Marketing MNGT

Notes on Marketing Management Notes Prepared By Name of Book Written By Ch Ali Imran Marketing Management Philip Kotler
Prepared by Ch Ali Imran
CHAPTER ! Assessing Marketing"s Criti#al Roll in $rgani%ational Performan#e

GLOBAL ECONOMY: Rapid #hanges #an easily render yesterday"s &inning '(sinesses o'solete) After the end of #old &ar #o(ntries and #ompanies are &restling &ith in#reased glo'al #ompetition) A good ne&s is that 'y glo'al market &e means a m(#h larger market for goods and ser*i#es and the 'ad ne&s is that no& these #ompanies ha*e to fa#e a greater #ompetition for a great n(m'er of #ompetitors) Income Gap: A large part of &orld ha*e gro&n poorer in the last fe& de#ades) Altho(gh the &ages has risen '(t the p(r#hasing po&er has de#lined espe#ially for the less skilled &ork for#e) The gap 'et&een ri#h and poor nations is gro&ing) Poor nations press(re the ri#her nations to open their markets '(t ri#her nations maintain tariffs and +(otas to prote#t their lo#al ind(stry and employment) There are t&o sol(tions to this pro'lem, ! Co(nter Trade- .poorer nations sho(ld pay in goods for other goods and ser*i#es) / Pro*iding More for 0ess- The poorer nations sho(ld sell their goods for less than of the ri#her nations) Environmental Restrictions: 1in#e !234"s en*ironmental lo&s are 'eing implemented &hi#h re+(ires to install poll(tion #ontrol e+(ipment) All these la&s raised #ost of man(fa#t(ring for the #ompanies of ri#her #o(ntries) Technical Points: Companies m(st a*oid 5(mping in too soon 6'efore the market is ready7 or too late 6after the market has 'een #on#(rred) W AT I! MAR"ETING# T E CORE CONCEPT!: Marketing has 'een defined in *ario(s &ays) $ne s#holar has defined it as- 8Creation and 9eli*ery of standard of li*ing): The definition &hi#h ser*es o(t p(rpose is as follo&s8A so#ial and managerial pro#ess 'y &hi#h indi*id(als and gro(ps o'tain &hat they need and &ant thro(gh #reating; offering or e<#hanging prod(#ts of *al(e &ith others): This definition ha*e follo&ing important pointsA so#ial and managerial pro#ess) /) Indi*id(als and gro(ps =) Needs and Wants; >) Creating; offering and e<#hanging; ?) Prod(#ts @) Ha*ing *al(e 0et (s #onsider them one 'y one) !A/ A !ocial an$ Mana%erial Process: Marketing is not an indi*id(als o&n &orking '(t the a#tions of indi*id(als or gro(ps &ith other indi*id(als or gro(ps) = Nee$s& Wants an$ 'eman$sNee$s: Needs of e*ery many are spe#ifi# and fe&) They are Bood; air; #lothing; shelter and s(r*i*al) Beyond this people ha*e a strong desire for re#reation) Need is a state of depri*ation of some 'asi# satisfa#tion) They are not #reated 'y so#iety they e<ist in the *ery te<t(re of h(man 'iology) Wants: Wants are the desires for spe#ifi# satisfiers of needs) Need is food '(t a desire to eat a #hi#ken or '(rger are &ants) Needs are fe& '(t &ants are many &hi#h are #ontin(ally shaped and reshaped 'y so#ial for#es and instit(tions like s#hool; families; '(siness; #ompetitors) 'eman$s- Wants for spe#ifi# prod(#ts that are 'a#ked 'y !7 a'ility to '(y and /7 &illingness to '(y them) > Creatin% O((erin% an$ E)chan%in%People #an o'tain prod(#ts in > &ays !7 1elf Prod(#tion) /7 By #oer#ion; 6=7 By 'egging and >7 'y e<#hanging) Marketing emerges &hen people de#ided to satisfy their needs and &ants thro(gh e<#hange) What is E)chan%e- It is the a#t of o'taining a desired prod(#t from someone 'y offering something in ret(rn) It ha*e ? #onditions !7 At least t&o parties) / Ea#h one ha*e something of *al(e) = Ea#h one ha*e a #apa'ility of #omm(ni#ation and deli*ery > Ea#h one is free to a##ept or re5e#t the e<#hange offer) ? Ea#h one 'elie*es in the appropriateness of the e<#hange) ? Pro$*ct +Goo$s& !ervices& an$ I$eas, A prod(#t is any thing that #an 'e offered to satisfy a need or &ant) A prod(#t #an #onsist of as many as three #omponents- ! Coods; / Ideas; and = 1er*i#es) @ 1
Notes on Marketing Management
-al*e Cost an$ !atis(action: A #ons(mer #hooses among many prod(#ts to satisfy a need on the 'asis of *al(e and #ost of the arti#le) Dal(e- It is the #ons(mer"s estimate a'o(t the o*erall #apa#ity of the prod(#t to satisfy his need; and Cost in#l(des the *al(e he ha*e to pay for the prod(#t and in#l(des the opport(nity #ost 6The #ost of lea*ing the other prod(#ts &hi#h he ha*e not p(r#hased)7 3 Mar.ets: Market #onsists of all potential #(stomers ha*ing a parti#(lar need or &ant 6&ho are &illing and a'le to engage in e<#hange7 to satisfy that need or &ant) Th(s market depends (pon; !7 the no of persons &ho ha*e need or &ant; /7 Ha*e reso(r#es of other"s interest; and =7 &illing and a'le to offer these reso(r#es in e<#hange for that they &ant) Traditionally a market is a pla#e &here '(yer and sellers are gathered to e<#hange their goods) MAR"ETING MANAGEMENT Marketing management takes pla#e &hen at least one part to a potential e<#hange thinks a'o(t the means of a#hie*ing desired responses from other parties) 1o; 8Marketing Management is a pro#ess of planning and e<e#(ting; 6#on#eption; pri#ing; promotion and distri'(tion7 ideas; goods and ser*i#es to #reate e<#hange that satisfies indi*id(als and organi%ational goals) T/pes o( 'eman$s: ! Negati*e 9emand When people are e*en ready to pay to a*oid s(#h prod(#t) i)e) ma5or part of the market dislikes the prod(#t) / No 9emand When #(stomer are (na&are of or (ninterested in prod(#t) = 0atent 9emand A demand &hi#h #annot 'e satisfied 'y any e<isting prod(#t) > 9e#lining 9emand- When demand of prod(#t starts de#line day 'y day) ? Irreg(lar 9emand- 9emand for s(#h prod(#ts &hi#h *aries seasonally; daily or e*en on ho(rly 'asis and #a(sing pro'lems of idle or o*er&orked #apa#ity) @ B(ll 9emand- $rgani%ations fa#es f(ll demand &hen they prod(#es (p to their f(ll #apa#ity) The marketing f(n#tion is to maintain the #(rrent le*el of demand 'y #ontin(o(sly impro*ing its +(ality and 'y meas(ring #(stomer"s satisfa#tion) 3 $*erf(ll 9emand When demand goes more than their #apa#ity and &ant to handle) Marketing management &ork in s(#h sit(ation is to de#rease demand temporarily or permanently) E Fn&holesome 9emand- An organi%ed effort to dis#o(rage their (tili%ation) 0ike (nselling #ompains #ond(#ted against #igarettes; al#ohol et#) The marketing task is to get people &ho like something to gi*e it (p (sing s(#h tools as fear messages; pri#e hikes; red(#ed a*aila'ility) COMPANY ORIENTATION! TOWAR' T E MAR"ET PLACE T E !ELLING CONCEPT! Companies &hile making marketing; make #ertain ass(mptions on the 'asis of ideas they ha*e some of these ideas are as follo&s! Pro$*ction Concept: Cons(mers fa*or those prod(#ts &hi#h are &idely a*aila'le at lo& #ost) Prod(#tion oriented managers #on#entrate on high prod(#tion &ith &ide distri'(tion) / Pro$*ct Concept: Cons(mer fa*or those prod(#ts that offer most +(ality; performan#e on inno*ati*e feat(res) Prod(#t oriented managers fo#(ses on marketing the s(perior prod(#ts and impro*ing them o*er time) = !ellin% Concept0!ales Concept: If #(stomer is left alone; &ill ordinarily not '(y eno(gh of the organi%ation"s prod(#ts) The organi%ation m(st; therefore; (ndertake an aggressi*e selling and promotion effort) T E MAR"ETING CONCEPT!: The marketing #on#ept is to a#hie*e organi%ational goals 'y 'eing more effe#ti*e than #ompetitors in integrating marketing a#ti*ities to &ards determining and satisfying the needs and &ants of target markets) Pillars O( Mar.etin% Target Market- 9etermine a part of total market to 'e ser*ed) /7 C(stomer Needs- C(stomers needs are of fi*e types 1tated needs- 6The #(stomer &ants an e<pensi*e #are7 G Real need- 6C(stomer &ants a #ar ha*ing lo& operation #ast and not effe#ted 'y its initial pri#e7 Fnstated need; 6The #(stomer e<pe#ts good ser*i#e from the dealer7 9elighted Needs; 6C(stomer '(ys the #are and re#ei*es a #omplimentary F1) road atlas7 G 1e#ret Need) 6Wants to 'e seen 'y friends as a *al(e oriented sa**y #ons(mer7 Coordinated or Integrated Marketing) When all the #ompany"s departments &ork together to ser*e the #(stomer"s interests; the res(lt is integrated marketing) It takes pla#e on t&o le*elsDario(s marketing f(n#tionsHHHHsales for#e; ad*ertising; prod(#t management; marketing resear#h; and so onHHHHm(st &ork together) All these marketing f(n#tions m(st 'e #oordinated from #(stomer"s point of *ie&) G 1o#ial marketing m(st 'e &ell #oordinated &ith other #ompany departments) 2
Profita'ility or organi%ation) The (ltimate p(rpose of the marketing is to help organi%ations to a#hie*e their goals) In for profit organi%ations the key aim is not only profits '(t to a#hie*e profit as a 'y prod(#t of doing the 5o' &ell) Points That (orces or%ani1ations More to2ar$s the Mar.etin% Concepts: ! 1ales 9e#line 0ook for the ans&er for de#line in sales and mo*ers to in#rease this sales 'y marketing) / 1lo& Cro&th- When sales gro&th rate is lo& and organi%ation makes organi%ed marketing mo*ement to #at#h ne& markets) = Changing B(ying Patterns- When #(stomer &ants #hanges rapidly) > In#reased Competition))) When #ompanies are s(ddenly atta#ked 'y po&erf(l marketing #ompanies and for#ed to meet the #hange) ? In#reased Marketing e<pendit(res- When e<pendit(res of #ompanies for ad*ertising; sales promotion; marketing resear#h; and #(stomer; ser*i#e getting o(t of hand) Management then de#ides it is time to (ndertake a marketing a(dit to impro*e its marketing) ? !ocial Concept: In the so#ial #on#ept managers determine needs &ants and interests of target markets and to deli*er the desired satisfa#tions more effe#ti*ely and effi#iently than #ompetitors in a &ay that preser*es or enhan#es the #ons(mer"s and the so#iety"s &ell 'eing) T E RAPI' A'OPTION O3 MAR"ETING MANAGEMENT: Marketing management today is the s('5e#t of gro&ing interest in all types of organi%ations; &ithin and o(tside the '(siness se#tor and in #o(ntries thro(gho(t the &orld)
CHAPTER / B(ilding C(stomer 1atisfa#tion Thro(gh I(ality; 1er*i#e; and Dal(e

'E3INING C4!TOMER -AL4E AN' !ATI!3ACTION: C*stomer -al*e: C*stomer 'elivere$ -al*e is the differen#e 'et&een total #(stomer *al(e and total #(stomer #ost) Total C*stomer -al*e is the '(ndle of 'enefits #(stomers e<pe#t from a gi*en prod(#t or ser*i#e) Total C*stomer Cost is the '(ndle of #osts #(stomers e<pe#t to in#(r in e*al(ating; o'taining and (sing the prod(#t or ser*i#e) C*stomer !atis(action: 1atisfa#tion is a person"s feelings of pleas(re or disappointment res(lting from #omparing a prod(#t"s per#ei*edJa#t(al performan#e 6or o(t#ome7 in relation to his or her e<pe#tations) Tools (or Trac.in% an$ Meas*rin% C*stomer !atis(action: Complaints 5 !*%%estion !/stem: Make it easy for #(stomer to deli*er s(ggestions and #omplaints) By &ay of s(ggestion 'o<es; s(pplying #omments #ards to #(stomers or hiring a p('li# relationing offi#er) C*stomer !atis(action !*rve/: Responsi*e #ompanies (ses a dire#t meas(re of #(stomer satisfa#tion 'y #ond(#ting periodi# s(r*eys) They send +(estioner or make a telephone #all asking a'o(t their satisfa#tion &ith the prod(#t) Ghost !hoppin%: Companies hire persons top pose potential '(yers to report their findings on strong and &eak points they e<perien#ed in '(ying the prod(#ts of #ompany and of the #ompetitors) These hired persons are #alled ghost shopper #an e*en pose #ertain pro'lems to test &hether the #ompany"s sells personnel handle the sit(ation &ell) Lost C*stomer Anal/sis: Companies sho(ld #onta#t #(stomers &ho ha*e stopped '(ying or s&it#hed to other s(ppliers to learn the reason) 9E0IDERINC CF1T$MER DA0FE AN9 1ATI1BACTI$NKeeping in *ie& the importan#e of #(stomer *al(e and satisfa#tion; &hat does the #ompany prod(#e and deli*er the #(stomerK To ans&er this +(estion; &e need to dis#(ss the #on#epts of a *al(e #hain and *al(e deli*ery systems) Dal(e Chain- is a tool for identifying &ays to #reate more #(stomer *al(e) It is a #olle#tion of a#ti*ities that are performed to design; prod(#e; market; deli*er and s(pport prod(#t) Dal(e #hain identifies nine strategi#ally rele*ant a#ti*ities that #reate *al(e and #ost in a spe#ifi# '(siness) These nine a#ti*ities #onsist of fi*e primary and fo(r s(pport a#ti*ities) The primary a#ti*ities represent the se+(en#e of 'ringing materials into the '(siness; #on*erting them in to final prod(#ts; shipping o(t them; marketing them and ser*i#ing them) The s(pport a#ti*ities in#l(de pro#(rement; te#hnology de*elopment; h(man reso(r#es management and firm infrastr(#t(re Dal(e 9eli*ery 1ystemJNet&ork- To 'e s(##essf(l the firm needs to look 'eyond its o&n operations; into the *al(e #hains of its s(ppliers; distri'(tors; and #(stomers) Many #ompanies today partnered &ith spe#ifi# s(ppliers and distri'(tors to #reate a s(perior *al(e deli*ery net&ork Attractin% an$ Retainin% C*stomers: 3
! / =
>
! / = > ? @ 3 E
! / = > ?
In addition to impro*ing s(pply many #ompanies are intent on de*eloping stronger 'onds and loyalty &ith their (ltimate #(stomers) C$MPFTINC THE C$1T $B 0$1T CF1T$MER1Today #ompanies m(st pay #loser attention to their #(stomer defe#tion rate and take steps to red(#e it) there are fo(r steps to this pro#essCompany m(st define and meas(re its retention rate) /) 9isting(ish the #a(ses of #(stomer attrition and identify those that #an 'e managed 'etter) =) Estimate ho& m(#h profit it loses &hen it loses #(stomers) >) Ho& it &o(ld #ost to red(#e the defe#tion rate) The Need for C(stomer Retention The #ost of attra#ting a ne& #(stomer is estimated to 'e fi*e times the #ost of keeping a #(rrent #(stomer happy) Relationship Mar.etin% The pro#ess of attra#ting and keeping #(stomers is #alled relationship marketing) The main steps in #(stomer de*elopment pro#ess are as follo&s1(spe#ts- The #ompany lo#ates e*ery one &ho might '(y the prod(#t or ser*i#es) Prospe#ts- $(t of s(spe#ts the persons ha*ing strong potential interest in the prod(#t and a'ility to pay for it are separated and are #alled prospe#ts) 9is+(alified Prospe#ts- 9is+(alified prospe#ts are those to &hom the #ompany re5e#ts 'e#a(se; they ha*e poor #redit standing or 'eing (nprofita'le) Birst Time C(stomers- The #ompany hopes to #on*ert many of its +(alified prospe#ts into first time #(stomers) Repeated C(stomer- The first time #(stomers &hi#h are satisfied &ith the prod(#t and '(ys it again 'e#omes repeated #(stomers) They may #ontin(e to '(y from #ompetitors as &ell) Clients The ne<t step is to #on*ert repeated #(stomers in to #lients) Clients are those #(stomers &ho '(y only from the #ompany the rele*ant prod(#t #ategories) Ad*o#ate- The ne<t step is to #on*ert #lients into ad*o#ates) Ad*o#ates are those &ho praise the #ompany prod(#ts and en#o(rage others to '(y from it) Partners- It is an (ltimate #hallenge to t(rn ad*o#ates into partners &here the #(stomer and #ompany &ork together a#ti*ely) 9(ring all a'o*e pro#ess some #(stomers may 'e#ome ina#ti*e or drop o(t d(e to mo*ing other lo#ation; dissatisfa#tion or adopting other #ompanies prod(#ts et#) It is often easier to re attra#t e< #(stomers than to find ne& ones) The #ost of attra#ting a ne& #(stomer is estimated to 'e ? times the #ost of keeping a #(rrent #(stomer happy) 9e*eloping the loyal #(stomers in#reases the #ompany"s re*en(e) The #ompany ha*e to spend for '(ilding greater #(stomer loyalty) Ho&e*er; a #ompany sho(ld not in*est in #(stomer relationship '(ilding so m(#h as the #ost may e<#eed the gains) There are ? different le*els of #ompany in*estment in #(stomer relationship '(ilding) Basi# Marketing- The sales person simply sells the prod(#t) Rea#ti*e Marketing- the sales person sells the prod(#t and en#o(rages the #(stomers #all if they ha*e any +(estion; #omments or #omplaints) A##o(nta'le Marketing- The sales person phones the #(stomer a short time after the sale to #he#k &hether the prod(#t is meeting the #(stomer"s e<pe#tations and also ask him for any prod(#t or ser*i#e s(ggestions and any spe#ifi# disappointments) Pro a#ti*e Marketing- The sales person #onta#ts the #(stomer from time to time telling a'o(t impro*ed prod(#ts and prod(#ts ne& (ses) 6Fse of sales rapes7 Partnership Marketing- The #ompany &orks #ontin(o(sly &ith #(stomers to dis#o*er &ays to effe#t #(stomer ser*ings or to help the #(stomer to perform 'etter) A #ompany #an (se three #(stomer val*e67*il$in% approa#hes !7 Adding finan#ial 'enefits, /7 adding so#ial 'enefits =7 adding str(#t(ral tiles) A$$in% 3inancial Bene(its: A #ompany #an offer t&o finan#ial 'enefits; a7 fre+(en#y marketing programs and '7 #l(' marketing programs) 3re8*enc/ Mar.etin% Pro%rams 6BMPs7 are designed to pro*ide re&ards to #(stomers &ho '(y fre+(ently andJor in s('stantial amo(nts) 3re8*enc/ Mar.etin% is an a#kno&ledgment of the fa#t t that /4L of a #ompany"s #(stomer might a##o(nt for E4L of its '(siness) '7 Many #ompanies ha*e #reated affinity gro(ps; or #l('s of their #(stomers to 'ond them #loser to the #ompany) Cl(' mem'ership may 'e offered a(tomati#ally (pon p(r#hase of a #ertain amo(nt; or 'y paying a fee) A$$in% !ocial Bene(its: Here #ompany personnel &ork on in#reasing their so#ial 'onds &ith #(stomers 'y indi*id(ali%ing and personali%ing their #(stomer relationships) Customers may be nameless to the institution: clients cannot be nameless. Customers are served as part of the mass or as part of large segments; clients are served on an individual basis. Customers are served by anyone who happens to be available; clients are served by the professional assigned to them. A$$in% str*ct*ral Tiles: The #ompany may s(pply #(stomers &ith spe#ial e+(ipment or #omp(ter linkages that help #(stomers manage their orders; payroll; in*entory; and so on) 4
IMPLEMENTING TOTAL 94ALITY MAR"ETING: Total I(ality Marketing 6TIM7 is an organi%ation &ide approa#h to #ontin(o(sly impro*ing the +(ality of all the organi%ation"s pro#esses; prod(#ts and ser*i#es) I(ality is the totality of feat(res and #hara#teristi#s of a prod(#t or ser*i#e ha*ing a'ility to satisfy stated or implied needs) Marketers play se*eral roles in helping their #ompany in defining and deli*ering high +(ality goods and ser*i#es to target #(stomers) They 'ear the responsi'ility for #orre#tly identifying the #(stomers" needs and re+(irements) G They m(st #omm(ni#ate #(stomer e<pe#tations #orre#tly to prod(#t designers) G they m(st make s(re that the #(stomers" orders are filled #orre#tly and on time) G They m(st #he#k that #(stomers ha*e re#ei*ed proper instr(#tions; training; and te#hni#al assistan#e) G They m(st stay in to(#h &ith #(stomers after the sale to ens(re that they are satisfied and remain satisfied) G They are making their spe#ifi# #ontri'(tions to total +(ality management and #(stomer satisfa#tion) $ne impli#ation of TIM is that marketing people m(st spend time and effort not only to impro*e e<ternal marketing '(t also to impro*e internal marketing) The marketer m(st #omplain like the #(stomer #omplains &hen the prod(#t or the ser*i#e is not right) Marketing m(st 'e the #(stomer"s &at#hdog or g(ardian; and m(st #onstantly hold (p the standard of gi*ing the #(stomer the 'est sol(tion)
CHAPTER = Winning Markets Thro(gh Market $riented 1trategi# Planning

A, T E NAT4RE O3 IG PER3ORMANCE B4!INE!!: There are fo(r proposed #hara#teristi#s of a high performan#e '(siness) !7 1takeholders; /7 pro#esses; =7 reso(r#es and >7 organi%ation) ! !ta.ehol$ersThe '(siness m(st define its stakeholders and their needs) 1takeholders may 'e #(stomers employees; s(ppliers and distri'(tors) The '(siness m(st stri*e to satisfy the e<pe#tations of ea#h stakeholders gro(p) The satisfa#tion of stakeholders lead to in#rease in profits and higher *al(e of the organi%ation) / Processes: A #ompany #an a##omplish its goals only 'y managing and linking its pro#esses) = Reso*rces: To #arry o(t pro#esses a #ompany needs reso(r#es like la'or po&er; material; ma#hines energy et#) These reso(r#es #an 'e o&ned; leased or rented) The management sho(ld adopt the &ay &hi#h pro*ide them 'est o(tp(t at la'or o(tlets) > Or%ani1ation: $rgani%ation #onsist of its str(#t(res; poli#ies; and #orporate #(lt(res) In rapidly #hanging '(siness en*ironment organi%ational str(#t(res and poli#ies #an 'e #hanged 6&ith diffi#(lty7 '(t its #(lt(re is hard to #hange) B(t its #hanging is a key to implementing a ne& strategy s(##essf(lly) B, CARPORATE !TRATEGIC PLANNING: All #orporate head+(arters m(st (ndertake planning a#ti*ities- i)e) I7 9efining #ompany mission; II7 Esta'lishing 1trategi# B(siness Fnits; III7 assigning reso(r#es to ea#h 1BF; ID7 Planning ne& '(siness) I 'e(inin% Corporate Mission: $rgani%ations e<ists to a##omplish something; &hi#h sho(ld 'e #lear and spe#ifi#) The aim may; o*er time lose its rele*an#e 'e#a(se of #hanged market #onditions) 1(##essf(l #ompany rene& their mission in the light of follo&ing +(estionsa7 When is o(r '(siness; '7 Who is o(r #(stomerK #7 Dal(e of the #(stomer; d7 What &ill o(r '(siness 'e; e7 What sho(ld o(r '(siness 'eK ! E0EMENT1 THAT 1HAPE THE C$MPANM"1 BF1INE11, Ea#h #ompany"s '(siness is shaped 'y ? elementsa7 History- of aims; poli#ies and a#hie*ements; '7 C(rrent Preferen#es of management and o&ners) #7 The market en*ironmentd7 Reso(r#es A*aila'le determines; &hi#h mission is possi'le) e7 9istin#ti*e Competen#ies- Mission sho(ld 'e 'ased on &hat it does 'est) / C$$9 MI11I$N 1TATE MAN$R CHARACTERI1TIC1The ma5or #hara#teristi#s of a good mission are as follo&si7 Bo#(s on limited n(m'er of goals; ii7 1tress the ma5or poli#ies and *al(es that the #ompany &ant to honor) iii7 9efine the ma5or #ompetiti*e s#opes &ithin &hi#h the #ompany &ill operate) It may 'e any of the follo&ing typesa7 Ind(stry 1#ope- The s#ope of the ind(stry in &hi#h the organi%ation operates) '7 Prod(#t and Appli#ations 1#ope- The range of prod(#ts and appli#ation in &hi#h the #ompany &ill parti#ipate) #7 Competen#y 1#ope- The range of te#hni#al and other #ompeten#ies &hi#h the #ompany &ill master) d7 Market 1egment 1#ope- the type of #(stomer the #ompany &ill ser*e) e7 Derti#al 1#ope- The n(m'er of #hannels and le*els in*ol*ed in pro#ess from ra& material to making finished goods and then their distri'(tion) f7 Ceographi#al 1#ope- The range of regions; #o(nties and gro(ps in &hi#h a #ompany &ill operate) II Esta7lishin% !trate%ic B*siness 4nit: 0arge #ompanies normally manage +(ite different '(siness at one time; ea#h re+(iring its o&n strategy) s(#h #ompanies di*ide them in to 1trategi# B(siness Fnits) 61BFs7) They di*ide them a##ording to their ma5or prod(#ts or markets) CHARACTERI1TIC1 $B 1BF! 1eparately identifia'le) / Ha*e a distin#t mission from others and the #ompany) = Ha*e its o&n #ompetitors > Ha*e its o&n e<e#(ti*e gro(p &ith profit responsi'ilities) III Assi%nin% Reso*rces to !B4s 6
The p(rpose of identifying 1BFs is to de*elop separate strategies and assign appropriate f(nding) Ea#h 1BF sends its plan to head+(arters; &ho appro*es them and sends 'a#k for re*ision or implementation) The p(rpose of sending plans to the head+(arters is to #he#k; &hi#h of its 1BF is performing &ell and to de#ide; &hi#h 1BF to 'e '(ild; hold; maintained; har*est and di*est) ID Plannin% Ne2 B*siness: $ften the pro5e#ted sales are less than #orporate management &ants them to 'e) If their is a strategi# planning gap 'et&een f(t(re desired and pro5e#ted sales; #ompany management &ill ha*e to de*elop ne& '(siness to fill this gape) There are three &ays to fill this gap) !7 Intensi*e Cro&th /7 Integrati*e Cro&th; =7 9i*ersifi#ation Cro&th; and >7 9o&nsi%ing $lder B(siness) ! INTEN1IDE CR$WTHManagement first re*ie&s for impro*ing its e<isting '(siness performan#e) It may 'e done 'y adopting follo&ing three strategiesMarket Penetration 1trategy- Binding the &ays to in#rease the #(rrent prod(#ts market share in the #(rrent market) '7 9ire#t Market 9e*elopment 1trategy- A strategy to look for ne& markets &hose needs might 'e met 'y its #(rrent prod(#ts) #7 Prod(#t 9e*elopment 1trategy- In addition to a'o*e to& management sho(ld also #onsider ne& prod(#t possi'ilities) / INTECRATIDE CR$WTH1ales and profits #an often 'e in#reased 'y 'a#k&ard; for&ard and hori%ontal integration) Ba#k&ard Integration- Mi<ing or engaging the '(siness s(pplying to yo(; e)g) ra& materials) '7 Bor&ard Integration- Integrating &ith an organi%ation to &hom yo( pro*ide goods; like retailers and &holesalers) #7 Hori%ontal Integration- A#+(iring one or more #ompetitors) = 9IDER1IBICATI$N CR$WTHWhen good opport(nities are fo(nd o(tside the present '(siness) There are three types of di*ersified gro&th) Con#entri# 9i*ersifi#ation 1trategy- 1eek ne& prod(#ts ha*ing te#hnologi#al synergy"s &ith e<isting prod(#t lines e*en thro(gh the ne& prod(#ts themsel*es may appeal to a different gro(p of #(stomers) '7 Hori%ontal 9i*ersifi#ation- 1ear#h ne& prod(#t that #o(ld appeal to #(rrent #(stomers thro(gh the ne& prod(#t or te#hnology; (nrelated to its #(rrent prod(#t line) #7 Conglomerate 9i*ersifi#ation- Bind ne& '(siness ha*ing no relationship to the #ompanies old '(siness) > 9$WN1IOINC $09ER BF1INE11Management sho(ld not only de*elop ne& '(sinesses '(t also #aref(lly di*est J #lose tired old '(siness in order to release needed reso(r#es and red(#e #osts) C B4!INE!! !TRATEGIC PLANNING: Indi*id(al '(siness (nits managers prepares their o&n strategi# plans in the light of the organi%ation goals and strategies) It #onsist of si< steps- !7 B(siness mission; /7 E<ternal en*ironmental analysis; =7 Internal En*ironment Analysis; >7 Coal form(lation; ?7 1trategy Borm(lation; @7 Program Borm(lations; 37 Implementation; and E7Beed'a#k) ! B*siness Mission: Ea#h 1BF define its mission &ithin the 'road #ompany missions) / E)ternal Environmental Anal/sis: A 1BF manager has to monitor key e<ternal ma#ro en*ironment and signifi#ant mi#ro en*ironment a#tors e)g) #(stoms; #ompetitors; s(ppliers et#)7 that effe#t its a'ility to earn profit) It sho(ld identify the asso#iated opport(nities and threats) $pport(nities- Marketing opport(nity is an area of '(yers in &hi#h a #ompany #an perform profita'ly) $pport(nities #an 'e listed and #lassified a##ording to their attra#ti*eness and s(##ess pro'a'ility) Threats- An en*ironmental threat is a #hallenge posed 'y an (nfa*ora'le trend or de*elopment that &o(ld lead in the a'sen#e of defensi*e marketing a#tion to deteriorate the sales and profit) = Internal Environment Anal/sis: Keeping in *ie& the e<ternal en*ironmental opport(nities and threats they sho(ld #onsider the internal strengths and &eaknesses) > Goal 3orm*lation: After e*al(ating the strengths and &eaknesses of organi%ation management pro#eeds to de*elop spe#ifi# goals for the planning period) This stage of '(siness strategi# planning pro#ess is #alled goal form(lation) E*ery fe& '(sinesses follo& only one o'5e#ti*e; rather most '(sinesses p(rs(e a mi< of o'5e#ti*es in#l(ding profita'ility; sales; gro&th market shares) The '(siness (nits sets these o'5e#ti*es and then manages 'y o'5e#ti*es) B(siness o'5e#ti*es m(st meat fo(r #riteriaPsThey m(st 'e arranged hierar#hi#ally) '7 1ho(ld 'e stated +(antitati*ely #7 Coals sho(ld 'e realisti#) d7 $'5e#ti*es m(st 'e #onsistent) ? !trate%/ 3orm*lation: 7
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Coals indi#ate &hat a '(siness (nit &ants to a#hie*e) 1trategy is a game plan for HHHHho& to get their or ho& to get a'o*e goals) Three generi# types of strategies are$*erall Cost 0eader 1hip- B(siness &orks hard to a#hie*e the lo&est #ost of prod(#tion and distri'(tion so that it #an set pri#e lo&er than its #ompetitors; and &in a large market share) '7 9ifferentiation- In it '(siness #on#entrate on a#hie*ing s(perior performan#e in an important #(stomer 'enefit area *al(ed 'y a large part of the market) #7 Bo#(s- In it '(siness fo#(ses on one or more narro& markets rather than going after a large market) d7 Allian#es- Many firms make marketing allian#es &hi#h fall in to > #ategories) Prod(#t J 1er*i#e Allian#e or 0i#ensing) #ompany li#enses another to prod(#e its prod(#t or t&o #ompanies 5ointly market their #omplementary prod(#ts or an ne& prod(#t) G Promotional Allian#es $ne #ompany agrees to #arry a promotion for another #ompany"s prod(#t or ser*i#e) e)g) A 'an may agree to display paintings from a lo#al art gallery on its &alls) G 0ogisti#s Allian#es- $ne #ompany offers logisti#al s(pport ser*i#es for another #ompany"s prod(#t) Bor e<ample A''ot 0a'oratories &areho(ses and deli*ers all =Ms medi#al and s(rgi#al prod(#ts a#ross the F1A) G Pri#ing Colla'oration- $ne or more #ompanies 5oin in a spe#ial pri#ing #olla'oration) Pro%ram 3orm*lation: After form(lating strategies '(siness &orks o(t detailed &ork programs) After form(lating programs; marketing people m(st e*al(ate the program #osts) These are the determination of &ays as to; ho& the strategy &ill 'e implemented) Th(s if a '(siness de#ides to a#hie*e te#hni#al leadership it m(st ha*e to make program to de*elop its resear#h and de*elopment department; et#) Implementation: Clear strategy and &ell tho(ght o(t s(pporting programs are (seless; if the firm fails to implement them #aref(lly) Indeed strategy is one of the se*en elements that the 'est managed #ompanies e<hi'it) The se*en elements are di*ided in to t&o gro(ps) Hard&are and 1oft&are) HAR9WARE1 are 1trategy; 1tr(#t(re; and 1ystem) 1$BTWARE1 are style; staff; skills and shared *al(e) 1tyle means that employees share a #ommon &ay of thinking and 'eha*ing) 1taff- Means #ompany ha*e hired a'le people; trained them &ell and assigned them the right 5o's) 1kills- Means that employees ha*e the skills needed to #arry o(t the #ompany"s strategy) 1hared Dal(es- Means employees share the same g(iding *al(es) 3ee$6Bac. 5 Control: At the end the firm need to tra#k the res(lts and monitor ne& de*elopments in the internal and e<ternal en*ironments) T E MAR"ETING PROCE!!: To f(lly (nderstand the marketing pro#ess; &e m(st first look at ho& a #ompany defines its '(siness) The task of any '(siness is to deli*er *al(e to the market at a profit) There are at least t&o *ie&s of the *al(e deli*ery pro#ess) Birst is the traditional *ie& is that firms makes something and then sells it) In this *ie& marketing takes pla#e in the se#ond half and it ass(mes that the #ompany kno&s &hat to make and that the market &ill '(y eno(gh (nits to prod(#e profits for the #ompany) 1e#ond one is the ne& *ie& of '(siness pro#ess) It pla#es marketing at the 'eginning of the '(siness planning pro#ess) Instead of emphasi%ing marketing and selling; #ompanies see them sel*es as part of a *al(e #reation and deli*ery se+(en#e) This se+(en#e #onsist of three parts) Choosing the *al(e; represents the 8home&ork: that marketing m(st do 'efore any prod(#t e<ists) The form(la HHHH segmentation; targeting; positioning 61TP7HHHHH is the essen#e of strategi# marketing) '7 When the *al(e has 'een #hosen; '(siness (nit is ready to pro*ide the *al(e) The tangi'le prod(#t"s spe#ifi#ations and ser*i#es m(st 'e detailed; and a target pri#e m(st 'e esta'lished) 9e*eloping spe#ifi# prod(#t feat(res; pri#es; and distri'(tion o##(rs at this stage and are part of ta#ti#al marketing) #7 In the third phase the *al(e is #omm(ni#ated) Here f(rther ta#ti#al marketing o##(rs in (tili%ing the sales for#e; sales promotion; ad*ertising; and other promotional tasks to inform the market a'o(t the prod(#t) The Napanese ha*e f(rther de*eloped this *ie& 'y prom(lgating the follo&ing #on#eptsOero C(stomer feed'a#k time- C(stomer feed'a#k sho(ld 'e #ontin(o(sly #olle#ted; to learn; ho& to impro*e the prod(#t and its marketing) /7 Oero prod(#t impro*ement time- Impro*ement ideas of #(stomers and employees sho(ld 'e e*al(ated and the most *al(ed and feasi'le ideas sho(ld 'e introd(#ed as soon as possi'le) =7 Oero P(r#hasing Time- Company sho(ld re#ei*e re+(ired parts #ontin(o(sly thro(gh 5(st in time arrangements &ith s(ppliers) >7 Oero 1et(p Time- The #ompany sho(ld 'e a'le to man(fa#t(re any of its prod(#ts as soon as they are ordered) ?7 Oero defe#ts- The prod(#t sho(ld 'e of high +(ality and free of fla&s) The Mar.etin% Process #onsist of !7analy%ing marketing opport(nities; /7 de*eloping marketing strategies; =7 planning marketing programs; and >7 managing the marketing effort)
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Anal/1in% Mar.etin% Opport*nities: The first task of marketing managers is to analy%e the long r(n opport(nities in this market for impro*ing the (nit"s performan#e) The p(rpose of market resear#h is to gather signifi#ant information a'o(t the marketing en*ironment) 'evelopin% Mar.etin% !trate%ies: It #onsist of t&o parts !7 9ifferentiating; and /7 positioning strategy for the target market) After la(n#hing the prod(#ts the prod(#t strategy &ill ha*e to 'e modified at the different stages in the prod(#t life #y#le; #onsisting of fo(r phases; introd(#tion; gro&th; mat(rity; and de#line) Plannin% Mar.etin% Pro%rams: To transform market strategy into marketing programs marketing managers m(st make 'asi# de#isions on i7 marketing e<pendit(res; ii7 marketing mi<; and iii7marketing allo#ation) i7 MARKETINC EQPEN9ITFRE- The management ha*e to de#ide as to &hat le*el of marketing e<pendit(re is ne#essary to a#hie*e its marketing o'5e#ti*es) ii7 MARKETINC MIQ- Marketing mi< is the set of marketing tools that the firm (ses to p(rs(e its marketing o'5e#ti*es in the target market) There are literally do%ens of marketing mi< tools) A fo(r fa#tor #lassifi#ation of these tools is *ery pop(lar; #alled as fo(r Ps- prod(#t; pri#e; pla#e and promotion) Marketing mi< de#ision m(st 'e made for 'oth distri'(tion #hannels and final #ons(mers) All the marketing mi< *aria'les #annot 'e ad5(sted in the short r(n)
Marketing Mi<
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Prod(#t Pri#e Promotion Pla#e Dariety 0ist Pri#e 1ales promotion Channels I(ality 9is#o(nts Ad*ertising Co*erage 9esign Allo&an#es 1ales Bor#e Assortments Brand Name Payment P('li# relations 0o#ations Pa#king period 9ire#t Marketing In*entory 1i%es Credit Transport 1er*i#es terms Warranties Ret(rns) Mana%in% the Mar.etin% E((ort: The final step in marketing pro#ess is managing the marketing effort) The #ompany m(st '(ild a marketing organi%ation that is #apa'le of implementing the marketing plan) There are three types of marketing #ontrolAnn(al Plan #ontrol- The task of #ompany is a#hie*ing its sales; profits; and other goals) Birst management state &ell defined goals for ea#h month or +(arter) G 1e#ond; management m(st meas(re its ongoing performan#e in the market pla#e) G Third; management m(st determine the (nderlying #a(ses of any serio(s performan#e gaps) G Bo(rth; management m(st #hoose #orre#ti*e a#tions to #lose gaps 'et&een goals and performan#e) Profita'ility Control Meas(ring the a#t(al profita'ility of prod(#ts; #(stomer gro(ps; trade #hannels; and other si%es) Marketing profita'ility analysis meas(res the profita'ility of different marketing a#ti*ities) Marketing effi#ien#y st(dies try to determine ho& *ario(s marketing a#ti*ities #o(ld 'e #arried o(t more effi#iently) #7 1trategi# Control- E*al(ating &hether the #ompany"s marketing strategy is appropriate to market #onditions) Be#a(se of rapid #hanges in the marketing en*ironment; ea#h #ompany needs to re assess periodi#ally its marketing effe#ti*eness thro(gh a #ontrol instr(ment kno&n as the marketing a(dit)
CHAPTER > Managing Marketing Information 1ystem and Meas(ring Market 9emand
A W AT I! MAR"ETING IN3ORMATION !Y!TEM: A marketing information system #onsist of people e+(ipment and pro#ed(re to gather; sort; analy%e; e*al(ate; and distri'(te needed informations timely and a##(rately to marketing de#ision makers) The needed information is de*eloped thro(gh s(' systems of Marketing Information 1ystem) !*76s/stems o( MI! ! Internal Company Re#ords; / Marketing Intelligen#e A#ti*ities; = Marketing Resear#h and > Marketing 9e#ision 1(pport 1ystem) ! Internal Recor$ !/stem: It in#l(des reports on orders; sales pri#es; in*entory le*els; re#ei*a'le; paya'le and so on) By analy%ing these information marketing managers #an spot light important opport(nities and pro'lems) I7 $R9ER T$ PAMMENT CMC0E It is the heart of the internal re#ord system) It in#l(des pro#ed(re and time in*ol*ed in re#ei*ing order; shipping goods 'a#k ordering of o(t of sto#k items and re#ei*ing payment against shipped items) Today #ompanies need to do these steps +(i#kly and a##(rately as the #(stomer fa*or those firms &ho deli*er goods on time) Many #ompanies are no& (sing ele#troni# data inter#hange 6E9I7 soft&are to impro*e the a##(ra#y and effi#ien#y of the order to payment #y#le) II7 1A0E1 REP$RTINCMarketing manager need (p to date reports of their #(rrent sales) Comp(ter te#hnology may 'e (sed to design fast and #omprehensi*e sales reporting system Marketing Information 1ystem represents a #ross 'et&een &hat a manager think they need; &hat manager"s really need; and &hat is e#onomi#ally feasi'le) In this regard marketing e<e#(ti*es HHHHlike prod(#t managers; sales managers; sales representati*esHHHHH to dis#o*er their information needs) / Mar.etin% Intelli%ence !/stem It is a set of pro#ed(res and so(r#es (sed 'y managers to o'tain their e*eryday information a'o(t pertinent de*elopment in the marketing en*ironment) It is done 'ya7 reading 'ooks; ' reading ne&spapers) #7 trade p('li#ations d7 talking to #(stomers; e7 talking to s(ppliers f7 talking to distri'(tors; g7 talking to other o(tsiders; and h7 talking to other managers A personnel &ithin the #ompany) If the marketing intelligen#e system is too #as(al; *al(a'le information #o(ld 'e lost or arri*e too late) A &ell r(n #ompany take follo&ing > steps to impro*e +(antity and +(ality of marketing intelligen#e systemTHR$FCH TRAININC THE 1A0E1 B$RCE- By training the sales for#e to spot and report ne& de*elopments) They sho(ld kno& that &hat type of information to 'e pro*ided to &hi#h manager) they are in e<#ellent position to pi#k (p information missed 'y other means) Met 'eing *ery '(sy they may fail to pass on the signifi#ant information) '7 THR$FCH 9I1TRIBFT$R1- Company may moti*ate distri'(tors; retailers; and other intermediaries to pass along important intelligen#e) #7 PFRCHA1E INB$RMATI$N BR$M $FT1I9E- Company may p(r#hase information from o(tside s(ppliers; e)g) resear#h firms) These resear#h firms gather and store data at a m(#h lo*er #ost than the #ompany #o(ld do on its o&n 'asis; and sell this information to the parties ha*ing #on#ern) d7 E1TAB0I1HINC AN INTERNA0 MARKETINC INB$RMATI$N CENTER to #olle#t and #ir#(late the marketing intelligen#e information) The staff s#ans ma5or p('li#ations; prepare an a'stra#t of rele*ant ne&s and pro*ide it to marketing manager) It #olle#t and files rele*ant information to assist manager in e*al(ating ne& information) = Mar.etin% Research !/stemMarketing resear#h system is a systemati# &ay of designing; #olle#ting; analy%ing and reporting data and findings &hi#h are rele*ant to a spe#ifi# marketing sit(ation; fa#ed to the #ompany) I7 1FPP0IER1 $B MARKETINC RE1EARCH- There are a n(m'er of &ays to do marketing resear#h) 0arge #ompanies generally ha*e their o&n marketing resear#h departments) While small #ompanies may not ha*e s(#h departments and #an #ond(#t resear#h in #reati*e and afforda'le manner; s(#h as gi*en 'ello&Engaging st(dents or Professors to design and #arry o(t marketing resear#h pro5e#ts) '7 Fsing on line information ser*i#es s(#h as Ameri#a on 0ine) #7 Many small #ompanies ro(tinely *isit their #ompetitors to 'ring ne& ideas) 0arge #ompanies #an adopt any of the follo&ing &ays of marketing resear#h) 1"
1yndi#ated ser*i#e Resear#h Birms- These firms gather information a'o(t #ons(mers and trade &hi#h they sell for fee) '7 C(stom Marketing Resear#h Birms- These firms are hired to #arry o(t #ertain resear#h pro5e#ts) They parti#ipate along &ith #ompany in designing the &ay of st(dy and th(s report res(lts &hi#h 'e#omes the property of the #ompany) #7 1pe#ialty 0ine Marketing Resear#h Birms- They pro*ide spe#iali%ed resear#h ser*i#es to others) II7 THE MARKETINC RE1EARCH PR$CE11Marketing resear#h pro#ess is #onsist of fi*e steps gi*en 'ello&9efine the pro'lem and resear#h o'5e#ti*es) A &ell defined pro'lem is half sol*ed) '7 9e*eloping the Resear#h Plans depends on the defined pro'lem) It in*ol*es planning for gathering the needed information) The resear#h plan in*ol*es de#ision a'o(t9ata so(r#es- i7 1e#ondary 9ata- Already gathered data for some p(rpose and #an also 'e (sed for this p(rpose and ii7 Primary 9ata- 9ata gathered only for the spe#ifi# p(rpose) G Resear#h approa#hes Resear#h data may 'e gathered in fo(r &ays i7 $'ser*ational resear#h- 9ata gathered 'y o'ser*ing the rele*ant a#tors and settings) ii7 Bo#(s Cro(p Resear#h- @ to E people are in*ited to spend fe& ho(r &ith a skilled resear#her and dis#(ss prod(#t or iss(e) iii7 1(r*ey Resear#h- 1(r*ey resear#h 'est s(it for des#ripti*e resear#h) s(r*eys are (nder taken to learn a'o(t peoples kno&ledge; 'eliefs; satisfa#tion et) and meas(re its magnit(de in the general pop(lation i*7 E<perimental Resear#h It is the most signifi#ally *alid resear#h) It #alls for sele#ting mat#hed gro(ps of s('5e#ts; s('5e#ting them to different treatments; #ontrolling e<traneo(s *aria'les and #he#king &hether o'ser*ed responses differen#es are statisti#ally signifi#ant) Resear#h instr(ments- T&o main resear#h instr(ments for #olle#ting data are I(estionnaires and Me#hani#al Instr(ments) i7 I(estionnaires- A most #ommonly (sed instr(ment for #olle#ting primary data) It #onsist of a set of +(estions presented to respondents for their ans&ers) I(estions may 'e #lose end or open end #losed end +(estions spe#ify all the possi'le ans&ers that are easier to interpret and ta'(late) $pen end +(estions allo& respondents to ans&er in their o&n &ords) ii Me#hani#al Instr(ments- Fsed less fre+(ently) Cal*anometers meas(re the s('5e#t"s interest or emotions aro(sed 'y e<pos(re to a spe#ifi# ad or pi#t(re) 1ampling Plans- After de#iding the resear#h approa#h and instr(ments; the resear#her m(st design a sampling plan) It #alls for three de#isions i7 1ampling Fnit- Who is to 'e s(r*eyed) The target pop(lation to 'e sampled) ii7 1ample 1i%e- Ho& many people sho(ld 'e s(r*eyed) 0arge sample gi*e more relia'le res(lts) B(t #a(ses more diffi#(lties and more e<penses) Cenerally a sample of !L of pop(lation gi*e the relia'le res(lts) iii7 1ampling Pro#ed(re- Ho& sho(ld the respondents 'e #hosenK To o'tain a representati*e sample a pro'a'ility sample of the pop(lation sho(ld 'e dra&n) Conta#t methods- When the sampling plan has 'een determined the resear#her m(st de#ide ho& the s('5e#t sho(ld 'e #onta#ted) the #hoi#es are i7 mail; ii7 telephone; or iii7personal inter*ie&s) i7 Mail I(estionnaire is the 'est &ay to rea#h people &ho &o(ld not gi*e personal inter*ie&s or &hose responses might 'e 'iased 'y the inter*ie&ers) B(t in it response is *ery lo& and slo&) ii7 Telephone Inter*ie&ing a 'est method for gathering information +(i#kly) The inter*ie&er is a'le to #larify +(estions if the respondents do not (nder stand them) iii7 Personal Inter*ie&ing is the most *ersatile of the three methods) The inter*ie&er #an ask more +(estions and #an re#ord additional o'ser*ations a'o(t the respondent s(#h as dress; 'ody; and lang(age) It is the most e<pensi*e method re+(ires more administrati*e planning and s(per*ision than other method) #7 C$00ECT THE INB$RMATI$N) It is the most e<pensi*e and prone to error stage of resear#h pro#ess) It is ne#essary for the organi%ation to take #are &hile #olle#ting information and to edit it properly) The (se of modern instr(ments like Comp(ters; #ash registers; and opti#al s#anners has helped organi%ations in gathering informations 'efore and after an ad*ertising #ompain) d7 ANA0MOE THE INB$RMATI$N- The ne<t to last step is to e<tra#t pertinent findings from the #olle#ted data) Resear#hers ta'(lates the data and de*elops fre+(en#y distri'(tions) A*erages and meas(res of dispersion are #omp(ted for the ma5or *aria'les) e7 PRE1ENT THE BIN9INC1- The last step of marketing resear#h is presenting the findings to the rele*ant parties) The resear#her sho(ld not o*er&helm management &ith lots of n(m'ers and fan#y statisti#al te#hni+(es; '(t rather sho(ld present ma5or findings that are pertinent to the ma5or marketing de#isions fa#ing management) 11
III Characteristics O( A Goo$ Mar.etin% ResearchA good marketing resear#h sho(ld ha*e se*en #hara#teristi#s) 1#ientifi# Method- is #aref(l o'ser*ation; form(lation of hypotheses; predi#tion and testing) '7 Resear#h Creati*ity- Marketing resear#h sho(ld also de*elop inno*ati*e &ays to sol*e a pro'lem #7 M(ltiple Methods- Cood Market resear#hers prefer to (se m(ltiple so(r#es to a*oid o*er relian#e on anyone method) d7 Interdependen#e of Models and 9atae7 Dal(e and Cost of Informationf7 Healthy 1kepti#ismg7 Ethi#al Marketing) > Mar.etin% 'ecision !*pport !/stem:+M'!!, M911 is a #oordinated #olle#tion of data; tools and te#hni+(es &ith s(pporting soft&are and hard&are 'y &hi#h an organi%ation gathers and interprets rele*ant information from '(siness and en*ironment and t(rns it into a 'asis for marketing a#tion)
AN O-ER-IEW O3 3ORECA!TING AN' 'EMAN' MEA!4REMENT

