MARKETING….

Marketing: DefinitionMarket segmentationMarketing concepts

• Market demand• Product• Value and satisfaction• Exchange and transactionsMarketing channels Competition

Marketing environmentMarketing mix

Marketing Defined…..

The Chartered Institute of Marketing define marketing as “The management process responsible for identifying , anticipating and satisfying customer requirements

profitably”

According to William Stanton“Marketing is a total system of business activities designed to plan, price, promote & distribute want satisfying products to target markets in order to achieve organisational objectives”

According to Philip Kotler“Marketing is a human activity directed at satisfying needs and wants through exchange process”

Scope of Marketing• Marketing Research• Product Planning & Development• Pricing• Advertising & Publicity• Sales Promotion• Packaging• Branding & Labelling• After Sales Service• Test Marketing

Importance/ Benefits Of Marketing• Satisfaction of human needs & wants• Profits & market reputation• Facilitates specialisation division of labour• Widens the market• Improves standard of living• Bring economic growth• Creates new norms of social economic behaviour• Provides channels of communication to business firms• Facilitates price control• Develops social significance at.

MARKETING CONCEPTS

7

Core Concepts of Marketing

Needs, wantsdemands

Markets Marketing &Marketers

Utility, Value &Satisfaction

Exchange, TransactionRelationships

Products

Need, Want &Demand

A need is a state of felt deprivation of some basic satisfaction

Wants are desires for specific satisfiers of these deprived needs

Demands are wants for specific products that are backed by an ability and willingness to buy them

Marketing Concept Continued…

Product is any thing that can be offered to satisfy a need or want

Exchange is the act of obtaining a desired product from someone by offering something in return

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

Market Segmentation

Market segmentation is a marketing strategy that involves dividing a broad target market into subsets of consumers who have common needs, and then designing and implementing strategies to target their needs and desires using media channels and other touch-points that best allow to reach them.

The process  of defining and subdividing a large homogeneous market  into clearly identifiable  segments  having similar  needs, wants or demand characteristics. Its objective  is to  design a market mix  that precisely matches the expectations of customers in the targeted segment.

Four basic factors that affect market segmentation are

(1) clear identification of the segment,

(2) measurability of its effective  size,

(3) its accessibility through promotional efforts

(4) its appropriateness to the policies and resources of the company. 

The Marketing Segmentation Process

Take marketing actions to reach target segmentsTake marketing actions to reach target segments

Select the product segments toward which the firm will direct its marketing actionsSelect the product segments toward which the firm will direct its marketing actions

Develop a market/product grid to relate the market segments to the firm’s products and actionsDevelop a market/product grid to relate the market segments to the firm’s products and actions

Find ways to group marketing actions available to the organizationFind ways to group marketing actions available to the organization

Find ways to group consumers according to their needsFind ways to group consumers according to their needs

• Geographic—The study of city size, urban/suburban/rural population distribution and climate.

• Demographic—The study of distribution of population’s age, sex, income, stage in family cycle and ethnic background.

• Psychographic—Personalties, lifestyles, social class including Activities Interests and Opinions (AIO).

• Behaviour towards products.• Benefits desired or sought.• Product usage rate.

Objectives of segmentation are:

1) To reduce risk in deciding where, when, how, and to whom a product, service, or brand will be marketed;

2) To increase marketing efficiency by directing effort specifically toward the designated segment in a manner consistent with that segment's characteristics.

Market segmentation process

1. Identify the needs & wants of customers.2. Identify the different characteristics

between market segments.3. Estimate the market potential.

