Marketing Management

Unit – 1
Definition : what is marketing ?

Marketing is the social and managerial process by which individuals and groups obtain what they
need and want through creating, offering and exchanging products of value with others.

 Marketing starts from the human needs and wants

 Need air beyond recreation they have preference

Towards brands

Food education

Water

Shelter

Clothing

 Ex: olden days gold purchase and today (Cell phone , ATM centers , fast food)

The Core Concepts Of Marketing

1. Need ,Want , Demand

s.no Need Want

1 It is a state of felt deprivation of some basic Wants are desire for
satisfaction. specific satisfiers of these
deeper needs.

Ex: car , luxury items

 Self
act

Esteem Needs
Social Needs

Safety Needs

Basic Needs

2 These needs are not created by marketer, by This was created by

human biology and human condition institutions, churches,
schools, families, business
corporations.

Needs Value Exchan Marketi

ge ng &
Wants Products Cost & Transac Markets Market
tions ers
Demands satisfacti &
on relation
ships

 Demand

 Demands are wants for specific products that are backed by an ability and willingness
to buy them.
Ex :desire to buy a car – desire to by a innova , lancer ( ability + willingness is required )
  So in this marketers has to identify how many people want the product with
ability and willingness.

2. Products

people satisfy their needs and wants through goods and services

Define a product ?

Anything that can be offered to satisfy a need or want.

Products ok ---- services how come ?

Ex : we are buying a car -- not to admire the beauty of the car – but it is providing transportation
service

Microwave oven ---- service

Services supplied by other vehicles

Persons ---------------- comedians show

Places------------------- ooty , kodaikanal
Activities--------------- yoga , exercises
Organizations---------rotary club
Ideas--------------------adopting different philosophy for life

So product covers both = physical product + services product

But manufacturers paying more attention to physical products than services.

“Buyers they are not buying the product but buying the hope “

“ sellers who concentrate their thinking on the physical product instead of customers need are said
to suffer from marketing myopia “

3.Value , Cost And Satisfaction

Value :

How do consumers choose among the many products that might satisfy a given need ?

 Suppose ‘X’ want to travel 20 kms daily.

 No of products will satisfy his needs

- by walk
- bi cycle
- two wheeler ---------- product choice or alternative set
- four wheeler
- bus

But ‘X’ wants --------------- Safe

Speed------------------- need set
Economical
Easy to use

Different products have different capacity to satisfy your need , based on the value you will choose
the product.

The guiding concept is customer value .

Value is the consumers estimate of the products over all capacity to satisfy his need. ( he will
rank the product based on the features and select the product )

Cost :

Each product involves cost. so before buying he will consider value + cost

Finally how the consumer is choosing the product --- Satisfaction

So buying decision = value + cost + satisfaction

4. Exchange , Transactions And Relationships

Exchange

When people decide to satisfy needs and wants through exchange marketing emerges.

Through four ways people can get products

o Self production - hunting , fishing , fruit gathering

o Coercion - stealing food from others
o Begging – approach others and begging
o Exchange - hungry people approach others and offer a resource in exchange ( money
, good , service )
 Marketing arises from exchange only because . exchange is the act of obtaining a desired
product from someone by offering something in return.

So to take place the exchange it should satisfy five conditions

1. There are at least two parties

2. Each party has something that might be value to the other party
3. Each party is capable of communication and delivery
4. Each party is free to accept or reject the offer
5. Each party believes it is appropriate or desirable to deal with the other party.

Transaction

Two parties are said to be engaged in exchange if they are negotiating and moving toward an
agreement. If an agreement is reached the transaction takes place.

If it involves money it is monetary transaction

If it involves product barter transaction

Transaction involves several dimensions

 At least two things of value

 Agreed upon conditions
 Time of agreement
 Place of agreement

Business maintains records of their transactions.

A transaction differs from a transfer

Not returning anything this is called transfer

For that they will expect some behavioral response .

charitable trust ( expected thank you response )

Ex : Business firm ----- buying response

Political party ------ voting

Church ------ joining

For successful exchanges

 The marketer analyses what each party expects to give and get.
 ‘ A ‘ offers products that motivates ‘ B ‘ to buy the product
 The Process Of Trying To Arrive At Mutually Agreeable Terms Is Called Negotiation.
 Negotiation leads to either mutually acceptable terms or a decision not to transact.
These are called transaction marketing.

Relationship Marketing

 Transaction marketing is part of relationship marketing.

 Smart marketers try to build up long term trusting “ win – win “ relationships with
valued customers, distributors, dealers and suppliers. That is accomplished by
promising and delivering high quality goods and services and fair price.
 Relationship marketing reduces the transaction cost.
 The ultimate outcome of marketing is the building unique company asses called a
marketing network.

5.Markets :

A market consist of all potential customers sharing a particular need or want who might be willing
and able to engage in exchange to satisfy that need or want.

 Market is the collection of sellers and buyers.

Market ( various grouping of customers)

Geographic market
Non Customer Group( voter market, labor market, donor market)
Product Market
Demographic Market
Need Market
 Resource
Markets

Manufacturer Government
Markets Consumer

Middle men
Markets

6.Marketing And Marketers

 Marketing means human activity taking place in relation to markets

 Marketing means working with markets to actualize potential exchanges for the purpose of
satisfying human needs and wants.

 A marketer is someone seeking a resource from someone else and willing to offer something
of value in exchange.

 The marketer is a company serving a market of end-users in the face of competitors. The
company and the competitors send their respective products and messages directly and or
through marketing intermediaries to the end users. Their relative effectiveness is influenced
by their respective suppliers as well as major environmental forces.
  Marketing is a social and managerial process by which individuals and groups obtain what
they need and want through creating, offering and exchanging products of value with others.

ENVIRONMENT

S Company
U E
P Marketing N
P D
L Intermediaries U
I S
E E
R R
Competitor
S S

MARKETING MANAGEMENT

Exchange process involves considerable amount of work and skill.

Definition : marketing ( management ) is the process of planning and executing the conception,
pricing., promotion and distribution of goods and services and ideas to create exchanges with target
groups that satisfy customer and organizational objectives.

Under five competing concepts under which organizations conduct their marketing activity :

1.Production Concept
2. Product Concept
3. The Selling Concept
4.The Marketing Concept
5. The Societal Marketing Concept

The production concept :

 Consumers will favor those products that are widely available and low in cost.
 High production efficiency and wide distribution coverage should be the focus of
managers of production oriented organizations.
 Ex : Maruthi, Cell Phones, Cycles.

Product concept :

 Consumers will favor those products that offer the most quality, performance or
innovative features.
 Product oriented organizations focus on making superior products and improving them
out of time.
Ex : Toyoto , Quails , Innova

The selling concept :

 The selling concept holds that consumers, if left alone will ordinarily not buy enough of
the organizations products.
 There fore organizations should undergo aggressive selling and promotion effort
Ex : pepsi , coco-cola, cellphone ( reliance, cell one, airtel ) , saravana
stores ( low cost strategy )

The marketing concept :

 It holds the key to achieving organizational goals consists in determining the needs and
wants of target markets and delivering the desired satisfaction more effectively an
deficiently than competitors.

 The marketing concepts can be expressed by some quoting

 Meeting needs profitably

 Find wants and fill them
 Love the customer not the product
 Have it your way
 You are the boss
Difference between selling concept and marketing concept
Selling concept Marketing concept

1 Selling focuses on the needs of the seller Selling focuses on the

needs of the buyer

2 Selling is pre occupied with the sellers needs to Marketing with the idea
convert his product in to cash of satisfying the needs of
the customer by means of
the product and the whole
cluster of things
associated with creating,
delivering an finally
consuming.
3. It focus on four pillars
Target markets

Selli
fac Prof
prod ng
tor it by
ucts & Customer needs
y high
pro
sales
moti
ng Coordinated
marketing

Profits through
customer
satisfaction

It rests on four mail

pillars.

4 It is an inside out perspective It is an outside – in

perspective
 Target market :

1.No company can operate in every market and satisfy every need.

2.Companies do best when they define their target market.

Ex : paseenger car
Sports car
Luxury car
Only for men / only for women / handicapped / agriculture tractors
( caterpillar ) , construction vehicles
Mahindra and mahindra ( scorpio , marshal , voger , palio , commander )

 Customer needs :

Marketing meeting needs profitably

Types of needs

1. Stated Need -- customer want an in expensive car ( stated )

2. Real Need -- customer wants a car whose operating cost is low

3. Unstated Need --- the customer expects good service from the dealer

4. Delight Need - customer buys a car and receives a complementary road

atlas
5. Secret Need -- the customer wants to be seen by friends as value oriented
consumer.
Why it is important to satisfy target customer ?

