and )pencer position has *een steadil- developed3 along with its profita*ilit-8 - the
1""$s it looked unstoppa*le as a retailer3 as it progressivel- e2panded its product range
from clothing to food3 furnishings and financial services8 ,he world seemed to *e waiting
for MO) to e2ploit3 and despite disappointing starts in the +) and #anada3 it developed
steadil- throughout 0urope and the Aar 0ast8 ,hen3 <ust like an- star who has *een put on
a pedestal3 the media *egan to savage the compan-8 (fter a sudden drop in profits and
sales during 1""!3 critics claimed that the compan- had lost its position in the market
place8 't appeared to *e like a super tanker3 ploughing straight ahead with a management
that had *ecome much less adapta*le to change than its nim*ler competitors8 Man-
o*servers had commented on the fact that the compan- did not have a marketing
department until 1""!8 Marketing3 at least in terms of advertising the *rand3 had *ecome
so important to its competitors3 *ut had never *een high on Marks O )pencer@s agenda8
(ccording to Media Monitoring )ervices3 MO)@s total media spending *etween Cec
1""71Bov 1""! was <ust ]487 million3 almost a drop in the ocean compared to the
spending of )ains*ur-s 4]4281m5= ,esco 4]2785m5= and &oolworths 4]2185m58 &hile
other retailers had worked hard on *uilding a *rand image3 MO) has relied on the .ualit-
of its stock to do the talking8 ,he argument was that ever-one knew what the- were
getting with MO) underwear or shirts 1 good .ualit- at fair3 *ut not cheap3 prices8
)imilarl- with food3 MO)@s offering was a*out .ualit- rather than price8 MO) *elieved
its customers knew what the *rand stood for and advertising was much less important
than ensuring that it could o*tain the right products at the right price8
'n 1""!3 MO) looked to marketing to help turn around its performance3 descri*ing its
new marketing division for +H retail as 7a significant development in our retailing
philosoph-78 Man- suspected that MO)@s conversion to marketing had *een encouraged
*- the e2ample set *- the star of modern retailing3 ,esco8 ,here are man- similarities
*etween the pro*lems facing MO) and those which ,esco faced a decade previousl-8 'n
the earl- 1""$s ,esco was a *rand which looked like it had seen *etter da-s8 ,he
retailer@s format was tired3 its stores poorl- laid out and the positioning of the compan-
was still *ased on its founder@s principle of @pile it high and sell it cheap@8 'ts arch1rival3
)ains*ur-@s3 was regarded as the more upmarket store for the middle classes3 who
shopped for .ualit- food in a more pleasant environment8 )ince then3 ,esco had
innovated with improved store designs3 petrol stations3 coffee shops3 a new fascia3 the
,esco #lu*card and 241hour store opening8 ,he list of ,esco@s marketing initiatives
seemed to *e unstoppa*le3 in an attempt to keep one step ahead of its competitors8 'n
contrast3 MO) had failed to keep pace with customer service8 'n man- issues of retail
development3 such as out1of1town shopping centres3 )unda- opening and lo-alt- cards3 it
had lagged *ehind its main competitors8 &hile it has stood still3 the likes of ,esco and
)ains*ur-@s marched ahead until there was no longer much that felt e2ceptional a*out the
MO) shopping e2perience8 (nal-sts argued that MO) had failed to make its store
la-outs help shoppers *ring clothing together to make outfits8 'n a t-pical MO) store3 all
<ackets would *e located in one area and all cardigans in another3 for e2ample8 'ts
competitors had made much greater progress in *ringing together co1ordinated sets of
clothing which would encourage shoppers to spend more8 MO) has also *een criticised
for making things difficult for customers *- not accepting pa-ment *- ma<or credit cards8
'n response to its current trou*les3 the newl- created marketing department of MO)
launched its first national campaign for retail towards the end of 1""!8 ,he ads followed
an initial attempt at regional ,E advertising earlier in the -ear3 which the compan- was
