placement prep- by smark!

8/13/2019 Placement Prep- By Smark!

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Concepts in Marketing

1. Production Concept D>>S Sole Supplier Many Customers

2. Product Concept D>S Many Suppliers Few Customers Undifferentiated Products

3. Selling Concept Products, even good ones, don't necessarily sell themselves.

Customers must be convinced to buy products. D


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5. Societal ConceptMarketers should take care of themselves, the customers and also the society.

Ex: Selling Banned substance takes care of Seller, Customer but NOT SOCIETY!!!

6. Ecological ConceptMarketers should be responsible towards ecology and environment.

7. Holistic Concept


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The Ansoff ModelThe Ansoff Matrix was first published in the Harvard Business Review in 1957, and has given generationsof marketers and business leaders a quick and simple way of thinking about growth.Sometimes called the Product/Market Expansion Grid, the matrix (see Figure 1 below) shows four ways that

businesses can grow, and helps people think about the risks associated with each option.

The Matrix essentially shows the risk that a particular strategy will expose you to, the idea being that eachtime you move into a new quadrant (horizontally or vertically) you increase risk.

The Corporate Ansoff MatrixLooking at it from a business perspective, the low risk option is to stay with your existing product in your

existing market: you know the product works, and the market holds few surprises for you.However, you expose yourself to a whole new level of risk by either moving into a new market with anexisting product, or developing a new product for an existing market. The new market may turn out to haveradically different needs and dynamics than you thought, and the new product may just not be commerciallysuccessful.And by moving two quadrants and targeting a new market with a new product, you increase your risk to yetanother level!

Personal AnsoffLooking at this idea from a personal perspective, just staying where you are is often a low risk option.Switching to a new role in the same company or industry, or changing to a similar job in a new industry is ahigh-risk option. And switching to a new role in a new industry has an even higher level of risk!


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Tip 1:Interpret this according to your circumstances. For example, an accountant may find it easy to switch from

one industry to another. But a salesman doing this may lose contacts that would take years to rebuild.Tip 2:Don't be too scared by risk if you manage it correctly (for example, by researching carefully, makingcontingency plans, building appropriate skills, and suchlike), then it can be well worth taking quite largerisks.

The table below helps you think about how you might classify different approaches.Market Development Diversification

Here, you re targeting new markets, or newareas of the market. You re trying to sell

more of the same things to different people.Here you might: Target different geographical

markets at home or abroad.

Use different sales channels, suchas online or direct sales if you arecurrently selling through the trade.

Target different groups of people,perhaps with different age groups,genders or demographic profilesfrom your normal customers.

This strategy is risky: There s often little scopefor using existing expertise or for achieving

economies of scale, because you are trying tosell completely different products or servicesto different customersThe main advantage of diversification is that,should one business suffer from adversecircumstances, the other may not be affected.

Market Penetration Product Development

With this approach, you re trying to sellmore of the same things to the same people.Here you might: Advertise, to encourage more

people within your existing market

to choose your product, or to usemore of it.

Introduce a loyalty scheme. Launch price or other special offer

promotions.

Increase your sales force activities. Buy a competitor company

(particularly in mature markets).

Here, you re selling more things to the samepeople. Here you might: Extend your product by producing

different variants, or packagingexisting products it in new ways.

Develop related products or services(for example, a domestic plumbingcompany might add a tiling serviceafter all, if customers who want a newkitchen plumbed in are quite likely toneed tiling as well!)

In a service industry, shorten yourtime to market, or improve customerservice or quality.


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2. Manage risk appropriately. For example, if you're switching from one quadrant to another, makesure that:

You research the move carefully. You build the capabilities needed to succeed in the new quadrant. You've got plenty of resources to cover a possible lean period while you're learning how to

sell the new product, and are learning what makes the new market tick . You have firstly thought through what you have to do if things don't work out, and that

failure won't "break" you.

Porter's Five Forces ModelAssessing the Balance of Power in a Business Situation

Why use the tool?The Porter s Five Forces tool is a simple but powerful tool for understanding where power lies in a

business situation. This is useful, because it helps you understand both the strength of your currentcompetitive position, and the strength of a position you re looking to move into.

With a clear understanding of where power lies, you can take fair advantage of a situation ofstrength, improve a situation of weakness, and avoid taking wrong steps. This makes it an important

part of your planning toolkit.

Conventionally, the tool is used to identify whether new products, services or businesses have thepotential to be profitable. However it can be very illuminating when used to understand the balanceof power in other situations.

How to use the tool:Five Forces Analysis assumes that there are five important forces that determine competitive powerin a situation. These are:-

1. Supplier Power: Here you assess how easy it is for suppliers to drive up prices. This is driven bythe number of suppliers of each key input, the uniqueness of their product or service, their strengthand control over you, the cost of switching from one to another, and so on. The fewer the supplierchoices you have, and the more you need suppliers' help, the more powerful your suppliers are.

2. Buyer Power: Here you ask yourself how easy it is for buyers to drive prices down. Again, thisis driven by the number of buyers, the importance of each individual buyer to your business, the costto them of switching from your products and services to those of someone else, and so on. If you dealwith few, powerful buyers, they are often able to dictate terms to you.

3. Competitive Rivalry: What is important here is the number and capability of your competitorsif you have many competitors, and they offer equally attractive products and services, then you llmost likely have little power in the situation. If suppliers and buyers don t get a good deal from you,

they ll go elsewhere. On the other hand, if no-one else can do what you do, then you can often havetremendous strength.

4. Threat of Substitution: This is affected by the ability of your customers to find a different wayof doing what you do for example, if you supply a unique software product that automates animportant process, people may substitute by doing the process manually or by outsourcing it. Ifsubstitution is easy and substitution is viable, then this weakens your power.

5. Threat of New Entry: Power is also affected by the ability of people to enter your market. If itcosts little in time or money to enter your market and compete effectively, if there are few economiesof scale in place, or if you have little protection for your key technologies, then new competitorscanquickly enter your market and weaken your position. If you have strong and durable barriers toentry, then you can preserve a favorable position and take fair advantage of it .

