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PRINCIPLES OF MARKETING

HEALTH DRINK
PRESENTED TO: PROF. ZIA UR REHMAN PRESENTED BY: M. Zahid Naeem M. Wasif Tofique M. Noman Idrees M. Usman Ishaq Hassan Raza Bhatti Bilal Ismat Ullah BC08-427 BC08-418 BC08-401 BC08-410 BC08-418 BC08-420

B.Com (Hons) 5th Semester Section (F)

HAILEY COLLEGE OF COMMERCE UNIVERSITY OF THE PUNJAB LAHORE


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Market Segmentation and Targeting


Target market is a specific market segment (people or organization) on which a seller focuses on its efforts is called a target market. In target market there are two kinds: 1. Market Aggregation 2. Market Segmentation In defining the market or markets it will sell to, an organization has its choice of two general approaches. In one, the total market is viewed as a single unitas one mass, aggregate market. This approach leads to market aggregation. In the other approach, the total market is seen as being composed of many smaller, homogeneous segments. This approach leads to strategy of market segmentation, in which one or more or these segments are selected as target markets.

Market Factors to Analyze:


In market people are with: 1) Wants to satisfy 2) The money to spend, and 3) The willingness to spend it. Therefore in the course of selecting the target markets, management should analyze these three components in detail. The decision between market aggregation and market segmentation is an important one because a company view of its market greatly affects its marketing mix and possibly its production, research and development and other operating departments.

Market Aggregation:
By adopting the strategy of market aggregation, an organization treats its total market as a unit---as one mass, aggregate market whose parts are considered to be alike in all major aspects. Basically, market aggregation is production oriented strategy. It enables a company to maximize its economies of scale in production, physical distribution and promotion. Producing and marketing

one product for one market means longer production runs at lower unit costs. Inventory cost is minimized when there is no variety of colors and sizes of products. Warehousing and transportation efforts are most efficient when one product is going to one market. In market aggregation we employ shotgun approach (one program broad target).

Market Segmentation:
In market segmentation, the total heterogeneous market far a product is divided into several segments, each of which tends to be homogenous in all significant aspects. Management then selects one or more of these segments as the organizations target market. Finally, a separate marketing mix is developed for each segment to this target market. The market for any product is normally made up of several segments. A market after all is the aggregate of consumers of a given product. And, consumer (the end user), who makes a market, are of varying characteristics and the user buying behavior. There are different factors contributing for varying mind set of consumers. It is thus natural that many differing segments occur within a market. In order to capture this heterogeneous market for any product, marketers usually divide or disintegrate the market into a number of sub-markets/segments and the process is known as market segmentation. Thus we can say that market segmentation is the segmentation of markets into homogenous groups of customers, each of them reacting differently to promotion, communication, pricing and other variables of the marketing mix. Market segments should be formed in that way that difference between buyers within each segment is as small as possible. Thus, every segment can be addressed with an individually targeted marketing mix. The importance of market segmentation results from the fact that the buyers of a product or a service are no homogenous group. Actually, every buyer has individual needs, preferences, resources and behaviors. Since it is virtually impossible to cater for every customers individual characteristics, marketers group customers to market segments by variables they have in common. These

common characteristics allow developing a standardized marketing mix for all customers in this segment. Through segmentation, the marketer can look at the differences among the customer groups and decide on appropriate strategies/offers for each group. This is precisely why some marketing gurus/experts have described segmentation as a strategy of dividing the markets for conquering them.

MARKETING STRATEGY AND MARKET SEGMENTATION: When it comes to marketing strategies, most people spontaneously think about the 4P (Product, Price, Place, Promotion) maybe extended by three more Ps for marketing services (People, Processes, Physical Evidence). Market segmentation and the identification of target markets, however, are an important element of each marketing strategy. They are the basis for determining any particular marketing mix. Basic steps in marketing strategy are as follows:-

Market segmentation is a customer oriented philosophy. We first identify the needs of customer within a submarket and then satisfy those needs. In market segmentation, we employ a rifle approach (separate programs, pinpointed targets) in our marketing activities. In adopting the target market strategy management can further chose either single segmentation or multiple segmentation.

TARGET MARKET STRATEGIES


There are several different target-market strategies that may be followed. Targeting strategies usually can be categorized as one of the following: Single-segment strategy: strategy
It is also known as a concentrated strategy. One market segment (not the entire market) is served with one marketing mix. A single-segment approach often is the strategy of choice for smaller companies with limited resources. A single segmentation strategy involves selecting as the target market one homogenous group from within the total market. For example, McDonalds target those people whose income is more than 30000 rupees means their customers are of the one nature in the sense that of income based.

Selective specialization/ Multiple Segmentation:specialization


This is a multiple-segment strategy, also known as a differentiated strategy. Different marketing mixes are offered to different segments. The product itself may or may not be different - in many cases only the promotional message or distribution channels vary. In the strategy of multiple segmentation two or more different groups of potential customers are identified as target market. For example, Lux, Rexona or Lifebuoy, for thse every product the marketing mix will be seprate from each other.

Product specialization- The firm specializes in a particular product specialization


and tailors it to different market segments.

Market specialization- The firm specializes in serving a particular specialization


market segment and offers that segment an array of different products.

Full market coverage - The firm attempts to serve the entire market.
This coverage can be achieved by means of either a mass market strategy in which a single undifferentiated marketing mix is offered to the entire market, or by a differentiated strategy in which a separate marketing mix is offered to each segment 6

A firm that is seeking to enter a market and grow should first target the most attractive segment that matches its capabilities. Once it gains a foothold, it can expand by pursuing a product specialization strategy, tailoring the product for different segments, or by pursuing a market specialization strategy and offering new products to its existing market segment. Choosing the target market is a part of marketing strategy formulation, the other two parts being positioning and marketing mix formulation. Without right targeting, the firm cannot formulate an effective strategy. It is through careful segmentation and targeting that firm pick up right group of consumers. Also, it is through this process that the firm gain vital knowledge about the need and buying behavior of the consumer in each segment and the differences between one segment and the other. And, it is by using this knowledge that the firm develops marketing programmes that match the specific requirement of different segments. In other words, segmentation and targeting help the firm not only the characteristics of each of the segments but also the distinctive excellence that is required for catering to the specific needs of the consumers in each of them. Another strategy whose use is increasing is individual marketing, in which the marketing mix is tailored on an individual consumer basis. While in the past impractical, individual marketing is becoming more viable thanks to advances in technology.

DECISIONS INVOLVED IN TARGETING STRATEGY INCLUDE:INCLUDE

1. which segments to targeting. 2. how many products to offer. 3. which products to offer in which segments.

TARGETING STRATEGY DECISIONS ARE INFLUENCED BY:


Market maturity. Diversity of buyers' needs and preferences. Strength of the competition. The volume of sales required for profitability. profitability

Benefits of Market Segmentation:


Following are the benefits of market segmentation: 1) Management can do a better marketing job, 2) Management can make more efficient use of marketing resources, 3) A small firm with limited resources might compete very effectively in one or two market segments, and 4) Advertising media can be used more effectively because promotional messages can be more specifically aimed toward each segment of the market.

ADVANTAGES OF MARKET SEGMENTATION


Various advantages of market segmentation are:1. Helps distinguish one customer group from another within a given market. 2. Facilitates proper choice of target market. 3. Facilitates effective tapping of the market. 4. Helps divide the markets and conquer them. 5. Helps crystallize the needs of the target buyers and elicit more predictable responses from them ; helps develop marketing programmes on a more predictable base; helps develop market offer that are most suited to each group. 6. Helps achieve the specialization required in product; distribution, promotion, and pricing for matching the customer group and develop marketing offers and appeal that match the need of each group. 7. Makes the marketing effort more efficient and economic. 8. Helps concentrate efforts on the most productive and profitable segment, instead of frittering them over irrelevant, or unproductive, or unprofitable segment.
9. Helps spot the less satisfied segments and succeed by satisfying such

segments.

EVALUATION OF THE SEGMENTS:


Whether market segmentation is successful or not can be evaluated by the following questions-

1. Is it sizeable: Size-wise, the popular segment is a bigger compared to the premium segment. In term of tonnage, of the total market of around 6, 00,000 tones, the popular segment account for 80 percent and the premium segment for the remaining 20 percent. If the firm wants a very large volume, it has to think of the popular segment. At the same time, it has to note that the premium segment too is sizeable, as it account for over 120,000 tones. In term of value, the premium segment is even more sizeable, formerly nearly 30 percent of the total market. Clearly, the segment cannot be ruled out as lacking in size.

2. Is it growing: Growth rate and likely future position of the segment will be the next consideration in the evaluation process. Usually, business firms seek out the high growth segments. Analysis will readily indicate to the firm that in bath drinks, the premium segment happens to be the high growth segment. Whereas the popular segment has been growing at 10 percent per annum, the premium segment has been growing at over 20 percent annum. When this fact is taken into consideration, the firms choice may tilt toward the premium segment. The tilt will be particularly pronounced if the firms natural disposition is to strive for a position in the high growth segment of the business.

3. Is it profitable: Next consideration will be the extend of profitability. In the present example, the firms quickly sense that the premium segment is more profitable one. Even a relatively lower volume in the segment may bring in good returns. On the contrary, in the popular segment, a much larger volume will be necessary for the business to be viable, since prices and margins in the segment are low. Another point is that costs of marketing, distribution and promotion in the business are quite high and are constantly on the rise. Costs of launching a

new brand are particularly high. The market is very competitive, aggressive promotional support through expensive media like TV becomes essential. In this background, the firm may come to the conclusion that it may be worthwhile to gamble in the premium segment rather than the popular segment.

4. Is it accessible: The firm has to now consider whether the segments are accessible to it. This may need further analysis. The market realities will have to be taken into consideration. The popular segment will be accessible only to the firm with a cost advantage, since price is a major determinant in this segment. Premium segment will be accessible only to firms, which enjoy a differentiation advantage, and which are also marketing savvy. At the upper end of the segment, HLLs Pears and Dove are well entrenched. Several other brands of different companies are competing in the segment. The firm has to take due note of this reality. At the same time, analysis also reveals that new brands do keep entering the segment every now and then, and some of them do manage to stay. So, the firm has no reason to believe that the premium segment is not accessible to it, unless it is convinced that it is very weak in marketing.

5. Is it compatible with the firms resources and capabilities: Having reached the conclusion that the premium segment is sizeable, growth oriented, profitable and accessible, the firm has to now find out if the segment matches its resources. For some firms, the popular segment may be the natural choice and for others, the premium segment. And, for some other choosing both. The premium segment is a highly competitive segment. Only firms endowed with strong resources and an aggressive marketing strategy/culture can fight and survive in the market. The firm therefore has to assess whether the particular segments are compatible with its resources and capabilities. Thus by this following analysis a firm can easily evaluate it market segmentations and also can tackle its problem.

ATTRIBUTES OF EFFECTIVE SEGMENTATION

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Market segmentation is resorted to for achieving certain practical purpose. For example, it has to be useful in developing and implementing effective and practical marketing programmes. For this to happen, the segments arrived at must meet certain criteria such:-

a. Identifiable: b. Accessible: c. Sizeable:

The differentiating attributes of the segments must be

measurable so that they can be identified. The segments must be reachable through communication

and distribution channels. The segments should be sufficiently large to justify the

resources required to target them. A very small segment may not serve commercial exploitation.

d. Profitable: - There is no use in locating segments that are sizeable but


not profitable.

e. Unique needs: To justify separate offerings, the segments must respond


differently to the different marketing mixes.

f. Durable: The segments should be relatively stable to minimize the cost of


frequent changes.

g. Measurable:

The potential of the segments as well as the effect of a

specific marketing mix on them should be measurable.

h. Compatible: capabilities.

Segments must be compatible with firms resources and

CONDITIONS FOR EFFECTIVE SEGMENTATION


Following are the conditions for effective segmentation: 1) The basis for segmentingthat is, the characteristics used to categorize customersmust be measurable and the data must be accessible. 2) The market segment itself should be accessible through existing marketing institutionschannels of distribution, advertising media, company sales force, and so onwith a minimum of cost and waste. 3) Each segment should be large enough to be profitable.

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REASONS FOR MARKET SEGMENTATION


Segmentation is the basis for developing targeted and effective marketing plans. Furthermore, analysis of market segments enables decisions about intensity of marketing activities in particular segments. A segment-orientated marketing approach generally offers a range of advantages for both, businesses and customers.

1 . Facilitates proper choice of target marketing:marketing:


Segmentation helps the marketers to distinguish one customer group from another within a given market and thereby enables him to decide which segment should form his target market.

2 . Higher Profits: It is often difficult to increase prices for the whole market. Nevertheless, it is possible to develop premium segments in which customers accept a higher price level. Such segments could be distinguished from the mass market by features like additional services, exclusive points of sale, product variations and the like. A typical segment-based price variation is by region. The generally higher price level in big cities is evidence for this. When differentiating prices by segments, organizations have to take care that there is no chance for cannibalization between high-priced products with high margins and budget offers in different segments. This risk is the higher, the less distinguished the segments are.

3 . Facilitates tapping of the market, adapting the offer to the target:Segmentation also enables the marketer to crystallize the needs of target buyers. It also helps him to generate an accurate prediction of the likely responses from each segment of the target buyer. Moreover, when buyers are handled after careful segmentation, the responses for each segment will be homogeneous. This in turn, will help the marketer develop marketing offer/programmers that most suited to each groups. He can achieve specialization that is required in product, distribution, promotion and pricing for

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matching the particular customer group and develop offers and appeals for the segmented group.

4 . Stimulating Innovation: An undifferentiated marketing strategy that targets at all customers in the total market necessarily reduces customers preferences to the smallest common basis. Segmentations provide information about smaller units in the total market that share particular needs. Only the identification of these needs enables a planned development of new or improved products that better meet the wishes of these customer groups. If a product meets and exceeds a customers expectations by adding superior value, the customers normally is willing to pay a higher price for that product. Thus, profit margins and profitability of the innovating organizations increase.

5 . Makes the marketing effort more efficient and economic: Segmentation ensures that the marketing effort is concentrated on well defined and carefully chosen segments. After all, the resources of any firm are limited and no firm can normally afford to attack and tap the entire market without any delimitation whatsoever. It would benefit the firm if the efforts were concentrated on segments that are more profitable and productive ones. Segmentation also helps the marketer assess as to what extend existing offer from competitors match the needs of different customer segments. The marketer can thus identify the relatively less satisfied segments and succeed by concentrating on them and satisfying their needs.

6 . Benefits the customer as well: Segmentation brings benefits not only to the marketer, but to the customer as well. When segmentation attains higher levels of sophistication and perfection, customers and companies can conveniently settle down with each other, as at such a stage, they can safely rely on each others discrimination. The firm can anticipate the wants of the customers and the customers can anticipate the capabilities of the firm.

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7 . Sustainable customer relationships in all phases of customer life


cycle: Customers change their preferences and patterns of behavior over time. Organizations that serve different segments along a customers life cycle can guide their customers from stage to stage by always offering them a special solution for their particular needs. For example, many car manufacturers offer a product range that caters for the needs of all phases of a customer life cycle: first car for early teens, fun-car for young professionals, family car for young families, etc. Skin care cosmetics brands often offer special series for babies, teens, normal skin, and elder skin.

8 . Targeted communication: It is necessary to communicate in a segment-specific way even if product features and brand identity are identical in all market segments. Such a targeted communications allows to stress those criteria that are most relevant for each particular segment (e.g. price vs. reliability vs. prestige).

9 . Higher market Shares: In contrast to an undifferentiated marketing strategy, segmentation supports the development of niche strategies. Thus marketing activities can be targeted at highly attractive market segments in the beginning. Market leadership in selected segments improves the competitive position of the whole organization in its relationship with suppliers, channel partners and customers. It strengthens the brand and ensures profitability. On that basis, organizations have better chances to increase their market shares in the overall market.

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BASES FOR SEGMENTATION


Markets can be segmented using several relevant bases. There are huge number of variables which leads to market segmentation. They comprise easy to determine demographic factors as well as variables on user behavior or customer preferences. Segmentation is done for consumer market and industrial market.

BASES FOR SEGMENTATION IN CONSUMER MARKET


Consumer characteristics: market can be segmented on the following customer

1. Geographic Segmentation. 2. Demographic Segmentation. 3. Psychographic Segmentation.


4.

Behaviouralistic Segmentation.

1)

Geographic Segmentation: - Potential customers are in a local,


state, regional or national marketplace segment. If a firm selling a product such as farm equipment, geographic location will remain a major factor in segmenting your target markets since their customers are located in particular rural areas. While for retail store, geographic location of the store is one of the most important considerations, in this case city areas are preferred. Segmentation of customers based on geographic factors are:a.

Region: - Segmentation by continent / country / state / district /


city.

b.

Size: - Segmentation on the basis of size of a metropolitan


area as per its population size.

c.

