marketing management

Marketing Management

Sangeeta Singh

INDEXINDEX1) What Is Marketing?2) The Marketing Environment3) Marketing Management4) Marketing as Decision Making5) Analyzing Consumer Behaviour6) Organizational Buying Behaviour7) Market Segmentation8) Targeted Marketing9) The Marketing Mix10) The Product11) New Product Development12) Marketing Channels13) Physical Distribution14) The Promotion Effort15) Price Determination16) Price Administration

WHAT IS MARKETING?WHAT IS MARKETING?

Chapter - 1

WHAT’S MARKETING IS ALL ABOUT

A HUMAN ACTIVITY DIRECTED AT SATISFYINGNEEDS AND WANTS THROUGH EXCHANGEPROCESSES

PHILIP KOTLER

IT IS THE PERFORMANCE OF BUSINESS ACTIVITIESTHAT DIRECT THE FLOW OF GOODS AND SERVICESFROM PRODUCER TO CONSUMERS

AMERICAN MARKETING ASSOCIATION

MARKETING CONTINUED…IT IS THE PROCES OF

• IDENTIFYING CUSTOMER NEEDS

• CONCEPTUALISING THOSE NEEDS IN TERMS OF ANORGANISATION’S CAPACITY TO PRODUCE.

• CONCEPTUALISING THE CONSEQUENT OUTPUT IN TERMS OF THE CUSTOMER NEEDS EARLIER IDENTIFIED, AND

• COMMUNICATING THAT CONCEPTUALISATION TO THE CUSTOMER

JOHN.A. HOWARDCOLUMBIA UNIVERSITY 1973

What is Marketing?What is Marketing?

Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.

More simply: Marketing is all about satisfying needs (...profitably and fairly)!!!

Marketing is an Exchange of Marketing is an Exchange of ValueValue

An exchange is the process by which some transfer of value occurs between a buyer and a seller.◦At least two people or organizations must be

willing to make a trade, and◦Each must have something the other values.◦Most exchanges occur in the form of a

monetary transaction.

WhyWhy is Marketing is Marketing Important?Important?Marketing Creates Utility

◦Place Utility◦Time Utility◦Possession Utility

Marketing’s Role in the Firm◦A firm’s marketing-related decisions must

affect and be affected by its other operations such as accounting and manufacturing.

WhyWhy is Marketing is Marketing Important?Important?

Marketing’s Role in Our Daily Lives

Marketing’s Role in Society

Production ConceptProduction Concept

Product ConceptProduct Concept

Selling ConceptSelling Concept

Marketing ConceptMarketing Concept

Consumers prefer products that are widely available and inexpensive

Consumers favor products that offer the most quality, performance,

or innovative features

Consumers will buy products only ifthe company aggressively

promotes/sells these products

Focuses on needs/ wants of target markets & delivering value

better than competitors

Company Orientations Towards Company Orientations Towards the Marketplacethe Marketplace

WhenWhen Did Marketing Begin? Did Marketing Begin?

Product OrientationProduct Orientation

Selling OrientationSelling Orientation

Customer OrientationCustomer Orientation

•Most Efficient Production & Distribution•Seller’s Market

•Satisfies Customers’ Needs and Wants•Total Quality

New Era OrientationNew Era Orientation •Benefits to Customers, Plus Firm’s Employees, Shareholders, and Communities.

•Marketing as a Sales Function•Buyer’s Market

Needs, Wants &Demands Products

Value & satisfaction

Exchange & transactionsMarkets & marketers

Mktg is a social process by which individuals & groups obtain what they need and want through creating & exchanging products &values with others.

The PILLSBURYThe PILLSBURYFirst Era in 1869 - 1930s. The idea for the formation of the company came from the availability of high quality wheat and the proximity of water power – NOT from the availability and proximity of growing major market areas or the demand for better less expensive, more convenient flour products. The principal concern here was with PRODUCTION

The PILLSBURYThe PILLSBURYIn this Era The company’s Philosophy might have been stated as: “ We are professional flour millers. Blessed with a supply of the finest North American wheat, plenty of water power, and excellent milling machinery, we produce flour of high quality. Our basic function is to mill high quality flour, and of course we must hire salesman to sell it just as we hire accountants to keep our books.”

The PILLSBURYThe PILLSBURY

Second Era in 1930s – 60s (Sales Orientation). This was the era of sales when for the first time the co began to be highly conscious of the consumer, her wants and her prejudices as a key factor in business equation. The first step along the road to become a marketing company has been taken.The principal concern here was with SALES.


In this Era The company’s Philosophy might have been stated as: “ We are a flour milling company, manufacturing a number of products for the consumer market. We must have a first rate sales organization which can dispose of all the products we can make at a favorable price. We must back up this sales force with consumer advertising and market intelligence. We want our salesman and our dealers to have all the tools they need for moving the output of our plants to the consumer.”


Second Era in 60s and beyond (Marketing Orientation). This was the era of product research and for the first time co felt the need to select the best new products. The first step the co took to set up a marketing department which developed criteria for determining which products to market. The criteria was nothing more or less than those of the consumer itself.The principal concern here was with Consumer Markets


In this Era The company’s Philosophy might have been stated as: “ We make and sell products for consumers.”

Needs, Wants &Demands Products

Value & satisfaction

Exchange & transactionsMarkets & marketers

Mktg is a social process by which individuals & groups obtain what they need and want through creating & exchanging products &values with others.

MarketIntegratedmarketing

Profits throughcustomer

satisfactionCustomer

needs

(b) The marketing concept

FactoryExistingproducts

Selling andpromotion

Profits throughsales volume

Startingpoint Focus Means Ends

(a) The selling concept

Customer Delivered Customer Delivered ValueValue

Difference Between Selling And Difference Between Selling And Marketing Marketing

Selling stats with the seller. Selling is preoccupied all the time with the needs of the seller; seller is the center of the business universe; activities start with seller’s existing products.

Emphasises on saleable surpluses available with in the corporation; seeks to quickly convert ‘product’ into ‘cash’; concerns itself with the tricks and techniques of getting the customers to part with their cash for the products available with the salesman.

Marketing starts with the buyers and focuses constantly on the needs of the buyers; buyer is the centre of the business universe; activities follow the buyer and his needs.

Emphasises on identification of a market opportunity; seeks to convert customer ‘needs’ into ‘products’; emphasises on fulfilling the needs of the customers.


View business as a ‘goods producing process’.

Over emphasises the ‘exchange’ aspect without caring for the ‘value satisfactions’ inherent in the exchange.

Seller’s convenience dominates the formulation of the ‘marketing mix’

View business as a ‘customer satisfying process’.

Concerns itself primarily and truly with the ‘value satisfactions’ that should flow to the customer from the exchange.

Buyers determines the shape the ‘marketing mix, should take.

Difference Between Selling And Marketing Difference Between Selling And Marketing

The firm makes the product first and then figures out how to sell and make profit.

Emphasises on staying with the existing technology and reducing the cost of production.

Seller’s motives dominate marketing communications.

What is to be offered as a ‘product’ is determined by the customer; the firm makes a ‘total product offering’ that would match and satisfy the identified needs of the customers; the ‘product’ is the consequence of the marketing effort; the marketing effort leads to products that the customers would actually want to buy in their own interest.

Emphasis on innovation in every sphere; on providing better value to the customer by adopting the most innovative technology.

Marketing communications is looked upon as the tool for communicating the benefits/satisfactions provided by the product.


