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Q1. Define Marketing. Also describe the nature and scope of marketing.
Ans. Marketing is a social and managerial process by which individuals and groups obtain what they need and want
through creating, offering and exchanging products of value with others.
Marketing has its origins in the fact that humans are creatures of needs and wants. Needs and wants create a state of
discomfort, which is resolved through acquiring products that satisfy these needs and wants. Since many products can
satisfy a given need and wants, these products are obtainable in several ways: Self – production, coercion, begging and
exchange. Most modern societies work on the principle of exchange, which means that people specialize in producing
particular products and trade them for the other things they need. The engage in transactions and relationship building. A
market is a group of people who share similar needs. Marketing encompasses those activities involved in working with
markets, that is, in trying to actualize potential exchanges.
Marketing management is the conscious effort to achieve desired exchange outcome with target markets. The marketer’s
basis skill lies in influencing the level, timing and composition of demand for a product service, organization, place, person
or idea.
Marketing is so basic that it cannot be considered a separate function. It is the whole business seen from the point of view
of its final result, that is, from the customer’s point of view. The marketing concept rests on four main pillars, namely a
market focus, customer orientation, coordinated marketing and profitability.
Market Focus: No Company can operate in every market and satisfy every need. Nor can it even do a good job within
one broad market. Companies do best when they define their target markets carefully. The do best when they prepare a
tailored marketing programme for each target market.
Customer Orientation: a company can define its market carefully but still needs customer orientated thinking i.e. satisfy
customer needs from the customer point of view, and not from its own point of view. Company’s sales come from two
groups: new customer’s and repeat customers. It always costs more to attract new customers than to retain current
customers. Therefore, customer retention is customer satisfaction. A satisfied customer:
- Buys again
- Talks favourably to others about the company
- Pays less attention to competing brands
- Buys other products from the same company
Thus a Company would be wise to regularly measure customer satisfaction.The delighted customers are more effective
advertisers than the advertisement placed in media.
Coordinated Marketing: Marketing requires the company to carry out internal marketing as well as external marketing.
Internal marketing is the task of successfully hiring trained and motivating able employees to serve the customers well.
Internal marketing must precede the external marketing. It makes no sense to promise excellent service before the
company’s staff is ready to provide excellent service.
Coordinated marketing means two things, first the various marketing functions – sales force, advertising product
management, marketing research, and so on must be coordinated among themselves. Second, marketing must be well
coordinated with the other company department. Marketing does not work when it is merely a department. It only works
when all employees appreciate the effect they have on customer satisfaction.
Profitability: The purpose of the marketing concept is to help organizations achieve their goals. In case of private firms,
the major goal is profit, in the case of non-profit and public organizations; it is surviving and attracting enough funds to
perform their work. The key is not to aim for profits as such but to achieve them as a buy product of doing the job well. A
company makes money by satisfying customer’s needs better than a profitable way to satisfy some target group’s wants
for personal satisfaction.
Needs : A human need is a state of felt deprivation of some basis satisfaction. People require food, clothing, shelter,
safety and few other things for survival. These needs are not created by their society or by marketers;
they exist in the very texture of human biology and the human condition.
Wants : Wants are desires for specific satisfiers of deeper needs. A person needs food wand wants and hamburger.
Demand : Demands are wants for specific products that are backed up by an ability and willingness to buy them.
Wants become demands when backed up by a purchasing power.
Products : Product is anything that can be offered to someone to satisfy a need or want to distinguish between
physical objects and intangible ones.
MARKET RESEARCH
Market research is the systematic design, collection, analysis and reporting of data and findings relevant to a specific
marketing situation facing the company.
Scope of Market Research
Market researchers have expanded their activities and techniques. The ten most common activities of market research
are –
1. Determination of marketing characteristics
2. Measurement of market potentials
3. Market share analysis
4. Sales analysis
5. Studies of business trends
6. Short range forecasting
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7. Competitive product studies
8. Long range forecasting
9. Pricing studies, and
10. Testing of existing products
Marketing Research Process
Marketing research is undertaken to understand a marketing problem better. Effective marketing research involves five
steps –
a. Defining the problem and research objectives
b. Developing the research plan
c. Collecting the information
d. Analysing the information
e. Presenting the findings.
I. Defining the problem and research objectives: The first step in research calls for the marketing manager is to define
the problem carefully and agree on the research objectives. A problem will defined is half solved.
Three types of research projects can be distinguished. Some research is exploratory i.e. to gather preliminary data to
shed light on the real nature of the problem and possibly suggest some hypothesis or new ideas. Some research is
descriptive i.e. to describe certain magnitudes. Some research is casual – that is to test a cause and effect relationship.
II. Developing the Research Plan: The second stage of marketing research calls for developing the most efficient plan
for gathering the needed information. Research plan calls for decisions on the data sources, research approaches,
research instruments, sampling plans and contact methods.
a) Data Source : The research plan can call for gathering secondary data, primary data or both. Secondary data
consists of information that already exists somewhere, having been collected for another purpose. Primary data
consist of original information gathered for the specific purpose at hand.
b) Research Approaches : Primary data can be collected in four broad ways: observation, focus group, Surveys and
experiments.
Observation – Fresh data can be gathered by observing the relevant actors and settings.
Focus Group - A focus group is a gathering of six to ten persons who spend a few hours with a skilled interviewer
to discuss a project, service, and organization of other marketing entity.
Survey Research – Companies undertake surveys to learn about people’s beliefs, preferences, satisfaction and
so on and to measure these magnitudes in the population.
Experiments – Experimental research calls for selected matched groups of subjects, subjecting them to different
treatments, controlling extraneous variables and checking whether response differences are statically significant.
Generally speaking observation and focus groups are best suited for exploratory research, surveys are best suited for
descriptive research and experiments are best suited for casual research.
c) Research Instruments – Marketing researchers have a choice of two main research instruments in collecting
primary data: the questionnaire and mechanical devices.
Questionnaire consists of a set of questions presented to respondents for their answers. The questionnaire is
very flexible in that there is any number of ways to ask questions.
Mechanical instruments are less frequently used in marketing. Galvanometers are used to measure the strength
of a subject’s interest on emotions aroused by an exposure to a specific and or picture. The tachistoscope is a
device that flashes on and to a subject with an exposure interval that may range from less then one-hundredth of
a second to several seconds. After each exposure, the respondent describes everything he recalls. Eye
cameras are used to study respondent’s eye moments to see at what points their eyes land first, how long they
linger on a given item? The audiometer is an electronic device that is attached to television sets in participating
homes to record when the set is on and to which channel it is tuned.
d) Sampling Plan – The marketing researcher must design a sampling plan, which calls for three decisions
III. Collecting the information – The researcher must now arrange for collecting the data. This phase is generally the
most expensive and most liable to error. Four major problems arise. Some respondents will not be at home and must be
re-contacted or replaced. Other respondents will refuse to cooperate. Still other will give biased or dishonest answers.
Finally, some interviewers will occasionally be biased or dishonest.
V. Presenting the findings – the researcher should present major findings that are relevant to the major marketing
decisions facing management. The study is useful when it reduces management’s uncertainty concerning the right move
to take.
(a) Scientific Method : Effective marketing research was the principles of scientific method: careful observation,
formulation of hypothesis, prediction and testing.
(b) Research Creativity : At its best, marketing research develops in various ways to solve a problem.
(c) Multiple Methods : Competent marketing researches shy away from over reliance on any one method, preferring to
adopt the method to the problem rather than the other way around. They also recognize the desirability of gathering
information from multiple to give greater confidence.
(d) Independence of models and Data : Competent marketing researches recognize that the facts derive their meaning
from models of the problem. These models guide the type of information sought and therefore should be made as
explicit as possible.
(e) Value and cost of information : Competent marketing researches show concern for measuring the value of
information against its cost. Value / cost helps the marketing research department which research project to
conduct, which research to use etc.
MARKETING ENVIRONMENTS
Marketing managers can effectively monitor changes in the marketing environment using marketing intelligence system.
“A marketing intelligence system is a set of procedures and sources used by managers to obtain their everyday
information about pertinent developments in the marketing environment”.
- Undirected viewing : General exposure to information where the manager has no specific purpose in mind.
- Conditional viewing : Directed exposure, not involving active search, to a more or less cleanly identified area or
type of information.
- Informed Search : A relatively limited and unstructured effort to obtain specific information or information for a
specific purpose.
- Formal Search : A deliberate effort usually following a pre-established plan, procedure or methodology – to
secure specific information or information relatively to a specific issue.
