1. (a) The concept of marketing mix involves a deliberate & careful choice of Organization ,

Product, Price, Promotion & Place, Strategies & Policies.

4 P’s Of Marketing Mix

MARKETING

It can be broadly defined as the study of the performance of sales, distribution,

advertising & sales promotion, planning of product sales & conducting research for demand.

Marketing Mix

Places Channel Coverage Locations Inventory Transport

Promotion Sales promotion Advertising Sales force Direct Marketing

Price List Price Discounts Allowance Payment Period Credit Term

Product Product Variety Quality Design Features Brand Name Packaging Sizes Services Warranties Return

In short, those functions in a business that directly involve contact with the consumer &

assessment of their needs are called marketing.

KOTLER According to Kotler marketing is a social & managerial process by which individuals

&groups obtain what they need & want through creating, offering & exchanging products of value

with others.

FEATURES OF MARKETING

* Marketing is a concept, a way of thinking. It starts where production leaves off.

* The marketing concept assumes that the objective of all business enterprise is to make a return to

those who have invested in it.

* Marketing is a total function & is concerned with activities such as product planning, product

development, product change, pricing & packaging selling & sales promotion & advertising &

marketing research.

* Marketing places its primary emphasis on the profitable satisfaction of consumer’s need by

providing products as a means to the end of satisfying needs.

* In the marketing concept the consumer is at the top of the organization chart.

IMPORTANCE OF MARKETING

* Marketing is the heart of any business organization .Thus, it affects each person’s life .

* Marketing aims at satisfying the needs of customers, accordingly it create utilities of time, place & possession.

* Marketing as a career provides an employment opportunity to various people.

* It helps in developing economic resources of any country.

* Marketing brings regional balances.

* Marketing determines the pattern of consumptions.

* Marketing aims to provide quality products & services , so as to satisfy the customer and ultimately raise their standard of living.

OBJECTIVES OF MARKETING

* To satisfy the needs and wants of customers.

* To determine marketing-mix that aim to satisfy the needs of the customer.

* To generate and create goodwill for the enterprise.

* To raise the standard of living of the people.

* To establish the organization &the methods which will be required.

*Helping one self to decide whether his career shall be marketing.

MARKETING MANAGEMENT

Marketing management is the process of planning and executing the conception, pricing,

promotion and distribution of goods, services and ideas to create exchanges with target groups that

satisfy customer and organizational objectives.

OBJECTIVES

* To satisfy customer.

* To create good image of the organization.

* To increase the quality of life of the people.

* To increase profit for the growth of the business.

* To generate more and more customer base for the business.

* To determine the marketing-mix that will satisfy the needs of customer.

FUNCTIONS

* Determining Objectives The goals like attaining a certain profit or sales target etc. are clearly defined in the marketing management segment.

* Planning After setting the goal the next step is to determine the manner in which these goals are to be achieved.

* Organizing It is the process of arranging activities and people in such a way so that maximum output with highest degree of efficiency can be achieved.

* Controlling Here, the actual performance result, is compared with the standards set if there is any deviation then proper measures should taken to avoid such deviation.

* Staffing This requires selection of human resources to accomplish the objectives of marketing management. Staffing is the most important function of marketing management as proper selection of personnel is the key to eliminate or reduction in management problems.

* Operating This function includes operating a sales force and directing an advertising programme.

* Establishment Of Marketing Policies It is very essential for guiding executives in their decision making on marketing problems that frequently arise.

CONCEPT

* The Marketing Concept The concept emerged in the mid-1950s. Instead of “ make and sell ” philosophy, business shifted to “ sense and respond ’’ philosophy. Therefore, now-a-days marketing is “customer centered ’’ and not “product centered’’. Hence the job is not to find the right customers for the products, but the right products for your customers. The marketing concept emphasizes the determination of the requirements of present and potential customers and supplying products to satisfy their requirements.

* The Selling Concept The concept holds that consumer, if left alone, will ordinarily not buy enough of the organisation’s product. The organization must, therefore, undertake an aggressive selling and promotion effort.

EX : COCA COLA , PEPSI etc. etc.

* The Product Concept According to this concept consumer will favour those products that offer the most quality, performance or innovative features. Managers in these organizations focus on making superior products and improving them over time. However, a new or improved product will not necessarily be successful unless the product is priced, distributed, advertised and sold properly.

* The Production Concept It is one of the oldest concept in business. According to this concept the consumer will prefer products that are widely available and inexpensive. Managers of production oriented business concentrate on achieving high production efficiency, low costs and mass distribution.

EX: The best example is CHINA who were the largest PC manufacturer. They take the advantage of the countries huge inexpensive labour pool. It is also used when a company wants to expand the market.

* The Societal Marketing Concept It holds that the organization’s task is to determine the needs, wants and interests of target market and to deliver the desired satisfactions more effectively and efficiently then competitors in a way that enhances the consumer’s and society’s well being.

Marketing as a ‘Process’

The process of marketing involves an exchange transaction between the buyer in the

seller. In this exchange transaction the development of a long term relationship between buyers and

sellers occurs if the buyer’s gain in the satisfaction on the purchase and subsequent consumption of

the product whereas the seller’s gain in the profit that he/she makes on such a transaction. If the

buyer is not satisfied, then the transaction has been at best, a selling transaction. And if the seller

does not make a profit, then it has been a dumping transaction. To be termed as a marketing

transaction the exchange must result in mutual satisfaction to both the buyer and the seller. The

essence of this is :

(a)Marketing is an exchange process – both buyer and seller must have something to give to each other.

(b) Both the buyer and Seller must gain.

(c) It should result in a long term satisfying relationship between both relationship month is crucial to successful business.

Therefore, it can be concluded that marketing as a process involves –

(a) Understanding the customers interests.

(b) Serving them in such a way that it helps the selling organization to fulfill its objective – profit maximization.

The marketing process is influenced by a No. of factors such as :

(i) Competition

(ii) Govt. rules & policies

(iii) The marketing Environment.

(iv) The social, political, economic & technological forces.

(v) Mass media of communication

(vi) Consumer Advocates

FUNCTIONS OF MARKETING MANAGER

Marketing Action

* Implem

entation

* Control

A Organizational System

* Marketing objectives

* Marketing capabilities

A Stages of Marketing process

Strategy Planning

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* Econom

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* Com

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* Market Selection.

D

In most of the business enterprises, Marketing Department is set up under the

supervision of the Marketing Manager. The major purpose of this Deptt is to generate revenue for

the business by selling want satisfying goods and services to the Customers. In order to achieve

this purpose, this Marketing Manager partners the following functions.

1. Marketing Research :

Marketing research is the systematic search and analysis of facts related to

marketing problem. It helps in analyzing the buyer’s habit, popularity of a product, effectiveness of

advertisements, etc. It provides upto-date information in regular intervals of time regarding

marketing and thus helps in decision making.

2. Product Planning & Development :

It is always necessary to plan and develop products which meet the specifications of

the customers. Product planning and development involves a number of decisions, viz, what to

produce or buy ? How to have its packing ? How to fix its price and how to sell it? etc.

3. Buying & Assembling :

Buying and Assembling are important functions of marketing. Buying is different

from assembling. Buying involves determination of requirements, finding the sources of supply,

placing the order and receiving the goods. But assembling means collection of goods already

purchased from different sources at a common point. It is also used in another sense. Raw-

materials are purchased and assembled in order to produce goods and services as per the need of

customers.

4. Selling :

This is an important function of marketing under which ownership of goods in

transferred from the seller to the buyer. This is done at a price. There are two different forms of

selling, viz. negotiated selling and action selling.

5. Standardization, Grading & Branding :

Standardization means setting up of specifications of a product. Then gradation is

done on the basis of these specifications and standards. At last, a brand name is given to a product

for identification.

6. Packing :

A good package represents a combination of the designer’s creative skills and the

product as well as marketing and sales knowledge of the manufacturer’s management team.

Packaging has become one of the essential services of modern marketing. Now, it is used by the

manufacturer to establish his branded product or distinct from those of rivals. Packaging also gives

protection to the product. Thus, packaging acts as a multi-purpose arrangement.

7. Storage :

Storage of goods in ware houses has become an indispensable services these days.

Goods are stored in ware houses to protect them from any kind of damage till they are actually sold

in the market.

8. Transportation :

It provides the physical means which facilitate the movement of persons, goods and

services from one place to another.

9. Salesmanship :

Salesmanship or personal selling is widely used in retail marketing. It involves

direct and personal contact of the seller or his representative with the purchaser.

10. Advertising :

It helps to spread the message about the product and thus, promote its sale.

11. Price :

Determination of price is an important function of a Marketing Manager. Price of a

product is influenced by the cost of production, profit margin, price fixed by the rival firms and

Govt. policy.

12. Financing :

Financing of customer purchasing has an integral part of modern marketing. The

provisional goods to the customers on credit basis is an important device to increase the sales

volume.

13. Insurance A large number of risks are involved in exchange of goods and services. Insurance

helps to covers these risks.

MARKETING ENVIRONMENT

Marketing Environment is the totality of forces and entities that surround and

potentially effect the marketing of a particular product.

The forces constituting marketing environment may be classified into –

Micro External forces

Macro Internal forces

External Forces:

These forces are uncontrollable in nature and influence the marketing environment.

Micro Factors :

Suppliers, customers, competitors and general public.

Macro Factors :

Demographic factors, Economic factors, Political factors, technological factors,

legal factors, socio-cultural factor, natural forces.

Internal Forces :

The internal environment of a firm consists of controllable forces like product

design, packaging, pricing promotion and distinction policies of the firm.

Marketing environment forces :

The various marketing environment forces are as follows :

* Socio-Economic Forces (A)

* Competition (B)

* Technology (C)

* Govt. Policies (D)

* Suppliers (E)

* Buyers (F)

* Consumer Resistance (G)

Socio-economic Forces : It refers to demographic changes geographical location, changes,

economic factors etc.

(a) Demographic Changes

The important demographic changes are as follows :

Age composition

Occupation & Literacy profile.

Sex structure of the population & role of women

Age composition :

The Marketer needs to understand the age composition in a country. As the youth

form a large proportion of the population in India, it is natural for firms to develop their products

and promotions for this group.

Example : Ready-made garments, cold drinks, motor bikes etc.

Occupation & Literacy problem:

The marketer needs to notice the changes in the literacy profile. A change in

literacy profile always mean a more demanding consumer. This also implies better reading habits

and hence, higher circulation of news papers and magazine may be ensured.

The occupational profile of the population also affect the product demand

Example : A shirt for the professional executive, sells best when advertised in magazines like Business India & Indian Today.

Sex Structure of the population & Role of women :

Indian population statistics reveal that women constitute almost 50% of Indian’s

population. Thus, role of women in marketing is very significant. Since more and more women

have chosen working and professional career, they now have less time available for their household

work. Thus, to help them firms have been developing many time-saving appliances like cooking

range, washing machine, vacuum cleaner, as well as ready to eat foods.

(b) Geographical changes :

It relates to changes in urban-rural distribution of population.

Example : The decade of the 1980’s saw a shift of industry and work-force including professionals, to Bangalore, which is now considered good test marketing centre.

(c) Changes in the value System :

Values are the beliefs which are held by the society and rarely change over a period

of time.

Example : Strong family bondage and love for the family as a core value have been a major driving force in the Indian market. The Marketer, in turn, has used this to promote his products.

Vicks vapo rub story:

It is an interesting example of wearing core Indian values into marketing

communications.

(a) Economic Factors

The economic environment affect the demand structure of any industry or firm.