Costs determine price.

Transportation, storage and other distribution functions are perceived as mere extensions of the production function.

Emphasis is on ‘somehow selling’; there is no coordination among the different functions of the total marketing task.

Consumer determines price; price determines costs.

They are seen as vital services to be provided to the customer, keeping customer’s convenience in focus.

Emphasis is on integrated marketing approach, an integrated strategy covering product, promotion, pricing and distribution.

Difference Between Selling And Marketing Difference Between Selling And Marketing

Different departments of the business operate as separate watertight compartments.

In firms practicing ‘selling’ production is the central function of the business.

‘Selling’ views the customer as the last link in the business.

All departments of the business operate in a highly integrated manner, the sole purpose being generation of consumer satisfaction.

In firms practicing ‘marketing’, marketing is the central function of the business; the entire company or business is organized around the marketing function.

‘Marketing’ views the customer as the very purpose of the business; sees the business from the point of view of the customer; customer consciousness, all departments and all people in the organization, all the time.

HowHow is Marketing is Marketing Done?Done?Marketers Develop and Implement a Marketing

Plan Based on the Following Information:

Organization’s Strengths and Weaknesses

Organization’s Strengths and Weaknesses

Organization’s Overall ObjectivesOrganization’s Overall Objectives

Opportunities and Threats to theOrganization in the Marketplace

Opportunities and Threats to theOrganization in the Marketplace

Needs, Wants and Needs, Wants and BenefitsBenefits

NeedsNeeds

WantsDesire to Satisfy Needs in Ways That are Culturally and Socially Influenced.

Let’s go eat a cheeseburger.

BenefitsOutcome Sought by a

Consumer That Motivates Buying Behavior. Now I’m

full; I feel better.

Difference Between a Consumer’s Actual State

and Some Ideal or Desired State. I’m Hungry!

Markets, Consumers and Markets, Consumers and DemandDemand

Market

Customerswho share a common

need that can be satisfied by a

specific productAND

who are willing, able and have the authority to make the exchange.

Customers

PotentialCustomers

DEMAND

Customers

Front-line people

Middle Management

TopManagement

Traditional Organization ChartTraditional Organization Chart

Customer-Oriented Organization Customer-Oriented Organization ChartChart

Customers

Front-line people

Middle management

Topmanage-

ment

Customers Cus

tom

ers

Evolving Views of Marketing’s Evolving Views of Marketing’s RoleRole

a. Marketing as anequal function

FinanceProduction

Marketing Humanresources

b. Marketing as a moreimportant function

Finance

Humanresources

Marketing

Production

Evolving Views of Marketing’s Evolving Views of Marketing’s RoleRole

c. Marketing as themajor function

Marketing

Finance

Hum

an

resources

Production

d. The customer as thecontrolling factor

Customer

Human

reso

urces

FinanceProductio

n

Marketing

Evolving Views of Evolving Views of Marketing’s RoleMarketing’s Role

e. The customer as the controllingfunction and marketing as the

integrative function

Customer

Marketing

Production

Hum

an

resources

Finance

Changing Marketing Changing Marketing ArchitectureArchitecture

INDUSTRIAL AGE(Past)Customer DrivenOne-wayFinite ReachTime DelayInformation

Constraints

INFORMATION AGE(Current and Future)Customer DrivingInfinite ReachTime SavingInformation

Abundance

How Marketing is Changing?How Marketing is Changing?

From Exchange / Transaction to Customer Value

From Suppliers Making Marketing Decisions to Customers Driving Those Decisions

From Physical Channels to Seamless Channels

From Market Segments to Segments of Size One

From Personal Based Communication Campaign to Permission Based Communication Campaign

Views on the Marketing Processes

5-C AnalysisCustomer

CompetitorCompanyContext

Collaborators

S-T-P Marketing

SegmentationTargeting

Positioning

4 P’s Marketing Plan

ProductPricing

PromotionPlace

The Functional View

Views on the Marketing Processes

Understanding Customer

Value

Creating Customer

Value

The Process View

Capturing Customer

Value

Delivering Customer

Value

Sustaining Customer

Value

Understanding Customer Understanding Customer ValueValue

Value is defined as the perceived worth in monetary units of the of the set of economic functional / technical and psychological benefits received by the customer in exchange for the price paid for a product offering, taking into consideration the available offerings and prices.- Anderson, Jain and Chintagunta(1993)

Understanding Customer Understanding Customer ValueValue

Psychological

Functional Economic

MARKETING’S MARKETING’S CONTRIBUTION WITHIN THE CONTRIBUTION WITHIN THE FIRMFIRM

Corporate / Business Unit Level

The Policy Question: How to develop a Customer Focus?

Marketing’s Answer: Bring the Voice of the customer in the organization

Tools: Mkt Research, Customer Visits, Market Orientation Audits

MARKETING’S MARKETING’S CONTRIBUTION WITHIN THE CONTRIBUTION WITHIN THE FIRMFIRM

Product LevelThe Policy Question: How to best adapt

to the market? Marketing’s Answer: Develop a value

proposition and competitive positioning based on customer needs

Tools: Customer and Competitor analysis

Plea From an Anonymous Plea From an Anonymous CustomerCustomerDon’t Sell me Clothes, Sell me a sharp appearance,

style and attractiveness.Don’t Sell me a House, Sell me comfort, contentment, a

good investment and a pride of ownership.Don’t Sell me Toys, Sell my children happy moments.Don’t Sell me Insurance, Sell me peace of mind, and a

great future for my family and me.Don’t Sell me Books, Sell me pleasant hours and the

profits of knowledge.Don’t Sell me Computers, Sell me the pleasure and

profits of the miracles of modern technology.

The Moral is…..The Moral is…..

Don’t Sell me THINGS, Sell me Ideas, Feelings, Self-respect, Home, Life and

Happiness.

PLEASE DON’T SELL ME THINGS

MARKETS

NEEDS, WANTSAND DEMANDS

PRODUCTS AND SERVICES

VALUE, UTILITYSATISFACTION

QUALITY

EXCHANGERELATIONSHIPS

TRANSACTIONS

CORE MARKETING CONCEPTS

FUNDAMENTAL TERMINOLOGIESNEEDS : FELT DEPREIVATION

WANTS : FORM TAKEN BY HUMAN NEEDS AS THEY ARE SHAPED BY CULTURE AND PERSONALITY.

DEMAND : WANTS BACKED BY PURCHASING POWER.

PRODUCT : ANY OFFERING TO SATISFY NEEDS AND WANTS MAINLY PHYSICAL OBJECTS, SERVICES, INFORMATION, PROPERTIES EXPERIENCES, EVENTS, PLACES, ORGANISATIONS, IDEAS, PERSONS.

FEATURES : PHYSICAL ATTRIBUTES OF THE PRODUCT

ADVANTAGES : OPERATIONAL FEATURES OF THE PRODUCT

BENEFITS : IMPLICIT, SUBJECTIVE OUTCOME AFTER USE OF THE PRODUCT WHICH LEADS SATISFACTION.

VALUE : IT IS (FUNCTIONAL BENEFIT+ EMOTIONAL BENEFIT)/ (MONEY + TIME+ ENERGY + PSYCHIC COSTS)

SATISFACTION : PERFORMANCE VS EXPECTATION FUNCTION

EXCHANGE : OBTAINING OF SOMETHING BY OFFERING SOMETHING ELSE IN RETURN.