Population density: - Segmentation on the basis of


population density such as urban / sub-urban / rural etc.

d.

Climate: - Segmentation as per climatic condition or weather.

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2)

Demographic Segmentation: - Segmentation of customers based


on demographic factors are:1) Regional Population Distribution 2) Urban-suburban-rural population 3) Age
4) Sex (Segmentation on the basis of Male and Female. It is also a

Dominant Factor.) 5) Family Life Cycle Stage 6) Others: race, religion, nationality, education, occupation

3)

Psychographic Segmentation: -

Psychographic Segmentation

groups customers according to their life-style and buying psychology. Many businesses offer products based on the attitudes, beliefs and emotions of their target market. The desire for status, enhanced appearance and more money are examples of psychographic variables. They are the factors that influence your customers' purchasing decision. A seller of luxury items would appeal to an individual's desire for status symbols Psychographic Segmentation includes variables such as:a. Activities. b. Interests. c. Opinions. d. Attitudes.
e. Values. Values

Activities, Interests, and Opinions (AIO) surveys are one tool of measuring Activities, Interests lifestyle.

4)

Behaviouralistic Segmentation: -

Markets can be segmented

on the basis of buyer behaviour as well. Since all Segmentation is in a way

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related to buyer behavior, one might be tempted to ask why buyer behavior-based segmentation should be a separate method. It is because there is some distinction between buyers characteristics that are reflected by their geographic, demographic and psychographic profiles, and their buying behaviour. Marketers often find practical benefit in using buying behaviour as a separate segmentation base in addition to bases like geographic, demographics, and psychographics. The primary idea in buyer behaviour segmentation is that different customer groups expect different benefits from the same product and accordingly, they will be different in their motives in owing it and their behavior in buying it. Variables of buyer behavior are:a.

Benefit sought: - Quality / economy / service / look etc of


the product.

b.

Usage rate: - Heavy user / moderate user / light user of a


product.

c.

User status: - Regular / potential / first time user / irregular


/occasional.

d.

Brand Loyalty: - Hard core loyal / split loyal / shifting /


switches.

e. Readiness to buy.
f.

Occasion: - Holidays and occasion stimulate customer to Occasion


purchase products.

g.

Attitude toward offering: - Enthusiastic / positive attitude /


negative attitude / indifferent / hostile.

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SEGMENTATION BASES FOR CONSUMER MARKETS


Geographic Region City or Metro-area Size Urban-Rural Climate Demographic Income Age Gender Family Life Cycle Social Class Education Occupation Psychographic Personality Life style Values

POSSIBLE MARKET SEGMENTS


Punjab, Sindh and census region Population Under 1000000; 25000005000000; 5000001-10000000 etc Urban, Suburban, Rural Hot, Cold, Sunny, Rainy, Cloudy Under Rs.25000; Rs.25000-50000; Rs.50001-75000; over Rs.75000. Under 6; 6-12, 13-19, 20-34, 35-49, 5064, 65 and over Male, Female Young, single; young, married, no children; etc Upper class, upper middle, lower middle, upper lower etc Grade school only, high school graduate, college graduate Professional, Manager, clerical, sales, student, homemaker, unemployed, etc Ambitious, Self-confident, aggressive, introverted, extroverted, sociable, etc Activities(golf, travel); Interests(politics, modern art); opinion(conservation, capitalism) Values and lifestyle, List of values.

Behavioral Benefits Desired Examples vary widely depending on product: appliancecost, quality, operating life; toothpasteno cavities, plaque control, bring teeth, good taste, low price Nonuser, light user, heavy user

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SEGMENTATION BASES FOR CONSUMER MARKETS


Usage rate

POSSIBLE MARKET SEGMENTS

BASES FOR SEGMENTATION IN INDUSTRIAL MARKET


In contrast to consumers, industrial customers tend to be fewer in number and purchase larger quantities. They evaluate offerings in more detail, and the decision process usually involves more than one person. These characteristics apply to organizations such as manufacturers and service providers, as well as resellers, governments, and institutions. Many of the consumer market segmentation variables can be applied to industrial markets. Industrial markets might be segmented on characteristics such as:

1. Location. 2. Company type. 3. Behavioral characteristics.


1)

Location

In industrial markets, customer location may be important in some cases. Shipping costs may be a purchase factor for vendor selection for products having a high bulk to value ratio, so distance from the vendor may be critical. In some industries firms tend to cluster together geographically and therefore may have similar needs within a region.
2)

Company Type:

Business customers can be classified according to type as follows:

a. Company size:-Whether size

the company is a large scale industry / a

small scale industry. Large industry always tries to order in bulk commodities while opposite for small scale sector.

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b. Industry: -

Whether the industry is manufacturing industry / service

industry. Also sometime differentiation is done between public sector industry or a private sector industry.

c. Purchase Criteria: It involves quality, price, durability, and lead time.


3) Behavioral Characteristics
In industrial markets, patterns of purchase behavior can be a basis for segmentation. Such behavioral characteristics may include:

Usage rate: Nonuser, light user, heavy user Buying status: potential, first-time, regular, etc. Purchase procedure: sealed bids, negotiations, etc.

Multi-level Segmentation: A Market can be segmented, using


several bases in successionWhile discussing about bases of segmentation we must discuss about multi-level segmentation, as it is not as through segmentation bases discussed above are mutually exclusive and a market can be segmented only with one particular base, on either / or basis. Since customer characteristic are spread over several variables, any market can be segmented through several bases. Different bases can be used in combination in segmenting a given market. They just have to be relevant for the concerned market. Actually, the different bases can be used in succession in a suitable order, and the market can be segmented at multi-levels. For example, a market can be segmented using the demographic base in the first instance, followed by the psychographic base and the buyer behavior/benefit base. Or, the market can be segmented using volume as the base in the first instance, followed by the demographic/psychographic/buyer behavior/benefit base. Assuming for example, that the firm first carries out volume segmentation of its market, it can know who the heavy user of its product are, but it cannot know the purpose for which they buy the product. The firm can then pick up the heavy users and carry out a multi-level segmentation, and continue its probe more deeply.

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Since each of these bases has several sub-bases, the numbers of levels in which a market can be segmented are indeed numerous. Actually, the aim should always be to go as deep as possible in segmenting the market so that segments that are most attractive and most suited can be chosen.

Multi-level segmentation enables better selection of target market and better choice of marketing mix: mix
Multi-level segmentation enables the marketers to choose his target market better. It also helps him to make the winning strategy and strike the right product offer and the right marketing mix. With the information generated from multi-level segmentation, he can obtain a deeper understanding of the customers in each segment, their needs, buying motives and buying behaviour. He can understand in what way each of the different segments want the product to be, he can then tailor his product, marketing offer and promotional appeal, to fit the individual segment; he can select the priced, distribution method/channels, media vehicles, advertising massages and sales appeal, which will be appropriate.

Example of General Motors:GM has identified about 40 different customer needs and correspondingly, 40 different market segments in which it would present with its vehicles. For example, it has targeted the Pontiac at active, sports-oriented, young couples, the Chevrolet at price-conscious young families, the Oldsmobile at affluent families, and the Buick at older, more conservative couples.

MARKET TARGETING
INTRODUCTION: - There was a time when finding the best customers was
like throwing darts in the dark. Target marketing changed all that...Today's savvy 21

marketers know that finding their best prospects and customers hinges on well thought out targeted marketing strategies. Defining a target market requires market segmentation, the process of pulling apart the entire market as a whole and separating it into manageable, disparate units based on demographics. Target market is a business term meaning the market segment to which a particular good or service is marketed. It is mainly defined by age, gender, geography, socio-economic grouping, or any other combination of demographics. It is generally studied and mapped by an organization through lists and reports containing demographic information that may have an effect on the marketing of key products or services. Target Marketing involves breaking a market into segments and then concentrating your marketing efforts on one or a few key segments. Target marketing can be the key to a small businesss success. The beauty of target marketing is that it makes the promotion, pricing and distribution of your products and/or services easier and more cost-effective. Target marketing provides a focus to all of your marketing activities. Market targeting simply means choosing ones target market. It needs to be clarified at the onset that marketing targeting is not synonymous with market segmentation. Segmentation is actually the prelude to target market selection. One has to carry out several tasks beside segmentation before choosing the target market. Through segmentation, a firm divides the market into many segments. But all these segments need not form its target market. Target market signifies only those segments that it wants to adopt as its market. A selection is thus involved in it. In choosing target market, a firm basically carries out an evaluation of the various segments and selects those segments that are most appropriate to it. As we know that the segments must be relevant, accessible, sizable and profitable. The evaluation of the different segments has to be actually based on these criteria and only on the basis of such an evaluation should the target segments be selected.

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PROCESS OF CHOOSING THE TARGET MARKET


The process of choosing the target Market are:-

Choosing the target market is related to, but not synonymous with, market
segmentation.

Segmentation is the means or the tool; choosing the target market is the
purpose.

Segmentation
selection.

can also be viewed as the prelude to target market

Choosing the target market usually follows multi-level segmentation using


different bases.

Choosing

the target market involves several other tasks in addition to

segmentation.

Looking at each segment as a distinct marketing opportunity. Evaluating the worth of each segment (sales/profit potential). Evaluating whether the segment is:
Distinguishable. Measurable. Sizable. Accessible. Growing. Profitable. Compatible with the firms resources.

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Examining whether it is better to choose the whole market, or the only a


few segment, and deciding which ones should be chosen.

Looking

for segments, which are relatively less satisfied by the current

offers in the market from competing brands.

Checking

out if the firm has the differential advantage / distinctive

capability for serving the selected segments.

Evaluating the firms resources and checking whether it is possible to put


in the marketing programmes required for capturing the spotted segments with those resources.

Finally selecting those segments that are most appropriate for the firm.
FACTORS TO BE CONSIDERED WHILE TARGET MARKET SELECTION
Target marketing tailors a marketing mix for one or more segments identified by market segmentation. Target marketing contrasts with mass marketing, which offers a single product to the entire market. Two important factors to consider when selecting a target market segment are the attractiveness of the segment and the fit between the segment and the firm's objectives, resources, and capabilities. capabilities

Attractiveness of a Market Segment


The following are some examples of aspects that should be considered when evaluating the attractiveness of a market segment:

Size of the segment (number of customers and/or number of units). Growth rate of the segment. Competition in the segment. Brand loyalty of existing customers in the segment.

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Attainable market share given promotional budget and competitors' expenditures. Required market share to break even. Sales potential for the firm in the segment. Expected profit margins in the segment.

Market research and analysis is instrumental in obtaining this information. For example, buyer intentions, sales force estimates, test marketing, and statistical demand analysis are useful for determining sales potential. The impact of applicable micro-environmental and macro-environmental variables on the market segment should be considered. Note that larger segments are not necessarily the most profitable to target since they likely will have more competition. It may be more profitable to serve one or more smaller segments that have little competition. On the other hand, if the firm can develop a competitive advantage, for example, via patent protection, it may find it profitable to pursue a larger market segment.

Suitability of Market Segments to the Firm


Market segments also should be evaluated according to how they fit the firm's objectives, resources, and capabilities. Some aspects of fit include:

Whether the firm can offer superior value to the customers in the segment The impact of serving the segment on the firm's image Access to distribution channels required to serve the segment The firm's resources vs. capital investment required to serve the segment

The better the firm's fit to a market segment and the more attractive the market segment, the greater the profit potential to the firm.

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POSITIONING
INTRODUCTION: - Positioning is a concept in marketing which was first
popularized by Al Ries and Jack Trout in their bestseller book Positioning - a Positioning battle for your mind". According to them Positioning is what you do to mind of the mind prospect. They iterate that any brand is valued by the perception it carries in the prospect or customer's mind. Each brand has thus to be 'Positioned' in a particular class or segment. Example: Mercedes is positioned for luxury segment, Volvo is positioned for safety. The position of a product is the sum of those attributes normally ascribed to it by the consumers its standing, its quality, the type of people who use it, its strengths, its weaknesses, any other unusual or memorable characteristics it may possess, its price and the value it represents. Although there are different definitions of Positioning, probably the most common is: "A product's position is how potential buyers see the product", and is expressed relative to the position of competitors. Positioning is a platform for the brand. It facilitates the brand to get through to the mind of the target consumer. The position of the brand has thus to be carefully maintained and managed. Example: when Malboro cut down its prices, its sales dropped immediately, as it began being associated with the generic segment. Watches like Rolex are positioned as luxury segment watches, thus they being one of the most expensive have become a symbol for accomplishment in life. If Rolex reduces its prices, it loses its perceived image and hence is in danger of losing its customers. This differs slightly from the context in which the term was first published in 1969

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by Al Ries and Jack Trout in the paper "Positioning" is a game people play in todays me-too market place" in the publication Industrial Marketing, in which the case is made that the typical consumer is overwhelmed with unwanted advertising, and has a natural tendency to discard all information that does not immediately find a comfortable (and empty) slot in the consumers mind. It was then expanded into their ground-breaking first book, "Positioning: The Battle for Your Mind", in which they define Positioning as "an Positioning: Mind organized system for finding a window in the mind. It is based on the concept that communication can only take place at the right time and under the right circumstances."

POSITIONING CONCEPTS:- Generally, there are three types of positioning concepts:

Functional positions

Solve problems. Provide benefits to customers. Get favorable perception by investors (stock profile) and lenders.
Symbolic positions

Self-image enhancement. Ego identification. Belongingness and social meaningfulness. Affective fulfillment.
Experiential positions

Provide sensory stimulation. Provide cognitive stimulation.


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APPROACHES OF POSITIONING
The main positioning strategy is to either developing or reinforcing a particular image for the brand in the mind of the customer. The main approaches to positioning strategy are:-

Customer benefits approach. The price-quality approach. The use or application approach. The product user approach. The product class approach. The cultural symbol approach. The competitor approach.

Customer benefit approach: approach


This is an important positioning strategy. It involves putting the brand above competitors, based on specific brand attributes and customer benefit. In the automobiles sector we can see many car manufacturer give emphasis on different technical aspects such as fuel efficiency, safety, engine performance, power windows etc. Generally marketers identify positioning in respect of product characteristics that have been ignored by the competitor. Often we can see that firms attempts to position their brands along with two or more characteristic simultaneously, this is done to give an extra edge to the product from its rival and also helps increase the products life cycle. Thus a single product can solve many problem is the main theme behind the product.

Price quality approach: -

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Sometimes brands attempts to offer more in term of service, feature, quality, or performance. Manufacturer of such brands charge higher prices partly to cover the cost and partly to communicate the fact that they are of high quality. In fact in the same product category there are brands, through comparable in qualities, which appeal on the basis of price. For example brands like Rado and Timex use quality and price positioning technique respectively. Rado competes for quality and Timex competes for price. It is difficult to use both quality and price positioning together because there is a risk that high quality-low price positioning technique may infer the image of the product in the mind of the consumer.

The use and application approach: In this strategy the product is positioned with a use or application approach. For example: - Largest Mobile manufacturer in the world Nokia positioned its few variant of N-series mobiles as music phones with enhanced memory and multimedia capabilities.

The product user approach:In this approach, the brand identifies and determines the target segement for which the product will be positioned. Many brand uses a model or a celebrity to position their product. The expectation are that a model or a celebrity is likely to influence the products image by reflecting their own image to it.

The cultural symbol approach: The positioning strategy is based on deeply entrenched cultural symbol. The use of cultural symbol can help to differentiate the brand from competitors brands. For example:- The positioning technique of Marlboro cigarettes use the image of typical American cowboy .

The competitor approach:Many brands use competitor as a dominant plank in their campaign. These brands are positioned following its competitor. This is an offensive strategy.

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DIFFERENT POSITIONING PLANKS / BASES:- Different types of


positioning planks /bases are used by the marketers are:-

Economy:- Product positioned toward a particular segment keeping in


mind it economy.Example-Maruti 800, detergent powder etc are positioned for Maruti the economy segment

Benefit:- Product positioned with some beneficial features. ExampleColgate total, Clinic plus etc.

Gender:- Product positioned for a particular segment. Gender: Luxury and exclusiveness:- Product or services positioned toward
luxury segment. Mercedes Benz E-class etc.

Fashion for elite class:- Product positioned for fashionable elite


class or member of the society, who always want to stay ahead in term of fashion and demands exclusive products only. Example Peter England, Van Heusen, Raymond etc. etc

Technology and value added features:- Positioning of a product


according to its technological advancement and value added features. Example:- Microsofts positioning of its recent operating system Windows Vista as the advanced operating system, Sony with various elecronic goods, LG etc

PRODUCT POSITIONING AND BRAND POSITIONING


It is essential to understand the relationship between product positioning and brand positioning. The two terms are synonymously and interchangeably used, technically they are different. Product positioning denotes the specific product category / product class in which the given product is opting to compete. And brand positioning denotes the positioning of the brand viz-a-viz the competing brands in the chosen product category.