Companies (ndertake marketing resear#h to identify market opport(nities) After #ompleting resear#h #ompany e*al(ate ea#h opport(nity 'efore #hoosing target market) Marketing is responsi'le to pro*e sales fore#asts &hi#h are 'ased on demand) Managers need to define #aref(lly &hat they mean 'y market demand) 'e(inition o( Mar.et: A market is a set of all a#t(al and potential '(yers of a prod(#t) Keeping in *ie& this definition a market may 'e s(' di*ided in to follo&ing &ays) Potential Market is the set of #ons(mers &ho has sho&n a s(ffi#ient le*el of interest in a defined market offer) '7 A*aila'le Market the set of #ons(mer &ho ha*e interest; in#ome and a##ess to a parti#(lar market offer) #7 I(alified a*aila'le Market- the set of #ons(mers &ho ha*e +(alifi#ations of a*aila'le market and also +(alifi#ation for the parti#(lar market offer) d7 Target Market also #alled ser*ed market is the part of +(alified a*aila'le market the #ompany de#ide to p(rs(e) e7 Penetrated Market the set of #(stomers &ho ha*e already 'o(ght the prod(#t of the #ompany) MEA!4RE! O3 MAR"ET 'EMAN': As a part of their planning #ompanies prepare many estimates of market si%e) Market demand #an 'e meas(red for si< different prod(#t le*els) ! All sales; / Ind(stry 1ales = #ompany sales; > Prod(#t line sales ? Prod(#t Borm sales @ Prod(#t item sales) Bi*e different spa#e le*els ! &orld / Co(ntry &ide = Region > Territory ? C(stomer and three time le*els ! 1hort r(n / Medi(m r(n = 0ong r(n) A -oca7*lar/ (or 'eman$ Meas*rement; Mar.et $eman$ for a prod(#t is the total *ol(me that &o(ld 'e 'o(ght 'y a defined #(stomer gro(p in a gi*en geographi#al at a spe#ified time period in a defined marketing en*ironment (nder a defined market program) Mar.et 3orecast The market demand #orresponding to the le*el of e<pendit(re a#t(ally o##(rred is #alled the market fore#ast) Mar.et Potential The market fore#ast sho&s e<pe#ted market demand not ma<im(m market demand) To assess market potential &e ha*e to *is(ali%e the market demand for a 8*ery high: le*el of ind(stry marketing e<pendit(re; &here f(rther in#rease in marketing effort &o(ld ha*e little effe#t in stim(lating f(rther demand) Compan/ 'eman$: is the #ompanies estimated share of the market demand at alternati*e le*els of #ompany marketing effort) Companies sales 3orecast e<pe#ted le*el of #ompany sales 'ased on a #hosen marketing plan and on ass(med marketing en*ironment) !ales 9*ota the sales goal set for a prod(#t line; di*ision or sales representati*e) It is primarily a managerial de*i#e for defining and stim(lating sales effort) !ales B*$%et: is a #onser*ati*e estimate of the e<pe#ted *ol(me of sales and is (sed primarily for making #(rrent p(r#hasing; prod(#tion; and #ash flo& de#isions) Companies !ales Potential It is the sales limit approa#hed 'y #ompany demand as #ompany marketing effort in#reases relati*e to #ompetitors) The a'sol(te limit of #ompany demand is; of #o(rse; the market potential) The t&o &o(ld 'e e+(al if the #ompany a#hie*ed !44L of the market)
12
CHAPTER ? 1#anning the Marketing En*ironment

1(##essf(l #ompanies take an o(tside inside *ie& of their '(siness) They re#ogni%e that the marketing en*ironment is #onstantly spinning ne& opport(nities and threats and the (nderstand the importan#e of #ontin(o(sly monitoring and adopting to the #hanging en*ironment) Many #ompanies fail to see #hange as opport(nity) They ignore or resist #hange (ntil it is too late) ANALY<ING NEE'! AN' TREN'! IN T E MACRO EN-IRONMENT: 1(##essf(l #ompanies re#ogni%e and respond 6profita'ly7 to (n met needs and trends in the ma#ro en*ironment) Many opport(nities are fo(nd 'y identifying trends) A tren$ is a dire#tion or se+(en#e of e*ents that ha*e some moment(m and d(ra'ility) They are more predi#ta'le and d(ra'le than fads) A 3a$ is an (npredi#ta'le; short li*ed; and &itho(t so#ial; e#onomi# and politi#al signifi#an#e) Me%atren$s are large; so#ial; e#onomi#; politi#al and te#hni#al #hanges 6that are slo& to form7; and on#e the #ome they infl(en#e (s for some time; i)e) 'et&een 3 to !4 years or longer) I'ENTI3YING AN' RE!PON'ING TO T E MA=OR MACRO6EN-IRONMENT 3ORCE!: Companies; its s(ppliers; #(stomers; #ompetitors all operate in ma#ro en*ironment of for#es and trends that shape opport(nities and threats) They are non #ontrolla'le and m(st ha*e to 'e monitored and responded) Within rapidly #hanging glo'al pi#t(re the firms m(st monitor si< ma5or for#es effe#ting the en*ironment) !7 9emographi# en*ironment; /7 e#onomi# en*ironment; =7 Nat(ral en*ironment >7 Te#hnologi#al en*ironment ?7 politi#alJlegal en*ironment; and @7 1o#ialJC(lt(ral en*ironment) 'emo%raphic Environment: Means the pop(lation for#es &hi#h effe#t the en*ironment) Marketers keenly interested ! gro&th rate of pop(lation in different #ities; / ages distri'(tion; = ethni# mi<; > ed(#ational le*el ? ho(sehold patterns and @ regional #hara#teristi#s) CR$WTH RATE- is &at#hed to make the f(t(re and present needs planning) ACE MIQ- #an 'e di*ided in to si< age gro(ps a7 Pre s#hool '7 1#hool age #hildren #7 Teens; d7 Mo(ng ad(lts age /? >4 e7 Middle aged ad(lts age >4 @? f7 $ld ad(lts a'o*e @? ETHNIC MARKET1- Ethni# means national or tri'al gro(ps that has a #ommon #(lt(re tradition) Ea#h pop(lation gro(p has #ertain spe#ifi# &ants and '(ying ha'its) E9FCATI$NA0 CR$FP- Pop(lation of any so#iety falls into fi*e ed(#ational gro(ps a7 Illiterate; '7 High s#hool drop o(ts #7 High s#hool degrees d7 College degrees; e7 Professional degrees) The ed(#ation le*el also effe#t the en*ironment of the market) H$F1E H$09 PATTERN1- The traditional ho(se hold pattern +(it differs from a modern ho(se hold pattern no& all the peoples of ho(se either do 5o' or go to s#hool and (se redeemed foods) RECI$NA0 J CE$CRAPHICA0 CHARACTERI1TIC1- Ceographi#al #hara#teristi#s also effe#ts the en*ironment) The people are shifting from r(ral areas to #ities and pop(lation of #ities is in#reasing in m(ltiples) Chan%in% a mass Mar.et in to Micro Mar.ets: All the a'o*e #hanges #a(ses a mass market to 'e #hanged J #on*erted in to n(mero(s mi#ro markets; ed(#ation; lifestyle; geography and so on) Ea#h gro(p has its o&n preferen#es and #ons(mer #hara#teristi#s) Economic Environment: E#onomi# en*ironment denotes the a*aila'le p(r#hasing po&er of the e#onomy) It depends on #(rrent in#ome; pri#es; sa*ings; de't; and #redit a*aila'ility) CFRRENT INC$ME- Nations *ary greatly in their le*el and distri'(tion of in#ome) It is a ma5or determinant in the nations ind(strial str(#t(re) There are fo(r types of ind(strial str(#t(res 1('sisten#e E#onomies- In it &ast ma5ority is engaged in simple agri#(lt(re and #ons(me most of their prod(#ts) There e#onomies offer fe& opport(nities for marketers '7 Ra& Material E<porting E#onomies- These e#onomies are ri#h in one or more nat(ral reso(r#es; '(t poor in other respe#ts) M(#h of their re*en(e #omes from e<porting these reso(r#es) 1(#h #o(ntries are good markets for e<tra#ti*e e+(ipment; tools and s(pplies and material handling tr(#ks) 9epending on n(m'er of foreign residing and &ealthy nati*e r(lers and landholders; they are also a market for &estern style #ommodities and l(<(ry goods) #7 Ind(striali%ing E#onomies- E#onomies in &hi#h !4 to /4L of the #o(ntry"s gross domesti# prod(#ts are man(fa#t(red) As man(fa#t(ring in#reases #o(ntries relies more on imports of ra& materials A hea*y ma#hinery; and less on import of finished prod(#ts) Ind(striali%ation #reates a ne& ri#h #lass and a small gro&ing middle #lass; 'oth demanding ne& types of goods; some of &hi#h #an 'e satisfied only 'y imports) 13
! / = >
? @
B !
d7 / = > ? @ 3 E C
Ind(strial E#onomies- the ma5or e<porters of man(fa#t(red goods and in*estments f(nds) They '(y man(fa#t(red goods from ea#h other and also e<port them to other types of e#onomies in e<#hange for ra& materials and semi finished goods) PRICE1- 9epends (pon *ario(s things like inflationary rate; ind(striali%ation in the #o(ntry; e#onomi# sta'ility et#) 1ADINC1- The e#onomy making more sa*ings &ill prosper fastly 'e#a(se 'anks #an gi*e loan at lesser interest rate) 9EBT- 9e'ts depend (pon the sa*ings of the e#onomy) CRE9IT ADAI0ABI0ITM INTERE1T RATE 1TACE $B EC$N$MM IN THE BF1INE11 0IBE CMC0E INB0ATI$N Nat*ral Environment: Nat(ral en*ironment also effe#ts the en*ironment trends) 1(#h as poll(tion and the a#tion of 8greens: against it) Marketers need to 'e a&are of threats and opport(nities asso#iated &ith fo(r trends in the nat(ral en*ironment) 1hortage of ra& material The earth"s ra& materials #onsist of the infinite; the finite rene&a'le; and the finite nonrene&a'le) Infinite reso(r#es; s(#h as air and &ater poses no immediate pro'lem; tho(gh in long r(n their are many pro'lems) Binite rene&a'le reso(r#es; s(#h as forests; and food m(st 'e (sed &isely) and Binite nonrene&a'le reso(r#es like oil; #oal) platin(m; %in#; sil*er; &ill pose serio(s pro'lems as their time of depletion approa#hes) '7 In#reased Energy Cost- Nonrene&a'le finite reso(r#es has #reated serio(s pro'lems for the &orld e#onomy; 'e#a(se as they are deteriorating their pri#es are in#reasing) #7 In#reased 0e*el of Poll(tion- 1ome ind(strial a#ti*ities ine*ita'le damage the nat(ral en*ironment) 0ike dangero(s mer#(ry le*els in the o#ean; the +(antity of 99T and other #hemi#al poll(tion"s in the soil et#) d7 Changing roles of Co*ernments- Co*ernments *ary in their #on#ern and efforts to promote a #lean en*ironment) The ma5or hopes are that #ompanies aro(nd the &orld &ill a##ept more so#ial responsi'ility and that less e<pensi*e de*i#es &ill 'e in*ented to #ontrolled and red(#e poll(tion) Technolo%ical Environment: Te#hnology is dramati#ally #hanging li*es of the people) E*ery ne& te#hnology has a for#e #reati*e for#e and distr(#ts the pre*io(s in*entions) e)g) transistors h(rt the *a#((m t('e et#) the marketers sho(ld &at#h the follo&ing trends in te#hnologyA##elerating Pa#e of Te#hnologi#al Change) Many of the todayPs #ommon prod(#ts &ere not a*aila'le =4 years ago) The time lag 'et&een ne& ideas and their s(##essf(l implementation is de#reasing rapidly) '7 Fnlimited $pport(nities for In*entions) 1#ientists today are &orking on a startling range of ne& te#hnologies that &ill re*ol(tioni%e prod(#ts and prod(#tion pro#ess) #7 Darying Resear#h and 9e*elopment B(dgets) Keeping in *ie& the a'o*e sit(ations it is ne#essary to in#rease the resear#h and de*elopment '(dgets) d7 In#reased Reg(lations of Te#hnologi#al Change) As prod(#ts 'e#ome more #omple< the p('li# needs to 'e ass(med of their safety) Co*ernment agen#ies are no& in*estigating to 'an potentially (nsafe prod(#ts) 1afety and health reg(lations ha*e 'een in#reased in the areas of food; a(tomo'iles; #lothing; ele#tri#al applian#es; and #onstr(#tion) Marketers sho(ld 'e a&are of these reg(lations &hen proposing de*eloping and la(n#hing ne& prod(#ts) Political 0 Le%al Environment: Marketing de#ision are strongly affe#ted 'y #hange in politi#al and legal re+(irements) This en*ironment is #omposed of; 0a&s; Co*ernment agen#ies and press(re gro(ps that infl(en#e organi%ations as &ell as markets) It in#l(des follo&ing0ECI10ATI$N RECF0ATINC BF1INE11- B(siness legislation has three main p(rposesProte#t #ompanies from (nfair #ompetition Prote#t #ons(mers from (nfair '(siness pra#ti#e) Prote#t interests of so#iety from (n 'ridled '(siness 'eha*ior) CR$WTH $B 1PECIA0 INTERE1T CR$FP1- Po&er of spe#ial gro(ps ha*e in#reased o*er the last fe& de#ades) They try to sa*e their interests and th(s effe#t the en*ironments) !ocial 0C*lt*ral Environment: 1o#ieties are shaped &ith their 'eliefs; *al(es and norms) People ha*e different *ie&s and at the same time from different points of *ie&s) People"s Die&s A'o(t Themsel*es) '7 People"s Die&s A'o(t $thers) #7 People"s Die&s A'o(t 1o#iety) d7 People"s Die&s A'o(t Nat(re) e7 People"s Die&s of the Fni*erse) E>TERNAL MICRO EN-IRONMENT: They are part of #ompanies marketing system !7 the market; /7 the s(pplier; =7 market intermediaries 14
/ =
Mar.et: Market ha*e three fa#tors People or organi%ations &ith &ants) '7 Their p(r#hasing po&er; #7 Their '(ying 'eha*ior) The !*pplier: $rgani%ations need #ooperati*e relationship &ith s(pplier) Mar.et Interme$iaries: They are independent '(siness organi%ations that dire#tly aid in the flo& of goods and ser*i#es 'et&een a marketing organi%ation and its markets) There are t&o types of market intermediaries !7 The firms middle man 6the &hole seller and retailer appointed 'y the organi%ation7) and /7Dario(s fa#ilitating organi%ations &hi#h pro*ide ser*i#es i)e) transportation; &areho(sing; finan#ing et#) They are needed to #omplete e<#hange 'et&een '(yers and sellers)
15
CHAPTER @ Analy%ing Cons(mer Markets and B(yer Beha*ior