Customer retention is more critical than customer attraction. Retention is possible only through
customer satisfaction.

A satisfied customer

- buys more and stays loyal longer

- Buys additional product if the company introduces new products

- Talk favorably about the company and its brand
- Pay less attention to competing brands
- Offer product ideas and services to the company
 - Costs less to serve than new customers.

Customer

New customer ( it cost Repeat customer ( it is

more to attract new less )
customers )

 Co - ordinated marketing

It means

1) The Various marketing functions sales force, advertising, product management, marketing
research and so on must be co coordinated among themselves.
2) Marketing must be well coordinated with other company departments.

So marketing concept requires both internal marketing and external marketing.

Internal marketing ---- it is the task of successfully hiring, training and motivating employees who
want to serve the customer well.

 Profitability :

Goal of the private firms is profitability and non privates are survival and attraction.
 The societal marketing concept :

The societal marketing concept holds that the organizations task is to determine the needs,
wants and interests of target markets and to deliver the desired satisfactions more effectively an
deficiently than competitors in a way that preserves or enhances the consumers and the society
well being .

Ex : hamburger -- high fat and starch very tasty fast food but it is not nutritious.

Societal marketing concept calls marketers to balance their marketing policies , company
profits, consumer want, satisfaction and public interest.
 Unit -2

STRATEGIC PLANNING

What Makes A Company Excellent ?

Excellent companies know how to adopt to a continuously changing marketplace.

Definition : Market oriented strategic planning is the managerial process of developing and maintaining
a viable fit between the organizations objectives, skills and resources and its changing market
opportunities. The aim of strategic planning is to shape and reshape the company’s businesses and
products so that they yield target profits and growth.

 The aim of strategic planning is to help a company select and organize its businesses in a way that
would keep the company health in spite of unexpected upset occurring in any of its specific
businesses or product lines.

 Three key ideas defined strategic planning. The first called for managing a companies businesses
as investment portfolio, for which it would be decided which business entities deserve to be
built, maintained, phased down or terminated.

 The second idea is to assess accurately the future profit potential of each businesses by
considering the markets growth rate and the companies position and fit.

 The third idea underlying strategic planning is that of strategy. Each company must determine
what makes the most sense in the light of its industry position and its objectives, opportunities ,
skills and resources.

 To understand strategic planning we need to recognize the most large companies consist of four
organizational levels.

o Corporate level - allocating resources an profitable future.

o Division level - allocation of fund to each business
o Business level
o Product level

 We will examine first the 1) nature of a high – performance business and then examine the
 2) major concepts and tools for carrying out corporate strategic planning.

I. THE NATURE OF HIGH PERFORMANCE BUSINESS

Today’s major challenge facing today’s companies is how to build and maintain viable businesses in the
face of the rapidly changing market place and environment.

 Increasing production efficiency

 Growth and profits

According to Arthur four factors are

 Stake holders
 Processes
 Resources
 Organization

1. Stake Holders

- Define stakeholders and identify their needs

- Employees, customers, suppliers, distributors should be recognized and satisfied
otherwise the profits will not be achieved.
- The progressive company creates a high level of employee satisfaction leads to
work on continuous improvement as well as break through innovation

Improvement High quality products & Repeated High

services create high purchase Growth
& customer satisfaction And
Innovation profits

High quality environment to High stakeholder

employees. satisfaction
2.Processes :

- a company can accomplish its goal through managing work processes.

- but departments work to maximize their own objectives not necessarily the companies objective.
- so now they are forming cross functional teams to manage the core business processes to achieve
excellence.

3. Resources

- to carry out processes a company needs resources like manpower/materials/machines/ information.

-the resources can be owned , leased or rented
-some resources under their control are not performing well so they are outsourcing for low cost.
-identify their core competencies and use this as a basis for strategic planning.

4.Organisation :

- the company consist of its structure, policies and culture.

-The structure and policies can be changes easily but the hardest is to change the culture.
-So the company must work hard to align their organizations structure, policies and culture to the change
in requirements of the business strategy.

II . CORPORATE STRATEGIC PLANNING

Defining the corporate mission

Establishing strategic business units
Assigning resources to each SBU
Planning new businesses.

1.Defining The Corporate Mission

- According To Peter Drucker

 What is our business ?

 Who is the customer ?

 What is value to the customer ?

 What will our business be ?

 What should our business be ?

-The companies mission ids shaped by five elements

 History ----- aims , policies , achievements

 Current preferences of -- owners and management

 Market environment

 Resources --- determine which missions are possible

 Distinctive competencies

- a well worked out mission statement provides company employees with a shared sense
of purpose , direction and opportunity.

- it takes long time ( 2 years ) to construct a mission statement

- mission should focus on a limited number of goals.

Ex: high quality products , good services , widest distribution , lowest price.

- the mission statement should define the major competitive scopes with in which the
company will operate.

a) Industry scope -- only one industry or related industries / industrial good or consumer good or
services

b)Products and application scope – range of products Ex: steel , cement / applicable to which type
of company Ex : construction

c)Competencies scope – range of technological competencies the company is having.

d)Market – segment scope – to what kind of customer and market the company is having

e)Vertical scope -- no of channels for distribution.

f)Geographical scope -- range of regions , countries or country groups where the corporate will
operate.
-the companies mission statement should be motivating.

-the corporate mission statement should stress major policies that the company wants to honor.

-Policies define how employees should deal with customers, suppliers, distributors, competitors and
other important groups.

-The companies mission statement should provide vision and direction for the company for the next
10 to 20 years. Missions are not revised every few years.

2.Establishing Strategic Business Units :

-most companies operate several businesses, they define their businesses in terms of products.

- A business must be viewed as a customer satisfying process not a goods producing process.

- A business can be defined in terms of three dimensions ,customer groups, customer needs
and technology.

- Company’s have to identify their businesses in order to manage them strategically.

-An SBU has three characteristics.

 It is a single business or collection of related businesses that can be planned separately

from the rest of the company.

 It has its own set of competitors.

 It has a manager who is responsible for strategic planning and profit performance and who
controls most of the factors affecting profit.

3. Assigning Resources To Each SBU:

- the purpose of identifying the company’s strategic business units is to assign to these units
strategic planning goals and appropriate funding.

- These units send their plans to company head quarters which approves them or sends them back
for revision.

- Head quarters review these plans to decide which of its SBU to build, maintain, harvest and
divest.
- Analytical tool used for classifying its business by profit potential

- Two business portfolio evaluation models are used 1) boston consulting group 2) general electric
model .

- BGC matrix also called Growth Share Matrix.

- It shows the eight business units current position and size.

Stars

 Question marks :

- high growth market ,low market share

- a question mark requires a lot of cash, the company has to add plants , equipments to overtake the
leader.
- The term question mark is well chosen because the company has to think hard about whether to keep
pouring money into this business. Invest in 2 business instead of 3 or 4.

 Stars :

- if the question mark businesses is successful it becomes a star.

- A star is the market leader.( it has two stars )
- stars are usually profitable and become the company’s future cash cows.
- The company must spend substantial funds to keep up to win the high market growth and fight off
competitors attack.
 Cash Cows :

- when a markets annual growth rate falls to less than 10 % the star becomes a cash cow.
- A cash cow produces a lot of cash for the company.
- But it cannot finance for expansion because market growth rate slowed down.
- But still enjoys economies of scale and high profit margin.

 Dogs :

- companies business have weak market share and low growth rates. ( low profit or losses )
- it is managing two dog businesses and they should consider whether it is holding on or phased out.

The company’s next task is to determine what objective strategy and budget to assign to each SBU

Build - the objective is to increase the SBU’s market share building is appropriate for question marks
whose shares have to grow if they are to become stars.

Hold – the objective is to preserve the SBU’s market share. This is appropriate for cash cows if they are
to continue to yield a large positive cash flow.

Harvest - the objective is to increase the SBU’s short term cash flow regardless of the long term effect.
This strategy is appropriate for weak cash cows whose future is dim and more cash flow is needed. This
can also be used with question marks and dogs.

Divest – the objective is to sell or liquidate the business because resources can be better used else where.
This is appropriate for dogs and question marks that are acting as a drag on the company’s profit.
As time passes , SBU’s change their position in the growth share matrix, successful SBU ‘s have a
lifecycle of question marks – stars - cash cow- finally dogs.