ISSUES IN PRODUCT POSITIONING

The main issues in product positioning are:

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Where is the new offer going to compete? As what? Which product function/customer need is it trying to meet? What other product categories serve this need? In other words, what are the substitute products that serve the same need? Where the real gap is, where is such a new offer welcome and wanted by the market? What are the companys competencies to fight here?

In fact, these are the issues the firm agitates in target market decision selection too. The linkage is only natural because in product positioning, the firm is actually bridging the product offer with the right target market.

ISSUES IN BRAND POSITIONING

The issues in brand positioning are: Which are the competing brands in the chosen product category? What are the unique claims/strength of the various brands? What position do they enjoy in consumers evaluation and perception? According to the consumer rating of the brands, is there a wide gap in expectation performance? What kind of a product/new attribute/new functions will attract the consumer? What is the most favoured position and yet vacant?

Can the new brand claim the needed distinction and take the position and satisfy that need?

CRITERIAS FOR SUCCESSFUL POSITIONING


Certain criteria are needed to be fulfilled for successful positioning are:Cer Clarity: - While positioning its brand the firm must be able to position itself in both distinct value, proposition, and to its target audience.

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Consistency: - Consistency in positioning means keeping the positioning plank/bases intact for longtime. Planks should be carefully chosen while positioning. But it does not mean that the firm must change its positioning bases even though its survival is at stake. The firm must be flexible to the changing environment. Credibility: - The firm must deliver trustworthy and believable value proposition. There should be perfect match between promise and action. Competitiveness: - For surviving in this competitive and changing environment innovative resources, talent pool, competitive advantage, strong financial backup etc are very important.

Conclusion: - Thus we can say that the total process of market


segmentation, targeting and positioning is a very important attribute of marketing mix. All these three process is very closely interrelated with each other.

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Once the organization has decided which customer groups within which market segments to target, it has to determine how to present the product to this target audience. This allows to exactly addressing the needs and expectations of the target groups with a tangible marketing mix that consists of product characteristics, price, promotional activities and places to present the product. Effective strategies of segmentation, targeting and positioning gives an extra advantage in changing and highly competitive environment. To make this three marketing process effective a thorough SWOT analysis of the firm is very important. Keeping in mind the strength, weakness, opportunity and threat the firm can formulate and implement its total marketing mix. Marketing Environment
The actors and forces outside marketing that affect marketing managements ability to build and maintain successful relationships with target customers.

Micro Environment
The actors close to the company that affects its ability to serve its customers- the company, suppliers, marketing intermediaries, customer markets, competitors and publics are called macro environment.

Competitors
The marketing concept states that to be successful, a company must provide greater customer value and satisfaction than its competitors do. Thus, marketers must do more than simply adapt to the needs of target consumers.Zombie has many direct and indirect competitors which are competing with Zombie to gain larger market share.

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Direct Competitors
By direct competitors, we mean brands which are targeting the same market segment targeted by Zombie. Our direct competitors are:

Speed Red Bull Twister


Speed drink:
Speed drink is one of Unilever's oldest brands, a brand that was truly 'global' before the term 'global brand' was invented. Speed energy drink was launched in 1894 as an affordable new product in the UK. Since 2000, major changes have been made to the Speed to ensure that it provides improved healthy protection and a more enjoyable healthy brusting experience for its billions of consumers.

Red Bull:
Red Bull is a product of Pepsi Co. It is a energetic drink. It contains an active healthy body, leaves skin reassuringly fresh and better, and available in 250 ml tin.

Indirect Competitors
By indirect competitors, we mean brands which are targeting the same market- drink market- but different segment. Indirect competitors of Zombie are

Blue Charge Battery


Blue Charge

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Blue Charge is the brand name of an energy drink, produced in the UK by Asda as an alternative to such products as Red Bull and Powerade.

Ingredients
The ingredients in Blue Charge, similar to those used in Red Bull, are: Carbonated Water, sucrose, glucose, sodium citrate, taurine, glucuronolactone, caffeine, inositol, niacinamide, calciumpantothenate, pyridoxine HCL, Vitamin B12, natural and artificial flavours, and colours.

Blue Charge
Blue Charge is the brand name of an energy drink, produced in the UK by Asda as an alternative to such products as Red Bull and Powerade.

Ingredients
The ingredients in Blue Charge, similar to those used in Red Bull, are: Carbonated Water, sucrose, glucose, sodium citrate, taurine, glucuronolactone, caffeine, inositol, niacinamide, calciumpantothenate, pyridoxine HCL, Vitamin B12, natural and artificial flavours, and colours.

Financial Condition
The financial condition of Protection Group of Industries is very sound. It has shown good growth rate in recent years. So, company can easily satisfy all its transactions and is able to support all its products as well as Zombie.

Macro Environment
The large societal forces that affect the microenvironment- demographic, economic, technological and political is called macro environment. The company

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and all other actors operate in a larger macro environment of forces that shape opportunities and poses threats to the company.

Target market for Zombie


Before we describe the target market for Zombie we must look first what the target marketing is .

Target marketing:
The process of evaluating each market segments attractiveness and selecting one or more segments to enter To understand the target marketing we must understand that what is market segmentation.

Market segmentation
Dividing a market into two smaller groups of buyers distinct needs characteristics or behavior we might require separate product or marketing mix. There is no single way to segment a market, company use different segmentation variables in market structure. For their product they use the main segmentation to find out their target consumer market is that they divide the drink market into three main segments.

Our product
Our Product target the anti septic market segment, the consumer of this segment are well aware to the anti septic function of the product ,they are more concern with health care they try their best to clean their body ,as much as possible, from the dangerous germs as well as from dust. They may include sportsmen, worker, engineers, medical staff, and specially children. We early mentioned that for product they use different segmentation variables in combination here we describe some of them in detail.

Demographic segmentation
Our product is for the whole family everyone can use it but as there is a large fraction of kids in age 1-16 years in Pakistan ,we take more interest in them it is basically due to our market strategy, but kids are not our only market segment

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our product is for the whole family .We also segmented our market with respect to the income of the family ,a family earning Rs = 10000 or more per month can afford it .Education also helps us to find out the target market , we mainly target educated people or at least who can understand the benefit and function of our product easily, thats why our target segment are usually concentrated in the towns where literacy rate is high than in the villages where people do not concern mainly with their health..

Psychographic segmentation
Psycho graphically our product target three social classes mainly. 1-Middle class. 2-Upper middle class. 3- Lower-upper also include to some extent.

Behavioral segmentation
Behaviorally we target the consumer who believes in quality and economy, regular users are also our target.

Geographic segmentation
Geographically there is no specific segmentation , they launched theeir product in the whole country ,and deliver it where we can reach, but cities have more density of our consumers than in villages. So these are the main segment s which company use to make the target market for their product they use these segments in combination to make the whole target market for their product.

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Product:
Product may be an idea, a physical entity (a good), or a service, or any combination of three. It exists for the purpose of exchange in satisfaction of individual organizational objectives. A well-structured product plan enables a company to pinpoint opportunities, develop appropriate marketing programs, coordinate a mix of products, maintain successful products as long as possible, reappraise faltering products, and delete undesirable products. A firm should define its products in three different distinct ways; tangible, augmented and generic. By considering all three definitions, the company is better able to identify consumer needs, competitive offering and distinctive product attributes.

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Tangible product is a basic physical entity, service or idea.

It has precise specifications and is offered under a given description or model number.

Augmented

product

includes

not

only

the

tangible

elements of a product, but also the accompanying cluster of image and service features.

Generic product focuses on what a product means to the

customer, not the seller

Product planning
Product planning is systemic decision making relating to all aspects of the development and management of a firms product, including branding and packaging. Each product consists of bundle of attributes capable of exchange and use, or usually a mix of tangible and intangible forms.

Goods:
Goods marketing entail the sale of physical products. Durable goods are physical products that are used over an extended period of time, such as furniture and heavy machinery. Nondurable goods are physical products that are made from materials other than metals, hard plastic and wood; are rather quickly consumed or worn out; or become dated and unfashionable, or in some other way no longer popular.

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Good are tangible. They are objectives, things and materials. Value is based on ownership. Goods can be stored. Surpluses in one period can be applied against shortage in another. Goods can be manufactured by one firm and marketed by another. The quality of a good can be differentiated from a distribution intermediarys quality. Goods can be standardized. Mass production and quality control can be used.

Services:
Services marketing encompass the rental of goods, the alteration or repair of the goods owned by the consumers, and personal services. A rented-goods service involves the leasing of the goods for a specified period of time. An owned goods service involves an alteration or repair of the goods owned by consumers. Non-goods services involve personal services on the part of the seller; it does not include a good. Services are often intangible. They may involve acts, deeds, performances, efforts. Many services cannot be physically possessed. The value of a service may be based on an experience. Services are usually perishable. Unused capacity cannot be stored or shifted from one time to another.

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Services are frequently inseparable. The quality of many services cannot be separated from the service provider. Service may vary in quality over time. It is difficult to standardize some services because of their labor intensiveness and the involvement of the service user in diagnosing or her service needs.

Raw material:
Raw material, component material, and fabricated parts are used up in production or become part pf final product. They are expense rather than capital items. They require limited decision making by the buyer, are inexpensive on a per-unit basis, and are rapidly consumed. Raw material are unprocessed primary materials from extractive and agricultural- minerals e.g. crude petroleum, coal, crops, an iron ore etc. Component materials are semi manufactured goods that undergo further changes in form, e.g steel, cement, wire, textile, and basic chemicals. Fabricated parts are placed in products without further changes in form, e.g. electric motors, vehicle batteries and microprocessor. The major marketing tasks for materials and parts are to ensure continuity in shipments, quality, and prompt delivery; actively pursue reorder; implement standardized pricing; employ aggressive distributors or sales personnel; seek long-term contract; and satisfy specifications set by buyers.

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Industrial services:
Maintenance and repair services include painting, machinery repairs, and janitorial services. Business advisory services include management consolatory, advertising agency services etc. Maintenance and repair services usually involve a low degree of consumer decision making, are relatively inexpensive, and are consumed quickly. They may become part of the final product and undergo a change in form. The major marketing thrust in on consistent, efficient service at a reasonable price. Business advisory service may involve a moderate to high level of consumer decision making when these service providers are first hired. Costs are relatively low. The benefits of these services may be long lasting. They do not become part of final products. The major marketing emphasis is on presenting an image of expertise and clearly conveying the reasons for a client to use the service. Both types of industrial services are frequently purchased on a contract or retainer basis, and some firms may decide to undertake the services internally.

Brand/model:
A product item is a specific model/ brand/ size of a product that a company sells, such as college course on the principles of marketing, a general motor truck. Usually a firm sells a group of closely related products items as part of a product line. In each product line, the items have some common characteristics,

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customers,

and/or uses; they may also share technologies,

distribution channels, prices, related services, and so on, as an example, Revlon Markets lipstick, eye makeup and other cosmetics. The product mix consists of all the different product lines a firm offers. Tyco Laboratories is a world wide manufacturing company with the three major product lines: fire protection/flow control, packaging materials, and electric and electronic components. A firm seeks a new market, reformulates a product or change or updates product positioning; or new technology becomes available. For instance, Stroh changed to bright blue cans and bottle labels because its white cans didnt stand out against the competition, Valvoline added more colors to its motor oil cans and increased the type size denoting the oils grade after consumer focus group said its oil cans looked dated. Clearasil acne medication gets a new packaging looks every few years because teens tend to buy the newest product in the market.

Packaging:
Sometime a distinction is made between packing and packaging-the former is concerned with protection and latter with promotion. But now a day this distinction is not concerned, modern packaging involves protecting and promoting the product. The purchasing agent used to be in charge of packaging in many companies- when protection was major job of package. But now, some companies have a corporate packaging staff. And in some companies, the product managers or specialists in packaging has taken over the job. General foods corporation

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appointed a manager of packaging development and procurement services which it decided that packaging is an important management tool. This manager coordinates packaging activities with the various product managers. This new-found status for packaging occurred in part because of growing competitiveness in many markets. This status also reflects the costliness of packaging errors- and the difficulty to correcting them. A poor packaging could have long term effects-killing the product ford customer who try it-and creating bad will among middlemen. In other words, packaging can have great strategic importance.

Key factors of packaging:


Several key factors must be weighed in making packaging decisions. A discussion of each follows: Package design affects a firm seeks for its products. Color, shape and material all influence consumer perceptions of a firm and its products. Plan packaging fosters a lower-quality image for generics. In family packaging, a firm uses a common element on each package in a product line. It parallels family branding. Campbell has virtually identical packages for its traditional soups, distinguished only by flavor or content identification. An international firm must determine if a standardized package can be used throughout the world. Standardization increases
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world wide recognition. For this reason, Coke and Pepsi utilize standard packages wherever possible. However, some colors, symbols, and shapes have negative meanings in certain nations. Package cost must be considered on both a total per unit basis. Total costs can run into the millions of $s. and per unit costs can go as high as 40 percent of a products selling pricedepending upon the purpose and extent of packaging. A firm has a number of packaging materials from which to choose, such as paper board, plastic, metal, glass, and cellophanes. In the selection, trade-offs are probably necessary. Also a firm must determine how innovative it wants its packaging to be. There is a wide range of package features from which to choose, depending on the product. These features include pour spouts, hinged lids, screw-on tops, pop-tops, see-through bags, tuck-or seal end cartoons. A firm selects the sizes, color, and shapes of its packaging. In selecting the package size, shelf life, convenience, traditions and competition must be determined. The choice of package color depends upon the image sought for the brand. Package shapes also affects the products image. The number of packages used with any one product depends on competition and the companys use of differential marketing. By selling small, medium and large sizes, an existing firm may ensure maximum shelf space, appeal to different consumers, and make

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it difficult and expensive for a new one to gain wholesaler and retailer support. The placement, content, size and performance of the label must be determined. Both company and brand names need to appear on the label. Package inserts in range from recipes to directions for use to safety tips to coupons for future purchases, and their inclusion should be noted on the label. Sometimes, a redesigned label may be confusing to the customers and hurt a products sale. Multiple packaging couples two or more product items in one container. It may involve the same product or a combination of different products. The goals of multiple packaging are to increase consumption, get the consumer to buy an assortment of items, or have the consumer to try a new item. Many multiple packs are versatile because they can be sold as they are shipped or broken into single units. Individually wrapping portion of a divisible product may offer a competitive advantage. It may also be quite costly. For certain items, some dealers desire preprinted pries-such as for shirts, books, magazines, watches, and candy. The dealer has the option of charging those prices or adhering their own labels. Some retailers prefer only a space for the price on the package and insert their own price labels automatically. Because of the growing use of computer technology by wholesalers and retailer in monitoring inventory levels, more of them are insisting on pre marked inventory codes on packages. And this code would be called and used as Universal Product
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Code (UPC). Universal Product Code, manufactures Premark items with a series of thick and thin vertical lines. Price and inventory data codes are presented b these lines, which appear on outer package labels-but not readable by employees and customers. These lines are read by the computerized optical scanning equipment at a checkout counter. In these instances, the cashier does not have to ring up a transaction manually and inventory data is instantly transmitted to the main computer of the retailer. A firm must be sure that the package designs fit in with the rest of its marketing mix. A well-known brand of perfume may be extravagantly packaged, distributed in select stores, advertised in upscale magazines, and sold at a high price. Although the two perfumes brands may cost an identical amount to make, the imitator would spend only a fraction as much on packaging.

Growing importance of Packaging:


The importance of packaging is partly shown by its cost. The rising costs for packaging are due in part to a shift from an earlier emphasis on protection. A new package can make the important difference in a new marketing strategy-by improving the product. A better box, wrapper, can or bottle may even let a relatively small, unknown firm complete successfully with established competitors. A package change can often creates a new productby giving customers a more desirable quantity. Multiple packs can be the basis of a new marketing strategy too. Consumer surveys showed

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that some customers were buying several units at a time of products like soft drinks etc. this suggested a new market. Manufacturers tried packaging in 4, 6 and 8 packs- and have been very successful. Better protective packaging is especially important to manufacturers and wholesalers. They often have to pay the cost of the goods damaged in shipment. There are also costs for selling such claims- and getting them settled is a nuisance. Goods damaged in shipment also may delay production or cause lost sales. Retailer needs good packaging which provides better protection can reduce store costs by cutting breakage, preventing discoloration etc. packages which are easy to handle can cut costs by speeding price marketing, improving handling and display, and saving. Promotion-oriented advertisement: Packaged goods are regularly seen in retail stores. They may actually be seen by many more potential customers than the companys advertisement. A good package sometimes gives a firm more promotion effect than it could possibly afford. An attractive package may speed turnover so much that total costs will decline as a percentage of sales. Total distribution cost can also rise because of packaging. But customers may be satisfied because the packaging improves the product. Package cost as a percentage of a manufacturers selling varies widely. packaging may be better than

Branding:

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Branding means the use of a name, term, symbol, or a design-or a combination of these-to identify a product. It includes the use of brand names, trademarks, and particularly all other means of products identification. Brand name has a narrower meaning. A brand name is a word, letter, or a group of words that the law says are trademark. A trademark is a legal term.

