Marketing management

“Business is not financial science, it’s about trading, buying and selling. It’s about creating a product or service so good that people will pay for it.”

— Anta Roddick

“Marketing takes a day to learn. Unfortunately it takes time to master.”

— Philip Kotler

Marketing management is the process of developing strategies and planning for product or

services, advertising, promotions, sales to reach desired customer segment.

"Marketing management is 'the art and science of choosing target markets and getting,

keeping, and growing customers through creating, delivering, and communicating superior

customer value' (Kotler and Keller, 2008)."

1. Gathering and Analysing Market Information:

The marketing begins with the research conducted by the marketer. The marketer conducts research to find out the needs of the customers. Under it, an effort is made to understand the consumer thoroughly in the following

ways: He tries to understand what customer wants to buy, when they are likely to buy, in

what quantity they will buy, what price they will be able to pay, etc. On the basis of this research the product is designed. The marketer also conducts

research to find out for what purpose the customer is buying the product, whether the product is bought as a necessity or for style for example, any kind of shoes will be

preferred by the customer to protect his feet but a branded pair is preferred for style.

According to the research report the marketer designs the label, brand name, packing, etc.

The research of the product is also conducted to decide the various promotional techniques of media to popularize the product.

2. Market Planning:

After conducting marketing research, the marketer has to plan the steps necessary to achieve marketing objectives under market planning. They make plan to increase production, plan to increase sale, plan to use promotional tools etc.

3. Product Designing and Development:

Every marketer offers a product or service to the customer but what product or service has to be offered must be planned.

The planning part includes the decisions like what should be the quality standards used in product, what shape or design would be used, what type of packing, how many models, how it can be made better than the competitor’s product etc.

For taking all these decisions proper product planning is done by the marketer for example, if marketer is dealing with refrigerator then in product planning they decide the quality standard, size of refrigerators, colour, design, technology of refrigerator, etc.

4. Standardisation and Grading:

Standardisation means maintaining quality standards to achieve uniformity in the product.

Standardisation provides quality assurance and consistency to consumers. Grading means classifying the product on some bases. The bases of classification can be size, quality etc. Grading is necessary when companies are not following strictly the technique of

standardization. Through grading marketer can get higher price for quality product. Grading is

generally used in agricultural products for example, wheat, rice, pulses, etc.

5. Packaging and Labelling:

The product is always supplied to customer in the packed form. Packaging refers to designing of packets, wrappers, cartons, etc. which are used to

pack the product. Packaging plays an important role in selling as attractive packing induces the

customers to buy the product that is why packing is called Silent Salesman.

For example, the name of the medicine on its bottle along with the manufacturer’s name, the formula used for making the medicine, date of manufacturing, expiry date, batch no., price etc., are printed on the slip thereby giving all the information regarding the medicine to the consumer. The slip carrying all these is details called Label and the process of preparing it as Labelling.

6. Branding:

Branding means giving a special name to the product. Companies may decide to sell the product in company’s name or they may decide a

special brand name for their products. For example, Sony, BPL, etc. are using company’s name as brand names whereas

Ariel, Tide (Procter & Gamble) P&G etc. are special brand name selected by company. The brand name must be selected very carefully as the customer’s loyalty depends

upon the brand name.

7. Customer Support Services:

In present day business environment, customer is the king pin in the market. So customer satisfaction is the main moto of every businessman. So a very important function of marketing management, relates to developing

customer support service such as handling customer complaints, after sale services, maintenance services, consumer information, technical services, etc.

Customer will become your permanent customer only when he is satisfied with customer support services.

8. Pricing of Products:

Price means the money which a customer has to pay to buy a product or service. It is the most crucial element of marketing as customer is highly price sensitive; a

little variation in price may take your customer to competitor’s product. Marketer keeps in mind various factors such as objective of firm, demand

competition etc. The price of a product should be fixed in a manner that it should not appear to be too

high and at the same time it should earn enough profit for the organisation.

9. Promotion and Selling:

After production of goods the marketer needs to offer them to customers; for this he performs two basic functions i.e., promotion and selling.

Promotion includes all the activities which are undertaken to communicate with the customer and increase the sale.

For promotion marketer performs various functions such as advertising, sales promotion, personal selling, publicity, etc.

10. Physical Distribution:

Another important function of marketing manager is making plans regarding distribution of goods or services.

Physical distribution includes decisions like choice of channel of distribution, maintaining inventory, storage, warehouses, etc.

11. Transportation:

The goods are not necessarily consumed at the same place where these are produced.

There is a place gap between the production and consumption. To cover this place gap the marketer makes use of various modes of transport so that

goods can be transferred to different corners of the country. It is not only that finished goods need to be transported but raw materials and

various other inputs are also transported from their place of origin to their place of use.

The marketer compares various modes of transport on various criteria and selects the best and most suitable to transport raw materials, inputs and finished goods.

12. Storage and Warehousing:

The goods are not consumed immediately when they are produced. There is a time gap between the production and consumption. So it is necessary to keep the goods safe during this time gap as goods need to be

protected from moisture, insects, rodents, thefts etc. So marketers often maintain their own warehouses to store the products or they

make use of public warehouses to keep the goods safe and fresh till they are demanded in the market.

Marketing Management Philosophies

There are five marketing concepts. A company should choose the right one according to

their and their customers’ needs.

1. Production Concept

2. Product Concept

3. Selling Concept

4. Marketing Concept

5. Social Marketing Concept

1. Production Concept

This concept works on an assumption that consumers prefer a product which is inexpensive

and widely available. This view point was encapsulated in Says Law which states ‘Supply

creates its own demand’. Hence companies focus on producing more of the product and

making sure that it is available to the customer everywhere easily.

Increase in the production of the product makes the companies get advantage of

economies of scale. This decreased production cost makes the product inexpensive and

more attractive to the customer.

Low price may attract new customers, but focus is just on production and not on the

product quality. This may result in decrease in sales if the product is not up to the

standards.

This philosophy only works when the demand is more than the supply. Moreover, a customer not always prefers an inexpensive product over others. There are many other factors which influence his purchase decision.

Examples of Production Concept of Marketing Management Philosophies

Companies whose product market is spread all over the world may use this approach. Any other company whose product’s demand is more than its supply.

2. Product Concept

This concept works on an assumption that customers prefer products of ‘greater quality’

and ‘price and availability’ doesn’t influence their purchase decision. Hence company

devotes most of its time in developing a product of greater quality which usually turns out

to be expensive.

Since the main focus of the marketers is the product quality, they often lose or fail to

appeal to customers whose demands are driven by other factors like price, availability,

usability, etc.

Examples of Product Concept of Marketing Management Philosophies

Companies in the technology industry.

3. Selling Concept

Production and product concept both focus on production but selling concept focuses on

making an actual sale of the product. Selling Concept focuses on making every possible sale

of the product, regardless of the quality of the product or the need of the customer. The

main focus is to make money. This philosophy doesn’t include building relations with the

customers. Hence repeated sales are very less. Companies following this concept may even

try to deceive the customers to make them buy their product.

Companies which follow this philosophy have a short sighted approach as they ‘try to sell

what they make rather than what market wants’.

Examples of Selling Concept of Marketing Management Philosophies

Companies with short sighted profit goals. This often leads to marketing myopia.

4. Marketing Concept

Selling Concept cannot let a company last long in the market. It’s a consumers market after

all. To succeed in the 21st century, one has to produce a product to fulfil the needs of their

customers. Hence, emerged the marketing concept. This concept works on an assumption

that consumers buy products which fulfil their needs. Businesses following the marketing

concept conduct researches to know about customers’ needs and wants and come out with

products to fulfil the same better than the competitors. By doing so, the business makes a

relation with the customer and generate profits in the long run.

However this isn’t the only philosophy which should be followed. Many business still follow

other concepts and make profits. It totally depends on the demand and supply and the

needs of the parties involved.

Examples of Marketing Concept of Marketing Management Philosophies

Companies who want to stay in the market for long time.

5. Societal Marketing Concept

Adding to the marketing concept, this philosophy focuses on society’s well-being as well.

Business focus on how to fulfil the needs of the customer without effecting the

environment, natural resources and focusing on society’s wellbeing. This philosophy

believes that the business is a part of the society and hence should take part in social

services like elimination of poverty, illiteracy, and controlling explosive population growth

etc.

Many of the big companies have included corporate social responsibility as a part of their

marketing activities.

The marketing mix is the set of controllable tactical marketing tools – product, price, place, and promotion – that the firm blends to produce the response it wants in the target market.

Kotler and Armstrong (2010).

Price

Price is the amount the consumer must exchange to receive the offering.

Solomon et al (2009).

Place

Place includes company activities that make the product available to target consumers.

Kotler and Armstrong (2010).

Product

Product means the goods-and-services combination the company offers to the target market.

Kotler and Armstrong (2010)

Promotion

Promotion includes all of the activities marketers undertake to inform consumers about their products and to encourage potential customers to buy these products.

Solomon et al (2009) Marketing Mix – Product

1. A product is an item that is built or produced to satisfy the needs of a certain group

of people. The product can be intangible or tangible as it can be in the form of

services or goods.

2. You must ensure to have the right type of product that is in demand for your market.

So during the product development phase, the marketer must do an extensive

research on the life cycle of the product that they are creating.

3. A product has a certain life cycle that includes the growth phase, the maturity phase,

and the sales decline phase. It is important for marketers to reinvent their products

to stimulate more demand once it reaches the sales decline phase.

4. Marketers must also create the right product mix. It may be wise to expand your

current product mix by diversifying and increasing the depth of your product line.

In developing the right product, you have to answer the following questions:

What does the client want from the service or product?

How will the customer use it?

Where will the client use it?

