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Marketing is increasingly becoming an important function in all organizations to ensure that demand for a product or service persists along with customer retention.
Scope of Marketing
A good marketer must be able to answer the following questions:
What is Marketing?
The formal definition of marketing is, Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationship in ways that benefit the organization and its stakeholders.
What is Marketed?
Some of the common entities that are marketed are goods, services, events, experiences, persons, places, properties, organizations, information and ideas.
from another party called the prospect. Marketing managers are responsible for demand management. Eight demand states are possible: Negative demand Nonexistent demand Latent demand Declining demand Irregular demand Full demand Overfull demand Unwholesome demand
The key customer markets are consumer markets, business markets, global markets, non-profit and governmental markets.
Product Concept o
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How does marketing affect customer value? How is strategic planning carried out at different levels of the organization? What does a marketing plan include?
Developing the right marketing strategy over time, through discipline and a creative
Supply Chain
Many companies today outsource less critical resources if they can obtain better quality or lower cost. Also, many companies partner with specific suppliers and distributors to create a superior value delivery network, also known as Supply Chain.
thought process can go a long way in the marketing management process. Firms must constantly strive to improve every aspect of their strategy and the plans to guide the marketing process.
Core Competencies
Core Competency refers to areas of special technical and production expertise, whereas distinctive capability describes excellence in broader business processes. Market-driven organizations generally excel in three distinctive capabilities: market sensing, customer linking and channel bonding.
Holistic Marketing
Holistic marketing orientation means, integrating the value exploration, value creation and value delivery activities with the purpose of building long-term, mutually satisfying relationships and co-prosperity among key stakeholders. It helps manage a superior value chain that delivers a high level of product quality, service and speed, in addition to expanding customer share, building customer loyalty and capturing customer lifetime value.
Value Chain
The value chain is a tool which is used for identifying ways to create more customer value. There are 9 strategically relevant activities 5 primary and 4 support.
Strategic Planning
Companies need to focus on the customer and organize to respond effectively to their changing needs, to be known as master marketers. The marketing plan is the central instrument for directing and coordinating the marketing effort. The marketing plan operates at two levels: strategic and tactical. The strategic marketing plan lays out the target markets and the value proposition the firm will offer, based on an analysis of the best market opportunities. The tactical marketing plan specifies the marketing tactics, including product features, promotion, merchandising, pricing, sales channels and service.
Corporate Headquarters
All corporate headquarters undertake four planning activities Defining the corporate mission Establishing strategic business units Assigning resources to each Strategic Business Unit Assessing growth opportunities
Innovation in marketing is critical. Senior management should identify and encourage fresh ideas from a youth perspective, from people new to the field and organization, to gain an understanding and a new approach to marketing.
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this information and also looks into the major macroeconomic forces that affect marketing decisions.
Chapter 3 - Capturing Marketing insights and Spotting Market Trends Internal Company Records
Order to Payment cycle - Customer places order for goods -> Sales team sends invoice to various departments -> Sales team back orders out of stock items -> Suppliers send goods and sales team pays suppliers -> Sales team delivers order and receives payment. Purpose is to minimize number and duration of cycles. Sales Information System - Keeping constant track of sales, customers, etc. It can help in identifying trends. Database / Data warehousing / Data Mining - Separate databases are there for products, salespersons and customers. Purpose is to analyze (mine) data using statistical methods and discover trends.
Economic
Purchasing Power depends on income, savings, prices, credit availability. Indias GDP is $1.2 trillion, per capital income of $3100 Income distribution: 77.7% of urban households have income up to Rs3000/month while only 2.1% have income more than Rs 10,000/month. Categories of Indian consumers: Destitute ( less than Rs16,000 annually, inactive participants in market exchange), Aspirants ( Rs 16,000 to Rs22,000, new entrants in consumption system), Climbers, (Rs 22,000 to Rs 45,000, have desire and willingness to buy but has limited cash), Consuming Class ( Rs 45, 000 to Rs 2,15,000, majority have money and are willing to pay), Rich ( more than Rs 2,15 000, have money and own a variety of products). Trend shows increasing % of Consumers and Climbers while a decreasing % of Destitute and Aspirants.
Social-Cultural
Society shapes beliefs, values, demands, and requirements. It affects dress codes, food habits, brand preferences. Trend shows an increasing role of children on purchasing decisions e.g. bicycles, computers, wrist watches, shoes and other FMCG goods.
affecting the firm and integrating those in its strategic plans is fast gaining ground. E.g. Focus on Non-renewable sources like Jatropha oil, Pollution Control Systems like landfills, recycling centers and focus on CNG initiatives.