Importance of brands:
Each producer has to mark his product so that the output can be cut back when necessary. This also means that poor quality can be trade back to the guilty producers. Early trademarks were also the protection to the buyer. Branding is advantageous to customers because: It makes shopping feasible and more efficient. Assures regular satisfaction to customers. It is dependable guides to quality. It may satisfy the status needs.

Branding is advantageous to branders because: Encourages repeat buying and lower costs. May develop loyal customers.
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May build corporate images. Five levels of brand familiarities: Rejection. Non recognition. Recognition. Preference. Insistence.

Choosing a brand name:


Brand name selection is an art, because it is difficult to define what is a good brand name? A brand name can make a difference. Its helps something to be sold. Because just using the company name or a family member's name is not enough. The trademark or brand name, which is chosen by a company, is protected by that company.

Raw Materials:
The ingredients in Zombie, similar to those used in Red Bull, are: Carbonated Water, sucrose, glucose, sodium citrate, taurine, glucuronolactone, caffeine, inositol, niacinamide, calciumpantothenate, pyridoxine HCL, Vitamin B12, natural and artificial flavours, and colours.

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HVAC System Although HVAC is often not a significant part of energy consumption in a soft drink manufacturing plants, it can be a major energy user in the administration part of the facilities. Major sources of energy savings in HVAC systems are: Controlling the HVAC system to heat and cool when needed by programmable thermostat or better with an energy management system. Proper zoning the HVAC air supply and return. Use of high EER package units with the

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minimum requirements of ASHRAE Standard 90.1. Use of variable frequency drive (VFD) controllers on air handlers in place of dampers Heat recovery from the ammonia vapor at the compressor exit to pre-heat the boiler feed water. This measure also results in energy savings in the cooling tower/ evaporative cooler system because it reduces the heat load. Use of VFD on cooling tower fans, using sump temperature for feedback. Use of VFD on cooling tower supply water pumps, using return water temperature or chiller condenser pressure for feedback. Modification of refrigeration parameters (e.g. suction pressure, head pressure) to conform to process requirements Heating System Heating is needed to warm the containers before they are packaged in order to prevent condensation on container surface. Hot water for
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heating the containers is usually heated to about 130-140 F. Two types of heating systems are used for this purpose, steam from steam boiler or hot water from hot water boiler that in turn heats the warming water through heat exchangers. Use of hot water boilers is much more efficient because small hot water boilers can be installed near the points of application (rather than installation of steam boilers in a more remote area). Installation of a central hot water boiler is also an option. Main advantages using local hot water boilers are: Use of lengthy piping can be avoided Redundancy is built into the system, due to multiple hot water boilers rather than one or two large steam boilers Modern hot water boilers are much more efficient than steam boilers. The issue of maintaining steam traps are totally avoided Compressed Air Systems As Figure 2 shows, air compression can be a significant portion of the electrical energy consumption in these facilities. Major sources of air consumption include air jets used for directing cans and bottles along the conveyor lines, air jets for drying the containers after various stages of washing, air leaks and pneumatic actuators. Significant saving can be achieved by using blowers in place of air jets for drying applications, and wherever possible for moving the containers. Table 1 compares the power consumption of a compressor versus blowers of various pressures. For majority of drying
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applications and some displacing applications, blowers can easily replace the compressed air. Refer to Compressed Air Challenge, 1998 for other energy efficiency measures for compressed air systems. Combined Heat and Power Carbonated soft drink facilities are ideal cases where distributed generation in the form of combine heat and power (CHP, the same as cogeneration) can be used. This is due to the fact that both heating and electrical energy are required simultaneously. In the plants we have audited, the ratio of electrical energy usage to heating energy usage have been 70% to 83%, which are in the bulk part range of electrical to thermal ratio of natural gas reciprocating engine cogeneration systems. Natural gas fueled reciprocating engines are suitable for this type of facility because, Low pressure steam or hot water production capability of these engines Suitability of the size of these engines to carbonated soft drink facilities, a few hundred kW to a few MW. Air pollution control technology is readily available for these engines even in a stringent air pollution control environment such as South Coast Air Quality Management District in California. Several percentage points of higher efficiency compared to gas turbines of the similar capacity. Buildings and grounds Refrigeration System High Efficiency Lighting In production of carbonated soft drinks, the refrigeration system and its accessories such as cooling towers/evaporative coolers use a significant amount of energy. The refrigeration systems mostly use ammonia as the refrigerant.
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In the plants we have audited, between 25% to 35% of plants electrical energy is used for refrigeration. Significant levels of energy savings can be achieved through: Soft drink manufacturers usually have very large high bay warehouses that are usually illuminated with high intensity discharge (HID) lamps, such as metal halide and high-pressure sodium. These types of lamps can not be turned on and off on demand, but they can be dimmed on demand, with an energy saving of 50 to 60%. Major savings can be attained by installing bi-level lighting control systems that are activated by occupancy sensors upon detection of a person or a forklift in an aisle and shifting to full brightness. Sequencing the compressors Use of high efficiency refrigeration compressors with VFD controllers 3

Marketing Mix:
The set of controllable tactical marketing tools ___ product, price, place and promotion____ that the firm blends to produce the response it wants in the target market.

Product:
Anything that can be offered to market for attention, acquisition, use or consumption that might satisfy a want or need.

Brand:

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A name, term, sign, symbol, or design, or a combination of these


intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.

PRICING STRATEGIES
Pricing is the process of determining what a company will receive in exchange for its products. Pricing factors are manufacturing cost, market place, competition, market condition, Quality of product. Pricing is a fundamental aspect of financial modeling, and is one of the four Ps of the marketing mix. The other three aspects are product, promotion, and place. It is also a key variable in microeconomic price allocation theory. Price is the only revenue generating element amongst the four Ps, the rest being cost centers. Pricing is the manual or automatic process of applying prices to purchase and sales orders, based on factors such as: a fixed amount, quantity break, promotion or sales campaign, specific vendor quote, price prevailing on entry, shipment or invoice date, combination of multiple orders or lines, and many others. Automated systems require more setup and maintenance but may prevent pricing errors.

What a price should do


A well chosen price should do three things: achieve the financial goals of the company (e.g., profitability) Fit the realities of the marketplace (Will customers buy at that price?) support a product's positioning and be consistent with the other variables in the marketing mix 56

o price is influenced by the type of distribution channel used, the type of promotions used, and the quality of the product price will usually need to be relatively high if manufacturing is expensive, distribution is exclusive, and the product is supported by extensive advertising and promotional campaigns a low price can be a viable substitute for product quality, effective promotions, or an energetic selling effort by distributors From the marketer's point of view, an efficient price is a price that is very close to the maximum that customers are prepared to pay. In economic terms, it is a price that shifts most of the consumer surplus to the producer. A good pricing strategy would be the one which could balance between the price floor (the price below which the organization ends up in losses) and the price ceiling (the price beyond which the organization experiences a no demand situation).

The 9 Laws of Price Sensitivity


In their book, "The Strategy and Tactics of Pricing", Thomas Nagle and Reed Holden outline 9 laws or factors that influence a buyer's price sensitivity with respect to a given purchase: 1) Reference Price Effect. 2) Difficult Comparison Effect. 3) Switching Costs Effect.

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4) Price-Quality Effect. 5) Expenditure Effect. 6) End-Benefit Effect. 7) Shared-cost Effect. 8) Fairness Effect. 9) The Framing Effect.

Competition-based pricing
Setting the price based upon prices of the similar competitor products. Competitive pricing is based on three types of competitive product: Products have lasting distinctiveness from competitor's product. Here we The product has low price elasticity. The product has low cross elasticity. The demand of the product will rise. that : The product has high price elasticity. The product has some cross elasticity. No expectation that demand of the product will rise. Products have perishable distinctiveness from competitor's product, Products have little distinctiveness from competitor's product. assuming assuming the product features are medium distinctiveness. can assume:

Cost-plus pricing
Cost-plus pricing is the simplest pricing method. The firm calculates the cost of producing the product and adds on a percentage (profit) to that price to give the

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selling price. This method although simple has two flaws; it takes no account of demand and there is no way of determining if potential customers will purchase the product at the calculated price. Cost-plus pricing is a pricing method used by companies. It is used primarily because it is easy to calculate and requires little information. There are several varieties, but the common thread in all of them is that one first calculates the cost of the product, and then includes an additional amount to represent profit. It is a way for companies to calculate how much profit they will make. Cost-plus pricing is often used on government contracts, and has been criticized as promoting wasteful expenditures. The method determines the price of a product or service that uses direct costs, indirect costs, and fixed costs whether related to the production and sale of the product or service or not. These costs are converted to per unit costs for the product and then a predetermined percentage of these costs is added to provide a profit margin.

Advantages of cost-plus pricing


Easy to calculate Minimal information requirements Easy to administer Tends to stabilize markets - insulated from demand variations and competitive factors Insures seller against unpredictable, or unexpected later costs 59

Ethical advantages Simplicity

Disadvantages of cost-plus pricing


Provides no incentive for efficiency Tends to ignore the role of consumers Tends to ignore the role of competitors Uses historical accounting costs rather than replacement value Uses normal or standard output level to allocate fixed costs Includes sunk costs rather than just using incremental costs Ignores opportunity costs Price = Cost of Production + Margin of Profit.

Creaming or skimming
Selling a product at a high price, sacrificing high sales to gain a high profit, therefore skimming the market. Usually employed to reimburse the cost of investment of the original research into the product commonly used in electronic markets when a new range, such as DVD players, are firstly dispatched into the market at a high price. This strategy is often used to target "early adopters" of a product or service. These early adopters are relatively less price-sensitive because either their need for the product is more than others or they understand the value of the product better than others. This strategy is employed only for a limited duration to recover most of investment made to build the product. To gain further market share, a seller must use other pricing tactics such as economy or penetration. This method can come with some setbacks as it could leave the product at a high price to competitors.

Limit pricing

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A limit price is the price set by a monopolist to discourage economic entry into a market, and is illegal in many countries. The limit price is the price that the entrant would face upon entering as long as the incumbent firm did not decrease output. The limit price is often lower than the average cost of production or just low enough to make entering not profitable. The quantity produced by the incumbent firm to act as a deterrent to entry is usually larger than would be optimal for a monopolist, but might still produce higher economic profits than would be earned under perfect competition. The problem with limit pricing as strategic behavior is that once the entrant has entered the market, the quantity used as a threat to deter entry is no longer the incumbent firm's best response. This means that for limit pricing to be an effective deterrent to entry, the threat must in some way be made credible. A way to achieve this is for the incumbent firm to constrain itself to produce a certain quantity whether entry occurs or not. An example of this would be if the firm signed a union contract to employ a certain (high) level of labor for a long period of time.

Loss leader
In the majority of cases, this pricing strategy is illegal under EU and US Competition rules. No market leader would wish to sell below cost unless this is part of its overall strategy. The idea of selling at a loss may appear to be in the public interest and therefore not often challenged. Only when the leader pushes up prices, it then becomes suspicious. Loss leadership can be similar to predatory pricing or cross subsidization; both seen as anti-competitive practices.

Price discrimination
Setting a different price for the same product in different segments to the market. For example, this can be for different ages or for different opening times, such as cinema tickets. Market orientated pricing is also a very simple form of pricing used by very new businesses. What it involves is, setting the price of your product/service according to research conducted on your target market. Price 61

discrimination exists when sales of identical goods or services are transacted at different prices from the same provider. In general, the practice of charging different customers different prices is called price discrimination.[1] In a theoretical market with perfect information, no transaction or prohibition on secondary exchange (or re-selling) to prevent arbitrage, price discrimination can only be a feature of monopolistic and oligopolistic markets[2], where market power can be exercised. Otherwise, the moment the seller tries to sell the same good at different prices, the buyer at the lower price can arbitrage by selling to the consumer buying at the higher price but with a tiny discount. However, product heterogeneity, market frictions or high fixed costs (which make marginalcost pricing unsustainable in the long run) can allow for some degree of differential pricing to different consumers, even in fully competitive retail or industrial markets. Price discrimination also occurs when the same price is charged to customers which have different supply costs. Types of price discrimination First degree price discrimination Second degree price discrimination Third degree price discrimination Price skimming Combination

Premium pricing
Premium pricing is the practice of keeping the price of a product or service artificially high in order to encourage favorable perceptions among buyers, based solely on the price. The practice is intended to exploit the (not necessarily justifiable) tendency for buyers to assume that expensive items enjoy an exceptional reputation or represent exceptional quality and distinction.

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Predatory pricing
Aggressive pricing intended to drive out competitors from a market. It is illegal in some places. Predatory pricing is the practice of selling a product or service at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors. If competitors or potential competitors cannot sustain equal or lower prices without losing money, they go out of business or choose not to enter the business. The predatory merchant then has fewer competitors or is even a de facto monopoly, and hypothetically could then raise prices above what the market would otherwise bear.In many countries there are legal restrictions for using this pricing strategy, which may be deemed anticompetitive. It may not be fact illegal, but have severe restrictions.

Contribution margin-based pricing


Contribution margin-based pricing maximizes the profit derived from an individual product, based on the difference between the product's price and variable costs (the product's contribution margin per unit), and on ones assumptions regarding the relationship between the products price and the number of units that can be sold at that price. The product's contribution to total firm profit (i.e., to operating income) is maximized when a price is chosen that maximizes the following: (contribution margin per unit) X (number of units sold). Price Variable cost per unit= Contribution margin per unit Contribution margin per unit * units sold = Products contribution to profit Contribution to profit from all products Firms fixed cost= total firms profit

Dynamic pricing

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A flexible pricing mechanism made possible by advances in information technology, and employed mostly by Internet based companies. By responding to market fluctuations or large amounts of data gathered from customers - ranging from where they live to what they buy to how much they have spent on past purchases - dynamic pricing allows online companies to adjust the prices of identical goods to correspond to a customers willingness to pay. The airline industry is often cited as a dynamic pricing success story. In fact, it employs the technique so artfully that most of the passengers on any given airplane have paid different ticket prices for the same flight.

Price leadership
Price leadership is an observation made of oligopolistic business behavior in which one company, usually the dominant competitor among several, leads the way in determining prices, the others soon following. In the long run price leadership could have a negative impact on the dominant firm. Over time, as the supply from the fringe (smaller) competitors in the market increases the residual demand of the dominant firm decreases. In such a scenario, if the dominant firm intends to continue as the price leader in the market, it can do so only at the cost of decreasing its supply to the market, consequently sacrificing its market share. Unheeded to, the gradual loss in market share could see the once dominant player lose its position of dominance in the market. Classical economic theory holds that price stability is ideally attained at a price equal to the incremental cost of producing additional units. Monopolies are able to extract optimum revenue by offering fewer units at a higher cost. An oligopoly where each firm acts independently tends toward equilibrium at the ideal, but such covert cooperation as price leadership tends toward higher profitability for all, though it is an unstable arrangement.

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In dominant firm price leadership, follower firms set the same price as an established leader. The price leader may be the largest firm that dominates the industry. In barometric firm price leadership, the most reliable firm emerges as the best barometer of market conditions, or the firm could be the one with the lowest costs of production, leading other firms to follow suit. Although this firm might not be dominating the industry, its prices are believed to reflect market conditions which are the most satisfactory, as the firm would most likely be a good forecaster of economic changes.

Target pricing
Pricing method whereby the selling price of a product is calculated to produce a particular rate of return on investment for a specific volume of production. The target pricing method is used most often by public utilities, like electric and gas companies, and companies whose capital investment is high, like automobile manufacturers. Target pricing is not useful for companies whose capital investment is low because, according to this formula, the selling price will be understated. Also the target pricing method is not keyed to the demand for the product, and if the entire volume is not sold, a company might sustain an overall budgetary loss on the product. In manufacturing, the target price may be used to calculate the target cost. This is the maximum cost that the seller is willing to pay to have the product manufactured. When the actual cost of manufacturing increases beyond the target cost, it may no longer be profitable for the seller to sell the product. Simply increasing the sales price to cover for the increase in overhead would increase the actual sales price over the intended target price. This may cause lower sales than expected, leading to a loss larger than the increase in overhead.

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Marginal-cost pricing
In business, the practice of setting the price of a product to equal the extra cost of producing an extra unit of output. By this policy, a producer charges, for each product unit sold, only the addition to total cost resulting from materials and direct labour. Businesses often set prices close to marginal cost during periods of poor sales. If, for example, an item has a marginal cost of Rs 1.00 and a normal selling price is Rs 2.00, the firm selling the item might wish to lower the price to Rs 1.10 if demand has waned. The business would choose this approach because the incremental profit of 10 cents from the transaction is better than no sale at all.