What features must the product have to meet the client’s needs?

Are there any necessary features that you missed out?

Are you creating features that are not needed by the client?

What’s the name of the product?

Does it have a catchy name?

What are the sizes or colours available?

How is the product different from the products of your competitors?

What does the product look like?

Key Points

Branding: (ease in introduction of new product)

- Generic vs brand

- Brand name/legal patent/trademark (TM)

Packaging: (silent salesman)

- Primary

- Secondary

- Transportation

- Product promotion

- Product differentiation

- Innovation

Labelling

Marketing Mix – Price

The price of the product is basically the amount that a customer pays for to enjoy it. Price is

a very important component of the marketing mix definition.

It is also a very important component of a marketing plan as it determines your firm’s profit

and survival. Adjusting the price of the product has a big impact on the entire marketing

strategy as well as greatly affecting the sales and demand of the product.

Pricing always help to shape the perception of your product in consumers eyes. Always

remember that a low price usually means an inferior good in the consumer’s eyes as they

compare your good to a competitor.

Consequently, prices too high will make the costs outweigh the benefits in customers eyes,

and they will therefore value their money over your product. Be sure to examine

competitors pricing accordingly.

Key Points

Obtaining market shares

Survival in competitive market

Product quality leadership

Product cost

Utility inelastic

Here are some of the important questions that you should ask yourself when you are

setting the product price:

How much did it cost you to produce the product?

What is the customers’ perceived product value?

Do you think that the slight price decrease could significantly increase your market

share?

Can the current price of the product keep up with the price of the product’s

competitors?

Marketing Mix – Place

Placement or distribution is a very important part of the product mix definition. You have to position and distribute the product in a place that is accessible to potential buyers.

This comes with a deep understanding of your target market. Understand them inside out and you will discover the most efficient positioning and distribution channels that directly speak with your market.

Here are some of the questions that you should answer in developing your distribution strategy:

Where do your clients look for your service or product?

What kind of stores do potential clients go to? Do they shop in a mall, or online?

How do you access the different distribution channels?

How is your distribution strategy different from your competitors?

Do you need a strong sales force?

Do you need to attend trade fairs?

Do you need to sell in an online store?

Key points

Place

- Right place, right quantity, right time

- Channel of distribution

- Market factor

Size of order

- Product related factors

Perishable and non-perishable

To sell a machine

- Company characteristics

Financial strength

Degree of control

Marketing Mix – Promotion

Promotion is a very important component of marketing as it can boost brand recognition and sales. Promotion is comprised of various elements like:

Sales Organization

Public Relations

Advertising

Sales Promotion

Advertising typically covers communication methods that are paid for like television advertisements, radio commercials, print media, and internet advertisements. In contemporary times, there seems to be a shift in focus offline to the online world.

Public relations: This includes press releases, exhibitions, sponsorship deals, seminars, conferences, and events.

Word of mouth is also a type of product promotion. Word of mouth is an informal communication about the benefits of the product by satisfied customers and ordinary individuals. The sales staffs plays a very important role in public relations and word of mouth.

In creating an effective product promotion strategy, you need to answer the following questions:

How can you send marketing messages to your potential buyers?

When is the best time to promote your product?

Will you reach your potential audience and buyers through television ads?

Is it best to use the social media in promoting the product?

What is the promotion strategy of your competitors?

Your combination of promotional strategies and how you go about promotion will depend on your budget, the message you want to communicate, and the target market you have defined already.

Key Points

Public relation

Not direct advertisement

Sponsorship

Lobbying

What is the product life cycle?

The product life cycle is an important concept in marketing. It describes the stages a

product goes through from when it was first thought of until it finally is removed from the

market. Not all products reach this final stage. Some continue to grow and others rise and

fall.

What are the main stages of the product life cycle?

The main stages of the product life cycle are:

1. Introduction – researching, developing and then launching the product

2. Growth – when sales are increasing at their fastest rate

3. Maturity – sales are near their highest, but the rate of growth is slowing down or

constant, e.g. new competitors in market or saturation

4. Decline – final stage of the cycle, when sales begin to fall

This can be illustrated by looking at the sales during the time period of the product.

Product Life Cycle Examples

1. Introduction – 3D TVs

2. Growth – Blueray discs/DVR

3. Maturity – DVD

4. Decline – Video cassette

3D Televisions: 3D may have been around for a few decades, but only after

considerable investment from broadcasters and technology companies are 3D TVs

available for the home, providing a good example of a product that is in the

Introduction Stage.

Blue Ray Players: With advanced technology delivering the very best viewing

experience, Blue Ray equipment is currently enjoying the steady increase in sales

that’s typical of the Growth Stage.

DVD Players: Introduced a number of years ago, manufacturers that make DVDs, and

the equipment needed to play them, have established a strong market share.

However, they still have to deal with the challenges from other technologies that are

characteristic of the Maturity Stage.

Video Recorders: While it is still possible to purchase VCRs this is a product that is

definitely in the Decline Stage, as it’s become easier and cheaper for consumers to

switch to the other, more modern formats.

Extending the Product Life Cycle

What can businesses do to extend the product life cycle?

1. Extension strategies extend the life of the product before it goes into decline. Again

businesses use marketing techniques to improve sales. Examples of the techniques

are:

Advertising – try to gain a new audience or remind the current audience

Price reduction – more attractive to customers

Adding value – add new features to the current product, e.g. improving the

specifications on a Smartphone

Explore new markets – selling the product into new geographical areas or creating a

version targeted at different segments

New packaging – brightening up old packaging or subtle changes

PROBLEMS WITH THE PRODUCT LIFE CYCLE THEORY

While the product life cycle theory is widely accepted, it does have critics who say that the

theory has so many exceptions

There is no set amount of time that a product must stay in any stage; each product is

different and moves through the stages at different times. Also, the four stages are

not the same time period in length, which is often overlooked.

There is no real proof that all products must die. Some products have been seen to

go from maturity back to a period of rapid growth thanks to some improvement or

redesign. Some argue that by saying in advance that a product must reach the end of

life stage, it becomes a self-fulfilling prophecy that companies subscribe to. Critics say

that some businesses interpret the first downturn in sales to mean that a product has

reached decline and should be killed, thus terminating some still-viable products

prematurely.

The theory can lead to an over-emphasis on new product releases at the expense of

mature products, when in fact the greater profits could possibly be derived from the

mature product if a little work was done on revamping the product.

Market Research is a term that is used to refer to a process of gathering or collecting information about target audience or target market. The main role of the concept of market research is to provide a company or a business organization with an in-depth view of the customers or consumers in order to be able to satisfy their needs better. The process of market research is integral to be able to compete with other players in the same industry and helps to analyze things like market size, competition and market needs.

Market research makes use of analytical and statistical techniques and methods to gather and interpret information in an organized fashion. This process also involves opinion and social research and is important in today’s increasingly complex business environment.

Factors

Market research can be considered as a method of getting an idea of the needs of the customers, and some of the factors that can be investigated through this process are given as follows:

1. Trends in the market – Market trends or trends in the market are the movements of a market in a given period of time.

2. Segmentation of the market – This is the division of a market into subgroups with similar features. This is needed to create a distinction between demographics, choices, genders, and personalities, etc.

3. Information – Market information is the information about prices of different products available in the market.

4. SWOT analysis – This analysis is an analysis of the Strengths, weaknesses, opportunities and threats to a business or company.

5. Effectiveness of marketing – Marketing effectiveness takes into account risk analysis, product research, customer analysis, and competitor analysis, etc.

Benefits of market research

Tapping opportunities – One of the biggest benefits of conducting market research is that it enables you to find out the various market opportunities and makes it possible to tap into them effectively. For example, it may help you to find whether your product is suitable for the audience you have targeted or not, and if it isn’t, then market research helps to identify the suitable audience.

Encouraging communication – Market research helps you to find out the best way to communicate with your customers. After obtaining research results, one tends to know the audience nature, personalities, likes, dislikes, etc. and this makes it easier to connect with them and reach out to them. Minimize gap between consumer and producer (numerous middleman)

Minimization of the risks – Another major benefit of market research is that it helps businesses minimize risks by taking actions on certain subjects. For example, it may help to add certain qualities to products that may reach out to number of people, thus decreasing chances of the product going not used.

Establish trends and market standing – The market changes continuously and constantly. In such a scenario, only thorough market research can help to establish the ongoing trends and then formulate plans according to the current customer needs and requirements.

Find out possible problems – Since market research brings out the customer reactions, choices, and preferences, a business can alter the product while it is still in the manufacturing or designing process. It is easier to find problems and then work on them if one has research results in hand.

Types of Market Research Techniques

1. Primary Market Research:

Primary market research is a kind of market research which is done by the

business or company itself with the objective of gathering information that can

be used to improve the products, services, and functions.

Primary market research is also known as field research since it is research done

from scratch, without using any information that is already made available

through other sources.

One can gather primary data or information through qualitative research

methods as well as quantitative research methods. Primary market research is

the most common type of a market research method and is also the most

valuable type. It is a method that only answers specific questions and not

irrelevant issues.

2. Secondary market research:

As opposed to primary market research, secondary market research is a research

technique that does not aim to gather information from scratch but relies on

already available information from multiple sources.

This research focuses on data or information that was collected by other people

and is available for either free or paid use for others.

Secondary market research takes into account many different sources for

collection of information including government data, office data, newspapers,

magazines, the internet, etc.

One of the benefits of doing secondary market research is that it is mostly free

and takes a lot less time.

Objectives of Marketing Research:

Marketing research may be conducted for different purposes. The main objectives or purposes of marketing research are:

1. To estimate the potential market for a new product to be introduced in the market.

2. To know the reactions of the consumers to a product already existing in the market.

3. To find out the general market conditions and tendencies.

4. To know the reasons for failure of a product already in the market.

5. To find out the better methods of distributing the products to consumers.

6. To know the types of consumers buying a product and their buying motives to know their opinions about the product and to get their suggestion improvement of a product.