Marketing channels

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

Functions• Information• Promotion• Negotiation• Ordering• Financing• Risk taking• Physical possession• Payment• Title

Channel selection

• Analyzing the customer needs (lot size, waiting time, product variety, service backing etc)

• Establishing channel objectives( product characteristics)

• Identifying the major alternatives (types & No of intermediaries)

• Evaluating (Economic, Control, Adaptive Criteria)

Distribution Channel Decisions

SelectingSelecting

ManagingManaging

MotivatingMotivating

DistributionChannelDecisions

DistributionChannelDecisions

Distribution Intermediaries

Distribution ChannelIntermediaries Distribution ChannelIntermediaries

BrokersBrokers

DistributorsDistributors

WholesalersWholesalers

RetailersRetailers

Competition

To prepare an effective marketing strategy, a company must study its competitors as well as its actual and potential customers

A company's closest competitors are those seeking to satisfy the same customers and needs and marketing similar offers

A company needs to gather information on competitor’s strategies objectives, strengths, weakness, and reaction pattern

Types• Pure Competition 

low barriers to entry, many choices, no business has dominance, many companies competing and nobody has a significant advantage examples

• small bars and restaurants, variety stores, convenience stores, barbers, small grocery stores, doughnut shops, professional services (dentist, doctor, architects)

Oligopoly  very similar products, few sellers, small firms follow lead of big firms, fairly inelastic demands

- many barriers to establishing a business so only the oldest and biggest businesses are operating examples all the businesses are big and of equal size

banking industry, automotive manufacturers, gasoline retail companies, insurance companies, telecommunications companies

• Monopoly one single large seller with no close competition and no alternate substitutes examples

• Indian Railway• Electricity• Postoffice

Monopolistic Competition sellers feel they do have some competition there is one big company dominating the market with a few medium or smaller sized companies examples

Google

Walmart

Airlines

Market Structure

Seller Entry Barriers

Seller Number

Buyer Entry Barriers

Buyer Number

Monopolistic competition

No Many No Many

Monopoly Yes One No Many

Monopsony No Many Yes One

Oligopoly Yes Few No Many

Oligopsony No Many Yes Few

Perfect Competition

No Many No Many

strategies

• Price discounts

• Lower-priced goods

• Value-priced goods

• Prestige goods

• Product proliferation

• Product innovation

• Improved services

• Distribution innovation

• Manufacturing-cost reduction

• Intensive advertising promotion

Marketing environment

The market environment refers to factors and forces that affect a firm’s ability to build and maintain successful relationships with customers.

Two levels of the environment are:

• Micro (internal) environment - small forces within the company that affect its ability to serve its customers.

• Macro (national) environment - larger societal forces that affect the microenvironment.

Marketing Mix

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

From the sellers view point (4P)• Product• Price• Place• PromotionCustomers View point (4C)• Customer needs and wants• Cost• Convenience• Communication

FUNCTIONS OF MARKETINGThe ten (11) functions of marketing are;

· Researching· Buying· Product development and management· Production· Promotion· Standardization and grading· Pricing· Distribution· Risk bearing· Financing· After sales-service

Sales forecastingElements of a Good Forecast

Timely

AccurateReliable

Mea

ningf

ul WrittenEas

y to us

e

Why is forecasting important?

Demand for products and services is usually uncertain.

Forecasting can be used for…

• Strategic planning (long range planning)

• Finance and accounting (budgets and cost controls)

• Marketing (future sales, new products)

• Production and operations

Principles of Forecasting

Many types of forecasting models that differ in complexity and amount of data & way they generate forecasts:

1. Forecasts are rarely perfect

2. Forecasts are more accurate for grouped data than for individual items

3. Forecast are more accurate for shorter than longer time periods

Types of Forecasting Methods

Forecasting methods are classified into two groups:

Qualitative Methods

Type Characteristics Strengths WeaknessesExecutive opinion

A group of managers meet & come up with a forecast

Good for strategic or new-product forecasting

One person's opinion can dominate the forecast

Market research

Uses surveys & interviews to identify customer preferences

Good determinant of customer preferences

It can be difficult to develop a good questionnaire

Delphi method

Seeks to develop a consensus among a group of experts

Excellent for forecasting long-term product demand, technological changes, and

Time consuming to develop

Executive Judgment: Opinion of a group of high level experts or managers is pooled

Market Research/Survey: Solicits input from customers pertaining to their future purchasing plans. It involves the use of questionnaires, consumer panels and tests of new products and services.