To use the tool to understand your situation, look at each of these forces one-by-one.


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Brainstorm the relevant factors for your market or situation, and then check against thefactors listed for the force in the diagram above.

Then mark the key factors on a diagram like the one above, and summarize the size and scaleof the forceon the diagram. An easy way of doing this is to use, for example, a single +sign for a force moderately inyour favor, or --" for a force strongly against you (you can seethis in the example below).

Then look at the situation you find using this analysis and think through how it affects you.Bear in mind that few situations are perfect; however use this as a framework for thinkingthrough what you could change toincrease your power with respect to each force.

To use the tool to understand your situation, look at each of these forces one-by-one. Brainstorm the relevant factors for your market or situation, and then check against the

factors listed for the force.

Then mark the key factors on a diagram like the one above, and summarize the size and scaleof the forceon the diagram. An easy way of doing this is to use, for example, a single +sign for a force moderately inyour favor, or --" for a force strongly against you (you can seethis in the example below).

Then look at the situation you find using this analysis and think through how it affects you.Bear in mind that few situations are perfect; however use this as a framework for thinkingthrough what you could change toincrease your power with respect to each force.

The Value Chain


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The term Value Chain was used by Michael Porter in his book "Competitive Advantage: Creating andSustaining superior Performance" (1985). The value chain analysis describes the activities the organization

performs and links them to the organizations competitive position.

Value chain analysis describes the activities within and around an organization, and relates them to ananalysis of the competitive strength of the organization. Therefore, it evaluates which value each particularactivity adds to the organizations products or services. This idea was built upon the insight that anorganization is more than a random compilation of machinery, equipment, people and money. Only if thesethings are arranged into systems and systematic activates it will become possible to produce something forwhich customers are willing to pay a price. Porter argues that the ability to perform particular activities andto manage the linkages between these activities is a source of competitive advantage.

Porter distinguishes between primary activities and support activities. Primary activities are directlyconcerned with the creation or delivery of a product or service. They can be grouped into five main areas:inbound logistics, operations, outbound logistics, marketing and sales, and service. Each of these primary

activities is linked to support activities which help to improve their effectiveness or efficiency. There arefour main areas of support activities: procurement, technology development (including R&D), humanresource management, and infrastructure (systems for planning, finance, quality, information managementetc.).

The basic model of Porters Value Chain is as follows:

The term Margin implies that organizations realize a profit margin that depends on their ability to managethe linkages between all activities in the value chain. In other words, the organization is able to deliver a

product / service for which the customer is willing to pay more than the sum of the costs of all activities inthe value chain.

BCG Matrix


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TheBoston ConsultingGroup (BCG) Matrix is a simple tool to assess acompany spositionin

terms of its productrange.Ithelpsa companythink about itsproductsand servicesand make

decisions about which itshould keep, which it should let go and which it should invest in further.Question Marks

Question marks are products that grow rapidly and as a result consume large amounts of cash, butbecause they havelow market shares they don t generate much cash. The result is a large net cashconsumption. A question mark has the potential to gain market share and become a star, and eventuallya cash cow when the market growth slows. If it doesn t become a market leader it will become a dogwhenmarket growth declines. Question marks need to be analysed carefullyto determine if they are worth theinvestment required to grow market share.

Dogs

Dogs have a low market share and a low growth rate and neither generate nor consume a large amountof cash. However, dogs are cash traps because of the money tied up in a business that has little

potential. Such businesses are candidates for divestiture.

Stars

Stars generate large sums of cash because of their strong relative market share, but also consumelarge amounts of cash because of their high growth rate. So the cash being spent and brought inapproximately nets out. If a star can maintain its large market share it will become a cash cow whenthe market growth rate declines.

Cash Cows

As leaders in a mature market, cash cows exhibit a return onassets that is greater than the marketgrowth rate so theygenerate more cash than they consume. These units shouldbe milked extractingtheprofitsand investing as little aspossible. They provide the cash required to turn question marks intomarket leaders.


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The GE 9 cell matrixDescription of the model

The General Electric Company, with the aid of the Boston Consulting Group and McKinsey

andCompany, pioneered the nine cell strategic business screen illustrated here. The circle on

the matrixrepresents your enterprise. Both axes are divided into three segments, yielding nine

cells. The ninecellsare grouped into three zones:

The Green Zone consists of the three cells in the upper left corner. If your enterprise falls in

this zone you are in a favorable position with relatively attractive growth opportunities. This

indicates a "greenlight" to invest in thisproduct/service.

The Yellow Zone consists of the three diagonal cells from the lower left to the upper right. A

positionin the yellow zone is viewed as having medium attractiveness. Management must

therefore exercisecaution when making additional investments in this product/service. The

suggested strategy is to seekto maintain share rather than growing or reducing share.

The Red Zone consists of the three cells in the lower right corner. A position in the red

zone is not attractive. The suggested strategy is that management should begin to make

plans to exit theindustry.


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Characterize your enterprise

The vertical axis represents the industry attractiveness. The expert system will position your

enterpriseon the chart based upon your description of:

bargaining power of thebuyers

bargaining power of the suppliers

internal rivalry

the threat of new entrants

the threat of substitutes

The horizontal axis represents the firm's competitive strength or ability to compete in the

industry. It includes an analysis of:

the value and quality of the offering

market share

stayingpower

experience

You can trace through the supporting analysis and its conclusions, adjusting your input

until youare satisfied your description accurately characterizes your enterprise.


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Analysis of Your Enterprise Position

High Attractiveness

Strong Competitive Position

The strategy advice for this cell is to invest

for growth. Consider the following

strategies:

provide maximum investment

diversify

consolidate your position to focus your

resources

accept moderate near-term profits to

build share

High Attractiveness

Average Competitive Position

The strategy advice for this cell is to

invest for growth. Consider the

following strategies:

build selectively on strength

define the implications of

challenging for market leadership

fill weaknesses to avoid

vulnerability

High Attractiveness

Weak Competitive Position


opportunistically invest for earnings.