7. To assess the strength and weakness of the competitors.

8. To know the dimensions of the marketing problems.

Methods of Market Research:

Types of Market-Survey Techniques (Questionnaire)

Market surveys are a way in which companies obtain information about their customers and non-customer consumers or businesses, and how these customers or consumers view a company's products and services versus competitive products. Market surveys can be either qualitative or quantitative. Qualitative surveys are used for obtaining information on a small scale while quantitative surveys are more predictable across the general population. There are a number of market-survey techniques that companies can use to acquire valuable information on their customers.

Focus Groups

Focus groups are a qualitative market-survey technique. A company may interview customers from various demographic groups based on age, income or others. The objective of a focus group is to get a general idea as to how these people shop for certain products, and which products they like best. The company may then introduce several new concepts, such as food, and survey people's likes and dislikes about the product.

One-on-One Surveys

One-on-one market surveys, another qualitative market-survey technique, are typically used for introducing new products. For example, a company may observe a customer operating a new type of software. The interviewer would then ask the customer and others how they like the new software and whether or not they would purchase it.

Customer-Satisfaction Phone Surveys

Many surveys are conducted over the phone, such as customer-satisfaction surveys. Customer-satisfaction surveys measure satisfaction levels of customers with regard to the company's products, service, prices and other key attributes. These surveys are more quantitative in nature in that companies conduct hundreds of surveys so that they can determine where they have significant advantages or problems. Changes can then be made to correct these issues.

Mail-In Surveys

A company may use a mail-in survey to determine why some customers have stopped purchasing their products. Software companies sometimes use this quantitative market-survey technique. A small incentive may be provided to respondents to fill out the information. Mail-in surveys are often very informative because a person can write in additional comments.

Online Surveys

Online surveys often appear on company websites in the form of a pop-up. These market-survey techniques can be activated at any time to start collecting demographic information or virtually any information for which a company is searching. The survey can then be terminated once enough questionnaires are completed. Online surveys can be unpredictable at times because there is no control over the type of person who responds.

Other Surveys

Panel survey:

consumer panel (group of persons or families)

Diaries to each members: enter all their purchases of the commoditise being surveyed

Diaries examined periodically

Observation method

Observational marketing research is a qualitative method of collecting and analyzing information obtained through directly or indirectly watching and observing others in natural or planned environments.

Marketing research in India

Seller’s Market Lower middle class (rural marketing opportunities) Weak bargaining power (poor knowledge) Present scenario: Consumer oriented marketing companies (developing stage)

Advantages of Marketing Research:

1. Marketing research helps the management of a firm in planning by providing accurate and up- to-date information about the demands, their changing tastes, attitudes, preferences, buying

2. It helps the manufacturer to adjust his production according to the conditions of demand.

3. It helps to establish correlative relationship between the product brand and consumers’ needs and preferences.

4. It helps the manufacturer to secure economies in the distribution of his products.

5. It makes the marketing of goods efficient and economical by eliminating all type of wastage.

6. It helps the manufacturer and dealers to find out the best way of approaching the potential

7. It helps the manufacturer to find out the defects in the existing product and take the required corrective steps to improve the product.

8. It helps the manufacturer in finding out the effectiveness of the existing channels of distribution and in finding out the best way of distributing the goods to the ultimate consumers.

9. It guides the manufacturer in planning his advertising and sales promotion efforts.

10. It is helpful in assessing the effectiveness of advertising programmes.

11. It is helpful in evaluating the relative efficiency of the different advertising media.

12. It is helpful in evaluating selling methods.

13. It reveals the causes of consumer resistance.

14. It minimises the risks of uncertainties and helps in taking sound decisions.

15. It reveals the nature of demand for the firm’s product. That is, it indicates whether the demand for the product is constant or seasonal.

16. It is helpful in ascertaining the reputation of the firm and its products.

17. It helps the firm in determining the range within which its products are to be offered to the consumers. That is, it is helpful in determining the sizes, colours, designs, prices, etc., of the products of the firm.

18. It would help the management to know how patents, licensing agreements and other legal restrictions affect the manufacture and sale of the firm’s products.

19. It is helpful to the management in determining the actual prices and the price ranges.

20. It is helpful to the management in determining the discount rates.

21. It is helpful to the management in ascertaining the price elasticity for its products.

22. It helps the firm in knowing the marketing and pricing strategy of competitors.

23. It is helpful in knowing the general conditions prevailing in the mark

24. It is helpful to the management in finding out the size of the market for its products.

25. It helps the firm in knowing its market share over various time periods

26. It is quite helpful to a firm in launching a new product.

27. It helps the firm in knowing the transportation, storage and supply requirements of its products.

28. It helps the firm in exploring new uses for its existing products and thereby, increasing the demand for its products.

29. It is helpful to a firm in making sales forecasts for its products and thereby, establishing harmonious adjustment between demand and supply of its products.

30. It helps the firm in exploring new markets for its products.

Limitations of Marketing Research:

1. It is not a Panacea: (answer to all)

Marketing Research is not the ultimate solution to all marketing problems. Rather it offers accurate information, which can arrive at suitable decisions to solve problem.

2. Not an exact science: (No. of Assumption)

It deals with human behaviour and as such cannot be examined in a controlled environment. There are various and uncontrollable factors which influence marketing forces. This gives scope for wrong conclusions. Hence this leads to marketing research as not being an exact science.

3. Limitation of time:

Its process is lengthy and needs long time to complete it. During the period between starting the research and implementation of decisions, the situation and assumptions

may have changed drastically which reduces the utility of research report. Decisions based on such report prove to be obsolete and result in false conclusions.

4. Erroneous findings:

The complicated problems may not be comprehensively studied and their impact properly analysed by the researcher on account of insufficient fund, time and technique. This leads to erroneous findings, which disappoint the management.

5. Not an exact tool of forecasting:

It cannot be used as a foolproof tool of forecasting because there are number of intervening factors between the findings of the research and marketing complex. The forces act and react and interact to give a complex state, which is difficult to be studied.

6. In-experienced research staff:

It needs great expertise and well-trained and experienced researcher, interviewer and investigator.

7. Narrow Conception: (Validation)

Marketing research is a fact-finding exercise. It is of low and questionable validity.

8. Involves high cost:

It is considered as a luxury for the management as it involves high cost.

9. Limitations of tools and techniques:

The validity of marketing research is also limited by the limitation of tools and techniques involved.

10. It is passive:

Its use and effectiveness largely depends upon the ability of executives to get the most value of it.

Pricing of Products

Pricing means the process of selecting the pricing objectives, determining the possible

range of prices, developing price strategies, setting the final price, and implementing and

controlling pricing decision. The determination of price is very important and crucial

decision. It affects all parties involved in the production, distribution, and consumption of

goods. Price affects the volume of production and the amount of profit.

According to W.J.Stanon, “Pricing is the functions of determining the products value in

monetary terms.”

Importance of Pricing

1. Profit Margins

The price you set affects your profit margin per unit sold, with higher prices giving you a

higher profit per item if you don’t lose sales. However, higher prices that lead to lower sales

volumes can decrease.

2. Sales Volumes

One of the most obvious affects pricing will have on your business is an increase or

decrease in sales volume. Economists study price elasticity, or the response of consumer

purchasing to a price change.

Increasing your prices might lower your sales volume only slightly, helping you make up for

decreased volume with higher total profits generated by higher margins. Lowering your

prices can increase your profits if your sales jump significantly.

3. Position

The price you set sends a message to some consumers about your business, product or

service, creating a perceived value. This affects your brand, image or position in the

marketplace.

For example, higher prices tell some consumers that you have higher quality. Other

consumers look for low-priced products and services, believing they’ll get the quality they

need at a low price. Offering sales, discounts, rebates and closeouts can send the message

you can’t sell your products or services at your regular price, or tell buyers they have a

short-term opportunity to get a bargain.

Steps involved in price determination process

Some of the major steps involved in price determination process are as follows: (i) Market

Segmentation (ii) Estimate Demand (iii) The Market Share (iv) The Marketing Mix (v)

Estimate of Costs (vi) Pricing Policies (vii) Pricing Strategies (viii) The Price Structure.

(i) Market Segmentation: (division based on income, location....)

In market segments, marketers will have firm decisions on:

(a) The type of products to be produced or sold.

(b) The kind of service to be rendered.

(c) The costs of operations to be estimated.

(d) The types of customers or market segments sought.

(ii) Estimate Demand:

Marketers will estimate total demand for the product based on sales forecast, channel

opinions and degree of competition in the market. Prices of comparable rival products can

guide us in pricing our products. We can determine market potential by trying different

prices in different markets.

(iii) The Market Share:

Marketers will choose a brand image and the desired market share on the basis of

competitive reaction. Market planners must know exactly what his rivals are charging.

Level of competitive pricing enables the firm to price above, below or at par and such a

decision is easier in many cases.

Higher initial price may be preferred, in case of smaller market share is anticipated,

whereas, in the expectation of a much larger market share for the brand, marketer will

have to prefer relatively lower price.

Proper pricing strategy is evolved to reach the expected market share either through

skimming price or through penetration price or through a compromise, i.e., fair trading or

fair price- to cover cost of goods, operating expenses and normal profit margin.

(iv) The Marketing Mix: (4P)

The overall marketing strategy is based on an integrated approach to all the elements of

marketing mix.

It covers:

(a) Product-market strategy

(b) Promotion strategy

(c) Pricing Strategy

(d) Distribution Strategy

Marketers will have to assign an appropriate role to price as an element of marketing mix.