General Electric Approach :

 assigning objectives to an SBU can not be determined by the two factors market growth rate and
relative market share. so some more factors are also considered in this approach.

 According to this approach each business is rated in terms of two major dimensions 1) market
attractiveness and 2) business strength.

 A strong company operating in an unattractive market nor a weak company operating in an

attractive market will do very well.

 GE matrix is divided into nine cells.

Upper three invest / grow

 Diagonal selectivity / earning

Lower three harvest / divest

 The task of marketing management is to mange demand or revenue to the target level
negotiated with the corporate management.

Business Strength

Strong Medium Weak

Protect Position Invest To Build Build Selectively

 Invest to grow at  Challenge for  Specialize around

maximum digestible rate leadership limited strengths
 Concentrate effort on  Build selectively on  Seeks ways to
maintaining strength. strength overcome
 Re in force weaknesses.
vulnerable areas.  Withdraw if
indications of
sustainable growth
are lacking
Build Selectively Selectivity / Manage for Limited Expansion or
Earnings Harvest
 Invest heavily in most attractive
segments 
Protect existing  Look for ways to
 Build up ability to counter program expand without
competition  Concentrate high risk otherwise
 Emphasize profitability by raising investment in minimize
productivity. segments where investment and
profitability is good rationalize
and risks are operations.
relatively low.
Protect and Refocus Manage for Earnings Divest

 Manage for current earnings  Protect position in  Sell at time that

 Concentrate on attractive segments most profitable will maximize cash
 Defend strengths segment value
 Upgrade product  Cut fixed costs and
line avoid investment
 Minimize mean while.
investment
4.Planning New Businesses:

- the company’s plan for its existing businesses will allow it to project total sales and profits.

- If there is a gap between future desired sales and projected sales. Corporate management will have to
develop nor acquire new businesses to fill this strategic planning gap.

- a company can fill the gap by three ways.

a ) identify opportunities to achieve growth with in the company’s current businesses ( intensive
growth opportunities )

b ) identify opportunities to build or acquire businesses that are related to the company’s current
businesses .( integrative growth opportunities)

c) identify opportunities to add attractive businesses that are un related to the company’s current
businesses. ( diversification growth opportunities )

Intensive Growth Integrative growth Diversification growth

Market penetration Backward integration Concentric diversification

Market development Forward integration Horizontal diversification

Product development Horizontal integration Conglomerate diversification

 Intensive growth

Current products New products

Market penetration strategy Product development strategy

Market development strategy Diversification strategy  I

ntegrativ
e growth

Backward integration ------- clubbing with manufacturers of raw material ex- automobile industries

Forward integration ------- manufacturer ----- supplier ------ dealer

Horizontal integration ------- developing more and more competitors in the same industries

 Diversification growth

Concentric diversification strategy ---- technological or marketing synergies with existing product line
Ex : VCD player – DVD player

Horizontal diversification -- new products to its current customers through technologically unrelated to
its current product line.
Ex : microwave oven

Conglomerate diversification --- developing entirely new businesses

Ex : ITC Group , Medimix , wipro

III BUSINESS STRATEGIC PLANNING

It involves eight steps.

1.Business Mission
2.External Environment Analysis ( Opportunity / Threat )

3. Internal Environment Analysis ( Strength / Weakness )

4.Goal Formulation

5.Strategy Formulation

6.Program Formulation

7.Implementation

8.Feedback And Control.

 Business mission :

It must define its various scopes more specifically its products, applications, competencies, market
segments, vertical positioning and geography.

 External Environment Analysis ( Opportunity / Threat )

macro environment
1.demographic
2.economic
3.technological
4.political / legal
5.social / cultural

micro environment

1.customers
2.compettors
3.distribution channels
4.suppliers

opportunity :

A marketing opportunity is an area of need in which a company can perform profitably.

The best performing company will be the one that can generate the greatest customer value and sustain it
over time

It can be measured by the business strengths and key success requirements.

Threats :

An environmental threat is a challenge posed by an unfavorable trend or development that would lead ,
in the absence of defensive marketing action to sales or profit deterioration.

It should be classified in terms of the seriousness and probability of occurrence

Ideal Business ------ major opportunity / high , major threat / low

Speculative Business ------ major opportunity / high , major threat / high

Mature Business ---- major opportunity / low , major threat / low

Troubled Business ------ major opportunity / low , major threat / high

 Internal Environment Analysis:

Each business needs to evaluate its strengths and weaknesses periodically. This can be done by a
consultant.

It can be divided into major strength / minor strength / neutral factor / minor weakness / major weakness

 Goal formulation :

After defining the mission and analyzing both the environments the next stage is called goal formulation.

The business may have mix of objectives including profitability / sales growth / market share
improvement / risk containment /innovativeness / reputation.

The objective should be hierarchical ( most to least ), quantitative ( ROI ), realistic , and consistent
( increase sales and profits )

 Strategy Formulation :

Goals indicate what a business unit wants to achieve . Strategy answers how to get there.

Micheal porter considered three types of strategies the companies can go for

Overall Cost Leadership Differentiation Focus

The business works hard to It can strive to be the service Here the business focuses on
achieve lowest production and leader, quality leader, style one or more narrow market
distribution costs. So that it can leader, technology leader. If it is segments rather than going after
price lesser than its competitors quality leader he has to buy quality a larger market.(niche market ).
and win a largest market share. components and inspect it.

 Program Formulation :

Once the business unit has developed its principal strategies, it must workout supporting programs.
( strengthen its R&D department , gather technology intelligence, develop and communicate technological
leadership.)

 Implementation :

According to Mckinsey 7 – S framework for strategy is.

1.Strategy

2.Struture Hard Ware

3.Systems

4.Style ---------------------------------------------- common way of behaving and thinking

5.Staff ----------------------------------------------- hire able people, train them well, assign them right jobs.
Soft Ware
6.Skills----------------------------------------------- skills needed to carry out the company’s strategy

7 Shareholders ------------------------------------ employees share the same guiding values and missions.

 Feed back and Control :

It is more important to do the right thing ( being effective ) than to do things right ( being efficient )

The key to organizational health is the organizations willingness to examine the changing environment
and to adopt appropriate new goals and behaviors.

Adaptable organizations continuously monitor the environment and attempt through flexible strategic
planning to maintain a viable fit with the evolving environment.

MARKETING PROCESS

What are the major steps in the marketing process?

  To understand the marketing process ,We must first look at the business process

 The task of any business is to deliver value to the market at a profit

 There are two views 1) business process and 2) value delivery process

 The firm proceeds to make something and then to see it.

Ex : Thomas Edison invented the phonograph and then hires sales people to sell it.

 The mass market is spitted into many micro markets each with its own wants, perceptions,
preferences and buying criteria.

 The smart competitor design the offer for well defined target markets.

 Business process consists of choosing the value, providing value and communicating the
value.

1.Choosing the value - represents that marketing must carry out before any product exists.

I.e.: segment the market, select the market target , develop the offers value positioning ( segmentation,
targeting , positioning ( STP) is the essence of strategic marketing

2.Provide the value - the tangible product and service must be specified and the product must be made
and distributed ( these are all the part of tactical marketing.)

3.Communicating the value - utilizing the sales force , sales promotion, advertising and other
promotional tasks too inform the market about the offer.

Steps followed for value creation and delivery process by Japanese.

 Zero customer feedback time – collecting feed back from customers for continuous improvement
 Zero product improvement time – implementing the ideas of customers and employees
 Zero purchasing time- supply product on time when ever it is required
 Zero setup time – manufacture products as soon as they ordered
 Zero defects – providing quality products

Definition :

The marketing process consists of analyzing marketing opportunities, researching and

selecting target markets, designing marketing strategies, planning marketing programmes
and organizing implementing and controlling the marketing effort.
1.Analyzing Marketing Opportunities:

 micro environment – suppliers, marketing intermediaries, customers, competitors and publics

 macro environment – demographic, economic, physical, technological, political and legal , social /
cultural analysis

2.Reserachimg And Selecting Target Markets And Positioning The Offer

 estimating the markets overall size

 growth

 profitability and risk

 market segmenting / evaluating / selecting the best market

3.Designing Marketing Strategies

 differentiating and positioning

4.Planning Marketing Programs

Marketing Strategy Must Be Transformed Into Marketing Programmes. It involves basic decisions on

o Marketing Expenditures
 o Marketing Mix
o Marketing Allocation

Marketing Expenditure

- establish marketing budget

- learn what the competitors budget to sales ratio

- have a goal of achieving a higher market share

Marketing Mix

It is the set of marketing tools that the firm uses to pursue its marketing objectives in he target market.