Technological
Four major trends are (a) Accelerated Pace of Change: e.g. Apple selling 23.5 million in 2006 (b) Unlimited Opportunities for Innovation e.g. Developments in Bio-tech, telecommunication, Robotics, aid vaccines, contraceptive pills. (c) Varying R & D Budget: e.g. Increasing R & D in Pharmaceutical companies like Cipla, Dr. Reddys, and Ranbaxy (d) Increasing regulation of technological change e.g. Drugs and cosmetic act, control on clinical trial, standard for drugs.
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Why Marketing Research?
Successful Marketing Managers need timely, accurate and actionable information about consumers, competition and their brands to assess past performance, plan future activities and take strategic decisions leading to successful product launch or increase growth of a brand.
Secondary Data:
Already existing somewhere which was collected for some other purpose
Research Methods
Observational Research: Observing Observational consumers, informal interviews, using tools from anthropology to provide deeper understanding of consumers. Focus Group Research: A meeting of a Focus group of people who represent potential customers or important actors for research discussing issues relevant to research Survey Research: Companies undertake Survey descriptive research to learn about peoples beliefs, preferences and satisfaction. Behavioral Data: Customers actual Behavioral purchases do not match their statements made in surveys always hence certain techniques help in exposing these discrepancies Experimental Research: This captures Experimental cause and effect relationship in observed findings.
Research Tools
Questionnaires: A set of questions Questionnaires: soliciting responses that is of relevance to market situation. They can be either open-ended or closed-ended. ended closed Qualitative Measures: Relatively Qualitative unstructured measurement approach for exploring consumers responses Technological Devices: devices like skin Technological sensors brain wave scanners to capture consumers response. Sampling Plan: A plan addressing Sampling questions like whom all to survey, how many people to survey, how should we select people for survey. Contact Methods: Mail Questionnaire, Contact Telephone Interview, Personal Interview, Online Interview.
Primary Data:
Freshly gathered data for research only. Expensive to collect.
Step 3: Data collection is one of the most expensive, time taking and most error prone phase of time-taking market research as it entirely depends on availability, honesty and consistency of respondents. However technology has eased the problem to a great extent. Step 4: This is the process to extract findings by tabulating the data and developing frequency distributions in hope of discovering additional findings. stributions Step 5: The researcher presents finding relevant to the major marketing decisions facing management management.
Types of Market
Potential market
Set of consumers who profess a sufficient level of interest in a market offer.
Step 6: Market research is just a tool to provide insight to the managers. Depending on their confidence in the findings, managers decide to use it
Barriers to Marketing Research Narrow approach to Marketing Research Uneven Caliber of researchers Poor framing of problem Late and occasionally erroneous findings Personality & presentational differences
Measuring Marketing Productivity To assess the efficiency and effectiveness of marketing of marketing activities there are Marketing metrics to assess marketing effects Marketing mix modeling to estimate casual relationships and measure how marketing activity affect outcomes Marketing Dashboard are a structured way to disseminate the insights gleaned from these two approaches within the organizations Types of Demand Market Demand It is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program Company Demand It is the companys estimated share of the market demand at alternative levels of company marketing effort in a given time period Current Demand It is the demand that companies attempt to determine by measuring total market potential, area market potential industry sales and market share Future Demand It is the demand that companies determine by surveying buyers intentions, solicit their sales forces input, gather expert opinions, analze past sales or engage in market testing mathematical models, advanced statistical techniques and computerized data collection procedures
Available market
Set of consumers who have interest income and access to a particular offer.
Target market
The part of the qualified available market the company decides to pursue.
Penetrated market
Set of consumers who are buying the company's product.
To estimate current demand companies attempt to determine total market potential, area market potential industry sales and market share To estimate future demand companies survey buyers intentions solicit their sales forces input, gather expert opinions, analyze past sales or engage in market testing mathematical models, advanced statistical techniques and computerized data collection procedures are essential to all types of demand and sales forecasting.
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This chapter discusses the importance and various methods of creating customer value and sustaining customer loyalty. As customers have become more informed and educated than ever, organisations have started to adopt business models where the customer is at the top.
Very often, a customer value analysis is undertaken by managers to better understand the companys strengths and weaknesses in comparison with competition. It follows the pattern below 1. Identify the major attributes and benefits that customers value. 2. Assess the quantitative importance of the different attributes and benefits.
Customer profitability
A profitable customer is one that over time yields a revenue stream that is significantly greater than that companys cost stream for attracting, selling and servicing that
150-20 Rule
The 20% most profitable customers generate as much as 150% of the profits of the company; the 20% least profitable customers lose 100% of the profits. Measuring customer profitability lies in the concept of Customer Lifetime Value (CLV). CLV describes the net present value of the future stream of profits expected over the customers lifetime purchases. CLV calculations are generally used by marketers to develop a long-term perspective.