The aim of marketing is to satisfy the target #(stomers needs and &ants) Mo$el o( cons*mer Behavior In the 'eginning marketers #o(ld (nderstand #ons(mers thro(gh the daily e<perien#e of selling them) B(t &ith the gro&th of #ompanies dire#t #onta#t &ith the #ons(mer has 'e#ome impossi'le) No& managers had to rely on 3 $"s gi*en 'ello&) ! $##(pants Who #onstit(te the marketK /) $'5e#ts What does the market '(yK =) $'5e#ti*es Why does the market '(yK >) $rgani%ations Who parti#ipates in '(yingK ?) $perations Ho& does the market '(yK @) $##asions When does the market '(yK 3) $(tlets Where does the market '(yK MA=OR 3ACTOR! IN3L4ENCING B4YING BE A-IOR: These fa#tors #an 'e s(' di*ided in to follo&ing fo(r #ategories) ! C(lt(ral Ba#tors / 1o#ial Ba#tors = Personal Ba#tors >7 psy#hologi#al Ba#tors) C*lt*ral 3actors: C(lt(re infl(en#es the #ons(mer 'eha*ior most effe#ti*ely than any others) It in#l(de #(lt(re; s(' #(lt(re and so#ial #lass) CF0TFRE- A f(ndamental determinant of a persons &ants and 'eha*ior) It in#l(des 'road #(lt(reJatmosphere of #o(ntry) E*ery e#onomy ha*e its o&n *al(es; per#eptions; preferen#es; and 'eha*iors) '7 1FB CF0TFRE- Ea#h #(lt(re #onsists of small s(' #(lt(res pro*iding more spe#ifi# identifi#ation) and so#iali%ation for its mem'ers) They in#l(de; nationalities; religions; and geographi#al regions) #7 1$CIA0 C0A11- It is relati*ely homogeneo(s di*isions of so#iety &hi#h are hierar#hi#ally ordered and &hose mem'ers share similar *al(es) It do not refle#t in#ome alone '(t also other indi#ators like o##(pation; ed(#ation; area of residen#e) It differs in their dress; spee#h; patterns; performan#e) !ocial 3actors: In addition to #(lt(ral fa#tors; a #ons(mer"s 'eha*ior is infl(en#ed 'y s(#h so#ial fa#tors as referen#e gro(ps; family; and roles and stat(sPs) Referen#e gro(ps- A persons referen#e gro(ps #onsist of all the gro(ps that ha*e a dire#t 6fa#e to fa#e7 or indire#t infl(en#e on the person"s attit(des or 'eha*ior) Cro(ps ha*ing a dire#t infl(en#e on a person are #alled mem'ership gro(ps) Mem'ership gro(ps may 'e s('di*ided in to primary and se#ondary) Primary gro(ps in#l(de family; friends; neigh'ors and #o &orkers et#) &ith &hom the person intera#t fairly and #ontin(o(sly) 1e#ondary gro(ps in#l(de religio(s; professional; and trade (nion gro(ps &hi#h re+(ire less intera#tion) '7 Bamily- Most infl(ential primary gro(p; #an also 'e s('di*ided in t&o gro(ps) parents and other i)e) spo(se and #hildren #7 Roles and 1tat(sPs- Role is the a#ti*ities that a person is e<pe#ted to perform d(e to his stat(s e)g) in family; &ith friends; in the #ompany &here he &orks) Personal 3actors: Bollo&ing are the personal fa#tors &hi#h effe#t the #ons(mer 'eha*iorAge and stage in life #y#le- People '(y different goods and ser*i#es o*er their lifetime) '7 $##(pation- $##(pation also effe#t the #ons(mption pattern) e)g) a &orker &ill p(r#hase ne#essities &ith lo& pri#e; &hile the president of #ompany &ill '(y e<pensi*e things) #7 E#onomi# Cir#(mstan#es- Prod(#t #hoi#e is also greatly effe#ted 'y one"s e#onomi# #ir#(mstan#es) Whi#h in#l(de their spend a'le in#ome; sa*ings and assets) de'ts; 'orro&ing po&er and attit(de to&ard spending *ers(s sa*ing) d7 0ifestyle- People #oming from the same s('#(lt(re; so#ial #lass; and o##(pation may lead +(ite different lifestyles) A lifestyle is the person"s pattern of li*ing in the &orld as e<pressed in the person"s a#ti*ities; interests; and opinions) e7 Personality and 1elf Con#ept- Ea#h person has a distin#t personality that infl(en#es his or her '(ying 'eha*ior) By personality; &e mean a person"s disting(ishing psy#hologi#al #hara#teristi#s that lead to relati*ely #onsistent and end(ring responses to his or her en*ironment) Personality is (s(ally des#ri'ed in terms of s(#h traits as self #onfiden#e; dominan#e; a(tonomy; deferen#e; so#ia'ility; defensi*eness; and adapta'ility) It is a (sef(l *aria'le in analy%ing a persons 'eha*ior) Ps/cholo%ical 3actors: Psy#hologi#al fa#tors are fo(r! Moti*ation; / Per#eption; = 0earning > Beliefs and Attit(des) I7 M$TIDATI$NA man ha*e many needs at any one time ) They are of t&o types) Biogeni#- The need &hi#h arise from physiologi#al states of tension s(#h as h(nger; thirst; dis#omfort et#) 16
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Psy#hogeni# They arise from psy#hologi#al states of tension s(#h as the need for re#ognition; esteem or 'elonging) Most psy#hogeni# needs are not intense eno(gh to moti*ate the person to a#t on them immediately) A need 'e#omes a moti*e &hen it is aro(sed to a s(ffi#ient le*el of intensity) A moti*e is a need s(ffi#iently pressing to dri*e the person to a#t) II7 PERCEPTI$NA moti*ated person is ready to a#t) Ho& the moti*ated person a#t(ally a#ts is infl(en#ed 'y his or per#eption of the sit(ation) Perception is the pro#ess 'y &hi#h an indi*id(al sele#ts; organi%es and interprets information inp(ts to #reate a meaningf(l pi#t(re of the &orld) Per#eption depends (pon not only physi#al stim(li; '(t also on the stim(li"s relation to the s(rro(nding field and on #onditions &ithin the indi*id(al) 9ifferent people #an per#ei*e the same sit(ation differently d(e the three per#ept(al pro#esses- a7 1ele#ti*e Attention; '7 1ele#ti*e 9istortion and 1ele#ti*e Retention) As a res(lt; people may not ne#essarily see or hear the message that marketers &ant to send) Marketers m(st; therefore; 'e #aref(l to take these per#ept(al pro#esses into a##o(nt in designing their marketing #ampaigns) 1ele#ti*e Attention- 1ele#ti*e attention means the marketers ha*e to &ork hard to attra#t #ons(mer"s noti#e 'e#a(se to #ons(mer pay sele#ti*e attention to the ad*ertisements) People noti#e those adds that relates to #(rrent needs G People noti#e those adds that they anti#ipate) G People likely to noti#e those adds &hose de*iations are large than normal si%e adds) '7 1ele#ti*e 9istortionIt is the tenden#y of people to t&ist information into personal meanings and interpret information in a &ay that &ill s(pport their per#eptions) #7 1ele#ti*e Retention- People tends to retain those information that s(pports their attit(des and 'eliefs d(e to sele#ti*e retention) III7 0EARNINC When people a#t; they learn) It in*ol*es #hanges in the indi*id(al"s 'eha*ior arising from e<perien#e) ID7 BE0IEB1 AN9 ATTITF9E1 Thro(gh doing and learning people a#+(ire 'eliefs and attit(des) These in t(rn infl(en#e their '(ying 'eha*ior) A 'elief is a des#ripti*e tho(ght that a person holds a'o(t something) and An Attit(de is a person"s 6end(ring fa*ora'le or (nfa*ora'le e*al(ations7; emotional feeling and a#tion tenden#ies to&ard s(m o'5e#t or idea) T E B4YING PROCE!!: To 'e s(##essf(l marketers m(st go 'eyond the (nderstanding as to ho& #ons(mers a#t(ally make their '(ying de#isions; rather they m(st identify &ho makes the '(ying de#ision) The types of '(ying de#isions and steps in '(ying pro#ess are gi*en 'ello&) B*/in% Roles: It is easy to identify '(yer for many prod(#ts) B(t marketers m(st 'e #aref(l in making their 6targeting7de#isions 'e#a(se '(ying roles #hange) There are fi*e roles people #an play in '(ying de#isions Initiator- Who firs s(ggest the idea of '(ying prod(#t) '7 Infl(en#er- A person &hose *ie& or ad*i#e infl(en#e the de#ision) #7 9e#ider- A person &ho de#ides on any #omponent of '(ying de#ision HHHHH &hether to '(y; &hat; ho& and &hom to '(y) d7 B(yer- Who a#t(ally p(r#hase) e7 Fser- A person &ho #ons(mes or (ses the prod(#t or ser*i#e) B*/in% Behavior: Beha*ior *aries &ith the type of '(ying de#ision) there are fo(r types of #ons(mers '(ying 'eha*ior 'ased on degree of '(yer"s in*ol*ement and degree of differen#es among 'rands) !7 Comple< '(ying 'eha*ior; /7 dissonan#e; red(#ing '(yer 'eha*ior; =7 Ha'it(al '(ying 'eha*ior; and >7 *ariety seeing '(ying 'eha*ior) C$MP0EQ BFMINC BEHADI$RCons(mer are in*ol*ed in #omple< '(ying 'eha*ior &hen they are highly in*ol*ed in p(r#hase; G a&are of signifi#ant differen#es among 'rands; G prod(#t is e<pensi*e and risky; G typi#ally does not kno& m(#h a'o(t prod(#t #ategory; and G has m(#h to learn) It in*ol*e three step pro#ess) !7 '(yer de*elops 'eliefs a'o(t the prod(#t) 1e#ond; de*elops attit(des a'o(t the prod(#t and third; he make tho(ghtf(l p(r#hase #hoi#e) The marketers m(st kno& the #ons(mers information gathering and e*al(ation pro#ess and de*elop strategies to assist the '(yer in learning a'o(t the prod(#t"s attri'(tes and #all for his attention to&ards high standing of the #ompany"s 'rand) To differentiate the 'rand"s feat(res marketers sho(ld (se print media to des#ri'e 'rand"s 'enefits) 9I11$NANCE HHHHRE9FCINC BFMER BEHADI$RRed(#ing '(ying 'eha*ior is #hara#teri%ed 'y#ons(mer is highly in*ol*ed in p(r#hase; G see litter differen#e in 'rands; 17
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p(r#hase is e<pensi*e ; infre+(ent and risky; In this #ase the '(yer &ill shop aro(nd to learn &hat is a*aila'le '(t &ill '(y fairly +(i#kly; perhaps responding primarily to a good pri#e or to p(r#hase #on*enien#e) After the p(r#hase the #ons(mer might e<perien#e dissonan#e that stems from noti#ing #ertain dis+(ieting feat(res of the prod(#t or hearing fa*ora'le things a'o(t other prod(#t) The #ons(mer &ill 'e alert to the information to 5(stify his de#ision of p(r#hase) = HABITFA0 BFMINC BEHADI$RMany prod(#ts are 'o(ght (nder #onditions of lo& #ons(mer in*ol*ement and the a'sen#e of signifi#ant 'rand differen#es; e)g) salt; tea; toothpaste et#) Marketers #an #on*ert lo& in*ol*ement prod(#ts into one of high in*ol*ement 'y fo(r &ays gi*en 'ello&link prod(#t to some in*ol*ing iss(e e)g) toothpaste resisting #a*ity, G link prod(#t to some in*ol*ing personal sit(ation; e)g) o(r #offee taken early in the morning shake of sleepiness, G ad*ertise to trigger strong emotions related to personal *al(es or defen#e) G Add an important prod(#t feat(re to a lo& in*ol*ement prod(#t) DARIETM 1EEINC BFMINC BEHADI$RThis type of '(ying 'eha*ior is #hara#teri%ed 'y0o& #ons(mer in*ol*ement; G signifi#ant 'rand differen#es G #ons(mers #an do a lot of 'rand s&it#hing) In s(#h a sit(ation the market leader try to en#o(rage ha'it(al '(ying 'eha*ior 'y dominating the shelf spa#e; a*oiding o(t of sto#k #onditions; and sponsoring fre+(ent reminder ad*ertising) Challenger firms &ill en#o(rage *ariety seeking 'y offering lo&er pri#es; deals; #o(pons; free samples; and ad*ertising that presents reasons for trying something ne&) T E !TAGE! O3 T E B4YING 'ECI!ION PROCE!!:` 1mart #ompanies keep an eye on the '(ying de#ision pro#ess in*ol*ed in their prod(#t #ategory) Cenerally a '(yer &hile making '(ying de#ision passes thro(gh ? different stages) It is not ne#essary that #ons(mer pass thro(gh them se+(entially espe#ially in the #ase of lo& in*ol*ement p(r#hase in s(#h a #ase #ons(mer may shift or re*erse some stages) These fi*e stages are !7 Pro'lem re#ognition; /7 Information 1ear#h; =7 E*al(ation of Alternati*es; >7 P(r#hase 9e#ision; ?7 Post p(r#hase 'eha*ior) Pro7lem Reco%nition: B(ying pro#ess 'egins &hen '(yer re#ogni%es the pro'lem or need) A need may arise either internally or e<ternally) Internal needs are like h(nger; thirst; se< et#) arise to a thresh hold le*el and 'e#omes a dri*e) The e<ternal need aro(sed 'y an e<ternal so(r#e; for e<ample a person passes a 'akery and sa& 'read and 'is#(its that stim(lates his h(nger) Marketers need to identify the #ir#(mstan#es that trigger a parti#(lar need; then they de*elop the marketing strategies that trigger #ons(mer interest) In(ormation !earch: An aro(sed #ons(mer &ill 'e in#lined to sear#h for more information) We may disting(ish 'et&een t&o le*els of aro(sal) The Mil$er search and the active in(ormation search: THE MI09ER 1EARCH- It may also 'e #alled as heightened attention) At this stage the #ons(mer simply pays more attention to informationPs a'o(t the desired prod(#t; like ads of the prod(#t; see friends &ho ha*e p(r#hased that prod(#t et#) THE ACTIDE INB$RMATI$N 1EARCH- At this stage he a#t(ally looks for reading material; phones friends; and engages in other a#ti*ities to learn a'o(t the prod(#t) The e<tent of sear#h depends (pon the strength of the dri*e; the amo(nt of information he already has; and the ease of o'taining additional information; the *al(e he gi*es to the additional information and the *al(e of satisfa#tion he o'tains from the sear#h) Cons(mer may #an get information from the follo&ing fo(r so(r#es Personal so(r#es- Bamily; friends; neigh'ors; a#+(aintan#es) Commer#ial so(r#es- Ad*ertising; salespersons; dealers; pa#kaging; displays) P('li# so(r#es Mass medial; #ons(mer rating organi%ations) E<periential so(r#es- Handling; e<amining; (sing the prod(#t) Thro(gh gathering information; the #ons(mer learns a'o(t #ompeting sets of 'rands and their feat(res) The selling #ompany m(st strategies to get its prod(#t into the a&areness set; #onsideration set; and #hoi#e set) The #ompany m(st also identify the other 'rands in the #ons(merPs #hoi#e set so that it #an plan its #ompetiti*e appeals) He sho(ld also identify the #ons(mers information so(r#es and e*al(ate their relati*e importan#e) Eval*ation o( Alternatives: There is no single and simple *al(ation pro#ess (sed 'y all #ons(mers in all sit(ations) 1ome 'asi# #on#epts &ill help (s to (nderstand #ons(mer e*al(ation pro#essi7 Cons(mer is trying to satisfy a need) ii7 He is looking for #ertain 'enefits from the prod(#t sol(tion; 1
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iii7 He looks at e*ery prod(#t as a '(ndle of attri'(tes; &ith *arying a'ilities of pro*iding 'enefits so(ght to satisfy need) The attri'(tes of interest to '(yers *ary 'y prod(#t #amerapi#t(re; sharpness; speed; si%e; pri#e; and life, hotello#ation; #leanliness; atmosphere; pri#e, tyerssafety; tread life; ride +(ality; pri#e) Marketers #an do a n(m'er of things to infl(en#e '(yers de#isioni7 Modify Prod(#tThey may redesign the 'rand so that it offers more #hara#teristi#s that the '(yer desires) It is also #alled real repositioning) ii7 Alter 'eliefs a'o(t the 'rand- A try to alter the '(yersP 'eliefs a'o(t &here the 'rand stands on key attri'(tes) It is (sef(l &here the '(yer (nderestimate the 'rand +(alities) It is not re#ommended if '(yers are a##(rately e*al(ating 'rand e<aggerated #laims &o(ld lead to '(yer dissatisfa#tion and 'ad &ord or mo(th) iii7 Alter the 'eliefs a'o(t the #ompetitors 'rands, A try to alter the '(yers 'eliefs a'o(t &here #ompetiti*e 'rands stand on different attri'(tes) This strategy; #alled #ompetiti*e repositioning; makes sense &hen '(yer mistakenly 'elie*e a #ompetitorPs 'rand has more +(ality that it a#t(ally has) It is often a##omplished 'y r(nning a #omparison ad) i*7 Alter the importan#e &eights- The marketer #o(ld try to pers(ade '(yers to atta#h more importan#e to the attri'(tes in &hi#h the 'rand e<#els) *7 Call attention to negle#ted attri'(tes- In s(#h a #ase the marketer dra&s the '(yerPs attention to negle#ted attri'(tes; &hi#h are not *ery #lear in the mind of the '(yer) *i7 1hift the '(yers ideas- The marketers #o(ld try to pers(ade '(yers to #hange their ideal le*els for one or more attri'(tes) P*rchase 'ecision: In the e*al(ation stage the #ons(mer forms preferen#es among 'rands in the #hoi#e set) The #ons(mer may for an intention to '(y the most preferred 'rand) Ho&e*er; t&o fa#tors may inter*ene 'et&een the p(r#hase intention and p(r#hase de#ision) !7 Attit(des of others; and /7 Fnanti#ipated sit(ational fa#tors) i7 Attit(des of $thers The e<tent to &hi#h others attit(des red(#es onePs preferred alternati*es depends on t&o things; first; the intensity of the other personPs negati*e attit(de to&ard the #ons(merPs preferred alternati*e and; se#ond; the #ons(merPs moti*ation to #omply &ith the other personPs &ishes) The more intense the other personPs negati*ism and the #loser the other person is to the #ons(mer; the more the #ons(mer &ill ad5(st his p(r#hase intention) ii7 Fnanti#ipated sit(ational Ba#tors- A #ons(merPs de#ision to modify; postpone; or a*oid a p(r#hase de#ision is hea*ily infl(en#ed 'y per#ei*ed risk) The amo(nt of per#ei*ed risk *aries &ith the amo(nt of money at stake; the amo(nt of attri'(te (n#ertainty; and the amo(nt of #ons(mer self #onfiden#e) Post P*rchase Behavior: After p(r#hasing the prod(#t the #ons(mer &ill e<perien#e some le*el of satisfa#tion or dissatisfa#tion The marketerPs 5o' does not end &hen the prod(#t is 'o(ght '(t #ontin(es into the post p(r#hase period Marketer m(st monitor post p(r#hase satisfa#tion; post p(r#hase a#tions; and post p(r#hase prod(#t (se and dispose)
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CHAPTER 3 Analy%ing B(siness Markets and B(siness B(yer Beha*ior

W AT I! ORGANI<ATIONAL B4YING: $rgani%ational '(ying is the de#ision making pro#ess 'y &hi#h formal organi%ations esta'lish the need for p(r#hased prod(#ts and ser*i#es and identify; e*al(ate; and #hoose among alternati*e 'rands and s(ppliers) 'I33ERENCE BETWEEN B4!INE!! MAR"ET AN' CON!4MER MAR"ET: B*siness Mar.et- #onsist of all the organi%ations that a#+(ire goods and ser*i#es; (sed in the prod(#tion of other prod(#ts or ser*i#es; that are sold; rented; or s(pplied to others) The ma5or ind(stries making (p the '(siness market are agri#(lt(re; forestry; and fisheries mining; man(fa#t(ring; #onstr(#tion; transportation; #omm(ni#ation; p('li# (tilities; 'anking; finan#e; and ins(ran#e; distri'(tion and ser*i#es) B(siness markets ha*e se*eral #hara#teristi#s that #ontrast sharply &ith #ons(mer markets some of them are gi*en 'ello&! BEWER BFMER1- B(siness marketers normally deals &ith far fe&er '(yers than the #ons(mer marketers does) / 0ARCER IFANTITM BFMER1- B(y in '(lk items for reprod(#tion) A fe& large '(yers do most of the p(r#hases) = C0$1ER 1FPP0IER CF1T$MER RE0ATI$N1HIP- Be#a(se of the smaller n(m'er of #(stomer 'ase and the importan#e and po&er of the large #(stomers; there are #lose relationships 'et&een #(stomers and s(ppliers) > CE$CRAPHICA00M C$NCENTRATE9 BFMER1- Cenerally one type of organi%ations e<ist in one lo#ality) Therefore; '(yers are #on#entrated in fe& lo#alities) ? 9ERIDE9 9EMAN9- 9emand of '(siness goods is (ltimately dependent on demand of #ons(mer goods) @ INE0A1TIC 9EMAN9- The demand of s(#h goods is not m(#h effe#ted 'y the #hange in pri#e; espe#ially in the short r(n; 'e#a(se prod(#ers #annot make +(i#k #hanges in their prod(#tion methods) 3 B0FCTFATINC 9EMAN9- A small per#entage in#rease in #ons(mer demands #an lead to a m(#h larger per#entage in#rease in demand for planed and e+(ipment; ne#essary to prod(#e the additional o(tp(t) 1ometimes a rise of !4L in #ons(mer demand #an #a(se as m(#h as /44L rise in '(siness demand for the prod(#t in the ne<t period; and a !4L fall in #ons(mer demand may #a(se a #omplete #ollapse in '(siness demand) This sales *olatility has led many '(siness marketers to di*ersify their prod(#ts and markets to a#hie*e more 'alan#ed sales o*er the '(siness #y#le) E PR$BE11I$NA0 PFRCHA1INC- B(siness good are p(r#hased 'y trained p(r#hasing agents; &ho m(st follo& the organi%ational poli#ies; #onstraints; and re+(irements) Professional '(yers spend their li*es in learning ho& to '(y 'etter; are more #ost effe#ti*e) This means the '(siness marketers ha*e to pro*ide greater te#hni#al data a'o(t their prod(#t and its ad*antages o*er #ompetitorsP prod(#ts) 2 1EDERA0 BFMINC INB0FENCE1- More people #an infl(en#e a '(siness '(ying de#ision than a #ons(mer '(ying de#ision) B(ying #ommittees #onsisting of te#hni#al e<perts and senior managers are #ommon in the p(r#hase of ma5or goods) Conse+(ently '(siness marketers ha*e to send &ell trained representati*es and often (ses teams to deal &ith the &ell trained '(yers) Altho(gh ad; sales promotion and p('li#ity plays important role '(t personal selling (s(ally ser*es as a main marketing tool) !4 9IRECT PFRCHA1INC- B(siness '(yers often '(y dire#tly from the man(fa#t(rers rather than thro(gh intermediaries; espe#ially those items that are te#hni#ally #omple< and e<pensi*e) !! RECIPR$CITM- B(siness '(yers often sele#t s(ppliers &ho also '(y from them) !/ 0EA1INC- Many ind(strial '(yers lease their e+(ipment instead of '(ying it) B*/in% !it*ations: B(siness '(yers fa#es many de#isions in making a p(r#hase) The n(m'er of de#isions depends on the type of '(ying sit(ation) There are three types of '(ying sit(ations the straight re '(y the modified re '(y and the ne& task) ! 1TRAICHT REBFM- P(r#hases are ordered on ro(tine 'asis from a pre*io(s s(pplier #alled in s(pplier) The o(t s(pplier offer something ne& or e<ploit dissatisfa#tion &ith the s(pplier) $(t s(pplier try to get a small order and then enlarge their share o*er time) / M$9IBIE9 REBFM- A sit(ation in &hi#h the '(yer &ants some modifi#ation in pri#e; deli*ery re+(irements or other terms) It in*ol*es additional dis#(ssion 'et&een '(yer and seller representati*e &ho tries to defend his position and 'e#omes ner*o(s) The o(t s(pplier see an opport(nity and offer 'etter fa#ilities to gain some '(siness) = NEW TA1K- P(r#hasing for the first time; therefore re+(ires more time and analysis of s(ppliers) !/stem B*/in% an$ !ellin%: Many '(siness '(yers prefer to '(y a total sol(tion of their pro'lem from one seller) It is #alled system '(ying Participants in the B*siness B*/in% Process: It is also #alled '(ying #enter and in#l(des all persons in*ol*ed in p(r#hasing &hi#h are gi*en 'ello&i7 Initiators- Those &ho re+(est that something 'e p(r#hased) ii7 Fsers- Those &ho &ill (se the prod(#t or ser*i#e) In many #ases; the (sers initiate the '(ying proposal) 2"
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Infl(en#es- People &ho infl(en#e the '(ying de#ision 'y defining spe#ifi#ations and pro*iding information for e*al(ating alternati*es) Te#hni#al personnel are parti#(larly important infl(en#es) i*7 9e#ider- People &ho de#ide on prod(#t re+(irements and or on s(ppliers) *7 Appro*ers- People &ho a(thori%e the proposed a#tions of de#iders or '(yers) *i7 B(yers- People &ho ha*e formal a(thority to sele#t the s(pplier and arrange the p(r#hase terms) *ii7 Catekeepers- People &ho ha*e the po&er to pre*ent sellers or information from rea#hing to mem'ers of the '(ying #enter) e)g) p(r#hasing agents; re#eptionists; and telephone operators may pre*ent sales persons from #onta#ting (ser or de#iders) Ma?or In(l*ences on B*siness B*/ers: B(siness '(yers are s('5e#t to many infl(en#es &hen they make their '(ying de#ision) They may 'e #lassified in to fo(r gro(ps !7 en*ironmental fa#tors; /7 organi%ational fa#tors; =7 interpersonal fa#tors; and >7 Indi*id(al fa#tors) ENDIR$NMENTA0 BACT$R1B(siness '(yers are hea*ily effe#ted 'y fa#tors in the #(rrent and e<pe#ted e#onomi# en*ironment; le*el of demand for their prod(#t E#onomi# o(tlook; interest rate te#hnologi#al de*elopments; and politi#al reg(latory) $RCANIOATI$NA0 BACT$R1Ea#h '(ying organi%ation has spe#ifi# o'5e#ti*es; poli#ies; pro#ed(res; organi%ational str(#t(re; and system) B(siness marketers sho(ld 'e parti#(larly a&are of these) Bollo&ing are the organi%ational trends in the organi%ational areai7 P(r#hasing department (pgrading- P(r#hasing department #ommonly o##(py a lo& position in the management hierar#hy They are no& 'eing (p graded) ii7 Centrali%ed P(r#hasing- In m(lti di*isional #ompanies most p(r#hasing is #arried o(t 'y separate di*isions 'e#a(se of their differing needs) Re#ently some of the #ompanies ha*e started the #entrali%ed p(r#hasing) iii7 9e#entrali%ed P(r#hasing of small ti#ket itemsi*7 0ong term Contra#ts- B(siness '(yers are in#reasingly a##epting long term #ontra#ts &ith s(ppliers) *7 P(r#hasing Performan#e E*al(ation and '(yers professional de*elopment- Many #ompanies ha*e installed the in#enti*e systems to re&ard p(r#hasing managers for goods '(ying performan#e) INTERPER1$NA0 BACT$R1The '(ying #enter (s(ally in#l(des se*eral parti#ipants &ith differing interests; a(thority; stat(s; empathy; and pers(asi*eness) the '(siness marketer is not likely to kno& &hat kind of gro(p dynami#s take pla#e d(ring the '(ying pro#ess; altho(gh &hate*er information he #an dis#o*er a'o(t the personalities and interpersonal fa#tors &o(ld 'e (sef(l) IN9IDI9FA0 BACT$R1Ea#h parti#ipant in the '(siness '(ying pro#ess has his o&n moti*ations; per#eptions; and preferen#e; infl(en#ed 'y the parti#ipants age; in#ome; ed(#ation; 5o' position; personality; attit(des to&ard risk; and #(lt(re) T E P4RC A!ING PROCE!!: B(siness '(yers p(r#hase goods and ser*i#es to make money to red(#e operating #ost; or to satisfy a legal or so#ial o'ligation) Bor '(ying goods '(siness '(yers ha*e to go thro(gh '(ying or pro#(rement pro#ess ha*ing eight steps #alled '(y phases) PR$B0EM REC$CNITI$N- 1ome one in the organi%ation re#ogni%es the pro'lem that #an 'e met 'y a#+(iring a good or ser*i#e) E*ents leading to pro'lem re#ognition are the follo&ingi7 Company de#ides to prod(#e a ne& prod(#t and needs ne& e+(ipment and materials to prod(#e it) ii7 A ma#hine 'reaks do&n and re+(ires repla#ement or ne& parts) iii7 P(r#hased material t(rns o(t to 'e (nsatisfa#tory; and the #ompany sear#hes for another s(pplier) i*7 A p(r#hasing manager senses an opport(nity to o'tain lo&er pri#es or 'etter +(ality) CENERA0 NEE9 9E1CRIPTI$N- $n re#ognition the '(yer pro#eeds to determine the needed items general #hara#teristi#s and +(ality needed) PR$9FCT 1PECIBICATI$N- After identifying the general needs the '(ying organi%ation pro#eeds to de*elop the items te#hni#al spe#ifi#ations) Bor it a prod(#t *al(e analysis is #ond(#ted) What is the prod(#t *al(e analysis- PDA is an approa#h to #ost red(#tion in &hi#h #omponents are #aref(lly st(died to determine if they #an 'e redesigned or standardi%ed or made 'y #heaper methods) 1FPP0IER 1EARCH- Then the #ompany sear#hes the most appropriate s(ppliers) Bor this p(rpose organi%ations (ses trade dire#tories; #omp(ter sear#h or make phone to other #ompanies for re#ommendations) PR$P$1A0 1$0ICITATI$N- The '(yer in*ite the +(alified s(ppliers to s('mit proposals &ith detailed spe#ifi#ations) The #ompany e*al(ate proposals and eliminate some s(ppliers and in*ite the remaining ones to make a formal presentation) 1FPP0IER1 1E0ECTI$N- The '(ying #enter; 'efore sele#ting a s(pplier; spe#ify the desired attri'(tes of the s(ppliers) Then it &ill rate s(ppliers on these attri'(tes and identify the most attra#ti*e s(ppliers) Bor this they often (se a s(pplier e*al(ation model) The attri'(tes may in#l(de the deli*ery relia'ility; pri#e; and s(pplier 21
rep(tation are highly important) Then the '(ying #enter attempt to negotiate &ith its preferred s(ppliers for 'etter pri#es and terms 'efore making the final sele#tion) The '(ying #enter also de#ide as to ho& many s(ppliers to (se) B(rthermore these #ompanies &ant ea#h #hosen s(pplier to 'e responsi'le for a larger #omponent system) They also often re+(ire the #hosen s(ppliers to a#hie*e #ontin(o(s +(ality and performan#e impro*ement &hile at the same time lo&ering the s(pply pri#e ea#h year 'y a gi*en per#entage) $R9ER R$FTINE 1PECIBICATI$N- After sele#tion of s(pplier the '(yer negotiate final order listing the i7 Te#hni#al spe#ifi#ations; ii7 I(antity needed; iii7 e<pe#ted time of deli*ery; i*7 ret(rn poli#ies; *7 &arrantees) et#) Writing a ne& p(r#hase order ea#h time is e<pensi*e and time #ons(ming) The p(r#haser also do not &ants to make a large p(r#hase order 6 and th(s de#reasing n(m'er of orders7; 'e#a(se it means to #arry more in*entory) A 'lanket #ontra#t esta'lishes a long term relationship in &hi#h the s(pplier promises to re s(pply at an agreed pri#e o*er a spe#ified period of time) PERB$RMANCE REDIEW- When all is done the '(yer re*ie&s the performan#e of the #hosen s(pplier) Three methods are #ommonly (sed) !7 the '(yer may #onta#t the end (ser and ask for e*al(ation; /7 Rate the s(pplier on se*eral #riteria (sing a &eighted s#ore method or =7 aggregate the #ost of poor s(pplier performan#e to #ome (p &ith ad5(sted #ost of p(r#hase in#l(ding pri#e) A'o*e gi*en stages are for the ne& task '(ying sit(ation) In modified re '(y or straight re '(y sit(ations; some of these stages &o(ld 'e #ompressed or 'ypassed) IN!TIT4TIONAL AN' GO-ERNMENT MAR"ET!: 1o far o(r dis#(ssion is a'o(t the profit seeking organi%ations) M(#h of it also applies to the '(ying pra#ti#es of instit(tional and go*ernment organi%ations) Ho&e*er; their #ertain spe#ial feat(re fo(nd in these markets)
22
CHAPTER E Analy%ing the Ind(stries and Competitors

There are fi*e for#es that determine the intrinsi# long r(n profit attra#ti*eness of a market or market segment) These are ind(stry #ompetitors; potential entrants; s('stit(tes; '(yers; and s(ppliers) The fi*e threats they poses are as follo&s! Threat of intense segment re*elry- A segment is (nattra#ti*e if it already #ontains n(mero(s; strong; or aggressi*e #ompetitors) It is e*en more (nattra#ti*e if the segment is sta'le or de#lining) / Threats of ne& entrants- A segmentPs attra#ti*eness *aries &ith the high of its entry and e<it 'arriers) The most attra#ti*e segment is one in &hi#h entry 'arriers are high and e<it 'arriers are lo& i)e) Be& ne& firms #an enter the ind(stry; and poor performing firms #an easily e<it) B(t &hen the entry and e<it 'oth 'arriers are high it means that poor performing firms &ill also stay in the market) and if 'oth 'arriers are lo& it means more firms #an enter in the segment) = Threats of 1('stit(te Prod(#ts, A segment is (nattra#ti*e &hen there are a#t(al or potential s('stit(tes for the prod(#t are a*aila'le) > Threat of '(yers gro&ing 'argaining po&er- A segment is (nattra#ti*e if the '(yer ha*e strong or gro&ing 'argaining po&er 'e#a(se he &ill for#e pri#es do&n; and demand more +(ality) ? Threat of s(ppliers gro&ing 'argaining po&er, I'ENTI3YING COMPETITOR!: Competitors may 'e at fo(r le*els! Brand #ompetitors- A #ompany offering similar prod(#t and ser*i#es to the same #(stomers at similar pri#es) / Ind(stry #ompetitors- $##(rs &hen a #ompany sees its #ompetitors as all #ompanies making the same prod(#t or #lass of prod(#ts) = Borm #ompetition- $##(rs &hen a #ompany sees its #ompetitors as all #ompanies man(fa#t(ring prod(#ts that s(pply the same ser*i#e) > Ceneri# #ompetition- $##(rs &hen a #ompany sees its #ompetitors as all #ompanies #ompete for the same #ons(mer R(pee) In$*str/ Concept o( Competitors: An ind(stry is a gro(p of firms that offer a prod(#t or #lass of prod(#ts that are #lose s('stit(tes for ea#h other) N*m7er o( !ellers an$ 'e%ree o( 'i((erentiation: The starting point for des#ri'ing an ind(stry is to spe#ify &hether there are one; fe&; or many sellers of the prod(#t and &hether the prod(#t is homogeneo(s or highly str(#t(re type! PFRE M$N$P$0M- E<ist &hen only one firm pro*ides a #ertain prod(#t or ser*i#e in a #ertain #o(ntry) It may 'y d(e to a reg(latory edi#t; patent; li#ense; s#ale e#onomi#s or other fa#tors) / $0IC$P$0M- An ind(stry str(#t(re in &hi#h a small n(m'er of 6(s(ally7 large firms prod(#e prod(#t that range from highly differentiated to standardi%ed) there are t&o forms of oligopoly p(re and differentiated) i7 P(re oligopoly- #onsist of a fe& #ompanies prod(#ing essentially the same #ommodity 6oil; steel7) A #ompany in a p(re oligopolisti# ind(stry &o(ld find it hard to #harge anything more than the going pri#e (nless it #an differentiate its ser*i#es) i7 9ifferentiated $ligopoly- #onsist of a fe& #ompanies prod(#ing partially differentiated prod(#ts 6#ameras; a(tos7 The differentiation #an o##(r along lines of +(ality; feat(res; styling; or ser*i#es) Ea#h #ompetitors may seek leadership in one of these ma5or attri'(tes; attra#t the #ons(mers fa*oring that attri'(te and #harge a pri#e premi(m for that attri'(te) = M$N$P$0I1TIC C$MPETITI$N- Consist of many #ompetitors a'le to differentiated their offers in &hole or part 6resta(rants; 'ea(ty shops7) Many of the #ompetitors fo#(s on market segments &here they #an meet #(stomer needs in a s(perior &ay and #ommand a pri#e premi(m) > PFRE C$MPETITI$N- Consists of many #ompetitors offering the same prod(#t and ser*i#e 6sto#k market; #ommodity market7) 1in#e there is no 'asis for differentiation; #ompetitors pri#e &ill 'e the same) No #ompetitor &ill ad*ertise (nless ad*ertising #an #reate psy#hologi#al differentiation 6#igarettes7 in &hi#h #ase it &o(ld 'e more proper to des#ri'e the ind(stry and monopolisti#ally #ompetiti*e) 1ellers &ill en5oy different profit rates only to the e<tent that they a#hie*e lo&er #osts of prod(#tion or distri'(tion) Entr/ an$ Mo7ilit/ Barriers: Ind(stry differ greatly in their ease of entry) It is easy to open a ne& resta(rant '(t diffi#(lt to enter the air #raft ind(stry) The ma5or 'arriers in#l(de high #apital re+(irements; e#onomies of s#ale; patents and li#ensing re+(irements; s#ar#e lo#ations; ra& materials; or distri'(tions; and rep(tational re+(irements) E)it an$ !hrin.a%e Barriers: Ideally firms sho(ld 'e free to lea*e ind(stries in &hi#h profit are (nattra#ti*e; '(t they often fa#e e<it 'arriers) Most #ommon 'arriers are lager moral o'ligations to #(stomers; #reditors; and employees; go*ernment restri#tions; lo& asset sal*age *al(e d(e to o*er spe#iali%ation or o'soles#en#e, la#k of alternati*e opport(nities high *erti#al integration and emotional 'arriers) 23
E*en if some firms do not &ant to e<it the ind(stry they might &ant to de#rease their si%e) The #ompanies try to red(#e the shrinkage 'arriers to help their ailing #ompetitors get smaller gra#ef(lly) T&o of the most #ommon shrinkage 'arriers are #ontra#t #ommitments and s('orns management) Cost !tr*ct*re: Ea#h ind(stry has a #ertain #ost mi< that dri*e m(#h of its strategi# #ond(#t) Bor e<ample steel making in*ol*es hea*y man(fa#t(ring and ra& materials #ost; &hile toy man(fa#t(ring in*ol*e hea*y distri'(tion and marketing #ost) Birms &ill pay the greatest attention to their greatest #osts and &ill strategies to red(#e these #osts) 'e%ree o( -ertical Inte%ration: 1ome firms find it ad*antageo(s to integrate 'a#k&ard and for&ard &hi#h often #a(ses lo&er in #ost and gi*e #ompany more #ontrol o*er the *al(e added stream) Moreo*er; *erti#ally integrated firms #an manip(late their pri#es and #osts in different segments of their '(siness to earn profit &here ta<es are lo&) 'e%ree o( Glo7ali1ation: 1ome ind(stries are highly lo#al others are glo'al) Companies in the glo'al ind(stries need to #ompete on a glo'al 'asis if they are to a#hie*e e#onomies of s#ale and keep (p &ith the latest ad*an#es in te#hnology) I'ENTI3YING COMPETITOR!@ !TRATEGIE!: A #ompanyPs #losest #ompetitors are those p(rs(ing the same target markets &ith the same strategy) A gro(p of firms follo&ing the same strategy in a gi*en target market is #alled a strategi# gro(p) A #ompany need to identify the strategi# gro(p in &hi#h it #ompetes) A #ompany m(st #ontin(o(sly monitor its #ompetitorsP strategies and re*ise their strategies thro(gh time depending (pon the #ompetitors strategy) 'ETERMINING COMPETITOR!@ OB=ECTI-E!: After identifying its main #ompetitors and their strategies a #ompany may ask itself- &hat is ea#h #ompetitor seeking in the marketpla#eK What dri*es ea#h #ompetitorPs 'eha*iorK An initial ass(mption is that #ompetitors stri*e to ma<imi%e their profits) and alternati*e ass(mption is that they p(rs(es a mi< of o'5e#ti*es - #(rrent profita'ility; market share gro&th #ash flo&; te#hnologi#al leadership; ser*i#e leadership and son on) A #ompetitors o'5e#ti*es are shaped 'y many things; in#l(ding its si%e; history; #(rrent management; finan#ial sit(ation; and pla#e in the large organi%ation) If a #ompetitor is part of a larger #ompany; it is important to kno& &hether the parent #ompany is r(nning it for gro&th or milking it) If the #ompetitor is not #riti#al to its parent #ompany; it #o(ld 'e atta#ked more readily) Binally a #ompany m(st also monitor its #ompetitors e<pansion plans) Assessin% Competitors !tren%ths an$ Wea.nesses: To identify the strengths and &eaknesses of #ompetitors a #ompany sho(ld first gather re#ent information on ea#h #ompetitorPs '(siness; in#l(ding data on sales; market shale; profit margin; ret(rn on in*estment; #ash flo&; ne& in*estments and #apa#ity (tili%ation) Companies normally learn a'o(t their #ompetitors position thro(gh se#ondary data; personal e<perien#e; and hearsay) They #an a(gment their kno&ledge 'y #ond(#ting primary marketing resear#h &ith #(stomers; s(ppliers; and dealers) All these so(r#es help a #ompany de#ide &hom to atta#k in the programma'le #ontrols market) In general e*ery #ompany sho(ld monitor three *aria'les &hen analy%ing its #ompetitorsi7 1hare of market- The #ompetitorPs share of the target market) ii7 1hare of mind- The per#entage of #(stomers &ho named the #ompetitor in responding to the statement) Name the first #ompany that #omes to mind in this ind(stry) iii7 1hare of heartThe per#entage of #(stomers &ho named the #ompetitor in responding to the statement) Name the #ompany from &hom yo( &o(ld prefer to '(y the prod(#t) Estimatin% Competitors Reaction Patterns: Identifi#ation of #ompetitors strangest and &eaknesses help managers to anti#ipate the #ompetitors likely rea#tions to other #ompaniesP strategies 6e)g) a pri#e #(t; a promotion step (p; or a ne& prod(#t introd(#tion7) In addition; ea#h #ompetitor has a #ertain philosophy of doing '(siness; a #ertain internal #(lt(re; and #ertain g(idelines 'eliefs) Most #ompetitors fall into one of follo&ing fo(r #ategories) ! THE 0AI9 BACK C$MPETIT$R1- A #ompetitor that doesnPt rea#t +(i#kly or strongly to a ri*alPs mo*e) The reasons may *ary) The laid 'a#k #ompetitors may feel their #(stomer are loyal; slo& in noti#ing the mo*e; may fa#e la#k of f(nds to rea#t) / THE 1E0ECTIDE C$MPETIT$R1- A #ompetitor that rea#t to only #ertain types of atta#ks and not to others) It might respond to pri#e #(ts '(t not to ad*ertising e<pendit(re in#reases) = THE TICER C$MPETIT$R- A #ompetitor that rea#t s&iftly and strongly to any assa(lt on its terrain) > THE 1T$CHA1TIC C$MPETIT$R1- A #ompetitor that does not e<hi'it a predi#ta'le rea#tion pattern) 1(#h #ompetitor might or might not retaliate on a parti#(lar o##asion- there is no &ay of predi#ting this de#ision on the 'asis of its e#onomi# sit(ation; history; or any thing else) 1ome ind(stries are #hara#teri%ed 'y relati*e a##ord among the #ompetitors; and others 'y #ontrast fighting) Here are some of the o'ser*ations a'o(t the likely state of #ompetiti*e relations) ! If #ompetitors are nearly identi#al and make their li*ing in the same &ay then their #ompetiti*e e+(ili'ri(m is (nsta'le) / If a single ma5or fa#tor is the #riti#al fa#tor; then #ompetiti*e e+(ili'ri(m is (nsta'le) 24
/ =
= If m(ltiple fa#tors may 'e #riti#al fa#tors; then it is possi'le for ea#h #ompetitor to ha*e some ad*antage and 'e differently attra#ti*e to some #ons(mers) The more fa#tors that may pro*ide a ad*antage; the more #ompetitors &ho #an #oe<ist) Competitors all ha*e their #ompetiti*e segment; defined 'y the preferen#e for the fa#tor trade offs that they offer) 'E!IGNING T E COMPETITI-E INTELLIGENCE !Y!TEM: Ea#h #ompany sho(ld #aref(lly design its #ompetiti*e intelligen#e system to 'e #ost effe#ti*e) E*eryone in the #ompany m(st 'e only sense; ser*e and satisfy the #(stomer '(t also 'e gi*en an in#enti*e to spot #ompetiti*e information and pass it on to the rele*ant parties in the #ompany) 1ometimes #ross dis#iplinary teams are formed spe#ifi#ally for this p(rpose) There are fo(r main steps in*ol*ed in designing a #ompetiti*e intelligen#e system! 1etting (p the 1ystem- The first stem #alls for identifying *ital types of #ompetiti*e information identifying the 'est so(r#es of this information and assigning a person &ho &ill manage the system and its ser*i#es) / Colle#ting the 9ata- the data are #olle#ted on a #ontin(o(s 'asis form the field; #ir#(its; and #ompetitorsP employees; from people &ho do '(siness &ith #ompetitors) = E*al(ating and Analy%ing the 9ata- The data are #he#ked for *alidity and relia'ility; interpreted; and organi%ed) > disseminating information and Responding- Key information is sent to rele*ant de#ision maker and managersP in+(ires a'o(t #ompetitors are ans&ered) !ELECTING COMPETITOR! TO ATTAC" AN' A-OI': With good #ompetiti*e intelligen#e; managers &ill find it easier to form(late their #ompetiti*e strategies) They &ill ha*e a 'etter sense of &hom they #an effe#ti*e #ompete &ith in the market) Cenerally managers #ond(#t a #(stomer *al(e analysis to re*eal the #ompanyPs strengths and &eaknesses relati*e to *ario(s #ompetitors) The aim of a #(stomer *al(e analysis is to determine the 'enefits that #(stomers in a target market segment &ant and ho& they per#ei*e the relati*e *al(e of #ompeting s(ppliers; offers) The ma5or steps in #(stomer *al(e analysis are! Identifying the ma5or attri'(tes that #(stomers *al(e / Assess the +(antitati*e importan#e of the different attri'(tes) = Assess the #ompanyPs and #ompetitorsP performan#es on the different #(stomer *al(es against their rated importan#e) > E<amine ho& #(stomers in a spe#ifi# segment rate the #ompanyPs performan#e against a spe#ifi# ma5or #ompetitor on an attri'(te 'y attri'(te 'asis) ? Monitor #(stomer *al(es o*er time) After the #ompany has done its #(stomer *al(e analysis; it #an fo#(s its atta#k on one of the follo&ing #lasses of #ompetitors- strong *ers(s &eak #ompetitors; #lose *ers(s distant #ompetitors; and good *ers(s 'ad #ompetitors) !tron% -ers*s Wea. Competitors: Most #ompanies aim their shots at their &eak #ompetitors) This strategy re+(ires fe&er reso(r#es and time per share point gained) B(t in the pro#ess of atta#king &eak #ompetitors; the firm may a#hie*e little in the &ay of impro*ed #apa'ilities) The firm sho(ld also #ompete &ith strong #ompetitors to keep (p &orth the state of the art) B(rthermore; e*en strong #ompetitors ha*e some &eaknesses; and the firm may pro*e to 'e a &orthy #ompetitor) Close vers*s 'istant Competitors: Most #ompanies #ompete &ith #ompetitors &ho resem'le them the most) At the same time; the #ompany sho(ld a*oid trying to destroy the #lose #ompetitor) Goo$ -ers*s Ba$ Competitors: Porter arg(es that e*ery ind(stry #ontains RgoodR and RBadR #ompetitors) Cood #ompetitors ha*e a n(m'er of #hara#teristi#s- they play 'y the ind(stryPs r(les- they make realisti# ass(mptions a'o(t the ind(stryPs gro&th potentials, they set pri#es in a reasona'le relation to #osts, they fa*or healthy ind(stry, they limit themsel*es to a portion or segment of the ind(stry, they moti*ate other to lo&er #osts or impro*e differentiationPs, and the a##ept the general le*el of their share of profits) Bad #ompetitors *iolate the r(les- They try to '(y share rather than earn it- they take large risks, they in*est in o*er #apa#ity, and in general; they (pset the ind(strial e+(ili'ri(m) A #ompany 'enefits in se*eral &ays from good #ompetitors) Competitors #onfer se*eral strategi# 'enefits- They lo&er the antitr(st risk, they in#rease total demand, they lead to more differentiation, the share the #ost of market de*elopment and legitimati%e a ne& te#hnology, they impro*e 'argaining po&er *is S *is la'or (nions or reg(lators, and they may ser*i#e less attra#ti*e segments)
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CHAPTER 2 Identifying Market 1egments and 1ele#ting Target Markets