Premium Pricing
Use a high price where there is a uniqueness about the product or service. This approach is used where a substantial competitive advantage exists. Such high prices are charge for luxuries such as Canard Cruises, Savoy Hotel rooms, and Concorde flights.

Penetration Pricing
The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by France Telecom and Sky TV. Penetration pricing is the pricing technique of setting a relatively low initial entry price, often lower than the eventual market price, to attract new customers. The strategy works on the expectation that customers will switch to the new brand because of the lower price. Penetration pricing is most commonly associated with a marketing objective of increasing market share or sales volume, rather than to make profit in the short term. The advantages of penetration pricing to the firm are:

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It can result in fast diffusion and adoption. This can achieve high market penetration rates quickly. This can take the competition by surprise, not giving them time to react. It can create goodwill among the early adopters segment. This can create more trade through word of mouth. It creates cost control and cost reduction pressures from the start, leading to greater efficiency. It discourages the entry of competitors. Low prices act as a barrier to entry (see: porter 5 forces analysis). It can create high stock turnover throughout the distribution channel. This can create critically important enthusiasm and support in the channel. It can be based on marginal cost pricing, which is economically efficient.

Price Skimming
Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply. Manufacturers of digital watches used a skimming approach in the 1970s. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches are implemented. Premium pricing, penetration pricing, economy pricing, and price skimming are the four main pricing policies/strategies. They form the bases for the exercise. However there are other important approaches to pricing. Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, then lowers the price over time. It is a temporal version of price discrimination/yield management. It allows the firm to recover its sunk costs quickly before competition steps in and lowers the market price.

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Price skimming is sometimes referred to as riding down the demand curve. The objective of a price skimming strategy is to capture the consumer surplus. If this is done successfully, then theoretically no customer will pay less for the product than the maximum they are willing to pay. In practice, it is almost impossible for a firm to capture all of this surplus.

Limitations of Price Skimming


There are several potential problems with this strategy. It is effective only when the firm is facing an inelastic demand curve. If the long run demand schedule is elastic (as in the diagram to the right), market equilibrium will be achieved by quantity changes rather than price changes. Penetration pricing is a more suitable strategy in this case. Price changes by any one firm will be matched by other firms resulting in a rapid growth in industry volume. Dominant market share will typically be obtained by a low cost producer that pursues a penetration strategy. A price skimmer must be careful with the law. Price discrimination is illegal in many jurisdictions, but yield management is not. Price skimming can be considered either a form of price discrimination or a form of yield management. Price discrimination uses market characteristics (such as price elasticity) to adjust prices, whereas yield management uses product characteristics. Marketers see this legal distinction as quaint since in almost all cases market characteristics correlate highly with product characteristics. If using a skimming strategy, a marketer must speak and think in terms of product characteristics in order to stay on the right side of the law. The inventory turn rate can be very low for skimmed products. This could cause problems for the manufacturer's distribution chain. It may be necessary to give retailers higher margins to convince them to handle enthusiastically the product. Skimming encourages the entry of competitors. When other firms see the high margins available in the industry, they will quickly enter.

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Skimming results in a slow rate of stuff diffusion and adaptation. This results in a high level of untapped demand. This gives competitors time to either imitate the product or leap frog it with a new innovation. If competitors do this, the window of opportunity will have been lost. The manufacturer could develop negative publicity if they lower the price too fast and without significant product changes. Some early purchasers will feel they have been ripped-off. They will feel it would have been better to wait and purchase the product at a much lower price. This negative sentiment will be transferred to the brand and the company as a whole. High margins may make the firm inefficient. There will be less incentive to keep costs under control. Inefficient practices will become established making it difficult to compete on value or price.

Examples of price skimming

With certain high-end electronics, such as the Apple IPhone and Sony PlayStation 3, price skimming was used. For instance, the Play station 3 was originally sold at $599, but it has been gradually reduced to $299.

Psychological Pricing
This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. Psychological pricing or price ending is a marketing practice little less than a based round on the theory e.g. that 19.99 certain or prices (but have not a psychological impact. The retail prices are often expressed as "odd prices": a number, 6.95 necessarily mathematically odd, it could also be 2.98 or 3.90). The theory is this drives demand greater than would be expected if consumers were perfectly rational. Psychological pricing is one cause of price points. For example 'price point perspective' 99 paisa not one Rupee.

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According to a 1997 study published in the Marketing Bulletin, approximately 60% of prices in advertising material ended in the digit 9, 30% ended in the digit 5, 7% ended in the digit 0 and the remaining seven digits combined accounted for only slightly over 3% of prices evaluated.[1] In the UK, before the withdrawal of the half penny coin in 1984, prices often ended in 99. This is still seen today in petrol (gasoline) pricing ending in 910s of the local currency's smallest denomination; for example in the US the price of a gallon of gasoline almost always ends in US$0.009 (e.g. US$3.289). In a traditional cash transaction, fractional pricing imposes tangible costs on the vendor (printing fractional prices), the cashier (producing awkward change) and the customer (stowing the change). These factors have become less relevant with the increased use of checks, credit and debit cards and other forms of currency-free exchange; also, the addition of sales tax makes the pre-tax price less relevant to the amount of change (although in Europe the sales tax is generally included in the shelf price). The psychological pricing theory is based on one or more of the following hypotheses: Consumers ignore the least significant digits rather than do the proper rounding. Even though the cents are seen and not totally ignored, they may subconsciously be partially ignored. Some suggest that this effect may be enhanced when the cents are printed smaller (for example, $1999). Fractional prices suggest to consumers that goods are marked at the lowest possible price. Now that consumers are used to psychological prices, other prices look odd. When items are listed in a way that is segregated into price bands (such as an online real estate search), price ending is used to keep an item in a lower band, to be seen by more potential purchasers.

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Judgments of numerical differences are anchored on left-most digits, a behavioral phenomenon referred to as the left-digit anchoring effect. This hypothesis suggests that people perceive the difference between 1.99 and 3.00 to be closer to 2.01 than to 1.00 because their judgments are anchored on the left-most digit. The theory of psychological pricing is controversial. Some studies show that buyers, even young children, have a very sophisticated understanding of true cost and relative value and that, to the limits of the accuracy of the test, they behave rationally. Other researchers claim that this ignores the non-rational nature of the phenomenon and that acceptance of the theory requires belief in a subconscious level of thought processes, a belief that economic models tend to deny or ignore. Research using results from modern scanner data is mixed. Now that many customers are used to odd pricing, high-end retailers and restaurants such as Nordstrom psychologically-price in even numbers in an attempt to reinforce their brand image of quality and sophistication.

Product Line Pricing


A product line is "a group of products that are closely related, either because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges." Many businesses offer a range of product lines which may be unique to a single organization or may be common across the business's industry. In 2002 the US Census compiled revenue figures for the finance and insurance industry by various product lines such as "accident, health and medical insurance premiums" and "income from secured consumer loans". Within the insurance industry, product lines are indicated by the type of risk coverage, such as auto insurance, commercial insurance and life insurance.

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Where there is a range of product or services the pricing reflect the benefits of parts of the range. For example car washes. Basic wash could be $2, wash and wax $4, and the whole package $6.

Optional Product Pricing


Companies will attempt to increase the amount customer spend once they start to buy. Optional 'extras' increase the overall price of the product or service. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other.

Captive Product Pricing


Where products have complements, companies will charge a premium price where the consumer is captured. For example a razor manufacturer will charge a low price and recoup its margin (and more) from the sale of the only design of blades which fit the razor.

Product Bundle Pricing


Here sellers combine several products in the same package. This also serves to move old stock. Videos and CDs are often sold using the bundle approach. Product bundling is a marketing strategy that involves offering several products for sale as one combined product. This strategy is very common in the software business (for example: bundle a word processor, a spreadsheet, and a database into a single office suite), in the cable television industry (for example, basic cable in the United States generally offers many channels at one price), and in the fast food industry in which multiple items are combined into a complete meal. A bundle of products is sometimes referred to as a package deal or a compilation or an anthology. 72

Bundling is most successful when: there are economies of scale in production, there are economies of scope in distribution, Marginal costs of bundling are low. production set-up costs are high, Customer acquisition costs are high. Consumers appreciate the resulting simplification of the purchase decision and benefit from the joint performance of the combined product. Product bundling is most suitable for high volume and high margin (i.e., low marginal cost) products. Research by Yannis Bakos and Erik Brynjolfsson found that bundling was particularly effective for digital "information goods" with close to zero marginal cost, and could enable a bundler with an inferior collection of products to drive even superior quality goods out of the market place. In oligopolistic and monopolistic industries, product bundling can be seen as an unfair use of market power because it limits the choices available to the consumer. In these cases it is typically called product tying. Pure bundling occurs when a consumer can only purchase the entire bundle or nothing, mixed bundling occurs when consumers are offered a choice between the purchasing the entire bundle or one of the separate parts of the bundle. Pure bundling can be further divided into two cases: in joint bundling, the two products are offered together for one bundled price, and, in leader bundling, a leader product is offered for discount if purchased with a non-leader product. Mixed-leader bundling is a variant of leader bundling with the added possibility of buying the leader product on its own.

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Bundling in political economy is a type of product bundling in which the product is a candidate in an election who markets his bundle of attributes and positions to the voters.

Promotional Pricing
Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free).

Geographical Pricing
Geographical pricing is evident where there are variations in price in different parts of the world. For example rarity value, or where shipping costs increase price. Geographical pricing, in marketing, is the practice of modifying a basic list price based on the geographical location of the buyer. It is intended to reflect the costs of shipping to different locations. There are several types of geographic pricing: FOB origin (Free on Board origin) - The shipping cost from the factory or warehouse is paid by the purchaser. Ownership of the goods is transferred to the buyer as soon as it leaves the point of origin. It can be either the buyer or seller that arranges for the transportation. Uniform delivery pricing - The same price is charged to all. Zone pricing - Prices increase as shipping distances increase. This is sometimes done by drawing concentric circles on a map with the plant or warehouse at the center and each circle defining the boundary of a price zone. Instead of using circles, irregularly shaped price boundaries can be drawn that reflect geography, population density, transportation infrastructure, and shipping cost. (The term "zone pricing" can also refer to the practice of setting prices that

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reflect local competitive conditions, i.e., the market forces of supply and demand, rather than actual cost of transportation.) Zone pricing, as practiced in the gasoline industry in the United States, is the pricing of gasoline based on a complex and secret weighting of factors, such as the number of competing stations, number of vehicles, average traffic flow, population density, and geographic characteristics. This can result in two branded gas stations only a few miles apart selling gasoline at a price differential of as much as $0.50 per gallon. Many businesspeople and economists state that gasoline zone pricing merely reflects the costs of doing business in a complex and volatile marketplace. Critics contend that industry monopoly and the ability to control not only industry-owned "corporate" stations, but locally owned or franchise stations, make zone pricing into an excuse to raise gasoline prices virtually at will. Oil industry representatives contend that while they set wholesale and dealer tank wagon prices, individual dealers are free to see whatever prices they wish and that this practice in itself causes widespread price variations outside industry control. Basing point pricing - Certain cities are designated as basing points. All goods shipped from a given basis point are charged the same amount. Freight-absorption pricing - The seller absorbs all or part of the cost of transportation. This amounts to a price discount, and is used as a promotional tactic.

Value Pricing
This approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales e.g. value meals at McDonalds. Value based pricing, or Value optimized pricing is a business strategy. It sets selling prices on the perceived value to the customer, rather than on the actual cost of the product, the market price, competitors prices, or the historical price.

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The goal of value-based pricing is to align price with value delivered. Price for any individual customer can be customized to reflect the specific value delivered. Examples could include metrics such as number of users and the value per users, number of annual transactions and the value per transaction, size of revenues and the impact on revenues, cost savings, or other measurements. Value based pricing is intended to make companies become more competitive and more profitable than using simpler pricing methods. It can also be used in product development and product management to configure products to maximize value for specific customers. Value-based pricing is dependent upon an understanding of how customers measure value, through careful evaluation of customer operations. Survey methods are sometimes used to determine the value, and therefore the willingness to pay, a customer attributes to a product or a service. Frameworks for value-based pricing include Economic Value Estimation are Relative Attribute Positioning, Van Westernport Price Sensitively Meter, Conjoint Analysis and Naivet Ratio To Complete. Another value pricing method uses Customer Value Research, which is Bernstein & Macias' method for gaining the customer's perception of value through the use of both qualitative and quantitative research methods.

Economy Pricing
This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc.

Discounts
There are three types of discounts:

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Quantity discounts Trade discounts Cash discounts. Quantity discounts are deduction from the sellers list price intended to encourage the customer to purchase in bulk quantity. Trade discounts are the reduction from the list price offered to buyers in payment for marketing functions the buyer will perform. Cash discount is a reduction granted to the buyers for paying the bills within the specified time.

Pricing Mistakes
Many companies make common pricing mistakes. Bernstein's article "Supplier Pricing Mistakes" outlines several which include: Weak controls on discounting Inadequate systems for tracking competitor selling prices and market share Cost-Up pricing Price increases poorly executed Worldwide price inconsistencies Paying sales reps on dollar volume vs. addition of profitability measures

Retail pricing
There are many outside influences that affect profitability and a retailer's bottom line. Setting the right price is a crucial step toward achieving that profit. Retailers are in business to make a profit, but figuring out what and how to price products may not come easily. Before we can determine which retail pricing strategy to use in setting the right price, we must know the costs associated with the products. Two key elements in

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factoring product cost is the cost of goods and the amount of operating expense.The cost of goods includes the amount paid for the product, plus any shipping or handling expenses. The cost of operating the business, or operating expense, includes overhead, payroll, marketing and office supplies. Regardless of the pricing strategy used, the retail price of the products should more than cover the cost of obtaining the goods plus the expenses related to operating the business. A retailer simply cannot succeed in business if they continue to sell their products below cost. Now that we understand what our products actually cost, we should look at how our competition is pricing their products. Retailers will also need to examine their channels of distribution and research what the market is willing to pay. Many pricing strategies exist and each is used based on particular a set of circumstances. Here are a few of the more popular pricing strategies to consider:

Mark-up Pricing
Markup on cost can be calculated by adding a pre-set (often industry standard) profit margin, or percentage, to the cost of the merchandise. Markup on retail is determined by dividing the Rupee markup by retail. Be sure to keep the initial mark-up high enough to cover price reductions, discounts, shrinkage and other anticipated expenses, and still achieve a satisfactory profit. Retailers with a varied product selection can use different mark-ups on each product line.

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Vendor Pricing
Manufacturer suggested retail price (MSRP) is a common strategy used by the smaller retail shops to avoid price wars and still maintain a decent profit. Some suppliers have minimum advertised prices but also suggest the retail pricing. By pricing products with the suggested retail prices supplied by the vendor, the retailer is out of the decision-making process. Another issue with using pre-set prices is that it doesn't allow a retailer to have an advantage over the competition.

Competitive Pricing
Consumers have many choices and are generally willing to shop around to receive the best price. Retailers considering a competitive pricing strategy will need to provide outstanding customer service to stand above the competition. Pricing below competition simply means pricing products lower than the competitor's price. This strategy works well if the retailer negotiates the best prices, reduces costs and develops a marketing strategy to focus on price specials. Prestige pricing, or pricing above competition, may be considered when location, exclusivity or unique customer service can justify higher prices. Retailers that stock high-quality merchandise that isn't available at any other location may be quite successful in pricing their products above competitors.

Other Pricing Strategies


Keystone pricing is not used as often as it once was. Doubling the cost paid for merchandise was once the rule of pricing products, but very few products these days allow a retailer to keystone the product price.

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Multiple pricing is a method which involves selling more than one product for one price, such as three items for 100. Not only is this strategy great for markdowns or sales events, but retailers have noticed consumers tend to purchase in larger amounts where the multiple pricing strategy is used. Discount pricing and price reductions are a natural part of retailing. Discounting can include coupons, rebates, seasonal prices and other promotional markdowns. Merchandise priced below cost is referred to as loss leaders. Although retailers make no profit on these discounted items, the hope is consumers will purchase other products at higher margins during their visit to the store. As you develop the best pricing model for your retail business, understand the ideal pricing strategy will depend on more than costs. It also depends on good pricing practices. It is difficult to say which component of pricing is more important than another. Just keep in mind, the right product price is the price the consumer is willing to pay, while providing a profit to the retailer.