Chapter 5 - Creating Customer Value, Satisfaction and Loyalty Trends Building Customer Loyalty
It involves the following procedures 1. Interacting with customers 2. Developing loyalty programs 3. Personalising marketing 4. Creating institutional ties
Database marketing
It is the process of building, maintaining and using customer databases and other databases to contact, transact and build customer relationships.
Customer Database
It contains customers past purchases, past volumes, past prices and profits; buyers personal details, status of current contacts, the companys share of the buyers business, competitive suppliers, etc.
Datamining
Through datamining, marketers can extract information about individuals, trends, etc. from the customer database. It uses techniques such as cluster analysis, predictive modelling, etc.
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Problem Recogniton
Information Search
Evaluation of Alternatives
Purchase Decision
Postpurchase Behaviour
Differences in Brands
Significant
Variety Seeking
Insignificant
Dissonance Reducing
Habitual
1. Complex Buying Behaviour: When a customer purchases something for the first time. 2. Variety Seeking: Consumers will keep switching varieties just out of boredom. Eg- Biscuits. Marketer should keep introducing new products and display the product prominently. 3. Habitual: Buying the same thing out of habit and not out of loyalty. Distribution network should be excellent in this case. Maintain consistency in product and advertising. 4. Dissonance Reducing: In case of repeat purchase of same product.
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Organizational buying
is the decisionmaking process by which organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers.
Modified rebuy: situation in which the buyer wants to modify product specifications, prices, delivery requirements, or other terms. New task: situation in which a purchaser buys a product or service for the first time (e.g., office building, new security system).
education, job position, After evaluating the proposals, the buyer will invite a few suppliers to make formal personality, attitudes presentations. toward risk, and culture. Cultural Factors Marketers carefully study the culture and customs of each region to better understand can affect buyers and the buying organization.
Stage 6: Supplier Selection The buying center specifies desired supplier attributes (such as product reliability and service reliability) and indicate their relative. A blanket contract may be established. The buyers computer automatically sends an order to the seller when stock is needed, and the supplier arranges delivery and billing according to the blanket contract. Stage 7: Order-Routine Specification The buyer negotiates the final order, listing the technical specifications, the quantity needed, the delivery schedule, and so on. In the case of MRO items, buyers are moving toward blanket contracts rather than periodic purchase orders. Stage 8: Performance Review are used. The buyer may contact the end users and ask for their evaluations. Or the buyer may rate the supplier on several criteria using a weighted score method. Or the buyer might aggregate the cost of poor supplier performance to come up with adjusted costs of purchase, including price.
the cultural factors that The buyer periodically reviews the performance of the chosen supplier(s). Three methods
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Mass Marketing:
The seller engages in mass production, mass distribution and mass promotion of one product for all buyers
B. Demographic Segmentation: The market is divided on the basis of variables such as age, family size, family life cycle, gender, income, occupation, education, religion etc. Demographic variables are easy to measure and are directly associated with customer needs and wants
Stage3: Parenthood
Stage4:Post Stage4:Post-ParentHood
C. Psychographic Segmentation: Here buyers are divided into different groups on the basis of psychological/personality traits, lifestyles or values. Lifestyle: Culture-oriented, sports oriented, outdoor oriented. Classification is oriented, done on three parameters: AIO-Activities, Interests and Opinions. Activities, Personality: Compulsive, gregarious ,authoritarian ,ambitious D. Behavioral segmentation: Buyers are divided on the basis of their knowledge of, attitude toward, use of, or response to a product. The behavioral variables are as follows:
P = Product M = Market
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Technological
is a bypass strategy practiced in high-tech industries. The challenger patiently researches and develops the next technology and launches an attack, shifting the battleground to its
costumers which often lowers costs and can manipulate prices and costs in different parts of the value chain.
leapfrogging Benchmarking is the art of learning from companies that perform certain tasks better than other companies.
Competitive Forces (Michael Porters 5 forces)
1. Threat of intense segment rivalry - segment is unattractive if it contains numerous, strong, or aggressive competitors. 2. Threat of new entrants - segment's attractiveness varies with the height of its entry and exit barriers. The most attractive segment has high entry barriers and low exit barriers. 3. Threat of substitute products - A segment is unattractive when there are actual or potential substitutes for the product. 4. Threat of buyers' growing bargaining power - A segment is unattractive if buyers possess strong or growing bargaining power. 5. Threat of suppliers' growing bargaining power - A segment is unattractive if the company's suppliers are able to raise prices or reduce quantity supplied.
Identifying Competitors
Entry, Mobility, And Exit Barriers Cost Structure Degree Of Vertical Integration Degree Of Globalization
territory, where it has Industry Concept Number Of Sellers And Degree Of Differentiation an advantage.