Marketing Managers carry on marketing intelligence mostly on their own by reading books, newspapers and trade
publications, talking to customers, suppliers, distributors and other outsiders and talking with other managers within the
company. Well-run companies take additional steps to improve the quality and quantity of marketing intelligence. First,
they train and motivate the sales force to spot and report new developments. Sales representatives are the company’s
‘eye and ears’. They are in an excellent position to pick up information missed by other means. Secondly, the company
motivates distributors, retailers and other middlemen to pass along important intelligence. Some companies appoint
specialists to gather marketing intelligence. They send out “Ghost Shoppers” to monitor the presentations of retail
personnel. Much can be learned about competitors through purchasing their products, attending open houses and trade
shows, reading competitor’s published reports and attending stock holders meeting; talking to their former employees and
present employees, dealers, distributors, suppliers and freight agents collecting competitors’ ads. Thirdly, the company
purchases information from outside suppliers such as NRS (National Readership Survey Report) etc. These research
firms can gather store and consumer-panel data at much less cost than it each company carried out its own panel
operations.
Q.No.3 – Why the study of marketing environment is important for a marketer? Discuss.
Ans. The marketing environment consists of the task environment and the broad environment.
The task environment includes the immediate actors involved in producing, distributing and promoting the offering. The
main actors are the company, suppliers, distributors, dealers and target customers. Included in the supplier group are –
material suppliers and service suppliers such as marketing research agencies, advertising agencies, banking and
insurance companies, transportation and telecommunication companies. Included with distributors and dealers are
agents, brokers and others who facilitate finding and selling to customers.
The broad environment consists of six components: demographic environment, economic environment, natural
environment, technological environment, political-legal environment and social-cultural environment. These environments
contain forces that can have major impact on the actors in the task environment.
The major responsibility for identifying significant market place changes falls to the company’s marketers. More than any
other group in the company, they must be the trend trackers and opportunity sectors.
Marketers are keenly interested in the size and growth rate of population in cities, regions and nations; age distribution
etc. Exposure population growth has major implications for business. A growing population does not mean growing
markets. Unless these markets have sufficient power nonetheless the companies that carefully analyse their markets and
find major opportunities.
National populations vary in their age mix. At one extreme is Mexico a country with a very young population and rapid
population growth. At the other extreme is Japan, a country with one of the world’s oldest populations. Milk diapers,
school supplies and toys would be important products in Mexico. Japan’s population would consume many more adult
products. A population can be sub divided into six age groups – pre-school, school-age children, teens, young, adults age
25 to 40, middle-aged adults aged 40 to 65 and older adults aged 65 and up. For marketers, the most populous age
groups shape up the marketing environment.
Marketing requires purchasing power as well as people. The available purchasing power in an economy depends on
current income, prices, saving, debt and credit availability. Marketers must pay close attention to major trends in income
and consumer-spending patterns because they can have a strong impact on business especially for companies whose
products are geared to high income price-sensitive consumers.
The deterioration of the natural environment is a major global concern. Steel companies and public utilities have hard to
invest billions of dollars in pollution-control equipment and more environmentally friendly fuels marketers need to be
aware of the threats and opportunities associated with four trends in the natural environment, the storage of raw materials
especially the water, the increased cost of energy, increased pollution levels and the changing rate of the governments.
UNIT- II
Consumer decision-making process
Consumer passes through five stages : Problem recognition, information search evaluation of alternatives, purchase
decision and post purchase behaviour, while deciding the purchase of product / services.
Problem Recognition: The buying process starts when the buyer recognizes a problem of need. The buyer senses a
difference between his or her actual state and desired state. The need can be triggered by internal or external; stimuli. In
the former case, one Person’s normal needs- hunger thirst-rises to be threshold level and becomes a drive. From
previous experiences, the person has learned hoe to cope with this drive and its motivated towards a class of objects that
will satisfy the drive. Or a need can be aroused by an external stimulus. A person passes a bakery and sees freshly baked
bread that stimulates her hunger, she admires a neighbour’s car, or she watches a television commercial advertisement a
Jamiacian vacation. All these stimuli can trigger problem or need.
Information Search: An aroused consumer will be inclined to search for more information. This search can be at two
levels:
a) The middle search State called heightened attention. Here the consumer simply becomes more receptive to
information about product in which he/she is interested. He/She pays attention to products ads, similar products
purchased by friends, and conversation about product.
b) Or consumer may go into active information search where consumer looks for reading material, and engages in
other search activities to learn about product in which he/she is interested. How many search consumers
undertakes depends upon strength of his/her drive; the amount of information he/she initially has, the ease of
obtaining additional information etc. Consumer information sources fall into four groups:
The relative amount and influence of these information sources varies with the product category and the buyer’s
characteristics. Generally speaking, the consumer receives the sources, that is, marketer dominated sources. On the
other hand, the most effective exposures come from personal sources. Each information source performs a somewhat
different function in influencing the buying decision. Commercial information normally performs and informing function and
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personal sources performs a legitimizing and /or evaluation function. For example, physicians often learn of new drugs
from commercial sources but turn to other doctors fro evaluation information.
Evaluation of alternatives: consumer from product judgments regarding brand choices largely on a conscious and
rational basis.
Consumer is trying to satisfy some need and is looking for certain benefits from the product solution. The consumer sees
each product as bundle of attributes with varying capabilities of delivering the sought benefits and satisfying this need.
Consumers will differ as to which product attributes are seen as relevant or salient. They will pay the most attention to the
ones that will delivery the sought benefits. The consumer is likely to develop a set of brand beliefs about where each
brand stands on each attribute. The brand beliefs make up the brand image. The consumer’s brand belief will vary with
his/her experiences and the effect of selective retention. The consumer is assumed to have a utility function for each
attribute. The consumer arrives at attributes (judgement, preferences) towards the brand alternatives through evaluation
procedure.
Purchase Decision: In the evaluation steps the consumer forms preferences among the brands. The consumer may
also forms a purchase intention to buy the most preferred brand. But actual purchase decision is influenced by (a)
attitudes of other and (b) unanticipated situational factors.
The extent to which another person’s attitude reduces one’s preferred alternative depends upon two thins (i) the intensity
of the other person’s negative attitude towards the consumer’s preferred alternative and (ii) the consumer’s motivation to
comply with the other person’s wishes.
Purchase intention is also influenced by unanticipated situational factors. A Consumer’s decision to modify, postpone or
avoid a purchase decision is heavily influenced by perceived risk varies with the amount of money at stake, the amount of
attribute uncertainty and the amount of consumer self confidence.
A consumer who decides to execute a purchase intention will be making up to five purchase sub decisions: (a) brand
decision (b) vendor decision (dealer) (c) quality decision (d) timing decision and (e) payment method decision.
Post purchase behaviour : The buyer’s satisfaction is a function of the closeness between the buyer’s product
expectations and the product’s perceived performance falls short of customer expectation, the customer is disappointed, if
it exceeds expectations, the customer is delighted. The feelings make a difference in whether the customer buys the
product again and talks favourably or unfavourably about the product to other.
UNIT – II
Ans. The aim of marketing is to meet and satisfy target customer’s needs and wants. The field of consumer behaviour
studies how individuals, groups and organizations select, buy, use and dispose of goods, services, ideas or experiences
to satisfy their needs and desires.
A consumer’s buying behaviour is influenced by cultural, social, personal and psychological factors.
I. Culture, sub-cultures and social class are particularly important in buying behaviour. Culture is a fundamental
determinant of a person’s wants and behaviour. The growing child acquires a set of values, perceptions, preferences and
behaviours through his or her family and other key institutions.
Each culture consists of smaller subcultures that provides more specific identification and socialization for their members.
Subcultures include nationalities, religions, social groups and geographic regions. Enough companies often design
specialized marketing programs to serve them. Such are known as “diversity marketing”
Virtually all human societies exhibit social satisfaction, stratification sometimes takes the form of caste system where the
members of different castes are reared for certain roles and cannot change their caste membership. More frequently, it
takes the form of ‘Social Classes’ relatively homogeneous and enduring divisions in a society, which are hierarchically
ordered and whose members share similar values, interests and behaviour. Social classes show distinct product and
brand preferences in many areas, including clothing, home furnishings, leisure activities and automobiles. Social classes
differ in media, magazines & books and lower class consumers preferring television. Even within a media category such
as TV, upper-class consumers prefer news and drama, and lower-class consumers prefer soaps operas and sports
programmes
II. Social Factors – In addition to cultural factors, a consumer’s behaviour is influenced by such social factors as reference
groups, family and social roles and statuses.
III Personal Factors: A buyer’s decision are also influenced by personal characteristics. These include the buyer’s age and
stage in the life cycle, occupation, economic circumstances, lifestyles and personality and self concept.
People buy different goods and services over a lifetime. The eat baby food in the early years, most foods in the
growing and mature years and special diets in the later years. Taste in clothes, furniture and recreation is also age
related.
Occupation also influences consumption pattern. A blue-collar worker will buy work clothes, work shoes and
lunch boxes. A company president will buy expensive suits, air travel and country club membership.
IV. Psychological Factors: A Person buying choices are influenced by four major psychological factors- motivation
perception, learning and beliefs and attitudes.
A Person has many needs at any given time. Some needs are biogenic, they arise from psychological states of
tension such as hunger, thurst or discomfort. Other needs are psychogenic; they arise from psychological states of
tension such as the need for recognition, esteem or belonging. A need becomes a motive when it is aroused to a sufficient
level of intensity. A motive is need that is sufficiently pressing to drive a person to act.