However, if you can't strengthen your

enterprise you should exit the market.

Consider the following strategies:

ride with the market growth

seek niches or specialization

seek an opportunity to increase

strength through acquisition

Medium Attractiveness



selectively invest for growth. Consider th e





selectively invest for earnings. Consider

the following strategies:


Weak Compe titive Position


preserve for harvest. Consider the


invest heavily in selected segments,

establish a ceiling for the market share

you wish to achieve

?seek a ttra cti ve new segmen ts to

apply strengths

segment the market to find a

more attractive position

make contingency plans to protect

your vulnerable position

act to preserve or boost cash

flow as you exit the business

seek an opportunistic sale

seek a way to increase your

strengths

Low Attractiveness



selectively invest for earnings. Consider the


Low Attractiveness



restructure, harvest or divest. Consider

the following strategies:

Low Attractiveness

Weak Competitive Position

The advice for this cell is to harvest or

divest. You should exit the market or

prune the product line.

defend strengths

shift resources to attractive

segments

make only essential

commitments

prepare to divest

?examine ways to revitalize the

industry

shift resources to a more

attractive segment


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Segmenting-Targeting-Positioning

Segmenting Targeting Positioning

Find segmentationbase or variables in

broad market

Compare segments forrelative attractiveness

List all F.A.BFeatures, Applications and

Benefits sought by theselected TMS

Group customerswith similar needsinto separatesegments

Select the attractivesegment matchingcompany scompetence to offer DA over rivals

Create USP and find theUBP.

Prepare segmentprofile.(Geographical,Demographical,Physiological &

Behavioral

Prepare BrandSegment Strategy

Communicate to the buyer

Positioning strategy:

The choice of TMS, which determines where the business competes and choice of differential advantagewhich it wants to project over its competitor It deals not with how the product is but how the company wants its target customers to perceive it.


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Ways to position:

Developing a positioning strategy:

A) Select target market segments:

B) Create a differential advantage

USP:

Unique selling point: An attribute to tout as No.1 Common No.1 positions- Best Quality, Lowest Price, Safest, Best Service, Best Value, fastest, Most Customized, Most Convenient,Most Advanced Technology

Steps in developing value proposition statement:

1. Co name? and Product name?2. 2. What is target customer profile In Geographic, Demographic, Psychographic including life style and

Techno-savviness parameters?

By attributeBy benefit

By use or application

By user

By competitor

By product category

by quality and price

Identify thebroad market

identify bases

for

segmentation

develop

profiles of

segments

measuresegments

attractiveness

Identifybenefits

sought

Measurecompetitor

positioning

Createreason for

preference


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3. One unique benefit that is distinctly different from others? Other normal benefits?4. What is customers perception of Benefit to price ratio? Expressed as Too high a price for the benefit?--

-Moderately high price for the benefit? Just right price for the benefit? Moderately low price for thebenefit

5. Make a value proposition statement An artistic statement, compact, unambiguous and easilyunderstood Neither too long nor too short- but covering the salient aspects of all the above 4 points

6. Eg: Good Day biscuits7. Good day biscuits by Britannia are a popular, healthy and tasty everyday treat for consumers of all ages

which spreads cheer amongst the people, creates an atmosphere of shared joy in the nation and providesgood value for money.

Repositioning Strategy

Positioning in this map determines the value for the customer. Value to be provided based on how the company is entering/targeting the market. Eg: New entrant- Right

value position

7 repositioning options

1. Introduce new brands2. Change existing brands3. Alter beliefs about brands4. Alter beliefs about competing brands5. Alter attributes importance6. Introduce new or neglected attributes7. Find new market segment

4 positioning errors to avoid

1. Under positioning2. Over positioning3. Confused positioning4. Doubtful positioning


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Ps of marketing

1. Product2. Price3. Place4. Promotion5. Pace (by Peter F. drucker)6. Physical Evidence7. People8. Process

Product:

It need not be tangibleit can be in the form of

Physical good (durable goods like jewellery & non-durables like soaps , food products) Services telecomm networks Experience movies, entertainment Events, properties, information (consultancy) or ideas.Products can be differentiated in

Form: shapes, sizes, colour, different packaging Features: eg dove differentiates itself from other soap by adding moisturising milk thus conveying it s amoisturiser and not just soap Customization- eg dell Performance Quality eq BMW Durability eg nokia handsets being most durable Reliability- eg people are willing to pay more for fruits and vegetables available in Nature s Basketknowing that they keep genuine organic food products Style eg Harley Davidson motorcycles Design particularly important in marketing retail services, apparels etc.Note: In case of services ordering ease, delivery time, installation, customer training, etc can be points ofdifferentiation

Product Strategies:


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A company s product mix has certain width, length, depth and consistency

Width of product mix refers to how many different product lines the company carries, length refers to total no.of items in the mix, depth refers to no. of variants each product offers, consistency of product refers to howclosely related the various product lines in terms of their end use, raw materials, production techniques,

distribution channel etc

Eg HUL

personal

carelaundry skin care hair care oral care deo

Lux surf Ponds sunsilk closeup axe

lifebuoy rin vaselineclinic

plusrexona

liril wheelfair &

lovely

breeze

dove

pears

Product mix width

Product

line

length

Product Mix width Strategy

Merits:

Even if one product doesn t do well, the others come for the rescue Economies of scale Large loyal customer base Prevent Competitive entry in marketDemerits:If mix width is too wide, company often fall short of resources

Product Mix consistency Strategy high degree of closeness in raw materials, technology used, packingmaterial, employee skills eg Himalaya, P&G ; low degree eg ITC, Tata

Merits: Synergy is nigh, cost is low, resources are shared, provides competitive advantage

Demerits:Sometimes firms have to say No to a particular product line which is inconsistent even if theselines may have huge growth opportunities.