Marketing Concept According to marketing approach, competitors are companies that satisfy the same customer need. The market concept of competition reveals a broader set of actual and potential competitors. By mapping the buyer's steps in obtaining and using the product a company's direct and indirect competitors can be identified.
Trends
Selecting Competitors:
Strong versus Weak: Weak require fewer resources per share point gained. The firm should also compete with strong competitors to keep up with the best.
Three Important Variables for analyzing competitors Share of market - The competitor's share of the target market. Share of mind - The percentage of customers who named the competitor in responding to the statement, "Name the first company that comes to mind in this industry." Share of heart - The percentage of customers who named the competitor in responding to the statement, "Name the company from which you would prefer to buy the product." Companies that make steady gains in mind share and heart share will inevitably make gains in market share and profitability.
Close versus Distant: Most companies compete with competitors who resemble them the most
"Good" versus "Bad": should support its good competitors (Play by the rules) and attack its bad competitors.
The nicher achieves high margin, whereas the mass marketer achieves high volume. Nichers some things from the have three tasks: creating niches, expanding niches, and protecting niches. Because niches can weaken, the firm must continually create new ones therefore multiple niching is leader but maintains preferable to single niching. The key idea in successful nichemanship is specialization. Here are some possible niche roles: differentiation in End-user specialist: The firm specializes in serving one type of end-use customer. terms of packaging, Customer-size specialist: The firm concentrates on selling to small, medium-sized, or large customers. advertising, pricing, Geographic specialist: The firm sells only in a certain locality, region, or area of the or location. world. Product-feature specialist: The firm specializes in producing a certain type of Adapter - takes the product or product feature leader's products and Quality-price specialist: The firm operates at the low- or high-quality ends of the market adapts or improves Channel specialist: The firm specializes in serving only one channel of distribution
them.
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10
It is important for the marketer to create a strong brand and maintain customer loyalty. This chapter talks about the concepts of brand and how branding works. We will understand what brand equity is, how it is built and measured as well as the decisions involved in branding strategy.
Brand:
A name, term, sign,
Brand Equity
Added value endowed on products and services. Reflected in way consumers think, feel and
symbol or design, or a act with respect to a brand. Customer based brand equity differential effect brand combination of them, knowledge has on customer response to the marketing of a brand. Maybe positive or intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.
negative depending on how consumers respond. It has three key ingredients Brand equity arises from differences in customer response Differences in response are a result of consumers knowledge of the brand. Brand Knowledge consists of all thoughts, feelings, images, experiences, beliefs and so on that become associated with the brand The differential response is reflected in perceptions, preferences and behaviour related to all aspects of the marketing of the brand Marketer must build a strong brand that ensures that the consumers have the right experiences.
Brand Promise
Marketers vision of what the brand must be and do for the consumers. The true and future value depends on customers, their brand knowledge and their likely response to marketing activity.
Brand Element:
Those trademark able devices that identify and differentiate the brand. Most strong brands employ multiple brand elements. Brand element choice criteria includes 6 main parameters first three being memorable, meaningful and likable (brand building) and last three being transferable, adaptable and protective (defensive).
Declining Leaders
Kodak AAA Tide
Brand Structure (Esteem & Knowledge) (E There are the five key components of the model 1. Differentiation degree to which a brand is seen as different from others 2. Energy brands sense of momentum 3. Relevance breadth of brands appeal 4. Esteem how well the brand is regarded and respected 5. Knowledge how familiar and intimate customers are with the brand
Resonance
Salience
Chapter 10 - Creating Brand Equity Trends Brand Salience how often and how easily customers think of the brand under
various purchase or consumption situations. Brand Performance how well the product or service meets customers functional needs Brand Imagery - describes the extrinsic properties of the product or service; also the way in which brand attempts to meet customers psychological or social needs Brand Judgements focus on customers own personal opinions and evaluations Brand Feelings customers emotional responses and reactions with respect to the brand Brand Resonance nature of the relationship customers have with the brand and the extent to which they feel theyre in sync with it
Brand Reinforcement
Brand needs to be managed so its value does not depreciate. Brand equity reinforced by marketing actions that consistently convey the meaning of the brand in terms of what it represents and how it makes the products superior. Reinforcing requires innovation and relevance throughout the marketing program.
Brand Audit consumer focussed series of procedures to assess the health of the
brand, uncover its sources of brand equity and suggest ways to improve and leverage its equity.
Brand Valuation Job of estimating the total financial value of the brand.