A #ompany that de#ide to operate in a 'road market re#ogni%es that it #annot ser*e all #(stomers in that market 'e#a(se #(stomer are too n(mero(s and di*erse in their '(ying re+(irements) Instead of #ompeting e*ery&here the #ompany needs to identify the market segments that it #an ser*e most effe#ti*ely) In target marketing the sellers disting(ish the ma5or market segment; target one or more of those segments and de*elop prod(#ts and marketing programs for ea#h segment) Target marketing in*ol*es three ma5or steps! Market 1egmentation- Identifying distin#t gro(ps of '(yers &ho might re+(ire separate prod(#ts) / Market Targeting- 1ele#t one or more market segments to enter) = Market Positioning- Esta'lish and #omm(ni#ate prod(#ts; key distin#ti*e 'enefits in the market) MAR"ET !EGMENTATIONMarket #onsist of '(yers &ho differ in many &ays) Markets #an 'e segmented in a n(m'er of &ay) Here &ill e<amine 6A7 le*el of segmentation; 6B7 patterns of segmentation; 6C7 market segmentation pro#ed(re; 697 'asis for segmenting of #ons(mer and '(siness markets; and 6E7 re+(irements for effe#ti*e segmentation) Levels o( !e%mentation: Market segmentation represents an effort to in#rease a #ompanyPs targeting pre#ision) It #an 'e #arried o(t at fo(r le*els) !7 segments; /7 ni#hes; =7 lo#al areas; and >7indi*id(als and ?7 self marketing) Before dis#(ssing these le*els first &e ha*e to (nderstand MA!! MAR"ETING: In mass marketing the seller engages in the mass prod(#tion; mass distri'(tion; and mass promotion of one prod(#t for all '(yers; like #o#a #ola) The traditional arg(ment is that mass marketing #reates the largest potential market; &hi#h leads to the lo&est #osts and (ltimately res(lts in lo&er pri#es or higher margins; '(t it is diffi#(lt to #arry o(t) 1ECMENT MARKETINCA segment #onsist of large identifia'le gro(p &ithin a market) 1egment marketing is the mid point 'et&een mass marketing and indi*id(al marketing) The segment marketing #ompanies kno& that '(yers differ in &ant; p(r#hasing po&er; lo#ation; '(ying ha'its) et#) The #ompany tries to isolate some 'road segments) e)g) an a(to #ompany identify fo(r le*els segments of #ar '(yers; i7 those &ho are seeking 'asi# transportation; ii7 those &ho are seeking high performan#e; iii7 those &ho are seeing l(<(ry; and i*7 those &ho are seeking safety) Cons(mers 'elonging to one segment are #onsidered +(it similar in their &ants and needs) yet they are not identi#al) 1ome segment mem'ers &ants additional feat(res not in#l(ded in the offer &hile others &o(ld gladly gi*e (p &hat they do not &ant *ery m(#h) 1egment marketing offers se*eral 'enefits o*er mass marketing) The #ompany #an prod(#e a more fine t(ned prod(#t and pri#e it appropriately for the target a(dien#e) The #hoi#e of distri'(tion #hannels; and #omm(ni#ation #hannels 'e#omes m(#h easier; and #ompany ha*e to fa#e fe&er #ompetitors) NICHE MARKETINCA ni#he means a small market &hose needs are not 'eing &ell ser*ed) It is (s(ally identified 'y di*iding a segment into s(' segments) Bor e<ample in the segment of hea*y smokers a s(' segment of hea*y smokers &ith emphysema) 1egments 'eing fairly large attra#t se*eral #ompetitors &hile ni#hes are fairly small and normally attra#t only a fe& #ompetitors) 0$CA0 MARKETINCAlso #alled regional marketing; or lo#ali%ed marketing) In it market programs are tailored to the needs and &ants of lo#al #(stomers gro(ps; 6trade areas neigh'or hoods7) IN9IDI9FA0 MARKETINCIt is the (ltimate le*el of segmentation &hi#h lead to Rone to one marketingR) it means prod(#ing a thing on re#eipt of order from #(stomer a##ording to the spe#ifi#ations) 1E0B MARKETINC, A form of indi*id(al marketing in &hi#h indi*id(al #(stomer takes more responsi'ility for determining &hi#h prod(#t and 'rands to '(y) Patterns o( Mar.et !e%mentation: Market segments #an 'e '(ilt (p in many &ays) Instead of looking at demographi# or lifestyle segments; &e #an disting(ish preferen#e segments) Three different patterns #an emerge) i7 H$M$CENE$F1 PREBERENCE1A market &here all the #(stomers ro(ghly ha*e the same preferen#e) The market sho&s no nat(ral segments) ii7 9EBF1E9 PREBERENCE1At the other e<treme the #(stomers preferen#es may 'e s#attered and #(stomers *ary greatly in their preferen#es) The first 'rand to enter the market is likely to position in the #enter to appeal to the most people) A se#ond #ompetitor &o(ld lo#ate ne<t to the first 'rand and fight for market share) $r it #o(ld lo#ate in a #orner to attra#t a #(stomer gro(p that &as not satisfied &ith the #enter 'rand) If se*eral 'rands are in the market they are likely to position thro(gh o(t the spa#e and sho& real differen#es to mat#h #ons(mer preferen#e differen#es) 26
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C0F1TERE9 PREBERENCE1The market might re*eal distin#t preferen#e #l(sters; #alled nat(ral market segments) The first firm in this market has three options) It might position in the #enter; hoping to appear to all gro(ps) It may position in the largest market segment) It might de*elop se*eral 'rands; ea#h positioned in a different segment) If the first firm de*eloped only one 'rand; #ompetitors &o(ld enter and introd(#e 'rands in the other segments) Mar.et !e%mentation Proce$*re: Marketing resear#h firms (ses a three step approa#h to identify the segments in the market) 1TEP $NE 1FRDEM 1TACE- Resear#hers #ond(#t e<ploratory inter*ie&s and fo#(s on #ons(merPs moti*ations; attit(des and 'eha*ior) Brom these findings resear#hers prepare a formal +(estioner to #olle#t data a'o(t theirAttit(des and their importan#e rating Brand a&areness and 'rand ratings) Prod(#t (sage patterns) Attit(des to&ards the prod(#t #ategory) 9emographi#s; geographi#; psy#ho graphi# and media graphi#s of the respondents) 1TEP TW$ ANA0M1I1 1TACE- The resear#her applies fa#tor analysis to the data to remo*e highly #orrelated *aria'les; then apply #l(ster analysis to #reate a spe#ifi# n(m'er of 6ma<imally different7 segments) 1TEP THREE PR$BI0INC 1TACE- Ea#h #l(ster is profiled in terms of its disting(ished attit(des; 'eha*ior; demographi#s; psy#ho graphi#s; and media patterns) Ea#h segment #an 'e gi*en a name; 'ased on dominant disting(ishing #hara#teristi#) Basis o( !e%mentin% Cons*mer Mar.ets: T&o 'road gro(ps are (sed to segment #ons(mer markets) Birst resear#hers form segments 'y looking at #ons(mer #hara#teristi#s; &hi#h may in#l(de geographi#; demographi#; and psy#ho graphi# #hara#teristi#s) $ther resear#hers try to form segments 'y looking at #ons(mer responses to 'enefits so(ght) They (se o##asions and 'rands) The ma5or segmentation *aria'les are- !7 geographi#; demographi#; psy#ho graphi#s and 'eha*ioral segmentation) CE$CRAPHIC 1ECMENTATI$N9i*iding the market into different geographi#al (nits s(#h as nations; states; regions #o(ntries; #ities; (r'an; r(ral; #limate et#) and then de#ide to operate in one or a fe& geographi# areas) 9EM$CRAPHIC 1ECMENTATI$NIn it market is di*ided into gro(ps on the 'asis of demographi# *aria'les s(#h as age; family si%e; family life #y#le gender; in#ome; o##(pation; ed(#ation religion; ra#e; generation; nationality; or so#ial #lass) These *aria'les are the most pop(lar 'e#a(se they are easier to meas(re than most other types of *aria'les) a7 Age and 0ife Cy#le 1tage- Cons(mers &ants and a'ilities #hange &ith age) Ho&e*er it is a tri#ky *aria'le and is mostly effe#ted 'y the psy#hology) '7 Cender, Cenerally applied in #lothing hair styling; #osmeti#s; and maga%ines) $##asionally other marketers noti#e an opport(nity for gender segmentation) #7 In#ome- Another long standing pra#ti#e in s(#h prod(#t and ser*i#e #ategories as a(tomo'iles 'oats; #lothing; #osmeti#s and tra*el) Ho&e*er; in#ome does not al&ays predi#t the 'est #(stomers for a gi*en prod(#t) d7 Ceneration- Ea#h generation is profo(ndly infl(en#ed 'y the milie( in &hi#h it gro&s (p) 1ome marketers target 'a'y 'om'ers (sing #omm(ni#ations and sym'ols that appeal to the optimism of that generation) e7 1o#ial Class- It has a strong infl(en#e on a personPs preferen#e in #ars; #lothing; home f(rnishing; reading ha'its et#) Many #ompanies designee prod(#ts for spe#ifi# so#ial #lasses P1MCH$ CRAPHIC 1ECMENTATI$NIn psy#ho graphi# segmentation; '(yers are di*ided into different gro(ps on the 'asis of lifestyle and J or personality) People &ithin the same demographi# gro(p #an e<hi'it *ery different psy#ho graphi# profiles) a7 0ifestyle- People e<hi'it many more lifestyles than se*en as are s(ggested 'y the so#ial #lasses) People prod(#t interests are infl(en#ed 'y their lifestyles) In fa#t; the goods they #ons(me e<press their lifestyles) Marketers are in#reasingly segmenting their markets 'y #ons(mer lifestyles) ' Personality- Marketers also (se personality *aria'les to segment marketers) They endo& their prod(#ts &ith 'rand personalities that #orrespond to #ons(mer personalities) BEHADI$RA0 1ECMENTATI$NB(yers are di*ided into gro(ps on the 'asis of their kno&ledge of ; attit(de to&ard; (se of; or response to a prod(#t) Bollo&ing are the types of 'eha*ioral segmentation) ! $##asions- B(yers #an 'e disting(ished a##ording to the o##asions they de*elop a need; p(r#hase a prod(#t; or (se a prod(#t) e)g) air tra*el is triggered 'y o##asions related to '(siness; *a#ation; or family) An air line #an spe#iali%e in ser*ing people for &hom one of these o##asions dominates) / Benefit 1egmentation- A po&erf(l form of segmentation in*ol*es #lassifying '(yers a##ording to the 'enefits they seek from the prod(#t) = Fser 1tat(s- Markets #an 'e segmented into gro(ps of non(sers; e< (sers; potential (sers; first time (sers; and reg(lar (sers of a prod(#t) The #ompanyPs position in the market &ill also infl(en#e its fo#(s) Market share leaders &ill fo#(s on attra#ting potential (sers; &hile smaller firms &ill often fo#(s on attra#ting #(rrent (sers a&ay from the market leader) 27
> Fsage rate- Market #an also 'e segmented into light; medi(m; and hea*y prod(#t (sers) Hea*y (sers are often a small per#entage of the market '(t a##o(nt for the high per#entage of total #ons(mption) Marketers (s(ally prefer to attra#t one hea*y (ser to their prod(#t or ser*i#e rather than se*eral light (sers) ? 0o#ality 1tat(s- A market #an 'e segmented 'y #ons(mer lo#ality patterns) Cons(mers #an ha*e *arying degrees of loyalty to 'rands; stores; and other entities) B(yers #an 'e di*ided into fo(r gro(ps a##ording to their 'rand loyalty) i7 Hard-core loyals: Who '(y one 'rand all the time) ii7 Split Loyals: Who are loyal to t&o or three 'rands) iii7 Shifting Loyals: Those shift from fa*oring one 'rand to another) i*7 Switchers: Cons(mers &ho sho& no loyalty to any 'rand) @ B(yers Readiness 1tage- A market #onsist of people in different stages of readiness to '(y a prod(#t) 1ome are (na&are of the prod(#t; some are a&are; some are formed; some are interested; some desire the prod(#t; and some intend to '(y) The relati*e n(m'ers make a 'ig differen#e in designing the marketing program) 3 Attit(de- Bi*e attit(de gro(ps #an 'e fo(nd in a market enth(siasti#; positi*e; indifferent; negati*e; and hostile) MF0TM ATTRIBFTE 1ECMENTATI$N Marketers no longer talk a'o(t the a*erage #ons(mers; or e*en limit their analysis to only a fe& market segments) Rather they are in#reasingly #rossing se*eral *aria'les in an effort to identify smaller; 'etter defined target gro(ps) Tar%etin% M*ltiple !e%ments: Dery often; #ompanies may 'egin their marketing &ith one targeted segment; then e<pand into other segments) BA!I! 3OR !EGMENTING B4!INE!! MAR"ET!: B(siness market s #an 'e segmented &ith many of the same *aria'les employed in #ons(mer market segmentation; s(#h as geography; 'enefit so(ght and (sage rate) Met '(siness markets #an also (se se*eral other *aria'le gi*en 'ello&'emo%raphic: It may in#l(de! Ind(stryWhi#h ind(stries sho(ld &e ser*e) / Company si%eWhat si%e #ompanies sho(ld &e ser*e) = 0o#ationWhi#h geographi#al areas sho(ld &e ser*e) Operatin% -aria7les: ! Te#hnologyWhat #(stomer te#hnologies sho(ld &e fo#(s onK / Fser JNon(ser stat(s1ho(ld &e ser*e hea*y (sers; medi(m; light or non(serK = C(stomer Capa'ilities1ho(ld &e ser*e #(stomers needing many or fe& goods or ser*i#esK P*rchasin% Approach: ! P(r#hasing B(n#tion $rgani%ation- 1ho(ld &e ser*e highly #entrali%ed or de#entrali%ed p(r#hasing organi%ationsK / Po&er 1tr(#t(re 1ho(ld &e ser*e Co) engineering dominants; finan#ially dominants or so forthK = Nat(re of E<isting Relationships- 1er*e #ompanies ha*ing strong relations &ith (s; or go after the most desira'le) > Ceneral P(r#hase Poli#y- 1er*e them &ho prefer leasing; ser*i#e #ontra#ts; systemPs p(r#hases or sealed 'idding) ? P(r#hasing Criteria 1er*e those #ompanies seeking +(alityK 1er*i#eK or pri#eK !it*ational 3actors: ! Frgen#y1ho(ld &e ser*e #ompanies that need +(i#k and s(dden deli*ery or ser*i#eK / 1pe#ifi# appli#ation1ho(ld &e fo#(s on #ertain appli#ation of o(r prod(#t rather that all appli#ationsK = 1i%e of $rder1ho(ld &e fo#(s on larger or small ordersK Personal Characteristics: ! B(yer 1eller 1imilarity 1ho(ld &e ser*e #ompanies &hose people and *al(es are similar to o(rsK / Attit(des to&ard risk1ho(ld &e ser*e risk taking or risk a*oiding #(stomersK = 0oyalty1ho(ld &e ser*e #ompanies that sho& high loyalty to their s(ppliersK Re8*irements (or E((ective !e%mentation: There are many &ays of segmenting a market; ho&e*er; all segmentation are not effe#ti*e) To 'e (sef(l market segments m(st 'e! MEA1FRAB0E- The p(r#hasing po&er and #hara#teristi#s of the segment #an 'e meas(red) / 1FB1TANTIA01egment sho(ld 'e large and profita'le eno(gh to ser*e) = ACCE11IB0EThe segment #an 'e effe#ti*ely rea#hed and ser*ed) > 9IBBERENTIAB0EThe segment are #on#ept(ally disting(isha'le and respond differently to different marketing mi< elements and programs) If married and (n married &oman respond similarly to a sale on perf(me; they don"t #onstit(te separate segments) > ACTI$NAB0E Effe#ti*e programs #an 'e form(lated for attra#ting and ser*ing the segments)
TARGET MAR"ETING
! After identifying market segments the enterprise has to e*al(ate them and de#ide; ho& many and &hi#h ones to target) No& &e &ill e<amine the pro#ess of e*al(ating and sele#ting marketing segmentsEval*atin% the Mar.et !e%ments: While e*al(ating the market segments the firm m(st look at t&o fa#tors gi*en 'ello&I7 The o*erall attra#ti*eness of the segment and 2
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II7 The #ompanies o'5e#ti*es and reso(r#es) !electin% the Mar.et !e%ment; After e*al(ating the firm de#ide to &hi#h and ho& many segments to ser*e) 1ele#tion #an 'e made in any of the follo&ing fi*e patterns I7 1INC0E 1ECMENT C$NCENTRATI$N- The most simplest #ase in &hi#h #ompany sele#ts only one segment and #on#entrates on it) II7 1E0ECTIDE 1PECIA0IOATI$N- Here the firm sele#ts a n(m'er of segments; ea#h o'5e#ti*ely attra#ti*e and appropriate; gi*en the firmPs o'5e#ti*es and are reso(r#es) there may 'e little or no synergy among the segments; '(t ea#h segment promises to 'e a money maker) This m(lti segment #o*erage strategy has the ad*antage of di*ersifying the firmPs risk) E*en if one segment 'e#omes (nattra#ti*e the firm #an #ontin(e to earn more in other one) III7 PR$9FCT 1PECIA0IOATI$N- When the firm #on#entrates on making a #ertain prod(#t that it sells to se*eral segments) In it a #ompany #an '(ild strong rep(tation in the spe#ifi# prod(#t area) The do&nside risk is that the prod(#t may 'e s(pplanted 'y an entirely ne& te#hnology) ID7 MARKET 1PECIA0IOATI$N- Here the firm #on#entrates on ser*ing many needs of a parti#(lar #(stom gro(p) D7 BF00 MARKET C$DERACE- When the firm attempts to ser*e all #(stomer gro(ps &ith all the prod(#ts that they might need) $nly *ery large firms #an (ndertake a f(ll market #o*erage strategy) 0arge firms #an #o*er a &hole market in t&o 'road &ays thro(gh (ndifferentiated marketing or differentiated marketing) a7 Fndifferentiated Marketing- In it the firm ignores market segment differen#es and goes after the &hole market &ith one market offer) It fo#(ses on '(yers needs rather than differen#es among '(yers) It design a prod(#t and a marketing program that &ill appeal to the 'roadest n(m'er of '(yers) It relies on mass distri'(tion and mass ad*ertising) '7 9ifferentiated Marketing- In it firms operate in se*eral market segments and designs different programs for ea#h segment) differentiated market #reates more total sales than (ndifferentiated It also in#rease the #ost of '(siness the follo&ing are the #ostsProd(#t modifi#ation #ost- Modifying a prod(#t to meet different market segment re+(irements (s(ally in*ol*es more resear#h and de*elopment; engineering and spe#ial tooling #osts) Man(fa#t(ring #ost- It is (s(ally more e<pensi*e to prod(#e !4 (nits of !4 different prod(#ts than !44 (nits of one prod(#t) Administrati*e #ost- for separate marketing plan for ea#h market segment) This re+(ires e<tra marketing rea#h; fore#asting; sales analysis; promotion; planning and #hannel management) In*entory Costs- It is (s(ally more to manage in*entories #ontaining many prod(#ts than in*entories #ontaining fe& prod(#ts) Promotion #osts- The #ompany has to rea#h different markets segments &ith different promotion programs) the res(lt is in#reased promotion planning #osts and media #osts) A''ITIONAL CON!I'ERATION IN E-AL4ATING AN' !ELECTING !EGMENT!: Bollo&ing fo(r more #onsiderations m(st 'e taken into a##o(nt in e*al(ating and sele#ting segments- !7 Ethi#al #hoi#e of market targets; /7 segment interrelationships and s(per segments; =7 segment 'y segment e*asion plans; and >7 intersegment #ooperation) Ethical Choice o( Mar.et Tar%ets: Market targeting sometimes generates #ontro*ersy like #igarette markets ha*e generate m(#h #ontro*ersy) In market targeting the iss(e is not &ho is targeted '(t rather ho& and for &hat) 1o#ially responsi'le marketing #alls for segmentation and targeting that ser*e not 5(st the interests of the #ompany '(t also the interests of those targeted) !e%ment Interrelationships an$ !*per se%ments: In sele#ting more than one segment; the #ompany sho(ld pay #lose attention to segment interrelationships on the #ost; performan#e and te#hnology side) Companies sho(ld also identify and try to operate in s(per segments rather than in isolated segments) A s(per segment is a set of segments sharing some e<ploita'le similarity) !e%ment B/ !e%ment Invasion Plans: E*en if the firm plans to target s(per segment; it is &ise to enter one segment at a time and #on#eal its grand plan) The #ompetitors m(st not kno& to &hat segment6s7 the firm &ill mo*e ne<t) Interse%ment Cooperation: The 'est &ay to manage segments is to appoint segment managers &ith s(ffi#ient a(thority and responsi'ility for '(ilding their segmentPs '(siness) At the same time; segment managers sho(ld not 'e so segment fo#(sed as to resist #ooperation &ith other #ompany personnel to impro*e o*erall #ompany performan#e)
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CHAPTER !4 9ifferentiating and Positioning the Market $ffering

In an ind(stry kno& for intense #ompetition; &ho #an a small #ompany #an #ompete against ind(stry leadersK $ne ans&er is 'y differentiating its prod(#t and a*oiding dire#t #ompetition) Companies that differentiate their offering solely 'y #(tting their #osts and pri#e may 'e making a mistake; for se*eral reasons) Birst #heaper prod(#ts are often *ie&ed as inferior in +(ality; se#ond the firm may #(t ser*i#es to keep the pri#e do&n &hi#h may alienate '(yers) Third a #ompetitor &ill (s(ally find a lo&er #ost prod(#tion method and offer an e*en #heaper *ersion) If the firm did not disting(ish its offering in any other &ay than pri#e; it &ill 'e so(ndly 'eaten 'y the #ompetitor) Companies are #onstantly trying to differentiate their market offering or *al(e pa#kage from #ompetitors) They pro*ide ne& g(arantees; spe#ial re&ards for loyal (sers; ne& #on*enien#es and en5oyments; and so on) E*en &hen they s(##eed their #ompetitors adopt s(#h their *al(e pa#kage and th(s #ompetiti*e ad*antages lasts only for a short time) Companies therefore; need to think; #onstantly a'o(t ne& feat(re and 'enefits to &in the attention and interests of #(stomers) TOOL! 3OR COMPETITI-E 'I33ERENTIATION: 9IBBERENTIATI$N is the a#t of designing a set of meaningf(l differen#es to disting(ish the #ompanyPs offering from #ompetitorsP offering)R The n(m'er of differentiation"s *aries &ith the type of ind(stry) Ind(stries are of fo(r types! D$0FME IN9F1TRM- A Ind(stry in &hi#h #ompanies #an gain only a fe& '(t large #ompetiti*e ad*antages; e)g) #onstr(#tion) In it a #ompany #an stri*e for lo& #ast position or the highly differentiated position) Here profita'ility is #orrelated &ith #ompany si%e and market share) / 1ECMENTE9 IN9F1TRM- An ind(stry in &hi#h there are only fe& #ompetiti*e ad*antages and ea#h is small; e)g) steel ind(stry) Here it is diffi#(lt to differentiate its prod(#t or de#rease its #ost Companies try to higher 'etter salespeople; entertain more la*ishly; '(t these are small ad*antages) = BRACMENTE9 IN9F1TRM- Where #ompany fa#es many opport(nities for differentiation; '(t ea#h opport(nity for #ompetiti*e ad*antage is small) > 1PECIA0IOE9 IN9F1TRM- An ind(stry in &hi#h #ompanies fa#es more opport(nities for differentiation and ea#h differentiation #an ha*e a high payoff; e)g) #ompanies making spe#ial ma#hinery for sele#ted market segments) Ho& e<a#tly #an a #ompany differentiate its prod(#t form #ompetitors) There are fi*e dimensions A7 Prod(#t; B71er*i#e; C7 Personnel; 97Channel; or E7Image) Pro$*ct 'i((erentiation: 9ifferentiating the physi#al prod(#ts) At one e<treme the prod(#ts are highly standardi%ed and allo& little *ariation; e)g) #hi#ken; steel aspirin) Met e*en here; gen(ine *ariation is possi'le) At the other e<treme are prod(#ts #apa'le of high differentiation; s(#h as a(tomo'iles; '(ildings; and f(rnit(re) The main prod(#t differentiation"s are !7 feat(res; /7 performan#e; =7d(ra'ility; >7relia'ility; ?7repara'ility; @7 style; and 37 design) BEATFRE1- Beat(res are #hara#teristi#s that s(pplement the prod(#tPs 'asi# f(n#tion) PERB$RMANCE- Refers the le*el at &hi#h the prod(#tPs primary #hara#teristi#s operate) C$NB$RMANCE IFA0ITM- Is the degree to &hi#h all the prod(#ed (nits are identi#al and meet the promised target spe#ifi#ations) 9FRABI0ITM- 9(ra'ility is the meas(re of the prod(#tPs e<pe#ted operating life (nder nat(ral and J or stressf(l #onditions) RE0IABI0ITM- It is the meas(re of the pro'a'ility that a prod(#t &ill not malf(n#tion or fail &ithin a spe#ified time period) B(yers normally &ill pay a premi(m for prod(#t &ith more relia'ility) REPARABI0ITM- B(yers prefer prod(#ts that are easy to repair; 1TM0E- B(yers are normally &illing to pay a premi(m for prod(#ts that are attra#ti*ely styled) 1tyle des#ri'es the prod(#tPs looks and feel to the '(yer) 9E1ICN- A most patent &ay to differentiate and position a #ompanyPs prod(#ts and ser*i#es) It is the totality of feat(res that affe#t; ho& a prod(#t looks and f(n#tions in terms of #(stomer re+(irements) !ervice 'i((erentiation: In addition to differentiating its physi#al prod(#t a firm #an also differentiate its ser*i#es) When the physi#al prod(#t #annot easily 'e differentiated; the dye to #ompetiti*e s(##ess often lies in adding more *al(e adding ser*i#es and impro*ing their +(ality) The main ser*i#e differentiation"s are !7 ordering ease; /7deli*ery; =7 installation; >7 #(stomer training; ?7 #(stomer #ons(lting; @7 maintenan#e and repair; and 37 fe& others) $R9ERINC EA1E- It refers to ho& easy it is for the #(stomer to pla#e an order &ith the #ompany) 9E0IDERM- Refers to ho& &ell the prod(#t or ser*i#e is deli*ered to the #(stomer; It in#l(des the speed; a##(ra#y and #are attending the deli*ery pro#ess) IN1TA00ATI$N- Installation is the &ork done to make a prod(#t operational in its planned lo#ation) B(yers of hea*y e+(ipment e<pe#t good installation ser*i#e from the *endor) CF1T$MER TRAININC- It refers to training the #(stomersP employees to (se the *endorPs e+(ipment properly and effi#iently) 3"
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CF1T$MER C$N1F0TINC- It refers to data; information system and ad*ising ser*i#e that the seller offers free or for a pri#e to '(yer) MAINTENANCE AN9 REPAIR- It des#ri'es the #ompanyPs ser*i#e program for helping #(stomers keep their p(r#hased prod(#ts in good &orking order) MI1CE00ANE$F1 1ERDICE1- Companies find many other &ays to add *al(e 'y differentiating their #(stomer ser*i#es) They #an offer a 'etter prod(#t &arranty or maintenan#e #ontra#t than their #ompetitors) They #an esta'lish patronage a&ards) Dirt(ally there are (nlimited n(m'er of spe#ifi# ser*i#es and 'enefits that #ompanies #an offer to differentiate themsel*es from their #ompetitors) PER!ONNEL 'I33ERENTIATION: Companies #an gain a strong #ompetiti*e ad*antage thro(gh hiring and training 'etter people than their #ompetitors) Better trained personnel"s e<hi'it si< #hara#teristi#s Competence: The employee possess the re+(ired skill and kno&ledge; Courtesy: The employees are friendly; respe#tf(l and #onsiderate) Credibility The employees are tr(st&orthy) Reliability The employees perform the ser*i#e #onsistently and a##(rately) Responsiveness The employees respond +(i#kly to #(stomersP re+(ests and pro'lems) Communication: The employees make an effort to (nderstand the #(stomer and #omm(ni#ate #learly Channel 'i((erentiation: Companies #an a#hie*e differentiation thro(gh the &ay they shape their distri'(tion #hannels; parti#(larly these #hannels are !7#o*erage; /7e<pertise; and =7 performan#e) Co*erage means its dealers are fo(nd in more lo#ations than #ompetitorsP dealers) E<pertise- means its dealers are typi#ally 'etter trained and perform more relia'ly) Performan#e- refers to de*eloping and managing dire#t marketing #hannels of high +(ality) Ima%e 'i((erentiation: E*en &hen the offers of t&o #ompetitors look same; '(yers may respond differently to the #ompany or 'rand image) Identity Ders(s Image- It is important to disting(ish 'et&een identity and image) Identity #omprises the &ays that a #ompany aims to identify itself or position its prod(#t) Image is the &ay the p('li# per#ei*es the #ompany or its prod(#ts) An effe#ti*e image does three things for a prod(#t) first it #on*eys a sing(lar message that esta'lishes the prod(#tPs #hara#ter and *al(e positions) 1e#ond; it #on*eys a message in a distin#ti*e &ay so that it is not #onf(sed &ith similar messages from #ompetitors) Third; it deli*ers emotional po&er so that it stirs the hearts as &ell as the minds of '(yers) 1MMB$01- A strong image #onsists of one or more sym'ols that trigger #ompany or 'rand re#ognition) The #ompany 'rands and logos sho(ld 'e designed to instant re#ognition) WRITTEN AN9 AF9I$DI1FA0 ME9IA- The #hosen sym'ols m(st 'e &orked into ad*ertisements that #on*ey the #ompany or 'rand personality) ATM$1PHERE- 9istin#ti*e physi#al #ondition in &hi#h the origination prod(#es or deli*ers its prod(#ts and ser*i#es is another po&erf(l image generator) EDENT1- A #ompany #an '(ild an identity thro(gh the type of e*ents it sponsors) 'E-ELOPING A PO!ITIONING !TRATEGY: A #ompany m(st #aref(lly sele#t the &ays in &hi#h it &ill disting(ish itself from #ompetitors a differen#e is &orth esta'lishing to the e<tent that it satisfies the follo&ing #riteria mportant- The differen#e deli*ers a high *al(ed 'enefit to a s(ffi#ient n(m'er of '(yers) !istinctive: The differen#e either is not offered 'y other or is offered in a more distin#ti*e &ay 'y the #ompany) Superior: The differen#e is s(perior to other &ays of o'taining the same 'enefit) Communicable: The differen#e is #omm(ni#a'le and *isi'le to '(yers) "reemptive: The differen#e #annot 'e easily #opied 'y the #ompetitors) Affordable: The '(yer #an afford to pay for the differen#e) "rofitable: The #ompany &ill fine it profita'le to introd(#e the differen#e) Positionin% is the a#t of designing the #ompanyPs offering and image so that they o##(py a meaningf(l and distin#t #ompetiti*e position in the target #(stomersP minds) o2 Man/ 'i((erences to Promote: Many marketers ad*o#ate promoting only one 'enefit to the target market) Ea#h 'rand sho(ld 'a#k an attri'(te and to(t itself a s n(m'er one on that attri'(te) The most #ommonly promoted n(m'er one positioning are R'est +(ality; 'est ser*i#e; lo&est pri#e; 'est *al(e; safest; fastest; most #(stomi%ed; most #on*enient and most ad*an#ed te#hnology)R Not e*eryone agrees that single 'enefit positioning is al&ays 'est) 9o('le 'enefit positioning may 'e ne#essary if t&o or more firms are #laiming to 'e 'est on the same attri'(te) As #ompanies in#rease the n(m'er of #laims for their 'rand; they risk dis'elief and a sole of #lear positioning) In general; a #ompany m(st a*oid fo(r ma5or positioning errors) 31
! / = > ! / = > ? @ 3
Fnderpositioning- 1ome #ompanies dis#o*er that '(yers ha*e only a *ag(e idea of the 'rand) B(yers donPt really sense anything spe#ial a'o(t it) The 'rand is seen 5(st as 5(st an other entry in a #ro&ded marketpla#e) $*erpositioning- B(yers may ha*e too narro& an image of the 'rand) That he deems it as high standard than his #apa'ilities) Conf(sed Positioning- B(yers might ha*e a #onf(sed image of the 'rand res(lting to many #laims or #hanging the 'randPs positioning too fre+(ently) 9o('tf(l Positioning- B(yer may fo(nd it hard to 'elie*e the 'rand #laims in *ie& of the prod(#tPs feat(res; pri#e; or man(fa#t(rer) The different positioning strategies that a #ompany #an adopt are gi*en 'ello&Attri'(te positioning- This o##(rs &hen a #ompany positions itself on an attri'(te; s(#h as si%e; n(m'er or years in e<isten#e; Benefit positioning- Here the prod(#t is positioned as the leader in a #ertain 'enefit) Fse J appli#ation positioning- This in*ol*e positioning the prod(#t as 'est for some (se or appli#ation) Fser positioning This in*ol*es positioning the prod(#t as 'est for some (ser gro(p; Competitors Positioning- Here the prod(#t positions itself as 'etter in some &ay than a named or implied #ompetitor) Prod(#t #ategory positioning- Here the prod(#t is positioned as the leader in a #ertain prod(#t #ategory) I(ality J Pri#e positioning- Here the prod(#t is positioned as offering the 'est *al(e for the pri#e)
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CHAPTER !! 9e*eloping Ne& Prod(#t