Product line length Strategy: It can be done in 3 ways

1. Down market stretch- eg ITC launching high end stationery product brand named papercraft, and laterbringing mid-low priced classmate2. Up market stretch- eg tata motors from economy segment going to premium by launching SX43. Two way stretch eg titan going for Raga and fast track.Merits: it will provide market coverage thus economies of scale and large loyal customer base

Demerits: if line is too long customer may get confused and there will be cannibalisation

Product Depth Strategy: eg lux has 2 forms (solid and liquid), 6 packing size,5 fragrances ie 2*6*5 wouldbe the product depth

Merits: helps in meeting the needs of sub segment

Demerits: if product depth is too high, a lot of cost will be spent in keeping the inventory


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**Product life cycle

8 steps of New product development

1. Market Analysis [STP & idea generation]2. Idea screening3. Concept development & testing4.

Market strategy formation5. Business analysis

6. Prototypes development & testing [lab testing]7. Test market8. Commercial launch


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**Marketing communication strategies based on Consumer buying

behaviour

Complex buying behavior eg purchase of house

High value brand or product Requires extensive collection of data Based on facts and figures Comparison Analysis and ChoicePost Purchase Discomfort Reduction Buying Behavior eg tanishq

Expensive product purchase Infrequent buying and less experience of product High buyer involvement in purchase Perception of high-risk purchase Few perceived differences in brands Reassurance by using some leadership advantageVariety Seeking Buying Behavior eg lays chips

Individual likes to shop around and experiment with different products Low consumer involvement in purchase

SignificaAnt perceived brand differences Consumers willing to try diversity of brands for variety and to avoid boredomHabitual Buying Behavior eg surf excel

Low consumer involvement in buying Consumer buys a product out of habit Buying of cheap frequently purchased items Few significant brand differences Considerable brand loyalty based on high customer satisfaction with previous purchases of the brand Little perceived difference between available offerings and no other incentiveExtensive Problem Solving

Buying situations which require considerable effort because the buyer has had no previous experience withthe product or suppliers; also called Extensive Decision Making Message must feature performance and economic benefits Full and detailed information.


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Limited Problem Solving eg reva electric car

Purchaser has had some previous experience but is unfamiliar with suppliers, product options, prices, etc A choice process involving a moderate degree of cognitive and behavioral effort A purchase involves some degree of conscious information searching and analysis

Involves moderately high priced goods which are not purchased too frequently Emphasis on USP of a productRoutine Problem Solving eg clinic all clear removing dandruff

A buying situation in which the buyer has had considerable past experience Also called Automatic Response Behavior or Habitual Response Behavior Habit is determinant Various Discounts givenImage buying behavior eg rolex

Expensive products Products represents personality and lifestyle Status symbol Promotional strategy emphasizes on rich lifestyle of consumer

sensual buying behavior eg axe deodorants

Desire for pleasure Convey pleasure sensually Ex: Perfumes, Exotic Scotch, fair and lovely.Impulsive buying behavior eg Chocolates

Seeing is buying Spontaneous See and Buy decisions Communication must use creative idea to attract customers through display, posters Less emphasis on factual information

Branding StrategiesThese 4 brand strategies arise because of 2 choices that a Brand Manager has;

1. Product Categorya. Existing i.e. new product is developed in existing lineb. New i.e. new product is developed in new line

2. Use of Brand Namea. Existing i.e. a new product has a name with a prefix or suffix of existing nameb. New i.e. new product can choose a completely new name


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New1. Line Extension StrategyNew product in existing product category using existing brand name.Success of mother company rubs off to the children and growth is very fast for the children.Example Lux launched Lux International.Product category was soap which was already existing and use of the existing brand name Lux.

2. Brand Extension StrategyNew product in new product category using existing brand name.Success of mother company rubs off to the children and growth is very fast for the children.Example Lux Shampoo, Lux Handwash named after Lux Soap. Product category was new i.e. shampooand handwash but use of already existing brand name Lux.


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3. Multi Brand StrategyNew product in existing product category using new brand name.Used when all different brands in similar category have dissimilar images and are meant to address differentpurposes.

Example Pears, Dove, Lux.

4. New Unique Brand

New product in new product category using new brand name. Example Lux Soap, KnoorSoup, Kwality Walls icecream of HUL

2nd

P of Marketing- Price

It is most important because of the following reasons:

1. It determines demand elasticity of the product in market.2. Determines the perceived quality of product(high price, high quality).3. Determines the value of product perceived in the minds of the consumer.4. Indirectly determines the cost/unit of producing and marketing a product.3 Important pricing strategies are:

Skimming : in this strategy set the price high and to catch up with the needs of small segment at the top end ofthe market who seek higher quality product and willing to pay proportionately higher price for it.

Penetration: Here the target is middle and low segment and is highly price sensitive. Price is fixed so attractivelylow that a large proportion of the market is deeply and quickly penetrated to get a large volume of sales.

Hybrid: skimming the whole market layer by layer over a period of time by offering the same high qualityproduct at lower prices.

Setting the pricing policy: A 6 step procedure:-

1. Selecting the pricing objective: Five major objectives are survival, maximum current profit, maximummarket share, maximum market skimming and product quality relationship.

2. Determining demand: Here demand has to be estimated using the price sensitivity and by variousmethods such as surveys, price experiments and statistical analysis. Marketers need to know howresponsive, or elastic, the demand would be to a change in price(price elasticity).

3. Estimating Costs: The company wants to charge a price that covers its cost of producing, distributingand selling the product, including a fair return for its effort and risk.

4. Analyzing competitorscosts, prices and offers: if the firm s offer contains features not offered by thenearest competitor, it should evaluate their worth to the customer and add that value to the competitor sprice and vice versa.

5. Selecting a pricing method: Markup Pricing: in this a standard markup is added to the product s cost. It works only if the marked-up

price actually brings in the expected level of sales.

Target Return Pricing: the firm determines the price that would yield its target rate of ROI. Perceived Value Pricing: Companies base their price on the customer s perceived value. Perceived value

is made up of buyer s image of the product performance, the channel deliverables, the warrantyworthiness and supplier s reputation. The key is to deliver more value than the competitor and todemonstrate this to prospective buyers.