CONCEPTS IN MARKETING

• PRODUCTION CONCEPT : WIDELY AVAILABLE &INEXPENSIVE PRODUCTS WILL BE PREFERRED.

• PRODUCT CONCEPTS : MOST QUALITATIVE, HIGH PERFORMING & INNOVATIVE FEATURES ORIENTED PRODUCTS WILL BE PREFERRED.

• SELLING CONCEPTS : IF LEFT ALONE, CONSUMERS AND BUSINESS WON’T BUY ENOUGH OF PRODUCTS SO DO AGGRESSIVE SELLING

• MARKETING CONCEPT : MEETING NEEDS PROFITABLY; FIND WANTS AND FILL THEM;

LOVE THE CUSTOMER, NOT THE PRODUT; HAVE IT YOUR WAY…

BURGER KING ->YOU’RE THE BOSS…

STARTINGPOINT

FOCUS

MEANS

ENDS

SELLINGCONCEPT

FACTORY

EXISTING

PRODUCTS

SELLING/

PROMOTING

PROFITS

THROUGH

SALES

VOLUME

MARKETINGCONCEPT

MARKET

CUSTOMERNEEDS

INTEGRATEDMARKETING

PROFITS THROUGHCUSTOMERSATISFACTION

THE MARKETING ENVIROMENTTHE MARKETING ENVIROMENT

Chapter -2

MARKETING ENVIRONMENTMARKETING ENVIRONMENTAll companies operate with in a marketing environment.

Micro Environment

Macro Environment

Micro EnvironmentMicro EnvironmentFive Components

Internal Environment

Marketing Intermediaries

Group of Customer

Competitors

Group of publics

Macro EnvironmentMacro Environment

Demographic Environment

Economic Environment

Natural Environment

Technological Environment

Political Environment

Cultural Environment

CO’S MKTG PROGRAMME

R & D

FINANCIALRESOURCES

HUMAN

RESOURCE

CO’SIMAGELOCATION

PRO-DUCTIONFACILITIES INTER

MEDIARIES

MARKET

COMPETITION

ECONOMIC CONDITIONS

DEMOGRAPHY

SUPPLIERS

INTERNEDIARIES

SOCIAL &CULTURALFORCES

POLITICAL &LEGAL FORCES

TECHNOLOGY

A COMPANY’S COMPLETE MARKETING ENVIRONMENT

THE BUSINESS CYCLETHE BUSINESS CYCLE•Prosperity (Boom)•Recession ( Slow Down)•Depression (Bust)•Recovery (Upswing)

STYLES FASHIONS FADS

STYLE

FASHION

FADS

BASIC AND DISTINCTIVE MODE OFEXPRESSIONCLOTHING – FORMAL VS. CASUAL

CURRENTLY ACCEPTED OR POPULARSTYLE IN A GIVEN FIELD

FASHION THAT ENTER QUCKLY, PEAK EARLY AND DECLINES VERYFAST

SALES

STYLE

TIME

SALES

FASHION

TIME TIME

FAD

SALES

(A) (B) (C)

PHASE- I INTRODUCTION

•STAGE JUST AFTER THE LAUNCH

•SALES GROWTH SLOW

•PROFITS MAY BE LACKING

•BECAUSE OF:

LOW SALES VOLUME

HIGH DISTRIBUTION ANDPROMOTION EXPENSES

HIGH COST OF MARKETDEVELOPMENT

TYPICAL FEATURES:

HIGH PRODUCT FAILURE RATE LITTLE COMPETITION FREQUENT PRODUCT MODIFICATION HIGH PRODUCTION AND MARKETING COST HIGH DEALER MARGINS

PROMOTION

RAPID SKIMMING

SLOW SKIMMING

RAPIDPENETRATION

SLOWPENETRATION

HIGH

LOW

HIGH LOW

DIFFERENT PRICE/ PROMOTION LEVELS CAN BE COMBINE

PR

ICE

STRATEGY

DEVELOP PRODUCT AWARENESS

INTENSIVE PERSONAL SELLING

SALE TO HIGH INCOME GROUPS

HEAVY SAMPLING / COUPENING FOR CONVE-NIENCE GOODS EDUCATIONAL ADVERTISING +PERSONAL SELLING FOR SPECIALITY PDT.

LIMITED DISTRIBUTION

PHASE – II GROWTH

IF PRODUCT SATISFIED MARKET ….. IT WILL ENTERGROWTH PHASE

SALES GROW AT INCREASING RATE

COMPETITION BUILDS UP FAST

NO. OF DISTRIBUTION OUTLETS GO UP

PROFITS HEALTHY ….. REACH AT PEAKPROMOTION/ SALES RATIO GO DOWN

STRATEGY

•EFFORT IS TO SUSTAIN RAPID MARKET GROWTH RATE•AND CAPTURING A DOMINANT POSITION

•IMPROVING PRODUCT QUALITY AND ADDING NEW•FEATURES AND MODELS

•MORE PRODUCT EXPOSURE•ENTRY INTO NEW MARKET SEGMENTS•AGGRESSIVE DISTRIBUTION STRATEGY

•SWITCH FROM CATEGORY RELATED PROMOTION TO•BRAND PROMOTION

PHASE – III MATURITY

LONGEST STAGE OF PLC MOST PRODUCTS … IN THIS STAGE MOST MARKETING STRATEGIES FOR MATURE PRODUCTS

THREE SUB- STAGES:

•GROWTH MATURITY

•RATE OF SALES GROWTH BEGINS TO DECLINE BECAUSE OF DISTRIBUTION SATURATION

•FULLEST POSSIBLE TAPPING OF MARKETALREADY OVER

STABLE MATURITY

SALES FLATTEN ON PER-CAPITA BASISFUTURE SALES – BY POPULATION GROWTHAND REPLACEMENT DEMAND

DECAYING MATURITY

•ABSOLUTE LEVEL OF SALES STARTS DECLINING

•CUSTOMERS MOVE TO RIVAL PRODUCTS/SUBSTITUTES

GENERAL FEATURES:

CUT- THROAT COMPETITION

PROFIT – EROSION

WEAK AND MARGINAL COMPETITORS DROP OUT

STRONG COMPETITORS TRY FOR COMPETITIVE ADVANTAGE

PRICES AND PROFITS CONTINUE TO FALL

DEALERS MARGINS SHRINK AND RELUCTANCE TO PUSH THE PRODUCTS

BASIC STRATEGIES IN MATURITY STAGE

(A) MARKET MODIFICATION

•LIFE OF PRODUCT CAN BE EXPANDED BY MARKETSTRETCHING•CONCENTRATING ON MARKET SEGMENTS YETUNTAPPED•STIMULATING INCREASED USAGE AMONGCURRENT USERS•PROMOTING MORE VARIED USAGE AMONGCURRENT USERS

- INCREASING NO. OF USE SITUATIONS USE OF BOROLINE FOR MANY PURPOSES

REPOSITIONING THE BRAND

CHANGING THE CUSTOMER’S PERCEPTIONS OF THE PLACE A PRODUCT OR BRAND OCCUPIES INA GIVEN MARKET

MILKMAID

JOHNSON’S BABY LOTION

COMPLAN

CHOCOLATE – CADBURY’S

(B) THE PRODUCT MODIFICATION

PRODUCT RELAUNCH TO BOOST UP SALES

QUALITY IMPROVEMENTINCREASING FUNCTIONAL PERFORMANCE OFPRODUCT – DURABILITY, RELIABILITY ETC.