Economic environment such as –

Gross National Product (GNP)

Per Capita Income (PCI)

Balance of payments (BOP) position.

Economies of scale.

Trends in the prices of goods & services.

Institutional factors like Govt. regulation, tax rebates & tariffs.

(B) Competition :

A firm generally faces three types of competition.

i) Brand Competition which comes from marketers or directly similar products.

Example : Visa l& Master card compete globally in the credit card field.

ii) Competition between substitute products which satisfy the same need.

Example : Indian Railway & Road Transport Service compete at the national level.iii) More General type of competition, every company is a rival for the customer’s limited

buying power.

(C) Technology:

It has a tremendous impact on our lifestyles, our consumption pattern, and our

economic well being.

Technological breakthrough can affects market in three ways.

i) By starting entirely new industries as computers, lasers & robots have done.

ii) By radically altering, or virtually destroying existing industries. When it first come out, T.V.

crippled the radio and movie industries.

iii) By stimulating markets and industries not related to the new technology. New home

appliances and microwavable foods give people additional time in which to engage in other

activities.

(D) Govt. Policies

Govt. all over the world are an important aspect of the economy. Govt. intervention

in industry is a reality. The extent of intervention varies. While in the US, this is relatively low, in

developing countries intervention is quite high. India, for example, has a history of controlled

economy with the Govt. Moreover, the Govt. is an important buyers and seller of goods and

services. A marketer not only needs to understand these policies but also the political philosophy

and ideologies of major political groups and individuals. The reasons are :

i) Govt. legislations and regulations affect the business environment.

ii) Marketing efforted are affects by the level of Govt. spending, the money supply and tax legislation.

(E) Suppliers :

A business cannot sell a product without being able to make or buy it. The Supplier

that supplies goods or services to the producers to make what it sells are the most important for

marketing success.

(F) Buyers :

Marketing aims to satisfy the buyers or customers. The marketing activities must be

directed and focused at the buyer. Satisfaction of buyer is highly essential. The buyers also

worthful in suggesting for improvements in products as well as marketing strategies.

(G) Consumer Resistance :

If the prices of raw-materials, labour and utilities like electricity etc, are showing

inflationary trends, the firm may have little option but to pass on this hike to the consumer in the

form of increased prices. If the firm happens to be in a monopolistic market or digopolistic market,

it might not face consumer resistance. But, if the firm is in a competitive market[industry, the

consumer may even shift his choice to the competing product. This, therefore, could pose a serious

threat to a firm’s survival. However, it is necessary on the part of marketer to recognize and

understand the importance consumer resistance.

ENVIRONMENT SCANNING TOOLS & TECHNIQUES :

It is the process of gathering information regarding a company’s external

environment, analyzing it and forecasting the impact. Information are collected both verbally as

well as written.

Sources of verbal information :

i) Radio & TV Reportsii) Consultantsiii) Customeriv) Financial Institutionsv) Firm’s employee’s like peer, subordinates and suspension.

Sources of written information

i) Financial Newspapers,ii) Business Magazinesiii) Govt. Publicationsiv) Trade & Industry journals.

Another technique for environment scanning is to design an appropriate marketing

information system (MIS) and also to periodically conduct marketing research.

Approaches to environmental scanning

SPIRE approach.

‘Scenario Building’ Approach

Step-II : Identification of the impact linkages between environment variables and other

strategic marketing components.

SPIRE Approaches :

This approach integrates environmental forces into strategic decisions through

SPIRE.

SPIRE Approach has following steps :

Step-I : Preparation of a matrix which sets out a detailed list of environmental variables and the

strategic marketing components hence showing possible interaction among them.

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Merits : i) It helps in generating executive ideas.

ii) It increase sensitivity of all delicious makers.

iii) It’s forecast can be used in actual decision making.

“SCENARIO BUILDING” APPROACH

Step-I : In this step the marketer analyses his decisions in terms of financial

investment, human resources required, dealer network required, any additions to P/M required

or if it has to be purchased from outside, evaluating the vendors and so forth.

Step-II : Identifying key decision factors like market share of the firm, current condition of

the industry, conditions of the economy and the competition etc. that have contributed to the

decision.

Step-III : This step requires enlisting the societal factor like demographic changes

literacy status etc. that have influence on consumer decision – making.

Step-IV : This step requires an analysis of the key variables enlisted in above steps

reportedly by collecting relevant data from both primary and secondary sources.

Step-V : The data so collected in the previous steps should now be extrapolated.

Step-VI : This is the last step of scenario building where the decision maker has to

elaborate an different scenarios.

C OMPETITION ANALYSIS:

It is necessary for the good being of the industry and encourage new product

development. And also competition leads to reduction in costs, innovation, market development

etc. etc.

According to Prof. Philip Kotler, there are four different levels of competition,

based on the degree of product substitutability. These are :

(a) Brand Competition:

Here a company consider other companies as their competitors which offers similar

product and services to the same customer of similar prices.

Example : Food might consider its major competitors as Toyota, Honda, Hyundai, Waganor & other manufacturers of medium priced automobiles. It would not see itself as competing with

Mercedes or BMW

(b) Industry Competition :

Here a company consider all other companies as its competitors who makes the

same product or class of products.

Example : Ford would see itself as competing against all other automobile manufacturers.

(c) Form Competition :

Here a company consider its competitors as all companies manufacturing products

that supply the same service.

Example : Ford would see itself competing against, not only other automobile manufacturers, but also against manufacturers of motorcycles, bicycles and tucks.

(d) Generic Competition

Here, a company consider its competitors as all companies that compete for the

same consumer purchasing power.

Example : Ford would see itself competing with Companies that sell major consumer durables, foreign vacations and new homes.

FACTORS CONTRIBUTING TO COMPETITON

The various factors that contributes to competitors are reduce costs, Govt. policies,

present of strong brands, customer, Technology etc. etc. Intensify of competition differs from one

market to another. This is true for both foreign and domestic markets. Mumbai for example,

witnesses cut-throat competition than any other town in the country. At the national level, the

Indian market is for less competitive than the US, Canadian, Hong Kong or Singapore markets.

Therefore, it is essential to have a discussion of the factors contributing to degree of competition.

(a) Motivation to Reduce Costs :

Competition is the most important factor which motivates firms to re-examine their

cost structure and eliminate inefficiency in the marketing system.

Example : As long as BSNL had monopoly over the telecom, the prices were exorbitant.

But with the emergence of competing telecom service providers – Air-Tel, Reliance,

Vodafone, VSNL had no option but to reduce its price.

Low barriers :

Low entry and exit barriers in a market are one of the key factors which leads to

competition. In the pre-liberalization period for example, consumer durables were being produced,

Kelvinator, Alwyn and Videocon, are BPL, Whirlpool, LG and so on, which has intensified the

competition.

MARKET PLANNING

Market planning is the basis for strategy development. The aim of marketing

planning is to shape the company’s business, products, services and messages so that they achieve

targeted profits and growth. Thus, the marketing plan is the central instrument for directing

and co-ordinating the marketing the marketing effort. Marketing department does not set the

marketing plan by itself. Plans are developed by teams with inputs and sign offs from every

important function. These plans are then implemented at the appropriate levels of the organization.

Results are monitored and corrective actions is taken when necessary. The marketing planning

process starts with the identification and analysis of marketing opportunities and ends with

formulation of plans.

The marketing plan operates at two levels.

Strategic marketing Plan Tactical Marketing Plan.

Strategic marketing plans :

It lays out the target market and the values proposition that will be offered, based on

analysis if the best market opportunities. The tactical marketing plan specifies the marketing

tactics, including product features, promotion merchandising, pricing, sales channels and services.

Exploring Marketing opportunity

Identification of market opportunity is critical before the management of a firm

takes a decision to launch or diversity in any product area. This involves an analysis of the

following :

(a) Size of the Market.

(b) Marketing programme required to satisfy market wants.

(c) Marketing strategies and the extent and quality of services rendered by other firms in the industry.

(d) Identification of keys success factors in an industry and linking them to a firm’s strengths & weakness.

PRODUCT MARKET SELECTION

The key issues that need to be addressed in product market selection are as follows :

i) First, identification of a target market. This target market may be the national or regional market, youth or grown up market or the women market etc.

ii) The second step of the analysis is the decision regarding the product form. The decision may be to market the product as a commodity or as a branded product.

iii) The next step, of the analysis is the decision regarding principal use of the product.

Example : Conservation of energy resulting in low electricity bill is very important for marketing of Consumer appliances operated on electrical mains.

iv) The final step in the selection of the core customer.

Example : It is the house wives to whom the washing machine is the most important product and hence, all communication from a firms marketing washing machines should be addressed to her.

The Marketer needs to turn his attention to making specific product – market

choices. These relate to the following choices –

i) Horizontal Diversifications & ii) Vertical Diversification.

Horizontal diversification:

It involves extending product or selecting products for market segments other than

the one currently being served by the firm.

Example : An Airline company flying people from one destination to another in region may also decide to diversify into courier business and fly papers and cargo on it routes.

Vertical Diversification :

It refers to identification of the level at which the firm sells.

Example : A Corporate company marketing and marketing cigarettes may also start manufacturing or selling of local tobacco, papers or even filter.

APPROACHES TO MARKETING PLANNING

There are two important approaches to market planning.

i) Profit Impact & Marketing Strategies Approach (PIMS)

It is one of the most important approaches to strategic planning and competitive

strategy development. This process is shown in the following figure :

Situation Audit

(Where are we ? How did we reach here ?

Who all are our competitors ?

Their strategies ?)

Analysis of firms strength and weaknesses

What are the key facilitators or hindrances in

our situation.

Objective setting.

Marketing share ? ROI ?

Sales Turnover ?

Implementation

Develop and evaluate strategy option

Situation Audit

(Where are we ? How did we reach here ?

Who all are our competitors ?

Their strategies ?)

Strategic decision making

This approach suggests identification of strength and weaknesses on the basis of

a firm ROI analysis. This analysis will also elp the firm to identify key success factors in the

industry.

ii. (a) Port-folio Approach :

BCG is a leading Management consulting firm in U.S. The firm developed an

approach using growth-share Matrix, called BCG Model. The horizontal axis of the matrix

measures relative market share at an SBU and vertical axis represents the annual growth rate of

the market in which the SBU operates. By relative market share we mean market share relative

to that of the SBU’s largest competitor.

The market growth rate along the vertical axis ranges from 0 percent to 20%. A

market growth rate above 10% is considered high.

The relative market share along the horizontal axis is expressed in logarithmic scale land thus,

equal distances represent the same percentage increase. A relative market share of 0.1 means

that the company’s sales volume is only 10% of the leader’s, a relative share of 10 means that

the Company’s SBU is the leader and has 10 times the sales of the rent strongest competitor in

that market. Relative market share is divided into high and low shares, using 1.0 as the cut

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The eight circles represent the current sizes and positions of eight business unit in a hypothetical

company/firm. The size of the circle depends on the rupee volume of each business. Thus, the

two largest business are 5 & 6. The location of each business unit indicates its market growth

rate and the relative market share. The growth share matrix is divided into four cells, each

indicating a different type of business viz. question marks, stars, cash cows and dogs.

i) Question Marks :

It operates in high growth market but have low relative market share. A question

marks requires a lot of cash because the company has to spent money on plant, equipment and

personnel to keep up with the fast growing market and because it wants to overtake the market

leader. The company in Fig. operates three question mark business and this may be too many.

ii) Stars :

These are the market leaders in a high-growth market. A star doesn’t necessarily

produce a positive cash flow for the company. The company must spent substantial funds to

keep up with the high market growth, and to tight off competitor’s attacks. In the Fig. the

company has two starts.

iii) Cash Cows :

It has largest relative market share and produce lot of cash for the company. But

these business have slow growth rate in the market and thus needs no finance for expansion.