Brand Portfolios
Marketers need multiple brands to cater to multiple markets. The reasons for diversifying the brand portfolio 1. Increasing shelf presence and retailer dependence in the store 2. Attracting customers seeking variety who may otherwise have switched to another brand 3. Increasing internal competition within the firm 4. Yielding economies of scale in advertising, sales, merchandising and physical distribution
Customer Equity
Sum of lifetime values of all customers. The aim of Customer Relationship Management (CRM) is to produce high customer equity.
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Positioning:
Positioning is the act of designing the companys offering and image to occupy a distinctive place in the minds of the target market. Positioning requires determining on a frame of reference based on the following factors:
strategies.
associate with a brand, positively evaluate and believe they could not find to the same extent
Points of Parity (POP): They are associations that are not unique to the brand
but in fact maybe shared with other brands. It has two forms: Category Points of Parity: Associations customers view as essential to a legitimate and credible offering within a certain product or service category. Competitive Points of Parity: Associations designed to negate a competitors pointsof-difference.
Competitive Advantages
It is a companys ability to perform in 1 or more ways that competitors cant match. Two
Straddle Positing:
It is a common positioning technique used when a company tries to straddle between two frames of reference. E.g. BMW through a well crafted marketing program straddled Luxury and Performance as both POD and POP.
sustainable competitive advantages are: Leverageable Advantage: is one that a company can use as a springboard to new advantages Customer Advantage: is an advantage that a customer sees in the companys offering
A companys positioning and differentiation strategy must change as the product, market and competitors change over the product life cycle (PLC).
Chapter 11 - Crafting the Brand Positioning Trends Summary of Product Lifecycle Characteristics, Objectives and Strategies
Introduction Characteristics Sales Low Sales High Cost per customer Negative Innovators Growth Rapidly rising sales Maturity Peak Sales Decline Declining Sales Low cost per customer Declining Profits Laggards
Maturity:
When the
Costs Profits
Average Cost per Low cost per customer customer Rising Profits Early Adopters High Profits Middle majority
competitors cover all Customers major segments of Marketing the market maturity stage occurs. Competitors invade each others profits slows down, market splits into finer segments and market segmentation occurs. This is often followed by market consolidation caused by the emergence of a new attribute that has greater appeal. Mature markets swing between fragmentation and consolidation.
Advertising Distribution Price Strategies Objectives
Offer product Diversify brands Phase out weak extensions, and items models products service, warranty
Charge cost-plus Price to penetrate Price to match or Cut price market best competitors Build selective distribution Build product awareness among early adopters Build Intensive distribution Build awareness and interest in mass market Build more intensive distribution Stress brand differences and benefits Go selective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyals Reduce to minimum level
Sales Promotion Use heavy sales Reduce to take Increase to promotion to advantage of encourage brand heavy consumer switching entice trial demand
Market Evolution
Emergence: Before a market materializes it exists as a latent market. Here the entrepreneur has three options: 1. Single Niche Strategy: Design a product to meet preferences of 1 segment of the market 2. Multiple-Niche Strategy: Launch 2 or more products simultaneously to capture 2 or more parts of the market 3. Mass Market Strategy: Design a product for the middle of the Market 1. 2. Maturity Decline: Eventually demand for the current products will begin to decrease because either: Societys total need level declines New Technology replaces the old
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Product Levels
Marketers need to address 5 product levels:
Product:
Anything that can be offered to a market to satisfy a need or want, including physical goods, services, experiences, events, persons, places, properties.
Core Benefit: The benefit a customer really buys. E.g. Hotel guest buys rest and sleep Basic Product: e.g. hotel room includes bed, bathroom, desk, dresser, closet, towel etc Expected product: attributes that buyers normally expect along with their product. Augmented product: attributes that exceed buyer expectations. In developed countries, brand positioning and competition take place at this level, while in developing countries it takes place at expected product level.
Potential product: it encompasses all the augmentations and transformations the product or offering might undergo in the future.
Product classification
Durability and tangibility 1. Nondurable goods: tangible goods that are normally consumed in a day or two. E.g.: soaps, soft drinks. They are purchased frequently, thus should be made available in many locations, charged a small markup, and advertised heavily to induce trial. 2. Durable goods: tangible goods that survive many uses. E.g. Clothes, machines. Require more personal selling, higher margins, more seller guarantees. 3. Services: intangible, variable, perishable products. E.g. Haircuts, repairs. Require more quality control, supplier credibility, adaptability. Consumer goods classification: done on the basis of shopping habits. 4 types1. Convenience goods: purchased frequently, immediately, with minimum effort Staples: purchased on regular basis Impulse goods: purchased w/o planning e.g. Chocolates Emergency goods: purchased when need is urgent e.g. Umbrellas
3. Specialty goods: they have unique characteristics for which consumers can spend mo
4. Unsought goods: those that consumers do not know about or think of buying. E
Industrial goods classification: done on the basis of relative cost and how they enter t
Straddle Positing:
It is a common positioning technique used when a company tries to straddle between two frames of reference. E.g. BMW through a well crafted marketing program straddled Luxury and Performance as both POD and POP.