Promotional strategy will affect pricing decisions.

The design of marketing mix can indicate the role to be played by pricing in relation to

promotion and distribution policies. Price is critical strategic element of the marketing mix

as it influences the quality perception and enables product or brand positioning. Price is

also a good tactical variable. Changes in price can be made much faster than in any other

variable of marketing mix. Hence, price has a good tactical value.

(v) Estimate of Costs:

Straight, cost-plus pricing is not desirable always as it is not sensitive to demand. Marketing

must take into account all relevant costs as well as price elasticity of demand.

(Cost-plus pricing = Break-even price x profit margin goal)

(vi) Pricing Policies:

Pricing policies are guidelines to carry out pricing strategy. Pricing policy may be fixed or

flexible. Pricing policies must change and adopt themselves with the changing objectives

and changing environment.

(vii) Pricing Strategies:

Strategy is a plan of action to adjust with changing condition of the market place. New and

unanticipated developments such as price cut by rivals, government regulations, economic

recession, changes in consumer demand etc. may take place, and then changes all for

special attention and relevant adjustments in the pricing policies.

(viii) The Price Structure:

Developing the price structure on the basis of pricing policies and strategies is the final step

in price determination prices. The price structure will now define the selling prices for all

products and permissible discounts and allowances to be given to distributor’s co-dealers

as well as various types of buyers.

Factors influencing pricing decisions

a. Internal factors

1. Cost of production

2. Goals of the enterprise: (max. Sales revenue, increase market share, image,

stability)

3. Marketing mix

4. Product differentiation: (features)

5. Organisational factors:

Top level management- Price range of various products

Middle and lower level: price of individual product

b. External factors

1. Demand

2. Supply of raw materials

3. Government policy

4. Consumers buying behaviour

5. Economic condition of country

6. Competition

Channels of Distribution In case of large number of consumer products, the potential buyers are scattered

over a wide geographical area. In order to contact these people efficiently and effectively, it is important to take the help of number of intermediaries as contacting them directly may not be cost effective and may be difficult even otherwise.

For example, a manufacturer of detergent powder in Gujarat would find it very difficult to directly approach customers, say in Delhi, Thiruvananthapuram, Bhuvaneshwar, Hyderabad Srinagar and other far off places. Therefore, he/ she would supply a large quantity of his/her product to a big merchant, say in Hyderabad.

This big merchant would then supply detergent powder to relatively small sellers in various towns of Hyderabad.

These sellers would, in turn, resell the goods to customers.

In this manner, goods are distributed from the place of production to the place of consumption.

These people, institutions, merchants, and functionaries, who take part in the distribution function, are called ‘Channels of Distribution’.

The route taken by goods as they move from producer to consumer is known as

Channel of Distribution.

In other words, channel refers to a team of merchants, agents, and business institutions that combine physical movement and title movement of products to reach specific destinations.

Mostly goods and services are distributed through a network of marketing channels. For example we buy merchandise of our need such as salt, bulb, tea, sugar, soap, paper, books, flour, etc., from retail sellers.

The channels bring economy of effort.

Let us say you have to buy four things, viz., Sugar, Bulb, Coffee and Ink. Most probably you would walk into a General Merchant’s Shop and buy all the articles from one place.

Imagine what would happen if there were no middlemen or general merchants available. In that case you would have to buy directly from the manufacturers of these products.

You will have to make four contacts, each with the producer of Sugar, Bulb, Coffee and Ink.

Compared to this, there was only one contact when all the things were bought from the same general merchant.

Now let us assume that there are four customers needing the same four articles. In all sixteen contacts would have to be made. In case middleman are used, as shown in the part II of the figure, only eight contacts could be needed. Thus, use of middlemen brings economy of effort.

Apart from the economy of effort, middlemen help to cover large geographical area and bring efficiency in distribution, including transportation, storage and negotiation. They bring convenience to customers as they make various items available at one store and also serve as authentic source of market information as they are in direct contact with the customer.

Types of Channels A manufacturer may choose from direct distribution to indirect distribution and from a short channel consisting of few intermediaries to a long channel of distribution consisting

of large number of middlemen. Each form of channel network differs in number and type of middlemen involved. The major types of channels are as follows: Direct Channel (Zero Level) The most simple and the shortest mode of distribution is direct distribution, where in the goods are made directly available by the manufacturers to customers, without involving any intermediary. This is also called zero level channel. A straight and direct relationship is established between the manufacturer and the customer. For example, when a manufacturer sells his goods through his own retail outlets; it is referred to as direct channel. Similarly, mail order selling, internet selling and selling through own sales force, are example of direct selling or zero level channel. Producers sell their goods and services directly to the consumers. There is no middleman present between the producers and consumers. The producers may sell directly to consumers through door-to-door salesmen and

through their own retail stores. For example, Bata India Ltd, HPCL, Liberty Shoes Limited has their own retail shops to

sell their products to consumers. For certain service organizations consumers avail the service directly. Banks,

consultancy firms, telephone companies, passenger and freight transport services, etc. are examples of direct channel of distribution of service.

Indirect Channels When a manufacturer employs one or more intermediary to move goods from the point of production to the point of consumption, the distribution network is called indirect. This may take any of the following forms: 1. Manufacturer-Retailer-Consumer (One Level Channel): In this form of arrangement one intermediary i.e., retailers is used between the manufacturers and the customers. That is, goods pass from the manufacture to the retailers who, in turn, sell them to the final users. For example, Maruti Udyog sells its cars and vans through company approved retailers. This type of distribution network enables the manufacturers to cover wide area of market while retaining control over the Channels. When the retailers are big and buy in bulk but sell in smaller units, directly to the

consumers. Departmental stores and super bazars are examples of this channel. 2. Manufacturer-Wholesaler-Retailer-Consumer (Two Level Channel): This is the most commonly adopted distribution network for most consumer goods like soaps, oils, clothes, rice, sugar and pulses. Here the wholesaler and retailer function as connecting links between the manufacturer and consumer. Use of two middlemen in the channel network enables the manufacturer to cover a larger market area. 3. Manufacturer-Agent-Wholesaler- Retailer-Consumer (Three Level Channels): In this case, manufactures use their own selling agents or brokers who connect them with wholesalers and then the retailers. Thus, one more level is added to the levels discussed in the proceeding arrangement. It is done particularly when the manufacturer carries a limited product line and has to cover a wide market. An agent in each major area is appointed, who in turn contact the wholesalers. Textile mills have sales agents

4. Manufacturer- Wholesaler -Consumer (One Level Channel): By-pass retailer Industrial and institutional buyers Government

Role of Wholesaler in distribution

a. Services to the manufacturer or producer 1. Order collector: Retailers are usually scattered, their orders are small and they are too many in

number. The wholesaler acts as order collecting and marketing agency for the manufacturer. The manufacturer can, therefore concentrate on production and need not worry

about distribution 2. Risk Transfer and financial relief (manufacturer): A wholesaler usually places huge advance orders on the manufacturer. Thus, the

manufacturer is insured for sale or disposal. He need not carry large stocks and can concentrate fully on manufacturing goods as

per order of the wholesaler. The manufacturer is therefore free from bearing of risk of loss.

3. Expert advice: Wholesaler can secure first hand information of consumer’s wants through the

retailer’s order. The wholesaler’s order on yhe manufacturer can act as an indicator of trend of

demand.

b. Services to the retailers

1. No need to hold large stocks of varied goods and financial relief (retailers) Lack of space: Retailers Dearth of capital: retailers Wholesaler’s warehouse: constant source of supply

2. Prompt delivery of goods 3. Benefits of specification: A retailer carries varied stocks, therefore he cannot claim expert knowledge of

market conditions for each article. The wholesaler specializes in one line of goods and knows the pulse of the market. Wholesaler can advice the retailer (when to buy, how much to buy at a time, quality

of product)

4. Announcement of new products New arrival of new goods

5. Grant of credit Wholesaler grant credit to their permanent customers Monthly or quarterly credit to the retailers: to avoid inconvenience and waste of time

in case of frequent purchase

Functions of Wholesalers (a) Collection of goods: A wholesaler collects goods from manufacturers or producers in large quantities. (b) Storage of goods: A wholesaler collects the goods and stores them safely in warehouses, till they are sold out. Perishable goods like fruits, vegetables, etc. are stored in cold storage. (c) Distribution: A wholesaler sells goods to different retailers. In this way, he also performs the function of distribution. (d) Financing: The wholesaler provides financial support to producers and manufacturers by sending money in advance to them. He also sells goods to the retailer on credit. Thus, at both ends the wholesaler acts as a financier. (e) Risk taking: The wholesaler buys finished goods from the producer and keeps them in the warehouses till they are sold. Therefore, he assumes the risks arising out of changes in demand, rise in price, spoilage or destruction of goods. Functions of Retailers (i) Buying and Assembling of goods: Retailers buy and assemble varieties of goods from different wholesalers and manufacturers. They keep goods of those brands and variety which are liked by the customers and the quantity in which these are in demand. (ii) Storage of goods: To ensure ready supply of goods to the customer retailers keep their goods in stores. Goods can be taken out of these store and sold to the customers as and when required. This saves consumers from botheration of buying goods in bulk and storing them. (iii) Credit facility: Although retailers mostly sell goods for cash, they also supply goods on credit to their regular customers. Credit facility is also provided to those customers who buy goods in large quantity.