E*ery #ompany m(st #arry on ne& prod(#t de*elopment) Repla#ement prod(#ts m(st 'e #reated to maintain or '(ild sales) A #ompany #an add ne& prod(#t thro(gh a#+(isition andJ or ne& prod(#t de*elopment) The a#+(isition ro(te #an take three forms) ! The #ompany #an '(y other #ompanies; / it #an a#+(ire patents from other #ompanies; or = it #an '(y a li#ense or fran#hise from another #ompany) The ne& prod(#t de*elopment ro(te #an take t&o forms) ! The #ompany #an de*elop ne& prod(#ts in its o&n la'oratories; or / it #an #ontra#t &ith independent resear#hers or ne& prod(#t de*elopment firms to de*elop spe#ifi# prod(#ts for the #ompany) There are si< #ategories of ne& prod(#ts in terms of their ne&ness to the #ompany and to the marketpla#e) i7 Ne& to the &orld prod(#ts- Ne& prod(#t that #reate an entirely ne& market) ii7 Ne& prod(#t lines- Ne& prod(#t that allo& a #ompany to enter an esta'lished market for the first time) iii7 Additions to E<isting prod(#t lines- Ne& prod(#t that s(pplement a #ompany"s esta'lished prod(#t lines 6Pa#kage; si%es; fla*ors; et#)7 i*7 Impro*ements and re*isions of e<isting prod(#ts- Ne& prod(#ts that pro*ide impro*ed performan#e or greater per#ei*ed *al(e and repla#e e<isting prod(#ts) *7 Repositioning- E<hi'iting prod(#ts that are targeted to ne& markets or market segments) *i7 Cost red(#tions- Ne& prod(#t that pro*ide similar performan#e at lo&er #ost) C ALLENGE! IN NEW6PRO'4CT 'E-ELOPMENT: Ne& te#hnologies has shortened the prod(#t life #y#le) The #ompanies &hi#h fail to de*elop ne& prod(#ts are p(tting themsel*es at great risk) At the same time the de*elopment of a ne& prod(#t is also risky d(e to the #han#es of fail(re) A ne& prod(#t may fail d(e to any one or more of the follo&ing reasons) i7 P(tting an ne& idea 6fa*orite to high le*el e<e#(ti*e7 inspite of negati*e market resear#h findings) ii7 The idea is good '(t market si%e is o*er estimated) iii7 The a#t(al prod(#t is not &ell designed) i*7 Ne& prod(#t is either in#orre#tly positioned in the market; not ad*ertised effe#ti*ely; or o*erpri#ed) *7 9e*elopment #osts are higher than e<pe#ted) *i7 Competitors fight 'a#k harder than e<pe#ted) In addition se*eral other fa#tors hinder ne& prod(#t de*elopment; &hi#h are gi*en 'ello&i7 1hortage of ne& prod(#tion ideas in #ertain areas i)e) their may 'e fe& &ays left to impro*e the prod(#ts ii7 B(ndamental Markets- Keen #ompetition leads to market fragmentation) iii7 1o#ial and go*ernmental Constraints- Ne& prod(#t ha*e to satisfy s(#h #riteria as to #ons(mer safety; ar#heologi#al #ompati'ility) i*7 Coastlines of the ne& prod(#t de*elopment pro#ess- A #ompany has to de*elop many ne& prod(#t ideas to find 5(st one &orthy of de*elopment) Moreo*er; #ompany ha*e to fa#e high resear#h and de*elopment #osts) *7 Capital shortages- 1ome #ompanies &ith good ideas; #annot raise the f(nds needed to resear#h and prod(#e them) *i7 Baster 9e*elopment Time- Many #ompetitors are likely to get the same idea at the same time and *i#tory often goes to the s&iftest) *ii7 1horter Prod(#t 0ife Cy#le- When a ne& prod(#t is s(##essf(l ri*als are +(i#k to #opy it) E33ECTI-E ORGANI<ATIONAL ARRANGEMENT!: 1(##essf(l ne& prod(#t de*elopment re+(ires the #ompany to esta'lish an effe#ti*e origination for managing the ne& prod(#t de*elopment pro#ess) An effe#ti*e organi%ation 'egins &ith its top management; &hi#h is (ltimately responsi'le for the s(##ess of the ne& prod(#t) Ne& prod(#t de*elopment re+(ires management to define the '(siness domains and prod(#t #ategories that the #ompany &ants to emphasi%e) Th(s top management m(st esta'lish spe#ifi# #riteria for a##eptan#e of ne& prod(#t ideas; espe#ially in large m(ltidi*isional #ompanies) A ma5or de#ision fa#ing top management is ho& m(#h to '(dget for ne& prod(#t de*elopment) Resear#h and de*elopment o(t #omes are so (n#ertain that it is diffi#(lt to (se normal in*estment #riteria for '(dgeting) 1ome #ompanies sol*e this pro'lem 'y en#o(raging and finan#ing as many pro5e#ts as possi'le) hoping to a#hie*e a fe& &inners) $ther #ompanies set their RA9 '(dget 'y applying a #on*entional per#entage of sales fig(res or 'y spending &hat the #ompetitors spends) 1till other #ompanies de#ide ho& many s(##essf(l ne& prod(#ts they need and &ork 'a#k&ard to estimate the re+(ired RA9 '(dget in*estments) Companies handle the organi%ational aspe#ts of ne& prod(#t de*elopment in se*eral &ays) The most #ommon of these are-
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Prod(#t Managers- Many #ompanies assign responsi'ility for ne& prod(#t ideas to their prod(#t managers) In pra#ti#e this system ha*e many fa(lts) The prod(#t managers are so '(sy in managing their e<isting prod(#ts that they #an tho(ght litter a'o(t ne& prod(#ts) / Ne& Prod(#t Managers- 1ome #ompanies ha*e appointed ne& prod(#e managers &ho report to gro(p prod(#t managers) this position professionalise the ne& prod(#t f(n#tion) Ho&e*er; like prod(#tion managers; ne& prod(#t managers tend to think in terms of prod(#t modifi#ation and line e<tensions limited to their prod(#t market) = Ne& prod(#t Committees- Many #ompanies ha*e a high le*el management #ommittee #harged &ith re*ie&ing and appro*ing ne& prod(#t proposals) > Ne& Prod(#t 9epartments 0arge #ompanies often esta'lish a ne& prod(#t department headed 'y a manager &ho has s('stantial a(thority and a##ess to top management) The departments ma5or responsi'ilities in#l(de generating an s#reening ne& ideas; &orking &ith RA9 department; and #arrying o(t field testing and #ommer#iali%ation) ? Ne& Prod(#t Dent(re Teams- A *ent(re team is a gro(p 'ro(ght together from *ario(s operating departments and #harged &ith de*eloping a spe#ifi# prod(#t or '(siness) MANAGING T E NEW PRO'4CT 'E-ELOPMENT PROCE!!: There are eight stages in*ol*ed in the ne& prod(#t de*elopment pro#ess) !7 idea generation; /7idea s#reening; =7#on#ept de*elopment and testing >7 marketing strategy de*elopment; ?7 '(siness analysis; @7 prod(#t de*elopment; 37 market testing; and E7 #ommer#iali%ation) I9EA CENERATI$N- The ne& prod(#t de*elopment pro#ess &ith the sear#h) Top managers sho(ld define the prod(#ts the a*aila'le markets and state the ne& prod(#ts o'5e#ti*es) Ne& prod(#t ideas #an #ome from many so(r#es; like #(stomers; s#ientists; employees; #ompetitors; #hannel mem'ers; and top management) C(stomers , Cons(mers needs and &ants are logi#al pla#e to start the sear#h for ne& prod(#t ideas) 1#ientists J Employees- Companies also rely on their s#ientists; engineers; designers; and other employer for ne& prod(#t ideas) 1(##essf(l #ompanies ha*e esta'lished a #(lt(re that en#o(rages e*ery employee to seek ne& &ays for impro*ing the #ompanyPs prod(#tion) Competitors- Companies #an also find good ideas 'y e<amining their #ompetitorPs prod(#ts and ser*i#es) They #an lean from s(ppliers; distri'(tors; and sales representati*es; &hat #ompetitors are doing) They #an find o(t &hat #(stomers like and dislike in their #ompetitorPs prod(#ts) They #an '(y their #ompetitors prod(#ts; take them apart; and '(ild 'etter ones) Channel Mem'ers- Companies sales representati*es and intermediaries are a parti#(larly good so(r#e of ne& prod(#t ideas) They ha*e first hand e<pos(re to #ost(mers needs and #omplaints) Top management- #an 'e another manor so(r#e of de*elopment of ne& ideas) Idea Generation techniques: There are a n(m'er of te#hni+(es of idea generation some are gi*en 'ello&i7 Attri'(te 0isting- 0isting the attri'(tes of an e<isting prod(#t and then modifying ea#h attri'(te in the sear#h for an impro*ed prod(#t) ii7 Bor#ed Relationships- In it se*eral aspe#ts are #onsidered in relation to one an other to #reate a ne& prod(#t; e)g) a #om'ine ma#hine #ontaining fa<; telephone; and #opy ma#hine into one (nit) iii7 Morphologi#al Analysis- It #onsist of identifying the str(#t(ral dimensions; of a pro'lem and e<amining the relationships among them) The hope is to find some no*el #om'inations) i*7 Need J Pro'lem Identifi#ation- In it idea generation starts from re*ie&ing #ons(mer needs J pro'lems) In it the #ons(mers are asked a'o(t needs; pro'lems and ideas) *7 Brainstorming- Cro(p #reati*ity #an 'e stim(lated 'y 'rain storming te#hni+(e) The (s(al 'rainstorming gro(p #onsist of @ to !4 peoples dis#(ssing the spe#ifi# pro'lem) The #hain starts ea#h dis#(ssion 'y saying; RRemem'er; &e &ant as many ideas as possi'le; and remem'er; no e*al(ation)R The ideas start flo&ing; one idea sparks another; and &ithin an ho(r o*er a h(ndred or more ne& ideas may find their &ay into the tape re#order) To 'e ma<imally effe#ti*e their fo(r g(idelines Criticism is ruled out: negati*e #omments on ideas m(st 'e &ithheld (ntil later) #reewheeling is welcomed- The &ilder the idea; the 'etter; it is easier to tame do&n than to think (p) $uantity is encouraged: The greater the n(m'er of ideas generated; the greater &ill 'e the #han#es of an idea &orth p(rs(ing) Combining and mproving ideas is encouraged: Parti#ipants sho(ld s(ggest ho& other peoplePs ideas #an 'e 5oined into more ideas) *i7 1yne#ti#s- William N)N Corder felt the 'rainstorming sessions tent to prod(#e sol(tions too +(i#kly; 'efore a s(ffi#ient n(m'er of perspe#ti*e ha*e 'een de*eloped) Th(s he has e<posed a *ery different te#hni+(e named as syne#ti#s method) It ha*e fi*e prin#iplesa7 !eferment: 0ook first for *ie&point rather than sol(tions) '7 %utonomy of &b'ect: 0et the pro'lem take on a life of its o&n) #7 (se of Common "lace- Take ad*antage of the familiar as a sign'oard to the strange) d7 nvolvement ) detachment: Alternate 'et&een entering into the parti#(lars of the pro'lem and standardi%ing 'a#k from them) 34
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e7 (se of *etaphor: 0et apparently irrele*ant; a##idental things s(ggest analogies that are so(r#es of ne& *ie&points) I9EA 1CREENINC- The ne& de*eloped ideas sho(ld 'e &ritten do&n and re*ie& ea#h &eek 'y an idea #ommittee and sot it into = gro(ps) i7 Promising Ideas; ii7 Marginal ideas; and iii7 re5e#ts) The #ompany sho(ld offer payment or re#ognition to the employees s('mitting the 'est ideas) There may 'e t&o types of errors &hile idea s#reening, i7 A 9rop error- When dismissed a good idea; and ii7 A Co error- When a #ompany permits a poor idea to mo*e into de*elopment and #ommer#iali%ation) C$NCEPT 9EDE0$PMENT AN9 TE1TINC- Attra#ti*e ideas m(st 'e refined into testa'le prod(#t #on#epts) We #an disting(ish among a prod(#t ides; a prod(#t #on#ept and a prod(#t image) A prod(#t Idea is a possi'le prod(#t idea; that the #ompany might offer to the market A prod(#t #on#ept is an ela'orated *ersion of the idea e<pressed in meaningf(l #ons(mer terms) A prod(#t Image- is the parti#(lar pi#t(re that #ons(mer a#+(ire of an a#t(al or potential prod(#t) Concept 'evelopment: A prod(#t idea #an 'e t(rned into se*eral prod(#t #on#epts) Bollo&ing are the three +(estions on &hi#h the #on#epts are 'ased) Who &ill (se it; What primary 'enefits sho(ld it pro*ide; When it #an 'e (sed e)g) in h(nger; in &inter; at 'reakfast et#) By ans&ering these +(estions a #ompany #an for many #on#epts; ea#h 'eing a #ategory #on#ept) Concept Testin%: Con#ept testing #alls for testing prod(#t #on#epts &ith an appropriate gro(p of target #ons(mers; then getting those #ons(mersP rea#tions) The #on#ept #an 'e presented sym'oli#ally or physi#ally) At this stage a &ord or pi#t(re des#ription #an s(ffi#e) Ho&e*er the more the tested #on#epts resem'le the final prod(#t or e<perien#e; the more dependa'le #on#ept testing is) MARKETINC 1TRATECM 9EDE0$PMENT- After testing the ne& prod(#t manage m(st de*elop a preliminary marketing strategy plan for introd(#ing the ne& prod(#t in to the market) The marketing strategy &ill (ndergo f(rther refinement in s('se+(ent stages) A plan to market the prod(#t is #onsist of three partsBirst- Target Market si%e; str(#t(re and 'eha*ior) the planned prod(#t positioning and the sales mark) 1e#ond- Planned pri#e; distri'(tion strategy and marketing '(dget for the first year) Third- The long r(n sales and profit goals and marketing mi< strategy) BF1INE11 ANA0M1I1- After de*eloping strategy the #ompany e*al(ate the prod(#tPs '(siness attra#ti*eness) Management prepares estimates of sales #ost and profit and determine &hether they satisfy the #ompanies o'5e#ti*es or not) If they do the prod(#t #on#ept #an mo*e to the prod(#t de*elopment stage PR$9FCT 9EDE0$PMENT- Fntil no& the idea e<ists only as a &ord des#ription; a dra&ing or a prototype) At this stage it 5(mps in in*estments e*al(ation and e*al(ation of #osts to 'e in#(rred in the earlier stages) The #ompany determines &hether the prod(#t idea #an 'e translated into a te#hni#ally and #ommer#ially feasi'le prod(#t) If it #annot do so the #ompanies a##(m(lated pro5e#t #ost &ill 'e lost) MARKET TE1TINC- If the management is satisfied &ith the prod(#ts f(n#tional and psy#hologi#al performan#e) The prod(#t is ready to 'e dressed (p &ith a 'rand name pa#king and preliminary marketing program) The goals are to test the ne& prod(#t in more a(thenti# #ons(mer setting and to learn ho& target the mark to and ho& #ons(mers and dealers rea#t to handling (sing and rep(r#hasing the a#t(al prod(#t) Ho&e*er; all #ompanies don"t #ond(#t market testing) It is 'etter; that &here the more risk is in*ol*ed the prod(#t m(st 'e market tested) In doing test marketing managers fa#es se*eral +(estions likei7 Ho& many test #ities; ii7 Whi#h #ities; iii7 0ength of test) i*7 What information to 'e #olle#ted) *7 What a#tion is to 'e taken on the #ompletion of test) C$MMERCIA0IOATI$N- If the test is #leared and #ompany has de#ided to market the prod(#t the #ompany ha*e to make hea*y e<pendit(re on plant; '(ilding; man(fa#t(ring fa#ilities) The sales fore#ast et#) CON!4MER A'OPTION PROCE!!: Ho& do potential #(stomer learn a'o(t ne& prod(#t; try them; and adopt or re5e#t themK Management m(st (nder stand this #ons(mer adoption pro#ess to '(ild an effe#ti*e strategy for early market penetration) The #ons(mer adoption pro#ess is follo&ed 'y the #ons(mer loyalty pro#ess &hi#h the #on#ern of the esta'lished prod(#er) !ta%es in the A$option Process: Adopters of the ne& prod(#t ha*e 'een o'ser*ed to mo*e thro(gh the follo&ing fi*e stages! Awareness: The #ons(mer 'e#omes a&are of the inno*ation '(t la#ks information a'o(t it) / Interests: The #ons(mer is stim(lated to seek information a'o(t the inno*ation) = Evaluation: Cons(me #onsider in the light of information &hether to try it or not) > Trail- Cons(mer try the prod(#t to impro*e his estimate of its *al(e) 35
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? Adoption: The #ons(mer de#ides to make f(ll and reg(lar (se of the inno*ation) 3actors In(l*encin% A$option Process: It is sometimes harder to generali%e a'o(t #ons(mers) Ho&e*er; marketers re#ogni%e a fe& 'asi# tr(ths a'o(t the adoption pro#essPE$P0E 9IBBER CREAT0M IN THEIR REA9INE11 T$ TRM NEW PR$9FCT1- 9ifferent people e<hi'it different 'eha*iors in respe#t of adopting ne& ideas) They #an 'e #lassified a##ording to follo&ing fi*e gro(psi7 Inno*ators- Willing to try ne& ideas at some risk ii7 Early Adopters- Those &ho adopt ne& ideas early '(t #aref(lly) iii7 9eli'eratesThey adopt ne& ideas 'efore the a*erage persons) They rarely are leaders) i*7 1kepti#alThey adopt a prod(#t after a ma5ority of people ha*e tried it) *7 0aggardsThey are s(spi#io(s of #hanges and adopt the inno*ation only &hen it takes on a meas(re for tradition itself) PER1$NA0 INB0FENCE P0AM1 A 0ARCE R$0E IN THE A9$PTI$N $B A PR$9FCT- Personal infl(en#e is the effe#t; one person ha*e; on others attit(des) It is an important fa#tor) Its signifi#an#e is greater in some sit(ations and for some indi*id(als than for others) It is more important in the e*al(ation stage of the adoption pro#ess than in the other stages) It ha*e more infl(en#e on late adopters than early adopters and it is more important in risky sit(ation than is safe sit(ation) THE CHARACTERI1TIC1 $B THE INN$DATI$N PR$9FCT EBBECT1 IT1 RATE $B A9$PTI$N- 1ome prod(#ts gain attention immediately &hile others take long time to gain a##eptan#e) Bi*e #hara#teristi#s are espe#ially important in infl(en#ing the rate of adoption of an inno*ation) i7 Inno*ations relati*e ad*antages- The degree it appears s(perior to the e<isting prod(#ts; the more +(i#kly it &ill 'e adopted) ii7 The inno*ationPs #ompati'ility- The degree to &hi#h it is relati*ely diffi#(lt to (nderstand or (se) iii7 The inno*ationPs Comple<ity- The degree to &hi#h it is relati*ely diffi#(lt to (nderstand or (se) i*7 The inno*ationPs 9i*isi'ility- The degree to &hi#h it #an 'e tried on a limited 'asis) *7 The inno*ationPs Comm(ni#a'ility- The degree to &hi#h its 'enefi#ial res(lts are o'ser*a'le or des#ri'a'le to others) $ther #hara#teristi#s that infl(en#e the rate of adoption are #ost; risk and (n#ertainty; s#ientifi# #redi'ility; and so#ial appro*al) The ne& prod(#t marketer has to resear#h all these fa#tors and gi*e the key ones ma<im(m attention in designing the ne& prod(#t and marketing program) 0IKE PE$P0E $RCANIOATI$N1 DARM IN THEIR REA9INE11 T$ A9$PT AN INN$DATI$N-
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CHAPTER !/ Managing 0ife Cy#le 1trategies

PRO'4CT! LI3E CYCLE:+PLC, The prod(#t life #y#le is an important #on#ept that pro*ides insight into a prod(#tPs #ompetiti*e dynami#s) To f(lly e<plain the P0C; &e &ill firs des#ri'e its present #on#ept the demandJte#hnology life #y#le) 'eman$ 0Technolo%/ Li(e C/cle: Remem'er that most prod(#ts e<ist as one sol(tion among many to meet a need) The #hanging need le*el is des#ri'ed 'y a demand life #y#le #(r*e) $n#e the need is identified; it is satisfied 'y some te#hnology) Ea#h ne& te#hnology satisfies demand in a 'etter &ay than the pre*io(s te#hnology) !ta%es in the Pro$*ct Li(e C/cle: To (nderstand the prod(#t life #y#le one sho(ld (nderstand positi*ely thatProd(#t ha*e a limited life; sales passes thro(gh distin#t stages; profit rise and fall at different stages of the life #y#le of the prod(#t) Prod(#t re+(ires different marketing strategies at different stages of their life #y#le) If &e dra& a #(r*e of past sales history of prod(#ts it &ill take 'ell shape and #an 'e di*ided in to fo(r stages- !7 Introd(#tion; /7 Cro&th; =7 Mat(rity; and >7 9e#line) ! INTR$9FCTI$N- A period of slo& sales gro&th and s('stantial profit impro*ement) Profit are non e<istent in this stage 'e#a(se of the hea*y e<penses in#(rred &ith prod(#t introd(#tion) / CR$WTH- A period of rapid market a##eptan#e and s('stantial profit impro*ements = MATFRITM- A period of slo&do&n in sales gro&th 'e#a(se the prod(#t has a#hie*ed a##eptan#e 'y most potential '(yers) Profit sta'ili%e or de#line 'e#a(se of in#reasing marketing o(tlays to defend the prod(#t against #ompetition) > 9EC0INE- The period &hen sales sho& do&n&ard drift and profits erode) It is diffi#(lt to designate &here ea#h stage 'egins and ends) Fs(ally the stages are marked &here the rates of sales gro&th or de#line 'e#omes prono(n#ed) Marketer sho(ld #he#k the normal se+(en#e of stages in their ind(stry and the a*erage d(ration of ea#h stage) PRO'4CT6CATEGORY& PRO'4CT63ORM& PRO'4CT& AN' BRAN' LI3E CYCLE!: The prod(#t life #y#le #on#ept #an 'e (sed to analy%e prod(#t #ategory; prod(#t form; prod(#t and 'rand life #y#le) Ea#h of them #an ha*e different life #y#le) ! Prod(#t Category ha*e the longest life #y#le) Many prod(#t #ategories stays at mat(rity stage indefinitely e)g) #igarettes; ne&spapers et#) / Prod(#t Borm- follo&s the standard life #y#le; more faithf(lly than prod(#t #ategories) = Prod(#t follo&s either the standard prod(#t life #y#le or one of se*eral *ariant shapes) > Branded Prod(#ts- #an ha*e a short or long prod(#t life #y#le) Altho(gh many ne& 'rands die an early death; some 'rand names ha*e a *ery long P0C) and are (sed to name and la(n#h ne& prod(#ts) Other !hapes o( the Pro$*ct Li(e C/cle: Not all prod(#ts e<hi'it the 'ell shaped life #y#le) Resear#hers ha*e fond si< to se*enteen different life #y#le patterns) Three #ommon alternate patterns are; !7 gro&th sl(mp mat(rity patterns; /7 #y#le re#y#le patterns and =7 s#alloped pattern) ! Cro&th sl(mp Mat(rity Patterns- In it sales gro& rapidly &hen prod(#t first introd(#ed and then fell to RpetrifiedR le*el) The petrified le*el is s(stained 'y the late adopters '(ying the prod(#t for the first time and early adopters repla#ing the prod(#t)) / Cy#le Re#y#le Pattern- In it the #ompany aggressi*ely promotes its ne& prod(#t and this prod(#es the firs #y#le) 0ater; sales start de#lining and the #ompany gi*es the other promotion p(sh; &hi#h prod(#es a se#ond #y#le) = 1#alloped Pattern- Her sales passes thro(gh a s(##ession of #y#les 'ased on the dis#o*ery of the ne& prod(#t #hara#teristi#s; (ses or (sers e)g) nylonPs sales sho&s a s#alloped pattern 'e#a(se of the many ne& (ses) Style, Fashion, And Fad Life ycles: There are three spe#ial #ategories of prod(#t life #y#les that sho(ld 'e disting(ished those pertaining to styles; fashions and fads) % Style is a 'asi# and distin#ti*e mode of e<pression appearing in a field of h(man endea*or) $n#e a style is in*ented; it #an last for generations; going in and o(t of *og(e) % fashion is a #(rrently a##epted or pop(lar style in a gi*en field) Bor e<ample 5eans are a fashion in todayPs #lothing) A fashion tent to gro& slo&ly; remains pop(lar for a &hile; and de#line slo&ly) The length of fashion #y#le is hard to predi#t) #ads are fashions that #ome +(i#kly into the p('li# eye; adopted &ith great %eal; ea#h early; and de#line *ery fast) Their a##eptan#e #y#le is short; and they tend to attra#t only a limited follo&ing) Bads appears to people &ho are sear#hing for e<#itement or &ho &ant to disting(ish themsel*es from others) Bads do not s(r*i*e 'e#a(se they do not normally satisfy a strong need or do not satisfy &ell) It is diffi#(lt to predi#t &hether something &ill 'e only a fad or ho& long a fad &ill last) The amo(nt of media attention; along &ith other fa#tors; infl(en#e the d(ration of the fadPs) 37
The real &inner in the fad &ar are those &ho re#ogni%e them early and #an le*erage those fads into prod(#ts &ith staying po&er) MAR"ETING !TRATEGIE! T RO4G O4T T E PRO'4CT LI3E CYCLE: Ea#h stage of the prod(#t life #y#le ha*e an appropriate marketing strategy) Intro$*ction !ta%e: The introd(#tion stage starts &hen the ne& prod(#t is la(n#hed) Be#a(se it takes time to roll o(t the prod(#t in se*eral markets and to fill the dealer pipelines; sales gro&th is slo& at this stage) The reasons for slo& gro&th may 'e i7 delay in the e<pansion of prod(#tion #apa#ity; ii7 delay in o'taining ade+(ate distri'(tion i)e) retail o(tlets; and iii7 #(stomer rel(#tan#e to #hange esta'lished 'eha*iors) MARKETINC 1TRATECIE1 IN THE INTR$9FCTI$N 1TACE) In la(n#hing a ne& prod(#t; marketing management #an set a high or a lo& le*el for ea#h marketing *aria'le 6pri#e; promotion; distri'(tion; prod(#t +(ality7) Considering the pri#e and promotion management #an p(rs(e one of the fo(r strategies gi*en 'ello&i7 A Rapid 1kimming 1trategy- 0a(n#hing prod(#t at high pri#e and high promotion le*el) The high promotion a#ts to a##elerate the rate of market penetration) This strategy make sense (nder the follo&ing ass(mptionsa large part of the potential market is (na&are of the prod(#t those &ho 'e#ome a&are of the prod(#t are eager to ha*e it and pay the asking pri#e, and the firm fa#es potential #ompetition and &ants to '(ild 'rand preferen#e) ii7 A 1lo& 1kimming 1trategy- 0a(n#hing a prod(#t at high pri#e and lo& promotion) High pri#e helps to re#o*er m(#h profit per (nit and lo& promotion keeps the marketing e<penses do&n) This #om'ination is e<pe#ted to skim lot of profit from the market) This strategy makes sense &hen Market is of limited si%e) Most of the market is a&are of the prod(#t) '(yers are &illing to pay high pri#e potential #ompetition is not eminent) iii7 A Rapid Penetration 1trategy- 0a(n#hing a prod(#t at lo& pri#e and spend hea*ily on promotion) This strategy promises to 'ring a'o(t fastest market penetration and the largest market share) Ass(mptions areMarket is large) Market is (na&are of the prod(#t) most '(yers are pri#e sensiti*e 1trong potential #ompetition; man(fa#t(ring #ost falls &ith s#ale of prod(#tion and a##(m(lated man(fa#t(ring e<penses) i*7 A 1lo& penetration strategy- 0a(n#h a prod(#t at lo& pri#e &ith lo& promotional e<penses THE MARKET PI$NEER1Companies &hile entering in the market m(st de#ide either to 'e first in the market &hi#h is highly re&arding '(t risky; and e<pensi*e; or to #ome in later &hi#h &o(ld make sense that the firm #an 'ring s(perior te#hnology; +(ality; or 'rand strength) The Gro2th !ta%e: Marked 'y rapid #lim' in sales) The early adopters like to adopt the prod(#t and additional #ost(mers start to '(y the prod(#t) 1eeing the attra#ti*e market opport(nities #ompetitors enter in the market) The introd(#e the ne& prod(#t feat(res and e<pand the distri'(tion #hain) Its #hara#teristi#s arePri#es remain the same or slightly #hanges d(e to #hange in demand) Companies maintain their promotional e<penses) Profits in#rease d(ring gro&th stage as !7 promotion #osts are spread o*er the large *ol(me and /7 (nit man(fa#t(ring #ost fall faster than pri#e de#line) The rate of gro&th e*ent(ally #hanges from an a##elerating rate to de#elerating rate) Birms ha*e to &at#h for the on set of the de#elerating rate in order to prepare ne& strategies) MARKET 1TRATECIE1 IN THE CR$WTH 1TACETo s(stain rapid market gro&th as long as possi'le follo&ing are the strategiesi7 impro*e prod(#t +(ality and adds ne& prod(#t feat(res and impro*ed styling) ii7 Add ne& models and flanker prod(#ts iii7 Enters ne& market segments) i*7 In#rease its distri'(tion #o*erage and enters ne& distri'(tion #hannels) *7 1hifting from prod(#t a&areness ad*ertising to prod(#t preferen#e ad*ertising) *i7 0o& do&n the pri#e to attra#t the ne<t layer of pri#e sensiti*e '(yers) Mat*rit/ !ta%e: Here the prod(#tPs rate of sales gro&th &ill slo& do&n; and the prod(#t &ill enter a stage of relati*e mat(rity) This stage normally lasts longer than the pre*io(s stages; and it poses formida'le #hallenges to marketing management) Mat(rity stage #an 'e s('di*ided in to three phases) I7 Cro&th mat(rity- The sales gro&th rate starts to de#line) there are no ne& distri'(tion #hannels to fill) II7 1ta'le Mat(rity- 1ales flatten on a per #apital 'asis 'e#a(se of market sat(ration) III7 9e#lining Mat(rity- The a'sol(te le*el of sales starts to de#line; and #(stomers start s&it#hing to other prod(#ts) MARKETINC 1TRATECIE1 IN THE MATFRITM 1TACE1ome #ompany a'andon their &eak prod(#ts) Marketers sho(ld systemati#ally #onsider strategies of market prod(#t and marketing mi< modifi#ation) 3
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Market Modifi#ation- The #ompany might try to e<pand the market for its mat(re 'rand 'y &orking &ith the t&o fa#tors that make (p sales *ol(me) ! The #ompany #an try to e<pand the n(m'er of 'rand (sers in three &aysi7 Convert +onusers: The #ompany #an try to attra#t non(sers to the prod(#t) ii7 ,nter new mar-et segments: Try to enter ne& segments that (se the prod(#t '(t not the 'rand) iii7 .in competitors/ Customers: Try to attra#t the #ompetitorsP #(stomers or adopt the 'rand) / Dol(me #an also 'e in#reased 'y #on*in#ing #(rrent 'rand (sers to in#rease ann(al (sage of the 'rand) Here are also three strategiesi7 *ore fre0uent use: The #ompany #an try to get #(stomers to (se the prod(#t more fre+(ently) ii7 *ore usage per occasion: try to interest (sers in (sing more of the prod(#t on ea#h o##asion) iii7 +ew and more varied uses: The #ompany #an try to dis#o*er ne& prod(#t (ses and #on*in#e people to (se the prod(#t in more *aried &ays) '7 Prod(#t Modifi#ation- Managers also try to stim(late sales 'y modifying the prod(#tPs #hara#teristi#s thro(gh +(ality impro*ement; feat(re impro*ement; or style impro*ement) i1 $uality mprovement: Aims at in#reasing the prod(#ts f(n#tional performan#e its d(ra'ility; relia'ility; speed; taste et#) ii7 #eature mprovement: aims at adding ne& feat(res e)g) si%e; &eight; additi*es et#) that e<pand the prod(#ts *ersatility, safety or #on*enien#e) iii7 Style improvement: in#reasing to prod(#tPs aestheti# appeal) #7 Marketing Mi< Modifi#ation- Prod(#t managers might also try to stim(late sales 'y modifying other marketing mi< elements) they sho(ld ask the follo&ing +(estionsi7 "rices: In#l(des a pri#e #(t to attra#t ne& tries and (sers) If so sho(ld the list pri#e 'e lo&ed or lo&ered thro(gh pri#e spe#ials; *ol(me or early p(r#hase dis#o(nts; freight #ost a'sorption; or easier #redit termsK $r the raise the pri#e to signal higher +(alityK ii7 !istribution: $'tain more prod(#t s(pport and display in the e<isting o(tlets; more o(tlets 'e penetrated; introd(#e prod(#t into ne& distri'(tion #hannel) iii7 %dvertising: In#rease the ad*ertising e<pendit(re; adds message 'e #hanged or timing; fre+(en#y or si%e of add 'e #hangedK i*7 Sales "romotion: Making trade deals; #ents off #o(pons; re'ates; &arranties; gifts and #ontests) *7 "ersonal Selling: In#rease the +(ality or n(m'er of sales people; re di*ision of sales territories) In#rease the sales for#e in#enti*es) *i7 Services: 0ike speeding (p deli*ery; te#hni#al assistan#e; and #redit fa#ility) > 'ecline !ta%e: The sales of most prod(#t forms and 'rands e*ent(ally de#line) It might 'e slo&; or rapid) 1ales may pol(nge to %ero or they may petrify at a lo& le*el) There are many reasons for sales de#line in#l(ding te#hnologi#al ad*an#es; shifts in #ons(mer tastes; and in#reased domesti# and foreign #ompetition) All lead to o*er#apa#ity; in#reased pri#e o(ting) and profit erosion) As sales de#line; some firms &ithdra& from the market) Those remaining may red(#e the n(m'er of prod(#ts they offer) They may &ithdra& from smaller market segments and &eaker trade #hannels; and they may #(t their promotion '(dget and red(#e their pri#es f(rther) MARKETINC 1TRATECIE1 9FRINC THE 9EC0INE 1TACEIn handling its aging prod(#ts; a #ompany fa#es a n(m'er of tasks and de#isions) a7 Identifying the Weak Prod(#ts- The first task is to esta'lish a system for identifying &eak prod(#ts) Birms may appoint a prod(#t re*ie& #ommittee &ith representati*es from marketing ; RA9; man(fa#t(ring; and finan#e) The #ommittee de*elops the system for identify &eak prod(#ts) The #ontrollers offi#e s(pplies data; a #omp(ter program analy%es this and helps manager to de#ide; &hi#h prod(#ts are d('io(s) The manager responsi'le for the d('io(s prod(#ts fill o(t the ratting forms sho&ing &here they thin sales and profits &ill go; &ith and &itho(t any #hanges in marketing strategy) The prod(#t re*ie& #ommittee e<amines this information and makes a re#ommendation for ea#h d('io(s prod(#t lea*e it alone; modify its marketing strategy; or drop it) '7 9etermining Marketing 1trategies- 1ome firms &ill a'andon de#lining markets earlier than others) M(#h depends on the e<it 'arriers in the ind(stry) The remaining firms &ill en5oy in#reased sales and profits) #7 The 9rop 9e#ision- When a #ompany de#ides to drop a prod(#t; it fa#es f(rther de#isions) If the prod(#t has strong distri'(tion and resid(al good&ill; the #ompany #an pro'a'ly sell it to another firm) If the fir #anPt find any '(yers; it m(st de#ide &hether to li+(idate the 'rand +(i#kly or slo&ly) It m(st also de#ide on ho& m(#h parts in*entory and ser*i#e to maintain for past #(stomers) MAR"ET E-OL4TION: Birms &hile *ie&ing prod(#t life #y#le pay parti#(lar attention to prod(#t or 'rand rather than to the o*erall market) This attit(de yields the prod(#t oriented pi#t(re rather than a market oriented pi#t(re) The demand J te#hnology life #y#le re+(ires to take a 'roader look at the &hole market) STAGES I! "A#$ET E%&L'TI&!: 0ike prod(#t market e*ol*e thro(gh fo(r stages- emergen#e; gro&th; mat(rity; and de#line)
3!
CHAPTER != 9esigning Marketing 1trategies for Market 0eaders; Challengers; Bollo&ers; and Ni#hers
A firm #an o##(py any of the follo&ing si< #ompetiti*e positions in the target market) ! 9ominant- Control the 'eha*ior of other #ompetitors and has a &ide #hoi#e of strategi# option) / 1trong- Can take a#tion 6&itho(t p(tting in danger its long term position7 regardless #ompetitors a#tion) = Ba*ora'le- Ha*e a e<ploita'le strength and a 'etter than a*erage opport(nity to impro*e its position) > Tena'le- Performing at a s(ffi#iently satisfa#tory le*el to #ontin(e '(siness '(t e<ist in the s(fferan#e of another dominant #ompany and has a less than a*erage opport(nity to impro*e its position) ? Weak- ha*e (nsatisfa#tory performan#e '(t an opport(nity e<ists for impro*ement) The firm m(st #hange or els e<it) @ Non*ia'le- Fnsatisfa#tory performan#e and no opport(nity to impro*ement) MAR"ET LEA'ER !TRATEGIE!: If a dominant firm &ant to remain n(m'er one it ha*e to take three a#tions! Bind &ay to e<pand total market demand) / 9efend its #(rrent market share thro(gh good defensi*e and offensi*e a#tions) = Try to in#rease its market share f(rther e*en if market si%e remains #onstant) E)pan$in% the total Mar.et: E<pansion #an 'e made 'y &ay of ne& (sers; ne& (ses; more (sage; i7 Ne& Fsers- Binding ne& (sers for the prod(#t and e<ploring the ne& markets) ii7 Ne& Fses- E<panding market 'y dis#o*ering and promoting ne& (ses for the prod(#t iii7 More Fsage- Con*in#ing people to (se more of the prod(#t per (se o##asion) 'e(en$in% the Mar.et !hare: While trying to e<pand total market si%e; the dominant firm m(st #ontin(o(sly defend it s #(rrent '(siness against ri*al atta#ks The leader is like a large elephant 'eing atta#ked 'y a s&arm of 'ees) There are si< defense strategies that dominant firm #an (se) These are s(mmari%ed 'ello&i7 P$1ITI$N 9EBENCE- The most 'asi# idea is to '(ild an impregna'le fortifi#ation aro(nd onePs territory) ii7 B0ANK 9EBENCE- The market leader sho(ld not only g(ard its territory '(t also ere#t o(tposts to prote#t a &eak front or possi'ly ser*e as an in*asion 'ase for #o(nteratta#king) iii7 PREEMPTIDE 9EBENCE- A more aggressi*e defense mane(*er is to la(n#h an atta#h on the enemy 'efore the enemy starts its offense against the leader) A #ompany #an la(n#h a preempti*e defen#e in se*eral &ays; like &aging g(errilla a#tion against the market 'y hitting one #ompetitor here; another there and keep e*eryone off 'alan#e) $r it #o(ld try to a#hie*e a grand market en*elopment) $r it #o(ld 'egin s(stained pri#e atta#ks) 1(stained; high press(re strategies and at retaining the initiati*e at all times and keeping the #ompetition al&ays on the defensi*e) i*7 C$FNTER$BBEN1IDE 9EBEN1E- Most market leaders; &hen atta#ked; &ill respond &ith a #o(nteratta#k) The leader #annot remain passi*e in the fa#e of a #ompetitorPs pri#e #(t; promotion 'lit%; prod(#t impro*ement; or sales territory in*asion) The leader has the strategi# #hoi#e of meeting the atta#ker frontly; mane(*ering against the atta#kerPs flank; or la(n#hing a pri#er mo*ement to #(t off the atta#king formations from their 'ase of operation) When a market leaderPs territory is atta#ked; an effe#ti*e #o(nteratta#k is to in*ade the atta#kerPs main territory so that it &ill ha*e to p(ll 'a#k some of its troops to defend its territory) *7 M$BI0E 9EBENCE- It in*ol*es more than the leader aggressi*ely defending its territory) In mo'ile defense; the leader stret#hes its domain o*er ne& territories that #an ser*e as f(t(re #enters for defense and offense) *i7 C$NTRACTI$N 9EBEN1E- 0arge #ompanies sometimes re#ogni%e that they #an no longer defend all of their territory) Their for#es are spread too thin; and #ompetitors are ni''ling a&ay on se*eral fronts) The 'est fo(rs of a#tion then appears to 'e planned #ontra#tion 6#alled strategi# &ithdra&al7) It is not market a'andonment '(t rather gi*ing (p the &eaker territories; and reassigning reso(r#es to stronger territories) Planned #ontra#tion is a mo*e to #onsolidate onePs #ompetiti*e strength in the market and #on#entrate mass at pi*otal positions) = E)pan$in% Mar.et !hare: Market leaders #an impro*e their profita'ility 'y in#reasing their market share) In many markets; one share point is &orth tens of millions of r(pees) MAR"ET C ALLENGER !TRATEGIE!: 1e#ond; third; and lo&er ranked firms are often #alled r(nner (p or trailing they #an adopt one of the t&o post(res!7 Atta#k the leader and other #ompetitors in an aggressi*e 'id for f(rther market share 6#alled market #hallengers7) /7 They #an play 'all and not ro#k the 'oat 6market follo&ers7) 'e(en$in% the !trate%ic O7?ectives an$ Opponent+s, Birst of all a market #hallenger ha*e to define his strategi# o'5e#ti*es) Most market #hallengers strategi# o'5e#ti*e is top in#rease their market share) It re+(ires a de#ision to atta#k; '(t first it ha*e to de#ide as to &hom to atta#k) 4"
i7
Atta#k the Market 0eader- This is a high risk '(t potentially high payoff strategy and makes good sense if the leader is Rfalls leaderR &ho is not ser*ing the market) In s(#h a #ase a s('stantial segment that is (nner*ed or poorly ser*ed pro*ide an e<#ellent strategi# target) ii7 Atta#k firms of Its o&n si%e- That are not doing the so' and are (nder finan#ed) iii7 Atta#k small and regional firms &hi#h are not doing the 5o' &ell; and are (nder finan#ed) Choosin% a General Attac. !trate%/: Ci*en #lear opponents an o'5e#ti*e; &hat options are a*aila'le in atta#king an enemyK We #an make progress 'y imaging at opponent &ho o##(pies a #ertain market territory) We disting(ish among fi*e atta#k strategies! BR$NTA0 ATTACK- When a #ompany atta#ks the opponents strengths rather than its &eaknesses) The o(t #ome depends on &ho has the more strength) and end(ran#e) / B0ANK ATTACK- When the #ompany atta#ks the others &eak points) The ma5or prin#iple of modern offensi*e &arfare is #on#entration of strength against &eakness) The aggressor may atta#k the strong side to tie (p the defenderPs troops '(t &ill la(n#h the real atta#k at the side or rear) = ENRICHMENT ATTACK- An attempt to #apt(re a &ide sli#e of the enemyPs territory thro(gh a #omprehensi*e 'lit% atta#k) It in*ol*es la(n#hing a grand offensi*e or se*eral fronts; so that the enemy m(st prote#t its front; sides; and rear sim(ltaneo(sly) The aggressor may offer the market e*erything the opponent offers and more; so that the offer is (nref(sa'le) Enri#hment makes sense &here the aggressor #ommands s(perior reso(r#es and 'elie*es that a s&ift enri#hment &ill 'reak the opponentPs &ill) > BMPA11 ATTACK- Consist of most indire#t strategies) It means 'y passing the enemy and atta#king easier markets to 'roaden onePs reso(r#e 'ase) The strategy offers three lines of approa#hes di*ersifying into (nrelated prod(#ts; di*ersifying into ne& geographi#al markets and leapfrogging into ne& te#hnologies to s(pplant e<isting prod(#ts) ? CFERRI00A ATTACK- Consist of small intermittent atta#ks on the opponentPs different territories) The aim is to harass and demorali%e the opponent and e*ent(ally se#(re permanent footholds) The g(errilla aggressor (ses 'oth #on*entional and (n#on*entional means to atta#k the opponent) These in#l(de sele#ti*e pri#e #(ts; intense promotional 'lit%es; and o##asional legal a#tions) Choosin% a !peci(ic Attac. !trate%/: The a'o*e fi*e strategies are *ery 'road) The #hallenger m(st p(t together a total strategy #onsisting of se*eral spe#ifi# strategies) Market #hallengers #an #hoose from se*eral spe#ifi# atta#k strategiesi7 Pri#e dis#o(nt 1trategy- 1elling a #ompara'le prod(#t at a lo&er pri#e) ii7 Cheaper goods strategy- The #hallenger #an offer an a*erage or lo& +(ality prod(#t at a m(#h lo&er pri#e) iii7 Prestige goods 1trategy- 0a(n#h a higher +(ality prod(#t and #harge a higher pri#e than the leader) i*7 Prod(#t proliferation 1trategy- Challenger atta#k the leader 'y la(n#hing a larger prod(#t *ariety; th(s gi*ing '(yer more #hoi#e) *7 Prod(#t inno*ation strategy- The #hallenger might p(rs(e prod(#t inno*ation to atta#k the leaderPs position) *i7 Impro*ed 1er*i#es 1trategy- $ffering ne& or 'etter ser*i#es to #(stomers) *ii7 9istri'(tion inno*ation strategy- 9is#o*ering or de*eloping ne& #hannels of distri'(tion) *iii7 Man(fa#t(ring #ost red(#tion strategy- P(rs(ing lo&er man(fa#t(ring #osts than the #ompetitors thro(gh more effi#ient p(r#hasing; lo&er la'or #osts; or modern prod(#tion e+(ipment) and (se lo&er #osts to pri#e more aggressi*ely to gain market share) i<7 Intensi*e ad*ertising promotion- 1ome #hallengers atta#k the leader 'y in#reasing their e<pendit(re on ad*ertising and promotion) A #hallenger #an rarely impro*e its market share 'y relying only one strategy) Its s(##ess depends on #om'ining se*eral prin#iples to impro*e its position o*er time) MAR"ET 3OLLOWER !TRATEGIE!: Many r(nner (p J follo&ers #ompanies prefer to follo& rather than #hallenge the market leader) B(t leaders ne*er take lightly any effort to dra& a&ay their #(stomers) If the r(nner (pPs take any a#tion like lo&er pri#es; impro*ed ser*i#e or additional prod(#t feat(res; the leader #an +(i#kly mat#h these to diff(se the atta#k) This is not to say that market follo&ers la#k strategies) A market follo&er m(st kno& ho& to hold #(rrent #(stomers and &in a fair share of ne& #(stomers) Ea#h follo&er tries to 'ring distin#ti*e ad*antages to its target market) A follo&er is often a ma5or target of atta#h 'y #hallengers; therefore; it m(st keep its man(fa#t(ring #osts lo& and its prod(#t +(ality and ser*i#es high) It m(st also enter ne& markets as they open (p) Bollo&er ship is (s(ally not the same as 'eing passi*e or a #ar'on #opy of the leader) The follo&er has to define a gro&th path; '(t one that does not ignite #ompetiti*e relation) Bo(r 'road follo&ership strategies #an 'e disting(ishedi7 Co(nterfeiter, Bollo&er d(pli#ates the leaderPs prod(#t and pa#kage and sells it on the 'la#k market or thro(gh disp(ta'le leaders) ii7 Cloner, The #loner em(lates the leaderPs prod(#ts; distri'(tion ad*ertising; and so on) iii7 Imitator- #opies some thing from the leader '(t maintain differentiation in terms of pa#kaging ad*ertising; pri#ing; and so on) i*7 Adapter, Take the leaderPs prod(#ts and adapt or impro*e them) The adapter may #hoose to sell to different markets to a*oid dire#t #onfrontation &ith the leader) B(t often the adopter gro&s into the f(t(re #hallenger) MAR"ET6NIC ER !TRATEGIE!: 41
An alternati*e; of 'eing a follo&er in a large market; is to 'e a leader in a small market) 1mall firms #ommonly a*oid #ompeting &ith larger firms 'y targeting small markets of littler or no interest to the larger firms) Ni#hing #arries a ma5or risk in that the market ni#he might dry (p or 'e atta#ked) The #ompany is then st(#k &ith highly spe#iali%ed reso(r#es that may not ha*e high *al(e alternati*e (ses) Niche !peciali1ation: The key idea in ni#hemanship is spe#iali%ation) The follo&ing spe#ialists roles are open to ni#hersi7 End (ser 1pe#ialist- The firm spe#iali%es in ser*ing one type of end (se #(stomer) ii7 Derti#al le*el 1pe#ialists- The firm spe#ials at some *erti#al le*el of the prod(#tion distri'(tion *al(e #hain) iii7 C(stomer si%e 1pe#ialist- The firm #on#entrates on selling to either small; medi(m si%e; or large #(stomers) Many ni#hers spe#iali%e in ser*ing small #(stomers &ho are negle#ted 'y the ma5ors) i*7 1pe#ifi# #(stomer spe#ialists, The firm limits its selling to one or a fe& ma5or #(stomers) *7 Ceographi# 1pe#ialists- The firms sells only in a #ertain lo#ality; region or area of the &orld) *i7 Prod(#t or prod(#t line spe#ialists- The firm #arries or prod(#es only one prod(#t or prod(#t line) *ii7 Prod(#t feat(re spe#ialist- The firm spe#ials in prod(#ing a #ertain type of prod(#t feat(re) *iii7 No' shop 1pe#ialist- The firm #(stomi%e its prod(#ts for indi*id(al #(stomers) i<7 I(ality J pri#e spe#ialists- the firm operates at the lo& or high +(ality ends of the market) <7 1er*i#e spe#ialist- The firm offers one ore more ser*i#es not a*aila'le from other firms) <i7 Channel 1pe#ialists- The firm spe#iali%es in ser*ing only one #hannel of distri'(tion)
42
CHAPTER !> 9esigning and Managing Clo'al Marketing 1trategies