said to *e ver- pleased with8 ,he newl- appointed #hief 02ecutive claimed 7't@s not that
people don@t like what we@re selling3 *ut that we haven@t got the message across8 ,here
are an awful lot of people who love us for our knickers3 *ut the- don@t love our home
furnishings *ecause the- don@t even know the- are there87 Man- critics thought the
pro*lems were much more deep1seated and *lamed the store@s pro*lems on the fact that
its autumn fashions were seen as dull and uninspiring3 and out of touch with consumers@
preferences8 Mreater authorit- was pledged to the marketing department when it came to
new product design8
'n response to its pledge to listen to what its customers wanted3 new designers were
*rought in to tr- and give the compan-@s ranges more sparkle8 ,he compan- even thought
the previousl- unthinka*le *- proposing to stock manufacturers@ own *randed products3
instead of rel-ing entirel- on MO)@s own la*el products8 'f customers wanted to o*tain
variet- at MO)3 the new thinking was that the compan- must adapt and offer it8 (nother
area identified for development was direct marketing of fashion products 1 an area where
the compan- had *egun to lag *ehind its rivals who had developed interactive we* sites8
)erious .uestions remained a*out the compan-8 ;ow .uickl- could it change in response
to its changed environmentJ ,he compan- had not *een known for speed- decision
making3 so pro*a*l- a ma<or structural overhaul was essential *efore it could get down to
the serious *usiness of adapting to customers@ changing needs8 (lso3 there was a great
danger of changing the compan-@s position too far and too fast3 there*- alienating its
traditional customers without gaining sufficient new ones8 (s a warning of how not to
change3 MO)@s rival ?aura (shle- had repositioned itself so radicall- from its original
format that it now failed to gain the support of an- ma<or group8 MO) had itself tried to
*ecome more fashion conscious during the mid11"!$s with similar effect3 and had to
make a hast- retreat to its traditional3 more staid image8
FU.-TI#N-
18 &hat do -ou understand *- positioning3 and what tools are availa*le to Marks and
)pencer to give it a positioning advantageJ
28 ,here has *een a lot of de*ate *out whether the e2istence of a marketing department
can actuall- *e harmful to services companies *ecause it a*solves ever-*od- else of
marketing responsi*ilities8 &hat then3 do -ou make of MO)@s decision to introduce a
marketing department8
'. M#BI". P)#N.- AND MA17.TIN4
/ne of the oldest principles of marketing is that sellers ma- sell features3 *ut *u-ers
essentiall- *u- *enefits8 ,his is a distinction sometimes lost on technolog- led
organisations3 and the service sector is no e2ception8 %ecent e2perience of the +H>s
largest telecommunications compan-3 Eodafone (irtouch3 illustrates how crucial it is to
see service offers in terms of the *enefits the- *ring to customers8 ,he compan- was
aware of e2tensive research which had found high levels of confusion among purchasers
of mo*ile phones3 with a seemingl- infinite permutation of features and prices8 &ith four
main networks to choose from3 do:ens of tariffs and hundreds of handsets3 it eas- to see
wh- *u-ers sought means of simplif-ing their *u-ing process8 ,hroughout the 1""$s3
Eodafone had positioned its +H network as superior technicall- to its competitors8
(dvertising focused on high coverage rates and call relia*ilit-8 Eodafone was the +H@s
most popular mo*ile phone operator3 with almost eight million customers3 including 482
million Pa- as -ou ,alk customers8 't had opened the +H@s first cellular network on 1
Kanuar- 1"!5and was the market leader since 1"!68 Eodafone@s networks in the +H 1
analogue and digital 1 *etween them carried over 1$$ million calls each week8 't took
Eodafone more than 13 -ears to connect its first three million su*scri*ers *ut onl- 12
months to connect the ne2t three million8 Eodafone had the largest share of the +H
cellular market with 33T and had more international roaming agreements than an- other