The tools are product, price, place, promotion

The company’s marketing mix at time ‘t’ for a particular product can be represented by ( p1,p2,p3,p4 )t.

One Can See That A Marketing Mix Is Selected From A Great Number Of Possibilities.

Marketing mix decisions must be made for both the distribution channels and the final consumers.

The company preparing an offer mix and utilizing a promotion mix to reach the distribution channels
and target consumers.

Offer mix Promotion Mix distribution channels target

customers

Company’s products sales promotion

Company’s services advertising
Company’s prices sales force
Public relations
Direct mail and telemarketing

Marketing mix
 Target market

All the marketing mix variables cannot be adjusted in the short run.

Marketing allocation

Allocate money to various products, channels, promotion media and sales areas.

To make these allocations , marketing managers use the notion of sales response functions.

The 4 P’s correspond to the customers 4 C’s

Product ------------------------------------- customers need and wants

Price ---------------------------------------- cost to the customer

Place ---------------------------------------- convenience

Promotion---------------------------------- communication

5.Organizing Implementing And Controlling The Marketing Effort

- marketing organizations are typically headed by a marketing vice president who performs two tasks.

 To co ordinate the work of all of the marketing personnel.

  To work closely with other functional vice presidents.

- three types of marketing controls can be a) annual plan control b) profitability control C)strategic
control

1.Annual Plan Control : it is the task of making sure that the company is achieving its sales profits and
other goals.

2.profitability control : it is the task of measuring actual profitability of products , customer groups,
trade channels and order sizes.

3.strategic control : it is the task of evaluating whether the company’s marketing strategy is still
appropriate to the market conditions.

ANALYSING MARKETING OPPORTUNITIES

Management devoted most of its attention to managing money, materials , men and machines.
Today the management has recognized the importance of the fifth resource information.

Information is required for three reasons.:

1.From Local To National To Global Marketing

2.From Buyer Needs To Buyer Wants

3.From Price To Non Price Competitions

concepts and components of marketing information system:

Every Firm Must Organize The Flow Of Marketing Information To Its Marketing Managers. So
The Firm Analyses The Managers Information Needs And Design The MIS.
Definition: “ A marketing information system ( MIS) consists of people, equipment and
procedures to gather, sort and analyze, evaluate and distribute needed, timely and accurate
information to marketing decision makers”

 The needed information is developed through internal company records, marketing

intelligence activities, marketing research and marketing decision support analysis.

I. Internal record system

It includes reports on orders, sales, prices, inventory levels, receivables, payables.

By analyzing this information, marketing managers can spot important opportunities and problems.
 a) The order to remittance cycle

- the heart of the internal record system is the order to remittance cycle.
- Sales representatives, dealers and customers dispatch orders to the firm.
- The order department prepares invoices and sends copies to various departments
- Out of stock items are back ordered
- Customers favor those firms that can deliver their goods on time.

b) Sales reporting systems

- Marketing managers need up to date reports of their current sales.

Ex :Consumer packaged goods items receive reports every two months. Auto
executives about ten days

- But they needed fast information.

c) Designing a user- oriented report system

The company’s marketing information should represent a cross between what managers think they need,
what managers really need and what is economically feasible.

II. Marketing intelligence system:

Internal record system supplies results data, the marketing intelligence system supplies
happening data.
Definition: “ A marketing intelligence system is a set of procedures and sources used by
managers to obtain their everyday information about pertinent developments in the marketing
environment “.

Marketing managers carry on marketing intelligence mostly on their own by reading books news
papers, trade publications, talking to customers, suppliers ,distributors and outsiders and other
managers with in the company.

STEPS TO IMPROVE THE QUALITY AND QUANTITY OF MARKETING INTELLIGENCE:

1. They train and motivate the sales people to spot and report new developments.

2.The company motivates distributors, retailers and other middlemen’s to pass along important
intelligence.

3.The Company purchases information from outside suppliers.

 4. Companies have established an internal marketing information center to collect and circulate
marketing intelligence.

III. Marketing research system:

Marketing research is the systematic design, collection analysis and reporting of data and findings
relevant to a specific marketing situation facing the company.

 Suppliers of marketing research:

A company can obtain marketing research in a number of ways.

- students or professor at a local college to design and carry out the project
- by hiring a marketing research firm
- own marketing research department
 The scope of marketing research :
Marketing researchers have steadily expanded their activities and techniques.

 The marketing research process:

Defining The Developing Collecting the Analyzing The Presenting The
Problem
5 steps. The Research information Information Findings
& Plan
Research
Objectives

Primary data
Data sources

Secondary data

observation
Research approaches focus groups

survey

experiment

questionnaire
 Research instrument

Mechanical instrument

Sampling unit
Sampling plan sample size

Sampling procedure

telephone
Contact methods E- mail
spersonal

CHARACTERISTICS OF GOOD MARKETING RESEARCH:

1.Scientific Method --- careful observation, formulation of hypothesis, prediction and testing

2. Research Creativity --- finding innovative ways to solve the problems.

3.Multiple Methods --- gathering information from multiple sources.

4.Interdependence Of Models And Data – the facts derive their meaning from models of the problem

5.Value And Cost Of Information – research cost should be quantifiable, the value will come only
through reliability and validity

6.Healthy Skepticism – assumptions made by managers about how the market works.

7. Ethical Marketing -- through marketing research companies learn more about consumers needs and
are able to supply more satisfying products and services.

IV. Marketing decision support system :

Definition: “ a coordinated collection of data systems, tools and techniques with supporting software
and hardware by which an organization gathers and interprets relevant information from business and
environment and turns it into a basis for marketing action “
 Marketing decision support system

Marketing Marketing
data evaluation and
decisions

ANALYZING THE MARKETING ENVIRONMENT

Major macro environment forces:

Companies and their suppliers, marketing intermediaries, customers, competitors and publics all operate
in a large macro environment of forces and trends that shapes opportunities and poses threats. These
forces are non controllables.

With in the rapidly changing global picture, the firm must monitor six major forces, namely
demographic, economic, natural, technological, political and cultural forces.

1.Demograpic Environment:

- the first environmental force to monitor is population because people make up markets.

- marketers are interested in the size, growth rate of population in different cities, regions and nations, age
distribution, educational level, house hold patterns, regional characteristics.

2.Econonomic Environment

Income Distribution - very low incomes / mostly low incomes / very low, very high incomes/ low
Medium high incomes / mostly medium incomes.

3.Natural Environment

marketers need to be aware of the threats and opportunities associated with four trends in the natural
environment.
- shortage of raw materials

-increased cost of energy ( solar, nuclear and wind )

-increased levels of pollution ( chemical and nuclear waste disposals )

- changing role of governments in environment protection.

4.Technological Environment:

- the most dramatic force shaping peoples lives is technology.

- every new technology is a force for creative destruction.

-the economy’s growth rate is affected by how many major new technologies are discovered.

- the marketers should watch the following trends in technology.

a. Accelerating pace of technological change

b. Unlimited innovational opportunities
c. Varying R & D budgets.
d. Increased regulation of technological change.

5. Political Environments

- marketing decisions are strongly affected by developments in the political environment.

- the environment is composed of laws, government agencies and pressure groups that influence an limit
various organizations and individuals in society.

What are the major political trend and their implications for marketing management ?

a) substantial amount of legislation regulating business.

Ex: Child Protection Act 1966

Banes sales of hazardous toys and articles.

b) Growth Of Public Interest Groups.

6. Cultural Environment:

the society that people grow up in shapes their basic beliefs, values and norms.

Some main cultural characteristics and trends of interest to marketers

a) core cultural values have high persistence

Ex: marriage is the core belief

b) each culture consists of sub cultures.

Students teenagers common beliefs and behaviors

c) secondary cultural values undergo shifts through time

- peoples views of themselves

-peoples views of others
- peoples views of organizations
-peoples views of society
- peoples vies of nature
- peoples views of the universe.

Unit - III

Product policies – consumer and industrial product decisions, branding , packaging and labeling

This unit deals with

1. What Is A Product ?
2. How Can A Company Build And Manage Its Product Mix And Product Lines ?
3. How Can A Company Make Better Brand Decisions?
4. How Can Packaging G And Labeling Be Used As A Marketing Tool?
What is a product ?

A product is anything that can be offered to a market for attention, acquisition, use or consumption that
might satisfy a want or need.