When people act, they learn. Learning involves changes in an individual’s behaviour arising from experience.
Most human behaviour is learned. Learning theorists believe that learning produced through the interplay of derives,
stimuli, cues, responses and reinforcement. A derive is a strong internal stimulus impelling action. Cues are minor stimuli
that determine when, where and how a person responds. Learning theory teaches marketers that they can build up
demand for a product by cues and providing positive reinforcement.
Through doing and learning, people acquire beliefs and attitudes. These in turn influence buying behavior. A
belief is a descriptive thought that a person holds about something. People’s beliefs about product or brand influence their
buying decisions.
Segmentation
Market segmentation is the process of dividing a market into subsets of consumers with common needs or characteristics.
The bases for segmenting the market can be a) Geographic segmentation b) Demographic segmentation c)
Phychographic segmentation and d) Behavioral segmentation.
Geographic Segmentation: Geographic Segmentation calls for diving the market into different geographical units such as
nations, states, regions, cities, etc. The company can decide to operate in one or a few graphic areas or operate in all but
pay attention to local variations in geographic needs and preferences eg. Wagh Bakri tea brand has 60% market share in
state of Gujrat (90% in Ahemdabad).
Demographic Segmentation: Demographic Segmentation consists of diving the market into groups on the basis of
demographic variables such as age, sex, family size, family life cycle, income occupation, education, religion, race and
nationality demographic variables are the most popular bases for distinguishing customer groups. One reason is that
consumer wants preferences and usage rates are often associated with demographic variables. Another is that
demographic variables are easier to measure than most other type of variable. Even when the target market is described
in non-demographic terms, the link back to demographic characteristics is necessary in order to know the size of the
target market and how to reach it efficiently eg. Sex segmentation is applied in clothing, cosmetic and magazines. Income
segmentation is used in products like automobile etc.
Social class has a strong influence on the person’s preference in cars, clothing, home furnishing, reading habits and so
on.
Behavioural Segmentation : In behavioural segmentations buyers are divided into groups on the basis of occasions
benefits, loyalty states, attitude towards products etc.
A powerful form of segmentation is the classification of buyers according to the different they seek from the product.
Benefit segmentation calls for identifying the major benefits that people look for in the product class, the kinds of people
who look for each benefit and the major brands the deliver each benefit. Benefit segmentation usually implies that a
company should focus on satisfying one benefit group. Thus ‘Anchor’ toothpaste offered the benefit of “anti-cavity
protection” which became its unique selling proposition.
TARGET MARKETING
In target marketing, the seller distinguishes the major market segments, targets one or more of these segments and
develop products and marketing programs tailored to each selected segment. Target marketing help sellers identify
marketing opportunities better. The sellers can develop the right offer for each target market. They can adjust their
prices, distribution channels and advertising to reach the target market effectively.
Target marketing calls for three major steps. The first is market segmentation, the act of dividing the market into
distinct of buyers who might require separate products and/or marketing mixes. The second step is market targeting,
the act of developing measures of segment attractiveness and selecting one or more market segment to enter. The
third step is product positioning, the act of establishing a variable competitive positioning of the firm and its offer in
each target market.
III) Company Objectives and Resources: The company needs consider its own objectives and resources in relation to a
segment under consideration. Some attractive segments could be dismissed because they do not mesh with company’s
long-run objectives. They may be tempting segments in themselves, but they do not move the company forward towards
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its goods. Even if the segment fits the company’s objectives, the company must consider whether it possesses the
requisite skills and resources to succeed in that segment. But even if the company possesses the requisite competences,
it needs to develop some superior advantages to the competition. It should not enter markets or market segments where it
cannot produce some form of superior value.
II. Selecting the Market Segment: a target market consists of a set of buyers sharing common needs or characteristics
that the company decides to serve. The company can consider five patterns: a) Single-segment concentration b) Selective
specialization c) Market Specialization d) Product Specialization and e) Full Coverage.
a) Single- Segment Concentration:- In the simplest case, the company selects a single segment. Through concentrated
marketing, the firm achieves a strong market position in the segment owing to its greater knowledge of the segment’s
needs and the special reputation it builds. At the same time, concentrated marketing involves higher than normal risks.
The particular market segment can turn sour. Or the competitors may decide to enter the same segment. Foe these
reasons, many companies prefer operate in more than one segment.
b) Selective specialization:- Here the firm selects a number of segments, each of which is objectively attractive and
matches the firm’s objectives and resources. Each segment promises to be a money maker. This strategy of multi
segment coverage has an advantage over single segment coverage of diversifying the firm’s risk. Even if one segment
becomes unattractive, the firm can continue to earn money in other segments.
c) Product Specialization:- Here the firm concentrates on making a certain product that it sells to several segments.
Through this strategy, the firm builds up a strong reputation in the specific product area.
d) Market Specialization:- Here the firm concentrates on serving many needs of a particular customer group. The firm
gains a strong reputation of specializing in serving this customer group and becomes a channel agent for all new products
that this customer group could feasibly use.
e) Full Market Coverage:- Here the firm attempts to serve all customer groups with all the products that they might need.
Only large firms can undertake a full market coverage strategy. Examples would include coca cola (non-alcoholic
beverage) ; IBM (Computer market) etc.
Large Firms can cover a whole market in two broad ways:- namely through undifferentiated marketing or
differentiated marketing.
Undifferentiated Marketing:- The firm might ignore market segment differences and go after whole market with one market
offer. It designs a product and a marketing programme that will appeal to the broadest number of buyers. It relies on mass
distribution and mass advertising.
Undifferentiated Marketing depends on the grounds of cost economics. The narrow product line keeps down production,
inventory and transportation cost.
Differentiated Marketing:- Here the firm operates in most market segments but designs different programmes for each
segment. General motor claims to do this when it says that it produces car for every purse, purpose and personality.
However, it also increases the cost of doing business.
POSITIONING
Positioning is an act of designing the company’s offer so that it occupies a distinct and valued position in the
target customer’s mind. Positioning is not what you do to a product, positioning is what you do to the mind of prospect.
Many marketers advocate promoting only one benefit to the target market. A company should develop a unique selling
proposition (U.S.P) for each brand & stick to it. Buyers tend to remember “Number one” better than other message,
specially in & over communicated society.
Once a brand has occupied a specific position in the mind of the customer, a competitor has only three strategy options:-
One strategy is to strengthen its own current position in the mind of customers.
The second strategy is to search for a new unoccupied position that is valued by enough customer & to grab it.
The third strategy is to deposition or reposition the competitor.
The number of differentiation opportunities varies with the type of industry. There exist four types of industry
based on the numbers of available competitive advantages & their sizes.
a) Volume Industry: One in which company is can gain only a few but large competitive advantages. In
the construction equipment industry, a company can strive for a low cost position or highly differentiated
position & win big on either basis. Profitability is correlated with the company size & market shares.
b) Stalemated Industry: One in which there are few potential competitive advantages & each is small. In
the steel industry it is hard to differentiate the product or decrease manufacturing costs. Company can
try to heir better sales people, entertain more lavishly, and the like, but these are small advantages.
Profitability is unrelated to company market share.
c) Fragmented Industry: One in which companies faces many for competitive advantages is small. A
restaurant can differentiated in many ways but end up not gaining a large market share. Both small and
large restaurant can be profitable or unprofitable.
d) Specialized Industry: One in which companies face many differentiation opportunities, and each
differentiation can have a high pay off. Among companies making specialized machinery for selected
market segments, some small companies can be profitable as some large companies.
A company can differentiated its market. Offering along five dimensions:- a) Product; b) Services; c) Personnel; d)
channel and e) Image.
Product Differentiation: Here the seller faces an abundance of design parameters, including form, features, performance
quality, conformance quality, durability, reliability, style, reparability and design.
a) Form:- Many product can be differentiated from the size, shape of physical structure of a product.
b) Features:- Most products can be offered with varying features that supplement the product’s basic
functions. Being the first to introduce valued new features is one of the most effective ways to compete.
c) Performance Quality: Most products are established one of four performance levels: low, average, high or
superior. Performance Quality is the level at which the products primary characteristics operate.
d) Conformance Quality: Buyers expect products to have a high conformance quality, which is the degree to
which all produced units are identical and meet the promised specifications.
e) Durability: Durability, a measure of the products expected operating life under natural stressful conditions,
is a valued attribute for certain products.
f) Reliability: Reliability is a measure of the probability that a product will not malfunction or fail within
specified time period.
g) Repairability : Repairability is a measure of the ease of repairing a product when it malfunctions or fails.
h) Style: style describes the product’s look and feel to the buyer. Style has the advantage of creating
distinctiveness that is difficult to copy.
i) Design: As competition intensifies, design offers a potent way to differentiate and position a company’s
products and services. Design is the totality of features that effect how a product looks and functions in
terms of customer requirements.