The &orld is rapidly shrinking &ith the ad*ent of faster #omm(ni#ation; transportation and finan#ial fla&s) A C0$BA0 IN9F1TRM- means an ind(stry in &hi#h the position of #ompetitors 6 in geographi# or national markets7 are f(ndamentally affe#ted 'y their o*erall glo'al position) A C0$BA0 BIRM- is a firm that operates in more than one #o(ntry and #apt(res 6prod(#tion; #osts and rep(tation that are not a*aila'le to p(rely domesti# #ompetitors) 'ECI'ING W ET ER TO GO ABROA': Most #ompanies prefer to remain domesti# if their domesti# market &ere large eno(gh) Met there are se*eral fa#tors that might dra& a #ompany into international arena! Clo'al firms atta#h the #ompanyPs domesti# market and the #ompany &ants to #o(nteratta#k these #ompetitors in their home markets to tie (p their reso(r#es) / Higher profit opport(nities in foreign market than domesti# market) = When firm needs a larger #(stomer 'ase to a#hie*e e#onomi#s of s#ale) > To red(#e firms dependen#e on any one market) ? C(stomer going a'road re+(ires international ser*i#es) Before going a'road the #ompany m(st &eigh se*eral risks gi*en 'ello&! The #ompany might not (nderstand the foreign #(stomers preferen#es an fail to offer #ompetiti*ely attra#ti*e prod(#ts) / Might not (nderstand the foreign #o(ntry"s '(siness #(lt(re or kno& ho& to deal effe#ti*ely &ith foreign nationals) = Might (nderestimate foreign reg(lations and in#(r (ne<pe#ted #osts) > Company may la#ks in managers &ith international e<perien#e) ? The foreign #o(ntry might #hange its #ommer#ial la&s; de*al(e its #(rren#y; or (ndergo a politi#al re*ol(tion and e<propriate foreign property) 'ECI'ING W IC MAR"ET TO ENTER: The #ompany has to define its international marketing o'5e#ti*es and poli#ies) What proportion of foreign to total sales &ill it seekK Most #ompanies start small &hen the *ent(re a'road) 1ome plan to stay small; *ie&ing foreign operations as a small part of their '(siness) The #ompany m(st de#ide &hether to market in a fe& #o(ntries or many #o(ntries) Cenerally speaking; a #ompany &hi#h de#ides to operate in fe&er #o(ntries #an do so &ith deeper #ommitment and penetration in ea#h) A #ompany sho(ld enter fe&er #o(ntries &hen Market entry and #ontrol #osts are high) Prod(#t and #omm(ni#ation adoption #osts are high, pop(lation and in#ome si%e and gro&th are high in the initial #o(ntries #hosen and 9ominant foreign firms #an esta'lish high 'arriers to entry) 'ECI'ING OW TO ENTER: After de#iding the target #o(ntries; it has to determine the 'est mode of entry) Its 'road #hoi#es are indire#t e<porting; dire#t e<porting; li#ensing; 5oint *ent(res; and dire#t in*estment) In$irect E)port: It is e<porting thro(gh independent intermediaries) There are fo(r types of intermediaries) I 9$ME1TIC BA1E9 EQP$RT MERCHANT- Who '(yers the man(fa#t(rerPs prod(#ts and then sells them a'road) II 9$ME1TIC BA1E9 EQP$RT ACENT- Who seeks foreign p(r#hasers; negotiate &ith them and re#ei*es #ommission it in#l(des trading #ompanies) III C$RP$RATIDE $RCANIOATI$N- The e<port goods on 'ehalf of se*eral prod(#ers and are partly (nder the #ontrol of those prod(#ers) ID EQP$RT MANACEMENT C$MPANM- A #ompany &ho agrees to manage a #ompanyPs e<port a#ti*ities for a fee) 'irect E)port: Companies may dei#ed to handle their e<ports; themsel*es) In it the in*estment and the risk are some&hat greater '(t so is the potential ret(rn) The &ays of dire#t e<port are gi*en 'ello&I 9$ME1TIC BA1E9 EQP$RT 9EPARTMENT $R 9IDI1I$N- and an e<port sales manager #arries on the a#t(al selling) II $DER1EA1 1A0E1 BRANCH $R 1FB1I9IARM- &hi#h handles the sales and distri'(tion and might handle &areho(sing and promotion as &ell) It often ser*es as a display #enter and #(stomer ser*i#e #enter) III TRADE0INC EQP$RT 1A0E1 REPRE1ENTATIDE- The #ompany #an send home 'ased sales representati*es a'road to finds '(siness) ID B$REICN BA1E9 9I1TRIBFT$R1 $R ACENT1- Highiring foreign 'ased distri'(tion and sales agents) They might 'e gi*en e<#l(si*e rights to represent the man(fa#t(res in that #o(ntry or only limited rights) Licensin%: In it the li#enser li#enses a foreign #ompany to (se a man(fa#t(ring pro#ess; trademark; patent; trade se#rete or other items of *al(e for a fee or royalty) Dario(s methods of li#ensing areI MANACEMENT C$NTRACT- When the #ompany e<ports management ser*i#es 'y appointing a manager to help the management of foreign #o(ntry) 43
C !
II
/ =
> E ! / =
C$NTRACT MANFBACTFRINC- The man(fa#t(rer engages a lo#al man(fa#t(rer to prod(#t the prod(#t on 'ehalf of the #ompany; lo#ally in the #o(ntry in &hi#h they are to 'e soled) III BRANCHI1INC- A #omplete form of li#ensing) The fran#hiser offers a fran#hisee a #omplete 'rand #on#ept and operating system In ret(rn the fran#hisee in*ests in the '(siness and pays #ertain fee to the fran#hiser) ID N$INT DENTFRE1- Boreign and lo#al in*estors 5oin together 'y in*esting and sharing o&nership and #ontrol) D 9IRECT INDE1TMENT- Also #alled dire#t o&ner ship of foreign 'ased assem'ly or man(fa#t(ring fa#ilities) T E INTERNATIONALI<ATION PROCE!! In the internationali%ation pro#ess a firm mo*es thro(gh fo(r stages gi*en 'ello&! No reg(lar e<port a#ti*ity) / E<port *ia independent representati*e; = Esta'lishing one or more s('sidiaries; > Esta'lishing of prod(#tion fa#ilitates a'road) 'ECI'ING ON T E MAR"ETING PROGRAM International #ompanies m(st ha*e to de#ide; as to ho& m(#h adopt the marketing strategy mi< to lo#al #onditions) The potential adoptions that firms might make 6in respe#t of their prod(#t; promotion; pri#e et#)7 as they enters foreign markets) 0et (s #onsider them one 'y one) Pro$*ct: There are fi*e different prod(#t strategies that #ompanies #an adopt are i7 1traight E<tension; ii7 Prod(#t Adoption; iii7 Prod(#t Inno*ation i7 1TRAICHT EQTEN1I$N- Introd(#ing the prod(#t in the foreign market &itho(t any #hange) ii7 PR$9FCT A9$PTI$N- In*ol*es altering the prod(#t to meet lo#al #onditions or preferen#es) There are se*eral le*els of adaptation) A #ompany #an prod(#e a a7 Regional version: naming it on the 'asis of the region northern *ersion et#) or '7 Country 2ersion: iii7 PR$9FCT INN$DATI$N- It #onsists of #reating something ne&) It #an take t&o forms that are &ell adapted to a foreign #o(ntryPs needs) It may 'e of t&o types a7 3ac-ward nvention: re introd(#ing earlier prod(#t) and '7 #orward nvention: Creating a ne& prod(#t to meet the needs of an other #o(ntry) Promotion: Either adopting some ad*ertising #ampaigns (sed in the home market or #hange them for the lo#al market) The pro#ess is #alled #omm(ni#ation adoption) Price: M(ltinationals fa#e se*eral pro'lems in pri#ing) They m(st had to deal &ith Pri#e es#alation; transfer pri#es d(mping #harges and gray markets) They ha*e three #hoi#es i 1etting a (niform pri#e e*ery&here in lo#al as &ell as foreign #o(ntries) ii 1etting a market 'ased pri#e in ea#h #o(ntry) iii 1etting a #ost 'ased pri#e in ea#h #o(ntry) Place: 9e#iding as ho& the prod(#t &ill rea#h to the final (sers) Ho& many intermediaries &ill 'e in*ol*ed in the distri'(tion pro#ess) 'ECI!ION O3 MAR"ETING ORIGINATION: 9epending (pon the le*el of in*ol*ement in the international arena; #ompanies may arrange their marketing a#ti*ities in three &ays E)port 'epartment: Begins simply 'y shipping o(t its goods) When international sales e<pand the #ompany organi%es an e<port department #onsisting of sales manager and a fe& assistants) International 'ivision: In*ol*ing in se*eral markets 'y different &ay) E<port to one; li#enses to other still make 5oint *ent(re in the third) They #reates an international di*ision to handle international a#ti*ities) Glo7al Ori%ination: When it 'e#omes impossi'le to #ontrol thro(gh international di*ision then they 'e#ome glo'al organi%ation)
44
CHAPTER !? Prod(#t 0ines Brands A Pa#king

! / = > ? ! / = > ? @ 3 3I-E LE-EL! O3 T E PRO'4CT: These fi*e le*els #onstit(te #ons(mer *al(e hierar#hyCore Bene(it: Is the f(ndamental 'enefit that #(stomer really '(ying) A #ons(mer '(ying drill is a#t(ally '(ying a hole) Basic Bene(it: Marketers #on*erts the #ore 'enefit into 'asi# prod(#t the #ore 'enefit in getting a hotel room is the '(yer rest A sleep &hile #ore 'enefits in#l(de a 'ed; 'athroom; to&els; desk et#) E)pecte$ Pro$*ct: A set of #hara#teristi#s a '(yer normally e<pe#ts &hile p(r#hasing a prod(#t) A*%mente$ Pro$*ct: That meets the #(stomerPs desires 'eyond their e<pe#tations) Cons*mption !/stem: The &ay the p(r#haser performs trying to a##omplish the 'enefits 'y (sing the prod(#t) PRO'4CT IERARC Y: It stret#hes from 'asi# needs to parti#(lar items that satisfy needs) There are se*en le*els of prod(#t hierar#hy) +eed #amily: The #ore need that (nder lies the e<isten#e of a prod(#t family) "roduct #amily: All the prod(#t #lasses that #an satisfy the #ore need) "roduct Class: A gro(p of prod(#ts &ithin the prod(#t family) "roduct Line: A gro(p in prod(#t #lass performing some f(n#tions) "roduct 4ype: A gro(p in prod(#t line that share one of se*eral possi'le forms of a prod(#t) 3rand: The name asso#iated &ith one or more prod(#ts in the prod(#t line) tem: A distin#t (nit in a 'rand or prod(#t line disting(isha'le 'y pri#e; si%e; et#) PRO'4CT CLA!!I3ICATION: Marketers traditionally #lassified prod(#t on the 'asis of the *arying prod(#t #hara#teristi# i)e) ! 9(ra'ility; / Tangi'ility; and = Fse) Ea#h prod(#t type has an appropriate marketing mi< strategy) '*ra7ilit/ an$ Tan%i7ilit/: A##ording to d(ra'ility and tangi'ility there are three gro(ps +ondurable 5oods; Tangi'le; #ons(med 'y one or fe& (ses; like; soap; salt et#) !urable 5oods: They are tangi'le and normally s(r*i*e many (ses; e)g) refrigerator; #lothing ma#hine et#) Services: Intangi'le; insepara'le; *aria'le and perisha'le) Cons*mer Goo$s Classi(ication: Cons(mer '(y a *ast array of goods &e #an #lassify them among #on*enien#e; shopping; so#iality; and (nso(ght goods) Convenience Goo$s are those goods that the #(stomer (s(ally p(r#hases fre+(ently; immediately; and &ith a minim(m of effort) e)g) soap; ne&spapers; et#) !hoppin% Goo$s: That the #ons(mer; in the pro#ess of sele#tion and p(r#hase; #hara#teristi#ally #ompares on s(#h 'ases as s(ita'ility; +(ality; pri#e; and style e)g) f(rnit(re; #lothing (sed #ars et#) !pecialt/ Goo$s: Coods &ith (ni+(e #hara#teristi#s and for &hi#h the '(yer ha'it(ally &illing to make a spe#ial p(r#hasing effort e)g) fan#y goods like #ars; men"s s(its; et#) 4nso*%ht Goo$s: Cons(mer does not kno& a'o(t and not normally think to '(y) In$*strial Goo$s Classi(ication: Ind(strial goods #an 'e #lassified in terms of ho& they enter the prod(#tion pro#ess and their relati*e #oastlines) They #an 'e #lassified in three #o(ps materials and parts; #apital items; and s(pplies A '(siness ser*i#es) Material an$ Parts: goods that enter the man(fa#t(rerPs prod(#t #ompletely) They fall into t&o #lasses; ra& materials and man(fa#t(red materials and parts) Capital Items: 0ong lasting goods fa#ilitates de*eloping and managing finished prod(#ts in#l(ding t&o gro(ps !7 Installations; /7 e+(ipment) !*pplies an$ B*siness !ervices: 1hort lasting goods and ser*i#es helps in de*eloping and managing the finished prod(#ts) PRO'4CT MI> 'ECI!ION! A prod(#t Mid is the set of all prod(#ts and items that a parti#(lar seller offers for sale to '(yers) A #ompanies prod(#t mi< has a #ertain &idth; lengths; depth; and #onsisten#y) The .idth refers of prod(#t mi< refers to ho& many different prod(#t lines the #ompany #aries) The Length of prod(#t mi< refers to the total n(m'er of items in its prod(#t mi<) The !epth: refers to ho& many *ariants are offered of ea#h prod(#t in the line) The Consistency of the prod(#t mi< refers to ho& #losely related the *ario(s prod(#t lines are in end (se; prod(#tion re+(irements; distri'(tion #hannels; or some other &ay) These fo(r dimensions of the prod(#t mi< pro*ide the handles for defining the #ompanyPs prod(#t strategy) The #an e<pand its '(siness in fo(r &ays i)e) 'y adding ne& prod(#t lines; adding more prod(#t *ariants and deepen its prod(#t mi< or p(rs(e more prod(#t line #onsisten#y or less; depending (pon &hether it &ants to a#+(ire a strong rep(tation in a single field or parti#ipate in se*eral fields) PRO'4CT6LINE 'ECI!ION!: A prod(#t line #onsist of *ario(s prod(#t lines) A pro$*ct line is a gro(p of prod(#ts that are #losely related 'e#a(se they perform a similar f(n#tion; are soled to the same #(stomer gro(ps; are marketed thro(gh the same #hannels; or fall &ithin gi*en pri#e ranges)) 45
! / =
Ea#h prod(#t line is (s(ally managed 'y a different e<e#(ti*e) E<amples or prod(#t line are a #ompany man(fa#t(ring Cons(mer Applian#es like refrigerators; sto*es; &ashing ma#hines; and other applian#e) Pro$*ct Line Anal/sis: The prod(#t line manager needs to kno& the per#entage of total sales and profits #ontri'(ted 'y ea#h item in the line) Pro$*ct6Line Mar.et Pro(ile: The prod(#t line manager m(st also re*ie& ho& the prod(#t line is positioned against #ompetitorsP prod(#t lines) Pro$*ct Line Len%th: The prod(#t line manager sho(ld ha*e to maintain a the optimal prod(#t line length) A prod(#t line is too short if the manager #an in#rease profits 'y adding times; the line is too long if the manager #an in#rease profit 'y dropping items) Line !tretchin%: When a #ompany lengthen its prod(#t line 'eyond its #(rrent range) The #ompany #an stret#h its line do&n&ard; (p&ard; or 'oth &ays) Line Mo$erni1ation: E*en &hen prod(#t line length is ade+(ate; the line might need to 'e moderni%ed) It may 'e an o*erha(l 'y pie#emeal or all at on#e) Line 3eat*rin%: The prod(#t line manager typi#ally sele#ts one or a fe& items in the line to feat(re) Managers might feat(re lo& end promotional models to ser*i#e as traffi# '(ilders) $r may feat(re a high end item to lend prestige to the prod(#t line)) Line Pr*nin%- Prod(#t line managers m(st periodi#ally re*ie& items for pr(ning) There are t&o o##asions for pr(ning) $ne is &hen the prod(#t line in#l(des dead&ood that is depressing profit) The &eak items #an 'e identified thro(gh sales and #ost analysis) The other o##asion for prod(#t pr(ning is &hen the #ompany is short of prod(#tion #apa#ity) The manager sho(ld #on#entrate on prod(#ing the higher margin items) BRAN' 'ECI!ION!: In de*eloping a marketing strategy for indi*id(al prod(#ts; the seller has to #onfront the 'randing de#ision) Branding is a ma5or iss(e in prod(#t strategy) WHAT I1 A BRAN9- A 'rand is a name; term; sign; sym'ol; or design; or a #om'ination of them) Intended to identify the goods or ser*i#es of one seller or gro(p of sellers and to differentiate them from those of #ompetitors) In essen#e; a 'rand identifies the seller or maker) It #an 'e a name; trademark; logo; or other sym'ol) Fnder the trademark la&; the seller is granted e<#l(si*e rights to the (se of the 'rand name in perpet(ity) Th(s it differs from other assets like patents and #opyrights; &hi#h ha*e e<piration dates) A 'rand is a sellerPs promise to #onsistently deli*er a spe#ifi# set of feat(res; 'enefits; and ser*i#es to the '(yers) The 'est 'rand #on*ey a &arranty of +(ality) A 'rand #an #on*ey (p to si< le*els of meanings) ! %ttributes: A 'rand first 'ring some #hara#teristi#s of the prod(#t; in mind of the '(yer) The #ompany (ses one ore more of these attri'(tes to ad*ertise the prod(#t) / 3enefits: A 'rand is more that a set of attri'(tes) C(stomers are not '(ying attri'(tes ; they are '(ying 'enefits) = 2alue: The 'rand also #on*eys something a'o(t the prod(#ers *al(es) The 'rand marketer m(st fig(re o(t the spe#ifi# gro(ps of '(yers &ho are seeking these *al(es) > Culture- The 'rand may represent a #ertain #(lt(re ) ? "ersonality: The 'rand #an also pro5e#t #ertain personality) @ (ser: The 'rand s(ggest the kind to #ons(mer &ho '(yo(ts or (ses the prod(#t) The concept an$ meas*rement o( Bran$ E8*it/: Brands *ary in the amo(nt of po&er and *al(e they ha*e in the marketpla#e) Be& #(stomers are 'rand loyal) Bi*e le*els of #(stomer attit(de to&ers their 'rand from lo&est to highest! C(stomer &ill #hange 'rands; espe#ially for pri#e reasons No 'rand loyalty) / C(stomer is satisfied) No reason the #hange the 'rand) = C(stomer is satisfied and &o(ld in#(r #osts 'y #hanging 'rand) > C(stomer *al(es the 'rand and sees it as a friend) ? C(stomer is de*oted to the 'rand) High 'rand e+(ity pro*ides a n(m'er of #ompetiti*e ad*antages! The #ompany &ill en5oy red(#ed marketing #osts 'e#a(se of the high le*el of #ons(mer 'rand a&areness and loyalty) / The #ompany &ill ha*e more trade le*erage in 'argaining &ith distri'(tors and retailers) sin#e #(stomers e<pe#t them to #arry the 'rand) = The #ompany #an #harge a higher pri#e that its #ompetitors 'e#a(se the 'rand has higher per#ei*ed +(ality) > The #ompany #an more easily la(n#h 'rand e<tensions sin#e the 'rand name #arries high #redi'ility) ? The 'rand offers the #ompany some defense against fier#e pri#e #ompetition) C ALLENGE! IN BRAN'ING: Banding poses se*eral #hallenges to the marketer) The key de#isions are dis#(ssed in the follo&ing se#tion) Bran$in% 'ecision: The Bran$ or Not To Bran$: While 'randing the prod(#ts the management ha*e to re*ie& t&o things the #ostspa#kaging; la'eling; ad*ertising; legal prote#tion and the risk that the prod(#t may pro*e (nsatisfying to the (serK $n the other hand 'randing gi*es the (ser se*eral ad*antages! Brand name makes it easier for the seller to pro#ess orders and tra#k do&n pro'lems) 46
The sellers 'rand name and trademark pro*ide legal prote#tion of (ni+(e prod(#t feat(res; &hi#h #ompetitors &o(ld other&ise 'e likely to #opy) = Branding gi*es the seller the opport(nity to attra#t a loyal and profita'le set of #(stomers) Brand loyalty gi*es sellers some prote#tion from #ompetition and greater #ontrol in planning their marketing program) > Branding helps the seller segment markets) ? 1trong 'rands help '(ild the #orporate image; making it easier to la(n#h ne& 'rands and gain a##eptan#e 'y distri'(tors and #ons(mers) Bran$6!ponsor 'ecision: A man(fa#t(rer has se*eral options &ith respe#t to 'rand sponsorship The prod(#t may 'e la(n#hed as a man(fa#t(rerPs 'rand 6sometimes #alled nationals 'rand7 a distri'(torPs 'rand 6also #alled retailer; store; ho(se or pri*ate 'rand7 or a li#ensed 'rand name Bran$ Name 'ecision Man(fa#t(rer &ho de#ide to 'and their prod(#ts m(st #hoose &hi#h 'rand names to (se) Bo(r strategies are a*aila'le here! ndividual 3rand names / 3lan-et family name for all products = Separately family names for all products > Company trade name combined with individual product names Bran$ !trate%/ 'ecision: A #ompany ha*e fi*e #hoi#es &hen it #omes to 'rand strategy) The #ompany #an introd(#e line e<tensions; 'rand e<tensions; m(lti 'rands; ne& 'rands and #o 'rands) Line ,6tensions: When the #ompany introd(#es additional items in the same prod(#t #ategory (nder the same 'rand name; (s(ally &ith ne& feat(res; s(#h as ne& fla*ors; forms; #olors; added ingredients; pa#kage si%es; and so on) 3rand ,6tensions: Fsing e<isting 'rand name to la(n#h a prod(#t in a ne& #ategory) Bor e<ample Honda (ses its #ompany name to #o*er s(#h different prod(#ts as its a(tomo'iles; motor#y#les; sno& 'o&ers; la&nmo&ers; marine engines; and sno&mo'iles) *ulti brands: A #ompany &ill often introd(#e additional 'rands in the same prod(#t #ategory) Dario(s moti*es are there for it i)e) to esta'lish different feat(res or appeal to different '(ying moti*es; et#) +ew brands: When a #ompany la(n#hes prod(#ts in a ne& #ategory; it may find that non of its #(rrent 'rand names are appropriate) When the present 'rand image is not likely to help the ne& prod(#t; #ompanies are 'etter off #reating ne& 'rand names) Co-brands: A rising phenomenon is the appearan#e of #o 'randing 6also #alled d(al 'randing7; is &hi#h t&o or more &ill kno& 'rands are #om'ined in an offer) Ea#h 'rand sponsor e<pe#ts that the other 'rand name &ill strengthen 'and preferen#e or p(r#hase intention) In the #ase of #o pa#kaged prod(#ts; ea#h 'rand hopes it might 'e rea#hing a ne& a(dien#e 'y asso#iating &ith the other 'rand) Bran$6Repositionin% 'ecision: Ho&e*er &ell a 'rand is positioned in a market; the #ompany may ha*e to reposition it later) A #ompetitor may la(n#h a 'rand ne<t to the #ompanyPs 'rand and #(t into its market share) $r #(stomer preferen#es may shift; lea*ing the #ompanyPs 'rand &ith less demand) PAC"AGING AN' LABELING 'ECI!ION!: Many marketers ha*e #alled pa#kaging a fifth P along&ith pri#e; prod(#t pla#e and promotion; and some treat it as an element of prod(#t strategy) PAC"AGING: "%C7%5 +5 in#l(des the a#ti*ities of designing and prod(#ing the #ontainer or &rapper for a prod(#t) It is the immediate &rapping or #o*ering pro*ided along&ith the prod(#t to fa#ilitate handling; prote#tion and identifi#ation of the prod(#t) It may 'e a 'o<; a 'ottle; a #an or and #ontainer &hi#h goes along&ith the prod(#t into the hands of the (ltimate (sers) In 'roader sense; pa#kaging also in#l(des the la'el and inserts; if any) "%C7 +5: refers to the pro*iding o*erall #ontainer; 6'o<es; #artons #rates; et#)7 for handling; prote#tion; distri'(tion and identifi#ation of prod(#ts in #ommer#ial +(antities; meant for the mem'ers of distri'(tion #hannels; large #ommer#ial (sers or ind(strial #ons(mers) Ho&e*er these t&o terms are 'eing (sed inter#hangea'ly) In re#ent times pa#kaging has 'e#ome a potent marketing tool) Well designed pa#kages #an #reate #on*enien#e *al(e for the #ons(mer and promotional *al(e for the prod(#er) Dario(s tools ha*e #ontri'(ted to the gro&ing (se of pa#kaging as a marketing tool! Self-service: An in#reasing n(m'er of prod(#ts are sold on a self ser*i#e 'asis in s(per markets and dis#o(nt ho(ses) The pa#kage m(st perform many of the sales tasks; It m(st attra#t attention; des#ri'e the prod(#tPs feat(res; #reate #ons(mer #onfiden#e; and make a fa*ora'le o*erall impression) / Consumer %ffluence: Rising #ons(mer affl(en#e means #ons(mers are &illing to pay a little more for the #on*enien#e; appearan#e; dependa'ility; and prestige of 'etter pa#kages) = Company and 3rand mage: Companies are re#ogni%ing the po&er of &ell designed pa#kages to #ontri'(te to instant re#ognition of the #ompany or 'rand) > nnovation opportunity: Inno*ati*e pa#kaging #an 'ring large 'enefits to #ons(mers and profits to prod(#ers) 47
9e*eloping an effe#ti*e pa#kage for a ne& prod(#t re+(ires se*eral de#isions) The first task is to esta'lish pa#kaging #on#ept) Pa#kaging #on#ept defines &hat the pa#kage sho(ld 'e or do for the parti#(lar prod(#t) 1ho(ld the pa#kagePs main f(n#tion 'e to offer s(perior prod(#t prote#tion; introd(#e a no*el dispensing method; s(ggest #ertain +(alities a'o(t the prod(#t or the #ompany; or something else) $n#e a pa#kaging #on#ept has 'e determined; de#isions m(st 'e made on additional pa#kaging elements i)e) si%e; shape; materials ; #olor; te<t and 'rand mark) Pa#kage might in#l(de (p to three le*els of material Primary pa#kage 6like 'ottle7; 1e#ondary Pa#kage 6Card'oard 'o<7 or shipping pa#kage6 #ontaining do%ens of pa#kages of pa#ked prod(#t7 La7elin%: It is a s('set of pa#kaging) 1ellers m(st la'el their prod(#ts) The la'el may 'e a simple tag atta#hed to the prod(#t or an ela'orately designed graphi# that is part of the pa#kage) The la'el might #arry only the 'rand name or a great deal of information) E*en if the seller prefers a simple la'el; the la& may re+(ire additional information) It is a pie#e of &ritten #omm(ni#ation informing the (ser of the prod(#t a'o(t its name; spe#ifi#ations; #hara#teristi#s; origin; +(ality; #olor; type; si%e; model or the method of (sing; handling; maintaining or ser*i#ing the prod(#t) Not many la'els are to #arry all this information at one pla#e)
CHAPTER !3 9esigning Pri#ing 1trategies and Programs