The Company uses its cash cows to pay bills and support other businesses. The company in Fig.

has only one cash cow and is therefore, highly vulnerable.

(iv) Dogs :

These are the business that have weak market shares in low growth markets. The

company in fig., holds two dogs.

ii. (b) The General Electric (US) Model

G.E. Model suggests a three coloured screen and mentions that products may fall

in any part of this coloured screen. The three colours are Green, Yellow & Red.

i) Products falling in green segment, or moderate to high market attractiveness and

moderate to high SBU strengths, require the company to invest in it and evolve the

company to invest in it and evolve strategies that will lead to it grow. From the point of

view of a decision to enter a market, this situation represents a ‘go’ decision.

ii) Product that stall in the red segment, or moderate to low market attractiveness and

company strengths, will require that marketer to harvest them or divert them from his

portfolio. If a new business proposition falls in this segment the firm will be better

advised not to enter in it.

iii) Product that falls in the yellow segment, or low market attractiveness and low SBU strength,

moderate market attractiveness and moderate SBU strength, or high market attractiveness but

low SBU strength is demand that the management uses the principle of selectivity, or in other

words the “wait & go” strategy.

PROCESS OF MARKETING PLANNING

i) Analysing Market opportunities

Identify the firm’s potential long run opportunities given its market experience

and core competencies.

ii) Developing Marketing Strategies :

Sales growth plan, positioning of the product in the target market, pricing

policies, distribution alternatives, sales force operations, advertising and sales promotion

programmes and customer service policy.

iii) Planning Marketing Programmes :

That is to transform marketing strategy into marketing programmes. Here

decisions are taken regarding marketing expenditures, marketing mix and marketing allocation

of the budget to the various products. Channels promotion media and sales areas.

iv) Managing the Marketing Efforts :

Organising the marketing resources and then implementing and controlling the

marketing plan. In the planning process of marketing, the planner should address to following

four issues.

(i) It is very important to decide that who will be responsible for developing the marketing plan.

(ii) It is also important to decide the frequency at which the planning exercise needs to be undertaken.

(iii) It is also important to decide who will review and approve the proposed plan along with the decisions regarding the frequency of review etc.

(iv) The fourth matter which must not be ignored is to decide on the best mechanism to ensure that the plan is executed and desired results are achieved.

MARKET RESEARCH & INFORMATION SYSTEM

American Marketing Association defined, “Marketing Research as the

systematic gathering, recording and analyzing of data about problems relating to the marketing

at goods & services.

Thus, marketing research is the development interpretation and communication

of decision oriented information to be used in all phases of the marketing process. In other

words, marketing research is the systematic design, collection, analysis and reporting of data and

findings relevant to a specific marketing situation seeing the company.

The Marketing Research Process :

The marketing research process starts right from defining the problem down to

the preparation of the report for presentation and decision making. In other words, the

researcher has to go through several steps, each step is having own decisive role in the total

research process, while applying marketing research for solving any marketing problem. The

various steps involved in marketing research process are as follows :

Step-I : Defining the Marketing Problem :

Defining a correct and appropriate definition regarding a marketing problem is

the most important part of the marketing research process. The problem definition should be

specific but not too rigid. If the definition of the problem is faulty, the research results will be

misleading and confusing. Thus, by clearly focusing on the real problem, the research job can

be simplified and completed with the minimum cost, effort and data. It is also essential to

analyse the problem in depth which helps collection and relevant information.

Step-II : Statement of Research Objective

It is essential to state the objective of research. These objectives should be

specific, attainable and measurable. The purpose of these objectives is to act as a guide to the

researcher and help him in maintaining a focus all through the research.

Step-III : Research Design and Research Procedure :

Once the research problem is defined and objectives are fixed, it is very

important to develop the research design and research procedure. These are 3 types of research

designs –

i) Exploratory Research, ii) Descriptive Research & iii) Causative Research

i) Exploratory Research :

Such research is conducted when the researcher does not know how and why a

certain phenomenon occurs. So the prime goal of this kind of search is to know the unknown.

ii) Descriptive Research :

Generally, this type of research is conducted only when the researcher

understands the phenomena or behavioural features.

iii) Causative Research :

it is carried out to establish a cause and effect relationship. In this kind of

research, hypothesis are framed and tested.

The choice of research design very much depends on the depth and extent of

data required, the cost and benefits of the research, the urgency of the work and the time

available for accomplishment of research.

Step-IV : Gathering the Information

Collection of both primary and secondary, data is crucial for conducting market

research. Primary data refer to data collected directly from the market place from customers,

traders and from suppliers. Again primary data one of two types viz. census data and sample

data. Census data refer to the data collected from the entire population whereas sample data

refer to the data collected from certain selected units of population. The problem is primary data

is its cost, both in terms of time and money. And often involvement of personal bias of the

researcher, Secondary data refer to information collected from published and unpublished

sources in which respect data has been collected and accumulated earlier by someone else.

Secondary data offers the advantage of economies of time and cost. But secondary data suffers

from the problem of lack of availability, relevance, inaccuracy and inefficiency Therefore, it is

essential that data should be collected very carefully and adopting most effective tools.

Step-V : Analysing the Information :

The data collected are needed appropriate analysis. The researcher tabulates

the data and develops frequency distribution. Both arithmetic and statistical analysis are

conducted by computing ratios, averages percentages, measures of dispersion and correlation

coefficient etc.

Step-VI : report & Presentation

The last but one step is that of writing out a report and making a presentation

decision maker. The report should be in the form of executive summary giving a bird’s eye view

of the research and major recommendations.

Sometimes the decision makers want the researcher to present the findings.

The researcher should present in the form of slides, the findings, that are relevant to the major

marketing decisions facing management.

Step-VII : Decision Making

In the last step, the decision maker takes judicious decision on the basis of the

findings reported and presented by the marketing research team

THE INTERNET & WORLD WIDE WEB BASED INFORMATION COLLECTION & PROCESSING

“The internet is a worldwide telecommunications network that allows

computers and the people who use them to access data, pictures, sound and files throughout the

world without regard to their physical location or the type of computer in which they reside”.

The most popular websites providing information on industry and economic

scenario are Yahoo, Alttavista, Hotbot, Rediff.com, Indya.com. etc.

A primary means of communicating with other professionals and special

interest groups and getting information on the internet is through news groups.

A number of companies after database packages on CD-ROM for personal

Computer like Encyclopedia Brittanica, Manorama year Book and National Geographi database

etc.

The marketing researchers collect information from thee soft sources and

analyze and interpret to reach relevant findings.

DATABASES, DATA WAREHOUSES AND DATA-MINING

Database is nothing but a store of information that can be handled by a

computer. Database facilitates data capturing which is a process for converting information into

a form that can be handled by a computer.

Database refers to the assembled data relevant to a particular topic, for

example, customers, competitors or industry trends, etc. Researchers search into database with

specific to uncover useful relationships and developments.

Example : The manager of a retail super market chain, say Big Bazar, might want to know which items are purchased most frequently in each of its stores in India. By having

the computer sort through the electronic records of all completed transactions, this information can be compiled quickly.

Therefore, databases helps the marketer for better understanding of the market

place behaviour and enables the marketers to address their customers needs more specifically.

Data Warehouses :

A data warehouse is an enormous collection of data from internal and external

sources, compiled by a firm for its own use or for use by its clients. The strategy of data

warehousing involves providing data to the users in a meaningful manner, thereby helping them

in taking operational and strategic decisions. Data analysis helps in analysis helps in analysis of

trends over a period of time and companions of current and historical data.

Data Mining :

More advanced statistical and artificial intelligence techniques are now being

applied to data warehouses. These techniques have the capability to looks “pros & cons” of data

that would be overlooked or unrecognizable to researchers. These techniques are called data

mining. Data mining extracts information from an unfamiliar database. It helps the marketers

connect better with his customers. It helps the marketer to target his campaigns more accurately.

Data mining techniques, in these days, help marketers understand the structural changes in the

market.

GLOBAL MARKET RESEARCH

In these days of liberalization, companies cannot simply stay domestic and

expect to maintain their markets. They are making their operations internationalized. In

deciding to go abroad a company needs to define its global objectives and policies. The company

must determine whether to market in a few countries or many countries. It must decide which

countries to consider. In general, the candidate countries should be rated on the basis of three

criteria.

i) Market Attractiveness

ii) Risk

iii) Competitive Advantage

A company trying to engage itself in global marketing, must correctly

identity, asses land interpret the needs of the overseas customers and carryout integrated

marketing to satisfy those needs. All these necessitates, the company involves in global market

research. Conducting marketing research in countries around the world has become very

important to many multi-national firms. Without gathering reliable marketing information

detailed marketing research, major decisions in global marketing cannot be taken. All the

relevant information on the overseas target markets must be systematically collected, outdated,

analyzed and stored. Detailed market studies are a must before embarking upon global

marketing. A good part of the data required for such studies can be collected from published and

other readily available sources like websites etc. Generally global marketing research is

conducted to decide :-

i) Whether to go abroad.ii) Competitive strength of the global market.iii) Which markets to enter?iv) How to enter the market ?v) The marketing program product decision, promotion decision, pricing decision and

distribution channels selection etc.vi) The marketing organization.

COMPETITIVE INTELLIGENCE

It is the process of gathering and analyzing available public information about

the activities and plans of competitors. The data that are used to study competitors are collected

from a variety of internal and external sources like the news media, printing media, the internet

and company’s own sales people. There are four main steps in designing competitive

intelligence system.

i) Setting up the systemii) Collecting the data.iii) Evaluating and analyzing the data to ensure their validity and reliability.iv) Disseminating information to relevant decision makers and responding to inquiries

made by managers.

The very purpose of competitive intelligence system is to continuously collect,

interpret and disseminate information about competitors to the management. This help in

designing competitive strategies.

CONSUMER BEHAVIOUR

It is a study of how individuals make decisions to spend their available

resources i.e. time, money and effort in consumption related items. Marketing efforts of a firm

have an impact on the buying decisions of buyer. Hence, marketers attempt to obtain an in-

depth knowledge of customer’s buying behaviour.

Consumer behaviour includes the act of individuals directly involved in

obtaining and using economic goods and services.

Importance of studying consumer behaviour :

i) It helps to determine the pricing policy of the product.

ii) It helps in developing new products, product features and other marketing mix

elements.

iii) It helps firms to strengthen the long term customer relationship.

iv) It helps to determine the durability an utility aspect of goods.

v) It helps to gain knowledge about customer’s specific needs, preferences, attitudes

towards different kinds of the product and brands.

vi) It helps in determining the quality, style, colour packing, form of the product.

Factors influencing consumer buying behaviour :

The various factors that influence consumer buying behaviour are :-

i) Cultural,ii) Socialiii) Personaliv) Psychological

The cultural factors that influence consumer buying behaviour includes the

following :

i) Cultureii) Sub-cultureiii) Social class

i) Culture :

It is the fundamental determinant of a person’s want and behaviour. It is

usually ‘passed on from one generation to the other. The growing child acquires a set of values,

perceptions, preferences and behaviours through his or her family and other key institutions. A

child growing up in the united states is exposed to the following values.