Service Differentiation : When the physical product can not easily be differentiated, the key to competitive success may lie
in adding valued service and improving their quality. The main service differentiators are ordering ease, delivery
installation, customer training, customer consulting and maintenance and repair.
a) Ordering Ease: Ordering ease refers to how easy it is for the customer to place an order with the company.
b) Delivery: Delivery refers to how well the product or service is delivered to the customer. It includes speed,
accuracy and care attending the delivery process.
c) Installation: Installation refers to the work done to make a product operational in its planned location. Buyers of
heavy equipment expect good installation service. Differentiation at this point in the consumption chain is
particularly important for companies with complex products.
d) Customer Training: Customer training refers to training the customer’s employers to use the vender’s equipment
properly and efficiently.
e) Customer Consulting: Customer consulting refers to data, information systems and advice services that the seller
offers to buyers
f) Maintenance and Repair: Maintenance and repair describes the service programme for helping customers keep
purchased products in good working order.
UNIT – III
VI) Product Development: at this stage the company will determine whether the product can be translated into a
technically and commercially feasible product. The job is to translate customer requirement into a working prototype.
When the prototypes are ready, they must be put through rig rows functional tests and customer tests. The product is
tested to see how it performs in different applications. Consumer testing can take several forms, from bringing consumers
into a laboratory to giving them samples to use in their homes.
VII) Market Testing: After management is satisfied with functional and psychological performance, the product is ready to
be dressed up with a brand name and packing, and put into a market test. The new product B introduced into an authentic
setting to learn how large the market is and how consumers and dealers react to handling, using and repurchasing the
product.
The amount of market testing to influenced by the investment cost and risk on one hand, at the time pressure
and research cost on the other. High investment-high risk products, where the changes of failure to high, must be market
tested; the cost of market tests will be insignificant percentage of the total project cost, high-risk products-those that
create new product categories, or have novel features- warrant more market testing than modified products.
The amount of market testing may be severely reduced if the company is under great time pressure because
competitors are about to launch their brands. The company may therefore prefer to face the risk of a product failure to the
risk of losing distribution or market penetration on a highly successful product.
VIII) Commercialization: If the company goes ahead with commercialization, it will face its largest cost to date. The
company will have to contract for manufacture or build or rent a full scale manufacturing facility. Plant size will be critical
promotion.
The company must decide whether to launch the new product in a single locality, a region, several region, the
national market or the international market. The company size is an important factor here. Small companies will select an
attractive city to put on a blitz campaign. They will enter other cities one at a time. Large companies will introduce their
product into a whole region and then move to a next region. Companies with national market, such as auto companies will
launch their new models in the national market. Most companies design new products to sell primarily in the domestic
market. If the product does well, the company considers exporting to foreign countries, redesigning if necessary.
Straight Rebuy: The straight rebuy is a buying situation in which the purchasing department reorders on a routine
basis(e.g. office Supplies, bulk chemicals). The buyer choose from supplier on an approved list. These supplier make an
effort to maintain product and service quality. The outside supplier attempt to offers something new or to exploit
dissatisfaction with a current supplier.
Modified Rebuy: The modified rebuy is a situation in which the buyers want to modify product specifications, prices
delivery requirements, or other terms. The modified rebuy usually involves additional decision participants on both sides.
New Task: The new task is a buying situation in which a purchase buys a product or service for the first time. The greater
the cost or risk, the larger the number of decision participants and the greater their information gathering and therefore the
longer the time to decision completion.
Many business buyers prefer to buy a total solution to their problem from one seller called System Buying , the
buyer would solicit bids from prime contractors, who would assemble the package or system. The contractor who was
awarded the contract would be responsible for bidding out and assembling the system’s subcomponents from second tier
contractors. The prime contractor would thus provide a turnkey solution , so called because the buyer had to turn one key
to get the job done.
The decision unit of the buying organization includes all the members of the organization who play any role in the
purchase decision process. They include:-
1) Initiators:- Those who request that something be purchased. They may be users or others in the organization.
2) Users:- Those who will use the product or service. In many cases, the users initiate the buying proposals and help
define the product requirement.
3) Influencer:- People who influence the buying decision. They often help define specifications and also provide
information for evaluating alternatives. Technical personnel are particularly important influences.
4) Deciders:- People who decide on product requirements or supplies.
5) Approvers:- People who authorise the proposed actions of deciders or buyers.
6) Buyers:- People who have formal authority to select the supplier and arrange the purchase terms. They play a major
role in selecting vendor and negotiating.
A typical PLC follows an S-Shaped curve. This curve is typically divided into four stages, known as introduction,
growth, maturity and decline.
Introduction:- A period of slow sales growth as the product is introduced in the market. Profits are non-existent in this
stage because of heavy expenses of product introduction.
Maturity:- A period of a slowdown in sales growth because the product has achieved acceptance by most potential
buyers. Profits stabilize or decline because of increased marketing out lays to defend the product against competition.
Decline:- The period when sales show a downward drift and profit erode.
Introduction stage : The introduction stage starts when the new product is launched. It takes time to roll out the
product in several markets and to fill dealers pipelines, so sales growth is apt to be slow.
In this stage, profits are negative or low because of the low sales and heavy distribution and promotion
expenses. Much money is needed to attract distributors and fill the pipeline.
Promotional expenses are at the highest ratio to sales because of the need for a high level of promotional efforts
to (i) inform potential consumers of the new and unknown product (ii) include trial of the product and (iii) Secure
distribution in retail outlets.
Considering only price and promotion, an organisation can pursue one of the four strategies in introduction
stage.
(a) Rapid Skimming (b) slow Skimming (c) Rapid Penetration (d) Slow Penetration
(A) Rapid Skimming: - Consist of launching the new product at a high price in order to recovers as much gross profit
per unit as possible. It spends heavily on promotion to convince the market of the products merit even at a high price
level. This strategy makes sense under the following assumptions:-
i) a large part of the market is unaware of the product.
ii) those who become aware are eager to have the product and can pay the asking price.
iii) the firm faces the potential competition and wants to build up the brand preference.
C) Rapid Penetration: Consist of launching the product at a low price and spending heavily on promotion. This strategy
promises to bring about the fastest market penetration and the largest market share. This strategy makes sense when
i) the market is large.
ii) the market is unaware of the product.
iii) most buyers are price sensitive.
iv) there is strong potential competition
v) the company’s unit manufacturing experience
D) Slow Penetration Strategy: Consist of launching the new product at a low price and low level of promotion. The low
price will encourage rapid product acceptance; and the company keeps its promotion costs down in order to realize more
net profit. The company believes that market demand is highly price elastic but minimally promotion elastic. This strategy
makes sense when
i) the market is large.
ii) the market is highly aware of the product.
iii) the market is price sensitive and
iv) there is some potential competition.
GROWTH STAGE: The growth stage is marked by a rapid climb in the sale. The early adopters like the product, and the
middle majority consumers start buying the product. New competitors enter the market, attracted by the opportunities for
large scale production and profit. They introduce new product features and this move further expands the market. The
increased number of distribution outlets leads to an increase in the number to fill the distribution pipeline.
Price remains where they are or fall insofar as demand is increasing quite rapidly. Companies maintain their
promotional expenditure at the same or at a slightly increased level to meet competition and to continue to educate the
market.
Profits increase during this stage as promotion costs are spread over a larger volume and unit manufacturing
costs fall faster than declines owing to the experience curve effect.
MATURITY STAGE: At some time, a product’s rate of sales growth will slow down and the product will outer a stage of
relative maturity. The maturity stage is divided into three phases. In the first phase, growth maturity, the sales growth rate
starts to decline. There are new distribution channels to fill. In the second phase, stable maturity, sales flatter on a per
capita basis because of market saturation. Most potential consumers have tried the product, and future sales are
governed by population growth and replacement demand. In the third phase, decaying maturity the absolute level of sales
now starts to decline and consumers starts to other products and substitutes.
The slowdown in the rate of sales growth creates overcapacity in the industry. This overcapacity leads to
intensified competition. Competitors scramble to find and enter niches. They engage is frequent markdowns and off-list
pricing. They increase their advertising and trade and consumer deals.
Marketing Strategies in the Maturity Stage: In the maturity state, some companies abandon their weaker products,
believing there is little they can do. They think the best thing is to conserve their money and spend it on newer products in
the development pipeline.
Marketers systematically consider strategies of market, product and marketing mix modification.
Market Modification: The company can try to expand the number of brand users in three ways:
a) Convert Non Users: The company can attract non users to the product.
b) Enter New Market Segment: The company can try to enter new market segments- geographic, demographic and so on.
c) win Competition’s Customers: The company can attract competitors customers to try or adopt the brand.
Product Modification: Managers also try to stimulate sales by modifying the product’s characteristics. This can take
several forms:
a) A strategy of quality movement aims at increasing the functional performance of the product - its durability, reliability,
speed, taste etc.
b) a strategy of features improvement aims at adding new features that expand the product’s versatility, safely or
convenience.
c) A strategy of style improvement aims at increasing the aesthetic appeal of the product.