!ETTING PRICE: A firm m(st ha*e to set its pri#e on three o##asion) !7 Birst time &hen it de*elops ne& prod(#t) /7 When it introd(#es its reg(lar prod(#t in a ne& distri'(tion #hannel or geographi#al area; and =7 &hen it enters or 'ids on ne& #ontra#t &ork) The firm has to #onsider many fa#tors in setting its pri#ing poli#y) In the follo&ing paragraphs; &e &ill des#ri'e a si< step pro#ed(re for pri#e setting- !7 sele#ting the pri#ing o'5e#ti*e, /7 determining demand, =7 estimating #osts, >7 analy%ing #ompetitorsP #osts; pri#es; and offers, ?7sele#ting a pri#ing method, and @7 sele#ting the final pri#e) !electin% the Pricin% O7?ective: The #ompany first has to de#ide &hat it &ants to a##omplish &ith parti#(lar prod(#t offer) If the o'5e#ti*es of the organi%ation are #lear it &ill 'e easy to set pri#e) There are si< types of o'5e#ti*es a #ompany #an p(rs(e s(r*i*al; ma<im(m #(rrent profit; ma<im(m #(rrent re*en(e; ma<im(m sales gro&th; ma<im(m market skimming; or prod(#t +(ality leadership) i7 1FRDIDA0- If the #ompany is &orking &ith o*er #apa#ity; or in intense #ompetition or #hanging #ons(mer &ants) Then its ma5or o'5e#ti*e shall 'e to s(r*i*e) They #(t pri#es to keep the plant r(nning and the in*entories t(rno*er) Profits are less important than s(r*i*al) As long as pri#es #o*ers the *aria'le #ost and some portion of fi<ed #ost; the #ompanies stay in '(siness) Ho&e*er it is only a short r(n o'5e#ti*e the firm m(st ha*e to lean as ho& to add *al(e) ii7 MAQIMFM CFRRENT PR$BIT- Many #ompanies set the pri#e that &ill ma<imi%e #(rrent profit) They e<amine the estimated demand (nder different pri#e le*els and set that pri#e at &hi#h the profit or #ash inflo& is ma<im(m) iii7 MAQIMFM CFRRENT REDENFE- Re*en(es ma<imi%ation re+(ires estimating only the demand f(n#tion) Many managers 'elie*e that re*en(e ma<imi%ation &ill lead to long r(n profit ma<imi%ation and market share gro&th) i*7 MAQIMFM 1A0E1 CR$WTH- 1ome #ompanies &ant to ma<imi%e (nit sales they 'elie*e that a higher sales *ol(me &ill lead to lo&er (nit #osts and higher long r(n profit) They set the lo&est pri#e; ass(ming the market is pri#e sensiti*e) It is also #alled market penetration pri#ing) *7 MAQIMFM MARKET 1KIMMINC- Means setting high pri#es to RskimR the market) It makes sense (nder the follo&ing #onditions a7 a s(ffi#ient n(m'er of '(yers ha*e a high #(rrent demand- '7 the (nit #ost of prod(#ing a small *ol(me are not so high that they #an#el the ad*antage of #harging &hat the traffi# &ill 'ear, #7 The high initial pri#e does not attra#t more #ompetitors to the market d7 the high pri#e #omm(ni#ates the image of a s(perior prod(#t) *i7 PR$9FCT IFA0ITM 0EA9ER1HIP- A #ompany might aim to 'e the prod(#t +(ality leader in the market) *ii7 $THER PRICINC $BNECTIDE1- Non profit and p('li# organi%ations may adopt a n(m'er of other pri#ing o'5e#ti*es) A (ni*ersity aims for partial #ost re#o*ery; kno&ing that it m(st rely on pri*ate gifts and p('li# grants to #o*er the remaining #osts) A nonprofit hospital may aim for f(ll #ost re#o*ery in its pri#ing) 'eterminin% 'eman$: Ea#h pri#e &ill lead to different le*el of demand) In a normal #ase they are in*ersely related) 3actors a((ectin% price !ensitivit/ - The demand #(r*e sho&s the market"s p(r#hase rate at alternati*e pri#es) Is s(ms the rea#tions of many indi*id(als &ho ha*e different pri#e sensiti*ities) The first step in estimating demand is th(s (nderstanding the fa#tors that affe#t the '(yers pri#e sensiti*ityi7 (ni0ue 2alue ,ffect: B(yers is less pri#e sensiti*e if the prod(#t is more distin#ti*e) ii7 Substitute %wareness ,ffect: B(yer is less sensiti*e if he kno&s less a'o(t s('stit(tes) iii7 !ifficult Comparison ,ffect: B(yer is less sensiti*e if they #annot #ompare the +(ality of prod(#t &ith other prod(#t) i*7 4otal ,6penditure ,ffect: B(yer is less sensiti*e for pri#e if the amo(nt of e<pendit(re is less as a part of their total in#ome) *7 ,nd-benefit effect: B(yers are less pri#e sensiti*e if the e<pendit(re is smaller as #ompare to the total end 'enefit of the prod(#t) *i7 Shared-Cost ,ffect: B(yer is less pri#e sensiti*e &hen part of the #ost is 'orn 'y other parties) *ii7 Sun- nvestment ,ffect: B(yer is less pri#e sensiti*e &hen the prod(#t its to 'e (sed in #onne#tion &ith asset pre*io(sly 'o(ght) *iii7 "rice $uality ,ffect: B(yers are less pri#e sensiti*e &hen the prod(#t is ass(med to ha*e more +(ality; prestige or e<#l(si*eness) i<7 nventory ,ffect: B(yers are less pri#e sensiti*e &hen they #annot store the prod(#t) Metho$s o( Estimatin% 'eman$ C*rves: Most #ompanies make some attempt to meas(re their demand #(r*es) To do so; they #an (se se*eral methods) i7 1tatisti#ally analy%ing the e<isting data on past pri#es; +(antities sold; and other fa#tors to estimate their relationship) 4!
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i7
ii7 iii7 i*7 *7 *i7 @
ii Cond(#t pri#e e<periments) 1ystemati#ally #arry the pri#es of se*eral prod(#ts sold and o'ser*ed the res(lts) and alternati*e approa#h is to #harge different pri#es in similar territories to see ho& sales are affe#ted) iii7 Asking '(yers to state ho& many (nits they &o(ld '(y at different proposed pri#es) Price Elasticit/ o( 'eman$: Marketers need to kno& ho& responsi*e; or elasti#; demand &o(ld 'e to a #hange in pri#e) Estimatin% Costs: 9emand sets a #eiling of the pri#e &hile #osts sets the floor) The #ompany &ants to #harge a pri#e that #o*ers its #osts of prod(#ing; distri'(ting; and selling the prod(#t; in#l(ding a fair ret(rn for its effort and risk) TMPE1 $B C$1T1- A #ompanyPs #osts take t&o forms; fi<ed and *aria'le) They are #olle#ti*ely #alled as total #ost and &hen they are di*ided in to (nits are #alled a*erage #ost) C$1T BEHADI$R1At different prod(#t ion 0e*els- Management sho(ld kno& ho& #ost *ary &ith different le*els of prod(#tion) As a B(n#tion of A##(m(lated Prod(#tion- Change of #osts d(e to different le*els of prod(#tion) The firm &hi#h is making more prod(#tion #an #harge lo& #osts 'e#a(se of the e<pertness of the &orkers) As a B(n#tion of 9ifferentiated Marketing $ffers- 9ifferent '(yers &ant different terms) 1ome &ants daily deli*ery some &ants &eakly and some &ants monthly &ith the #onsideration of sa*ing &hi#h res(lts the #ompany in different #osts) Therefore a #ompany ha*e to make a#ti*ity 'ased #ost a##o(nting instead of standard #ost a##o(nting) Target #osting- Costs #hange &ith prod(#tion s#ale and e<perien#e) They also #hange as a res(lt of a #on#entrated effort 'y the #ompanyPs designers; engineers; and p(r#hasing agents to red(#e them) Target Costing is a Napanese te#hni+(e) With resear#h they determine prod(#t desired f(n#tions) Then they set the #ompetiti*e pri#e of the prod(#t from this they ded(#t profit margin and this lea*es the target #ost they m(st ha*e to a#hie*e) Anal/1in% competitors Costs Prices an$ O((ers: Within the range of possi'le pri#es determined 'y the market demand and #osts #ompetitorsP #osts; pri#es and possi'le pri#e rea#tions help the firms esta'lishing &here to set its pri#es) The #ompany #an send o(t #omparison shoppers to pri#e and assess #ompetitorsP offers; a#+(ire #ompetitorsP pri#e lists;; '(y #ompetitorsP prod(#t and take it apart; and ask '(yers ho& they per#ei*e the pri#e and +(ality of ea#h #ompetitorPs offer) $n#e the #ompany is a&are of #ompetitorsP pri#es and offers; it #an (se them a s an orienting point for its o&n pri#ing) If the firm"s offer is similar to a manor #ompetitorPs one ; then the firm &ill ha*e to pri#e #lose to the #ompetitor or lose sales) If the firm"s offer is inferior the firm is not a'le to #harge more than the #ompetitors) If the firmPs offer is s(perior; the firm #an #harge more than the #ompetitor) !electin% a Pricin% Metho$: No& the organi%ation &ill 'e ready to sele#t a pri#e) It &ill 'e some &here 'et&een one that is too lo& to prod(#e profit and that is too high to prod(#e eno(gh demand) There are three ma5or #onsiderations in pri#e setting !7 #ost /7 #ompetitors pri#es and =7 pri#es of s('stit(tes) Company may sele#t any pri#ing method that in#l(des one or more of these three #onsiderations) The pri#ing method &ill then lead to a spe#ifi# pri#e) Bollo&ing are the pri#e setting methods) MARK FP PRICINC- A most elementary pri#ing method is to add a standard mark(p to the prod(#tPs #ost) Mark(ps *ary #onsidera'ly amend different goods) Mark(ps are generally higher on seasonal items 6 to #o*er the risk of not selling7; spe#ialty items; slo&er mo*ing items; items &ith high storage and handling #osts; and demand inelasti# items) Companies also #harge &hen hidden or highly *aria'le #osts are in*ol*ed) TARCET RETFRN PRICINC- A pri#e &hi#h yields organi%ation target rate of ret(rn on in*estment) PERCEIDE9 DA0FE PRICINC- In it marketer see the '(yers per#eption of *al(e not the sellers #ost as a key to pri#ing) DA0FE PRICINC- Charge a fairly ho& pri#e for a high +(ality offering) It say that the pri#e sho(ld represent the high *al(e offered to #ons(mers) C$INC RATE PRICINC- Basing pri#e on #ompetitors pri#e) 1EA0E9 BI9 PRICINC- In it the firm 'asis its pri#e on e<pe#tations of ho& #ompetitors &ill pri#e their prod(#ts) !electin% the 3inal Price: Pri#ing methods arro&s the pri#ing range) In #onsidering the final pri#e follo&ing additional fa#tors sho(ld 'e #onsidered) i7 "sychological "ricing: Many #ons(mers (se pri#e as an indi#ator of +(ality) ii7 4he influence of &ther *ar-eting *i6 ,lements on "rice: The final pri#e m(st take into a##o(nt the 'rands +(ality and ad*ertising relati*e to #ompetition) a7 Brands &ith a*erage +(ality '(t high relati*e ad*ertising '(dgets &ere a'le to #harge premi(m pri#es) '7 Brand &ith high relati*e +(ality and high relati*e ad*ertising o'tained the highest pri#es) Con*ersely 'rands &ith lo& +(ality and lo& ad*ertising #harred the lo&est pri#es) #7 The positi*e relationship 'et&een high pri#es and high ad*ertising held most strongly in the later stages of the prod(#t life #y#le; for market leaders and for lo& #ost prod(#t) 5"
iii7
Companies "ricing "olicy: The #ontemplated pri#e m(st 'e #onsistent &ith #ompany pri#ing poli#ies) Many #ompanies set (p a pri#ing department to de*elop pri#ing poli#ies and esta'lish appro*e pri#ing de#isions) i*7 mpact of "rice on &ther parties: Management sho(ld also #onsider the rea#tion of parties to the #ontemplated pri#e) Ho& &ill the distri'(tors and deals feel a'o(t itK &ill the #ompany sales for#e 'e silting to sell at that pri#e or #omplain that the pri#e is too highK Ho& &ill #ompetitors rea#t to A$optin% the Price: Companies (s(ally not set a single pri#e '(t sets a pri#ing str(#t(re refle#ting i7 CE$CRAPHICA0 PRICINC: Pri#ing in different lo#ation; #ities and #o(ntries) Either to #harge high pri#e to distant #(stomers or lo& pri#e to in#rease the *ol(me of sales) Moreo*er &hether the pri#e &ill 'e re*i*ed in hard #ash or in other items in payment &hi#h #a(se #o(nter trade) C&(+4,R4R%!, #&R*S: 8 3arter: 9ire#t e<#hange of goods) / Compensation !eal: 1ome per#entage is re#ei*ed in #ash and remaining in goods) = 3uybac- %rrangement: The seller sells the plant and te#hnology and agrees to a##ept partial in #ash and partial payment in the prod(#ts man(fa#t(red &ith that e+(ipment) > &ffset: 1eller re#ei*ed f(ll amo(nt in #ash '(t agrees to spend a s('stantial amo(nt of that in that #o(ntry) ii7 PRICE 9I1C$FNT A00$WANCE- Most #ompanies re&ard #(stomers for !7 early payment /7 *ol(me p(r#hased and =7 off season '(ying; in any of the follo&ing &ays) a7 Cash discounts: Bor early payment) '7 $uantity !iscount: 9is#o(nt allo&ed for large p(r#hases) #7 #unctional !iscount: Bor performing #ertain f(n#tions s(#h as storing; selling and re#ord keeping) d7 Seasonal !iscount: Bor o(t of season prod(#ts) e7 %llowances: Are other types of red(#tions from pri#e s(#h as at the time of la(n#hing ne& prod(#t) iii7 PR$M$TI$NA0 PRICINC- Companies (ses se*eral pri#ing te#hni+(es to stim(late early p(r#hase) The te#hni+(es are a7 Loss Leader "ricing: 1elling at less than #ost to in#rease sales) '7 Special-event pricing- 0ike Eid and Christmas #7 Cash Rebates: for a spe#ial time period) d7 Low nterest #inancing: Instead of de#reasing pri#e the #ompany offer #(stomers lo& interest finan#ing) e7 Longer "ayment 4erms: 1ellers stret#h their loans o*er longer periods and th(s lo&er monthly payments) f7 .arranties and service contracts: The #ompany #an promote sales 'y adding a free &arranty offer or ser*i#e #ontra#t) g7 "sychological !iscounting: P(tting an artifi#ially high pri#e on prod(#t and then offering it at s('stantial sa*ings) i*7 9I1CRIMINAT$RM PRICINC- When #ompany sells one prod(#t at t&o or more pri#es that do not refle#t a proportional differen#e in #osts) It #an take se*eral formsa7 Customer Segment pricing: 9ifferent #(stomer gro(ps are #harged different pri#es for the same prod(#t; e)g) lo&er admission fee for #hildren and higher for the senior #iti%ens) '7 "roduct #orm "ricing: 9ifferent *ersions of the prod(#t are pri#ed differently) #7 mage pricing: Pri#ing same prod(#t at t&o different le*els 'ased on image differen#es) d7 Location "ricing- When same prod(#t is pri#ed differently at different lo#ations e*en tho(gh the #ost of offering at ea#h lo#ation is the same) e7 4ime pricing: Pri#es are *aried 'y season; day; or ho(r) D7 PR$9FCT PRICINC MIQ- The pri#ing logi# m(st 'e modified &hen the prod(#t is a part of prod(#t mi<) In s(#h a #ase the firm sear#hes for a set of pri#es that ma<imi%e the profits on the total prod(#t mi<) We #an disting(ish si< sit(ations in*ol*ing prod(#t mi< pri#ing- !7 prod(#t line pri#ing; /7 optional feat(re pri#ing; =7 #apti*e prod(#t pri#ing; >7t&o part pri#ing; ?7 'yprod(#t pri#ing; and @7 prod(#t '(ndling pri#ing) a7 "roduct line "ricing: Companies normally de*elop prod(#t lines; rather than single prod(#t) Management m(st de#ide on pri#ing steps to esta'lish from one line to the ne<t) The pri#e steps sho(ld take into a##o(nt #ost differen#es 'et&een different lines; #(stomer e*al(ations of different feat(res; and #ompetitors" pri#es) '7 &ptional-feature pricing: Many #ompanies offer optional prod(#ts or feat(res along&ith their main prod(#t) Pri#ing these options is sti#ky pro'lem; 'e#a(se #ompanies m(st ha*e to de#ide &hi#h item is to in#l(de in the sti#ker pri#e and &hi#h to offer as options)) #7 Captive product pricing: 1ome prod(#ts re+(ire the (se of an#illary or #apti*e prod(#t; e)g) ra%or and 'lades #amera and #amera films et#) Man(fa#t(rers of main prod(#t often pri#e them lo& and set high mark(ps on the s(pplies) d7 4wo-part pricing: 1er*i#e firms often engage in this type of pri#ing) They #harge a fi<ed fee pl(s a *aria'le (sage fee) Th(s telephone (sers pay a minim(m monthly fee pl(s #harges for #alls 'eyond a #ertain limit) 51
3y-product pricing: The prod(#tion of #ertain prod(#ts often res(lts in the de*elopment of 'y prod(#ts) If the 'y prod(#ts ha*e *al(e to the #(stomer gro(p; then they sho(ld 'e pri#ed on their *al(e) Any in#ome earned on the 'yprod(#ts &ill make it easier for the #ompany to #harge a lo&er pri#e on its main prod(#t) if #ompetitors for#es it to do so) f7 "roduct-building "ricing- When the sellers '(ndle their prod(#ts at a set pri#e &ith some sa*ing) 1in#e #(stomers may not ha*e planned to '(y all of the #omponents; the sa*ings on the pri#e '(ndle m(st 'e s('stantial eno(gh to ind(#e them to '(y the '(ndle) INITIATING AN' RE!PON'ING TO PRICE C ANGE!: After de*eloping pri#e strategies; #ompanies &ill fa#e sit(ations &here they need to #(t or raise pri#es) Initiatin% Price C*ts: There are many #ir#(mstan#es &hi#h lead a firm to #(t its pri#esa7 E<#ess Plant #apa#ity- and additional re*en(es #annot 'e generated &itho(t pri#e red(#tion) '7 9e#lining Market 1hare- When #ompanies fo(nd that they are loosing their market share; to restore their market they ha*e to de#ries their pri#e) e7 Try to 9ominate the Market thro(gh 0o&er Cost- and to in#rease their market share) This strategy also in*ol*es high risksi7 Low 0uality trap: Cons(mers &ill ass(me that the +(ality is 'elo& that of the higher pri#ed #ompetitors) ii7 #ragile-mar-et-share trap: A lo& pri#e '(ys market share '(t not market loyalty) C(stomers &ill shift to another lo&er pri#e firm that #omes along) iii7 Shallow-poc-ets trap: High pri#ed #ompetitors may also #(ts their pri#e and may ha*e longer staying po&er 'e#a(se of deeper #ash reser*es) Initiatin% Price Increases: 1(##essf(l pri#e in#rease #an in#rease profits #onsidera'ly if the sales *ol(me is (naffe#ted) The #ir#(mstan#es pro*oking pri#e in#reases area7 Cost Inflation- Rising #osts (nmat#hed 'y prod(#ti*e gains s+(ee%e profit margins and lead #ompanies to reg(lar ro(nd to in#rease pri#es) Companies often raise pri#es 'y more than the #ost in#rease in anti#ipation of f(rther inflation or go*ernment pri#e #ontrols, this pra#ti#e is #alled anti#ipatory pri#ing) '7 $*er 9emand- When a #ompany #annot s(pply all of its #(stomers; it #an raise its pri#es; or ration s(pplies to #(stomers; or may do 'oth) In o*er demand sit(ation pri#e #an 'e in#reased in se*eral &aysi7 %doption of delayed 0uotation pricing: When #ompany does not fi< the pri#e of its prod(#t (ntil it is finished or deli*ered) ii7 (se of escalator clauses: When #ompany re+(ires the #(stomers to pay today"s pri#e and all or any part of inflation in#rease that takes pla#e 'efore deli*ery) iii7 (nbundling of goods and services: The #ompany maintains its pri#e '(t remo*es or pri#es separately one or more elements that &ere par of the former offer; s(#h as free deli*ery or installation) i*7 Reduction of discounts: The #ompany instr(#ts its sales for#e not to offer its normal #ash and +(antity dis#o(nts) A #ompany might also ha*e to de#ide &hether to raise the pri#e sharply on a one time 'asis or to raise it 'y small amo(nts se*eral times) While passing on pri#e in#reases to the #(stomers; the #ompany needs to a*oid the image of a pri#e go(ge; 'e#a(se #(stomer &ill t(rn against the pri#e go(gers &hen the market softens) Other 2a/s o( Respon$in% i%h Costs: There are some &ays that a #ompany #an respond to high #osts or demand &itho(t raising pri#es) The possi'ilities in#l(de the follo&ingI7 Shrin-ing the amount of product instead of raising the pri#e) ii7 Substituting less-e6pensive materials or ingredients. iii7 Reducing or removing product features to red(#e #ost) i*7 Removing or deducing product service9 s(#h as installation; free deli*ery; or long &arranties) *7 (sing less e6pensive pac-aging material or promoting larger pa#kage si%e to keep do&n pa#kaging #ost) *i7 Reducing the number of models offered. *ii7 Creating new economy brands. Reactions to Price Chan%es: Any pri#e #hange #an effe#t the #(stomers; #ompetitors; distri'(tors; and s(ppliers and may pro*oke go*ernment rea#tion as &ell) CF1T$MER1" REACTI$N1- C(stomers often +(estion a'o(t the moti*e 'ehind the red(#tion or in#rease in pri#e) They may treat it as a de#rease in +(ality or strength of the #ompany) $n the other hand an in#rease in pri#e may seem them that the item is hot and might 'e (no'taina'le if it is not 'o(ght soon) C(stomers are most pri#e sensiti*e to prod(#ts that #ost a lot and are 'o(ght fre+(ently; &hile they hardly noti#e higher pri#es on lo& #ost items that they '(y infre+(ently) A seller #an #harge more than #ompetitors and still get the '(siness if the #(stomer #an 'e #on*in#ed that the prod(#ts total lifetime #osts are lo&er) C$MPETIT$R1 REACTI$N1- A firm #hanging its pri#e had to 'e &orried a'o(t #ompetitors" as &ell as #(stomers" rea#tions) Competitors are most likely to rea#t &here the n(m'er of firms in the ind(stry is small the 52
e7
prod(#t is homogeneo(s; and the '(yers are highly informed) The pro'lem is #ompli#ated 'e#a(se the #ompetitor #an p(t different interpretations on a #ompany pri#e #(t and take s(#h a#tion &hi#h may s(rprises the #ompany) When there are se*eral #ompetitors the #ompany m(st estimate ea#h #lose #ompetitor"s likely rea#tion) Respon$in% to CompetitorsA Price Chan%es: Ho& sho(ld a firm respond to a pri#e #hange initiated 'y a #ompetitorK In markets #hara#teri%ed 'y high prod(#t homogeneity) the firm has little #hoi#e '(t top meet a #ompetitor"s pri#e #(t) The firm sho(ld sear#h for &ays to enhan#e its a(gmented prod(#t) If it #annot find any &ay it ha*e to meet the pri#e red(#tion) Before rea#ting the firm need to #onsider the follo&ing iss(es- !7 Why did the #ompetitors #hange the pri#eK /7 9oes the #ompetitor plan to make the pri#e #hange temporary or permanentK =7 What &ill happen to the #ompany"s market share and profits if it does not respondK >7 What are the other #ompetitors and other firms" responses likely to 'e to ea#h possi'le rea#tionK Market leaders often fa#e aggressi*e pri#e #(tting 'y smaller firms trying to '(ild market share) When the atta#king firms prod(#t is #ompara'le to the leaders; its lo&er pri#e &ill #(t into the leader"s share); The leader at this point has se*eral options!) *aintain price: The leader maintain its pri#e and profit margin ; 'elie*ing thata7 It &o(ld lose too m(#h profit if it red(#ed its pri#e '7 it &o(ld not loose to m(#h market share; and #7 it #o(ld regain market share &hen ne#essary) /) Raise perceived 0uality: The leader #o(ld maintain pri#e '(t strengthen the *al(e of its offer) It #o(ld impro*e its prod(#t; ser*i#es; and #omm(ni#ations) It #o(ld stress the relati*e +(ality of its prod(#t o*er that of the lo& pri#e #ompetitors) =) Reduce "rice: The leader might drop its pri#e to the #ompetitor"s pri#e) When it 'elie*es a7 its #ost fall &ith *ol(me; '7 it &o(ld lose market share 'e#a(se the market is pri#e sensiti*e; and #7 it &o(ld 'e hard to re'(ild market share one it is lost) >) ncrease price and improve 0uality: The leader might raise; its pri#e and introd(#e ne& 'rands to market the atta#king 'rand) ?) Launch low-price fighter line: $ne of the 'est responses is to add lo&er pri#e items to the line or to #reate a separate lo&er pri#e 'rand) This is ne#essary if the parti#(lar market segment 'eing lost is pri#e sensiti*e) The 'est response *aries &ith sit(ation) The #ompany (nder atta#k has to #onsider the prod(#t"s stage in the life #y#le; its importan#e in the #ompany"s prod(#t portfolio; the #ompetitor"s intentions and reso(r#es; the market pri#e and +(ality sensiti*ity; the 'eha*ior of #osts &ith *ol(me; and the #ompany"s alternati*e opport(nities)
53
CHAPTER !E 1ele#ting and Managing Marketing Channels

Bet&een the prod(#er and the final (ser stands the marketing #hannel) W AT ARE T E MAR"ETING C ANNEL!: Marketing #hannels are the sets of interdependent organi%ations in*ol*ed in pro#ess of making a prod(#t or ser*i#e a*aila'le for (se) The market intermediaries make (p a marketing #hannel) They are also #alled trade #hannel or distri'(tion #hannel) Wh/ Interme$iaries 4se$: Prod(#ers gain se*eral ad*antages yo( the (se of intermediaries) ! They ha*e la#k of finan#ial reso(r#es to #arry o(t dire#t marketing) / If dire#t marketing is not feasi'le = The prod(#ers &ho esta'lish their o&n #hannels #an often earn a greater ret(rn 'y in#reasing their in*estment in their main '(siness 6Prod(#tion of the goods7) Channel 3*nctions an$ 3lo2s: A marketing #hannel performs the &ork of mo*ing goods from prod(#ers to #ons(mers) It o*er#omes the time; pla#e; and possession gaps that separate goods and ser*i#es from those &ho need or &ant them) Mem'ers of the marketing #hannel perform a n(m'er of dye f(n#tions! nformation- The #olle#tion and distri'(tion of marketing resear#h information a'o(t potential and #(rrent #(stomers; #ompetitors and other a#tors) / "romotion The de*elopment and dissemination of pers(asi*e #omm(ni#ations designed to attra#t #(stomers to the offer) = +egotiation: The attempt to rea#h final agreement on pri#e and other terms so that transfer of o&nership or possession #an 'e effe#ted) > #inancing: The a#+(isition and allo#ation of f(nds re+(ired to finan#e in*entories at different le*els of the marketing #hannel) ? Ris- ta-ing: The ass(mption of risks #onne#ted &ith #arrying o(t the #hannel &ork) @ "hysical possession: The s(##essi*e storage and mo*ement of physi#al prod(#ts from ra& materials to the final #(stomers) 3 "ayment: B(yers" payment of their 'ills to the sellers thro(gh 'anks and other finan#ial instit(tions) E 4itle: The a#t(al transfer of o&nership from one organi%ation or person to another) Channel Levels: Ea#h intermediary that performs &ork in 'ringing the prod(#t and its title #loser to the final '(yer #onstit(tes a #hannel le*el) 1in#e the prod(#e and the final #(stomer 'oth perform &ork; they are part of e*ery #hannel) By (sing the n(m'er of intermediary le*els &e designate the length of a #hannel) A (ero)level channel 6Also #alled dire#t marketing7; #onsist of a man(fa#t(rer selling dire#tly to the final #(stomer) Its ma5or types are door to door sales; mail order; telemarketing; TD; selling and man(fa#t(rer o&ned stores) A one)level channel $ne selling intermediary; s(#h as retailer) A two)level channel #ontains t&o intermediaries) In #ons(mer markets they are typi#ally a &holesaler and a retailer) A three)level channel in*ol*ing three le*els of intermediaries) Channel normally des#ri'e a for&ard mo*ement of prod(#ts) $ne #an also talk a'o(t 'a#k&ard #hannels) It is the re#y#ling of solid &astes) 1e*eral intermediaries play a role in 'a#k&ard #hannels e)g) soft drink intermediaries; trash #olle#tion spe#ialists; re#y#ling #enters; trash re#y#ling 'rokers et#) C ANNEL6'E!IGN 'ECI!ION!: In designing marketing #hannels; man(fa#t(res ha*e to de#ide &hat is ideal; &hat is feasi'le; and &hat is a*aila'le) 9esigning of a #hannel system #alls for- !7analy%ing #(stomer needs; /7esta'lishing #hannel o'5e#ti*es; and =7 identifying and e*al(ating the ma5or #hannel a#ti*ities) ! Anal/1in% C*stomersA 'esire$ !ervice O*tp*t Levels: Fnderstanding 6&hat; &here; &hy; &hen and ho& target #(stomers '(y7 is the first step in designing the marketing #hannel) They m(st also (nderstand the ser*i#e o(tp(t le*els desired 'y the #(stomers the types and le*els of ser*i#es that people &ant and e<pe#t &hen they p(r#hase a prod(#t) Channels prod(#e fi*e #hannel o(t p(tsI7 0$T 1IOE- It is the n(m'er of (nits that the marketing #hannel permits a typi#al #(stomer to p(r#hase on a o##asion) $'*io(sly different #hannels are set (p for ho(sehold '(yers and the resale p(rpose '(yers) The smaller the si%e; the greater the ser*i#e o(tp(t le*el that the #hannel m(st pro*ide) ii7 WAITINC TIME- The a*erage time that #(stomers of that #hannel &ait for re#eipt of the goods) iii7 1PECIA0 C$NDENIENCE- The degree to &hi#h the marketing #hannel makes it easy for #(stomers to p(r#hase the prod(#t) i*7 PR$9FCT DARIETM- The assortment 'readth pro*ided 'y the marketing #hannel)
54
*7 1ERDICE BACKFP- The added ser*i#es like; #redit; deli*ery; installation; repairs; pro*ided 'y the #hannel) The greater the ser*i#e 'a#k(p; the greater the &ork pro*ided 'y the #hannel) / Esta7lishin% the Channel O7?ectives an$ Constraints: Channels o'5e#ti*es sho(ld 'e stated in terms of targeted ser*i#e o(tp(t le*els) Fnder #ompetiti*e #onditions; #hannel instit(tions sho(ld arrange their f(n#tional tasks so as to minimi%e total #hannel #osts &ith respe#t to desired le*els of ser*i#e o(tp(ts) 1e*eral market segments desire differing ser*i#e o(tp(ts) Effe#ti*e #hannel planning re+(ires determining &hi#h market segments to ser*e and the 'est #hannels to (se in ea#h #ase) = I$enti(/in% the ma?or channel Alternatives: After defining the target market and desired positioning it sho(ld identify its #hannel alternati*es) A #hannel alternati*e is des#ri'ed 'y three elements i7the types of a*aila'le intermediaries; ii7 the n(m'er of intermediaries needed; iii7 the terms and responsi'ilities of ea#h #hannel parti#ipant) i7TMPE1 $B INTERME9IARIE1- The firm needs to identify the types of intermediaries a*aila'le to #arry on its #hannel &ork) They are of follo&ing three typesa7 Company 1ales Bor#e- E<pand the #ompanies dire#t sales for#e) Assign sales representati*es to territories to #onta#t all prospe#ts in the areas) or to de*elop the different sales for#e for different ind(stries) '7 Man(fa#t(rers" Agen#y- Higher man(fa#t(rers" agents in different regions or en (se ind(stries to sell the ne& test e+(ipment) #7 Ind(strial 9istri'(tion- Bind distri'(tors in different regions and end (se ind(stries; &ho &ill '(y and a(dio de*i#e) Ci*e them e<#l(si*e distri'(tion; ade+(ate margins; prod(#t training and promotional s(pport) ii7 NFMBER $B INTERME9IARIE1- Companies ha*e to de#ide the n(m'er of intermediaries to (se at ea#h #hannel le*el) Three strategies are a*aila'le a7 e<#l(si*e distri'(tion; '7 sele#ti*e distri'(tion; and #7 intensi*e distri'(tion) a7 E<#l(si*e 9istri'(tion- 1e*erely limiting the n(m'er of intermediaries handling the #ompany"s goods; or ser*i#es) It is (sed to maintain a great deal of #ontrol o*er the ser*i#e le*el and ser*i#e o(tp(ts offered 'y the re*elers) '7 1ele#ti*e 9istri'(tion- It in*ol*es the (se of more than a fe& '(t less than all of the intermediaries; &ho are &illing to #arry a parti#(lar prod(#t) Fsed 'y the old and ne& #ompanies seeking to o'tain distri'(tors) #7 Intensi*e 9istri'(tion- The man(fa#t(rer pla#es the goods or ser*i#es in as many o(tlets as possi'le) When the #ons(mer re+(ires a great deal of lo#ation #on*enien#e) This strategy is generally (sed for #on*enien#e items) ii7 TERM1 AN9 RE1P$N1IBI0ITM $B CHANNE0 MEMBER1- The prod(#er m(st determine the rights and responsi'ilities of the parti#ipating #hannel mem'ers; making s(re that ea#h #hannel mem'er is treated respe#tf(lly and gi*en the opport(nity to 'e profita'le) The main elements in the trade relations mi< are pri#e poli#ies; #onditions of sale territorial rights; and spe#ifi# ser*i#es to 'e performed 'y ea#h party) a7 Pri#e Poli#y- the prod(#er esta'lish a pri#e list and s#hed(le of dis#o(nts that the intermediaries see as e+(ita'le and s(ffi#ient) '7 9istri'(tors" territorial Rights- 9istri'(tors &ant to kno& &here and (nder &hat terms the prod(#er &ill enfran#hise other distri'(tors) #7 M(t(al ser*i#es and responsi'ilities- m(st 'e #aref(lly spelled o(t; espe#ially in fran#hised and e<#l(si*e agen#y #hannels) > Eval*atin% the Ma?or Channel Alternatives: The prod(#er may identify se*eral #hannel alternati*es and ha*e to determine the one 'est s(ited to its needs) Ea#h alternati*e needs to 'e e*al(ated against e#onomi#; #ontrol and adapti*e #riteria) i7 EC$N$MIC CRITERIA- Ea#h #hannel #an prod(#e different le*el of sales and #osts) The first step is to determine &hether a #ompany sales for#e or sales agen#y &ill prod(#e more sales) Most marketing managers 'elie*e that #ompany sales for#e &ill sell more and some 'elie*es that sales agen#y #o(ld #on#ei*a'ly sell more than a #ompany sales for#e) ii7 C$NTR$0 CRITERIA- The prod(#e m(st take into a##o(nt #ontrol iss(es) Fsing a sales agen#y poses a #ontrol pro'lem; 'e#a(se it is an independent '(siness firm seeking to ma<imi%e its profit) The agents may #on#entrate on the #(stomers &ho '(y the most; not ne#essarily of the man(fa#t(rer"s goods) iii7 A9APTIDE CRITERIA- To de*elop a #hannel; the #hannel mem'ers m(st make some degree of #ommitment to ea#h other for a spe#ified period of time) These #ommitments in*aria'ly lead to a de#rease in the prod(#er"s a'ility to respond to a #hanging marketpla#e) In rapidly #hanging or (n#ertain prod(#t markets; the prod(#er needs to seek #hannel str(#t(res and poli#ies that ma<imi%e #ontrol and a'ility to #hange marketing strategy s&iftly) C ANNEL6MANAGEMENT 'ECI!ION!: After #hoosing a #hannel alternati*e; indi*id(al intermediaries m(st 'e sele#ted; moti*ated and e*al(ated) Channel arrangements m(st also 'e modified o*er time) ! !electin% Channel Mem7ers: 55
>
9ifferent prod(#ers attra#t +(alified intermediaries differently &ithin the #hosen #hannel) 1ome prod(#ers ha*e no tro('le in re#r(iting intermediaries; a promise of e<#l(si*e or sele#ti*e distri'(tion &ill dra& a s(ffi#ient n(m'er of appli#ants and some prod(#ers ha*e to &ork hard to get +(alified intermediaries) The prod(#er has to determine the re+(ired #hara#teristi#s of 'etter intermediaries) They &ill &ant to e*al(ate intermediaries on the 'asis of a7 N(m'er of years in '(siness; '7 the other lines #arried 'y them; #7 gro&th and profit re#ords; d7 sol*en#y of the intermediary; d7 #ooperati*eness; and e7 rep(tation) Motivatin% Channel Mem7ersA man(fa#t(rer m(st ha*e to moti*ate the intermediaries to do their 'est fo') Bollo&ing are some &ays to moti*ate themI7 C$ERCIDE P$WER- When the man(fa#t(rer threatens to &ithdra& a reso(r#e or terminate a relationship if intermediaries fail to #ooperate) This po&er is +(it effe#ti*e if the intermediaries are highly dependent (pon the man(fa#t(rer) ii7 REWAR9 P$WER- When the man(fa#t(rer offers intermediaries an e<tra 'enefit for performing spe#ifi# a#ts or f(n#tions) It prod(#es 'etter res(lts than #oer#i*e po&er '(t #an 'e o*errated) iii7 0ECITIMATE P$WER- When the man(fa#t(rer re+(ires a 'eha*ior that is &arranted 'y the #ontra#t) The man(fa#t(rer feels it has this right and the intermediaries ha*e this o'ligation) i*7 EQPERT P$WER- Can 'e applied &hen the man(fa#t(rer has spe#ial kno&ledge that the intermediaries *al(e) This is an effe#ti*e form of po&er; if intermediaries &o(ld perform poorly &itho(t this help) $n#e the e<pertise is palled on to the intermediaries; this 'asis of po&er &eakens The man(fa#t(rer m(st #ontin(e to de*elop ne& e<pertise so that the intermediaries &ill &ant to #ontin(e #ooperating) *7 REBERENT P$WER- o##(rs &hen the man(fa#t(rer is so highly respe#ted that intermediaries are pro(d to 'e identified &ith it) Eval*atin% Channel Mem7ers: The prod(#er m(st periodi#ally e*al(ate intermediaries" performan#e against s(#h standards as sales +(ota attainment; a*erage in*entory le*els; #(stomer deli*ery time; treatment of damaged and lost goods; and #ooperation in promotional and training programs) Mo$i(/in% Channel Arran%ements: A prod(#er m(st do more than design a good #hannel system and set it into motion) The system &ill re+(ire periodi# modifi#ation to meet ne& #onditions in the marketpla#e) Modifi#ation 'e#omes ne#essary &hen e<isting #hannel is not &orking as planned; #ons(mer '(ying patterns #hange; the market e<pands; ne& #ompetitions arises; inno*ati*e distri'(tion #hannel emerge and the prod(#t mo*es into later stages in the prod(#t life #y#le) C ANNEL 'YNAMIC!: 9istri'(tion #hannels do not stand still) Ne& &holesaling and relating instit(tions emerge; and ne& #hannel systems e*ol*e) Re#ently the market #hannels ha*e gro&n as !7 *erti#al; /7hori%ontal; and =7m(lti #hannel marketing systems) We &ill see ho& these systems #ooperate; #onfli#t; and #ompete) -ertical Mar.etin% !/stems: It is a #hallenge for the #on*entional marketing #hannels) A #on*entional marketing #hannel #omprises an independent prod(#er;; &holesaler6s7; and retailer6s7) Ea#h is a separate '(siness entity seeking to ma<imi%e its o&n profits; e*en if this goal red(#es profit for the system as a &hole) A *erti#al marketing system 6DM17; 'y #ontrast; #omprises the prod(#er; &hole seller6s7 and retailer6s7 a#ting as a (nified system) $ne #hannel mem'er o&ns the others or fran#hises them or has so m(#h po&er that they all #ooperate) The DM1 #an 'e dominated 'y the prod(#er; the &holesaler; or the retailer) It is a professionally managed and #entrally programmed net&orks; pre engineered to a#hie*e operating e#onomies and ma<im(m market impa#t) There are three types of DM1- I7 #orporate; ii7 administered; and =7 #ontra#t(al) i7 C$RP$RATE DERTICA0 MARKETINC 1M1TEM- Com'ining s(##essi*e stages of prod(#tion and distri'(tion (nder single o&nership) It is fa*ored 'y #ompanies that desire a high le*el of #ontrol o*er their #hannels) ii7 A9MINI1TERE9 DERTICA0 MARKETINC 1M1TEM- Coordinate s(##essi*e stages of prod(#tion and distri'(tion not thro(gh #ommon o&nership '(t thro(gh the si%e and po&er of one of the mem'ers) Man(fa#t(rers of a dominant 'rand are a'le to se#(re strong trade #ooperation and s(pport from re*elers) iii7 C$NTRACTFA0 DERTICA0 MARKETINC 1M1TEM- It is #onsist of independent firms at different le*els of prod(#tion and distri'(tion integrating their programs on a #ontra#t(al 'asis to o'tain more e#onomise and sales impa#t than they #o(ld a#hie*e alone) Contra#t(al DM1s are of three typesa7 Wholesaler sponsored *ol(ntary #hains- Wholesales organi%e *ol(ntary #hains of independent retailers to help them #ompete &ith large #hain organi%ations) '7 Retailer Cooperati*es- Retailer might take the initiati*e and organi%e a ne& '(siness entity to #arry on &holesaling and possi'ly some prod(#tion) #7 Bran#hise $rgani%ations- A #hannel mem'er #alled a fran#hiser might link se*eral s(##essi*e stages in the prod(#tion distri'(tion pro#ess) 56
ori1ontal Mar.etin% !/stems: In it t&o or more (nrelated #ompanies p(t together reso(r#es or programs to e<ploit an emerging marketing opport(nity) Ea#h #ompany la#ks the #apital; kno& ho&; prod(#tion or marketing reso(r#es to *ent(re alone; or it is afraid of the risk) The #ompanies might &ork &ith ea#h other on a temporary or permanent 'asis or #reate a separate #ompany) M*lti6channel Mar.etin% !/stem: It o##(rs &hen a single firm (ses t&o or more marketing #hannels to rea#h one or more #(stomer segments) By adding more #hannels #ompanies #an gain three important 'enefits) !7 in#reased market #o*erage; /7 the #hannel #ost &ill 'e lo&er; and =7 is the more #(stomi%ed selling) 61ee 0esson Notes for this #hapter at page />7
57
Chapter !2 Managing Retailing; Wholesaling; and Market logisti#s