AMBASSADOR

PREMIERPADMINI

AMBASSADOR- NOVA

NEW LATCHESUPHOLSTRY, ETC.

FEATURE IMPROVEMENT

ADDING UP NEW FEATURES THAT EXPANDSPRODUCT’S VERSTALITY, SAFETY, OR CONVENIENCE

FORHAN’SCOLGATE

FORHAN’S FLOURIDE

COLGATE FLOURIGUARD

ONE PROBLEM: FEATURES HIGHLY IMITABLE

STYLE IMPROVEMENT

INCREASING AESTHETIC APPEAL IN CONTRASTTO FUNCTIONAL APPEAL

CHANGE IN COLOR / TEXTURE / PACKAGE

(C) MARKET – MIX MODIFICATION

•SALES STIMULATION BY ALTERING MARKETING•MIX

•SLASHING PRICES TO ATTRACT NEW CONSUMERS

•MORE EFFECTIVE ADVERTISING CAMPAIGNS

•HEAVY USE OF SALES PROMOTION TECHNIQUES

•ALTERING DISTRIBUTION - CHANNELS

PROBLEM: ALL METHODS ARE HIGHLY IMITABLE

PHASE-IV DECLINE

WARNING SIGNAL: PERMANENT DROP IN SALESMOST PRODUCTS EVENTUALLY ENTERS IN DECLINE PHASERATE OF DECLINE DEPENDS ON:•CHANGE IN CONSUMERS’ TASTES AND ADOPTION•OF SUBSTITUTE PRODUCTS

•TECHNOLOGICAL INNOVATIONS DEVELOPMENT•OF EFFECTIVE SUSTITUTES

DECLINING DEMAND …. FORCE MANY COMPETITORS OUT OF MARKET

PROMOTION BECOMES SELECTIVE LESS EXPOSURE

STRATEGY IN DECLINE PHASE

IDENTIFY WEAK PRODUCTS THROUGH COMPREHENSIVE MARKETING RESEARCH

DETERMINE APPROPRIATE RESPONSE:

TO STAY ON OR

TO DROP THE PRODUCT

IF DECISIONS IS TO STAY:

THREE OPTIONS:

(A) CONTINUATION STRATEGY

- CONTINUE PAST PRACTICES

(B) CONCENTRATION - CONCENTRATE RESOURCES IN STRATEGY STRONGEST MARKETS

(C) HARVESTING - REDUCING EXPENSES TO STRATEGY INCREASE PROFITS

IF DECISION IS TO DROP:

-WHEN PRODUCT’S RATING FAIL TO MEET COMPETITION ON CERTAIN KEY CRITERIA

OPTION

DROPPING ITCOMPLETELY

SELLING OR TRANSFERING IT TOOTHER COMPANY

TYPES OF MARKET STRUCTURETYPES OF MARKET STRUCTUREPure Competition

◦ Many Small Buyers , Small Buyers, Homogeneous Product,◦ Easy Entry & Exit, Perfect information

Monopolistic Competition◦ Many Sellers & buyers and each is offering something different.◦ No close subsitute

Oligopoly◦ Few large independent firms account for bulk of the industry sales◦ Each oligopolist has vast industry customers.◦ Action of one firm tend to directly affect the others in the industry.◦ Each firm tries to anticipate what the others will do.

Pure Monopoly◦ It’s the opposite of pure competition

MARKETING MARKETING MANAGEMENTMANAGEMENT

Chapter - 3

THE BCG GROWTH-SHARE MATRIXTHE BCG GROWTH-SHARE MATRIX

Stars: High growth high share businesses or productsrequire heavy investmenteventually they will become cashcows.

Cash Cows: high share pproducts less investment to hold their market shareand provides the company with the money to support other SBUs (Strategic Business Unit)

Question Marks: High Growth, they require a lot of resources to hold their market sharemanagement has to decide which Q mark can become stars & which should be phased out.

Dogs: Low growth low share SBUs They may generate enough money to sustain themselves, but cannot contribute to the corporate kitty.

MARKETING AS MARKETING AS DECISION MAKING AND DECISION MAKING AND INFORMATION INFORMATION GATHERINGGATHERING

Chapter - 4

MARKETER’S PROBLEMSMARKETER’S PROBLEMSMarketers need to find solution of two problems

•Determining Goals

•Developing Plans to achieve them

Marketing Information Systems (MIS)

It’s a structured and interacting complex of persons, machines and procedures designed to generate an orderly flow of pertinent information collected from intra- and extra company resources, for use as the basis for decision making in specific responsibility areas of marketing management.

MARKETING INFORMATION SYSTEMMARKETING INFORMATION SYSTEM

Define the Problem or opportunity.

Is the value of Additional information worth the cost?

Make Decisions

Gather Additional Information

Available Informationye

s

no

External DataState of the EconomyPolitical EnvironmentCompetitive Situation

Customer Data

Internal DataSalesCosts

Marketing ObjectivesMarketing Research

Marketing Mix

Data BankData Processing

Information Bank

Gather, Store, Retrieve Data

Evaluate, Disseminate Information

Process, Analyses Data

MIS

MARKET RESEARCHMARKET RESEARCH

“The systematic gathering and recording and analysing of data about problems relating to the marketing of

goods and services.”

THE CONSUMER RESEARCH PROCESSTHE CONSUMER RESEARCH PROCESS

DEVELOP OBJECTIVES

COLLECTSECONDARY DATA

DESIGN QUALITATIVE RESEARCH•METHOD•SCREENER QUESTIONNAIRE•DISCUSSION GUIDE

DESIGN QUANTITATIVE RESEARCH•METHOD•SAMPLE DESIGN•DATA COLLECTION INSTRUMENT

EXPLORATORY STUDY

CONDUCT RESEARCH(USING HIGHLYTRAINED INTERVIEWERS)

ANALYZE DATA (SUBJECTIVE)

PREPARE REPORT

COLLECT PRIMARY DATA (USUALLY BY FIELD STAFF)

ANALYZE DATA (OBJECTIVE)

PREPARE REPORT

THE MARKETING RESEARCH THE MARKETING RESEARCH PROCESSPROCESS

1) Identify & Define the Problem/Opportunity.2) Conduct a Preliminary Exploration.3) Determine the Research Process.4) Determine Data Needs5) Determine Data Sources.6) Create the Research Design A) Functional Categories

i) Exploratory Researchii) Descriptive Researchiii) Casal Researchiv) Predictive Research.

B) Methodological Categoriesi) Historical Researchii) Survey Researchiii) Experimental Researchiv) Motivational Research

7) Collect the Data A) Primary Data B) Secondary Data8) Analyse the Data and convert to Information9) Communicate the information.

Defining the problem and Research Objectives

A marketing research project might have one of threetypes of objectives. The objective of exploratoryresearch is to gather preliminary information thatwill help define the problem and suggest hypotheses.The objective of descriptive research is to describethings such as the market potential for a product orthe demographics and attitudes of consumers whobuy the product. The objective of casual research isto test hypotheses about cause-and-effectrelationship.

ANALYZING CONSUMER ANALYZING CONSUMER BEHAVIOURBEHAVIOUR

Chapter - 5

Consumer BehaviourConsumer Behaviour•The Behavior that consumer display in searching for purchasing using evaluating & disposing of products and services that they expect will satisfy their needs.

•Study of how individuals make decisions to spend their available resources (Time….Money…Effort) on consumption related items.