Marketing Mix Modification : Product managers might also try to stimulate sales by modifying one or more marketing
mix elements which include Prices, Distribution, Services, Advertising, Sales Promotion or Personal selling.
DECLINE STAGE: The sales of most product forms and brands eventually decline. Sales decline for a number of reasons
including technological advances, consumer shifts in tastes and increased and foreign. All lead to overcapacity, increased
price cutting and profit erosion.
As sales and profits decline, some firms withdraw from the market. Those remaining may reduce the number of
product offerings. They may withdraw from smaller market segments and weaker trade channels. They may cut the
promotion budget and reduce their price further.
Marketing Strategies during the Decline Stage:
- Increasing the firm’s investment (to dominate or strengthen its competitive position)
- Maintaining the firm’s investment level until the uncertainties about the industry are resolved
- Decreasing the firm’s investment level selectively, by sloughing of unprofitable customer groups, while
simultaneously strengthening the firms investment in lucrative niches.
- Harvesting (or milking) the firm’s investment to recover cash quickly.
- Divesting the business quickly by disposing of its assets as advantageously as possible.
Q6. What is Product? Elaborate the major product line decision for a car manufacturer.
Ans: A Product is anything that can be offered to a market to satisfy a want or need. Products that are marketed include
physical goods, services, experiences events, persons, places, properties, organizations, information and ideas.Each
product is related to certain other products. The product hierarchy stretches from basic needs to particular items that
satisfy those needs. Six levels of the product hierarchy can be identified:-
a) Need Family:- The core need that underlines the existence of product family. e.g. security in case of life insurance.
Product line managers need to know the sales and profits of each item in their line in order to determine which items to
build, maintain, harvest or divest. They also need to understand each product line’s market profile. Every company’s
product portfolio contains product with different margins. A company can classify its products into four types that yield
different gross margins depending upon sales volume and promotion. To illustrate with personal computers.
- Core Product:- Basic computers that produce high sales volume and are heavily promoted but with low margins
because they are viewed as undifferentiated products.
- Staples:- Items with lower sales volume and no promotion such as faster CPU’s or bigger memories. They yield
some what higher margins.
- Specialies:- Items with lower sales volume but which might be highly promoted, such as digital moving-making
euipment, or might general income for services, such as personal delivery, installation, or on site training.
- Convenience Item:- Peripheral items that sell promotion in high volume but receives less promotion such as
computer monitors, printers, upscale video or sound cards and software. Consumers tend to by them where they
buy the original equipment because it is more convenient than making shopping trips. These items carry higher
margins.
The Product line manager must review how line is positioned against competitor’s lines. A product line
is too short it profits can be increased by adding items. Company objectives influence product line length.
Companies that emphasize high profitably will carry shorter lines consisting of carefully chosen items.
Every company’s product line covers a certain part of the total possible range. For example BMW
automobiles are located in the upper price range of the automobiles market. “Line stretching” occurs when a
company lengthen its product line beyond its current range. The company can stretch its line downmarket,
upmarket or both ways.
Car manufacturer BMW may want to introduce a lower priced line automobile if it finds strong growth
opportunities in that segment or if it finds upper market segment is stagnating or declining. This is called “Down-
market Stretch”.
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Companies like Maruti Udyog may wish to enter high end of the market for more growth higher margins
or simply to position themselves as full line manufacturer. This is called upward stretch.
Branding
Branding is giving a name, term, sign, symbol or design or a combination of them, intended it identify the goods
or services of one seller and to differentiate them from those of competitors.
- Brand Name: The part of a brand which can be vocalised eg. Honda, Avon etc.
- Brand Mark: The part of a brand which can be recognized but is not utterable such as symbol, design, or
distinctive colouring or lettering eg. McDonald’s.
- Trade Mark: A brand or part of a brand that is given legal protection because it is capable of exclusive rights to
use the brand name and/or brand mark.
- Copy Right: The exclusive legal right to reproduce, publish and sell matter and from of a literary, musical or
artistic work.
Branding gives several advantages to the seller. First, seller’s brand name and trademark provide legal protection to
unique product features, which would otherwise be copied by competitors.
Second, branding gives the seller the opportunity to attract a loyal and profitable set of customers. Brand loyalty given
sellers some protection from competition and greater control in planning their marketing mix.
Third, good brands help build corporate image. By carrying the company’s name, the help advertise the quality and size of
the company.
In deciding to brand a product, the manufacturer has several options with respect to brand sponsorship. The product may
be launched as manufacturer brand (sometimes called brand name) or it may be launched as a licensed name brand. Or
the manufacturer may supply the product to middleman who put on a distributor brand (also called retailer, store or private
brand).
Manufacturer who brand their products face further choices. Three brand name strategies can be distinguished:
a) Individual Brand Names: This policy is followed by Hindustan Levers Ltd. (HLL) Surf, Wheel etc.
b) A Blanket family name for all products: This policy is followed by Philips Audio System.
c) Company trade name combined with individual product name: This policy is followed by Maruti Udyog Ltd.
(Maruti 800, Maruti Wagon-R, Maruti Esteem etc.)
An increasing number of department stores, middleman etc. are launching store names. Retailshelf space is scarce and
many manufacturers, especially the newer and smaller ones, can not introduce products into distribution under their own
brand name. Middleman take special care to maintain the quality of their brands, their building consumer’s confidence.
Store brands are often priced lower than comparable manufacturer’s brands thus appealing to budget-concious shoppers
especially in times of inflation, middleman give more prominent display to their own brands and make sure they are better
stocked.
Among the desirable quantities fro a brand name are:
1) it should be easy to pronounced.
2) It should be easy to remember.
3) It should from positive image about the product.
Price is the only element in the marketing mix that produce revenue; the other elements produce cost. Price is
the amount of money that customers have to pay for the product. There are six step procedure for price setting
a) Selecting the pricing objectives b) determining demand c) estimating costs d) analyzing competitors price and
offers e) selecting a pricing method f) selecting the final price
A) Selecting the pricing Objectives: A company can pursue any six major objectives through its pricing
i) Survival- Companies pursue survival as their major objective if plagued with overcapacity, intense competition, or
consumer wants. To keep the plant going and inventories turning over, they will often cut prices. Profits are less important
than cut prices. Profits are less important than survival. However, survival is only a short run objectives.
ii) Maximum current Profit- Many companies try to set the price that will maximize current profits. They estimate the cost
and demand associated with alternative prices and chooses the price that produces maximum current profit, cash flow or
rate of return on investment.
iii) Maximum current Revenue- some companies will set a price to maximize sales revenue. Revenue maximization
requires only estimating the demand function.
Many managers believe that revenue maximization will lead to long-run profit maximization and market share growth.
iv) Maximum Sales Growth: Some companies want to maximize unit sales. They believe that a higher sales
volume will lead to lower unit costs and higher long run profit. They set the lowest price, assuming the market is price
sensitive. This is called market penetration pricing.
v)Maximum Market skimming: Many Companies favour setting high prices to skim to the market. If estimates the highest
price it can charge given the comparative benefits of its new product versus the available substitutes. Each time sales
slow down; it lowers the price to draw in the next price sensitive layer of customers.
vi) Product-Quality Leadership:-A company might aim to be the product-quality leader in the market.
vii) Determining Demand: Each price that the company might charge will lead to a different level of demand and will
therefore, have a different impact of its marketing objectives. In normal case, demand and price are inversely related , that
is, the higher the price, the lower the demand.
Substitute- Awareness Effect: Buyers are less price sensitive when they are less aware of the substitutes.
Difficult-Comparison Effect: Buyers are less price sensitive when they cannot easily compare the quality of substitutes
Total Expenditure Effect: Buyers are less price sensitive of the product is not very expensive with respect to their income.
End-Benefit Effect: Buyers are less price sensitive the less the expenditure is to the total cost of the product.
Shared Cost Effect: Buyers are less price sensitive part of the cost is borne by another party.
Price Quality Effect: Buyers are less price sensitive when the product is assumed to have more quality, prestige or
exclusiveness.
Inventory Effect: Buyers are fewer prices sensitive when they cannot store the product.
III Estimating Cost: a company will like to charge a price that covers its cost of producing, distributing and selling the
product, including a fair return for its efforts and risk.
Types of Costs:- A company’s cost takes two forms, fixed and variable. Fixed cost are the costs that do not vary with
production of sales revenue. Examples of fixed costs includes monthly rent, interest etc.
Variable costs vary directly with the level of production. These costs tend to be constant per unit produced. They
are called variable because their with the number of unit produced.
Total cost consists of the sum of the fixed and variable costs for a given level of production. Management will like
to charge a price that will be at least cover the total production costs at a given level of production.