Achievement and success, activity, efficiency and practicability, progress and material comfort,

individualism, freedom, external comfort, humanitarianism and youthfulness. An individual’s

buying pattern is largely influenced by the culture. Our culture reflects what we eat, what we

wear, the code of conduct, our buying habits, consumption pattern an the way we use and

dispose products.

b) Sub-culture :

Cash culture consists of smaller sub-culture that provide more specific

identification and socialization for their members. Sub-culture include nationalities, religions,

recial groups and geographic regions. The groups have similar habits, behaviour pattern, buying

behaviour on the basis of their age, religion, common experiences or even geographic location.

Advertising strategy of a firm are also affected by the sub-cultural differences.

Example : A firm that markets most of its product in Andhra Pradesh has to air its commercials in Telugu to reach the vast majority of people in the state.

(c) Social Class:

It shows distinct product and brand references in many areas including

clothing, home furnishings, leisure activities and automobiles. Social class can be subdivided

into four categories such as upper class, upper middle class, middle class and the lower class

differ in media preferences, with upper class consumer preferring magazines and books and

lower class consumers preferring television. Even within a media category such as TV, upper-

class consumers prefer news and drama, and lower class consumer prefer soap operas and sports

programs. To an extent, social class determine the type, quality and quantity of products that a

person buys or uses.

ii) Social Factors :

Consumer behaviour is influenced by social factors such as reference groups,

family and social roles and statuses.

(a) Reference Groups: A persons reference group consist of all that group that have a direct

or indirect influence on the person’s attitudes or behaviour. Groups having a direct influence

on a person are called membership groups. Some membership groups are primary groups,

such as family, friends, neighbours and co-workers with whom the person interacts fairly

continuously and informally. People also belong to secondary groups, such as religious,

professional and trade-union groups, which tends to be more formal and requires less

continuous interaction.

(b) Family : The family is the most important consumer-buying organization in society. A

family is a small reference group but it is prominent in influencing consumer behaviour.

Family go through various stages of life cycle, each stage creates different demand for

different products and the buying behaviour of the member is greatly influenced by the stage

of the family life cycle.

Example : The consumer demands of a bachelor are different from those of a newly married couple or a family with children/no children, other couples with dependent

children, older couples with no dependent children.

Members of a family exert a strong influence on the buying decision. The

husband the wife and the children play different roles while purchasing different products

and services and thee roles very from country to country.

Example : In India, the major buying decisions for the children are taken by the parents. Joint decision are taken by both the husband and the wife for purchasing expensive products and services. Therefore, marketers are keenly interested in the roles played by the members and the relative influence each member exerts on the buying decisions. Marketers try to adjust their marketing mix to influence the decisions of the decision maker in the family.

(c) Roles & Statuses : A role consists of the activities a person is expected to perform. Each

role carries a status. A Supreme Court Justice has more status than a sales manager, and a

sales manager has more status than Office Clerk. People choose products that communicate

their role and status in society. Company Presidents often drive Mercedes, wear expensive

suits, and drink Chivas Regal Scotch. Marketers must be aware of the status – Symbol

potential of products and brands.

iii) personal factors :

These includes the buyer’s age and stage in the life cycle, occupation,

economic circumstances, lifestyle and personality and self concept.

(a) Age k& Stage in the life cycle : People buy different goods and services over a life time.

They eat baby foods in the early years, most food in the growing and mature years and

special diets in the later years.

Over the lifecycle stages, people use different products and their demand for

goods and services keep changing. People at different ages will have different tastes in

food, clothes and furniture and recreation. Even families pass through different stages of

the life cycle. Therefore, marketers should determine the needs of their target markets and

introduce different product and marketing efforts targeted at different stages.

(b) Occupation & Economic Circumstances : Occupation also influences consumption

pattern. A blue color worker will buy will buy work clothes, work shoes an lunch boxes.

A company even tailor its products for certain occupational groups. Computer software

companies, for example, design different products for brand managers, engineers, lawyers

and physicians. The financial condition of an individual such as his disposable income,

savings, his ability to buy costly products and services on installments and bear the interest

rates, etc. will have a significant influence on his buying behaviour.

(c) Life Style : A lifestyle is a person’s pattern of living in the world as expressed in activities,

interests and opinions. Life style portrays the “Whole person” interacting with his or her

environment. Marketers search for relationships between their products and life style

groups.

Example : A computer manufacturer might find that most computer buyers are achievement-oriented.

(d) Psychological Factors : A person’s buying choices are influenced by four major

psychological factors, such as :- (i) Motivation, (ii) Perception, (iii) Learning & (iv)

Beliefs & Attitudes.

i) Motivation : A person has many needs at any given time. Some needs are biogenic,

they arise from physiological states of tension such as hunger, thirst or discomfort.

Other needs are psychogenic, they arise from psychological states of tension such as the

need for recognition, esteem or belonging. A motive is a need that is sufficiently

pressing to drive the person to act.

Needs are motivational elements behind the purchasing decision of customers. One of the

most widely known as motivational theory, the hierarchy of needs, was proposed by

Abraham Maslow and explains why people are driven by particular needs at particular

times. According to Maslow needs can be classified as :

(a) Physiological Needs,

(b) Safety Needs

(c) Love and belongingness (Social needs)

(d) Eastern needs

(e) Self actualization needs.

Selfactuali-zationneeds

Esteem needs(Self esteem, status,

Recognition)

Social Need(Sense of belonging, long

Safely needs(Security, Protection)

Physiological Needs(Food, Water, Shelter)

Custmer tend to satisfy their needs on the basis of the requirement of the

needs.

Example: Physiological need is the most basic need and hence, an individual would satisfy it first.

Satisfaction of one need leads to emergence of higher level unfulfilled needs.

Needs are general in nature but wants arise out of the desire to fulfill the needs in a specific

way.

Example : Food can be classified as a need, but eating a particular dish or at a particular food joint in a want.

Marketers must work to create these wants in the customers and position their

product in such a way as to invoke desire in the customer to fulfill these wants.

ii) Perception : It is defined as the process by which an individual selects, organizes and

interprets stimuli into meaningful thoughts and pictures. Customers base their

perception on their needs, wants, past experiences and something that they consider to

be true.

Example : A subscriber/reader who reads a particular newspaper or journal might perceive it to give the true picture of the happenings around him.

Perceptions of a person are affected by many factors like reality, sense, rule etc.

Customers perceive their environment through the sense of touch, smell, taste

hearing etc.

Customer’s buying decision are also influenced by the risk factor involved. E.g.

does the customer perceived the product to be safe, does he find it worth spending the

time on shopping. Marketer can address these problems through appropriate

communication strategies.

Understanding the customer’s perception helps the marketers position their

product better than that of the competitors.

Hence, marketers must made an effort to understand the precautions of the customers and

adjust their marketing mind accordingly.

iii) Learning: It involves changes in an individual behaviour arising from experience.

Learning theorists believe that learning is produced through the interplay of drives,

stimuli, cues responses and reinforcement.

A drive is a strong internal stimulus impelling action. Cues are minor

stimuli that determine when, where and how a person responds. Suppose you buy an

IBM computer. If your experience is recording and IBM will be positively reinforced.

Later on when you want to buy a printer, you may assume that because IBM makes

good computers, IBM also makes good printers. In other words, you generalize your

response to similar stimuli.

Learning theory teaches marketers that they build up demand for a product by

associating it with strong drives and providing positive reimbursement.

iv) Beliefs & Attitudes : Through doing and learning, people acquires beliefs and attitudes.

These in turn influence buying behaviour. A belief is a descriptive thought that a

person holds about something. People’s beliefs about a product or brand influence their

buying decisions. A study of the influence of brand belief’s found that consumers are

equally split in their preference for Diet Coke Versus Diet Pepsi where testing both on a

blind basis. When tasting the brand versions, consumers preferred Diet Coke by 65%

and Diet Pepsi by only 23% (with the remainder seeing no difference). This example

highlights the role brand beliefs play in product choice.

Marketer are interested in the beliefs people carry in their about their

products.

BUYING MOTIVES

Buying motives are basically two types :

i) Product Motives, ii) Patronage Motive.

The motives which prompt people to buy a given product are called Product

Motives. The influences that explain why they buy from particular firms or shops are called

patronage motives.

Classification of Buying motives

Buying Motives

Patronage MotivesProduct Motive

Rational Patronage Motives

Emotional Patronage Motives

Rational Product Motives

Emotional Product Motives

Emotional Product Motives : The emotional Motives may persuade a consumer to

buy a certain product without evaluating the merits and demerits of such action.

Rational product motives : It involves a logical analysis of the intended purchase the

purpose expected to be served by the product, the various alternatives available to the buyer etc.

Emotional Patronage Motives : It Persuade a buyer to buy from specific shops

without much logical reason behind that action. He may like the place or may consider the shop

as his “favourable” shopping place.

Rational Patronage Motives : It persuade a buyer to buy from specific shops because

it offers a side selection of the latest model or good offer sales service.

BUYING DECISIONS

Decision making is a process of selecting an appropriate option from two or

more alternatives. A customer gets the freedom of choosing a particular brand or product when

there is more than one brand or product to choose from.

Buying Roles :

It is easy to identify the buyer for many products. In the U.S. men normally

choose their sharing equipment and women choose their cosmetics, but even here marketers

must be careful in making their forgetting decisions, because buying roles change. When ICI,

the giant British Chemical Company, discovered that women made 60% of the decisions on the

brand of household paint, it decided to advertise its Dulux brand to women.

Different Roles Assumed by People :

i) Initiato r : The person who first suggests the idea of buying the product or service.

ii) Influence r : The person whose view or advice influences the buying decision.

iii) Decider : The person who decides on any component of a buying decision, whether to

buy, what to buy how to buy or where to buy,

iv) Buyer : The person who makes the actual purchase.

v) User : The person who consumes or uses the product or service.

Buying behaviour :

Consumer decision making varies with the type of buying decision. The decision

to buy tooth paste, a tennis racket, a personal computer, a new car are all very different.

Complex and complexive purchases are likely to involve more buyer deliberation and more

participants. There are four types of consumer buying behaviour, based on the degree of buyer

involvement and the degree of differences among brands.

i) Complex Buying Behaviour

It involves a three-step process. First, the buyer develops beliefs about the

product. Secondly, he or she develops attitudes about the product. Thirdly he or she makes a

thoughtful choice. Consumers engage in complex buying behaviour when they are highly

involved in a purchase and aware of significant differences among brands. This is usually the

case when the product is expensive, bought infrequently, risky and highly self expressive, like

an automobile. Here, the marketer develop strategies that assists the customer to learn more

about the product and the distinct features of their brand. Tying up with various stores for

promoting the product and motivating the sales personnel can also be an effective tool in this

regard.

ii) Dissonance – Reducing Buyer Behaviours :

Sometimes the consumer is highly involved in a purchase but sees little

differences in brands. The high involvement is based on the fact that the purchase is expensive,

infrequent, and risky. In this case, the buyer will shop around to learn what is available. If the

consumer finds quality differences in the brands, he or she might go for the high price.

After the purchase, the Consumer might experience dissonance that items from

noticing certain disquieting features or hearing favourable things about other brands and will be

alert to information that supports his or her decision. Marketing communication should supply

beliefs and evaluations that helps the consumer feel good about his or her brand choice.

iii) Habitual Buying Behaviour:

When customers buy low-cost regularly purchased/routine products, they do not

make significant efforts to gather much information about the product. They choose the brand,

which they are familiar with or have been choosing for a long time. Purchase decision in such

cases is quick. Therefore, customer involvement in such purchase decision is low. Customers

usually do not evaluate the post purchase performance of such products.

iv) Variety-seeking Buying Behaviour

Consumer shows a great amount of brand differentiation when buying a low

involvement product. Here, consumer often switth brands and not very brand conscious. They

evaluate the product during consumption.