It includes physical goods ( automobiles and books), services ( haircuts),persons( Abdul Kalam, Man
Mohan Singh)places ( ooty, kodaikanal) organizations ( educational institutions, Cherian medical
foundation) and ideas ( traffic rules, safe driving, family planning )

Five levels of a product :-

1. core benefit – the fundamental service or benefit that the customer is really buying.

Ex : restaurants ( food , rest, sleep safety )- applicable to whole class.

2. generic products - the markets has to turn the core benefit into generic product.

Ex : toaster

3. expected product - a set of attributes and conditions that buyers normally expect and agree to
when they purchase this product.

Ex: hotel – he expects a clean bed, soap and towels, plumbing, fixtures, telephone, clothes closet,
harm environment.

4 augmented product :- the additional services and benefits that distinguish the company’s offer from
competitors offers.

Ex: in the same hotel providing a television set, shampoo, fresh flowers.

The competition essentially takes place at the product augmentation level.

The new competition is not between what companies produce in their factories but between what
they add to their factories, but between what they add to their factory output in the form of
packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing
and other things that people value.

Some things should be noted about product augmentation strategy.

First : each augmentation costs the company money. The marketer has to ask whether customers
will pay enough tom cover extra cost.

Second : augmented benefits soon become expected benefits so the competitor will have to search
for still further features and benefits to add to their offer.
Third : as companies raise the price of their augmented product, some competitors can revert to
offering a stripped down product at a much lower price.

5.potential product :- augmented product describes what is included in the product today the
potential product points to its possible evolution. Where companies search aggressively for new
ways to satisfy customers and distinguish their offer, that new ways not only satisfy them but also
delight them. Delighting is a matter of adding unexpected surprise to the offer.

Ex:f fruits, cds – new film

Providing balloons to Childs, daksina chitra,

Product hierarchy ( seven levels)

1.Need Family – the core need that under lies the product family Ex: security

2.Product Family – All The Product Classes That Can Satisfy A Core Need With Reasonable
Effectiveness Ex: Savings And Income.

3.Product Class : A Group Of Products With In The Product Family Recognized As Having A
Certain Functional Coherence Ex: Financial Instruments.

4. Product Line :- A Group Of Products With In A Product Class That Are Closely Related
 Because They Function In A Similar Manner Or Are Sold To The Same Customer Groups Or
Are Marketed Through The Same Types Of Outlets Or Fall With In A Given Price Ranges.

Ex: Life Insurance

5.Product Type: - those items with in a product line that share one of several possible forms of
the product Ex: term life

6.Brand : the name associated with one or more items in the product line that is used to identify
the source or character of items Ex: prudential

7.Item : a distinct unit within a brand or product line that is distinguishable by size , price
appearance or some other attribute the term is called stock keeping unit.

Ex : prudential renewable term life insurance

Product classification :

Based on the product classifications it is necessary to examine company decisions regarding the
1. product mix 2. product lines 3. individual products.

 Product mix decisions :

- A product mix ( also called product assortment ) is the set of all product lines and items that a
particular seller offers for sale to buyers.

-A company’s product mix will have certain width, length, depth and consistency.

- the width refers to how many product lines the company carries.

Ex: proctor and gamble

Detergents – ariel and tide

Hair care products – pantene shampoo

Health care products –

Personal – hygiene products

Beverages

Food

- the length refers to the total number of items in its product mix.
 - the depth refers to how many variants are offered in each product line.

- the consistency refers to how closely related the various product lines are in end use production
requirements, distribution channels and some other way.

So the company can expand its business through four ways, width, length, depth, consistency.

 Product line decisions

A product line is a group of products that are closely related because they perform a similar function are
sold to the same customer groups are marketed through the same channels or make up a particular price
range.

Ex: Dettol, Dettol Liquid soap, Dettol soap

Lakeme Cold Cream, Eyeliner Lipstick Facewash Scrubber

Ujala Liquid ,Detergent Powder

Himalaya Products

Each product line is managed by different executive.

Product Line Analysis

Product line managers need to know the sales and profits of each item in their line and how
their product line compares with competitors product lines.

a) product line sales and profits :

 b) product line market profile

the product line manager must also review how the product line is positioned against competitors
product lines.

- this is one use of mapping.

-another benefit of product mapping is that it identifies market segments.

Product line length

- if the line is too short the manager can increase profits by adding items if the line is too long the
manager can increase profits by dropping items. This decision will based on company objectives.

- if the company seeking high market share and market growth it will carry longer lines.

- but if the items are added several costs rise – design and engineering cost

- inventory carrying cost

 - manufacturing – change over costs

- order processing costs

- transportation costs

- new item, promotional costs

- the company can enlarge the length of its product line in two ways

down ward stretch

a) line stretching
b) line filling
up ward stretch

- line stretching – downward stretching – many companies locate at the upper end of the market and
subsequently their line downward

- a company might stretch downward for any of the following reasons

 the company is attacked by a competitor at the high end and

decides to counter attack by invading the competitors low
end.
 The company finds that slower growth is taking place at the
high end.
 The company initially entered the high end to establish a
quality image and intended to roll downward.
 The company adds a low end to plug a market hole that
would otherwise attract a new competitor.

Ex : super computer to mini computers

Upward stretch :

 Those who are attracted by a hi9gh growth rate and higher margins they may move toward the
high end but it is risky.

 If the brand loyal believes that the low end producers can deliver the high quality product they will
be attracted by the segment.

Two way stretch :

  If the company wants to serve the middle market segment they may choose this.

Ex : calculators not computers ( high end ------ not digital diary ( low end

Line filling decisions

A product line can be lengthened by adding more items with in the present range of line

Several motives for line filling

1.Reaching Foe Incremental Profits

2.to satisfy dealers who complain about lost sales because of missing items in the line
3.trying tio utilize excess capacity
4.trying to be the leading full line company

Line Modernization Decision

When product line length is adequate the line might need to be modernized

Ex : medimix , ponds

Line featuring decision

The product line manager typically selects one or few items in the line to feature

Some times the low end product perform well and the high end product will not do so . so the people
should involve in promoting the sales of the high end products.

Line pruning decision.

Product line managers must periodically review items for pruning.

There are two occasions for pruning

1.when the product line includes dad wood that is depressing profits.

2.The weak items can be identified through sales and cost analysis.

3.When the company is short of production capacity. The manager should concentrate on producing the
higher margin items.

New Product Development

Six categories of new products:

 1. New to the world products – new products that create an entirely new market
2. New product lines- new products that allow a company to enter an established market for the first
time.
3. Addition to existing product lines- new products that supplement a company’s established product
lines.
4. Improvements in revision top existing products- new products that provide improved performance
or greater perceived value and replace existing products.
5. Repositioning- existing products that are targeted to new markets or market segments.
6. Cost reductions- new products that provide similar performance at lower cost.

What are the main risks in developing new products ? why new product fails in the market ?

1.shortage of important new product ideas in certain areas.

2.fragmented markets – companies have to aim their new products at smaller market segments and this
means lower sales and profits for each product.
3.s
cial and governmental constraints : new products have to satisfy public criteria such as consumer safety
and ecological compatibility.

4.c
ostliness of the new product process : to finish with a good product the company has to face rising R&D ,
manufacturing and marketing costs.
1. capital shortage : some companies with good ideas cannot raise the funds needed to research
them.

6 faster development time many competitors are likely to get the same idea at the same time and
the victory often goes to the swiftest ( manufacturing design takes more cost ) “ achieving better
quality at a cheaper price at a faster speed than competitor “

Marketing Research An And Aid To Marketing, Marketing Research Process(Already Studied In Unit II )
Sales Forecasting Techniques.

 Demand Can Be Measured For Six Different Product Levels, Five Space levels and three time
levels.

Which market to measure ?

 Marketers talk about potential markets, available markets, served markets and penetrated markets.

 Market is the set of all actual and potential buyers of a product.

  Potential buyer would have three characteristics interest , income and access.

 The potential market is the set of consumers who profess a sufficient level of interest in a defined
market offer.

 Potential consumers must have enough income to afford the product.

 The available market is the set of consumers who have interest, income and access to particular
market offer.

 The served market ( target market ) is the part of the qualified available market the company
decides to pursue.

 The penetrated market is the set of consumers who have already bought the product.

The major concepts in demand measurement are market demand and company demand, market
forecast , market potential, company forecast and company potential.

1. Market Demand : market demand for a product is the total volume that would be bought by a
defined customer group in a defined geographical area in a defined time period in a defined
marketing environment under a defined marketing program.

2. Market Forecast : the market demand corresponding to the level of industry marketing
expenditure is called the market forecast.