Delphi Method: As opposed to regular panels where the individuals involved are in direct communication, this method eliminates the effects of group potential dominance of the most vocal members. The group involves individuals from inside as well as outside the organization.

Quantitative Forecasting MethodsQuantitativeForecasting

RegressionModels

2. MovingAverage

1. Naive

Time SeriesModels

3. ExponentialSmoothing

a) simpleb) weighted

a) levelb) trendc) seasonality

Time Series ModelsTry to predict the future based on past data. Assume that factors influencing the past will continue to influence the future

Naive Approach:Demand in next period is the same as demand in most

recent period

2. Simple Moving Average

n

A+...+A +A +A =F 1n-t2-t1-tt

1t

n

A+...+A +A +A =F 1n-t2-t1-tt

1t

• Assumes an average is a good estimator of future behavior

– Used if little or no trend

– Used for smoothing

Ft+1 = Forecast for the upcoming period, t+1n = Number of periods to be averagedA t = Actual occurrence in period t

• Gives more emphasis to recent data

• Weights – decrease for older data– sum to 1.0

2. Weighted Moving Average

1n-tn2-t31-t2t11t Aw+...+Aw+A w+A w=F 1n-tn2-t31-t2t11t Aw+...+Aw+A w+A w=F

Simple movingaverage models

weight all previousperiods equally

Simple movingaverage models

weight all previousperiods equally

3. Exponential Smoothing• Assumes the most recent observations have the

highest predictive value– gives more weight to recent time periods

Ft+1 = Ft + (At - Ft)Ft+1 = Ft + (At - Ft)et

Ft+1 = Forecast value for time t+1

At = Actual value at time t

= Smoothing constant

Need initial forecast Ft

to start.

Need initial forecast Ft

to start.

• Collect historical data

• Select a model– Moving average methods

• Select n (number of periods)• For weighted moving average: select weights

– Exponential smoothing• Select

• Selections should produce a good forecast

To Use a Forecasting Method

…but what is a good forecast?

Measures of Forecast Error

b. MSE = Mean Squared Error

n

F-A =MSE

n

1=t

2tt

n

F-A =MSE

n

1=t

2tt

MAD = A - F

n

t tt=1

n

MAD =

A - F

n

t tt=1

n

et

Ideal values =0 (i.e., no forecasting error)

MSE =RMSE MSE =RMSEc. RMSE = Root Mean Squared Error

a. MAD = Mean Absolute Deviation

Regression Analysis as a Method for Forecasting

Regression analysis takes advantage of the relationship between two variables. Demand is then forecasted based on the knowledge of this relationship and for the given value of the related variable.

Ex: Sale of Tires (Y), Sale of Autos (X) are obviously related

If we analyze the past data of these two variables and establish a relationship between them, we may use that relationship to forecast the sales of tires given the sales of automobiles.

The simplest form of the relationship is, of course, linear, hence it is referred to as a regression line.

Sales of Autos (100,000)

Selecting the Right Forecasting Model

1. The amount & type of available data Some methods require more data than others

2. Degree of accuracy required Increasing accuracy means more data

3. Length of forecast horizon Different models for 3 month vs. 10 years

4. Presence of data patterns Lagging will occur when a forecasting model meant for a

level pattern is applied with a trend

Forecasting Software

• Spreadsheets– Microsoft Excel, Quattro Pro, Lotus 1-2-3 – Limited statistical analysis of forecast data

• Statistical packages– SPSS, SAS, NCSS, Minitab– Forecasting plus statistical and graphics

• Specialty forecasting packages– Forecast Master, Forecast Pro, Autobox, SCA

Pricing DecisionsWhat consumers give up to purchase a product or service

What consumers give up to purchase a product or service

TimeTimePrice VariablePrice Variable

Mental activityMental activity

Behavioral effortBehavioral effort

Factors the firm must considerFactors the firm must consider

CostsCosts

DemandDemand

CompetitionCompetition

Perceived valuePerceived value

Relating Price to Ads and Promotion

Price must be consistent with perceptions of the productPrice must be consistent with perceptions of the product