The Substance of The Substance of MarketingMarketing

Want To Enter the Watch Business!!!

You Must Make A Set Of Important (Marketing Related) Decisions!!!

WHAT ARE THESE DECISIONS???

The Probable Decisions are…!!!The Probable Decisions are…!!!

To which consumer should I sell my watches?

How should I define the consumer I hope to serve? Should I think in terms of geography, perhaps the country in which my consumer lives? Or may be the consumer’s income or sex or fashion orientation is more important?


Should I sell direct to consumers or through stores, and if through stores, what type of stores?Do I want to offer my product in several types of outlet or only in one type?How do I select and service the particular outlets I Chose?Finally, How do I convince the store to carry my brand?


How should I communicate to the consumers to whom I wish to sell?Do I use advertising, and if so in what media?How do I reach the stores? Do I use sales people?Should the salespeople visit the stores or should they just telephone them?

FRAMEWORK FOR ANALYZINGCONSUMER BEHAVIOUR

ENVIRONMENTAL ANDINDIVIDUAL ANFLUENCES

BUYERDECISION PROCESS

OUTCOME

TYPEOFBUYINGSITUATION

SOME CONSUMER BEHAVIOUR ROLES

Role Description-----------------------------------------------------------------------Initiator The person who determines that some need

or want is not being met.

Influencer The person who intentionally/unintentionally influencesthe decision to buy the actual purchase and/or use of product or service.

Buyer The person who actually makes the purchase.

User The person who actually uses or consumes theproduct or service.

Studying consumer behaviour

PURCHASING PROCESS

INFORMATION SERACH & EVALUATION

FEEDBACK

DECISION PROCESS

PROBLEM RECOGNITION

POST PURCHASE BEHAVIOUR

INDIVIDUAL DETERMINANTS

INFORMATION PROCESSING` MOTIVATION & INVOLVEMENT

ATTITUDES PERSONALITY & SELF-CONCEPT

LEARNING & MEMORY

EXTERNAL ENVIRONMENT

CULTURAL INFLUENCES SUBCULTURAL INFLUENCES

OTHER INFLUENCES

PERSONAL INFLUENCES

FAMILY INFLUENCES

SOCIAL GROUP INFLUENCES`

SOCIAL CLASS INFLUENCES

FACTORS INFLUENCING CONSUMER FACTORS INFLUENCING CONSUMER BEHAVIOURBEHAVIOUR

CultureSub-CultureSocial Class

CULTURAL

ReferenceGroupsFamilyRolesStatus

SOCIAL

Age & Life CycleStage

OccupationEconomics

CircumstancesLife Style

Personality & Self

PERSONAL

MotivationPerceptionLearningBeliefs

Attitudes

PSYCHOLOGICAL

BUYER

SOCIAL CLASSESSOCIAL CLASSESUpper-UpperLower-UppersUpper-MiddlesMiddle ClassWorking ClassUpper LowersLowers Lowers

FAMILY LIFE CYCLEFAMILY LIFE CYCLE

FOUR TYPES OF BUYER BEHAVIOURHENRY ASSEL 2X2 MATRIX

SIGNIFICANTDIFFERENCESBETWEENBRANDS

FEWDIFFERENCESBETWEENBRANDS

HIGH INVOLVEMENT LOW INVOLVEMENT

COMPLEXDECISION MAKING

IMPULSE PURCHASING

BRANDLOYALTY

INERTIA

MEDICAL SERVICESAUTO,FINANCIALPLANNING SERVICES

CEREALS SNACKS

PERFUMESCIGARETTEBEVERAGES

LIGHT BULBESSOAPS

TYPES OF PURCHASE DECISION

CONSUMER BUYINGDECISION PROCESS

PROBLEMRECOGNITION

INFO.SEARCH

EVALUATIONBEHAVIOUR

PURCHASEDECISION

POST-PURCHASEBEHAVIOUR

ORGANIZATIONAL ORGANIZATIONAL BUYING BEHAVIOURBUYING BEHAVIOUR

Chapter - 6

Key Linkages

External Environment Internal Organization

External Linkages Internal Linkages

Customer Marketing Manufacturing

Derived DemandComplex Buying Process

Concentrated Customer base

Emphasis on Technology High Level of Customization

Made to Order

INDUSTRIAL MARKETINGINDUSTRIAL MARKETING“The decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate and choose among alternative brands & suppliers.”

CONTRASTING INDUSTRIAL MARKETING & CONTRASTING INDUSTRIAL MARKETING & CONSUMER MARKETINGCONSUMER MARKETING

` INDUSTRIAL MARKETS CONSUMER MARKETS

Market structure geographically concentrated dispersedFewer buyers mass marketsOligopolistic competition Monopolistic

competitionProducts Technical complexity Standardised

CustomisedService, delivery and availabilityVery important somewhat important

Buyer behavior functional involvement family involvementRational/task motives dominate social/psychological

motives predominatetechnical expertise less tech expertisestable interpersonal relations nonpersonal relationsreciprocity

Decision making distinct, observable stages Unobservable, mental Stages

Channels Short, More direct, Fewer linkages Indirect, Multiple linkages

Promotion emphasis on personal selling emphasis on advttg.Price Competitive bidding list prices

Negotiating on complex purchasesList prices on standard items

ORGANISATIONAL CUSTOMERORGANISATIONAL CUSTOMER

Raw materialExtraction

MaterialProcessing

Manufacturing ofparts andAssembly

Finalassembly

Distri-bution

Stage 1 Stage 2 Stage 3 Stage 4 Stage 5

The chain Indicative of the Zone of the Organisational Customer

ORGANIZATIONAL BUYING ORGANIZATIONAL BUYING BEHAVIOURBEHAVIOUR

OrganizationalBuyer

Individual* Age* Income* Education* Job Position* Risk Attitude

Interpersonal

* Authority* Status* Empathy* Persuasiveness

Organizatioanl

* Objectives* Policies* Procedures* Organizational structure* System

ExternalEnvironment

* Economic* Infrastructural* Social* Political* Competition* Regulatory

INDUSTRIAL MARKETINGINDUSTRIAL MARKETINGTHE INDUSTRIAL CUSTOMERS BUYER MOTIVES

The Industrial Buyer Is Motivated By Budgetary Considerations Like Profit Goals, Expense

Quotas And The Cost Benefit Guidelines.

The Major Objective Variables Derived From The Above Are

QUALITY : Consistency Which Can Also Result In The Savings On The Inventory, Standardisation

SERVICE : Products And Materials, Technical, Sales & Replacement Parts, Delivery, Information.

PRICE : Evaluated Price / Perceived PricesSAVINGS : Motivation Provided By Savings Even More In The

Accelerating Costs Times

ASSURANCE OF : The Confidence On Timely SuppliesSUPPLYBUYER : Personal Feelings And Emotions As Well As Some

ExtraneousTEMPERAMENT Important Factors

The Reseller MarketThe Reseller MarketUtilities Produced :-

Time Place Possession

Buying Decisions in Reseller Make•What Assortment to carry?•What Vendors to buy from•What prices & terms to negotiate?