3. Market Potential : the market forecast shows expected market demand not maximum market
demand.

Market potential is the limit approached by market demand as industry marketing expenditures approach
infinity for a given environment.

Market
Demand
in the
specific
period
 Industry marketing expenditures

4.Company Demand :

 Company demand is the company’s share of market demand.

 The company’s share of market demand depends on how its products, services, prices,
communications are perceived relative to the competitors.

5.Company Forecast :

The Company Sales Forecast Is The Expected Level Of Company Sales Based On A Chosen Marketing
Plan And An Assumed Marketing Environment.

 Sales quota : it is the sales goal set for a product line, company division or sales representative. It
is primarily a managerial device for defining and stimulating sales effort.

 Sales budget : it is a conservative estimate of the expected volume of sales and is used primarily
for making current purchasing, production and cash – flow decisions.

6.Company Potential:

company sales potential is the limit approached by company demand as company marketing effotrt
increases relative to competitors.

Estimating Current Demand:

1.Total Market Potential :

total market potential is the maximum amount pf sales that might be available to all the firms in an
industry during a given period. Under a given level of industry marketing effort and given environmental
conditions.

Q =nqp

Q – total market potential

n – number of buyers in the specific product.

q- quantity purchased by an average buyer

p - price of an average unit

2. Area Market Potential :

 company’s face the problem of selecting the best territory and allocating optimal budget.

 So they need to analyze the market potential of different cities, states and nations.

 Methods used for estimation a) market build up method b) multiple factor index method

 Market build up method : the methods calls for identifying all the potential buyers in each
market and estimating their potential purchases.

 Multiple factor index method:

Ex: drug manufacturer estimates the potential by the population size in the region, number of
physicians in that area. Per capita income of drug industry in the particular industry.

3. Estimating Industry Sales And Market Shares:

 Company’s need to know the actual industry sales taking place in its market. This means
identifying its competitors and estimating their sales.

 The industry’s trade association will often collect and publish total industry sales. They will
compare among themselves.
Ex: AIMA collect all leading B – Schools based on the rating they will come to know about the industry
and their position.

Estimating Future Demand :

All forecasts are built on one of the three information bases.

b) what people say – survey of buyers / sales people / outside experts

c) what people do – putting the product in to test market and analyzing the response .

d) what people have done – analyzing the records of past buying behavior using time series
analysis.
1.Survey Of Buyers Intention:

collecting information from buyers about their opinion.

2. Composite Of Sales Force Opinion:

- the company will ask its sales representatives for estimates.

- some times they may be optimistic or pessimistic.

- by providing incentives to the sales people will motivate them to come out with the clear picture for
future development.

3. Expert Opinion:

- companies can also obtain forecasts from experts.

- experts ( dealers , distributors , suppliers, marketing consultants and trade associations.)

- the experts exchange views and produce a group estimate ( group discussion methods )

- the supply estimates individually , the analyst t combines and come out with a single estimate ( pooling
of individual estimate )

- the individual estimates are reviewed, revised and followed by further rounds of estimating ( delphi
method )

4. Market Test Method :

A direct market test is desirable for forecasting new product.

5. Time Series Analysis:

- many firms prepare their forecasts on the basis of past sales.

- past sales are analyzed into four major components

1. Trend ( T )

2. Cycle ( C )
 3. Season ( S )

4. Erratic Events ( E )

Trend : Is the result of basic developments in population, capital formation and technology.

Cycle : Many sales are affected by swings in general economic activity.

Season : consistent pattern of sales movement with in a year ( hourly / weekly / monthly / quarterly

pattern – seasonal )

6. Statistical Demand Analysis:

numerous real factors affect the sales of any product statistical demand analysis is a set if statistical
procedures designed to discover the most important real factors affecting sales and their relative influence

most of the factors are price, income, population and promotion.

Q = f ( X1 , X2 , X3-----------------------------------, Xn )

Market segmentation

 Marketer can not serve all the customers in that market. Because they are dispersed and vary in
their requirements

 The heart of strategic marketing can be described as STP marketing.( segmenting, targeting,
positioning )

 Sellers have not always view this marketing strategies they pass through three stages.

1.mass marketing Ex: coco cola mass production

mass distribution

mass promotion
 2.product variety marketing different features

Ex: noodles, icecream

styles

qualities

sizes

3. target marketing - marketing tailored to the particular segment

Ex: platinum

 In today target marketing helps sellers identify marketing opportunities better.

 Target marketing involves three steps.

1. market segmentation – identifying / profiling distinct group of buyers.

2. market targeting - selecting one or more segments to enter
3. market positioning – establishing and communicating the products

Market Segmentation :

 market consists of buyer but they differ in their wants, purchasing power, geographical
location, buying attitude, buying practice.

 Some manufacturers concentrate on limited product and limited customer group. This kind
of segmentation is called customized marketing. This is not profitable. So they classified
based on the individual requirements and market responses.

 Market segments are large identifiable groups ( car buyers)

 Niche is a more narrowly defined group that may seek a special combination of benefits.
  Short Note About Niche Market

The customers in the niche have a distinct and somewhat complex set of needs

They will pay a premium to the firm best satisfying their needs

The niche marketer would need to specialize its operations to be successful.

The niche leader is not easily attacked by other competitors .Ex: aircraft

Patterns Of Market Segmentation :

1.Homogeneous Preferences

The Market Where All The Consumers Have Roughly The Same Preference.
2. Diffused Preferences

The Consumer Preference May Be Scattered Through Out The Space

3. Clustered Preferences

The Market Might Reveal Distinct Preference Clusters Called Natural Market Segments.

Market Segmentation Procedure :

1. Survey Stage : The Researcher Conducts Exploratory Interviews To Gain Insight In To Consumer
Motivations Attitudes And Behavior.

Using these findings the researcher prepares a formal questionnaire to collect data on

 Attributes and their important rating

 Brand awareness and brand ratings
 Product usage pattern
 Attitude toward the product category
 Demographics, psychographics and media graphics of the respondents.

2. Analysis Stage : The Researcher Applies Factor Analysis To The Data To Remove Highly Correlated
Variables. Then The Researcher Applies Cluster Analysis To Create A Specified Number Of
Maximally Different Segments.

3. Profiling Stage : each cluster is now profiled in terms of its attitudes, behavior, demographics,
psychographics and media- consumption habits.

Bases For Segmenting Consumer Markets

The Bases Based On Two Characteristics

1) Consumer Characteristics
2) Consumer Response

The major variables are

1.Geographic - region , city or metro size, density , climate

2. Demographic – age , gender, family size, family life cycle, income, occupation, education, religion,
race ( white , black, Asian), nationality

3. Psychographics - social class ( lower / middle / upper / working class) , lifestyle ( dressing ),
personality

4. Behavioral – occasions, benefits, user status, usage rate, loyalty status, readiness stage, attitude towards
product.

Requirements For Effective Segmentation

 Measurable

 Substantial ( profitable enough to serve)

 Accessible ( the segments can be effectively reached and served )

 Differentiable ( women – married -unmarried )

 Actionable ( effective program can be formulated to attract and serve the segment)

MARKET TARGETING

To evaluate the various segments and decide how many and which one is to target is called market
targeting

To evaluate the market segments the firm looks for three factors

1. Segment size and growth

2. Segment structural attractiveness
3. Company objectives and resources.
  Segment size and growth

1. First check whether the segment has the right size and growth characteristics
2. Large companies prefer large sales volumes and they avoid small segments and they prefer to
enter in to the growing segments.

 Segment structural attractiveness

The company may have desirable size and growth but lack profit potential. So the company has appraise
the impact on long run profitability of five groups.

1. industry competitors
2. potential entrants
3. substitutes
4. buyers
5. suppliers
Five Forces Determining The Segment Structural Attractiveness

1.Threat Of Industry Competitor

-contains numerous , strong, aggressive competitors

- competitors have high stakes in staying in the segment
- this conditions leads to price wars, advertising battle, new product
introductions to compete
- un attractive segment

2. Threat Of New Entrants

- un attractive segment
- they have high barriers to enter
- a segment attractiveness varies with the height of the entry and exit
barriers
3. Threat Of Substitute Products

- a segment is unattractive when there are actual or potential substitutes

for the products.
- It places a limit on the potential prices and profits.
- If technology advances or competition increases the prices may fall

4. Threat Of Bargaining Power Of Buyers

- if the buyers possess a strong bargaining power the segment will

become unattractive
- buyers force prices down demand more quality and service and place
competitors against each other.
- So sellers might select buyers who possesses the least power to
negotiate or switch suppliers.