Value Pricing: It basically deals with complete reengineering the company s operations to become alow-cost producer without sacrificing quality, to attract a large number of value- conscious customers. An


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important type of value pricing is ELDP(Everyday low pricing) in which a constant low price is chargedwith little or no price promotions and special sales.

Going- Rate Pricing: in this the firm charges its price largely on competitor s prices, either same, moreor less.

Auction- Type Pricing: because of internet, this is becoming popular. Major types are: EnglishAuctions( 1 seller and many buyers), Dutch Auctions( one seller and many buyers or one buyer and manysellers), Sealed- bid auctions( suppliers can submit only 1 bid and cannot know the other bids).

6. Selecting the Final Price: The final price must take into account the brand s quality and advertising,company s pricing policies, gain and risk sharing pricing and the impact of price on other parties.

Comparison of value pricing method with perceived value method:

In both the methods, company employees are challenged to create additional value and pass on part of thebenefit to customers.

In perceived value, value is created by forming a completely new innovative product with more featuresand applications whereas in value pricing, value is created in the supply chain management and reducingthe cost of production.

In perceived value, due to increase in quality and benefits, the Selling Price of the product increaseswhereas in value pricing the cost decreases and hence the Selling Price also decreases.

3rd

P of marketing place

Following questions need to be considered

1. Where do buyers look for your product or service?2. If they look in a store, what kind? A specialist boutique or in a supermarket, or both? Or online? Or direct

via a catalogue?3. How can you access the right distribution channel?4. Do you need to use a sales force? Or attend trade fairs? Or make online submissions? Or send samples to

catalogue companies?5. What do competitors do? And how can you learn that and /or differentiate?6. In case of shop how ambience would be?What Does Kotler Say?

Place: - Refers to how the product gets to the buyer; for instance, point-of-sale assignment or retailing. Thisthird P has furthermore at times been called

Place, referring to the channel by which a product or service is sold (e.g. onlinevs. retail), which geographic region or industry, to which division (young adults, families, business citizens),etc. also referring to how the surroundings in which the product is sold in can influence sales. Place is inregards to distribution, location and methods of getting the product to the customer. This includes thelocation of your business, shop front, distributors, logistics and the potential use of the internet to sellproducts directly to consumers.

Internet and the Third P :Today when internet has made it to every urban household the whole concept of place has changeddrastically. Today there is no need to sell a product in a store and hence there is no need to worry aboutwhere the store needs to be placed. Just have a national website and you will be sorted. However promotingthe website as per the target market is a tough task. After all if you are selling products for old people, thenyou cannot promote your product on matrimony website, Isn t it?


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Marketingcommunications

mix (o rpromotionmix)

The specific mix ofadvertising,personal selling, salespromotion,andpublic relations acompany uses topursueits advertising andmarketing objectives.

Advertising Any paid form of non-personalpresentation and

promotion ofideas, goods,or services by an identifiedsponsor.

Personal sellingPersonal presentation by

the firm s sales force tomake sales andbuildcustomer relationships.

Sales promotion Short-term incentives to

encourage purchase orsale ofa product orservice.

Public relations Building good relations

with the company spublics by obtaining

favourable publicity,

building up a goodcorporate image, and

handling or heading off

unfavourable rumours,

stories, and events.

Direct marketing Direct communications

with carefully targetedindividuals to obtain animmediate response.

A company s total marketing communications mix, or promotion mix, consistsof the specific blend of advertising, personal selling, salespromotion, and publicrelations tools that the company uses to pursue its advertising and marketing

objectives. The five major types of promotion are:2

Advertising: Any paid form of non-personal presentation and promotionof ideas, goods, or services by an identified sponsor.

Personal selling: Personal presentation by the firm s sales force to make salesandbuild customer relationships.

Sales promotion: Short-term incentives to encourage the purchase or sale ofaproduct or service.

Public relations: Building good relations with the company s publics byobtain- ing favourable publicity, building up a good corporate image, andhandling or heading off unfavourable rumours, stories, and events.

Direct marketing: Direct communications with carefully targetedindividual consumers to obtain an immediate response the use of mail,

telephone, fax, e-mail, and other non-personal tools to communicate directlywith specific consumers or to solicit a direct response.

Each type of promotion has its own tools. Advertising includes print,broadcast, outdoor, and other forms. Personal selling includes salespresentations, trade shows, and incentive programs. Sales promotion includespoint-of-purchase dis- plays, premiums, discounts, coupons, specialtyadvertising, and demonstrations. Direct marketing includes catalogues,telemarketing, fax transmissions, and the Internet. Thanks to technological

breakthroughs, marketers can now communicate through traditional media(newspapers, radio, telephone, and television), as well as its newer forms (faxmachines, cellular phones, pagers, and computers). These new technologieshave encouraged more companies to move from mass communication tomore targeted communication and one-on-one dialogue.

At the same time, communication goes beyond these specific promotiontools. The product s design, its price, the shape and colour of its package, andthe stores that sell it all communicate something to buyers. Thus, althoughthe promotion mix is the company s primary communication activity, the entiremarketing mix promotion and product, price, and place must becoordinated for greatest communication impact.


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FIGURE 13-

2

Elements in thecommunication

process


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A Viewoft h e C o m m u n i c a t i o n P r o c e s s

IMC involves identifying the target audience and shaping

Sender: The party sending the message to another party here, Hewlett-Packard.Encoding: The process of putting thought into symbolic form HP s advertising agency

assembles words and illustrations into an advertisement that will convey the intended message.

Message: The set of symbols that the sender transmits the actual HP multi- functionmachine ad.

Media: The communication channels throughwhich the message moves from sender toreceiver in this case, the specific magazines that HP selects.

Decoding: The process by which the receiver as- signs meaning to the symbols encoded by thesender a consumer reads the HP multifunction machine ad and interprets the words andillustrations it contains.

Receiver: The party receiving the message sentby another party the home office or businesscustomer who reads the HP multifunction machine ad.