Ex : The consumer has some beliefs about cookies, chooses a brand of cookies without much

evaluation, and evaluates the product during consumption. Next time, the consumer may

reach for another brand out of wish for a different taste. Brand switching occurs for the

sake of variety rather than dissatisfaction.

Here, the market leader we strategies like offering the product of a low price,

free samples, discount coupons etc. to allure the customers for impulse buying.

Buying Decision Process

Before, buying the product consumer pass through different stages. The buying

decision process can be divided into five stages.

i) Problem Recognition

ii) Information Search

iii) Evaluation of alternatives

iv) Post Purchase Behaviour

v) Post Purchase use and disposal

i) Problem Recognition :

The buying process starts when the buyer recognizes a problem or need. A need

can be aroused internally within the person.

Ex : Hunger.

Or by an external stimulus. An external stimulus such as an advertisement or the attractiveness

of a product package may also bigger a need in the person. Marketers try to arouse these needs

and help people identity these through products, pricing strategies, packing and advertisements.

iii) Information Search :i

A consumer who realizes the need for a product will try to gather information

regarding the product. Information search helps the customer understand the features of a

product and competing brands better. Post purchase experience can also help the customer

reduce the time for information search and information search and evaluation. Information can

be gathered from several sources like –

i) Personal Sources : Family, friends, neighbours and reference group.

ii) Commercial Sources : Advertising, dealers, displays, sales persons, packaging.

iii) Public Sources : Mass Media, consumer rating Organisation.

iv) Experiential Sources : Handling,, examining, using the product.

Personal sources influence the buying decision of a prospective buyer. Though all types of

sources, provide information, maximum amount of information is obtained through commercial

sources. After gathering all the relevant information, a customer than evaluate the information.

iii) Evaluation of Alternatives :

After gathering the information the consumer analyzes them to select the right

brand or product. The criteria to evaluate a product may differ depending either on the buying

situation or on the level of involvement required. For high value and infrequently purchased

items, a customer an be involved in detailed analysis of information. However for low

involvement or low priced products, customer can be simple criterion, such as price.

Sales Personnels can help customers evaluate the product or brand features.

When the customers evaluating process results in identifying brands, which he is ready to buy,

he moves on to the next stage, the actual purchase.

iv) Purchase Decision :

After evaluation the next step is selection or purchase of a particular brand. The

purchase decision also depends on the availability of the brand. This stage also accounts for a

large number of sub-decisions about purchasing a product like –

Seller & location of the store.

Time of purchase.

Price of the product

Delivery & warranty

Payment method like credit arrangements

Size of the product colour and attractiveness of the package.

v) Post Purchase Behaviour :

After purchasing the product, the consumer will experience some level of

satisfaction on dissatisfaction. The marketer’s job doesn’t end when the product is bought.

Marketers must monitor post purchase satisfaction or dissonance.

a. Post Purchase Satisfaction : If the product meets the expected performance, the customer

is satisfied. If the performance exceeds the expectations, the customer is delighted and if

it doesn’t the customer is dissatisfied. Marketers should try to improve the performance

of the products and add new and unique features to delight the customers. Post purchase

satisfaction with the product leads the customer to make repeat purchase and recommend

it to others in his reference group.

b. Post Purchase Dissonance : The dissatisfaction or dissonance might arise, when the

customer hears good things about other brands, or when he does not get all the features he

was looking for in the product. When products of competitors brands have the desirable

features that the customer was seeking, the customer experiences cognitive dissonance.

The buyer may even try to return the product. In order to avoid these, marketers should

try to reassure the customer about his purchase decision.

v) Post Purchase Use and Disposal : Marketers should observe how consumers use the

purchased product and how they dispose off their products. Some customers may

discover new uses for the products other than what the product was meant for.

Ex : People in Punjab used the single tub washing machines for making the summer drink

“Lassi”.

Marketers should also make an effort to educate customers on how to dispose the

products like hazardous material and other items like plastic bags, beverage containers,

aerosol cars etc.

Many socially responsible companies are engaged in recycling their products.

Kodak recycles acetate films, uses recycled papers, and jute for packing its products.

Marketers may also come up with innovative products for successful disposal of their

product.

Ex : Gumpals offers special tissues and dispensers to dispose of its chewing grum.

Tools to study Buyers Behaviour :

It is very useful for the marketers to study buyer behaviour regularly. Various

types of tools are used by the marketers for this purpose. These are – 1) Surveys, 2) Projective

Techniques,, 3) Focus Group Discussions.

1) Surveys : Here the researcher carries out opinion polls involving customers, sales

persons, dealers and experts. While conducting these surveys, the researcher has to

carefully select the instructions and methods of surreys. These methods are postal

surveys, telephone surveys or personal contacts. Personal contract method, though time

consuming and costly, gets a higher response rate and provide meaningful responses.

2) Productive Techniques : Like word association, picture association and thematic

appreciation tests (TAT) have been used to get to now subconscious level responses.

Marketer is giving importance to these qualitative techniques as they provide valuable

information on his or her product or brand.

3) Focus Group Discussions : This is customer qualitative techniques used to assess

customer’s perception about the product and situations.

ORGANIZATIONAL BUYING BEHAVIOUR

Organizational buying may be defined as “the decision making process by which

formal organizations establish the need for purchased products and services and identify,

evaluate and choose among alternative brands and supplies.

Fewer Buyers : The Business marketers normally deals with for fewer buyers than

the consumer marketer does.

Larger Buyers : A few large buyers to most of the purchasing in such industries as

aircraft engines and defense weapons.

Close supplier - customer relationship : Because of the smaller customer base and the

importance and power f the larger customers, suppliers are frequently expected to

customize their offerings to individual business customer needs. In the recent years,

relationship between customers and suppliers have been changing from down right

adversarial to close and integrated.

Derived Demand : The demand for business goods in ultimately derived from the

demand for consumer goods. For this reason, the business marketers must closely

monitor the buying patterns of ultimate consumers.

Fluctuating Demand : The demand for business goods and services tends to be more

volatile than the demand for consumer goods and services. A given percentage increase in

consumer demand can lead to a much larger percentage increase in the demand for plant

and equipment necessary to produce to the additional out-put.

Professional Purchasing : Business goods are purchased by trained purchasing

agents, who must follow their organization’s purchasing policies, constraints, and

requirements. Where the same is not done in consumer purchasing.

Reciprocity : Business buyer often select suppliers who also buy from them.

Ex : A paper manufacturer that buyer chemicals from a chemical company that buys a considerable amount of its paper. Direct Purchasing : Business buyers often buy directly from manufacturers rather

than through intermediaries, especially items that are technically complex or expensive.

Participants in the Business Buying Process :

i) Initiators : Those who request that something be purchased. They may be users

or others in the organization.

ii) Users : Those who will use the product or service. In many cases, the users

initiate the buying proposal and help define the product requirements.

iii) Influencer : People who influence the buying decision. They often help define

specifications and also provide information for evaluating alternatives. Technical

personnel are particularly important influencers.

iv) Deciders : People who decide on product requirements or on suppliers.

v) Approvers : People who authorize the proposed actions of deciders or buyers.

vi) Buyers : people who have formed authority to select the supplier and arrange the

purchase terms. Buyers may help shape product specifications, but they play their

major role in selecting vendors and negotiating. In more complex purchases, the

buyers might induce high-level managers.

vii) Gate Keepers : People who have the power to prevent sellers or information from

reaching members of the buying center.

Ex : Purchasing agents, receptionists, and telephone operators may prevent sales persons from contacting users or deciders.

STEPS IN BUYING PROCESS

Problem Recognition : The buying process begins when someone in the company

recognizer a problem or need that can be met by acquiring a good or service. The

problem can be recognized by someone who is internal to the organization or by someone

who is external to the organization. Some common events lead to problem recognition.

The company decides to develop a new product and needs new equipment and materials.

A machine breaks own and requires new parts. Purchased material turns out to be

unsatisfactory, and the company searches for another supplier. A purchasing manager

senses an opportunity to obtain lower prices or better quality.

Externally, the buyer may get new ideas at a trade show, see an ad, or receive a

call from a sales representative who offer a better product or a lower price.

General Need Recognition : After problem recognition, the firm has to identify the

exact quantity of the product required and the quality levels desired. The people involved

in problem recognition, must find out the alternative available to solve the problem that

has been identified. For products that are purchased regularly, the specification will be

standardized. Also, for the smaller general products, the specifications can be easily

given by the people who actually use the product. But for products of a complex nature,

the purchase department needs the assistance of all those who are concerned with the

product to lay down the product specifications.

Product specifications : This is a crucial stage in the buying process, where the firm

starts negotiating with the supplier by giving the technical specifications of the product.

This is the stage where those who have specified the details of the product have a say in

the purchase process. In this stage, the purchase department searches for external

information to issue product specifications. It is beneficial at this stage for the suppliers

to maintain a close co-ordination with the buyers of the organization, sine such suppliers

will have an early advantage over competitive suppliers.

Supplier Search : The buyer now tries to identify the most appropriate suppliers.

The buyer can examine trade directories, contact other companies for recommendations,

watch trade advertisements, and attend trade shows. However, now-a-days the most

likely place to look is on the internet. Once the list of suppliers is finalized, the company

carefully analyzes each supplier and selects one who meets the specifications, quality

standards and delivery schedules set by the purchasing department. Industrial marketers

who have a significant presence in all of the above said media will have a significant

advantage over other suppliers.

Proposed Solicitation : The buyer invites qualified suppliers to submit proposals. If

the item is complex or expensive, the buyer will require a detailed written proposal from

each qualified supplier. After evaluating the proposals, the buyer will invite a few

suppliers to make formal presentations.

Business marketers must be skilled in researching, writing and presenting

proposals. Written proposals should be marketing documents that describe value and

benefits in customer terms, not just technical documents. Oral presentations should

inspire confidence, and position their company’s capabilities and resources so that they

stand out from the competition.

Supplier Selection : Before selecting a supplier, the buying center will specify desired

supplier attributes and their relative importance. It will them suppliers on these attributes

and identify the most attractive suppliers.

In practice, business buyers use a variety of methods to assess supplier value.

Business marketers need to do a better job of understanding how business buyers arrive at

their valuations.

Order Routine Specification : After selecting suppliers, the buyer negotiates the final

order, listing the technical specifications, the quantity needed, the expected time of

delivery, return policies, warranties and so on. In the case of maintenance, repair and

operating items buyers are moving towards blanket contracts rather than periodic

purchase orders. A blanker contract establishes a long term relationship in which the

supplier promises to re-supply the buyer as needed, at agreed upon prices, over a

specified period of time. Because the stock is held by the seller, blanker contracts are

sometimes called stockless purchase plans. The buyer’s computer automatically sends an

order to the seller when stock is needed.

Blanket contracting leads to more single source buying and ordering of more

items from that single source. This system locks suppliers in tighter with the buyer and

makes it difficult for out-suppliers to break in unless the buyer becomes dissatisfied with

the in-supplier’s prices, quality or service.