Raw materials: 2 kinds- Farm products, which are seasonal and require spec
marketing apart from advertising, and Natural products, which are limited in supp
Manufactured materials and parts: 2 kinds- component materials (e.g. Iro tires. These enter the final product w/o change.) products. They includethat personal selling important than advertising. They includeMaintenance and repair items. E.g. Paint, broom. Operating supplies. E.g. Lubricants, writing paper, pencils. products. They includeMaintenance and repair services. E.g. Air conditioner maintenance. Business advisory services. E.g. Management consulting, advertising.
cement. These are usually fabricated further), and component parts (e.g. Moto
2. Capital items: long lasting goods that facilitate developing or managing the finish
3. Supplies: short term goods that facilitate developing or managing finished produc
4. Business services: short term services that facilitate developing or managing finish
Product Differentiation Form: this includes size, shape, physical structure. Features: they supplement the basic function of the product. Company must compare customer value v/s company cost for each potential feature. Customization: requires gathering and using information about consumers. Mass customization is the ability of a company to meet each customers requirements. Performance quality: it is the level at which a products primary characteristics operate. 4 performance levels- low, average, high, and superior. The level must be appropriate to the target segment and not necessarily the best. Conformance quality: the degree to which all produced units is identical and meets the promised specifications. Durability: buyers generally pay more for more durable products. However, the extra price must not be excessive and the product must not be subject to rapid technological obsolescence Reliability: probability that a product will not fail within a specified time period. Reparability: the ease of fixing a product when it malfunctions or fails Style: the products look and feel. Creates distinctiveness that is difficult to copy.
Differentiation
Product Hierarchy
1. Need family: the core need that underlies the existence of a product family. E.g. Security. 2. Product family: product classes that satisfy a core need. E.g. Savings and income 3. Product class: a group of products within a family that have functional coherence 4. Product line: a group of products within a class that perform similar function, are sold to same customers, are marketed through same channels. E.g. Life insurance. 5. Product type: a group of items within a line that share of possible forms of the product. E.g. Term life insurance. 6. Item: a distinct unit within a brand or product line distinguishable by size, price, appearance, etc. ICICI prudential term life insurance.
Product system:
compatible manner.
Product Mix
It is the set of all products and items a particular seller offers for sale. Width: how many product lines the company carries. Length: the total no. of items in the mix. Depth: how many variants are offered of each product in the line? Consistency: how closely related the various product lines are in end use.
Product line
Product line analysis: based on Sales and Profit: a company can classify its products based on the margins. o Core products: basic products that have a high sales volume but with low margins as they are essentially undifferentiated commodities. E.g. Basic computers. o Staples: lower sales volume, higher margins, no promotions. E.g. Faster CPU o Specialties: lower sales volume, highly promoted. E.g. Installation, delivery. o Convenience items: peripherals selling in high volumes, less promotion, high margins. E.g. Software, carry cases. Market Profile: product line managers must review how the line is positioned against competitors lines.
Chapter 12 - Setting Product Strategy Line stretching: occurs when companies try to go beyond their current range
offered. Companies stretch in the following ways Down Market Stretch: introducing lower-priced line than the one being offered. It can be risky as the price may not be less enough for competitors or some customers may shift the cheaper version. Up-Marker Stretch: entering high end of market for better growth, higher margins. Two way Stretch: middle level companies entering both high end and low end markets. Helps in establishing market dominance. E.g. Titan started as mid level watch, and then introduced Sonata for low end and Edge, Xylus for high end. Note: a high end model of a low end brand is preferred over a low end model of a high end brand.
Line filling: lengthening product line by introducing more items in the present range. Line modernization, Featuring and Pruning:
product
lines need to change with the times. Can be done piecemeal or all at once. Piecemeal allows company to gauge the effect of change on consumers, but allows competitors to copy and pose greater challenge. Improvements must not occur too early (as they will affect sales of current product) and too late (as competitors would get more time). The company may choose between featuring their most selling items and promoting their weak items from time to time. Companies also need to optimize their brand portfolio. For this, they need to identify the weak items, and weed them away. E.g. Unilever found only 400 of its 1600 items generated 90% of companys profits.
marketed together in some fashion. It includes same company co-branding (Gillette launched Mach 3 Turbo with its shaving gel), joint venture co-branding (Indian oil and Citibank cobranded credit cards), multiple sponsor co-branding ( Taligent, a one time alliance of Apple, IBM and Motorola) and retail co-branding (2 retail establishments using the same location to optimize space and profits). It allows products to be convincingly positioned and generating greater sales as 2 well known images are combined. However, consumer expectations with the level of involvement are high, so an unsatisfactory performance will be damaging for the partner company as well.