Assortment StrategiesExclusive AssortmentsDeep AssortmentBroad AssortmentScrambled Assortment

MARKET SEGMENTATIONMARKET SEGMENTATION

Chapter - 7

MARKETERS-MARKETMARKETERS-MARKETTo the marketer, the term market means:-

1. People ( as individuals or members of an organization.)

2. People with Desires

3. People with willingness and ability (Buying power) to satisfy their desires.

4. People who can become customers because they have been authorized to buy.

STRATEGIES FOR IDENTIFYING TARGET STRATEGIES FOR IDENTIFYING TARGET MARKETSMARKETS

Mass Market StrategyOrganization’s Single

Marketing MixMass

Market

Concentration StrategyOrganization’s Single

Marketing Mix

Organization’s Several Marketing Mixes

Multi Segment Strategy

ABCD

ABCD

EFGH

EFGH

MarketSegmentati

on

MarketSegmentati

on

THE CONCENTRATION STRATEGYTHE CONCENTRATION STRATEGYAdvantages

1. Can thoroughly research the segment’s wants and run a much lower risk of not being able to satisfy its target market.

2. Long productions run may be possible.

3. Distribution, promotion and price can be keyed to satisfy one segment.

Disadvantages

1. The organizational cannot spread its risk. Thus, a decline in the selected segment’s buying power, or a change in taste or the entry of rivals can have a negative impact on profitability.

2. Sometimes a firm that focuses exclusively on one segment develops a specialist image in that segment. As a result it may encounter difficulties in directing its efforts to other segments.

MULTI-SEGMENT STRATEGYMULTI-SEGMENT STRATEGYAdvantages

1. Can serve a greater number of potential consumers.

2. Can utilize excess capacity to serve additional segments.

Disadvantages

1. The Organizations may spread itself too thinly as a result.

2. Productions costs may go up

3. Marketing costs also tend to go up.

SEGMENTING CONSUMER SEGMENTING CONSUMER MARKETSMARKETS

GEOGRAPHY DEMOGRAPHICS PSYCHO-GRAPHICS

PRODUCT RELATED CONSUMER CHARACTERISTICS

POTENTIAL

CONSUMER

SEGMENTS

Nation/ Region

State/ Region

City/ Nbhrhd

Climate/Terain

Population

Density

Mkt Density

Age, Sex, Buying

Power, Expenditure

Patterns, Occuptn, Eductn, Race, or Nationality, Family Life Cycle

Social Class

Personality

Life Style

Amount of Usage

Types of usage

Brand Loyalty

Benefits Soughts

TARGETED MARKETINGTARGETED MARKETING

Chapter - 8

DEVELOPING MARKETING DEVELOPING MARKETING STRATEGYSTRATEGY

1. Define the relevant market2. Analyze characteristics and wants of potential

customers.3. Identify bases for segmenting the market4. Define and describe market segments.5. Analyze competitor’s positions6. Evaluate market segments7. Select the market segment (s)8. Finalize the marketing mix (es)

123

1) Segmentation consists of marketers identifying & profiling distinct groupsof buyers who require separate market offerings

2) Targeting consists of selecting one or more of these segments.

3) Positioning consists of establishing& communicating the products key distinctive benefits in the market

SALES FORECASTING METHODSSALES FORECASTING METHODS1) Simple Trend Analysis

2) Correlation Methods

3) Executive Judgment

4) Sales Force Composite

5) Surveys of Buyers Intentions

6) Market Tests

7) Substitute Method

The Four Ps: The ToolsThe Four Ps: The Tools

MarketingMix

Product

Price Promotion

Place

The Four Cs: The EndsThe Four Cs: The Ends

CustomerSolution

CustomerCost

Communication

Conven-ience

The Other 4Cs: The The Other 4Cs: The ParticipantsParticipants

Company

Consumer Channel

Competitors

The Participants

Marketing’s Tools: The Marketing Marketing’s Tools: The Marketing MixMix

ProductGood, Service, Idea, Place, Person

ProductGood, Service, Idea, Place, Person

PriceAssignment of Value

PriceAssignment of Value

PlaceAvailability of Product

PlaceAvailability of Product

PromotionActivities to Inform Consumers

PromotionActivities to Inform Consumers

Tools that Are Used Together to Create a Desired Response Among a Set of Defined Customers

Tools that Are Used Together to Create a Desired Response Among a Set of Defined Customers

THE MARKETING MIXTHE MARKETING MIX

Chapter - 9

THE PRODUCT/ MARKET THE PRODUCT/ MARKET EXPANSION GRIDEXPANSION GRID

Nuts &boltsNuts &bolts

Marketer creates the product that will meet the identified needs of the consumer.

Carries out function as transportation so that the product can conveniently reach the consumer.

Price that is acceptable to the consumer. Communicates the benefits of the offer.

Sole Vehicle for Creating Customer Sole Vehicle for Creating Customer ValueValue

James Culliton coined the term Marketing Mix as marketing mgr is a mixer of ingredients.

Jerome Mccarthy the American professor first described the marketing mix in terms of 4 P’s.

MARKETING MIXMARKETING MIX

4Ps 4Cs

Product Customer needs & wants

Price Cost to the Company

Place Convenience

Promotion Communication

MARKETING MIX

MARKETING MIX

TARGETMARKET

PRODUCT PLACE

QualityFeaturesOptionsStyleBrand NamePackagingSizesServicesWarrantiesReturns

ChannelsCoverageLocationsInventoryTransport

PRICE PROMOTION

List PriceDiscountsAllowancesPayment PeriodCredit terms

AdvertisingPersonal SellingSale promotionPublic Relations

The Four Ps of the Marketing Mix

MARKETING MIX STRATEGYMARKETING MIX STRATEGY

Offer Mix

ProductsServicesPrices

Company

Promotion Mix

Channels Customers

SalesPromotion

Advertising

Sales force

Publicrelations

Direct mail andtelemarketing

Environmental Variables Of MarketingEnvironmental Variables Of Marketing

CompetitionConsumerGovernment of the landForces of natureMM can control the marktg mix but not

these.He can not dictate what the competitor

should or should not do.Environmental Variable is also known as non

controllable variables & Marktg Mix is controllable variables

Marketing can basically be looked upon as interaction between the MarktgMix & EV.

MMix elements can be combined in an infinite number of ways.

MMix in effect signifies the manner in which the mrktg effort or mrktg budgets distributed.

MMix expressed in Rs terms becomes the marketing budget.

PRODUCTPRODUCT

Chapter - 9

THREE LEVELS OF PRODUCTTHREE LEVELS OF PRODUCT

Corebenefit

or service

Packaging

Brand Features name

Quality Styling

Warranty

After Sale service

Delivery and credit

Installation AugmentedProduct

TangibleProduct

CoreProduct

PRODUCTS CLASSIFICATION PRODUCTS CLASSIFICATION SYSTEMSSYSTEMS

Consumer Products◦“ Used by ultimate consumers or households and can be used

without any commercial processing”

Industrial Products◦“Sold Primarily for use in producing other goods or

rendering services”

MaggieMaggieBas 2 mints, Fast to cook & good to eat.

Health bhi taste bhi no MSG groupMaggie is Nestle Flagship brand& globally

alsoMaggie came to India 25 years ago1983 as

2mts noodles In the80s market was beginning to change with the noodles category& consumer fancy was Chinese Noodles.Maggie understood what was happening with the consumer.

Key need for a product that provides good quality & convenience.This allowed mother to add her own inputs like vegetables.

Tagline fast to cook & good to eat was also to educate the consumer about the advantages of using it.

The jingle for the Maggie was was pretty catchy & went down well with Children

In some areas they were ahead of their times like the launch of sweet noodles.

Not that everything always workbut what pulled them through is the fact that they have been able to be ahead of their times.