Response: The reactions of the receiver afterbe- ing exposed to the message any of hundreds ofpossible responses, such as the consumer is more aware of the attributes of HP multifunction ma-chines, actually buys an HP multifunction machine, or does nothing.

Feedback: The part of the receiver s response communicatedback to the sender HP researchshows that consumers are struck by and remember the ad, or consumers write or call HP prais-ing or criticizing the ad or HP sproducts.

Noise: The unplanned static or distortion during the communicationprocess, which results in thereceiver s getting a different message than the one the sender sent the consumer is distractedwhile reading the magazine and misses the HP ad or its keypoints.

Step s i n D eveloping E f f e c t ive Communica t ion

We now examine the steps in developing an effective integrated communications and promotion

program. The marketing communicator must: identify the target audience; determine theresponse sought; choose a message; choose the media through which to send the message; select

the message source; and collect feedback.

Ident i fy ing the Target Audience

A marketing communicator starts with a clear target audience in mind. The audience may be

potential buyers or current users, those who make the buying decision or those who influence

it. The audience may be individuals, groups, special publics, or the general public. The target

audience will affect the communicator s decisions on what will be said, how it will be said, whenit will be said, where it will be said, and who will say it.Determining the Desired Response

After defining the target audience, the marketing communicator must decide what response isdesired. In most cases, the final response ispurchase. But purchase is the result of a long process

of consumer decision making. The target audience may be in any of six buyer readiness stages,

the stages that consumers typically pass through on their way to making a purchase. These stages

are awareness, knowledge, liking, preference, conviction, and purchase (see Figure 13-3). The

marketing communicator needs to know where the target audience is now and to what stage it

needs to be moved.

The marketing communicator s target market may be totally unaware of the product, knowonly its name, or know little about it. The communicator must first build awareness and

knowledge. When Nissan introduced its Infiniti auto- mobile line, it began with an extensive teaser advertising campaign to createname familiarity. Initial ads for the Infiniti createdcuriosity and awareness by showing the car s name but not the car. Later ads createdknowledge by informing potential buyers of the car s high quality and many innovative features.

Assuming target consumers know the product, how do they feel about it? Once potential

buyers know about the Infiniti, Nissan s marketers want to move them through successively


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stronger stages of feelings toward the car. These stages include liking (feeling favourable about

the Infiniti), preference (preferring Infiniti to other car brands), and conviction (believing that

Infiniti is the best car for them). Infiniti marketers can use a combination of the promotion mix

tools to create positive feelings and conviction. Advertising extols the Infiniti s advantages over

com-peting brands. Press releases and other public relations activities stress the car s innovativefeatures and performance. Dealer salespeople tell buyers about options, value for the price, andafter-sale service.

Finally, some members of the target market might be convinced about the product, but not

quite get around to making the purchase. Potential Infiniti buyers may decide to wait for more

information or for the economy to improve. The communicator must lead these consumers to take

the final step. Actions may include offering special promotional prices, rebates, or premiums.

Salespeople may call or write to selected customers, inviting them to visit the dealership for a

special showing.

Designing a Message

Having def ined the desired audience response, the communicator turns to developing an

effective message. Ideally, the message should get attention, hold interest, arouse desire, and obtainaction (a framework known as the AIDA model ). Inpractice, few messages take the consumer

all the way from awareness topurchase,but the AIDA framework suggests the qualities of a good

message.

In putting together the message, the marketing communicator must solve threeproblems: what to

say (message content), how to say it logically (message struc- ture), and how to say it

symbolically (message format).

Choosing Media

The communicator now must select channels of communication.There are two broad types of communication channels personal andnon-personal.

Personal Communication Channels

In personal communication channels, two or more people communicate directly with each other.They can communicate face to face, over the telephone, or even through the mail or e-mail.

Personal communication channels are effective because they allow for personal addressing and

feedback.

The company controls some personal communication channels directly; company

salespeople, for example, contact buyers in the target market. But other personal

communications about the product may reach buyers through channels not directly controlledby

the company. These may be independent experts consumer advocates, consumer buying guides,and others making statements to target buyers. Or they may be neighbours, friends, familymembers, and associates talking to target buyers. This last channel, known as word-of-mouth

influence, has considerable effect in many product areas. Personal influence carries great weight for products that are expensive, risky, or highly

visible. For example, buyers of automobiles, home decor, and fashion often go beyond mass-

media sources to seek the opinions of knowledgeablepeople.

Non-Personal Communication ChannelsNon-personal communication channels are media that carry messages without personal contact or

feedback. They include major media, atmospheres, and events.Major media include print media

(newspapers, magazines, direct mail); broadcast media (radio, television); and display media

(billboards, signs, poster s) .Atmospheres are designed environments that create or reinforce thebuyer s leanings toward buying aproduct.Selecting the Message Source

In either personal or non-personal communication, the message s impact on the target audience is

affected by how the audience views the communicator. Messages delivered by highly credible

sources are more persuasive. Therefore, marketers hire celebrity endorsers well-known athletes,actors, and even cartoon characters to deliver their messages.


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Col lect ing Feedback

After sending the message, the communicator must research its effect on the target audience.

This involves asking the target audience members whether they remember the message, how

many times they saw it, what points they recall, how they felt about the message, and their past

and present attitudes toward the product and company. The communicator also wants to

measure behaviour resulting from the message how many people bought a product, talked to

others about it, or visited the store.

Feedback on marketing communications may suggest changes in the promotion program or in the

product offer itself. For example, when the new Boston Market restaurant chain enters new market

areas, it uses television advertising and coupons innewspaper inserts to inform area consumers about

the restaurant and to lure them in.

Set t ing t h e Tota l P romot ion B u d g e t and M ix

We have examined the steps in planning and sending communications to a target audience. But

how does the company decide on the total promotion budget and its division among the majorpromotional tools to create the promotion mix? Wenow look at these questions.

Setting the Total Promotion Budget

One of the hardest marketing decisions facing a company is how much to spend on promotion.