Price break up
Material Cost Labor Cost Packaging and Labeling Cost` Distribution 11% 18% 11% 10%

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Advertisement Profit Taxes Total per Unit Cost

26% 08% 16% 100%

In 125g drink material cost per unit is 11% of the total price that is 6.38 rupees. Labor cost per unit is 10% of the total price that is 5.8 rupees. Packaging and labeling cost per unit is 11% of the total price that is 6.38 rupees. Distribution cost per unit is 18% of the total price that is 10.44 rupees. Advertisement cost per unit is 26% of the total price that is 15.08 rupees. Profit of the organization is 08% of the total price per unit that is 4.64 rupees. Total taxes per unit are 16% of the total price per unit that is 9.28 rupees. In 80g drink material cost per unit is 11% of the total price that is 4.18 rupees. Labor cost per unit is 10% of the total price that is 3.8 rupees. Packaging and labeling cost per unit is 11% of the total price that is 4.18 rupees. Distribution cost per unit is 18% of the total price that is 6.84 rupees. Advertisement cost per unit is 26% of the total price that is 9.88 rupees. Profit of the organization is 08% of the total price per unit that is 3.04 rupees. Total taxes per unit is 16% of the total price per unit that is 6.08 rupees.

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Distribution
Distribution-activities that make products available to customers when and where they need them. A channel of distribution or marketing channel is a group of individuals and organizations that directs the flow of products from producers and customers. Marketing Intermediaries link producers to other intermediaries or to the ultimate users of the product. Operate between the producer and the final buyer.

Types of utility distribution offers:


TIME...when the customers want to purchase the product. PLACE...where the customers want to purchase the product. POSSESSION...facilitates customer ownership of the product. FORM...sometimes, if changes have been made to the product in the distribution channel, i.e. Pepsi/Coke, concentrate to bottlers.

Each channel member has different responsibilities within the overall structure of the distribution of the system; mutual profit/success is obtained through cooperation. The distribution system: determines a product's marketing presence and the buyers' accessibility to the product entails a long-term commitment, easier to change other aspects of the marketing mix.

Justification for Intermediaries


"Weve eliminated the middle man and we're passing on the savings to you"-a typical broadcast from Supermarket XYZ Why do we use intermediaries? Without intermediaries: May be able to reduce distribution costs, if the supermarket can perform those functions more efficiently than a wholesaler, but the supermarket inventory costs may increase as a consequence, therefore no savings and less efficient.

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Number 1 Reason
Improve exchange efficiency. There are certain costs associated with an exchange, therefore need to try to reduce the number of transactions (exchanges): *Chicken *Potatoes *Carrots *Plates *Silverware * *Customer1 with 1 intermediary---10 transactions *Customer2 With no intermediaries---25 transactions *Customer3 *Customer4 *Customer5

Without an intermediary, each buyer has to negotiate and exchange with each seller. With one intermediary, each buyer negotiates with one intermediary (as opposed to 5 sellers), and each seller negotiates with one intermediary (as opposed to 5 buyers).

Number 2 Reason
Intermediaries are specialists in the exchange process, provide access to and control over important resources for the proper functioning of the marketing channel. Division of labor. Still need services that intermediaries (wholesalers, retailers etc.) provide; if they were eliminated then someone else would have to assume the tasks (either producer or customer). Functions can be shifted and shared among channel members, but cannot be eliminated, unless the buyer assumes them. "You can eliminate the middle man, but you can't eliminate their functions"-a well accepted maxim in marketing.

Functions of Intermediaries
Primary role of middlemen is to transform the assortment of products made by producers in the assortments desired by consumers. Producers make narrow assortments in large quantities, consumers want broad assortments in small quantities, discrepancy in quantity and assortment. Match Supply and Demand: *Chicken *Customer1 83

*Potatoes *Customer2 *Carrots *Customer3 *Plates *Customer4 *Silverware *Customer5 PRODUCER Specialization in production, economies of scale etc., therefore wants to produce large quantities but narrow product mixes.

Efficiently
CUSTOMER Wants a broad assortment (products produced by many manufacturers) of products made available conveniently (within easy reach).

Other functions of intermediaries include:


Assuming risk--Provide working capital by paying for goods before they are sold. information Flow financing Payment and title flow. negotiation contacts promotion

A producer will use an intermediary when it believes that the intermediary can perform the function(s) more economically and efficiently than it can.

Types of Channels of Distribution


Consumer Channels Channels for Consumer Products. Vertical dimensions, determined by the # in the channel.

Channel A:
Producer | | | | | |_______________ v Consumer IE door to door purchases, unsought products IE Encyclopedias. Fruit picking orchards. Services often use direct channels since the service provider, in most cases, 84

must be there to provide the service. Simplest method, not necessarily the most effective. Technological developments are making the direct channel more common:

TV Home shopping CDs Catalogs, LL Bean etc. Internet, WWW

When you can use the media of communication to effect exchange...1-800#s, Credit Cards etc.

Channel B:
Producer | | | |______________ v Retailer | | | |________________ v Consumer Large retailers, JC Penney, KMart, no discrepancy in quantity supplied and demanded. Popular for shopping products, clothing. Automobiles...cost of transportation and inventory is high.

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Channel C:
Producer | | | V Wholesaler | | V Retailer | | | V Consumer Smaller retailers, widely distributed products, convenience products.

Channel D:
Producer | | | V Agent | | | V Wholesaler | | | V Retailer | | | V Consumer Mass distribution, IE processed food; also when there are a number of small producers etc. May be the most efficient distribution channel for consumer products. Convenience products. 86

Horizontal dimensions, the # of channel members at the same level. IE Chevrolet much wider distribution than Rolls Royce.

Business to Business Channels Channel E:


Producer | | | | V Buyer Very popular, especially for high cost items that need after sale support. Fewer customers clustered geographically. This is a more common structure than the direct channel in consumer markets.

Channel F:
Producer | | | V BB distributor | | | V Buyer Distributor takes title. Used when there are many customers. IE consumable supplies etc.

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Channel G:
Producer | | | V Agent | | | V Buyer When a company does not have a marketing department or sales force, the agent performs those tasks.

Channel H:
Producer | | | V Agent | | | V Distributor | | | V Buyer Used as above, with many customers, IE exporting.

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Multiple Marketing Channels


Dual Distribution Use several types of channels simultaneously, IE when you have consumer and business to business markets. Set up 2 or more Marketing channels to attract the same target market or different target markets. Using two or more channels to attract the same target market can lead to channel conflict.

Wholesale Intermediaries
Wholesale transactions are all transactions except the transaction with the ultimate consumer. Classification of a wholesaler or retailer is determined by the purchaser, not by the price. If over 50% of sales is with other intermediaries then the intermediary is a wholesaler. If over 50% of sales is with the consumer, then the intermediary is a retailer. Firms can engage in wholesaling activities without being wholesalers. Nature and Importance of Wholesaling Approximately a $1.94 trillion industry in the US 300,000 wholesaling establishments in the US Employ 6.5 million people, down from 6.57 million in 1989 Very competitive. Wholesalers will be eliminated from a channel if they do not perform valuable functions effectively and efficiently.

Types of Wholesale Intermediaries


2 Types of intermediaries: Merchant intermediaries buy products and resell them. Functional intermediaries do not take title, they expedite exchanges among producers and resellers, compensated by fees and/or commission.

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Merchant Wholesalers Take title. Account for approximately 83% of wholesalers, 50% of wholesale sales. Employ 4.5 million people. Two types: Full Service Wholesalers-offer widest possible range of functions. Categorized as: o General Merchandise-wide mix (unrelated), limited depth. o Limited Line-only few products but an extensive assortment. o Specialty Line-narrowest range of products. o Rack Jobbers-are specialty line that own and maintain display racks, take back unsold products. Limited Service Merchant Wholesalers-only provide some marketing functions. o Cash and Carry wholesaler-customers pay and furnish their own transportation, No credit. o Truck Wholesalers-Operate rolling warehouses and sell a limited line of products directly from their trucks to their customers. Follow regular routes, primarily perishable products. o Drop Shippers (desk jobbers)-take title, negotiate sales but do not take possession. o Mail Order Wholesalers-use catalogues instead of sales force to sell.

Agents and Brokers Negotiate purchases, expedite sales but do not take title. Functional middlemen, that bring buyers and sellers together. Compensated with commission. Agents represent buyers and sellers on a permanent basis. Brokers represent buyers and sellers on a temporary basis. 10.4% of wholesalers total sales volume. Manufacturers Agent-over half of all agents. Represent two or more sellers and offer customers complete lines. Handle non- competing (complementary) products. Written agreements. Selling Agent-market either all specified line or manufacturers entire output. Perform every wholesaling activity except taking title of the product. Used in place of a marketing department. Represent noncompeting product lines.

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Commission Merchant-focus primarily on the selling task. Receive goods on consignment from local sellers and negotiate sales in large central markets. Auction Companies-provide storage for inspection. Sales made to the highest bidder. Brokers-negotiate exchanges-perform the fewest intermediary functions. Assume no risk. Manufacturers Sales branches and offices Resemble merchant wholesalers operations, 9% of wholesale establishments and generate 31% of wholesale sales. Manufacturer owned. Sales Branches-sell product and provide support services to manufacturers sales forces. Sales Office-serves normally associated with agents; like sales branches located away from a manufacturing plant-carry no inventory.

Vertical Marketing Systems


The traditional view of channels focuses on buyers and sellers in direct contact. IE don't look beyond the next level. The systems view focuses on a framework for the whole distribution system. A Vertical Marketing System (VMS) is a marketing channel that a single channel member coordinates. The channel member manages channel activities to achieve efficient, low cost distribution aimed at satisfying the target market customers. There are three types of Vertical Marketing Systems, Corporate, Administered and Contractual.

Corporate VMS
More than one stage of the distribution channel under one ownership, IE supermarket chains that own processing plants and large retailers that purchase wholesaling and production facilities. Examples: Sears Sherwin Williams Giant Foods Gallo Banana Republic Hallmark The Gap Oil Companies

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Administered VMS Channel members are independent with a high level of inter organizational management by informal coordination. Agree to adopt uniform accounting policies etc., and promotional activities. One Channel member dominates, has a channel leader. Examples:

Wal-Mart Toys R Us Kellogg Pepsi Coke GE P&G McKesson Corp JC Penney Campbell

Channel Leader-Effectiveness of channel hinges on channel leadership. Leader must possess channel power. Power can come in the following forms:

Reward--provide financial benefits Expert--be the expert compared with other members Referent--strongly identify with leader Coercive--punish members

Contractual VMS Most popular VMS, inter organizational relationships formalized through contracts that spell out each members rights and obligations. IE McDonald's and KFC. Franchise organizations 1/3 retail sales and 500,000 outlets. Wholesaler sponsored, IGA stores-independent retailers band together under contractual leadership of a wholesaler. Supervalu Stores, largest food wholesaler in the US, offers a broad package of services to 2800 independent food retailers that voluntarily enter into a buying contract. Retailer sponsored cooperatives which set up, own and operate their own wholesalers. Channel Conflict Channel members may disagree on the best methods to attain goals. Inevitable when individual short run goals are not compatible. Can occur between firms at the same level, or between firms at different levels. Want to maximize profits and 92

autonomy. Channel members belong to different channel systems, creating potential conflicts. Producers may try to circumvent intermediaries.

Selection of Distribution Channels


Should determine what the final buyer wants and determine the best way to reach them. Marketing Oriented!! Determined by: Organizational Goals, Objectives (same day delivery), resources and capabilities. Companies with wide product mixes can sell more directly to the retailers, have more promotional skills etc. (P&G) Market Characteristics, Geography, greater distance use more intermediaries, market density, clustering, market size etc., industrial vs. consumer, Buyer Behavior, Where?/How?/ May need creativity , Leggs Product Attributes, IE Need to provide a service. Perish ability-short channels, storage requirements, space, fashion, size (reduce handling), complexity, standard. Environmental Forces, IE Competition, Technology Need to determine the # of Intermediaries Determine the channel width, intensity of distribution, the products market exposure.

Selective Distribution: Only some available outlets (usually geographic) are chosen. Typically shopping products. Buyers prefer to spend time searching. Customer service important. Selective distribution motivates retail support. Producers have more control. Retailer promotional support. Exclusive Distribution: One outlet in a relatively large area. Products purchased infrequently, last a long time and require service. Used as an incentive to sellers. No one to undercut them. (Place Utility) Allows for the highest control. Easier to get retailers to carry a complete inventory and to provide service and repair facilities. May be used to introduce new products, then change when market is more

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competitive (Move from introduction to the growth stage of the product life cycle.

Nature of Retailing Retailing includes all transactions in which the buyer intends to consume. A Retailer: Must derive more than 1/2 of their sales from the ultimate consumer of the product to be classified a retailer (less than 1/2, then they are a wholesaler).

Classification of Retail Stores


According to 5 Criteria:

Form of Ownership
Sole Proprietor (majority #s) Corporate Chains Contractual Chains Franchising

Types of Merchandise Offering


Merchandise mix, breadth (variety); depth (selection in product)
o o o

Limited-line stores-----> Sporting Goods Stores etc. Single-line stores------> Specialty Retailers Foot Locker, Radio Shack...Category Killers...Borders Books, Toys R Us etc. General merchandise stores Department stores Macy's, Strawbridge & Clothier etc. Competition from discount stores and specialty have put pressure on department stores. Some department stores are cutting services, offering basement discounts (competing with discount stores), others are remodelling and opening designer departments and boutiques (competing with specialty stores). Others increased services, IE restaurants. Leased departments, leased to entrepreneurs. Supermarkets... Superfresh etc. Supermarkets are adding high turnover non-food items to offset low margins of food items. Added delis and hot pizza etc, in response to societal pressure (fast food). Also competition from convenience stores, 7-11 etc.

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Hypermarkets...success in europe, not in US 40% food, 60% general merchandise WalMart (222,000 Square feet, $2.5m per week) moving more toward supercenters. Supercenters...merchandise/groceries Wal Mart's projected high growth area of 1990s. Getting away from Hypermarkets. 80% of shoppers shop both sides of store. Use groceries to attract customers (traffice generaters), hoping they purchase high margin items. Discount Stores...Wal-Mart, KMart Developed in the 1950s when the post war supply for goods caught up with the demand for goods. Departmentalized, volume retailers. Off-price retailers... Buy manufacturers seconds, overruns, off seasons at a deep discount. TJ Maxx, Marshalls (317 stores, largest in the US). Discounted prices, fewer customer services. Inventory turned over 9- 12* per year (specialty retailer *3). Outlet malls-Reading VF outlet. Manufacturers that use Off-price retailing may alienate specialty retailers. Cannot advertise specific brands, but are advertising existence. Factory Outlets Dollar Discounts Offering more and more first run items, it is difficult for manufacturers to make enough "seconds" to fill these stores. Also starting to offer services, i.e. taking credit cards etc. It is not always the case anymore that you are guaranteed to get a better deal here than at a Department Store that has items on sale...especially if you consider the costs of accessing remote locations etc. Warehouse/Wholesale Club... Members only selling operations combine cash & carry wholesaling with discount retailing. Pioneered by Price Club, now bought out by Cost Co. Wholesale Club. Largest, WalMart's Sam's Club, $6.6 bn. KMart's PACE Variety Stores... Woolworths are transforming to specialty merchants, Champs Sporting Goods, Kids Mart, Lady Footlocker, Woolworth Express. Variety stores are becoming less popular.

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Service Price Orientation (Level of Service)


1 Service oriented retailer strategy. 2 Slim Profit margins, discount retailers, off-price retailers, deep discounters. High | Price Department Stores | Specialty Stores | | | | Min ------------------------------------------------------------Max. Service | | | Superstores | Discount Stores | Factory Outlets | | Low |

Where retailing takes place


In store vs. non store. In Home Retailing, selling via personal contacts with customers in their own home. Avon, Electrolux, Amway, Encyclopedias. Either cold calling, or calling on a lead. Can demonstrate the product. Becoming less popular, moving more toward office party plan etc, since more dual earning families. Party plan-Tupperware Telemarketing, direct selling of goods and services by phone, generate sales leads, increase customer service, raise funds for non-profit organizations, gather marketing data. $13.6 bn per year telemarketing. Successful when combined with other strategies. Long distance telephone companies. Mail Order Retailing, sell by description. Compact discs. LL Bean. Eliminate personal selling and store operations. Appropriate for specialty products. Key is using customer databases to develop targeted catalogs that appeal to narrow target markets. 96

$57.4 b sales Offers convenience (Place utility), no parking or long lines etc. Buy from anywhere, retailer has low rent, small sales staff and no shop lifting. Postal rates increased cost of delivery by 14%. Sears discontinued 100 year old "Big Book", $3 bn in sales. Why? Mass marketing not in vogue. Now Sears provides customer databases from 24 million CC users and partners (Hanover Direct) market specifically targeted catalogs. LL Bean ($992 million in 1 year) Lands End Eddie Bauer J. Crew Automated Vending, less than 2% of retail sales. Most impersonal way of retailing. Convenience Products. High repair costs, restocking cost. Pizza. ATMs, Purnell's basement, Restrooms, gas stations. Price higher than in stores, consumers pay for convenience. Personal products, no human contact. Snapple new contract to sell its products through its own vending machine, developing another distribution channel (dual distribution). Pressure on cigarette industry to stop marketing cigarettes through this channel, since it makes cigarettes available to those under 18. Television shopping, QVC and Home Shopping Network. Total market currently worth $2 + bn per year, projected $25 bn by end of decade. Usually bargain products, but Saks 5th Avenue etc. are experimenting. Newer networks looking to create a "store" atmosphere, as opposed to a studio atmosphere, looking for more affluent customers. Use has plateaued due to: o Limited Cable Channel capacity o Waiting for improvements in technology, i.e. interactivity. Also Infomercials (85% fail), increased sales 20% last year, to $900 million, used for direct sales (retailing) and increasing store sales (advertising). QVS and HSN developing Infomercial presence: Sell products through home shopping network (test marketability), create infomercials for the winners. Impulse (TV shopping) Court consumers (infomercials), will this strategy succeed? Electronic Shopping Using computer on-line services Problems: Security of monetary transactions Who is the vendor? Prodigy Compuserve

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Strategic Issues in Retailing


Consumer purchases are often the results of social influences and psychological factor. Need to create marketing strategies to increase store patronage. Location: Least flexible of strategic retailing issues and one of the most important. Need to consider:

cost location of the target market kinds of products being sold availability of public transportation customer characteristics competitors location relative ease of traffic flow, incl. pedestrian parking and major thorough fares complementary stores

Product Assortment: Wide and shallow, deep and narrow? Look at merchandising policies.