5. Threat Of Bargaining Power Of Suppliers:

if the companies suppliers are able to raise prices or reduce quantity. The segment will become un
attractive.
Potential entrants

Industry competitors

Suppliers buyers

substitutes
  Company objectives and resources

Even if a segment is large, growing and structurally attractive the company needs to consider its own
objectives and resources in relation to that segment. Some attractive segments could be dismissed because
they do not mesh with the company’s long-term objectives. Even if the company possesses the requisite
competencies, it needs to develop some superior advantages it should enter only market segments where it
can offer superior value.

SELECTING THE MARKET SEGMENT

Now the company must decide which and how many segments to serve. That is the problem of target
market selection.

1.single segment concentration :

- the companies select a single segment ( small car segment ()

- through concentrated marketing they achieve a strong market position
and enjoys the operating economies.
- If they suddenly stop buying small car the business will be affected.
2. selective specialization :

- the firm selects a number of segments. They may be small

- the strategy of multi segment coverage has the advantage of
diversifying the firms risk.
- If one segment becomes an un attractive they can continue to earn
- money in other segments.

3. product specialization

- firm concentrates on making a certain product that it sells to several

segments
- EX: TNPL copier to school colleges universities
- The firm produces strong reputation in the specific area.

4. market specialization

- the firm concentrates on serving many needs to a particular customer

group
- EX: Johnson and Johnson
5. full market coverage :

- a firm attempts to serve all customer groups with a ll products that

they might need.
- Large firms only can undertake
- EX: IBM ( computer market)
General motors ( vehicle market )
Coco cola ( drinker market )

Large firms can cover the whole market by two ways 1.un differentiated marketing 2. differentiated
marketing

Un differentiated marketing Differentiated marketing

- it focus on what is common in the needs of the - the firm operates in several market segments and
buyer rather than on what is different designs different programmes for each segment.

- it designs a product and a marketing program that Ex: GM

will appeal to the broad number of buyers ( mass
distribution, mass advertising ) The following costs are higher in the case of
differentiated marketing
EX: coco cola 1. product modification cost
2. manufacturing cost
3. administrative cost
4. inventory cost
 5. promotion cost

Additional consideration in evaluating and selecting segments

1. Ethical choice of market targets

2. Segment interrelation ships and super segments
3. Segment by segment invasion plans.

DIFFERENTIATING AND POSITIONING THE MARKETING OFFER

Suppose a company has researched and selected the target market. If the target market is charging higher
price. The competitors may enter and bring the prices down. Customer will favor lesser price product only
so the company has to think about differentiating the marketing offer.

Three strategies that lead to successful differentiation and market leadership

1.operational excellence - reliable product and service - on time –competitive price Ex: vasanth &co

2. customer intimacy- maintaining intimate relationship with customers and providing needed product
Ex : SBI,ICICI

3. product leadership- offering customers innovative products Ex: nokia

Tools For Competitive Differentiation:

To develop its marketing strategy a company must ask in what specific ways can it obtain a competitive
advantage.

Industry types

Fragmented Specialization
many

opportunity & gain

few
Stalemate volume
 Small large

A company or market offer can be differentiated along four basic dimensions

2. Product
3. Services
4. Personnel Or Image

2. Product Differentiation :

 The physical product differentiation, the main product differentiators are features,
performance, conformance, durability, reliability, repair ability, style, design.

Features - camera , watch , automobile , cycles

Performance - the levels at which the products primary characteristics operate.

Conformance – the degree to which a products design and operating characteristics come
close to the target standard.

Reliability - is a measure of the probability that a product will not mal function or fail
with in a specified time period.

Repair ability – is a measure of the ease of fixing a product that malfunction or fails.

Style – style describes how well the product looks and feels to the buyer. Ex: hero
Honda -Pleasure

Design - well designed product would be pleasant to look at, easy to open, install, learn
how to use repair and dispose of.

3. Services Differentiation :

 The service differentiations are delivery, installation, customer training, consulting service, repair
and a few others.
 Delivery - how well the product or service is delivered to the customer ( speed , accuracy, care
attending delivery )

Installation – it is the work done to make a product operational in its planned location.

Customer training - it refers to training the customers employees to use the vendors equipment
properly and efficiently.

Consulting service - it refers to data, information system and advising services that the seller
offers free or for a price to buyers.

Repair – the quality of repair service available to buyers of the company’s product.

Miscellaneous services - Product Warranty ,patronage awards Ex: frequent flyers – discount/ free
FB – customers – star hotel

3.Personnel Differentiation

 Companies can gain a strong competitive advantage through hiring and training better people than
their competitor.

Ex: Singapore airlines enjoys an excellent reputation in large part because of the beauty and grace
of their flight attendants.

Better trained personnel exhibit six characteristics.

i. Competence - required skills and knowledge

ii. Courtesy – employees are friendly, respectful and considerate
iii. Credibility - employees are trust worthy
iv. Reliability – employees perform their service with consistency and accuracy
v. Responsiveness – employees respond quickly to customers request and problems
vi. Communication – they understand customers and communicate clearly

4. Image Differentiation:
  Even when competing offers look the same buyers may respond differently to the company brand
and image

Identity Vs image - identity - name , logo symbols , atmospheres and events . this way creates
brand image .

- identity is the ways that a company aims to identify itself to its

publics.

- image is the way the public perceives the company.

Symbols - a strong image consists of one or more symbols that trigger

company or brand recognition and to symbolize the quality of
the organization.

Written And Audio Visual Media - the chosen symbols must be worked into advertisements that
convey the company or brand personality. The ads should
convey a story line, a mood , a performance level – something
distinctive.

Atmosphere - the physical space in which the organization produces or

delivers its product and services becomes another powerful
image generator.( building design / interior design, layout,
colors, materials, furnishings )

Events - a company can build an identity through the type of events it

sponsors.

Developing A Positioning Strategy

Not all brand differences are meaningful or worthwhile. Not every difference is a differentiate. Each
difference has the potential to create company costs as well as customer benefits.

So the difference should satisfy the following criteria.

1. Important - the difference delivers a highly valued benefit to a sufficient number of

buyers.
2. Distinctive - the offer should be in a more distinctive way than other company.
 3. Superior - the benefit should be superior to other ways to obtain the same benefit.
4. Communicable - the difference is communicable & visible to the buyers.
5. Preemptive - the difference cannot be easily copied by competitors.
6. Affordable - the buyer can afford to pay for the difference
7. Profitable - it should be profitable to the company to introduce the difference.

Differentiation is the act of designing a set of meaningful differences to distinguish the company’s offer
from competitors offers.

Positioning is the act of designing the company’s offer and images so that it occupies a distinct and
valued place in the target customers mind.

How many differences to promote?

Major one differences to promote are best quality, best service, lower price, best value., most advanced
technology.

A company must avoid four major positioning errors are :

1.Under Positioning - Some Companies Discover That Buyers Have Only A Vague Idea Of The
Brand They Don’t Sense Really About That.
2.Over Positioning - Buyers May Have Too Narrow On Image Of The Brand ( Ex: People May
Think that Diamond Cost Starts From Rs.5000 But It Is Available For Rs 900
Also )
3.Confused Positioning – Buyers Might Have A Confused Image Of The Brand Resulting From Making
Too Many Claims.
4.Doubtful Positioning - Buyers May Find It Hard To Believe The Brand Claims In View Of The
Product Features Price Or Manufacturer.

In searching for a positioning seven positioning strategies are available

1. Attribute Positioning - Disney world is the largest theme park in the world. Largest
represent the product feature that implies the benefit.
2. Benefit Positioning - Spencer plaza – best place to get all the product – representing the
benefits.
3. Use / Application Positioning –the tourist who want an limited hour for entertainment and
purchase .Ex: Japan
 4. User Positioning - Abirami mall, snow world can define it self through user category.
5. Competitor Positioning - saravana stores contains more variety of products than the
competitor.
6. Product Category Positioning - ITC not only cigarette, different products and different business
positioning.
7. Quality / Price Positioning - can position it seklf as the best value for money Ex: US
education

Communicating The Company’s Positioning :

The company must not only develop a clear positioning strategy, but it must also choose and
communicate the positioning strategy.

Ex: best in quality positioning.

UNIT –IV

BUYER BEHAVIOUR

The aim of marketing is to meet and satisfy target customers needs and wants.