(iv) Personal services: Retailers render personal services to the customers by providing expert advice regarding quality, features and usefulness of the items. They give suggestions considering the likes and dislikes of the customers. They also provide free home delivery service to customers. Thus, they create place utility by making the goods available when they are demanded. (v) Risk bearing: The retailer has to bear many risks, such as risk of: (a) Fire or theft of goods (b) Deterioration in the quality of goods as long as they are not sold out. (c) Change in fashion and taste of consumers. (vi) Display of goods: Retailers display different types of goods in a very systematic and attractive manner. It helps to attract the attention of the customers and also facilitates quick delivery of goods. (vii) Supply of information: Retailers provide all information about the behaviour, tastes, fashions and demands of the customers to the producers through wholesalers. They become a very useful source of information for marketing research.

Sales promotion uses both media and non-media marketing communications for a pre-

determined, limited time to increase consumer demand, stimulate market demand or

improve product availability.

Sales promotions targeted at the consumer are called consumer sales promotions.

Sales promotions targeted at retailers and wholesaler are called trade sales

promotions.

If you have a product which is new in the market or which is not receiving a lot of attention,

then you can promote this product to customers via sales promotions.

There are two types of Sales promotions

a) Consumer sales promotions

Any sales promotion activity that you do keeping the end consumer in mind is

known as consumer sales promotions.

The objective of Consumer sales promotions might be various.

A consumer might be asked to test a sample of a completely new perfume in

the market and rate it. An existing customer might be asked to use a Scratch

card so that he receives a gift.

At the end, the result should be an action from the consumer. Either the

consumer should purchase the product right away, or he should come to

know about the product so that further awareness is created for the brand.

b) Trade Sales promotions

If your promotional activities are focused on Dealers, distributors or agents, then it

is known as trade promotions.

Example – You are a dealer for Televisions. Now Sony comes and tells you, you will

be given 5% discount if you cross a sale of 100 televisions. Naturally, you will be very

motivated because 5% in television sales is huge. Plus selling Sony TV’s is easy

because it is already a brand. Thus, you divert all potential customers to Sony

Televisions so that you can achieve the target.

Sales promotion uses both media and non-media marketing communications for a pre-

determined, limited time to increase consumer demand, stimulate market demand or

improve product availability.

Sales promotions targeted at the consumer are called consumer sales promotions.

Sales promotions targeted at retailers and wholesale are called trade sales

promotions.

If you have a product which is new in the market or which is not receiving a lot of attention,

then you can promote this product to customers via sales promotions.

There are two types of Sales promotions

a) Consumer sales promotions

Any sales promotion activity that you do keeping the end consumer in mind is

known as consumer sales promotions.

The objective of Consumer sales promotions might be various.

A consumer might be asked to test a sample of a completely new perfume in

the market and rate it. An existing customer might be asked to use a Scratch

card so that he receives a gift.

At the end, the result should be an action from the consumer. Either the

consumer should purchase the product right away, or he should come to

know about the product so that further awareness is created for the brand.

b) Trade Sales promotions

If your promotional activities are focused on Dealers, distributors or agents, then it

is known as trade promotions.

Example – You are a dealer for Televisions. Now Sony comes and tells you, you will

be given 5% discount if you cross a sale of 100 televisions. Naturally, you will be very

motivated because 5% in television sales is huge. Plus selling Sony TV’s is easy

because it is already a brand. Thus, you divert all potential customers to Sony

Televisions so that you can achieve the target.

Sales promotion techniques

1) Discounts – Trade / consumer

If there is a 10% discount on the product for the consumer, then it is known as

consumer discount. However, if there is a 10% discount to the dealer when he

is purchasing from the company, it is known as trade discount.

In trade discounts, the dealer may or may not forward the discount to the customer.

However, many dealers know the importance of achieving sales volumes hence they

pass on discounts to customers whenever they receive trade discounts.

2) Gifting

A customer who purchases a set amount of products will get the “Assured gift” from

you. This creates excitement in the mind of the customer and he received something

for “free”. He might visit again and again.

3) Coupons

Quite commonly used to motivate people to purchase when they think the price is

high or it can be incentive to buy your product above the competitors.

Domino’s, Pizza hut and McDonalds very prominently use coupons in their marketing.

If you have their coupon in hand, you get a discount of X amount on the purchase.

What the coupon does is, it instigates you to take action. If today I get a coupon

saying I will get 10% off on whatever I purchase from an XYZ store, then I will surely

go purchasing. I will purchase all those products anyways. But the coupon got me

purchasing from the XYZ showroom. That’s the objective of the coupon which it has

accomplished

4) Financing

As a result, the customer, who does not have complete money to buy the product,

will likely purchase the product using financing options. Such financing helps the

dealer to liquidate the product faster and also helps the customer in making

purchasing decisions.

5) Sampling

Sampling is an excellent way to introduce your product in the market and at the same

time to increase the awareness of the product.

Sampling might be of higher cost to the company but it is quite successful in the

various types of sales promotions.

Sampling gives a chance to the consumers to compare the products with other

substitutes. Samples are given to doctors by medical representatives. Specimen

copies of books are given to professors. The idea behind this is that they recommend

their products for use to patients or students.

6) Bundling

The disadvantage of bundling is that customer might think one of the products is of

poor quality.

If the products are bundled together and both products are of an excellent brand,

then the bundled product will sell much higher quantities and will defeat competition

in numbers.

7) Contests

Contests can be as simple as winning a gift through a scratch card, or it can be an in

house game in a retail showroom or it can be an online contest for which users have

to enter their information.

9) Exchange offers

Exchange offers are quite commonly used all across the world and used strongly in

festive season when sales will be more and people are in a purchasing mood. In

exchange offer, you can exchange an old product for a new product. You will receive

a discount based on the valuation of your old product. “Exchange offer reimbursed”

10) Free trial

Chances are, you have come across several softwares or online programs which offer

a free trial to you before you purchase the product.

11) Email Marketing

Email marketing bundled with an exciting and irresistible offer can really entice the

customer in purchasing your product.

12) Exhibitions

More commonly used in Food, Jewellery, Clothing, Chemicals and similar such

industries where sellers want to showcase the products they have to their buyers.

13) Demonstrations

One of the most popular products to be sold through product demonstrations was vacuum cleaners which used to be sold house to house (purifiers being promoted through demonstrations in malls, showrooms and other places.)

Demonstrations are an excellent way to create more awareness of the product and to make customers comfortable towards a technical product. Technicality of the product can be a barrier to purchase. Hence demonstration is a type of sales promotion mostly used for technical type of products.

14) Continuity programs

Airlines give more “miles” to the customers who are flying more and more with the airline. Because you are awarded gifts the more you fly with one airline, you are likely to continue flying with that airline so that you receive more miles.

Another example of the continuity program is when a super market advertises that customers who buy 5 times in this month from that super market will get a gift. This ways, the customer will not shift anywhere else but will do shopping from that super market. Such continuity programs not only aim at getting new customers, but they also retain old customers effectively.

5. Money Refund Offers:

If the purchaser is not satisfied with the product, a part or all of the purchaser’s

money will be refunded. It is stated on the package. It will create new users and

strengthen the brand loyalty.

I. Consumer Sales Promotion:

Activities aimed at reaching the consumer at his home or in his office may be called

consumer sales promotion. It is aimed to inform or educate the consumers and to stimulate

the consumers. Success in sales depends on consumers’ co-operation. Consumer sales

promotion increases the use of product by the consumers, attracts new customers and

stands straight among the competitors, to introduce new products and to promote

established products.

The following are the various sales promotion schemes used at the consumers’ level:

1. Sampling:

Free samples are given to consumers to increase their interest in the product. They are also

given to introduce a new product and expand the market. It increases the sales volume

when the product is a new one to the customers. It is an effective device when the product

is purchased often, e.g., soaps, detergents, tea or coffee etc.

It is a method of demand creation. Sampling gives a chance to the consumers to compare

the products with other substitutes. Samples are given to doctors by medical

representatives. Specimen copies of books are given to professors. The idea behind this is

that they recommend their products for use to patients or students.

The samples may be delivered door to door, sent by mail, picked up in a store, attached to

another product etc. It is the most effective way to introduce a new product. It is costly to

produce a sample. It is the most expensive method. It is costly to distributors also. It is not

justifiable for well-established product, a product with slow turnover, a product having less

profit, perishable products etc.

2. Coupons:

Coupons are supplied along with a product. It is a certificate that reduces prices. Coupons

can be mailed, enclosed in the packets or printed in the advertisements. The purpose is to

attract the customers and bring them to a particular shop to increase the sales of a

particular brand.

The coupons are used:

(1) to introduce new products,

(2) to increase the sale of an established product,

(3) to sell new and larger size of a product,

(4) to encourage repeated sales, and

(5) to switch on consumer from one brand to another brand. It is a short-run stimulus.

3. Demonstration:

It is the instructions to educate the consumers in the manner of using the product. It is a

promotional tool to attract the attention of the consumers. When products are complex

and of a technical nature, demonstration is necessary, e.g., computers, field machinery,

electrical pumping set etc. Demonstration is done in front of consumers for mix, wet

grinder in retail shops etc.

Further examples:

Demonstration at retail shops:

Sometimes, the demonstrations are organised at the retail stores by company salesmen for

the benefit of retailers as well as consumers.

School Demonstrations:

When the products happen to be a costly one and a hi-tech one, companies arrange

demonstrations in schools or hotels. Here the consumers are invited to a particular place

and demonstrations are arranged.

Door-to-door Demonstrations:

Consumer products companies quite often resort to house- to-house demonstrations. It is

considered a highly specialized field of sales promotion. Eureka Forbes, the consumer

appliances firm etc. popularized their products through door-to-door demonstrations.

Demonstrations to key people: Sometimes, demonstrations are organised for the benefit of

key people and influential persons. It is a good selling technique.

4. Contests:

These are conducted to attract new customers or to introduce new products. The

consumers are asked to state in a few words why they prefer a particular product. To enter

into the contest, the consumers must purchase a product and submit the evidence (a label

or package or a card attached to the product) with the entry form for contest.