Nestle gauged the needs & requirements of the consumer in depth.

Evolve the instant noodles categorywhile retaining the companys DNA focus of wellness & nutrition.

Improving further the goodness Quotient in the products

Company moved away from not so healthy maida to Atta & Rice noodles.

Also enriched traditional range with Protien & Calcium

Push was mainly on Taste bhi health bhi

After noodles it launchedKetchup& maggie hot N sweetsNestle world widespends a lot of money on

research & development in terms of taste health & convenience.

CONSUMER PRODUCT CONSUMER PRODUCT CLASSIFICATIONSCLASSIFICATIONS

Consumer Products

Convenience Products

Specialty Product

Unsought Product

Shopping Product

Staples Impulse EmergencyHomogeneou

s Heterogeneou

sRegularly New

SERVICESSERVICESCharacteristics of Services

1) Sold Exclusively on the basis of benefits

2) Can not produce in anticipation of demand.

3) Time Utility is crucial

4) Cannot be produced in one location for consumption in another.

5) Perishing upon offering

6) Once consumed it can not be returned to seller.

7) Quality control.

Product Mix & Product LineProduct Mix & Product Line

They are two expressions denoting the range & variety of the products of the firm.

Product mix- Denotes the complete set of all products offered for sale by a company

Product Line- It is the number of item brands in the line. Line stretching is a measure firms under take frequently in to enter a new price slot & a new market segment.

Eg HLL, Ariel , Parker , Prestige ,

PRODUCT MIXPRODUCT MIX

WidthWidth - number of different

product lines

LengthLength - total number of itemswithin the lines

Depth Depth - number of versions of each product

Product Mix - Product Mix - all the product

lines offered

Co

nsi

sten

cy

NEW PRODUCT NEW PRODUCT DEVELOPMENT DEVELOPMENT AND AND LIFE CYCLE STRATEGIESLIFE CYCLE STRATEGIES

Chapter - 10

STAGES IN NEW PRODUCT STAGES IN NEW PRODUCT DEVELOPMENTDEVELOPMENT

SIX CATEGORIES OF NEW PRODUCTSSIX CATEGORIES OF NEW PRODUCTS

New-to-the-world product.

New-product line.

Additions to existing product lines.

Improvements in/revisions to existing products.

Repositioning.

Cost reductions.

MARKETING CHANNELSMARKETING CHANNELS

Chapter - 12

MARKETING CHANNELSMARKETING CHANNELSMarketing channels can be viewed as sets of interdependent organizations involved in the process of making a product or service available for use of consumption.

Functions and Flows

Information Promotion Negotiation Ordering Financing Risk Taking Physical Possession Payment Title

NUMBER OF CHANNEL LEVELSNUMBER OF CHANNEL LEVELS

Zero-level channel (M-C)

One-level channel(M-R-C)

Two-level channel(M-W-R-C)

Three-level channel(M-W-J-R-C)

Man

ufac

ture

rRetailer

JobberWholesaler

Wholesaler Retailer

Retailer

(a) Consumer marketing Channels

Con

sum

er

NUMBER OF CHANNEL LEVELSNUMBER OF CHANNEL LEVELS

Manufacturer Industrial consumer

Industrialdistribution

Manufacturer’s representative

Manufacturer’s sales branch

(b) Industrial marketing channel

CHANNEL-DESIGN DECISIONSCHANNEL-DESIGN DECISIONS

Analyzing Consumer Needs for Service Outputs

Lot sizeWaiting timeSpaital convenience Product variety

Establishing the channel Objectives and Constraints

Product CharacteristicsMiddlemen

CharacteristicsCompetitive

CharacteristicsCompany CharacteristicsEnvironmental

Characteristics

CHANNEL PLANNINGCHANNEL PLANNINGThe Types of Middlemen

◦Dual Distribution◦Facilitating Distribution

Determining the Number of Middlemen◦Intensive Distribution◦Selective Distribution◦Exclusive Distribution

Determining which specific middlemen to use

Determining how to motivate middlemen

WHOLESALINGWHOLESALINGNature and Importance :Wholesaling includes all activities involved in selling goods or service to those who buy for resale or business use.

Function of Wholesalers

•Selling and promoting•Buying and assortment building•Bulk-breaking•Warehousing•Transportation•Financing•Risk bearing•Market information•Management services and counseling

TYPE OF WHOLESALERSTYPE OF WHOLESALERS

FULL-SERVICE WHOLESALERSWholesale merchantsIndustrial distribution

LIMITED-SERVICE WHOLESALEERS

Cash-and-carry wholesalersTruck wholesalersProducers’ cooperativesMail-order wholesalers

PHYSICAL PHYSICAL DISTRIBUTIONDISTRIBUTION

Chapter - 13

PHYSICAL DISTRIBUTIONPHYSICAL DISTRIBUTIONIt Involves

1) Moving raw material from their source destination to the beginning of the production process.

2) Moving raw materials, semi finished products & finished products through warehouse

3) Moving finished products to Middleman or final buyers as required.

THE SUBSYSTEMS OF PDTHE SUBSYSTEMS OF PDWarehousing

◦ Number◦ Location◦ Size

Inventory Control◦ Order Timings◦ Order Quantity

Materials Handling

Order Processing

Transportation

MODES OF TRANSPORTATIONMODES OF TRANSPORTATIONRail Roads

Motor Carriers

Air Freight

Pipelines

Water Transportation

PHYSICAL DISTRIBUTIONPHYSICAL DISTRIBUTION

• Transportation

Total cost per unit

Inventory carrying cost per unit

Order-processing cost per unit

Q*

Order Quantity

Cos

t per

Uni

t (R

upee

s)

Determining OptimalOrder Quantity

THE PROMOTION THE PROMOTION EFFORTEFFORT

Chapter - 14

THE COMMUNICATION PROCESS

Noise

ResponseFeedback

Message

Media

Sender Encoding Decoding Receiver

PositioningPositioning

◦Positioning is the platform for the brand◦Positioning is the fact of fixing locus of the

product offer in the minds◦Al Ries & Jack Trout “ Positioning is what you do

to the mind of the prospect.That is you position the product to the mind of the prospect.”

◦To create a perception of brand in consumers mind

MARKETING COMMUNICATIONMARKETING COMMUNICATION

Major toolsAdvertisingSales promotionPublicityPersonal sellingPackagingPublic Relation

COMMON COMMON COMMUNICATION/PROMOTION COMMUNICATION/PROMOTION TOOLSTOOLS

--------------------------------------------------------------------------- Sales Personal

Advertising Promotion Publicity Selling

---------------------------------------------------------------------------Print and Contests,games Press kits Sales presentationsbroadcast ads sweepstakes, Speeches Sales meetingsPackaging-outer lotteries Seminars TelemarketingPackaging inserts Premiums and gifts Annual reports Incentive programsMailings,Catalogs Sampling Salesmen samplesMotion pictures Fairs and trade show donations Fairs and trade showsHouse magazines Exhibits Public relationsBrochures and Demonstrationsbooklets Couponing,RebatesReprints of ads Low-interest financingBillboards EntertainmentDisplay signs Trade-in allowancesPoint-of-purchase Trading stampsdisplay Tie-insAudiovisulas material