So the marketers must study their target customers wants , perceptions, preferences and shopping and
buying behaviors. This will provide clues for developing new products, product features, prices,
channels , messages and other marketing mix elements.
A model of consumer behavior :

1. who constitutes the market ?

Occupants ( one who occupies a particular place )

2. what does the market buy?

Objects.

3. why does the market buy?

Objectives

4. who participates in the buying ?

organizations

5. how does the market buy ?

operations

6. when does the market buy?

Occasions

7. where does the market buy ?

outlets ( an agency through which a product is marketed )

How Do The Buyers Characteristics ( Cultural (Family ) , Social ( Status ) , Personal ( Age ) And
Psychological ) Influence Buying Behavior ?

Major factors influencing buying behavior

1.cultural factors : ( culture , sub culture and social class )

 culture : culture is the most fundamental determinants of a persons wants and behavior.

The growing child acquires a set of values , perceptions, preferences and behaviors through
his or her family and other key institutions.
  Sub culture : each culture consists of smaller sub cultures that provide more specific
identification and socialization for its members.

Sub cultures include nationalities , religions, racial groups and geographical regions.

Ex : Indian clothing

 Social class: all human societies exhibit social stratification.

Ex: caste system ( each caste involved in a particular work )

Social classes are relatively homogeneous and enduring divisions in a society, which are
hierarchically ordered and whose members share similar values , interests and behaviors

social classes have several characteristics.

First persons with in each social class tend to

behave more a like than persons from two different social classes.

Second persons are perceived as occupying inferior or superior positions according to their
social class.

Third a persons social class is indicated by a number of variables such as occupation,

income, wealth , education and value orientation rather than by any single variable.

Fourth – individuals can move from one social class tpo another up or down during their
life time.

2.Social Factors ( reference groups , family and social roles / status.)

 Reference groups :
- many groups influence a persons behavior.

- a persons reference groups consist of all the groups that have a direct ( face to face ) or
indirect influence on the persons attitudes or behaviour

- groups having a direct influence on a person are called membership groups.

- primary groups such as family, friends , neighbors and co workers with which the person
interacts fairly and continuously.
 - secondary groups – religious , professional and trade union groups.

- groups to which person would like to belong are called aspirational groups.

Ex: Basket ball team

- a dissociative group is one whose values or behavior an individual rejects.

 Family: family

The family of orientation family of procreation

Consist of ones parents consist of spouse and children

From them they will get orientation it may be influenced by husband , wife or children
towards religion, politics, self worth
and love

 roles / status : a person participates in many groups ( family ,clubs , organizations )

- the persons position in each group can be defined in terms of role and status

- role consist of the activities that a person is expected to perform

- each role carries a status. The teacher is having more status than the clerk.

3. personal factors : ( buyers age, life cycle stage, occupation, economic circumstances,

lifestyle, personality and self concept )

 age and life cycle stage :

- people buy different goods an d services over their lifetime.

Early year ( baby food ) growing stage ( nutrition’s ) matured stage ( special diet )

- consumption is also shaped by the stage of the family life cycle. ( 9 stages )

2. bachelor stage
3. newly married couples
4. full nest one ( child under 6 )
5. full nest two ( 6 and above )
6. full nest three ( older married couples with dependent children )
7. empty nest one – older married couples, no children living with them .
8. empty nest two – older married, head retired, no children living at home.
9. solitary survivor in labor force ( income is good )
10. solitary survivor , retired ( special need for attention, affection and security.)

 occupation :

a persons occupation also influences his or her consumption pattern.

- blue color need varies.

- White color need varies

 Economic circumstances :

Product choice is greatly affected by ones economic circumstances.

Peoples economic circumstances consists of their spend able income , savings and assets, debts ,
borrowing power , attitude toward spending versus saving.

 Life style:

A persons lifestyle is the persons pattern of living in the world as expressed in the persons activities.,
interests and opinions.

That is how he is interacting with his environment.

 Personality and self concept :

Personality is the persons distinguishing psychological characteristics that lead to relatively consistent and
enduring response to his or her environment.
Personality is described in terms of self confidence, dominance , autonomy, deference, sociability,
defensiveness and adaptability.

Personality is related to self concept ( that is how one individual views himself or herself.)

5. psychological factors : ( motivation, perceptions , learning , beliefs and attitudes )

 motivation :

- maslow’s theory of motivation

- hers bergs two factor theory

 perception :

- a motivated person is ready to act

- how the motivated person actually acts is influence by his perception of
the situation.
- Why do people perceive the same situation differently ?
- Perception is defined as “ the process by which an individual selects ,
organizes and interprets information inputs to create a meaningful
picture “ of the world
- People can emerge with different perceptions of the same object
because of three perceptual processes.
- 1) selective attention
- 2) selective distortion
- 3) selective retention

 selective attention: people are exposed to a tremendous

amount of daily stimuli.
Ex : peoples are exposed to 1500 and above ads a day which
stimuli the person will notice is important.

Some findings are :

People are likely to notice stimuli that relate to a current need.

Ex : functions – ad for TV with gold coin often.

Peoples are more likely to notice stimuli that they anticipate.

( expect )
 Ex : TV + CD player - 15000 / each separately 20000

People are likely to notice stimuli whose deviations are large in

relation to the normal size of the stimuli.

Ex : getting 1000 Rs product for Rs 500

 selective distortion : it describes the tendency of people to

twist information into personal meanings.

People interpret information in a way that will support rather

than challenge their pre conceptions.

 Selective retention: selective retention is likely to

remember good points mentioned in the stimuli or ad

 Learning : learning describes changes in an individuals behavior arising from experience.

- The learning is produced through

a) drives --- strong internal stimulus impelling active
b) stimuli --- when it is directed toward a particular drive
c) cues--- it determines when, where and how the person responds.
d) Responses
e) Reinforcement

 Beliefs and attitudes :

A belief is a descriptive thought that a person holds about something

An attitude describes a persons enduring favorable or unfavorable cognitive evaluations, emotional

feelings and action tendencies toward some object or idea.

The Buying Decision Process :

Buying roles : for many products it is easy to identify the buyer.

Ex : sarees – women suits – men

There are five roles people might play in a buying decision process

1. initiator : a person who first suggest the idea of buying a product.

2. influencer: a person whose advice influence the decision
3. decider :a person who decides on whether to buy, what to buy, how to buy, where to buy.
4. buyer : the person who makes the actual purchase
5. user : a person who uses the product.

Types of buying behavior :

1. Complex Buying Behavior : consumers are highly involved when the product is expensive, bought
infrequently, risky. In that the marketers needs to differentiate the brands features, brand benefits and
motivates the people to buy the product.

2. Dissonance - Reducing Buying Behavior

some times the consumer is highly involved in a purchase but sees little difference in the brands. So the
marketer should aim to supply beliefs and evaluation that help the consumer feel good about his brand
choice.

3. Habitual Buying Behavior :

they are all brand loyal customers.

4.Variety Seeking Buying Behavior

here consumers are often observed to do a lot of brand switching. The marketer has to avoid the out of
stock conditions in this stages.

Stages In The Buying Decision Process

The consumer passes through five stages.

1. problem recognition
2. information search

3. evaluation of alternatives
4. purchase decision
5. post purchase behavior
 Industrial Buyer Behavior

There are major difference between the behavior of consumers and behavior of institutions or industries.

s.n Consumer buyer behavior Industrial buyer behavior

o
1 Consumers seek need satisfaction in a highly
subjective manner and hence consumer purchases
are dominated by emotions and are not always
rational.
2 In individual buying behavior, we have no
formalities to be performed in the actual buying.
3. In the buying task , we have five different roles
played by user, purchaser, decider, influencer and
initiator. In consumer markets two or more of these
roles are often played by the same person and the
entire buying process involves a few persons.
Organizational behavior is more objective as the buying
behavior is influenced mainly by the multiple buying
goals and objectives of the origination. The personal
needs and goals play a secondary role in organizational
purchases.
In the organizational buying there is the influence of a
formal organization structure on the buying process.
In organizational buying these five roles are played by
several persons and the entire buying processes quite
elaborate it is socially more complex than personal
buying. In organizational buying users are different
from buyers and we have specialized advisors in
buying such as consultants or engineers and there may
be approvers like quality control experts in
organizational buying. We have multiple purchasing
influences.

The process of buying industrial goods involves

1. Determination Of Needs
2. Determination Of Quality
3. Determination Of Quantity
4. Quality Description ( Technical Specification )
5. Selection Of Suppliers
6. Analyzing Quotations
7. Order Placing
8. Order Processing Information Feedback On The Experience With The Goods Bought.