Higher prices communicate higher product qualityHigher prices communicate higher product quality

Lower prices reflect bargain or “value” perceptionsLower prices reflect bargain or “value” perceptions

Price, advertising and distribution be unified in identifying product position

Price, advertising and distribution be unified in identifying product position

PricingConsiderationsPricingConsiderations

A product positioned as high quality while carrying a lower price than competitors will confuse customers

A product positioned as high quality while carrying a lower price than competitors will confuse customers

Legal and Ethical Issues in Pricing

Unfair Trade Practices

Key Legaland Ethical

IssuesRelated to

Price

Key Legaland Ethical

IssuesRelated to

Price

Price Fixing

Price Discrimination

Predatory Pricing

Special Pricing Tactics

Odd-EvenPricing

Two-PartPricing

BundlePricing

BaitPricing

PriceLining

FlexiblePricing

ProfessionalServices

LeaderPricing

SinglePrice

CommonSpecial Pricing

Tactics

CommonSpecial Pricing

Tactics

• Advertising– Any paid form of nonpersonal presentation and

promotion of ideas, goods, or services by an identified sponsor.

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Major Advertising Decisions

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Advertising

• Advertising objectives can be classified by primary purpose:– Inform

• Introducing new products– Persuade

• Becomes more important as competition increases

• Comparative ads– Remind

• Most important for mature products

Setting objectivesSetting objectives

Setting the budgetSetting the budget

Developing the Developing the advertising advertising strategystrategy

Evaluating Evaluating advertising advertising campaignscampaigns

Key Decisions:Key Decisions:

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Advertising

Major Media TypesMajor Media Types

• Newspapers• Television• Direct Mail

RadioRadio

MagazinesMagazines

OutdoorOutdoor

InternetInternet

Major Types of Advertising

Corporate Image

Advocacy Advertising

Typesof

Advertising

Typesof

AdvertisingPioneering

Competitive

Comparative

ProductAdvertising

InstitutionalAdvertising

Advertising Campaign Decision Process

Determine the campaign objectives.

Make creative decisions. Make media decisions.

Evaluate the campaign.

Sales promotion is the short-term incentives to encourage the purchase or sale of a product or service

Tools for Consumer Sales Promotion

Coupons

Premiums

Frequent Buyer Programs

Contests and Sweepstakes

Samples

Point-of-PurchaseDisplays

SixCategories

ofConsumer

SalesPromotions

SixCategories

ofConsumer

SalesPromotions

Elements of the Promotion Mix

Advertising

Ingredientsof the

PromotionMix

Ingredientsof the

PromotionMix

Public Relations

Personal Selling

Sales Promotion

• Sales Promotions– Can be targeted at final buyers,

retailers and wholesalers, business customers, and members of the sales force.

– The use of sales promotions has been growing rapidly.

Sales Promotion

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Sales Promotion

Consumer Promotion ToolsConsumer Promotion Tools

• Samples• Cash Refunds

(Rebates)• Price packs (cents-

off deals)• Advertising

Specialties

PremiumsPremiumsPatronage Patronage RewardsRewardsPoint-of-Purchase Point-of-Purchase CommunicationsCommunicationsContests, Games, Contests, Games, and Sweepstakesand Sweepstakes

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• Trade Promotion Tools– Discounts (also called price-offs,

off-list, and off-invoice discounts)– Allowances

• Advertising allowances• Display allowances

– Free goods– Push money– Specialty advertising items

Sales Promotion

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• Key Decisions When Developing the Sales Promotion Program:– Size of the incentive– Conditions for participation– Promotion and distribution of the actual sales

promotion program– Length of the promotional program– Evaluation

• Surveys and experiments can be used

Sales Promotion

Creating a Promotion Plan

Choose Promotion Mix

Develop Promotion Budget

Set Promotion Objectives

Identify Target Market

Analyze the Marketplace