Retail Positioning: Competition is intense. Need to identify an undeserved market segment and service the segment distinguishing yourself from others in the minds of consumers, IE position as high price, high quality with many services, or reasonable quality at "everyday low prices". Atmospherics: Describes the physical elements in a store's design that appeals to consumers and encourages consumers to buy. Warm, fresh, functional exciting. Exterior Atmospherics-store front, display windows, important to attract new customers. Surrounding businesses, look of the mall etc. Interior Atmospherics-lighting, color, dressing room facilities etc Displays enhance and provide customers with information. Need to determine the atmosphere that your target market seeks.

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Store Image: Mental picture that a retailer tries to project to the consumer. To a consumer, it is a persons attitude towards a store. Need to project an image, a functional and psychological image in consumer's minds that is acceptable to the target market. Depends on the atmospherics, reputation, number of services offered, product mix, pricing etc. FAO Schwartz "It is important to leave people with a memorable image of your store. At Disneyland, its Cinderellas castle. For us, its the clock." Relationship Marketing: Importance of Logistics Discusses the issues that are related to the growth in Wal Mart, and the decline in Kmart. Specifically logistical issues, information technologies that managed inventory systems, location etc. Distribution channel refers to the series of business firms which together facilitate distribution of products from their manufacturers to the end customers and users. These firms constituting the distribution channels are called middleman or intermediaries. Typically a distribution channel consists of different types of intermediaries like wholesaler and retailers. Manufacturers prefer to distribute their goods through distribution channels rather than sell directly to end customer because of several useful functions performed by them. These include the following: Physical distribution or transportation of products from place of manufacturing to places more convenient to customers for buying. Storage of products at various locations so that customer can get immediate delivery of the products they want without waiting for transportation from manufacturing locations. Bulk breaking, or dividing large order quantities of product from supply manufacturers to smaller quantities that are more suitable for customers. Assortment, or making a large variety of products available to customers at one location. Typically, u sell just one type of products, whereas retail outlets stock a very wide range of products from many different suppliers.

Physical Distribution

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Physical distribution is the set of activities concerned with efficient movement of finished goods from the end of the production operation to the consumer. Physical distribution takes place within numerous wholesaling and retailing distribution channels, and includes such important decision areas as customer service, inventory control, materials handling, protective packaging, order procession, transportation, warehouse site selection, and warehousing. Physical distribution is part of a larger process called "distribution," which includes wholesale and retail marketing, as well the physical movement of products. Physical distribution activities have recently received increasing attention from business managers, including small business owners. This is due in large part to the fact that these functions often represent almost half of the total marketing costs of a product. In fact, research studies indicate that physical distribution costs nationally amount to approximately 20 percent of the country's total gross national product (GNP). These findings have led many small businesses to expand their cost-cutting efforts beyond their historical focus on production to encompass physical distribution activities. The importance of physical distribution is also based on its relevance to customer satisfaction. By storing goods in convenient locations for shipment to wholesalers and retailers, and by creating fast, reliable means of moving the goods, small business owners can help assure continued success in a rapidly changing, competitive global market.

A SYSTEM APPROACH
Physical distribution can be viewed as a system of components linked together for the efficient movement of products. Small business owners can ask the following questions in addressing these components: Customer serviceWhat level of customer service should be provided? TransportationHow will the products be shipped? WarehousingWhere will the goods be located? How many warehouses should be utilized? Order processingHow should the orders be handled? Inventory controlHow much inventory should be maintained at each location? Protective packaging and materials handlingHow can efficient methods be developed for handling goods in the factory, warehouse, and transport terminals?

These components are interrelated: decisions made in one area affect the relative efficiency of others. For example, a small business that provides customized personal computers may transport finished products by air rather than by truck, as faster delivery times may allow lower inventory costs, which would more than offset the higher cost of air transport. Viewing physical

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distribution from a systems perspective can be the key to providing a defined level of customer service at the lowest possible cost. CUSTOMER SERVICE Customer service is a precisely-defined standard of customer satisfaction which a small business owner intends to provide for its customers. For example, a customer service standard for the above-mentioned provider of customized computers might be that 60 percent of all PCS reach the customer within 48 hours of ordering. It might further set a standard of delivering 90 percent of all of its units within 72 hours, and all 100 percent of its units within 96 hours. A physical distribution system is then set up to reach this goal at the lowest possible cost. In today's fast-paced, technologically advanced business environment, such systems often involve the use of specialized software that allows the owner to track inventory while simultaneously analyzing all the routes and transportation modes available to determine the fastest, most cost-effective way to delivery goods on time.

TRANSPORTATION The United States' transportation system has long been a government-regulated industry, much like its telephone and electrical utilities. But in 1977 the deregulation of transportation began with the removal of federal regulations for cargo air carriers not engaged in passenger transportation. The deregulation movement has since expanded in ways that have fundamentally altered the transportation landscape for small business owners, large conglomerates and, ultimately, the consumer. Transportation costs are largely based on the rates charged by carriers. There are two basic types of transportation rates: class and commodity. The class rate, which is the higher of the two rates, is the standard rate for every commodity moving between any two destinations. The commodity rate is sometimes called a special rate, since it is given by carriers to shippers as a reward for either regular use or large-quantity shipments. Unfortunately, many small business owners do not have the volume of shipping needed to take advantage of commodity rates. However, small businesses are increasingly utilizing a third type of rate that has emerged in recent years. This rate is known as a negotiated or contract rate. Popularized in the 1980s following transportation deregulation, contract rates allow a shipper and carrier to negotiate a rate for a particular service, with the

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terms of the rate, service, and other variables finalized in a contract between the two parties. Transportation costs vary by mode of shipping, as discussed below. TRUCKINGFLEXIBLE AND GROWING The shipping method most favored by small business (and many large enterprises as well) is trucking. Carrying primarily manufactured products (as opposed to bulk materials), trucks offer fast, frequent, and economic delivery to more destinations in the country than any other mode. Trucks are particularly useful for short-distance shipments, and they offer relatively fast, consistent service for both large and small shipments. AIR FREIGHTFAST BUT EXPENSIVE Because of the relatively high cost of air transport, small businesses typically use air only for the movement of valuable or highly-perishable products. However, goods that qualify for this treatment do represent a significant share of the small business market. Owners can sometimes offset the high cost of air transportation with reduced inventoryholding costs and the increased business that may accompany faster customer service. WATER CARRIERSSLOW BUT INEXPENSIVE There are two basic types of water carriers: inland or barge lines, and oceangoing deep-water ships. Barge lines are efficient transporters of bulky, lowunit-value commodities such as grain, gravel, lumber, sand, and steel. Barge lines typically do not serve small businesses. Oceangoing ships, on the other hand, operate in the Great Lakes, transporting goods among port cities, and in international commerce. Sea shipments are an important part of foreign trade, and thus are of vital importance to small businesses seeking an international market share. RAILROADSLONG DISTANCE SHIPPING Railroads continue to present an efficient mode for the movement of bulky commodities over long distances. These commodities include coal, chemicals, grain, non-metallic minerals, and lumber and wood products. PIPELINESSPECIALIZED TRANSPORTERS Pipelines are utilized to efficiently transport natural gas and oil products from mining sites to refineries and other destinations. In addition, so-called slurry pipelines transport products such as coal, which is ground to a powder, mixed with water, and moved as a suspension through the pipes. INTERMODAL SERVICES Small business owners often take advantage of multimode deals offered by shipping companies. Under these arrangements, business owners can utilize a given transportation mode in the section of the trip in which it is most cost efficient, and use other modes for other segments of the transport.

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Overall costs are often significantly lower under this arrangement than with single-mode transport. Of vital importance to small businesses are transporters specializing in small shipments. These include bus freight services, United Parcel Service, Federal Express, DHL International, the United States Postal Service, and others. Since small businesses can be virtually paralyzed by transportation strikes or other disruptions in small shipment service, many owners choose to diversify to include numerous shippers, thus maintaining an established relationship with an alternate shipper should disruptions occur. Additionally, small businesses often rely on freight forwarders who act as transportation intermediaries: these firms consolidate shipments from numerous customers to provide lower rates than are available without consolidation. Freight forwarding not only provides cost savings to small businesses, it provides entrepreneurial opportunities for start-up businesses as well. WAREHOUSING Small business owners who require warehousing facilities must decide whether to maintain their own strategically located depot(s), or resort to holding their goods in public warehouses. And those entrepreneurs who go with non-public warehousing must further decide between storage or distribution facilities. A storage warehouse holds products for moderate to long-term periods in an attempt to balance supply and demand for producers and purchasers. They are most often used by small businesses whose products' supply and demand are seasonal. On the other hand, a distribution warehouse assembles and redistributes products quickly, keeping them on the move as much as possible. Many distribution warehouses physically store goods for fewer than 24 hours before shipping them on to customers. In contrast to the older, multi-story structures that dot cities around the country, modern warehouses are long, one-story buildings located in suburban and semirural settings where land costs are substantially less. These facilities are often located so that their users have easy access to major highways or other transportation options. Single-story construction eliminates the need for installing and maintaining freight elevators, and for accommodating floor load limits. Furthermore, the internal flow of stock runs a straight course rather than up and down multiple levels. The efficient movement of goods involves entry on one side of the building, central storage, and departure out the other end. Computer technology for automating warehouses is dropping in price, and thus is increasingly available for small business applications. Sophisticated software translates orders into bar codes and determines the most efficient inventory picking sequence. Order information is keyboarded only once, while labels, bills, and shipping documents are generated automatically. Information reaches handheld scanners, which warehouse staff members use to fill orders. The

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advantages of automation include low inventory error rates and high processing speeds. INVENTORY CONTROL Inventory control can be a major component of a small business physical distribution system. Costs include funds invested in inventory, depreciation, and possible obsolescence of the goods. Experts agree that small business inventory costs have dropped dramatically due to deregulation of the transportation industry. Inventory control analysts have developed a number of techniques which can help small businesses control inventory effectively. The most basic is the Economic Order Quantity (EOQ) model. This involves a trade-off between the two fundamental components of an inventory control cost: inventory-carrying cost (which increases with the addition of more inventory), and order-processing cost (which decreases as the quantity ordered increases). These two cost items are traded off in determining the optimal warehouse inventory quantity to maintain for each product. The EOQ point is the one at which total cost is minimized. By maintaining product inventories as close to the EOQ point as possible, small business owners can minimize their inventory costs. ORDER PROCESSING The small business owner is concerned with order processinganother physical distribution functionbecause it directly affects the ability to meet the customer service standards defined by the owner. If the order processing system is efficient, the owner can avoid the costs of premium transportation or high inventory levels. Order processing varies by industry, but often consists of four major activities: a credit check; recording of the sale, such as crediting a sales representative's commission account; making the appropriate accounting entries; and locating the item, shipping, and adjusting inventory records. Technological innovations, such as increased use of the Universal Product Code, are contributing to greater efficiency in order processing. Bar code systems give small businesses the ability to route customer orders efficiently and reduce the need for manual handling. The coded information includes all the data necessary to generate customer invoices, thus eliminating the need for repeated keypunching. Another technological innovation affecting order processing is Electronic Data Interchange. EDI allows computers at two different locations to exchange business documents in machine-readable format, employing strictly-defined industry standards. Purchase orders, invoices, remittance slips, and the like are exchanged electronically, thereby eliminating duplication of data entry, dramatic reductions in data entry errors, and increased speed in procurement cycles.

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PROTECTIVE PACKAGING AND MATERIALS HANDLING Another important component of a small business physical distribution system is material handling. This comprises all of the activities associated with moving products within a production facility, warehouse, and transportation terminals. One important innovation is known as unitizingcombining as many packages as possible into one load, preferably on a pallet. Unitizing is accomplished with steel bands or shrink wrapping to hold the unit in place. Advantages of this material handling methodology include reduced labor, rapid movement, and minimized damage and pilferage. A second innovation is containerizationthe combining of several unitized loads into one box. Containers that are presented in this manner are often unloaded in fewer than 24 hours, whereas the task could otherwise take days or weeks. This speed allows small export businesses adequate delivery schedules in competitive international markets. In-transit damage is also reduced because individual packages are not handled en route to the purchaser.

Place:
Place is a marketing term that includes company activities that make the product available to target consumer. Protect group of industries partners with a large body of independently owned dealership that sells the companys many different products. Protect group of industries selects its dealers carefully and supports them strongly. IBL (that is the sole dealer of products in Pakistan) keep an inventory of companies products demonstrate them to potential buyers, negotiate prices, close sales and serves consumers to delight them repeatedly Product supply to consumer Consumer can get it from any Departmental store, super store, Journal store, Utility stores etc. The product distribution system is wide and it spreads all over Pakistan. Large number of wholesalers and shopkeepers are involved in the 105

distribution of the product. it is available very easily from any nearby super stores even very small stores in street-corners do have enough supply of the product to deliver to consumers. Distribution channel IBL(International Brands(Pvt) Ltd.) is the sole distributor of Zombie along with other products of P&G in Pakistan. Head office of IBL is located in Karachi, it has its regional offices in each province, regional office for Punjab is located at Gulberg in Lahore. They supply product up to 400 whole sellers and 6500 retailers in Lahore. In Punjab they have sub-regional office located at Faisalabad. Supply Chain Supply chain in the country is made regionally by distributor of the product in each specified region who then supply it to the local wholesalers and retailers. From retail stores the consumer can buy it.

DISTRIBUTION STRATEGY CHANNEL OF DISTRIBUTION FOR CONSUMER PRODUCT There are 2 primary channels of distribution for Zombie drink: Distributors and sub distributors: The company sells the products to its appointed distributors and sub distributors (+300 all over Pakistan) that are responsible for the distribution of pre-defined geographical areas who distribute it further to wholesalers and/or retailers. The retail distribution is further classified into TOP STORES (TSPs) which include all the high profile outlets like al-fatah, HKB, Akbari stores etc and whole sale comprises of categories of diamond, gold and silver divided on the based on their average purchase per month and from here the product reaches the point of sale for the customer. Direct Delivery (Key Accounts) The company provides direct delivery to select large customers like institutional buyers of key accounts which sell directly to the consumer (in case of USC and CSD) or to small retailers / end-consumer (in case of MAKRO / METRO).

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INTENSITY OF DISTRIBUTION RB has an intensive distribution strategy of the product through its distributors that cover every geographical area and who resell onwards to wholesalers and retailers. There is also direct delivery service to key accounts (USC, CSD, MAKRO &METRO). Every available channel is utilized for maximum distribution and coverage to all the hypermarkets, supermarkets, general stores, kiryana stores and medical stores. The company also has in place a RDF (rural development force) which is covering the rural areas and exploring new markets for potential market penetration. PRODUCT STRATEGY Consumer and biz product Zombie drink is a fast moving consumer product. Convenience good It is an essential good vis--vis its target market, which is all households (primarily mothers) who can afford buying drink and who want to fulfill an everyday need (primarily bathing) that provides them and their family with a 100% anti-bacterial solution complete protection from all germs/ bacteria and cleanliness from dirt / grime.

PROMOTION
PROMOTION:
DEFINITION:
To communicate with individuals, groups or organizations to directly or indirectly facilitate exchanges by informing and persuading one or more audiences to accept an organization's products. Companies must communicate with their customers; this communication should not be left to chance. Design communication to your specific target audience:
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Target Market Part of Target Market Different stakeholders of your organization.

PROMOTIONAL MIX
Organizations combine specific ingredients of the promotional mix to promote a particular product. All promotional tools (promotional mix):

Advertising Sales Promotion Publicity

ADVERTISING:
DEFINITION:
Paid form of non personal communication about an organization or its products that is transmitted to a target audience through a mass/broadcast medium.