Performance Review : The buyer periodically reviews the performance of the chosen

supplier(s). Three methods are commonly used. The buyer may contact the end users

and ask for their evaluations; the buyer may rate the supplier on several criteria using a

weighted score method; or the buyer might aggregate the cost of poor supplier

performance to come up with adjusted costs or purchase, including price. The

performance review may lead the buyer to continue, modify or end the relationship with

the supplier. The supplier should monitor the same variables that are monitored by the

product’s buyers and end users.

CLASSIFICATION OF ORGANIZATIONAL MARKETS

1. The Institutional Markets :

It consists of schools, hospitals, nursing homes prisons and other institutions that

must provide goods and services to people in their care. A marketer trying to cater to

customers in these markets should carefully plan out their marketing strategies to suit the

individual needs of these customers. Generally, non-profit organizations such as schools,

colleges universities, hospitals and museums comprise institutional markets. Universities,

schools and colleges requires a lot of infrastructure like class room furniture, books,

computers and so son. Hospitals require surgical equipment, diagnostic machinery, beds and

many other products. Harks, it is always a better strategy to approach these customers

individually and offer tailor made solutions to address their needs.

2. Government Markets :

Government agencies are the largest buyers of goods and services in a country.

The Indian Govt. spends billions of dollars every year on goods and services for the various

government departments at the central, state, district, municipal and village levels.

To be able to sustain and complete in this market, industrial marketers must have

a clear perspective of the procedures followed by the Government in its buying methods.

The purchasing process of the government is influenced by different groups of people of

various levels who legislate, select and analyze the goods and services before actually

purchasing them. Each year, the government of India spends a massive amount for the

defence of the country. Normally, it appears difficult to market any product or service to the

government departments. No amount of marketing, advertising or promotional effort will

have an effect an officials in charge of purchases in government departments since they give

the maximum importune to the cost of the product or service and purchase only those with

the lowest price. The Govt. of India purchases raw-materials, finished goods, capital

intensive goods, tools and spare parts, consumables, office furniture and other equipment and

services. It buys product ranging from small pins to airplanes and aircraft carriers. The

Govt. also purchase services ranging from garbage clearance to huge construction projects

such as construction of dams and major rivers. The need to fulfill contain social obligations

make the Govt. purchase a minimum amount of products and services from the unorganized

sector and cooperative societies as well. Otherwise, all purchases by Government

departments take place formally with the organized sector with tenders being called for and

rules and procedures being strictly followed. Normally, the entire process of calling for

tenders, giving the work order, and issue of payment takes a very long time.

3. Producer Markets :

Producers buy the products from suppliers, not for direct sales to the customers,

but for processing them and converting them into finished goods. These finished goods are

then sold to customers for their use.

Example:

Britannia purchases firm products such as wheat, milk and sugar not for selling them

directly to the customers but for processing them into various products like biscuits,

bread, cookies and so on. These finished products are then sold to the end customers for

consumption. The producer markets are further divided into original equipment

manufacturers (OEM), industrial dealers and users.

OEM buy industrial products and incorporate them into their final products.

Hero Honda is an OEM, which buyer tyres from other companies to fit their

motorcycles. Similarly, IBM, the computer manufacturer, buys microprocessors from

Intel. Therefore IBM is an OEM for Intel. Finally, the third type of producers are users

who buy the products which will facilitate their production process though they are not

part.

4. Reseller Markets :

Resellers are marketers who do not purchase products for converting them into

finished products or for personal use, but for selling them to other customers for a monetary

gain. Wholesalers for a part of the resellers market. Buyers wield a greater bargaining

power in the reseller markets. In the reseller market, buyers can influence the producers to

change and enhance the product features at no additional cost to make the products

competitive in the market. Here re-sellers normally bargain with the manufacturers for heavy

price discounts.

MARKET SEGMENTATION

It is the process of dividing a heterogeneous market into homogeneous sub-

units.

Objectives of Market Segmentation :

To identify potential customers and additional benefits desired by the consumers. To know the willingness of consumers to pay for the additional benefits. To know the preference of place of purchase (shop) by consumers. To pay proper attention to particular areas. To plan all marketing activities around the consumers. To understand competition and formulate marketing programmes. To design marketing mix and promotion mix. To help and make the marketing efforts more efficient and more economical. To increase productivity and adds to consumer value.

Importance of Market Segmentation :

In reality market demand is heterogeneous and not homogeneous. When

differences in customer needs are analysed, the analysis may reveal that certain customers

needs are not being met and the marketer can exploit such a marketing opportunity and till

these needs. This can yield profits and prospects for growth. Segmentation ensures higher

customer satisfaction. Importance of market segmentation can be understood from the

following points.

i) Facilitates proper choice of target market : Segmentation helps the marketer

to distinguish one customer group from another within a given market and thereby

enables him to decide which segment should form his target market.

ii) It plan all marketing activities around the customers.

iii) Facilitates tapping of the market : Segmentation also enables the marketer to

fulfill the needs of the target buyer. It also helps him to generate an accurate

prediction of the likely responses from each segment of the target buyers.

iv) Making the Marketing effort more efficient and economic: Segmentation

ensures that the marketing effort is concentrated on well defined and carefully

chosen segments. It would benefit the firm if the efforts were concentrated on

segments that are the most productive and profitable ones.

v) Effective utilization of Marketing resources : Segmentation leads to more

effective utilization of marketing resources, because customer is the focus of

marketing effort and only target markets are served. Marketing programme is

tailored exactly in accordance with the needs of specific market segment and

produce, price and promotion can have best coordination.

vi) Helps to assess competitive strengths and weaknesses. Competitive strengths

and weakness can be assessed effectively and marketers can avoid competition and

use resources more profitably by catering customer demand which is not being met

by rivals.

vii) Creates good Coordination among customers : Segmentation brings benefits

not only to the marketer, but to the customer as well. When segmentation attains

higher level of sophistication and perfection, customers and companies can

conveniently settled down with each other.

LEVELS OF MARKET SEGMENTATION

The levels of market segmentation are – (A) Segment Marketing, (B)

Individual Marketing, (C) Niche Marketing & (D) Local Marketing.

(A) Segment Marketing :

A market segment consists of a group of customers who share a similar

set of wards. Thus, we would distinguish between Car buyers who are primarily seeking

low-cost basic transportation and those seeking a luxurious driving experience. We must

be careful not confuse a segment and sector. The problem is that young, middle-income

car buyers will differ about what they want in a car. Some will want a low-cost car and

others will want an experience car. Young, middle-income car buyers is a sector, not a

segment.

The marketers doesn’t create the segments, the marketer’s task is to

identify the segments and decide which one(s) to target. Segment marketing offers

several benefits over mass marketing. The company can create a more fine-tuned product

or service offering and price it appropriately for the target segment. The company can

more easily select the best distribution and communication channels, and it will also have

a clearer picture of its competitors. However, even and segment is partly a fiction, in that

not everyone wants exactly the same thing.

(B) Niche Marketing

A niche is a more narrowly defined group seeking a distinctive mix of

benefits. The market segment when further divided into sub-segment to identify and cater

to the unsatisfied needs of a small group is called a niche. Generally, a niche is a small

segment at the market that has some specific unsatisfied needs. The fundamental

difference between a segment and a niche is that a segment is usually is usually a broader

market place where many competitors operate.

Ex - In the mid-size car segment, we have Maruti Zen, Alto, Wagon-R, Tata Indica and Fiat Palio. A niche is a comparatively smaller segment like the Ferrari

which will have a limited customer base because of its specialized product offerings. Niche marketers presumably understand their customer’s needs so

well that the customers willingly pay a premium.

(C) Local Marketing :

“Think Global Act Local” has long been a buzzword. Mot marketers who

have a global presence tend to offer customized products to suit the local markets. The

prominence of local marketing has became so dominant that even if a product proves to

be successful at the national or global level, it may fails utterly at the local level because

at un-matured local tastes and preferences.

(D) Individual Customer Marketing :

Individual Marketing is the extreme level of segmentation in which

marketers focus on individual customers. Intact, almost all the business-to-business

marketing is individual marketing. These days most companies are approaching

individuals through e-mails to promote their products and services.

Those who favours individual marketing claim that segments are a fiction,

that individuals within so-called segments differ greatly, and that marketers can achieve

much more provision and effectiveness by addressing individual needs.

BASES & METHODS OF SEGMENTING CONSUMER & INDUSTRIAL MARKETERS

Market Segmentation can be broadly divided into 3 major groups.

1) Customer based segmentation, 2) Product related segmentation3) Competition related segmentation.

1. Customer based segmentation :

Three important factors in this type of segmentation are - a) Geographic

location of customers, b) Psychographic variables, c) Buyer Readiness.

(a) Geography Location of Customers :

Rural & Urban Division (Ex – Nike Show Room)

Metro & Non-Metro (Max Brands are used in Metro)

Previously there was a difference in rural market and urban market. But

after the advent of TV, Video etc. etc. the rural customer is more aware about various

products and buys the same branded products which is urban counterpart buys.

Demographic Characteristics :

Factors like age, education, income, occupation, sex, family size, and

martial status etc. etc. are used singly or in combination, to segment the market.

Age :

Infants Marketing (Newly born – 14 years)

Child Marketing (1 – 12 years) Tears Marketing (13 – 19 years) Adolescent Marketing (16 – 19 years) Youth Marketing (20 – 25 years) Middle aged Marketing ( 36 – 50 years) Elder & Seniors Marketing (50 years & above)

The buying decision of FMCG Products like tooth paste, soap, are bought

through the influence of child food products like biscuits, burger, pizzas, fruit juice, soft

drink etc. etc.

Income :

On the basis if income the market can be segmented as –

Low Income Low Middle Income Middle Income Upper Middle Income Higher Income

If income increases the expenditure partners changes i.e. it increases. You are travelling

by train suppose Rs.10,000 is your income per month. And if your income increases to

Rs.1,00,000 you may travel by plane.

Eating out, Buying automobiles etc. etc.

Occupation :

Whether self employed, part-time, full-time, Ex- Doctor, CA, Business

Men, Professors, Teachers, S/W Professionals, Marketing Professionals etc.

A PC manufacturer can sell more PC to software professionals.

Education

Based on education the Indian market can be segmented as –

Ligerates Illiterates High School Educated University Graduates, Post-GraduatesEducated people are more aware about the environment and product.

Martial Status :

Behaviour and consumption pattern of single and married people differs.

Ex - Married people are more frugal in spending money. Unmarried people are not so frugal in spending money.

Family Size :

Nuclear family Parents and children living separately in the same town).

Stand alone (Living outside city).

i) 360 Litres refrigerators for large family.

ii) 165 litres refrigerators for small family.

(b) Psychographic Variable :

Even though the two individuals may be of the same age, and same

profession with similar education and income. Each of the customer may have a different

attitude towards risk taking and new products and stores i.e. on the basis of life style.

(c) Buyers Readiness :

Another variable used for segmenting the market is buyer readiness or

preparedness to buy the product.

Unaware Buyers People aware but not interested People who are interested to buy People who will positively buy the product.

2. Product Related Segment :

(a) Product use situation,

(b) Benefits Segmentation

(c) Consumption

(d) Decision Criteria.

(a) Product use situation :

The marketer may also use product related bases for market segmentation.

One of the important bases is product use situations.

Rasna, for example, is shown as being used in different situations like a

party, the unexpected guests, a drink at the end of a long and tiring working day. A

marketer tgries to make the product versatile so that it can be used in different situations.

A customer may buy a sports watch for sporting activities and a jeweled watch for party

wear. Thus, a product or a brand may be selected by the customer depending on use

situations.