+H mo*ile operator8 't could offer its su*scri*ers roaming with 22$ networks in 1$4
countries8
Cespite all of the a*ove3 Eodafone was aware that although it was recognised as an
e2tremel- strong *usiness in the corporate marketplace3 it was not so strong in the market
for personal customers8 %esearch indicated that personal *u-ers *ought Eodafone for
essentiall- rational reasons rather than having an- emotional attachment to the *rand8 ,he
success of the competing /range network3 which had developed a ver- strong image3 was
a lesson to Eodafone that man- people did not understand man- of the product features
on offer3 *ut instead identified with a *rand whose values the- could share8 Eodafone
recognised that it needed to *e perceived as adding value to a consumer>s lifest-leJ8
Miven the increasing comple2it- of product features3 positioning on technical features
was likel- to make life more confusing for personal customers8 (n alternative approach
was needed which focused on image and lifest-le *enefits8 ,he compan- decided to hire
'dentica the consultanc- that originall- created the /ne 2 /ne *rand to revamp its
*rand communications and advertising strateg- in an effort to make Eodafone more
appealing to personal customers8 'dentica created a new Lvisual language> for the
Eodafone *rand8 Eodafone *ecame involved in the *iggest ever ,E3 press3 poster and
radio advertising campaign in its 15 -ear histor-8 0mplo-ing a completel- new st-le3 the
new advertising centred around the theme9 @Pou are now trul- mo*ile8 ?et the world
come to -ou@ and featured a new end1line 1 Eodafone P/+ (%0 ;0%08 ,he campaign
demonstrated how Eodafone@s products and services were designed to make life easier
for its customers8
,he campaign3 created *- MP CC3 was worth ]2$ million over two months alone and
ran for the whole -ear8 ringing meaning to the Eodafone *rand and what it represented3
a series of advertisements3 through a range of media3 showed how Eodafone let the world
come to its customers3 ena*ling them to *e trul- mo*ile8 ,his portra-ed how Eodafone
alwa-s pioneered to make things more possi*le for its customers in a wire1free world8 'n
press and poster e2ecutions3 Eodafone used arrows photographed in various real life
situations to depict its flagship services3 e8g8 a weather vane was used to illustrate the
Eodafone 'nteractive weather service showing how weather information could *e *rought
to customers through their mo*ile8 0ach advertisement again had the Eodafone P/+
(%0 ;0%0 end1line8 ,he arrows indicated the directional approach of Eodafone3 letting
the world come to the customer8 /ther e2ecutions illustrated cinema listing information3
sports updates3 share price information3 international roaming and the Eodafone Personal
%oadwatch 1!$$ service8
,he change in emphasis *- Eodafone seemed to *e timel-8 ,he mo*ile phone industr-
was facing a new wave of confusing product features hitting consumers3 with the
development of &ireless (ccess Protocol 4&(P5 phones and the newer 6,hird
generationF phones due to *e launched in 2$$18 't seemed inevita*le that all of the
competing networks would *e offering confusing permutations of features with their
service3 so Eodafone calculated that3 given similar levels of relia*ilit- and sophistication
*- all networks3 a favoura*le image and lifest-le association would *e an important
source of competitive advantage8 Miven the right image with e2isting technolog-3 there
would *e a strong pro*a*ilit- that consumers would migrate with the *rand to the new
technolog- when it arrived8
)ource9 adapted from
6Eodafone 'mage )hiftF3 Marketing3 4th Ma-3 2$$$ and Eodafone ;ome Page3
http9DDwww8vodafone8co8uk
QUESTIONS
18 'dentif- the principal *enefits to customers which derive from a mo*ile phone8
&hat differences are likel- to e2ist *etween market segmentsJ
28 's a strong *rand identit- on its own a source of sustaina*le competitive advantageJ
,o what e2tent must this *e *acked up *- real product featuresJ
38 (re goods different to services in the wa- that a distinction is made *etween
features and *enefitsJ