PROS:

Flexibility allows you to focus on a small, precisely defined segment. Cost efficient-reach a large number at a low cost per person, allows the message to be repeated, and can improve public image.
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Allows for repeating the message-lets the buyer receive and compare the messages of various competitors. Very expressive, allows for dramatization. Also used to build a long term image of a product. Trigger quick sales, Sears advertising a weekend sale.

Cons:

Rarely provides quick feedback, or necessarily any feedback Less persuasive than personal selling Audience does not have to pay attention Indirect feedback (without interactivity)

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SELECTING PROMOTIONAL TOOLS


A marketer must do the following while planning and sending communications to a target audience:
1. IDENTIFY THE AUDIENCE

Individuals, groups, special publics or the general public. Intermediaries vs. Consumer 2. IDENTIFY THE STAGE OF PRODUCT LIFE CYCLE
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Introductory Inform Publicity/Advertising/Sales force (interim.)/Sales promotion (free samples) Growth Persuade Differentiate from competitors offering Maturity Remind Reminder advertising, Sales promotion (coupons) Decline Cut budget Complexity How much information must be communicated? The more complex the message, the greater the need to use personal selling. Risk Greater risk, greater need for personal selling

3. PRODUCT CHARACTERISTICS
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4. STAGES OF BUYING DECISION

in many cases the final response sought is purchase, but purchase is the result of a long process of consumer decision making. Need to know where the target
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audience now stands (in the process), and what state they need to be moved to. ADOPTION PROCESS
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Not Aware--Advertising/Publicity Aware--no knowledge Advertising/Publicity Interest--how do they feel? Personal Selling/Sales Promotion/Advertising Evaluation--should they try? sales promotion/personal selling Trial--test drive/sales promotion Adoption--do they purchase? Reminder/reinforce-advertising

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Communication programs goal must lead consumers to take the final step.
5. CHANNEL STRATEGIES

Push Vs Pull Policy


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Push-promotes product only to the next institutions down the marketing channel. Stresses personal selling, can use sales promotions and advertising used in conjunction. Pull-promotes directly to consumers, intention is to create a strong consumer demand, primarily advertising and sales promotion. Since consumers are persuaded to seek products in retail stores,

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retailers will in turn go to wholesalers etc (use channels overhead)

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SCOPE AND IMPORTANCE OF SALES PROMOTION:


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companies are looking to get a competitive edge quick returns are possible for short term profits more consumers are looking for promotions before purchase Channel members putting pressure on mf. for promotions advances in tech. make SP easier (i.e. coupon redemption)

SALES PROMOTION OPPORTUNITIES AND LIMITATIONS


OPPORTUNITIES:
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Increase in sales by providing extra incentive to purchase. May focus on resellers (push), consumers (pull) or both. Objectives must be consistent with promotional objectives and overall company objectives. Balance between short term sales increase and long term need for desired reputation and brand image. Attract customer traffic and maintain brand/company loyalty.

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Reminder functions-calendars, T Shirts, match books etc. Impulse purchases increased by displays Contests generate excitement esp. with high payoffs.

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LIMITATIONS:
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Consumers may just wait for the incentives May diminish image of the firm, represent decline in the product quality. Reduces profit margins, customers may stock up during the promotion. Shift focus away from the product itself to secondary factors, therefore no product differential advantage.

SALES PROMOTION METHODS Consumer Sales Promotion Techniques Encourage/stimulate customers to patronize a specific retail store or to try a specific product. Coupons: Usually reduce the purchase price or offered as cash. Need to state the offer clearly and make it easy to recognize.

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Point of Purchase Display: Outside signs, window displays, counter pieces, display racks. 90% of retailers believe that point of purchase materials sell products. Essentials for product. Also with 2/3 of purchasing decisions made in the store, they are important.

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Free Samples: Stimulate trial of product. Increase sales volume at the early stage of the product life cycle and obtain desirable distribution. Most expensive sales promotion technique. Not appropriate for mature products and slow turnover products. Handout...With Sampling there is too a free lunch Discusses the pros and cons of free sampling. Money Refunds/Rebates: Submit proof of purchase and mail specific refund, usually need multiple purchase for refund. Helps promote trial use, due to the complexity of the refund, it has little impact. Customers have a poor perception of rebate offered products. Used extensively in the Auto and Computer industry. Premium Items:

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Offered free or at minimum cost as a bonus. Used to attract competitors customers, different sizes of established products. Gas stations give free glasses--basics buy!! McDonalds premium items are considered collectors items by some! Flintstones program last year with McDonalds. Burger King with the Lion King movie last summer the following tie-in premium programs. Cents-off Offer: Strong incentive for trying a product-very similar to coupons, but are a part of the package. Consumer Contests and Sweepstakes: Consumers compete based on their analytical or creative skills. Must be accurate or you will anger customers/retailers. Sweepstakes are prohibited in some states.

TRADE SALES PROMOTION TECHNIQUES:


Push Policy emphasizes promotions focused on the next intermediary.

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Trade Sales Promotion Techniques-stimulate wholesalers and retailers to carry products and to market them aggressively. Producers use sales promotion techniques to encourage resellers to carry their products and to promote them more effectively. ALLOWANCES AND DISCOUNTS:

Merchandise...reimburse for extra retail support, i.e. advertising, shelf space Case...discount on cases ordered in specific period. Finance...Paying for financial costs/losses associated with consumer sales promotions.

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COOPERATIVE ADVERTISING: Manufacturer agrees to pay a certain amount of retailers media. TRAINING OF SALES STAFF

PUBLICITY:
At no charge (most of the time) Part of public relations, a broad set of communication activities used to create and maintain favorable relations between the organization and its publics:
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customers employees stockholders government officials society in general

Need to cultivate effective media relations, and targeting publicity to key markets is viewed as the highest priorities. Handout...Communicators Guide To Publicity What is news? Planning Publicity Program Writing a news release Photographs
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Radio and TV News

Limitations of Using Publicity Media must judge publicity to be news worthy, timely, interesting and accurate. Cannot control the content or timing. May delete the most important part.

ADVERTISEMENT
ADVERTISING DEFINITION:
Paid form of non personal communication about an organization or its products that is transmitted to a target audience through a mass/broadcast medium SCOPE AND IMPORTANCE OF ADVERTISING:

ADVERTISEMENTS ARE IMPORTANT FOR:


standardized products products aimed at large markets products that have easily communicated features products low in price Products sold through independent channel members and/or are new.

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Broadcast Ad spending is at an all time high due to heavy competition in the:


Computer industry Telecommunications Industry Auto Industry

Whenever severe competition between marketers, introducing new products etc. Even with evolution of direct marketing, and interactive media. NATURE OF ADVERTISING: Used by many types of organizations including Churches, Universities, Civic groups and charities, politicians!! Need to consider the following issues:

Does the product possess unique, important features to focus on Unique Selling Point (USP) Are the hidden qualities important to the buyers Is the general demand trend for the product adequate Is the market potential for the product adequate Is the competitive environment favorable Is the organization able and willing to spend the required money to launch an advertising campaign

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USE OF ADVERTISING:

CLASSIC DISTINCTIONS:
PROMOTING PRODUCTS OR ORGANIZATIONS Institutional Advertising promotes organizations, images, ideas or political issues. IE Beer Company sponsors responsible drinking to promote the company image. PHILIP MORRIS ADVERTISING Product Advertising promotes goods and services. STIMULATING PRIMARY AND SELECTIVE DEMAND First to introduce product needs to stimulate primary demand. Pioneer Advertising informs people about the product (introduction stage of the product life cycle). Do not emphasize the brand name. Can also be used to stimulate the demand for a product group, IE Beef council. For Selective demand, advertisers use Competitive advertising, brand uses, benefits not available with other brands. Can use comparative advertising, 1988 Trademark Law Revision Act, cannot misinterpret. American Express et al.
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Handout...When Visa and American Express... Deals with the competitive advertising between Visa and Amex AT&T True Rewards...using new kind of math/use former MCI customers MCI Friends and Family...hammer advantages of friends FF..."Put It In Writing"... Sprint 10 cents a minute OFFSETTING COMPETITORS ADVERTISING Defensive advertising, offset to lessen the effect of competitors advertising. Used in fast-food industry, extremely competitive consumer products markets. MAKING SALESPERSONS MORE EFFECTIVE Tries to resell product to buyers by informing them of uses, features and benefits- encourage them to contact dealers etc. Cars...bring to retail store. INCREASING USE OF PRODUCT Consumer can consume only so much of a product, this limits absolute demand. May need to convince the market to use the product in more than one way. REMINDING AND REINFORCING CUSTOMERS

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Reminder, need to keep company/product name at the forefront of consumers' minds in the competitive marketplace. Reinforcement prevents cognitive dissonance. REDUCING SALES FLUCTUATIONS Increase sales during slow periods will help increase production efficiency; IE advertising reduced prices of lawn mowers in the winter months (reduce inventory costs). Coupons for Pizza only Mon-Thurs. DEVELOPING AN ADVERTISING CAMPAIGN: IDENTIFY AND ANALYZE THE ADVERTISING TARGET. The group of people for which the advertisement is aimed at, may direct campaign at only a portion of the target market. Research and analyze advertising targets to establish an information base for a campaign. Generally increase advertisers knowledge about their target--the more effective the campaign. David Ogilvy Award focuses on rewarding research in advertising: 1994 finalists:
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Nabisco's Oreo Cookie campaign, nostalgic feeling re: cookies, slogan "Unlock the magic!"....Winner!!
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AT&T "You will campaign", customers did not feel AT&T was innovative Goodyear, Equated ads, customer concerns were related to tires traction ability in the wet.

DEFINING OBJECTIVES. What the firm hopes to accomplish from the campaign, should be clear, precise and measurable, can help measure the success at the end of the campaign. Use a benchmark. At what stage is the target market in the Product Adoption Process. What are the goals of the campaign...to increase purchases, to generate traffic in the retail store etc? DETERMINE THE ADVERTISING APPROPRIATION Total amount of money that a marketer allocates for advertising in a specific period.
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Objective and Task Approach determine the objectives, then list the tasks needed to achieve the objectives. Percent of Sales Approach Sales create marketing?! What happens when the products sales are declining? Competition Matching Approach other companies have different advertising objectives.

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Arbitrary Approach determined by high level executives, Delaware MBA Program

CREATING AN ADVERTISING MESSAGE A function of the product's features, uses and benefits. Must be aware of the characteristics of target market, different message to different target market. Dependant on objective of the campaign.

COMPONENTS OF THE ADVERTISEMENT:


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Headline Illustrations Subhead line Body Copy Signature

Copy verbal portion of the advert. Includes all aspects except the illustrations. Attempts to move the reader through:
1. 2. 3. 4.

Awareness Interest Desire Action

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Developing a Media Plan Sets forth the exact media vehicles to be used and dates and times of ads. Effectiveness of plan determines how many people in the advertiser's target will be exposed to the message. Need to select the media to be used and dates and times ads appear. Primary goal--reach the highest # of people (within the advertiser's target) per $ spent. Achieve the appropriate message reach and frequency for the target audience while staying within the budget. VARIOUS MEDIA
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TV Channels/programs, Baseball = male 18-49 Academy awards = female 18-49 Sponsor cable channels, Reebok with Cable Health Club "Reebok University" Radio, Becoming more segmented, also allowed to own 2 FM stations in one area. Magazines, Lead time considerations, also pass along rate, subscription plus news agent sales. Newspapers, Local vs. national Direct Mail, Evolution of Database marketing, able to narrowly target with DM.

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Outdoor, Billboards Atlanta is most billboard per capita city, Transit...City Buses, Blimps...At Events Placed-Based, Schools, also sponsor educational programs, Supermarkets, Health Clubs, Dining Halls. Intrusive..."Only go where you are wanted!! Target market is known...not assumed.

Need to select general media, IE Newspapers, then subclass, IE Philadelphia Inquirer. Executing the Campaign Requires extensive planning and coordination. Advertising Agencies, production costs, research organizations, media firms, printers, photographers, and commercial artists etc. Detailed schedules are needed to insure everything is accomplished on time. EVALUATING THE EFFECTIVENESS OF THE CAMPAIGN Measure the achievement of the objectives, assessing the effectiveness of the copy etc., and the media. Typical consumer is bombarded with about 300 advertising messages/day, 109,500 per year. 80% of people cannot remember a typical ad one day after seeing it. NEED CREATIVITY!?!? Pretests before campaign, use a consumer jury. During the campaign, "inquiries"-coupons numbered.
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Posttests after the campaign use consumer surveys to measure the change in communication objectives change in sales or market share. Cannot be precise due to the environment. Use recognition tests to determine the degree to which consumers recognize advertisements. Recall evaluation, consumers are asked what they have seen lately. Aided or unaided.

PUBLICITY AND ADVERTISING COMPARED


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Publicity is primarily informative Advertising is informative and persuasive Publicity is more subdued Publicity does not identify the sponsor Publicity is free (??!) Publicity is part of a program or print story and appears more objective Publicity is not subject to repetition Publicity is more credible
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Little control over publicity

Promotion
Promotion stands for the various activities the company undertakes to commmunicate its product merits to persuade target/potential customers to buy them.In general, promotion consists of four major areas advertising, sales promotion, public relations and personal selling, though not all may be used. 1.Advertising 2.Sales Promotion 3.Public Relation

Advertising
The Protect company has allocated sufficient resources to different market segments. Adequate resources are provided for product development, advertisements, promotion and other marketing mix elements. It can be observed in the advertisements Different advertisement methods used by companyAdvertisement through media. Media has become a most powerful tool ever to advertise a product. It can help a company to convey their message to billions of potential consumers. Zombie is spending heavily on media campaign. They play documentaries in the form of cartoons in which they teach children that how Zombie can protect them from germs who are always around them. They are playing programs in which there is a contest among school children in which they ask questions about their cartoon documentaries. They also communicate with parents that how they can keep their children safe and healthy.
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Advertisement through print media Print media as we know consists of newspapers, magazines etc. Zombie is effectively using this media to convey their message. It is less expensive as to T.V media. They try to communicate their message through puzzles, stories and games.

Advertisement through Billboards They made advertisement through billboards On main roads and at main points they installed the billboards of Zombie to capture the attraction of people Advertisement Through Posters Zombie use this method to attract the people this method is less expensive. Promotion It is a short term approach through which they try to stimulate the sales of Zombie among their customers. Advertising offer a reason to buy while sales promotion offer an incentive to buy. Sales promotion includes consumer promotion, trade promotion and business and sales promotion. Sales promotion seems most effective when used together with advertisement. Consumer promotion toolsSamples: They provide samples in schools to children in their hygiene program.
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Prizes: They give prizes to children in schools to attract them as they will be potential buyers in future. Safeguard also gives prizes to its retailers like wall clock on the basis of their sales Price Packs: Zombie also use price packs technique to promote their product. Trade promotion tools Discount: They provide discounts to wholesalers and retailers up to 2.5%. There is no discount for end-user. Business promotion tools Conventions They arranged conventions to promote their product in start when they launched hygiene program to educate the people. Business Trips They also arrange business trips in foreign countries for whole sellers and retailers who achieved maximum sales in a particular year. Public Relation Building good relations with various publics for obtaining favorable publicity, building up good corporate image, and handling or heading off unfavorable rumors, stories and events public relations have strong impact on public awareness at a much lower cost and built good relation with customers. 1 Press relations or press agency Dawn print their add in their magazine because they sponsor that weekly magazine for children. They have good relations with other press media as well. 2 Product publicity3 Public affairs4 Investor relations Safeguard use public relation and they went to school and give information to children about germs and tell them that how they can protect from germs Ethical Issues
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There are no ethical issues related to Zombie. Rather, it is good for general health of society.Sehat-safai campaign launched is intended to create awareness among people that they should take care of their health. This campaign has been very successful, now, people of Pakistan are more conscious of germs and giving importance to cleanliness. Conclusion: Zombie is an anti-bacterial drink which protect its users against germ causing a lot of diseases. Zombie has positioned itself in very unique manner. It claims that it is the only anti-bacterial drink which gives protection against germs. Zombie has launched very successful advertising and promotion campaigns. Before launching of Zombie in the Lahore, Lifebuoy, Safeguard and Dettol__ anti-bacterial drinks__ are there in market, but people were not that much conscious about their health and germs protection. Zombie has made them aware that they should be protected against germs and bacteria and people should use an anti-bacterial drink regularly and live healthy life. Recommendations:

Zombie can enhance their market share by advertising and campaigning in colleges and universities just like as they did in schools for kids, also specially to start a campaign for girls that Zombie can protect them from acne as well as can perform as best beauty drink. By giving special programs and special offers on special occasions (like EID) company can promote its products positioning and sales. Company should extend their sehat-i-safai program into towns as well as they are doing in big cities.

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