John Wanamaker, the department-store magnate, once said: I knowthat half of my advertising iswasted, but I don t know which half. I spent $2 million for advertising, and I don t know if thatis half enough or twice too much. Therefore, it is not surprising that industries and companiesvary widely in how much they spend on promotion. Promotion spending may be 20 to 30 percent

of sales in the cosmetics industry and only two or three percent in the industrial machinery

industry. Within any industry, both low and high spenders can be found.

How does a company decide on its promotion budget? We look at four common methods usedto set the total budget for advertising: the affordable method, the percentage-of-sales method, the

competitive-parity method, and the objective- and-task method.14

Affordable MethodSome companies use the affordable method: They set the promotion budget at the level they thinkthe company can afford. Small businesses often use this method, reasoning that the company

cannot spend more on advertising than it has. They start with total revenues, deduct operating

expenses and capital outlays, and then devote some portion of the remaining funds to advertising.

Unfortunately, this method of setting budgets completely ignores the effects of promotion on sales.It tends to place advertising last among spending priorities, even in situations in whichadvertising is critical to the firm s success. It leads to an uncertain annual promotion budget,which makes long-range market planning difficult. Although the affordable method can result inoverspending on advertising, it more often results in under spending.

Percentage-of-Sales MethodOther companies use the percentage-of-sales method, setting their promotion budget at a certainpercentage of current or forecasted sales. Or they budget aper- centage of the unit sales price.

The percentage-of-sales method has a number of advantages. First, using this method means that

promotion spending is likely to vary with what the company can afford. It also helpsmanagement think about the relationship between promotion spending, selling price, and profit

per unit. Finally, it supposedly creates competitive stability because competing firms tend to spend

about the same percentage of their sales onpromotion.

Despite these claimed advantages, however, the percentage-of-sales method has little to justifyit. It wrongly views sales as the cause of promotion rather than as the result. A study in thisarea found good correlation between investments in advertising and the strength of the brandsconcerned but it turned out to be effect and cause, not cause and effect. The strongest brandshad the highest sales and could afford the biggest investments in advertising! 15 The budgetis based on availability of funds rather than on opportunities. It may prevent the increased


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spending sometimes needed to turn around falling sales. Because the budget varies with year-to-year sales, long-range planning is difficult. Finally, the method does not provide any basis forchoosing a specific percentage, except what has been done in the past or what competitors are

doing.

Competitive-Parity MethodStill other companies use the competitive-parity method, setting their promotion budgets tomatch competitors outlays. They monitor competitors advertising or get industry promotionspending estimates from publications or trade associations, and then set their budgets based on the

industry average.

Two arguments support this method. First, competitors budgets represent the collective wisdom

of the industry. Second, spending what competitors spend helps prevent promotion wars.

Unfortunately, neither argument is valid. There are no grounds for believing that the

competition has a better idea of what a company should be spending on promotion than does

the company itself. Companies differ greatly, and each has its own special promotion needs.

Finally, there is no evidence that budgets based on competitive parity prevent promotion wars.

Objective-and-Task MethodThe most logical budget setting method is the objective-and-task method, whereby the companysets its promotion budget based on what it wants to accomplish with promotion. This budgeting

method entails defining specific promotion objectives; determining the tasks needed to achieve these

objectives; and estimating the costs ofperforming these tasks. The sum of these costs is the proposed

promotion budget.

The objective-and-task method forces management to spell out its assumptions about the

relationship between dollars spent and promotion results. But it is also the most difficult methodto use. It is often hard to determine which specific tasks will achieve specific objectives. For

example, suppose Sony wants 95 percent awareness for its latest camcorder model during the

six-month introductory period. What specific advertising messages and media schedules should

Sony use to attain this objective? How much would these messages and media schedules cost?Sony management must consider such questions, even though they are hard to answer.

Setting the Overall Promotion Mix

The company now must divide the total promotion budget among the major promotion tools advertising, personal selling, sales promotion, and public relations. It must blend the promotiontools carefully into a coordinated promotion mix. Companies within the same industry differ

greatly in the design of their promotion mixes. For example, Avon spends most of itspromotion funds on personal selling and direct marketing, whereas Revlon spends heavily onconsumer advertising.

The Nature of Each Promotion Tool

Each promotion tool advertising, personal selling, sales promotion, public relations, and directmarketing has unique characteristics and costs. Marketers must understand these characteristicsin selecting their tools.

Ad v ertising. Advertising can reach masses of geographically dispersed buyers ata low cost per exposure and enables the seller to repeat a message many times. Television

advertising, for example, reaches huge audiences. On an average day,

77 percent of Canadians view television at least once. This viewership may be split betweenCanadian national networks (19.5%), French networks (17.7%), Cana- dian Global andindependents (17.6%), and US conventional and superstations (17.4%). More than 127 millionNorth Americans tune in to the Super Bowl, and about 78 million people watched at least part of

the past Academy Awards broadcast. If you want to get to the mass audience, says a mediaservices executive, Broadcast TV is where you have to be. He adds, For anybody introducingany- thing who has to lasso an audience in a hurry a new product, a new campaign, a new


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movie the networks are still the biggest show in town. 16Beyond its reach, large-scale advertising says something positive about the seller s size,

popularity, and success. Because of advertising s public nature, consumers tend to view

advertised products as more legitimate.

Advertising is also very expressive. It allows the company to dramatize its products

through the artful use of visuals, print, sound, and colour. On the one hand, advertising can be

used to build a long-term image for a product (such as Coca-Cola ads). On the other hand,

advertising can trigger quick sales (such as Sears weekend sale ads).Advertising also has shortcomings. Although it reaches many people quickly, advertising is

impersonal and cannot be as persuasive as company salespeople. For the mostpart, advertising can

carry on only a one-way communication with the audience, and the audience does not feel that itmust pay attention or respond. In addition, advertising can be very costly. Although some

advertising forms, such as newspaper and radio advertising, can be done on small budgets, other

forms, such as network TV advertising, require very largebudgets.