(b) Benefits Segmentation :

Here, the marketer identifies benefits that a customer looks for when

buying a product. This has been a very effective method of segmenting the market for

watches, where a customer may buy for functional purposes, durability, as a gift, an

accessory, or a jewellery item. In each case, the customer need is different. “Titan, in

one of its early commercials reminded the woman that “the next time he thinks of a gift

for you, ask for titan”. Customers look for different benefits. Some want intangible

benefits while other looks for tangible ones. Looking attractive and pretty is important to

a woman when she buys dresses or cosmetics. Hence, fair and lovely used thin intangible

psychological benefit to segment its market.

(c) Consumption :

It has also been the basis for segmenting beverages (tea, coffee, soft

drinks), liquor and cigarette markets. Accordingly the following segments are visible.

a) Heavy users, b) Light users, c) Moderate users.

The differentiation between them is based on the benchmark quantity defined by the

marketer for each segment.

d) Decision Criteria :

Another basis of segmentation is the decision criteria a customer uses to

evaluate and buy a brand or the product. Research shown the following four parameters in

consumer decision making today = a) Price, b) Perceived quality of the product/service,

c) Service offered by the firm & d) Technology.

Customer differ in term of sensitivity on all these parameters. For

example there are customer clusters who are high on price sensitivity. There are

segments that are quality, technology and service sensitive. To market these segments,

firms need to research the most dominant decision criteria in each segment and then

evaluate its capability to deliver. This analysis can help firms take appropriate

positioning decisions.

COMPETITION RELATED SEGMENTATION

Customer loyalty, is an important index to determine the competitive

position of the firm. So this is used as a basis of segmenting have the following segments

:

i) Hard-Core Loyals :

These are the customers who continue to buy the same brand over & over

again. The rest here is, will the customer refuse the competing brand, if and when

offered, and insist a buying his own preferred brand? Newspapers, cigarette smokers and

tea drinkers are some customer groups where such hard-core loyalties are commonly

visible.

ii) Soft Core Loyals :

Those who are loyal to two or three brands in a product group are called

soft core loyal.

Ex - A house wife buys Lux, Lux, Lux, Cinthol, Cinthol, Cinthol, Pears, Pears, Lux in her nine shopping cycles will marketer needs to watch such customers and motive them to shift to the hard-core loyalty segment.

iii) Switchers :

switchers are those customers who never stick to a brand. These are the

customers for whom brand switching is as easy as changing a shirt. They may switch for

variety or for a special deal. In either case, the brand is changing. The firm needs to

examine why it is losing its customers to competitor brands.

Hence it is the job of marketer to make out why the customer is switching

either because of low price or habit, non-availability of competing brand. The marketer

should examine these factors, carefully and see if any if them is a factor determining

customer quality.

SEGMENTING INDUSTRIAL MARKETS

Some of the commonly used based for segmenting the industrial

1) Size of the customer.2) Geographical Location.3) End use.4) Buyer Behaviour/motivation or purchase criteria

1. Size of the Customer :

Based on the size and purchases, we may have - a) Large Buyers, b) Medium sized

Buyers, c) Small Buyers.

Generally firms have different payment terms, product packaging and sales call

frequencies for, each of these customer group. The size of a customer can help a firm determine its sales

potential and competitive position in that customer group. This type of segmentation can also help the

marketer to correct any imbalances that may exist in his selling efforts.

2. Geographical Location

The geographical location of a customer is another basis for segmenting the industrial

products market.

Example - Firms located in Mumbai constitute one segment for a telecom firm, while firm

located in Delhi constitute another market segment or plan.

3. End Use :

Another way of segmenting the industrial market is by differentiating end user’s of the

firm’s product. For a steel manufacturer, some of the end user segments include automobiles,

construction, office furniture. Each of these segments have their characteristics and require a different

marketing approach.

4. Buyer Behaviour/Motivation or Purchase Criteria :

Within any specific end use segment, we can further segment the market on the basis of

purchase ;criteria. For example – using price as an input we can segment buyers as insensitive, sensitive

and highly sensitive to price changes. We can also categorize customer – whether he wants standardized

or customized products.

TARGET MARKET STRATEGY

There are 3 strategies –

i) Standardization

ii) Differentiation

iii) Focus

i) Standardization

Here the firm offers the same product to different market segments. It uses the same

pricing, communication and distribution strategies.

Example - Coke, P&PSI (Soft Drink)

These soft drinks retain the same flavor, advertising, and packaging across segments in different

geographical areas. The advantage is the economies of scale which a firm gets in mass product and

marketing.

ii) Differentiation :

This is just the opposite of the standardization strategy. Hence, the firm differentiates

its products to suit different segment needs and expectations.

Example - An airline differentiates its products into 3 classes-

First class, Business class & economy class

Each of these classes is targeted at a specific segment whose needs are different from the other.

iii) Focus :

This is a combination of standardization and differentiation. Here, the core strategy

remain the same but differentiation is made to take into account specific customer group requirement.

Example – Maruti 800.

Both the cars has some basic features and offers specific benefits to its buyers. However, a buyer who is

looking for more features like power steering and music systems can get the same at an additional price.

In this way Maruti is able to focus its entire strategy on both the economy and premium segments. This

strategy helps the firm enjoy the economies of scale as well as higher market penetration and

consequentially a higher market scheme. Therefore, the marketer has to choose the appropriate strategy

in order to achieve higher market penetration in each of his market segments.

POSITIONING

Positioning start with a product. A piece of Merchandise, a service, a company, an

institution, or even a person. But positioning is not what you do to a product. Positioning is what you do

to the mind of the prospect. That is, you position the product in the mind of the prospect.

Well known products generally hold a distinctive position in consumer’s mind.

Example – Hertz – World’s largest auto-rental agency.

Coca-cola – World’s largest soft-drink company.

Porsche – World’s best sports car.

These above brands own these positions, and it would be hard for a competitors to claim them.

A competitor has 3 strategic alternatives :

i) Strengthen own current position : The first is to strengthen its own current position in the

market. Avis acknowledged its second position in the rental for business and claimed. “We are

number two. We try harder. 7 up advertised itself as “the uncola”.

ii) Grab an unoccupied position : United Jersy Bank, noting advertised that giant banks were

usually flower ion arranging loans, positioned itself as “the fast-moving bank.

iii) De-position or Re-position : BMW attempts to deposition Mercedes Benz with the comparison

“The ultimate sitting machine versus the ultimate driving machine.”

MARKET DEMAND FORECASTING

KEY TERMS IN FORECASTING

Market Demand

i) In reality, market only refers to a set of existing and potential buyers of a product / service.

ii) Market Potential : Market Potential is a is a quantitative estimate of the total possible

demand by customers for a product in a given market. In other words, market potential

refers to the upper limit of market demand. It gives an indication of the ultimate potential for

the product and industry as a whole, assuming that the ideal marketing effort is made.

iii) Company Potential: It refers to a pat of the market potential that an individual firm or

company can achieve at the maximum in a given market, under ideal conditions and on the

assumption that the ideal marketing effort is made.

iv) Market Demand : It refers to the total value that would be brought by a deprived customer

group in a defined geographical area in a defined time period in a defined marketing

environment under a defined marketing programme.

v) Company Demand : It refers to that port of market potential that is achievable under existing

conditions. In other words, company demand refers to a company’s share of the total market

demand.

vi) Market Forecast : It refers to what the customer will demand in total in actual practice

during the period of the forecast, given the product and a defined marketing environment.

vii) Company Forecast : It refers to the total demand for the product of a particular firm that is

expected during the period of the forecast.

viii) Sales Forecast : It refers to the estimates of future sales of the Company’s products. It

indicates how much of a product is likely to be sold during a specified future period in a

specified market, at specified prices.

Forecasting Tools :

There are two kinds of tolls that one can use to estimate market demand.

i) Quantitative

ii) Quantitative.

Quantitative tools are opinion polling methods. In these methods, the opinion from the various

competent authorities such as the consumers, managers, sales force etc. are recorded. Based on

these opinions, the demand for a product in the future is forecasted. The opinion polling methods

of demand forecasting are of three kinds :

i) Buying Intention Survey Method : This involves surveying the buyers to assess their

intention to buy the product. This is very useful in estimating the market demand for

consumer durables or even a view product. This method could also be used to measure the

demand for a product at a different level of the market effort.

Ex – Change in price and its effect on consumer demand can be studied through this method.

The purchase intention of the buyer can be measured on a seven-point scale from a

“definitely buy” to a “definitely not buy”. The response so obtained constitutes purchase

probability for a given product and hence an index of purchase probability can be made.

ii) Sales Force Opinion Method : In this method, the company asks individual sales personnel to

estimate sales of the given product in his or her territory. These estimates are then pooled and a

national level forecast of sales is obtained. Very few companies use this tool as, most often, sales

people are believed to underestimate sales in their territories. The reason is that they would like to

show a positive variance of sales against targets to their top management. It is for this reason that

not many companies rely on sales force opinion.

iii) Expert opinion method : This involves constituting a panel of experts and asking them to

estimate the market demand for a given product. They are also asked to mention their

assumption about the future market environment. Individual experts do not know who else

is on the panel. Since each expert works from his or her office, the chances of him or her

getting influenced by others doesn’t arise. Once the marketers gets the estimates, he or she

isolates extreme opinions and estimates and revert back to the concerned expert, giving

them the assumptions which others have made. However, the marketers does not reveal the

estimate of the other experts. This method can study different scenarios and is particularly

useful in estimating demand for a new product or technology.

A variant of the Delphi Technique is the expert opinion poll in which a firm may

interview experts in its industry. These experts could be dealers, large buyers, marketing

consultants and trade associations. These polls too have the same limitations as that of the

consumer survey. Nevertheless, these polls are commonly used by many firms for

estimating market demand and the company’s market share.

Quantitative Techniques :

A wide variety of analytical and statistical methods are available for demand

forecasting by a firm. The firm can choose the most appropriate one depending on its forecasting

objectives. There are two types of demand forecasting.

i) Short Term

ii) Long Term

The Important short-term forecasting tools are :

i) Moving Average Method.

ii) Exponential smoothing method.

The Important long Term forecasting tools are :

i) Time series analysis.

ii) Econometrics Methods.

i) Moving Average Method :

This method helps eliminate the effects of seasonality and other irregular trends in

demand while forecasting the future figures. The method gives a time series of moving averages,

each point of the time series is the arithmetical or weighted average of a number of preceding

consecutive points of the time series.

Moving averages consists of a series of arithmetic means calculated from

overlapping groups of successive values of time series. Each moving average’ is based on values

covering a fixed time interval, called ‘period of moving average’ and is shown against the enter of

the period. The composition of items adjusted successively by replacing the first value of the

previous by averaged group by the next value below that group. Thus, for a time series, y 1, y2, y3

….. yN for different time periods, the moving average of period ‘N’ is given by

1st value of moving average y1 = y1+y2+ y3

N

2nd value of moving average y2= y2+y3+ yN

N

3rd value of moving average y3 = y3+y4 +…..+ yN N

and so on.

When the period of moving average is odd, i.e., if ‘N’ is odd, the successive values

of moving averages are placed against the middle value of the concerned group of items. For

Example, if N = 9, the first moving average value is placed against the middle period, i.e., 5 th

value, the second moving average value is placed against the time period ‘6’ and so on.

When the period of moving average is even, i.e., ‘N’ is even, there are two middle

periods. Obviously in this case, moving average averages with the original data, we take a two-

period average of the moving average and place them in between the corresponding time periods.

This technique is called centering and the corresponding values are called moving averages

centered.