To take part in the contest the consumers must be interested in the product. Consumers’

skill and their ideas are tested and the prize is given to the best entry. It stimulates sales at

the retail level. Entry forms correctly filled are submitted to the panel of judges. They will

select the best and prizes will be given to the successful consumers. Like contest,

sweepstakes and games are also employed in sales promotions, and prizes are offered to

the winners.

5. Money Refund Offers:

If the purchaser is not satisfied with the product, a part or all of the purchaser’s money will

be refunded. It is stated on the package. It will create new users and strengthen the brand

loyalty. Sometimes, the money will be refunded if 10 top covers or 10 empty bottles or 10

packages are sent back to the manufacturers.

6. Premium Offers:

It is a temporary price reduction which increases the instinct of the buyers. Products are

offered free or at a reduced cost as an inducement for purchasing. It is offered to

consumers for consumer goods like soap, brush, paste, washing powder, glucose etc. For

instance, when the customer buys two soaps, a soap box is given free along with the soaps.

The soap box is a premium. In certain cases, the price is reduced. The reduced amount is a

premium.

There are many types of premium offers:

(a) Direct premium

(b) A reusable container

(c) Free-in-mail premium

(d) A self-liquidating premium

(e) Trading stamps.

(a) Direct Premium:

A with-pack premium accompanies the product inside (in pack) or outside (on-pack) the

package e.g., one plastic spoon in Taj tea or one steel spoon inside glucose-D or Cadbury

sweets inside the bourn-vita refill pack etc.

(b) A Reusable Container:

It is a container which can be reused after the product is used. Point soap powder, sway

soap powder etc. are in plastic buckets or plastic containers.

(c) Free in Mail Premium:

Premium items are sent by the company by mail to consumers who are requested to send

the proof of their purchase. For instance cigarette companies offer a packet of 10 cigarettes

against 10 empty covers.

(d) A Self-liquidating Premium:

It is an item sold below its normal retail price to consumers. The cost of the additional

product is collected from the buyer at a concessional rate. For instance, a steel tumbler is

given free of cost if you buy a packet of 200 gms of sunrise instant coffee; or a soap powder

manufacturer offers two kilograms of soap powder along with a plastic bucket at 50% off

price. This method increases sales and brings benefits.

(e) Trading Stamps:

It is given for purchasing the product in a particular shop. It is a premium given to the

consumers by the seller in the form of stamps. These stamps are redeemable at the stamp

redemption centres. To attract customers the retail shops use trading stamps.

7. Price off Offer:

It stimulates sales during a slump season. It gives a temporary discount to the consumers,

i.e., goods are offered at a rate less than the labelled rate. Fans are sold at a reduction rate

in rainy season.

8. Consumer Sweepstakes:

Consumers submit their names for inclusion in a list of prize-winning contest. A ticket (like a

lottery ticket) is given to the consumer of a specific brand. At the specified time, lots will be

drawn. The prize-winner gets the prize. This system is followed by retail businessmen to

promote sales.

9. Buy-back Allowance:

Allowance is given following a previous trade deal. That is, trade deal offers a certain

amount of money for new purchases based on the purchased quantity. It prevents decline

in post-trade deal. Buyers’ motivation is increased because of their cooperation on the first

trade deal, e.g., when cinthol and marvel soaps are concerned, the salesmen give one mug

and two coupons free. If we purchase the two soaps by giving the coupons to the shop, the

seller will reduce Rs. 2/- from the original price.

10. Free Trials:

It consists of inviting prospective purchasers to try the product without cost, in the hope

that they will buy the product. Thus, buyers are encouraged by free trial to stimulate

purchase interest.

II. Dealer Sales Promotion:

The other name for dealer promotion is trade promotion. Manufacturers use a number of

techniques to secure the co-operation of wholesalers, retailers or the middlemen. These

activities, which increase the interest and enthusiasm of dealers and distributors, are called

dealer or distributor sales promotion. It is the middlemen who are important persons for

the fast movements of products. Hence this must be offered with some incentive.

Following are the dealer sales promotion devices:

1. Buying Allowance:

It is an offer of money off or temporary reduction to dealers for purchasing in stipulated

period of time. It is a very effective method to introduce new products in the market. It

encourages the dealers to buy a quantity that they will not buy in ordinary time. This buying

allowance gives the dealers immediate profit, and price redemption. A wet grinder

producer will give one grinder free if one purchases five wet grinders at a time.

2. Merchandise Allowance:

An advertising allowance is given to the dealers for advertising the features of the

manufacturer’s product. A display allowance is given to them for arranging special displays

of the product. After verifying the promotional work of the dealer, the manufacturers will

give a certain amount of money for promotional activities.

They hope that additional efforts will be taken to increase the sales at retail level. Some

manufacturers, as an encouragement, offer additional quantities of merchandise. This

technique is known as merchandise deal e.g., Godrej company offers the dealers one extra

soap cake, free of cost, when one purchases a dozen soap cakes.

3. Price Deals:

Apart from the regular discount, special discounts are also allowed to the dealers for a

specified quantity of purchase. This special discount is over and above the regular discount.

For instance, a regular discount of Rs. 10 per case is allowed; and if the dealer purchases

100 cases at a time, he will be given a discount of Rs. 12 per case, i.e., Rs. 200 extra for the

purchase of 100 cases.

4. Push Money or Premium:

Manufacturers may offer push money. It is a payment in cash or gifts given to dealers or to

their sales force to push the manufacturer’s product. To push his brand, the manufacturer

will offer free specialty items that carry company’s name, such as pens, pencils, calendars,

match boxes, memo pads and yard sticks etc. This is a device for aggressive selling.

5. Co-operative Advertising:

Dealers spend money in advertising manufacturer’s product with the consent of the

manufacturers. The dealer can claim an allowance by giving the proof of the advertisement.

This is an indirect advertising for the manufacturer. It will increase the sales of the

manufacturer’s product. But it is a burden on the manufacturer’s budget.

6. Dealer Sales Contests:

This is an indirect way of boosting the sales. This type of contest is conducted at the level of

retailers and wholesalers. This is in the form of window display, store display, sales

(volume) etc. Prize is awarded to the outstanding achievements. This method is aimed at

stimulating and motivating distributors, dealers, sales-staff etc.

7. Dealer’s Listed Promotion:

Listing dealer is an advertisement. It gives a list of dealers or retailers who stock the product

or who are engaged in its promotion. For example, the advertisement of Bombay Dyeing in

newspapers carries the names of the stockiest of their products. The consumer can buy the

product from anyone of the listed dealers. This method induces the dealers to stock the

products; and the consumers are encouraged to buy the products from the listed dealers.

8. Dealer’s Gift:

Manufacturers give attractive and useful articles to dealers against their order. The articles

are transistor, radio, television set, clock, watch etc. Some manufacturers offer free

holidays family tours to dealers who place more orders. Ralli Fan Co., arranges for free

holidays tours to those who sell the maximum fans in a year.

9. Point-of-purchase:

This plays the role of silent salesman. Point-of-purchase is also known as dealer-aids, dealer

displays, and dealer hopes etc. The competition among the retailers or traders has

encouraged point-of-purchase advertising, which is a significant method for sales

promotion. It means advertising at the point of purchase by the consumers.

It is generally at the level of retailer’s shop. For instance floor displays, stands, overhead

signs, wall signs, posters etc., are examples of point-of-purchase materials. Again, it may be

exterior or interior items. Exterior items like banners, displays are utilized by firms like

service station.

Interior items like floor display, end of counter displays, displays at walls, shelves, hanging

from ceiling etc. are found in the store. Retailers adopt this method to draw the attention

of customers and create an interest in the minds of the prospects. This method is suitable

for consumer goods as well as industrial goods.

III. Sales Force Promotion:

As dealer and consumer promotion, the sales force promotion also is a necessary one. The

activities of sales force must be induced. In the channel of distribution the role of salesman

is very important. The idea of sales force promotion is to make the salesman’s effort more

effective.

The tools for sales force promotions are:

1. Bonus to Sales Force:

The manufacturer sets a target of sales for a year. If the sales force sell the products above

the targeted sales, bonus is offered to them. This is an encouragement incentive given to

the sales people to sell more products—to cross the quota or targeted sales.

2. Sales Force Contests:

To increase the interest and efforts of sales by sales force over a specified time, these

contests are announced. The prizes are given to the salesman who secures the maximum

sales in sales contests. Thus it stimulates the salesmen to sell more products.

3. Salesmen Meetings and Conferences:

The idea behind these is to educate, inspire and reward salesmen. Encouragement is given

to them during the discussion. New selling techniques are described to them and discussed

in the conference.

Advertising

According to Wood, “Advertising is causing to know to remember, to do.”

According to Wheeler, “Advertising is any form of paid non-personal presentation of ideas,

goods or services for the purpose of inducting people to buy.”

According to William J. Stanton, “Advertising consists of all the activities involves in

presenting to a group, a non-personal, oral or visual, openly sponsored message regarding

disseminated through one or more media and is paid for by an identified sponsor.”

The main features of advertise are as under: It is directed towards increasing the sales of business. Advertising is a paid form of publicity It is non-personal. They are directed at a mass audience and nor at the individual as is in

the case of personal selling.

Objective / Functions of advertising

The purpose of advertising is nothing but to sell something -a product, a service or an idea.

The real objective of advertising is effective communication between producers and

consumers. The following are the main objectives of advertising:

Preparing Ground for New Product

New product needs introduction because potential customers have never used such

product earlier and the advertisement prepare a ground for that new product.

Creation of Demand

The main objective of the advertisement is to create a favourable climate for maintaining of

improving sales. Customers are to be reminded about the product and the brand. It may

induce new customers to buy the product by informing them its qualities since it is possible

that some of the customers may change their brands.