P ersonal Selling.Personal selling is the most effective tool at certain stages of thebuying process, particularly in building up buyers preferences, convictions, and actions.Compared to advertising, personal selling has several unique qualities. It involves personal

interaction between two or more people, so each person can observe the other s needsand characteristics and make quick adjustments. Personal selling also allows all kinds of

relationships to develop, rang- ing from a matter-of-fact selling relationship to a deep per-

sonal friendship. The effective salesperson keeps the customer s interests at heart tobuild a long-term relationship. Finally, with personal selling, the buyer usually feels a greater

need to listen and respond, even if the response is a polite no thank you. These qualities come at a cost, however. A sales force requires a longer-term commitment thandoes advertising: A company can turn on and off its advertising, but it is hard to change the

size of a sales force. Personal selling is also the company s most expensive promotion tool,costing industrial companies an average of over $275 per salescall.17

Sales Promotion. Sales promotion includes a wide assortment of tools, includ- ingcoupons, contests, cents-off deals, and premiums such as buy 10 products, and get onefree. These attract consumer attention and provide information that may lead to apurchase. They offer strong incentives to purchase byproviding inducements or contributions

that give additional value to consumers. And sales promotions invite and reward quick

response. Where advertising says, Buy ourproduct, sales promotion says, Buy it now. Companies use sales promotion tools to create a stronger and quicker response. Sales

promotion can be used to dramatize product offers and to boost sagging sales. Salespromotion

effects are usually short lived, however, and are not effective in building long-run brand

preference. Public Rela tions. Public relations offers several benefits. It is very believable: news

stories, features, and events seem more real and believable to readers than ads do. Publicrelations also can reach many prospects who avoid salespeople and advertisements themessage gets to the buyers as news rather than as a sales- directed communication. And,like advertising, public relations can dramatize a company or product. Marketers tend to

underuse public relations or to use it as an afterthought. Yet a well-planned public relations

campaign used with other promotion mix elements can be very effective and economical.

Direct Mark eting. The many forms of direct marketing direct mail, telemar-keting, electronic marketing, online marketing, and others share four distinctivecharacteristics. Direct marketing is non-public: The message is normally addressed to a

specific person. Direct marketing is also immediate and customized: Messages can beprepared very quickly and can be tailored to appeal to specific consumers. Finally, direct

marketing is interactive: It allows a dialogue between the marketer and consumer, and

messages can be altered depending on the consumer s response. Therefore, direct marketingis well suited to highly targeted marketing efforts and to building one-on-one customer

relationships.


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Promotion Mix Strategies

Marketers can choose from two basic promotion mix strategies push promotion or pullpromotion. Figure 13-4 contrasts the two strategies. A push strategy involves pushing theproduct through distribution channels to final consumers. The producer directs its marketingactivities (primarily personal selling and trade promotion) toward channel members to induce

them to carry the product and topromote it to final consumers. Using a pull strategy, the producer

directs its marketing activities (primarily advertising and consumer promotion) toward final con-

sumers to induce them to buy the product. If the pull strategy is effective, consumers then will

demand the product from channel members, who will in turn demand it from producers. Thus,

under a pull strategy, consumer demand pulls the product through the channels.Some small industrial goods companies use only push strategies; some directmarketing

companies use only pull. Most large companies use some combination of both. For example,Frito-Lay uses mass-media advertising to pull its products, and a large sales force and trade

promotions to push its products through the channels. In recent years, consumer goods

companies have been decreasing the pull portions of their promotion mixes in favour of morepush.

Companies consider many factors when developing their promotion mix strategies, including type

of product-market and the product life cycle stage. For example, the importance of different

promotion tools varies between consumer and busi ness markets. Consumer goods companies

usually pull more, putting more of their funds into advertising, followed by salespromotion,personal selling, and then public relations. In contrast, business-to-business marketers tend to push more, putting more of their funds into personal selling, followed by sales promotion,advertising, and public relations. In general, personal selling is used more heavily with expensiveand risky goods and in markets with fewer and larger sellers.

The effects of different promotion tools also vary with stages of the product life cycle. In the

introduction stage, advertising and public relations are good for producing high awareness, salespromotion is useful in promoting early trial, and personal selling must be used to get the trade to

carry the product. In the growth stage, advertising and public relations continue to be powerful

influences, whereas sales promotion can be reduced because fewer incentives are needed. In the

mature stage, sales promotion again becomes important relative to advertising: Buyers know

the brands, and advertising is needed only to remind them of the product. In the decline stage,

advertising is kept at a reminder level, public relations is dropped, and salespeople give the

product only a little attention; however, salespromotion might continue to be strong.

Integrating the Promotion Mix

Having set the promotion budget and mix, the company must take steps to see that all of thepromotion mix elements are smoothly integrated. This is a check- list for integrating the firm smarketing communications.18

Analyze trendsinternal and externalthat can affect your companys ability to do business:

Look for areas where communications can help the most. Deter- mine the strengths and weaknesses


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of each communications function. Develop a combination of promotional tactics based on these

strengths and weaknesses.

Audit the pockets of communications spending throughout the organization: Itemize thecommunications budgets and tasks and consolidate these into a single budgeting process.

Reassess all communications expenditures by product, promotional tool, stage of the life cycle,

and observed effect. Identify all contact points for the company and its brands: Work to ensure that communicationsat each point are consistent with your overall communications strategy and that your

communications efforts are occurring when, where, and how your customers want them.

Team up in communications planning: Engage all communications functions in joint planning.

Include customers, suppliers, and other stakeholders at every stage of communications planning.

Create compatible themes, tones, and quality across all communications media: Make sure each

element carries your unique primary messages and selling points. This consistency achieves

greater impact and prevents the unnecessary duplication of work across functions.

Create performance measures that are shared by all communications elements: Develop systems

to evaluate the combined impact of all communications activities. Appoint a director responsible for the companys persuasive communications ef-forts: This moveencourages efficiency by centralizing planning and creating shared performance measures.

By Junior Team

Smark!!


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