Example 8.1 - For the following time series which gives the demand for the period of an industry,

find the trend by using 3-years moving average.

Year 1999 2000 2001 2002 2003 2004 2005 2006Production : (in 100 tons)

42 46 48 39 54 65 66 60

Soln. 3- yearly moving averages

Year Production (in 100 tons)

3-yearly moving total

3-yearly moving Average

1999 42 - -

2000 46 136 45.33

2001 48 133 44.33

2002 39 141 47.00

2003 54 158 52.67

2004 65 185 61.67

2005 66 191 63.67

2006 60 - -

This method is helped in trend calculations only. And, since so mathematical

function is used for finding the trend, value for a future period cannot be predicated under this

method. However, this method is called the smoothing of a series in the sense that it reduces the

fluctuations in the time series.

2. Exponential Smoothing Method :

Another technique, called the exponential smoothing is a very popular approach for

short term forecasting. It is similar to moving averages and used fairly extensively. Forecasts

based on exponential smoothing are a weighted average of observed and predicted values for the

previous period. And, weights are determined by selecting a smoothing constant that minimizes

the sum of squared deviations between the forecasted and observed values. The weights assigned

to each value reflect the degree of importance of that value. More recent values, being assigned to

each value reflect the degree of importance of that value. More recent values, being more relevant

for the forecast the degree of importance of that value. More recent values, being more relevant

for the forecast are assigned greater weights than previous period values. It may be noted that

weights (w) are to be assigned such that ‘w’ lies between zero and unity (0<w<1). The process of

exponential smoothing is an follows :

Let ‘y’, be the observed value of the series at time ‘t’, and ‘S1’ be the smoothened

value at time ‘t’. The smoothing scheme begins by setting smoothened value equal to the observed

value for the period (t=1), S1 = y1. And for any succeeding time period ‘t’, the smoothened value

‘S1’ is found with the help of the equations :

St = wyt + (1-w) St-1

Where, St is the current smoothened value

w is the weight and 0 < w < 1

yt is the current observed value

St-1 is the previous smoothened value.

Example 8.2 The demand for product of a firm over the last 10 weeks are given below. If w =

0.20, forecast the demand for the next week, i.e. 11th week.

Week : 1 2 3 4 5 6 7 8 9 10

Demand :(in units)

400 430 420 440 460 440 470 430 440 420

Soln. Forecasts Based on Exponential Smoothing

Week(t)

Demand(Yt)

W=0.20St

1 430 400.00

2 430 406.00

3 420 408.80

4 440 415.04

5 460 424.03

6 440 427.23

7 470 435.78

8 430 434.62

9 440 435.70

10 420 432.56

11 - 430.04

It has been assumed that S1 = y1, Thus,

S2 = 0.20 (430) + (1-0.20)(400) = 406.00

S3 = 0.20 (420) + (1-0.20)(406) = 408.80

S4 = 0.20 (440) + (1-0.20)( 408.80) = 415.04

S5 = 0.20 (460) + (1-0.20)(415.04) = 424.03

S6 = 0.20 (440) + (1-0.20)(424.03) = 435/23

S8 = 0.20 (430) + (1-0.20)(435.78) = 434.62

S9 = 0.20 (440) + (1-0.20)(434.62) = 435.70

S10 = 0.20 (420) + (1-0.20)(435.70) = 432.56

Using w = 0.20, the forecasted demand for the 11th week is computed as follows :

S11 = 0.20 (420) +_ 0.80 (432.56) – 430.04

Exponential smoothing method is particularly useful when forecasts of a large

number of items are made. It is not necessary to keep a long history of past data. The method can

have a stable response to changes and responses can be adjusted as required. In other words, as

additional observations become available it is easy to update the forecasts. Thus, exponential

smoothing is one of the most accurate statistical techniques available for forecasting.

3. Time Series analysis

Another statistical method that is extensively used in long-term demand forecasting

is the Time series Analysis, also now as Trend cycle Analysis. A firm which has been in existence

for some time, will have accumulated data on sales of the various products pertaining to different

time periods. Such data,. When arranged chronologically yield ‘time series’. Thus, a time series is

a set of chronologically ordered points of raw data, for example, demand for a product, by month,

for several continuous years.

Time series analysis helps in identifying and explaining :

1. Systematic variation or seasonal variation which arises due to seasonality in the series of data.

2. Cyclical patterns that repeat every two year or every three years and so on.

3. Trend in the data.

4. Growth rates of these trends.

5. Forecasting the future demand.

The important assumption behind the time series analysis is that the factors

influencing demand will not change very much over a period of time and that the future will reflect

the past. In this sense, this method is basically a projection method/. Projections of future

demand are made by studying the interaction of the basic and significant influences of demand. In

this method, a statistical technique is followed to analyse past demand data. All basic factors

underlying demand variations are analyzed. The four main types o demand variations, (a) Long-

term growth trends, (b) cyclical changes, (c) seasonal variations, and (d) random fluctuations, are

isolated and measured using the statistical technique. The trend lines for each type of variation are

studied and demand forecasts are made.

4. Econometrics Methods

Economics provide certain econometric models which constitute another analytical

method of demand forecasting Econometrics basically attempts to express economic theories in

mathematical terms so that they can be verified by statistical methods and used to measure the

impact of one economic variable upon another for predicting future events. The econometric

forecasting models vividly represent the real world situations and the multiple variables involved

in the demand situation.

The econometric model is based on the following principles.

1. Demand for a product depends on several factors.

2. The determinants of demand are independent variables whereas demand is dependent variable.

3. There is constant interactions between demand and reach of the determinants of the demand.

4. There is also constant interaction among the independent variables themselves.

5. The independent variables may be exogenous and/or endogenous. Former are external non-economic determinants of demand.

6. The interrelationship between demand and its determinants can be estimated by statistical analysis of past data.

7. The econometric model is constituted by a set of interdependent equations, linear or non-linear, that described and simulate the total demand situation. The forecast is derived through this set of equations.

The econometric models are used more in forecasting the demand for durable

goods both industrial and consumer durable goods. But these models are quite complex and

extensive to develop.

PRODUCT PLANNING

Product planning may be defined as “the act of marking out and supervising the

search, screening, development and commercialization of new products; the modification of

existing lines; and the discontinuance of marginal or unprofitable lines”.

Importance of PLC

(a) PLC concept is a useful tool for market forecasting, planning and control.

(b) The knowledge that a product will pass through such a cycle of life is helpful in evolving

proper product policies and promotion and pricing strategies.

(c) PLC is a reliable aid in modifying the marketing strategies.

(d) PLC helps the marketer to plan a strategy to meet the competition.

(e) PLC cautions management about the declining stage of the product.

However, PLC is not free from criticisms. In an article, “Forget the product life

cycle”, Dhalla and Yuspeh, argued that the PLC concept is essentially descriptive and if the

management use it as perceptive tool, it would be making a grievous mistake. Some of the

blunders committed due to dependences on PLC are firms put to much of emphasis on new

product development instead of continuing the revitalization process of existing brands (a study

shows that more than 95% of new products fail); sometimes firms get misguided by PLC concept

that stagnation in sales or negative growth rates in sales create illusion of decline stage leading to

phase out of products or brands.

Still it is believed that PLC is an important strategic tool in marketing. Levitt

believes that PLC is a planning tool and not just a descriptive tool. Thus, firms renewed to use it.

LOCATING PRODUCTS IN PLC

Since PLC is a useful concept to deal with product, pricing and promotional

strategies of a firm, it should be effectively manipulated by the firm to locate its product or brand

in it. The approach to locating a product or brand in the PLC of a firm involves environmental

scanning and trend analysis. The involves the following steps.

1. Analysis of historical sales and growth trends in the brand and industry.

2. Analysis of recent trends in the market place. This involves.

(a) Analysis of recent trend regarding the number and strengths of competitors.

(b) Analysis of the quality, performance and perceived benefits of competitor products.

(c) Analysis of shifts in distribution channels, if any

(d) Analysis of the relative advantage the brand product enjoys over competitors in the

market place.

3. Analysis of development of short term tactics of competitors.

4. Analysis of historical information regarding life cycles of similar and related products.

5. Projecting brand or product sales on the basis of above analysis.

6. Estimation of the probable years remaining for the brand of product.

7. Fixation of the brand or product’s position in the life cycle.

STEPS IN NEW PRODUCT DEVELOPMENT PROCESS

Eight stages are involved in the new product development process :

Idea generation Screening, Concept development and testing, Marketing-strategy development, Business analysis, Product development, Market testing & Commercialization

The purpose of each stage is to determine whether the idea should be stage is to determine

whether he idea should be dropped or moved to the next stage. The companies develop new

products to achieve strong sales and healthy profits. Thus, every company should have an explicit

strategy with respect to developing new products. This strategy is called New-Product Strategy.

A new product strategy is a statement identifying the role a new product is expected to playing

achieving corporate and marketing goals. For example, a new product might be designed to

protect market share of the company. If it is so, then the new product strategy may be to introduce

an additional to an existing product line or revise an existing product.

Let us now consider the various stages a firm has to pass through for launching a

new product in the market.

Idea generation : The New Product Development (NPD) process starts with the search for

ideas. New product ideas can come from interacting with various groups and from using

creativity generating techniques. Ideas for new products can come from customer, scientists,

competitors, employees and top management. Customer needs and wants are also the

sources to search for ideas.

Screening : An organization or company should motivate its employees through reward. So

that they can submit their idea Manager or Idea Committee. The company then divide the

ideas into 3 groups such as – i) Promising ideas, ii) Marginal ideas, iii) Rejects.

Each promising ideas is researched by a committee member. And the surviving ideas

then move into full-scale screening process. Also the screened idea helps in evaluating the

potential of new product ideas.

Concept development and testing : A concept is an elaborated version of a product idea

expressed in meaningful consumer terms. According to Levitt, customers buy concepts and

not just the tangible product. For example, a leading soft drink company wanted to strength

its product line by adding a new range of fruit juice. This is the idea from which following

product concepts may be developed.

Concept-1 : Fresh fruit juice for children and adolescents as a health supplement at breakfast.Concept-2 : Fresh bottled mango juice for the young and the grown ups as a fun thirst quenching and refreshing beverage to be had at any time.Concept-3 : Fresh bottled mango juice for adults as a health supplement.

Assume that the second concept looks to be attractive and promising. Then the next task

is decide how will the new product differ from existing soft drinks. The company may

consider two product attributes-taste and packaging. The company can also position the

brand against competing ones on several features like use situation, price, calories, and

convenience. The moment it does so, the product concept, now becomes a brand concept.

After the product and brand concepts have been developed, the stage is now set for

testing them.

Marketing-strategy development : After having a successful concept resting, the new

product manager develops a preliminary marketing-strategy plan for producing the new

product into the market. The plan generally consists of three arts :

The first part describes the target market’s size, structure and behaviour, the planned

product positioning; and the sales market share, and profit goals sought in the first few years.

The second part outlines the planned price, distribution strategy, and marketing budget

for the first year.

The third part describes the long-run sales and profit goals and marketing – mix strategy

over time.

Business analysis : It’s an in-depth study of the estimated economic feasibility of new

product ideas. In this stage the company needs to prepare sales, cost and profit projections to

determine whether they satisfy company objectives.

Product development : It involves developing the product itself and further development of

marketing, packaging ad distribution cost estimates.

Market testing : This stage thoroughly evaluates the acceptance of potential market through

the use of market research.

Commercialization : It is the actual introduction of the product into

the market place, with all the related decision and resource commitments.