Facing the Competition

Another important objective of the advertisement is to face to competition. Under

competitive conditions, advertisement helps to build up brand image and brand loyalty

and when customers have developed brand loyalty, becomes difficult for the middlemen

to change it.

Creating or Enhancing Goodwill

Large scale advertising is often undertaken with the objective of creating or enhancing the

goodwill of the advertising company. This, in turn, increases the market receptiveness of

the company’s product and helps the salesmen to win customers easily.

Informing the Changes to the Customers

Whenever changes are made in the prices, channels of distribution or in the product by way

of any improvement in quality, size, weight, brand, packing, etc., they must be informed to

the public by the producer through advertisement.

Neutralizing Competitor’s Advertising

Advertising is unavoidable to complete with or neutralize competitor’s advertising. When

competitors are adopting intensive advertising as their promotional strategy, it is

reasonable to follow similar practices to neutralize their effects. In such cases, it is essential

for the manufacturer to create a different image of his product.

Benefits or Importance of Advertisement

Benefits to Manufacturers

It increases sales volume by creating attraction towards the product.

It helps easy introduction of new products into the markets by the same manufacturer.

It helps to create an image and reputation not only of the products but also of the

producer or advertiser. In this way, it creates goodwill for the manufacturer.

It helps to establish a direct contact between manufacturers and consumers.

It leads to smoothen the demand of the product. It saves the product from seasonal

fluctuations by discovering new and new usage of the product.

It creates a highly responsive market and thereby quickens the turnover that results in

lower inventory.

Selling cost per unit is reduced because of increased sale volume. Consequently, product

overheads (non-labour expenses) are also reduced due to mass production and sale.

Overhead Cost Examples: (Rent, Utilities, Insurance, Office equipment such as computers or

telephones, Office supplies)

Advertising gives the employees a feeling of pride in their jobs and to be in the service of

such a concern of repute. It, thus inspires the executives and worker to improve their

efficiency.

Advertising is necessary to meet the competition in the market and to survive.

Benefits to Wholesalers and Retailers

Easy sale of the products is possible since consumers are aware of the product and its

quality.

It increases the rate of the turn-over of the stock because demand is already created by

advertisement.

It supplements the selling activities.

The reputation created is shared by the wholesalers and retailers alike because they need

not spend anything for the advertising of already a well advertised product.

It ensures more economical selling because selling overheads are reduced.

It enables them to have product information.

Benefits to Consumers

Advertising stresses quality and very often prices. This forms an indirect guarantee to the

consumers of the quality and price. Further large scale production assumed by advertising

enables the seller to seller product at a lower cost.

Advertising helps in eliminating the middlemen by establishing direct contacts between

producers and consumers. It results in cheaper goods.

It helps them to know where and when the products are available. This reduces their

shopping time.

It provides an opportunity to the customers to compare the merits and demerits of various

substitute products.

This is perhaps the only medium through which consumers could know the varied and new

uses of the product.

Modern advertisements are highly informative.

Benefits to Salesmen

Introducing the product becomes quite easy and convenient because manufacturer has

already advertised the goods informing the consumers about the product and its quality.

Advertising prepares necessary ground for a salesman to begin his work effectively. Hence

sales efforts are reduced.

The contact established with the customer by a salesman is made permanent through

effective advertising because a customer is assumed of the quality and price of the

product.

The salesman can weigh the effectiveness of advertising when he makes direct contact with

the consumers.

Benefits to Community or Society

Advertising, in general, is educative in nature. In the words of the late President Roosevelt

of the U.S.A., “Advertising brings to the greatest number of people actual knowledge

concerning useful things: it is essentially a form of education and the progress of civilization

depends on education.”

Advertising leads to a large-scale production creating more employment opportunities to

the public in various jobs directly or indirectly.

It initiates a process of creating more wants and their satisfaction higher standard of living.

For example, advertising has made more popular and universal the uses of such inventions

as the automobiles, radios, and various household appliances.

Newspapers would not have become so popular and so cheap if there had been no

advertisements. The cheap production of newspapers is possible only through the

publication of advertisements in them. It sustains the press.

It assures employment opportunities for the professional men and artist.

Media of Advertising

a. Indirect Advertising

1. Press Advertising

i. Newspaper advertising

All kinds of goods

Wide range of coverage

ii. Magazine Advertising

Type of press advertising

Articles by Expert

2. Outdoor Advertising

Posters

Neon sign

Car cards

3. Film Advertising/Radio/Television

Educating people through entertainment

Combination of sight, sound and motion

4. Display Advertising

Window display

Showrooms

b. Direct Advertising

Leaflets

Brochures

Calendars

Pamphlets

Catalogues

Techniques to evaluate the effectiveness of the advertisement

1. Attention value

2. Suggestive value: Suggestion as to the use and quality of the product

3. Memorising Value

4. Conviction value: Convince about accuracy and truth of advertisement

5. Sentimental value

6. Educational value

7. Instinctive appeal value: compel the man to act (Parental instinct, Health, Beauty,

prestige)

What are the main ways of segmenting a market?

There are quite a number of potential market segmentation bases (also referred to as

segmentation variables), which an organization could effectively utilize to construct market

segments. As a simple guide, segmentation bases can be classified into five major

categories:

geographic,

demographic,

psychographic,

behavioral, and

benefits sought.

By using any of these segmentation bases, either individually or in combination, an

organization can construct market segments for evaluation to help them select appropriate

target markets.

Note: This topic discusses segmentation bases for consumer markets, there is a separate

topic area relating to business market segmentation bases/variables.

SEGMENTATION

BASE

DESCRIPTION OF EACH MAIN

CONSUMER SEGMENTATION BASE

Geographic Segmenting by country, region, city or

other geographic basis.

Demographic Segmenting based on identifiable

population characteristics, such as

age, occupation, marital status and so

on.

Psychographic This segmentation approach involves

an understanding of a consumer’s

lifestyle, interests, and opinions.

Benefits sought This approach segments consumers

on the basis of specific benefits they

are seeking from the product, such as

convenience, or status, or value, and

so on.

Behavioral Segmenting the market based on their

relationship with the product or the

firm. Examples include: heavy or light

users, brand loyal or brand switchers,

and so on.

Understanding market segmentation bases/variables

Probably the best approach to understanding the different segmentation bases is to view

some examples, which are listed in the table below.

It is important to note that sometimes textbooks classify the lower-level bases/variables

slightly differently. For example, some textbooks integrate ‘benefits sought’ as being a

‘behavioral’ segmentation base option. However, benefits sought are quite an important

and commonly used segmentation approach in real business practice and should be

separated out. And some texts will list geo-demographics (a combination of geographic and

demographic measures) as a separate category. However, as it is possible to combine (use

hybrid segmentation) any of the bases, the following examples just utilize the major

categories.

MAIN CATEGORY SEGMENTATION BASE EXAMPLE/S

Geographic Country/continent England, UK, Europe

Region/area of the

country

North India, West India,

South India

City New York, Los Angeles,

Dallas, Chicago

Urban/rural Measured by the area’s

population density

Climate Tropical, arid, alpine

Coastal/inland Measured by distance to the

coast

Demographic Age group Pre-teens, teens, young

adults, older adults

Generation Baby boomers, Gen X, Gen

Y

Gender Male, female

Marital status Married, single, widowed

Family life cycle Young married no kids,

married young kids

Family size Couple only, small family,

large family

Occupation Professional, trade,

unskilled

Education High school, university,

vocational

Ethnic background African-American, Hispanic,

Asian

Religion Christian, Jewish, Hindu,

Muslim

Psychographic Lifestyle Family, social, sporty,

travel, education

Values (VALS) VALS = values and lifestyles

Social class Upper class, middle class,

lower class

Personality/self-

concept

Ongoing, creative,

innovator, serious

Activities, interests,

opinions (AIO)

Various hobbies, sports,

interests

Benefits Sought Needs/motivations Convenience, value, safety,

esteem

Behavioral Occasion Birthday, anniversary,

Valentine’s Day

Buying stage Ready to buy, gathering

information only

User status Regular, occasional, never

Usage rate Heavy, light

Loyalty status Loyal, occasional switcher,

regular switcher

Brand knowledge Strong, some, none

Shopping style Enjoys shopping, functional,

avoids

Involvement level High, medium, low

Please note that these are some examples only – there are many other ways to segment

(divide) a consumer market. The important things to remember are: the major categories,

that there are hundreds of potentially useful segmentation bases, and that these bases can

be used in combination (which is known as hybrid segmentation).

Can firms use more than one segmentation base?

Yes, by using more than one approach for segmentation organizations can have a much

stronger understanding of each of the segments. Please refer examples for segmentation

bases and to main tools used in segmenting markets.

What is hybrid (multivariate) segmentation?

Hybrid segmentation (which is also sometimes referred to as multivariate segmentation)

refers to using multiple segmentation variables in the construction of market segments. For

example, using a demographic segmentation variable together with a psychographic

segmentation variable in order to determine the market segment. The segmentation trees

shown in the example section use hybrid segmentation.

Market segmentation is one of the most efficient tools for marketers to cater to their target

group. It makes it easier for them to personalize their campaigns, focus on what’s

necessary, and to group similar consumers to target a specific audience in a cost-effective

manner. Market segmentation is being used by marketers since late 1900’s. Simple though

it may be, it is of vital use to forming any marketing plan.

What is Market Segmentation?

Market Segmentation is a process of dividing the market of potential customers into

different groups and segments on the basis of certain characteristics. The member of these

groups share similar characteristics and usually have one or more than one aspect common

among them.