A. Mark-up Pricing: The most elementary pricing method is to add a standard mark-up to the cost of the product.
B. Target Return Pricing: The firm determines the price that would yield its target rate of return on
investment (ROI). Suppose a manufacturer has invested one million in the business and wants t set price to earn a 20
percent ROI i.e 2,00,000. he hopes to sell 50,000 pieces and the unit cost Rs. 16/-. The target return price is given by the
formula
Suppose the fixed cost is Rs, 300000 and variable cost is Rs. 10/- and the produces wants to charge price of Rs. 20/-,
then the break-even volume is given by
Perceived value Pricing: An increasing number of companies are basing their price on the product’s perceived value.
They see the buyer’s perception of value, not the sellers cost, as the key to pricing. They use the non-price variables in
the marketing mix to build up perceived value in the buyers mind, price is set to capture the perceived value.
Going Rate Pricing: In going rate pricing, the firm bases its price largely on competitors prices. With less attention
paid on its own cost and demand. The firm might charge the same, more of less than its major competitors.
Sealed Bid Pricing: Competitive-oriented Pricing is common where firm for jobs. The firm bases its price on
expectations of how competitors will price rather than on a rigid relation of the firm’s costs or demands. The firm wants to
win the contract , and winning normally requires submitting a lower price than competitors.
VI. Selecting the Final Price: While selecting the final price, the company has to select some additional factors
such as:-
Psychological Pricing:Sellers should consider the psychology of prices in addition to their economies. Many
consumers use price as an indicator of quality. Image pricing is especially effective with ego-sensitive products such as
perfumes and expensive cars.
The influence of others Marketing-mix elements on Price: The Final price must take into account the brander’s
quality and advertising relative to competition. Brands with average relative high quality but high relative advertising
budgets able to charge premium price, consumers are willing to pay higher prices for know products than for unknown
products.
Cash Discounts: A cash discount is a price reduction to buyers who promptly pay their bills. Such discounts, serve the
purpose of reducing the sellers liquidity and reducing credit-collection cost and bad-debts.
Quantity Discount: A quantity discount is a price reduction to buyers who buy large volumes. Quantity discounts
must not exceed the.
Many managers believe that revenue maximization will lead to long-run profit maximization and market share growth.
Maximum Sales Growth: Some companies want to maximize unit sales. They believe that a higher sales volume will lead to lower
unit costs and higher long run profit. They set the lowest price, assuming the market is price sensitive. This is called market
penetration pricing.
Maximum Market skimming: Many Companies favour setting high prices to skim to the market. If estimates the highest price it can
charge given the comparative benefits of its new product versus the available substitutes. Each time sales slow down, it lowers the
price to draw in the next price sensitive layer of customers.
Product-Quality Leadership:- A company might aim to be the product-quality leader in the market.
Determining Demand: Each price that the company might charge will lead to a different level of demand and will
therefore, have a different impact of its marketing objectives. In normal case, demand and price are inversely related , that is, the
higher the price, the lower the demand.
Unique – Value Effect: Buyers are less sensitive when the product is more unique.
Substitute- Awareness Effect: Buyers are less price sensitive when they are less aware of the substitutes.
Difficult-Comparison Effect: Buyers are less price sensitive when they cannot easily compare the quality of substitutes
Total Expenditure Effect: Buyers are less price sensitive of the product is not very expensive with respect to their income.
End-Benefit Effect: Buyers are less price sensitive the less the expenditure is to the total cost of the product.
Shared Cost Effect: Buyers are less price sensitive part of the cost is borne by another party.
Price Quality Effect: Buyers are less price sensitive when the product is assumed to have more quality, prestige or exclusiveness.
Inventory Effect: Buyers are less price sensitive when they cannot store the product.
III Estimating Cost a company will like to charge a price that covers its cost of producing, distributing and selling the
product, including a fair return for its efforts and risk.
Types of Cost:-A company’s cost takes two forms, fixed and variable. Fixed cost are the costs that do not vary with production of
sales revenue. Examples of fixed costs includes monthly rent, interest etc.
Variable costs vary directly with the level of production. These costs tend to be constant per unit produced. They are called
variable because their with the number of unit produced.
Total cost consists of the sum of the fixed and variable costs for a given level of production. Management will like to charge
a price that will be at least cover the total production costs at a given level of production.
IV Analysing competitors price and offers: Competitors prices and possible price reactors help the firm establish where its
prices might be set. The company needs to learn the price and quality of each competitors offer.
Once the company is aware of competitors prices and offers, it can use them as an orienting point for its own pricing. If the
firm’s offer is similar to a major competitor’s offer, then the firm will have to price close to the competitors or lose sales. If the firm’s
offer is inferior, the firm will not be able to charge more than the competitor. If the firm offer is superior, the firm can charge more
than the competitor.
V. Selecting a Pricing Method: A company can select any of the following pricing method:
f. Mark-up Pricing
g. Target-return Pricing
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h. Perceived value pricing
i. Going rate Pricing
j. Select-bid Pricing
A. Mark-up Pricing: The most elementary pricing method is to add a standard mark-up to the cost of the product.
B. Target Return Pricing: The firm determines the price that would yield its target rate of return on investment
(ROI). Suppose a manufacturer has invested one million in the business and wants t set price to earn a 20 percent ROI i.e 2,00,000. he
hopes to sell 50,000 pieces and the unit cost Rs. 16/-. The target return price is given by the formula
Suppose the fixed cost is Rs, 300000 and variable cost is Rs. 10/- and the produces wants to charge price of Rs. 20/-, then the break-
even volume is given by
Perceived value Pricing: An increasing number of companies are basing their price on the product’s perceived value. They see
the buyer’s perception of value, not the sellers cost, as the key to pricing. They use the non-price variables in the marketing mix to
build up perceived value in the buyers mind, price is set to capture the perceived value.
Going Rate Pricing: In going rate pricing, the firm bases its price largely on competitors prices. With less attention paid on
its own cost and demand. The firm might charge the same, more of less than its major competitors.
Sealed Bid Pricing: Competitive-oriented Pricing is common where firm for jobs. The firm bases its price on expectations of how
competitors will price rather than on a rigid relation of the firm’s costs or demands. The firm wants to win the contract , and winning
normally requires submitting a lower price than competitors.
VI. Selecting the Final Price: While selecting the final price, the company has to select some additional factors such as:-
Psychological Pricing: Sellers should consider the psychology of prices in addition to their economies. Many
consumers use price as an indicator of quality. Image pricing is especially effective with ego-sensitive products such as perfumes and
expensive cars.
The influence of others Marketing-mix elements on Price: The Final price must take into account the brander’s quality and
advertising relative to competition. Brands with average relative high quality but high relative advertising budgets able to charge
premium price, consumers are willing to pay higher prices for know products than for unknown products.
Price Discounts and Allowances: Most companies will modify their basic price to reward customers for such acts as early
payment, volume purchases and off-search buying. These price adjustment – called discounts and allowances can be of various types
such as:-
Cash Discounts: A cash discount is a price reduction to buyers who promptly pay their bills. Such discounts, serve the purpose of
reducing the sellers liquidity and reducing credit-collection cost and bad-debts.
Quantity Discount: A quantity discount is a price reduction to buyers who buy large volumes. Quantity discounts must not exceed the.
Cost savings to the seller associated with selling large quantities. These savings include reduced expense of selling, inventory and
transportation.
Seasonal discounts:-a seasonal discounts is a price reduction to buyers who buy merchandise or service out of season. Seasonal
discounts allow the seller to maintain steadier production during the year.
Promotional pricing
Marketing channel can be viewed as a set of interdependent organization involved in the process of making a product or service
available for use or consumption.
Most producers do not sell their goods directly to the final users. Between them and final user stand a host of
marketing intermediaries performing variety of functions and bearing variety of names? Some intermediaries-such as wholesalers and
retailers-buy, take title to and resell the merchandise; they are called merchant middlemen. Others-such as brokers, manufacturers
representative and sales agents-search for customers and may negotiate on behalf of the producers but do not take title to the goods;
they are called agent middlemen. Still others-such as transportation companies, independent warehouses, banks and advertising
agencies –assist in the performance of distribution but neither take title to goods nor negotiate purchases or sales; they are called
facilitators.
e) Financing: - The acquisition and allocation of funds required to finance Inventories at different levels of the marketing channel
f) Risk taking:- the assumptions if risks connected with carrying out the channel work..
g) Physical possession:- the successive storage and movement of the physical products from raw materials to final customers.
h) Payment:- buyers paying their bills through banks and other financial Institutions to the sellers.
i) Title:- the actual transfer of ownership from one organization or person to Another.
a)lot size:- the lot size is the number of units that the marketing channel permits a typical customers to buy on a buying occasion. The
smaller is the lot size, the greater the service output level that the channel must provide.
b)Waiting time:- waiting time is the average time that customer of That channel wait for receipt of the goods. Customers normally
prefer fast delivery Channels. Faster service requires a great service output level.
c)special convenience:- special convenience expresses the degree to which the marketing channel makes it easy for customers to
purchase the product.
d)product variety:- product variety represents the assortment breath provided by the marketing channel. Normally customers prefer
greater Assortment breadth because it increases the chance of exactly meeting their need.
e)service backup:- service backup represents the add-on service (credit,delievery, installation, repairsI) provided by the channel. The
greater the service. backup, the greater the work provided by the channel.