Symbols and logos

OBJECTIVES OF PROMOTIONAL OBJECTIVES OF PROMOTIONAL ACTIVITIESACTIVITIES

1) Creating Awareness

2) Providing Information

3) Explaining Company Actions

4) Inducing Product Trials

5) Inducing Middlemen to Stock Product

6) Retaining Loyal Customers

7) Increasing Amount & Frequency of use

8) Learning about Customers

9) Reducing Sales fluctuations

ADVERTISINGADVERTISING

Public presentation

Pervasiveness

Amplified expessiveness

Impersonality

Personal sellingPersonal sellingPersonal confrontationCultivationResponse

• Communication• incentive• invitation

• High credibility• Off guard• Dramatization

Sales Promotion

Publicity

Major Decisions in Advertising Major Decisions in Advertising ManagementManagement

Objectives settingCommunication Objectives Sales Objectives

Budget decisions

Affordable approach Percent of sales Competitive parity Objectives and task

Message decision

Message generationMessage evaluation and selectionMessage execution

Media decision

Reach, frequency, impact Major media typesSpecific media vehicles Media timing

Advertising evaluation

Communication impact Sales impact

PRICE DETERRMINATIONPRICE DETERRMINATION

Chapter - 15

NINE MARKETING-MIX STRATEGY ON NINE MARKETING-MIX STRATEGY ON PRICEPRICE

1. Premium Strategy

2. High-value Strategy

3. Superb-value Strategy

4. Overcharging Strategy

5. Average Strategy

6. Good-value Strategy

7. Rip-off Strategy

8. False economy Strategy

9. Economy Strategy

High Medium Low Price

High

Medium

Low

Pro

duct

Qua

lity

SELECTING THE PRICE OBJECTIVESELECTING THE PRICE OBJECTIVESurvival

Maximum Current Profit

Maximum Current Revenue

Maximum Sales Growth

Maximum Market Skimming

Product-Quality Leadership

DETERMINING DEMANDDETERMINING DEMAND1. Unique value effect. Buyers are less price-sensitive when the

product is more unique.2. Substitute awareness effect. Buyers are less price-sensitive

when they are less aware of substitutes.3. Difficult comparison effect. Buyers are less price-sensitive

when they cannot easily compare the quality of substitutes.4. Total expenditure effect. Buyers are less price-sensitive the

lower the expenditure is as a ratio to their income.5. End-benefit effect. Buyers are less price-sensitive the less the

expenditure is to the total cost of the end product.6. Shared cost effect. Buyers are less price-sensitive when part of

the cost is borne by another party.7. Sunk investment effect. Buyers are less price-sensitive when

the product is used in conjuction with assets previously bought.8. Price-quality effect. Buyers are less price-sensitive when the

product is assumed to have more quality, prestige, or exclusiveness.

9. Inventory effect. Buyers are less price-sensitive when they cannot store the product.

INELASTIC AND ELASTIC INELASTIC AND ELASTIC DEMANDDEMAND

P1

P2

P’2

P’1

Q’2 Q’1 Q2 Q1

Pri

ce

Quantity Demanded per Period Quantity Demanded per Period (a) Inelastic demand (b) Elastic demand

D

D

PRICING METHODPRICING METHOD

Low Price-------------No possible profit atthis price

High Price-------------No possible demand at this price

Competitor’s prices UniqueProduct and product costs prices of substitutes features

Major Considerations in Setting a Price

1,200

1,000

800

600

400

200

0 10 20 30 40 50 (Sales Volume in unit ‘0000)

}Target Profit

Total revenue

Total Cost

Fixed Cost

Break-even Chart for Determining Target Return Price & Break-Even Volums

D o

l l o

r s

(

I n

`0

0 0

)

Promotional Pricing & Discriminatory Promotional Pricing & Discriminatory PricingPricing

PROMOTIONAL PRICING

Special event pricing

Cash rebatesLow-interest

financingPsychological

discounting

DISCRIMINATORY PRICING

Customer-segment pricing

Product-form pricing

Image pricingLocation pricingTime pricing

HOW TO ADD VALUE THROUGH HOW TO ADD VALUE THROUGH DIFFERENTIATED PRICINGDIFFERENTIATED PRICING

Plan forpremium pricing

Set pricewell above highestprice-point

Ensurematching value

Determine product benefits

Check whether extraordinary pricing is possible

Planpredatory pricing

Set pricewell below lowestprice point

Ensurematchingbenefits

Convey pricedifferential

Reinforce positioning throughmarketing mix

Ensureincrease in customer value

BREAKEVEN ANALYSISBREAKEVEN ANALYSIS

Absorption CostingAbsorption Costing

All costs incurred are allocated to particular cost centres – direct costs, indirect costs, semi variable costs and selling costs

Allocates indirect costs more accurately to the point where the cost occurred

Marginal CostingMarginal Costing

The cost of producing one extra unit of output (the variable costs)

Selling price – MC = Contribution

Contribution is the amount which can contribute to the overheads (fixed costs)

Total RevenueTotal Revenue

Total RevenueTotal Revenue

Total Revenue = Price x Quantity SoldPrice can be raised or lowered to change revenue –

price elasticity of demand important here◦Different pricing strategies can be used – penetration,

psychological, etc.

Quantity Sold can be influenced by amending the elements of the marketing mix – 4Ps

Break EvenBreak Even

Break Even AnalysisBreak Even Analysis

Costs/Revenue

Output/Sales

Initially a firm will incur fixed costs, these do not depend on output or sales.

FC

As output is generated, the firm will incur variable costs – these vary directly with the amount produced.

VC The total costs therefore (assuming accurate forecasts!) is the sum of FC+VC

TC Total revenue is determined by the price charged and the quantity sold – again this will be determined by expected forecast sales initially.

TR The lower the price, the less steep the total revenue curve.

TR

Q1

The break even point occurs where total revenue equals total costs – the firm, in this example, would have to sell Q1 to generate sufficient revenue to cover its costs.

Break Even AnalysisCosts/Revenue

Output/Sales

FC

VCTCTR (p = £2)

Q1

If the firm chose to set price higher than £2 (say £3) the TR curve would be steeper – they would not have to sell as many units to break even

TR (p = £3)

Q2


Output/Sales

FC

VCTC

TR (p = £2)

Q1

If the firm chose to set prices lower (say £1) it would need to sell more units before covering its costs.

TR (p = £1)

Q3


Output/Sales

FC

VC

TCTR (p = £2)

Q1

Loss

Profit


•Importance of Price Elasticity of Demand

•Higher prices might mean fewer sales to break even but those sales may take a longer time to achieve

•Lower prices might encourage more customers but higher volume needed before sufficient revenue generated to break even


Links of break even to pricing strategies and elasticity

Penetration pricing – ‘high’ volume, ‘low’ price – more sales to break even

Market Skimming – ‘high’ price ‘low’ volumes – fewer sales to break even

Elasticity – what is likely to happen to sales when prices are increased or decreased?

PRICE ADMINISTRATIONPRICE ADMINISTRATION

Chapter - 15

DISCOUNTS & ALLOWANCESDISCOUNTS & ALLOWANCES

1) Quantity Discount Cumulative Quantity Discounts Non-Cumulative Quantity Discounts

2) Trade Discounts3) Seasonal Discounts4) Cash Discounts5) Trade-in Allowances6) Damaged good Allowances7) Brokerage Allowances8) Promotional Allowances

PSYCHOLOGICAL PRICINGPSYCHOLOGICAL PRICING

Prestige Pricing

Leader Pricing

Odd Pricing

Competitive Bidding Expected Profit =P (Bid Price – Cost Estimate) P = Probability of winning the bid

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