There are many reasons as to why market segmentation is done. One of the major reasons

marketers segment market is because they can create custom marketing mix for each

segment and cater them accordingly.

The concept of market segmentation was coined by Wendell R. Smith who in his article

“Product Differentiation and Market Segmentation as Alternative Marketing Strategies”

observed “many examples of segmentation” in 1956. Present day market segmentation

exists basically to solve one major problem of marketers; more conversions. More

conversion is possible through personalized marketing campaigns which require marketers

to segment market and draft better product and communication strategies according to

needs of the segment.

Basis of Market Segmentation

Segmenting is dividing a group into subgroups according to some set ‘basis’. These bases

range from age, gender, etc. to psychographic factors like attitude, interest, values, etc.

Gender

Gender is one of the most simple yet important basis of market segmentation. The

interests, needs and wants of males and females differ at many levels. Thus, marketers

focus on different marketing and communication strategies for both. This type of

segmentation is usually seen in the case of cosmetics, clothing, and jewellery industry, etc.

Age group

Segmenting market according to the age group of the audience is a great strategy for

personalized marketing. Most of the products in the market are not universal to be used by

all the age groups. Hence, by segmenting the market according to the target age group,

marketers create better marketing and communication strategies and get better conversion

rates.

Income

Income decides the purchasing power of the target audience. It is also one of the key

factors to decide whether to market the product as a need, want or a luxury. Marketers

usually segment the market into three different groups considering their income. These are

High Income Group

Mid Income Group

Low Income Group

This division also varies according to the product, its use, and the area the business is

operating in.

Place

The place where the target audience lives affects the buying decision the most. A person

living on mountains will have less or no demand for ice cream than the person living in a

desert.

Occupation

Occupation, just like income, influences the purchase decision of the audience. A need of

an entrepreneur might be a luxury for a government sector employee. There are even many

products which cater to an audience engaged in a specific occupation.

Usage

Product usage also acts as a segmenting basis. A user can be labelled as heavy, medium or

light user of a product. The audience can also be segmented on the basis of their awareness

of the product.

Lifestyle

Other than physical factors, marketers also segment the market on the basis of lifestyle.

Lifestyle includes subsets like marital status, interests, hobbies, religion, values, and other

psychographic factors which affect the decision making of an individual.

Types of Market Segmentation

Geographic Segmentation

Geographic segmentation divides the market on the basis of geography. This type of market

segmentation is important for the marketers as people belonging to different regions may

have different requirements. For example, water might be scarce in some regions which

inflates the demand for bottled water but, at the same time, it might be in abundance in

other regions where the demand for the same is very less.

People belonging to different regions may have different reasons to use the same product

as well. Geographic segmentation helps marketer draft personalized marketing campaigns

for everyone.

Demographic Segmentation

Demographic segmentation divides the market on the basis of demographic variables like

age, gender, marital status, family size, income, religion, race, occupation, nationality, etc.

This is one of the most common segmentation practice among the marketers. Demographic

segmentation is seen almost in every industry like automobiles, beauty products, mobile

phones, apparels, etc and is set on a premise that the customers’ buying behaviour is

hugely influenced by their demographics.

Behavioral Segmentation

The market is also segmented based on audience’s behaviour, usage, preference, choices

and decision making. The segments are usually divided based on their knowledge of the

product and usage of the product. It is believed that the knowledge of the product and its

use affects the buying decision of an individual. The audience can be segmented into –

Those who know about the product,

Those who don’t know about the product,

Ex-users,

Potential users,

Current Users,

First time users, etc.

People can be labelled as brand loyal, brand-neutral, or competitor loyal. They can also be

labelled according to their usage. For example, a sports person may prefer an energy drink

as elementary (heavy user) and a not so sporty person may buy it just because he likes the

taste (light/medium user).

Psychographic Segmentation

Psychographic Segmentation divides the audience on the basis of their personality, lifestyle

and attitude. This segmentation process works on a premise that consumer buying

behaviour can be influenced by his personality and lifestyle. Personality is the combination

of characteristics that form an individual’s distinctive character and includes habits, traits,

attitude, temperament, etc. Lifestyle is how a person lives his life.

Personality and lifestyle influence the buying decision and habits of a person to a great

extent. A person having a lavish lifestyle may consider having an air conditioner in every

room as a need, whereas a person living in the same city but having a conservative lifestyle

may consider it as a luxury.

Nature of a market segment

A market segment needs to be homogeneous. There should be something common among

the individuals of the segment that the marketer can capitalise on. Marketers also need to

check that different segments have different distinguishing features which make

them unique. But segmenting requires more than just similar features. Marketers must also

ensure that the individuals of the segment respond in a similar way to the stimulus. That is,

the segment must have a similar type of reaction to the marketing activities being pitched.

Examples of market segmentation

Market segmentation is a common practice among all the industries. It is not possible for a

marketer to address the mass with same marketing strategy. Here are some examples of

market segmentation to prove this point.

Marketers will only waste their time and might end up making fun of themselves if they

don’t segment the market while marketing beauty products.

A company that sells nutritious food might market the product to the older people while

fast-food chains target the working demographic or teens.

Sports brands often segment the market based on the sports they play which help them

market the sports specific products to the right audience.

Market Segmentation is a convenient method marketers use to cut costs and boost their

conversions. It allows them to be specific in their planning and thus provide better results.

It ultimately helps them to target the niche user base by making smaller segments.

The four bases for segmenting consumer market are as follows: A. Demographic

Segmentation B. Geographic Segmentation C. Psychographic Segmentation D. Behavioural

Segmentation.

A. Demographic Segmentation:

Demographic segmentation divides the markets into groups based on variables such as age,

gender, family size, income, occupation, education, religion, race and nationality.

Demographic factors are the most popular bases for segmenting the consumer group. One

reason is that consumer needs, wants, and usage rates often vary closely with the

demographic variables. Moreover, demographic factors are easier to measure than most

other type of variables.

1. Age:

It is one of the most common demographic variables used to segment markets. Some com-

panies offer different products, or use different marketing approaches for different age

groups. For example, McDonald’s targets children, teens, adults and seniors with different

ads and media. Markets that are commonly segmented by age includes clothing, toys,

music, automobiles, soaps, shampoos and foods.

2. Gender:

Gender segmentation is used in clothing, cosmetics and magazines.

3. Income:

Markets are also segmented on the basis of income. Income is used to divide the markets

because it influences the people’s product purchase. It affects a consumer’s buying power

and style of living. Income includes housing, furniture, automobile, clothing, alcoholic,

beverages, food, sporting goods, luxury goods, financial services and travel.

4. Family cycle:

Product needs vary according to age, number of persons in the household, marital status,

and number and age of children. These variables can be combined into a single variable

called family life cycle. Housing, home appliances, furniture, food and automobile are few

of the numerous product markets segmented by the family cycle stages. Social class can be

divided into upper class, middle class and lower class. Many companies deal in clothing,

home furnishing, leisure activities, design products and services for specific social classes.

B. Geographic Segmentation:

Geographic segmentation refers to dividing a market into different geographical units such

as nations, states, regions, cities, or neighbourhoods. For example, national newspapers are

published and distributed to different cities in different languages to cater to the needs of

the consumers.

Geographic variables such as climate, terrain, natural resources, and population density

also influence consumer product needs. Companies may divide markets into regions

because the differences in geographic variables can cause consumer needs and wants to

differ from one region to another.

C. Psychographic Segmentation:

Psychographic segmentation pertains to lifestyle and personality traits. In the case of

certain products, buying behaviour predominantly depends on lifestyle and personality

characteristics.

1. Personality characteristics:

It refers to a person’s individual character traits, attitudes and habits. Here markets are

segmented according to competitiveness, introvert, extrovert, ambitious, aggressiveness,

etc. This type of segmentation is used when a product is similar to many competing

products, and consumer needs for products are not affected by other segmentation

variables.

2. Lifestyle:

It is the manner in which people live and spend their time and money. Lifestyle analysis

provides marketers with a broad view of consumers because it segments the markets into

groups on the basis of activities, interests, beliefs and opinions. Companies making

cosmetics, alcoholic beverages and furniture’s segment market according to the lifestyle.

D. Behavioural Segmentation:

In behavioural segmentation, buyers are divided into groups on the basis of their

knowledge of, attitude towards, use of, or response to a product. Behavioural

segmentation includes segmentation on the basis of occasions, user status, usage rate

loyalty status, buyer-readiness stage and attitude.

1. Occasion:

Buyers can be distinguished according to the occasions when they purchase a product, use

a product, or develop a need to use a product. It helps the firm expand the product usage.

For example, Cadbury’s advertising to promote the product during wedding season is an

example of occasion segmentation.

2. User status:

Sometimes the markets are segmented on the basis of user status, that is, on the basis of

non-user, ex-user, potential user, first-time user and regular user of the product. Large

companies usually target potential users, whereas smaller firms focus on current users.

3. Usage rate:

Markets can be distinguished on the basis of usage rate, that is, on the basis of light,

medium and heavy users. Heavy users are often a small percentage of the market, but

account for a high percentage of the total consumption. Marketers usually prefer to attract

a heavy user rather than several light users, and vary their promotional efforts accordingly.

4. Loyalty status:

Buyers can be divided on the basis of their loyalty status—hardcore loyal (consumer who

buy one brand all the time), split loyal (consumers who are loyal to two or three brands),

shifting loyal (consumers who shift from one brand to another), and switchers (consumers

who show no loyalty to any brand).

5. Buyer readiness stage:

The six psychological stages through which a person passes when deciding to purchase a

product. The six stages are awareness of the product, knowledge of what it does, interest in

the product, preference over competing products, conviction of the product’s suitability,

and purchase. Marketing campaigns exist in large part to move the target audience through

the buyer readiness stages.