The marketing manager must know the service output desired by the target customers provided increased levels of service output
means increased costs for the channel and higher prices for customers.
The channel objectives should be stated in terms of targeted services output level. Under competitive conditions, channel institutions
should arrange their functional tasks so as to minimize total channel costs with respect to tasks desired levels of service output.
Effective channel planning requires manufactures to determine which market segment to serve and the best channels to use in each
case. Each producer develops its channel objectives in the face of constrains stemming from products, intermediaries, competitors,
company policy, environment and the level of service output desired be target customers.
Product characteristics:- Perishable products require more direct marketing because of the dangers associated with delays and
repeated handling. Bulky products require channels that minimize the shipping distance. Custom-built machinery and specialized
business forms are sold directly by company sales representatives because middlemen lack the requisite knowledge. Products
requiring installation and/or maintenance services are usually sold and maintained by the company or exclusively branches dealers.
Competitive characteristics:- Channel design is influenced by the competitor’s channels. The produces may want to compete in or
near the same outlets carrying the competitor’s products. In some other industries, producers may want to avoid the channels used by
competitors.
1) Types of intermediaries:-
The firm has following channel alternatives-
Company Sales force:- Expend the company’s direct sales force. Assign to contact all prospects in the area. Or develop separate
sales force for different products.
Manufacture’s Agency:- Hire agencies in different regions sell the equipment.
Industrial Distributors:- Find distributors in the different regions who will buy and carry device. Give them exclusive
distribution adequate margins and promotional support.
2) The number of intermediaries:-
Company has to decide on the number of middlemen to use at each channel level. Three strategies are available.
Intensive Distribution:- Producers of convenience goods etc. typically seek intensive distribution that is stocking their product
in numerous outlets. These goods must have place utility.
Exclusive Distribution:- Some producers limit the number of intermediaries handling their products. Through exclusive
distribution the manufacturer hopes to obtain more aggressive and knowledgeable selling and more control over intermediaries
polices on prices, promotion, credit and various activities.
3) Terms and responsibilities of channel members:- The producer must determine the conditions and responsibilities of the
participating channel members. The main elements in the trade relation mix are price policies, conditions of sale, territorial
rights and specific service to be performed by each party.
4) Evaluating the major channel alternatives:-
Each channel alternative needs to be evaluated against economic, control and adaptive criteria.
Economic criteria:- Each channel alternative will produce a different level of sales and cost. Company sales representatives
concentrate entirely on the company’s products; they are better trained to sell the company’s products, they are more aggressive
because their future depends on the company’s success on the other hand, sales agency could comically sell more than a company
sales force. The sales agency has more number of sales representatives and secondly, sales agency has better knowledge of the
geographical area in which he is operating
RETAILING
Retailing includes all the activities involved in selling goods or services directly to final consumer for their personal, non
business ose. It does not matter how the goods or services are sold (by person, mail, telephone) or where they are sold( in a store,
on the street, or in the consumer’s home).
Retailers can be various types:-
a) Store retailer
b) Non store retail
A)Store retailer:- Store retailers includes:-
Specialty store:- A specialty store carries a narrow product line with a deep assortment within that line
examples of specialty retailers are apparel stores, sporting goods stores.
Department store:- A department store carries several products lines, typically clothing, home
furniture and household goods.
Super market:-A supermarket is a relatively large, low cost, low margin high volume self service
operation designed to serve the consumer’s total need for food and household-maintains product.
Convenience store:- Convenience stores are relatively small stores that are located near residential
areas; are open long house and seven days limited line of high turnover convenience products.
Place Decisions :- retailers are ;accustomed to saying that the key to success in retailing is “location”. For example customers
primarily choose the bank that is nearest to them Department – store chains, oil companies and last food franchisers exercise great
case in selecting location.
WHOLE SALING
Wholesaling includes all activities involved in selling goods or services to those who buy for resale or business use.
Whole sellers differ from retailers in a number of ways. first , wholes sellers pay less attention to promotion , atmosphere and
location, because they are dealing with business customers rather than final consumes, second, wholesale transactions are usually
cover a larger trade area than retailers. Third, the government deals with wholesalers and retailers differently in regard to legal
regulations and taxes.
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Major Wholesaler Type :- The major types of wholesalers
1) Merchant wholesalers
2) Brokers and Agents and
3) Manufacturers’ Agents.
1) Merchant wholesalers :- They are independently owned businesses that take title to the merchandise they handle. In
different trades they are called jobbers, distributors, or mill supply houses.
2) Brokers and Agents:- They differ from merchant wholesalers in two ways. They do not take title to goods, and they
perform only few functions. Their main function is to facilitate buying and selling, and for their they earn a commission.
3) Manufacturer’s Agents :- manufacturer’s agents represent two or more manufacturers of complimentary lines. They enter
into a formal written agreement with each manufacture covering price policy, territories, order-handling procedures,
delivery service and warranties and commission rates. They use there wide contacts to sell the manufacturer’s products,
manufacturer’s agents are used to sell such lines as apparel, electrical afford to maintain their own sales-force and by large
manufactures who want to use agents territories.
ADVERTISING
Advertising is defined as any paid from on non-personal presentation and promotion of ideas, goods or services by an identified
sponsor. Advertising could be through various media: magazine and newspaper space, radio and television; outdoor displays, direct
mail, novelties, catalogs, directories and circulars. And advertising has many purposes, long term buildup of the organizations
cooperate image. Long-term build up of a particular brand announcement of a special sale, advocacy of a particular cause and
information dissemination about a sale/service of automobile, property etc. In developing an advertising programmer, marketing
managers must always start identifying the target market and buyer motives. The five major decisions in developing an advertising
program, known as five Ms-
a) What are advertising objectives?
b) How much can be spent?
c) What media should be used
d) what message should be spent
e) How should the result be evaluated
Setting the advertising objectives:-
The first step in developing an advertising program is to get the advertising objectives. These objectives must flow from prior
decisions on the target market, market positioning and marketing mix. The marketing positioning and marketing mix strategies define
the job that advertising must do in the total marketing program.
Advertising objectives can be classified as to whether their aim is to inform, persuade or remind.
Informative advertising figures heavily in the pioneering stage of a product category, where the objective is to build primary demand.
Persuasive advertising has moved into the category of comparison advertising, which seeks to establish the superiority if
one brand through specific comparison with one or more other brands in the product class.
Reminder advertising is highly important in the nature stage of the product to keep the consumer thinking about the product. A related
from of advertising is reinforcement advertising which seeks to assure current purchasers that they have made a right choice.
Deciding on the Advertising Budget (Money)
Four common methods are used to set a promotion budget:-
a) Affordable method:- Many companies set the promotion budget at what they think the company.
b) Percentage of sales method:- Many companies set their promotion expenditure at a specified percentage of sales or of the
sales price .
c) Competitive party method:- Some companies set their advertising budget to achieve share of voice party with their
competitors. The marketing manager believes that by spending the same percentage of his sales on advertising as his
competitor, he will maintain his market share.
d) Objective and task method:- The objective and task method calls upon marketers to develop their promotion budgets by
defining their specific objectives, determining the objectives and estimating the costs of performing these tasks. The sum of
these costs is the proposed promotion budget.
Some specific factors that are considered when setting the advertising budget are:-
Stage in the product life cycle:- New product typically receive large advertising budgets to build awareness and to gain
consumer trail. Established brands usually are supported with lower budgets as a ratio to sales.
Market share and consumer base:- High market share brands usually require less advertising expenditure as a percentage of
sales to maintain their share. To build share by increasing market size or market share requires larger advertising expenditure.
(1.) Samples: Samples are offers of a free amount or a trial of a product for consumers. The sample might be delivered doors-to-
door, sent by mail or found attached to another product.
(2.) Coupons: Coupons are certificates entitling the bearer to a stated savings on the purchase of a specific product.
The third economic characteristics are the country’s income distribution. Income distribution is related to a country’s
industrial structure but is also offered by the political system.
II Political – Legal Environment A company should consider four factors in deciding whether to do business in a particular
country.
III. Cultural Environment: - Each nation has its own values, customs and taboos. Foreign business people, if they are to be
effective, must drop their ethnocentrism and try to understand the culture and business practices of their hosts, who often out
on different concepts of time, space and etiquette. The way foreign consumers perceive and use certain products must be
checked out by the seller before planning the marketing programme.
Deciding which Market to Enter
Five steps are involved in estimating the probable rate of return on investment and thus determining which foreign market to enter: -
(1.) Estimate of current Market Potential: - The first step is to estimate total industry sales in each market. This task calls for
using published data and primary data collated through company surveys.
(2.) Forecast of Future Market Potential and Risk: - Te firm also needs to forecast future industry sales. It requires Predicting
economic and Political developments and their impact on industry sales.
(3.) Forecast of Sales Potential: - Estimating the company’s sales requires forecasting its probable market share based on its
competitive advantages.