Ingredient Branding:
special case of cobranding. It created brand equity for materials, components, parts that are contained products. Ingredient brands create preference for their products so that a host product which does not have that ingredient.
For co-branding to succeed, both brands must have brand equity, and must fit in terms of values, goals and capabilities.
Labeling: labels identify the product, grade the product, describe the product and
promote the product (through attractive graphics).
expected product performance by the manufacturer. Products under warranties can be Guarantees reduce the buyers perceived risk. They are especially helpful when the company is not well known or when product quality is superior to that of competitors.
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Service marketing is
different from goods marketing as service consumer relies on word of mouth, they rely heavily on price, personnel & physical cues to judge quality. They are highly loyal to service providers who satisfy them & because switching costs are high, consumer inertia can make it challenging to entice a customer away from a competitor.
they turn to service differentiation. Service providers find significant profitability in delivering superior services.
How do we define and classify services and how do they differ from goods
A service is any act or performance one party can offer to another that is essentially intangible and does not result in the ownership of anything .Its production may or may not be tied to physical product Categories of services mix. Services can be equipment based or people based & they differ in their objectives and ownership. Service companies can choose among different processes to deliver their service. Services needs client presence & may meet a personal or business need.
Hybrid Major service with accompanying minor goods and services Pure Service
Internal Marketing
It describes the training and motivating employees to serve the customers well.Engage every employee in the organization to practise marketing
Interactive Marketing
It describes the employee skills in serving the client
Inseparability
Services are typically produced and consumed simultaneously .Thus service providers must learn to work in larger groups to provide services to customers Services are variable and buyers are aware of this variability and often Services talk to others about quality before selecting a services. Invest In Good Hiring Standardize the service-performance process performance MonitorCustomer Satisfaction process Services cannot be stored hence there is always a mismatch between Services demand & supply.Stratgies that marketers must use : Demand Side - Differential Pricing,Nonpeak Demand,Complementary Services,Reservation Systems Supply Side - Part-Time employees ,Peak Time efficiency,Increased Time consumer participation,shared services,Facilities for future expansion
Variability
Perishability
Devising Branding Stratgey Create a brand hierarchy and brand portfolio that permits positioning, targeting of different market segments Provide Post-Sales support Sales
Identify what is most valuable to customer and include repair & maintainence services
Chapter 13 - Designing and Managing Services Trends Best Practices of Service Quality Management
STRATEGIC COMPONE NT Top companies are customer obsessed They have clear sense of target customer and their need
TOP MANAGEM ENT COMMITME NT Thorough commitme nt to service e.g Marriot,Xer ox Both financial & service performanc e monitored by top manageme nt
HIGH STANDARDS Setting high service standards developing reliable,resi lient & innovative customer Intefrace systems
SELFSERVICE TEHNOLOGI ES replacing person to person interaction s with self service technologie s e.g ATMs Helping customers to use these facilities
SATISFYING EMPLOYEES & CUSTOMERS Instilling a possitive attitude about customer satisfaction in employees
Marketing Management
By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
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SUMMARY by
Chapter
14
Pricing Environment:
Many firms are nowadays following the low-price trend and have seen success in converting the acquired customers to more expensive products by combining unique product formulations and engaging marketing campaigns.
profitability. Also, price is the only component in the marketing mix that provides revenue and not costs.
Buyers can :
Get instant price comparisons from thousands of vendors: Websites like pricescan.com offer data about products like prices and reviews from hundreds of merchants. Name their prices: The consumer can state his desired price for a product and find the seller willing to meet this price on sites like priceline.com. Also, volume-aggregating sites collate orders from many customers and press the supplier for a deeper discount. Get products free: The open source software movement has eroded margins for almost any major software player. Also, the recent emergence of low-cost airlines providing tickets only for the amount of taxes levied on a ticket is an example how firms have been successful with free offerings.
Sellers can :
Monitor customer behaviour and customize offers: Firms use software to analyse pricing requests with pricing factors such as past sales data, discounts, etc. to reduce processing time of these requests greatly. Offer certain customers special prices: Certain customers are offered lower prices by firms in order to capture a certain market segment on ensure the loyalty of existing customers further.