(4.) Forecast of cast of Costs and Profits: - Costs will depend n the company’s contemplated entry strategy. If it exports or
licenses, its costs will be spelled out in the contracts. If it locates manufacturing facilities in the country, its cost estimation
will require understanding local labor conditions, taxes trade practices and so on. The company subtracts estimated costs
from estimated sales to derive company subtracts estimated cost from estimated sales to derive company profits each year of
the planning horizon.
(5.) Estimate of Rate of Return in Investment: - The forecasted income stream should be related to the investment stream
to derive the implied at the rate of return. This should be high enough to cover the company’s normal target return on its
investment and risk of marketing in that country.
Once a Company decides to target a particular country it has determine the best mode of entry. Its broad choices are indirect
exporting, direct exporting, licensing, Joint Ventures and direct investment.
Indirect Export Companies typically start with indirect exporting, that is, they work through independent middlemen. Four types
of middlemen are available to the company.
(a.) Domestic-based Export Merchant: - This middleman buys the manufacturer’s products and sells it abroad on its own
account.
(b.) Domestic-Based Export Agent: - This agent seeks and negotiates foreign purchases and is paid commission. Included
in the group are trading companies.
(c.) Cooperative Organization: - A Cooperative organization carries on exporting activities on behalf of several
producers and is partly under their administrative control. This form is often used by producers of primary products fruits,
nuts and so on.
(d.) Export-management Company: - The middleman agrees to manage a company’s exports for a fee.
(a.) Domestic-Based Export Department or Division: - An export sales manager carries on the actual selling and draws
on the market assistant as needed. It might involve into a self-contained export department performing all activities involved
in export and operating as a profit centre.
(b.) Overseas Sales Branch or Subsidiary: - An overseas sales branch allows the manufacturer to achieve greater presence and
programme control in the foreign market. The sales branch handles sales distribution and might handle warehousing and
promotion as well. It often serves as a display centre and customer service centre.
(c.) Traveling Export Sales Representatives: - The Company can send home-based sales representatives abroad
to find business.
Licensing represents a simple way for manufacturer to become involved in international marketing. The licensor enters an
agreement with a license in the foreign market, offering the rights to use a manufacturing process, trademark patent, or other
item for value for a fee or loyalty. The licensor gains entry into the market at little risk; the license gains production
expertise or a well known product or name without having to start from scratch.
Joint Venture
In Joint Venture, foreign Investor joins with Local Investor to create a new company in which they share Joint Ownership
and control.
Direct Investment
The ultimate form of foreign involvement is direct ownership of foreign based assembly or manufacturing facility. The
foreign company can buy part or full interest in a local company or build its own facilities.
Marketing Programme
Product
A company can adopt following strategies of product and promotion to a foreign market: -
(a.) Straight Extension: - It means introducing the product in the foreign market without any change. Straight Extension
has been successful with cameras, consumer electronics etc.
(b.) Product Adoption: - It involves altering the product to meet local conditions or preferences, International
companies often develop a product version to meet basic needs in developing economics.
(c.) Product Invention: - It is creating something new. It can take two earlier product forms that are well adapted to a
foreign country’s needs. Forward invention is creating a new product to meet a need in another country.
II Promotion: -
The Company can change the message at three different levels. The company can use one message around the
world by varying only the language, name and colors.
The next possibility is to use the same theme globally but adapt the copy to each local market.
Finally, some companies encourages their and agencies to make a full adoption of theme and execution
to the local market.
III Price: -
In setting a global pricing policy, companies have three choices: -
(a.) Setting a Uniform Price Everywhere. But this would be too high a price in poor countries and not high enough in
rich counters.
(b.) setting a Market based Price in each country: Here a company would charge what each country would bear. But
this ignores difference in the actual cost from country to country. Also it would lead to a situation where
middlemen in low price countries transship their product to high price country.
IV Distribution Channels
The international company must take a while channel view of the problem of distributing its products to the final
users. These are three major links between the sellers and ultimate user. In the first link, seller’s international marketing headquarters,
the export department or international division marks decisions on channels and other marketing-mix element
The second link, channels between nations, gets the products to the borders of the foreign nation. It consists of decisions on the types
of intermediaries (agents; trading companies and the like) the type of transportation (air, sea and so on) and the financing and risk
arrangements the third link, channels between foreign nations, get the products from their foreign entry point to the final buyer and
user.
WHY GO GLOBAL
Several factors are drawing more and more companter into international agena;
a) global firms offer better products and tower prices can attack company’s domestic market. The company might want to
counterattack these competitors in their home market.
b) The company discovers that some foreign markets present higher profit opportunities that the elomestic market.
c) The company needs a larger customer base to achieve economies of scale.
d) The company wants to reduce its dependence on any one market.
Web Marketing
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Web Marketing describes the use of electronic means and platform to conduct a company’s business . the advent of internet has
greatly increased the ability of a company to conduct their business faster, more accurately, over a wider range of time and space at a
reduced cost, countless companies have set up web sites to inform and promote their products and services.
E-commerce is more specific than e-business, it means that in addition to providing information to visitors about the company, its
history, policies, products and services and job opportunities, the company or site offers to online. E-commerce has given rise to e-
purchasing and e-marketing. E-purchasing means companies decide to purchase goods, services and information from various online
suppliers. E-marketing company efforts to inform, communicate, promote and sell its products and services.
E-business and e-commerce take place over four major internet domains : B2c (Business to consumer) ; B2B (Business to business ) ;
C2C (Consumer to consumer ) and C2B (Consumer to Business).
Evaluating and controlling marketing
PERFORMANCE
The marketing department’s job B to plan and control marketing activity four types of marketing control can be distinguished.
Managers use various tools to check on plan performance; sales analysis, market share analysis, marketing expense to share analysis
and customer attitude tracking.
a) Sales Analysis sales analysis consists of measuring and evaluating actual sales in relation to sales goals.
b) Market share Analysis company sales do not reveal how well the company. If the company ‘s market share goes up. The
company is gaining on competitors; if it goes down, the company is losing relative to competitors.
c) Marketing Expense to Sales Analysis : - annual plan control requires making sure that the company is not overspending to
achieve its sales goals. The key ratio is to watch is marketing expense to sales. The are five components in expence to sales satio:-
1) Sales force to sales
2) Advertising to sales
3) Marketing research to sales and
4)sales administration to sales.
D) Customer Satisfaction tracking alert concpanter set up systems to monitor the attitude and satisfaction of customers, dealers and
other market system participants, by monitoring changing levels of customers preference and satisfaction before they affect sales,
management can take earlier action. The main customer satisfaction tracking system are:-
1) complaint and suggestion system:- market oriented companies record, analyze and respond to written and oral complaints that
come from the customer.
2) customer panel:- some companies run panels of customers who have agreed to communicate there attitude periodically through
phone calls or mail questionnaires
3) customer surveys; - some companies periodleally mail questionnaire to a random saeuple of customer to evaluate the friendliness
of the staff, the quality of service etc
Profitability control
Besides annual-plan control companies need to measure the profitability of their various products, territories, customer groups, trade
channels and orders sizes. This information will help management determine whether any products of marketing activites should be
expanded, reduced or eliminated .
Efficiency control
Suppose profitability qualysis reveals that the company is earning poor profits in connection with certain products, territories,
customer groups etc. in such a ease company has to find more efficient ways to improve the performance of there marketing entities.
When a company starts investigating sales force efficiency it can often find areas improvement.
Advertising Efficiency
Marketing managers keep track of advertising efficiency by following the following key indicators
1. Advertising cost per thousand target buyers reached by media category and media vehicle .
2. Percentage of audience who noted, saw and read most for each print media vehicle.
3. consumer opinions on the ad contents and effectiveness
4. before after measures of attitudes toward the product
5. number of inquiries stimulated by the ad
6. cost per inquiry
Distribution efficiency
Management needs to search for distribution economies several tools are available for improving inventory control, warehouse and
transportation modes
Strategic control
Companies need under take a critical review of their overall marketing effectiveness, two tools are available namely, marketing
effectiveness rating review and marketing qudit
Marketing Audit
A marketing audit is a comprehensive systematic, independent and periodic examination of a company’s marketing environment
objectives ,. Strategies and activities with a view to determine problem areas and opportunities and recommending a plan of action to
improve the company’s marketing performance
1. marketing environment audit:- this audit analyzes major microenvironment n forces and trends in the key components of the
company’s task environment marketing customers, competitors, distributors and facilitators
2. marketing strategy audit :- this audit reviews the company’s marketing objectives and marketing strategy to appraise how
well these are adapted to the current and forecasted marketing environment.
3. marketing organization audit:- this audit evaluates the capabilities of the marketing organization for implementing the
necessary strategy for the forecasted environment.
4. marketing systems audit :- this audit assesses the quality of the company systems for analysis, planning and control
5. marketing productivity audit :- this audit examines the profitability of different marketing and the cost effectiveness of
different marketing expenditures.