Step 1: Selecting the Pricing Objective The firm first decides where it wants to position its market offering. The five major pricing objectives are Survival: Companies pursue survival if they are plagued with over-capacity, intense competition, or changing consumer wants. Maximum current profit: Many firms try to set a price that maximises their current profits and delivers a high return on investment. Maximum market share: Here, firms believe that a higher sales volume will lead to lower unit costs and higher long-run profits and thereby maximise their market share. Maximum market skimming: Companies offering new technologies often set high prices initially in order to gain high profits from various segments of the market early on. Product-Quality Leadership: Many firms aspire to be the product-quality leader in the market. Step 2: Determining Demand Each price leads to a different level of demand and therefore has a different impact on a companys marketing objectives. The factors entailing this are Price Sensitivity: The relation between price and demand, i.e. the demand curve can be analysed to determine the markets probable purchase quantity at various prices. This helps a firm to maximise its profits. Estimating Demand Curves: Most companies use the following methods to estimate
Price-Quality inferences: demand curves: Market Surveys, Price Experiments, Statistical Analysis, etc. Many consumers use price Price Elasticity: Marketers need to know how responsive, or elastic, the demand would be, to a change in price. If the price elasticity is high, increasing prices would as an indicator of quality. lead to a great reduction in demand, while decreasing prices would lead to increase High-price cars are in demand. Hence, marketers prefer inelastic markets where price changes do not perceived to be of higher elicit great shifts in demand. quality and vice versa. Price cues: Consumer perceptions of prices are also affected by the manner in which prices are displayed. Many sellers believe setting a price of Rs.2999 puts a product into the 2000 range instead of the 3000 range as perceived by the consumer. Putting Sale signs near the price display have also been known to be effective.
Step 3: Estimating Costs While demand sets a ceiling on the range of price a firm can charge for its product, costs determine the floor. Types of Costs and Levels of Production: Costs are classified as Fixed costs and Variable costs. Fixed costs include salaries, electricity bills, etc. which do not depend upon quantity produced. Variable costs include processing costs, packaging costs, shipping costs, etc. which depend upon quantity produced. Hence, companies must decide on a level of production which will more or less guarantee no losses on the cost of production. Accumulated Production: As firms gain experience in production of a good, the costs involved begin to decline. This is due to various factors such as workers finding shortcuts, smoother flow of materials, etc. This decline in cost with production experience is called experience curve. Target Costing: Other than production scale and experience, costs also change a result of concentrated efforts by designers, engineers, purchase agents etc. They examine each cost component and try to find ways to reduce the costs involved in each of these.
Initiating and
Chapter 14 - Developing Pricing Strategies and Programs Step 4: Analyzing Competitors The introduction of any change in price, cost, offers given by Trends
any seller can elicit a response in the market. A firm must analyse the value offered by a competitor to a customer in terms of prices, addons, post-sale services, etc. and thereby modify its own price in order to be competitive in the market. Step 5: Selecting Pricing Methods There are six major pricing methods: Mark-up Pricing: The most elementary pricing method is to add a standard mark-up to the producers cost. Target-return Pricing: In target-return pricing, the firm determines the price that would yield its target return on investment. Perceived-value Pricing: Perceived-value pricing is made up of several factors like the buyers image of the product, the channel deliverables, warranty quality, customer support, suppliers reputation, etc. Value Pricing: Here, high quality products are assigned a fairly low price. The basic aim here is to attract a value-conscious customer base by reengineering the company to become a low-cost producer without sacrificing quality. Going-rate Pricing: Here, firms base their prices largely on competitors prices, charging nearly the same as major competitors in the market do. Auction-type Pricing: There are three types in this pricing method English Auctions (Ascending bids): Here, the seller puts up an item and the bidders raise the price until the top price is reached. Dutch Auctions (Descending bids): Here, the seller announces a high price and then goes on lowering the price until a bidder accepts it. Or, a buyer announces his desire for a product and sellers compete to offer him the lowest price. Sealed-bid Auctions: Here, potential suppliers submit their bids without knowledge of other bids made and the best bid is selected. Step 6: Selecting the Final Price After the pricing methods have narrowed the range of the price, the company selects the final price by taking into account factors as listed below: Impact of other marketing activities: The final price must take into account the brands quality and advertising relative to the competition. Company Pricing Policies: The final price must be compliant with the companys pricing policies.
increases: Companies initiate price increase to increase their profits by taking into account the feasibility of the price rise. A major factor leading to these price increases is over demand, where the company cannot supply all its customers and hence raises its prices. Responding to
competitors price
changes: Firms respond Gain-and-Risk-sharing Pricing: Buyers may resist accepting a suppliers proposal because of a high perceived level of risk. Hence, the seller has the option of offering to absorb part to price cuts/raises by competitors by considering various factors like the products stage in the life cycle, its importance in the company portfolio, etc.
or all of the risk if the promised value is not delivered. Impact of price on other parties: The final prices effect on other parties such as distributors, dealers, competitors, government should also be taken into account by the management.