RETAILING: Retailing in#l(des all the a#ti*ities in*ol*ed in selling goods or ser*i#es dire#tly to final #ons(mers for their personal; non'(siness (se) A retailer or Retail !tore is any '(siness enterprise &hose sales *ol(me #omes primarily from retailing) T/pes o( Retailers: 1tore retailing; Non store retailing; and Retail $rgani%ations) 1T$RE RETAI0INC- The most important retail store types fall into eight #ategories spe#ialty stores; department stores; s(permarkets; #on*enien#e stores; dis#o(nt stores; off pri#e retailers; s(per stores; and #atalog sho&rooms) Ne& store types emerge to meet &idely different #ons(mer preferen#es for ser*i#e le*els and spe#ifi# ser*i#es) Retailers in most prod(#t #ategories #an position themsel*es as offering one of fo(r le*els of ser*i#es) !7 1elf ser*i#e retailing; /7 1elf sele#tion retailing; =70imited ser*i#e retailing and >7 B(ll ser*i#e retailing) N$N1T$RE RETAI0INC- It is gro&ing m(#h faster than store rtailing; Non store retailing falls into fo(r ma5or #ategories- !7 dire#t selling; /7 dire#t marketing; =7 a(tomati# *ending; and >7'(ying ser*i#es) RETAI0 $RCANIOATI$N1 Altho(gh many retail stores are independently o&ned; and in#reasing n(m'er are falling (nder some form of #orporate retailing) Retail organi%ations a#hie*e many e#onomies of s#ale) Retailer Mar.etin% 'ecisions: Retailers ha*e to make marketing de#isions a'o(t !7 target market; /!7 prod(#t assortment and pro#(rement; =7 ser*i#es and store atmosphere; ?7 pri#e; @7 promotion and 37 pla#e) TARCET MARKET 9ECI1I$N- 1ho(ld the store fo#(s on (ps#ale; mids#ale; or do&ns#ale shoppersK 9o they &ant *ariety assortment depth; or #on*enien#eK PR$9FCT A11$RTMENT AN9 PR$CFREMENT 9ECI1I$N- The prod(#t assortment m(st mat#h the target ;arlet"s shopping e<pe#tations) 1ERDICE AN9 1T$RE ATM$1PHERE 9ECI1I$N- Retailer m(st also de#ide on the ser*i#es mi< to offer #(stomers) It is a key tool for differentiating one store from another) PRICE 9ECI1I$N- It is the key positioning fa#tor and m(st 'e de#ided in relation to the target market; the prod(#t and ser*i#e assortment mi<; and #ompetition) All retailers &o(ld like to #harge high mark(ps and a#hie*e high *ol(mes; '(t (s(ally the t&o do not go together) PR$M$TI$N 9ECI1I$N Retailers (se a *ide range of promotion tools to generate traffi# and p(r#hases) They pla#e ads; r(ns spe#ial sales; iss(e money sa*ing #o(pons; et#) Ea#h retailer; m(st (se promotion tools that s(pport and reinfor#e its image positioning) P0ACE 9ECI1I$N- There are three keys to the s(##ess are lo#ation; lo#ation and lo#ation) W OLE!ALING: Wholesaling in#l(des all the a#ti*ities in*ol*ed in selling goods or ser*i#es to those &ho '(y for resale or '(siness (se) Wholesaling e<#l(des man(fa#t(rers and farmers 'e#a(se they are engaged primarily in prod(#tion; and it e<#l(des retailers) Wholesalers differ from retailers in a n(m'er of &aysBirst- Wholesalers pay less attention to promotion; atmosphere; and lo#ation 'e#a(se they are dealing &ith '(siness #(stomers rather than final #ons(mers;) 1e#ond- Wholesale transa#tions are (s(ally larger than retail transa#tions; and &holesalers (s(ally #o*er a large trade area than retailers) Third- the go*ernment deals &ith &holesalers and retailers differently in regard to legal reg(lations and ta<es) Why are &hole salers (sed K Man(fa#t(rers #o(ld 'y pass them and sell dire#tly to retailers or final #ons(mer) In general ; &holesalers are (sed &hen they are more effi#ient in performing one or more of the follo&ing f(n#tions1elling and promoting- They pro*ide a sales for#e &ho helps the prod(#er to rea#h many small '(siness #(stomers at a relati*ely lo& #ost) B(ying and assortment '(ilding- Wholesalers are a'le t sele#t items and '(ild the assortments &here #(stomers need; th(s sa*ing the #(stomers #onsidera'le &ork) B(lk Breaking- He a#hie*e sa*ings for their #(stomers thro(gh '(ying in large #arload lots and 'reaking the '(lk into smaller (nits) Wareho(sing- He hold in*entories; there'y red(#ing the in*entory #osts and risks to s(ppliers and #(stomers) Transportation- They pro*ide +(i#ker deli*ery to '(yers 'e#a(se they are #loser to the '(yers than the man(fa#t(rer) Binan#ing- They finan#e their #(stomers 'y granting them #redit; and finan#e their s(pplier 'y ordering early and paying their 'ills on time) Risk Bearing- Wholesaler a'sor' some risk 'y taking title and 'earing the #ost of theft; damage; spoilage; and o'soles#en#e) Market Information- 1(pply information to the man(fa#t(rer and the #(stomers) Management 1er*i#es and Cons(ltan#y They help retailers in impro*ing their operations; training their employees and telling them a'o(t layo(ts and displays) They may also help their s(pplier 'y pro*iding training and te#hni#al ser*i#es) 5
/ =
! / = > ? @
! / = > ? @ 3 E 2
! /
= >
MAR"ET LOGI!TIC!: The pro#ess of getting goods to #(stomers has traditionally 'een #alled physi#al distri'(tion) Physi#al distri'(tion starts at the fa#tory) Managers try to #hoose a set of &horeho(ses and transportation #arriers that &ill deli*er prod(#ed goods to final destinations in the desired time and at the lo&est total #ost) Mar.et Lo%istics: in*ol*es planning; implementing; and #ontrolling the physi#al flo&s of materials and final goods from points of origin to points of (se to meet #(stomer re+(irements at a profit) O7?ectives o( Mar.et Lo%istics: 1ome #ompanies state their market logisti#s o'5e#ti*es as 8getting the right goods to right pla#es at the right time for the least #ost): Fnfort(nately; this o'5e#ti*e pro*ides little pra#ti#al g(idan#e) Mar.et6Lo%istics 'ecisions: There are fo(r ma5or de#isions that m(st 'e made &ith regard to market logisti#s !7 $rdering Pro#ess; /7 Wareho(sing; =7 In*entory; >7 Transportation) $R9ERINC PR$CE11- Market logisti#s 'egins &ith a #(stomer order) It is ne#essary to shorten the order to remittan#e #y#le) The longer the #y#le takes; the lo&er the #(stomer"s satisfa#tion and the lo&er the #ompany"s profits) WAREH$F1INC- E*ery #ompany has to store its finished goods (ntil they are sold) A storage fa#ility is ne#essary 'e#a(se prod(#tion and #ons(mption #y#le rarely ma#h) The storage f(n#tion helps to smooth dis#repan#ies 'et&een desired +(antities and timing to the market) The #ompany has to de#ide the n(m'er of sto#king lo#ations) The n(m'er of sto#king lo#ations m(st strike a 'alan#e 'et&een #(stomer ser*i#e le*els and distri'(tion #ost) INDENT$RM- It is a ma5or market logisti#s &hi#h effe#t the #(stomers satisfa#tion) TRAN1P$RTATI$N- Transportation #hoi#es &ill affe#t prod(#t pri#ing; on time deli*ery performan#e; and the #ondition of the goods &hen they arri*e; all of &hi#h &ill affe#t #(stomer satisfa#tion
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CHAPTER /4 9esigning and managing integrated marketing #omm(ni#ations

'E-ELOPING E33ECTI-E COMM4NICATION: There are eight steps in de*eloping an effe#ti*e total #omm(ni#ation and promotion program) The marketing #omm(ni#ator m(st !7 identify the target a(dien#e; /7 determine the #omm(ni#ation o'5e#ti*es; =7 design the message; >7 sele#t the #omm(ni#ation #hannels; ?7 esta'lish the total promotion"s res(lts; and E7 manage and #oordinate the integrated marketing #omm(ni#ation pro#ess) I$enti(/in% the Tar%et A*$ience: A marketing #omm(ni#ator m(st start &ith a #lear target a(dien#e in mind; &hi#h may 'e potential '(yers of the prod(#t; #(rrent (sers; or infl(en#ers) The a(dien#e #o(ld 'e indi*id(als; gro(ps; parti#(lar p('li#s or the general p('li#) The target a(dien#e &ill #riti#ally infl(en#e the #omm(ni#ator"s de#isions on &hat to say; ho& to say it; &hen to say; &here and to &hom to say) IMACE ANA0M1I1- Image is the set of 'eliefs; ideas and impressions that a person holds regarding an o'5e#t) People"s attit(de and a#tions to&ard an o'5e#t are highly #onditioned 'y that o'5e#t"s image) 'eterminin% the Comm*nication O7?ectives: The marketing #omm(ni#ator m(st de#ide on the desired a(dien#e response; &hi#h may 'e a p(r#hase; high satisfa#tion; and fa*ora'le &ord of mo(th) Here &e &ill dis#(ss the marketers 'eha*ior in si< '(yer readiness states a&areness; kno&ledge; liking; preferen#e; #on*i#tion and p(r#hase) a7 A&areness- When most of the a(dien#e is a&are of the o'5e#t; the #omm(ni#ator"s task is to '(ild a&areness;) This task #an 'e a##omplished &ith simple messages repeating the prod(#t"s name) '7 Kno&ledge- When the target a(dien#e might ha*e prod(#t"s a&areness '(t not m(#h more; the marketer may &ant its target a(dien#e to kno& a'o(t the organi%ation and the prod(#t) #7 0inking- If the target mem'ers kno& the prod(#t; ho& they feel a'o(t itK If they look fa*ora'ly it is ne#essary to find o(t &hy and then de*elop a #omm(ni#ation #ompaign to shore (p fa*ora'le feelings) d7 Preferen#e- The target a(dien#e might like the prod(#t '(t not prefer it to others) In this #ase the #omm(ni#ator m(st try to '(ild #ons(mer preferen#e) The #omm(ni#ator &ill promote the prod(#t"s +(ality; *al(e; performan#e; and other feat(res) The #omm(ni#ator #an #he#k on the #ompaign"s s(##ess 'y meas(ring a(dien#e preferen#es again after the #ompeign) e7 Con*i#tion- A target a(dien#e might prefer a parti#(lar prod(#t '(t not de*elop a #on*i#tion a'o(t '(ying it) The #omm(ni#ator"s 5o' is to '(ild #on*i#tion among interested #(stomers) that the prod(#t is their 'est #hoi#e) f7 P(r#hase- Binally; some mem'ers of the target a(dien#e might ha*e #on*i#tion '(t not +(it get aro(nd to making the p(r#hase) They may &eight for information or plan to a#t later) The #omm(ni#ator m(st lead these #ons(mers to take the final step) 'esi%nin% the Messa%e: Ha*ing defined the desired a(dien#e response; the #omm(ni#ator mo*e to de*eloping an effe#ti*e message) Ideally; the message sho(ld gain attention; hold interest; aro(se desire and eli#it a#tion) Borm(lating the message &ill re+(ire sol*ing fo(r pro'lems- !7 &hat to say 6message #ontents7; /7 ho& to say it logi#ally 6message str(#t(re7; #7 ho& to say it sym'oli#ally 6message format7; and &ho sho(ld say it 6message so(r#e ME11ACE C$NTENT1, In determining the 'est message #ontent; management sear#h for an appeal; theme; idea; or (ni+(e selling proposition) This amo(nts to form(lating some kind of 'enefit; moti*ation; identifi#ation; or reason &hy the a(dien#e sho(ld think a'o(t or in*estigate the prod(#t) There are three types of appeals rational; emotional; and moral)) i7 Rational Appeals- to the a(dien#e"s self interest) They sho& that the prod(#t &ill prod(#e the #laimed 'enefits) ii7 Emotional Appeals- Attempt to stir (p negati*e or positi*e emotions that &ill moti*ate p(r#hase) iii7 Moral Appeals- are dire#ted to the a(dien#e"s sense of &hat is right and proper) They are often (sed to e<hort people to s(pport so#ial #a(ses; s(#h as a #leaner en*ironment; 'etter ra#e relations; e+(al right for &omen; and aid to the disad*antaged) ME11ACE 1TRFCTFRE- The effe#ti*eness of the message depends (pon its str(#t(re as &ell as its #ontents) 1ome early e<periments s(pported stating #on#l(sions for the a(dien#e rather than allo&ing the a(dien#e to rea#h its o&n #on#l(sions) Con#l(sion dra&ing might #a(se negati*e rea#tions in the follo&ing sit(ation If the #omm(ni#ator is (ntr(st&orthy; If the iss(e is simple or the a(dien#e is intelligent; if the iss(e is highly personal) ME11ACE B$RMAT- The #omm(ni#ator m(st de*elop a strong format for the message) If the message is &ritten the #omm(ni#ator has to de#ide on the headline; #opy; and #olor) If the message is to 'e #arried of the radio; the #omm(ni#ator has to #hoose &ords; *oi#e +(alities et#) If the message is to 'e #arried on tele*ision or in person; then all of the a'o*e elements pl(s 'ody lang(age ha*e to 'e planned) Presenters ha*e to pay attention to 6"
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their fa#ial e<pression; gest(res; dress; post(re; and heir style) If the message is #arried 'y the prod(#t or its pa#kaging; the #omm(ni#ator has to pay attention to #olor; te<t(re; s#ent; si%e and shape) d7 > ME11ACE 1$FR1- Message deli*ered 'y attra#ti*e or pop(lar so(r#es a#hie*e higher attention and re#all) !electin% the Comm*nication Channel: The #omm(ni#ator m(st sele#t effi#ient #hannels of #omm(ni#ation to #arry the message) In many #ases many different #hannels m(st 'e (sed) Comm(ni#ation #hannels are of t&o 'road types; !7 personal and non personal Win ea#h are fo(nd many s(' #hannelsI7 PER1$NA0 C$MMFNICATI$N CHANNE01- It in*ol*es t&o or more persons #omm(ni#ating dire#tly &ith ea#h other) They might #omm(ni#ate fa#e to fa#e; person to a(dien#e; o*er the telephone or thro(gh the mails) Personal #omm(ni#ation #hannels deri*e their effe#ti*eness thro(gh the opport(nities for indi*id(ali%ing the presentation and feed'a#k) II7 N$NPER1$NA0 C$MMFNICATI$N CHANNE01- They #arry messages &itho(t personal #onta#t or intera#tion) They in#l(de media; atmospheres; and e*ents) Media- Consist of print media; 'road#ast media; ele#troni# media and display media) Most non personal messages #ome thro(gh paid media) ? Esta7lishin% the total Promotional B*$%et: A most diffi#(lt marketing de#ision) Ind(stries and #ompanies *ary #onsidera'ly in ho& m(#h they spend on promotion) Their are fo(r #ommon methods (sed to set a promotion '(dget a7 the afforda'le method; '7per#entage of sales method; #7#ompetiti*e parity method; and d7o'5e#ti*e and task method) a7 ABB$R9AB0E METH$9- 1etting promotion '(dget at &hat #ompany think that it #an afford) This method of setting '(dgets #ompletely ignores the role of promotion as an in*estment and the immediate impa#t of promotion on sales *ol(me) It leads to an (n#ertain ann(al promotion '(dget; &hi#h makes long range market #omm(ni#ation planning diffi#(lt) '7 PERCENTACE $B 1A0E1 METH$9- any #ompanies set their promotion e<pendit(res at a spe#ified per#entage of sales or of the sales pri#e) #7 C$MPETITIDE PARITM METH$9- 1ome #ompanies set their promotion '(dget to a#hie*e share of *oi#e parity &ith their #ompetitors) d7 $BNECTIDE AN9 TA1K METH$9- In it the marketers de*elop their promotion '(dgets 'y defining their spe#ifi# o'5e#ti*es; determining the tasks that m(st 'e performed to a#hie*e these o'5e#ti*es; and estimating the #osts of performing these tasks) The s(m of these #osts is the proposed promotion '(dget) @ 'eci$in% on the Promotion Mi): Companies fa#e the task of distri'(ting the total promotion '(dget o*er the fi*e promotional tools i7ad*ertising; ii7sales promotion; iii7p('li# relations and p('li#ity; i*7 sales for#e; and *7 dire#t marketing) I7 A9DERTI1INC- I(alities of ad*ertising are a7 P('li# presentation- A highly p('li# mode of #omm(ni#ation) '7 Pers(asi*eness- It is a per*asi*e medi(m that permits the seller to repeat a message many times) It also allo&s the '(yer to re#ei*e and #ompare the message of *ario(s #ompetitors) #7 Amplified e<pressi*eness- Ad*ertising pro*ides opport(nities for dramati%ing the #ompany and its prod(#t thro(gho(t the artf(l (se of print; so(nd; and #olor) d7 Impersonality- Cannot 'e a #ompelling as a #ompany sales representati*e) The a(dien#e does not feel o'ligated to pay attention; or respond) Ad*ertising is a'le to #arry on only a monolog(e in front of; not a dialog(e &ith the a(dien#e) ii7 1A0E1 PR$M$TI$N- Altho(gh the sales promotion tools are highly di*erse; they all offer three distin#ti*e 'enefits) Comm(ni#ation- Cain attention and (s(ally pro*ide information that may lead the #ons(mer to the prod(#t) In#enti*e- They in#orporate some #on#ession; ind(#ement; or #ontri'(tion that gi*es *al(e to the #ons(mer) In*itation- They in#l(de a distin#t in*itation to engage in the transa#tion no&) iii7 PFB0IC RE0ATI$N1 AN9 PFB0ICITM- The appeal of p('li# relations and p('li#ity is 'ased on their three distin#ti*e +(alities High #redi'ility- Ne&s stories and feat(res are more a(thenti# and #redi'le to readers than ads) A'ility to #at#h '(yers off g(ard- P('li# relations #an rea#h many prospe#ts &ho prefer to a*oid sales people and ad*ertisements) The message gets to the '(yers as ne&s rather than as a sales dire#ted #omm(ni#ation) 9ramati%ation- 0ike ad*ertising; p('li# relations has the potential for dramati%ing a #ompany or prod(#t) i*7 PER1$NA0 1E00INC- is the most #ost effe#ti*e tool at later stages of the '(ying pro#ess; parti#(larly in '(ilding (p the #(stomers preferen#e; #on*i#tion; and a#tion) It ha*e three distin#ti*e 'enefits Personal #onfrontation- It in*ol*e an intera#ti*e relationship 'et&een t&o or more persons) Ea#h party is a'le to o'ser*e the others" needs and #hara#teristi#s at #lose hand and make immediate ad5(stments) C(lti*ation- Personal selling permits all kinds of relationship to spring (p; ranging from a matter of fa#t selling relationship to a deep personal friendship)
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Response- It makes the '(yer feel (nder some o'ligation for ha*ing listened to the sales talk) The '(yer has a greater need to attend and respond; e*en if the response is a polite 8thank yo(): *7 9IRECT MARKETINC- Altho(gh their are many forms of dire#t marketing dire#t mail; telemarketing; ele#troni# marketing; and so on they all share fo(r distin#ti*e #hara#teristi#s 9ire#t marketing is Nonp('li#- The message is normally addressed to a spe#ifi# person) C(stomi%ed- The message #an 'e #(stomi%ed to appeal to the addressed indi*id(al) Fp to date- A message #an 'e prepared *ery +(i#kly for deli*ery to an indi*id(al) Intera#ti*e The message #an 'e altered depending on the person"s response) 3actors in settin% the promotion Mi): Companies m(st #onsider se*eral fa#tors in de*eloping their promotion mi<, the type of prod(#t market in &hi#h they are selling; &hether to (se a p(sh or p(ll strategy; ho& ready #ons(mers are to make a p(r#hase; the prod(#t"s stage in the prod(#t life #y#le and the #ompanies market rank) ! TMPE $B PR$9FCT KARATE- Promotional tools *ary 'et&een #ons(mer and '(siness markets) Cons(mer goods #ompanies spend on sales promotion; ad*ertising personal selling; and p('li# relations in that order) B(siness goods #ompanies spend on personal selling; sales promotion;) ad*ertising and p('li# relations in that order) In general personal selling is more hea*ily (sed &ith #omple<; e<pensi*e; and risky goods and in markets &ith fe&er and larger sellers) / PF1H DER1F1 PF00 1TRATECM- A p(sh strategy in*ol*es man(fa#t(rers making a#ti*ities 6primarily sales for#e and trade promotion7 dire#ted at #hannel intermediaries) The goal is to ind(#e the intermediaries to order and #arry the prod(#t and promote it to en (sers) A p(ll 1trategy- in*ol*es marketing a#ti*ities 6primarily ad*ertising and #ons(mer promotion7 dire#ted at end (sers) The p(rpose is to ind(#e them to ask intermediaries for the prod(#t and th(s ind(#e the intermediaries to order the prod(#t from the man(fa#t(rer) = BFMER REA9INE11 1TACE- Promotional tools *ary in their #ost effe#ti*eness at different stages of '(yer readiness) Ad and p('li#ity play the most important roles in the a&areness stage; m(#h more important than the roles played 'y 8#old #alls: from sales representati*es or 'y sales promotion) > PR$9FCT 0IBE CMC0E 1TACE- Promotional tools also *ary in their #ost effe#ti*eness at different stages of the prod(#t life #y#le) 9ifferent strategies are In the introd(#tion stage; ad*ertising and p('li#ity ha*e the highest #ost effe#ti*eness; follo&ed 'y personal selling to gain distri'(tion #o*erage and sales promotion to ind(#e trail) In the gro&th stage; all the tools #an 'e toned do&n 'e#a(se demand has its o&n moment(m thro(gh &ord of mo(th) In the mat(rity stage; sales promotion; ad*); and personal selling all gro& more important in that order) In de#line stage; sales promotion #ontin(es strong; ad*erting and p('li#ity are red(#ed and sales people gi*e the prod(#t only minimal attention) ? C$MPANM MARKET RANK- Top ranking 'rands dri*e more 'enefits from ad*ertising than sales promotions) Meas*rin% the PromotionAs Res*lts: After implementing the promotional plan; the #omm(ni#ator m(st meas(re its impa#t on the target a(dien#e) This in*ol*e asking the target a(dien#e &hether they re#ogni%e or re#all the message; ho& many times they says it; &hat points they re#all; ho& they felt a'o(t the message; and their pre*io(s and #(rrent attit(des to&ard the prod(#t and #ompany) Mana%in% an$ Coor$inatin% Inte%rate$ Mar.etin% Comm*nications: Many #ompanies still rely primarily on one or t&o #omm(ni#ation tools to a#hie*e their #omm(ni#ation aims This pra#ti#e persists in spite of the disintegration of mass markets into a m(ltit(de of mini markets; ea#h re+(iring its o&n #omm(ni#ation approa#h, the proliferation of ne& types of media, and the gro&ing sophisti#ation of #ons(mers)
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CHAPTER /! Managing Ad*ertising; 1ales Promotion; and P('li# Relations

'E-ELOPING AN' MANAGING AN A'-ERTI!ING PROGRAM: It is the most #ommon tool (sed 'y the organi%ations to dire#t pers(asi*e #omm(ni#ations to target '(yers and p('li#s) It may 'e defined as follo&s A'-ERTI!ING is any paid form of nonpersonal presentation and promotion of ideal; goods; or ser*i#es 'y an identified sponsor) $rgani%ations handle their ad*ertising in different &ays) In small #ompanies; ad*) is handled 'y someone in the sales or marketing department; &ho &orks &ith and ad*ertising agen#y) A large #ompany &ill often set (p its o&n ad*ertising department; &hose manager reports to the *i#e president of marketing) In de*eloping and ad*ertising program; marketing managers m(st al&ays start 'y identifying the target market and '(yer moti*es; Then they #an pro#eed to make the fi*e ma5or de#isions in de*eloping an ad*ertising program; kno& as the fi*e Ms Mission- What are the ad*ertising o'5e#ti*esK Money- Ho& m(#h #an 'e spentK Message- What message sho(ld 'e sentK Media- What media sho(ld 'e (sedK Meas(rement- Ho& sho(ld the res(lts 'e e*al(atedK These de#isions are f(rther des#ri'ed in the follo&ing se#tions) !ettin% the O7?ectives: Prior to setting o'5e#ti*es de#isions on the target market; market positioning and marketing mi< are to 'e made) The market positioning and marketing mi< strategies define the 5o' that ad*ertising m(st do in the total marketing program) Ad*ertising o'5e#ti*es #an 'e #lassified a##ording to &hether their aim is to inform pers(ade; or remind) a7 INB$RMATIDE A9DERTI1INC- Carried o(t hea*ily in the pioneering stage of a prod(#t #ategory; &here the o'5e#ti*e is to '(ild primary demand) '7 PER1FA1IDE A9DERTI1INC- It is important in the #ompetiti*e stage; &here a #ompany"s o'5e#ti*e is to '(ild sele#ti*e demand for a parti#(lar 'rand) Most ad*ertising falls into this #ategory) In (sing #omparati*e ad*ertising; a #ompany sho(ld make s(re that it #an pro*e its #laim of s(periority and that it #annot 'e #o(nteratta#ked in an area &here the other 'rand is stronger) Comparati*e ad*ertising &orks 'est &hen it eli#its #ogniti*e and affe#ti*e moti*ations sim(ltaneo(sly) #7 REMIN9ER A9DERTI1INC- is highly important &ith mat(re prod(#ts) A related form of ad*ertising is reinfor#ement ad*ertising &hi#h seeks to ass(re #(rrent p(r#hasers that they ha*e made the right #hoi#e) Choi#e of o'5e#ti*es sho(ld 'e 'ased on a thoro(gh analysis of the #(rrent marketing sit(ation) 'eci$in% on the A$vertisin% B*$%et: After setting o'5e#ti*es the #ompany #an pro#eed to esta'lish its ad*ertising '(dget for ea#h prod(#t) The role of ad*ertising is to in#rease the demand of the prod(#t) The #ompany &ants to spend the amo(nt re+(ired to a#hie*e the sales goal) B(t ho& does a #ompany kno& it is spending the right amo(ntK There are fi*e spe#ifi# fa#tors to #onsider &hen setting the ad*ertising '(dget!) 1TACE IN THE PR$9FCT 0IBE CMC0E- Ne& prod(#t typi#ally re#ei*e large ad*ertising '(dgets to '(ild a&areness and to gain #ons(mer trial) Esta'lished 'rands (s(ally are s(pported &ith lo&er ad*ertising '(dgets as a ration to sales) /) MARKET 1HARE AN9 C$N1FMER BIA1- High market share 'rands (s(ally re+(ires less ad*ertising e<pendit(re as a per#entage of sales to maintain their share) They '(ilds share 'y in#reasing market si%e re+(ires larger ad*ertising e<pendit(res) =) C$MPETITI$N AN9 C0FTTER- In a market &ith a large n(m'er of #ompetitors and high ad*ertising spending; a 'rand m(st ad*ertise more hea*ily to 'e heard a'o*e the noise in the market) E*en simple #l(tter from ad*ertisements not dire#tly #ompetiti*e to the 'rand #reates a need for hea*ier ad*ertising) >) A9DERTI1INC BREIFENCM- The n(m'er of repetitions needed to p(t a#ross the 'rand"s message to #ons(mers has an important impa#t on the ad*ertising '(dget) ?) PR$9FCT 1FB1TITFTABI0ITM- Brands in a##ommodate #lass 6e)g) #igarettes; soft drinks7 re+(ire hea*y ad*ertising to esta'lish a differential image) Ad*ertising is also important &hen a 'rand #an offer (ni+(e physi#al 'enefits or feat(res) Choosin% the A$vertisin% Messa%e: Ad*ertising #ompaigns differ in their #reati*ity &hi#h is more important than the n(m'er of dollars spent $nly after gaining attention #an a #ommer#ial help to in#rease the 'rand"s sales) Ad*ertising go thro(gh fo(r steps to de*elop a #reati*e strategy- a7 message generation; '7 message e*al(ation and sele#tion; #7 message e<e#(tion; and d7 message so#ial responsi'ility re*ie&) ME11ACE CENERATI$N- In prin#iple the prod(#t"s message the ma5or 'enefits that the 'rand offers sho(ld 'e de#ided as part of de*eloping the prod(#t #on#ept) $*er time; the marketer might &ant to #hange the
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message &itho(t #hanging the prod(#t; espe#ially if #ons(mers are seeking ne& or different 'enefits format the prod(#t) Creati*e people (se se*eral methods to generate possi'le ad*ertising appeals) 1ome pro#eed ind(#ti*ely 'y talking to the #ons(mers; dealers; e<perts; and #ompetitors) 1ome #reati*e people (ser ded(#ti*e frame&ork for generating ad*ertising message) B(yers are e<pe#ting one of the fo(r types of re&ards form a prod(#t i)e) rational; sensory; so#ial or ego satisfa#tion) He might *is(ali%e 6e<perien#e7 these re&ards after intended (se; &hile intended (se or in in#idental (se) Crossing these fo(r types of re&ards &ith three types of e<perien#es generates !/ types of ad*ertising messages) The ad*ertisers #an generate a theme for ea#h of the !/ #ells as possi'le messages for the prod(#t) '7 ME11ACE EDA0FATI$N AN9 1E0ECTI$N- The ad*ertisers needs to e*al(ate the alternati*e messages) A good ad normally fo#(ses on one #ore selling proposition) The message sho(ld 'e rated on desira'ility; e<#l(si*eness; and 'elie*a'ility) The message m(st first say something desira'le or interesting a'o(t the prod(#t) The message m(st also say something e<#l(si*e or distin#ti*e that does not apply to e*ery 'rand in the prod(#t #ategory) Binally; the message m(st 'e 'elie*a'le or pro*a'le) #7 ME11ACE EQECFTI$N- The message"s impa#t depends not only (pon &hat is said '(t also on ho& it is said) 1ome ads aim for rational positioning and others for emotional positioning) Creati*e people m(st also find a style; tone; &ords; and format of e<e#(ting message) All of these elements m(st deli*er a #ohesi*e image and message) 1tyle - A message #an 'e presented in any of the follo&ing different styles; or #om'inations of them) Slice of Life: 1ho&s one or more persons (sing the prod(#t in a normal setting) Life style: Emphasi%e ho& a prod(#t fits in &ith a lifestyle. #antasy: Creates a fantasy aro(nd the prod(#t or its (se) *ood or image: E*okes a mood or image aro(nd the prod(#t; s(#h as 'ea(ty; lo*e or serenity) No #laim is made a'o(t the prod(#t e<#ept thro(gh s(ggestion) *usical: Fses 'a#kgro(nd m(si# or sho&s one or more persons or #artoon #hara#ters singing a song in*ol*ing the prod(#t) "ersonality symbol: Creates a #hara#ter that personifies the prod(#t) The #hara#ter might 'e animated 6Mr) #lean7 or real 6Marl'oro man7) 4echnical e6pertise: 1ho&s the #ompany"s e<pertise; e<perien#e; and pride in making the prod(#t) Scientific ,vidence: Presents s(r*ey or s#ientifi# e*iden#e that the 'rand is preferred o*er or o(tperforms other 'rands) 4estimonial evidence: This feat(res a highly #redi'le; lika'le; or e<pert so(r#e endorsing the prod(#t) Tone- The Comm(ni#ator m(st also #hoose an appropriate tone for the ad) 1ome #ompanies (ses positi*e tone and almost al&ays a*oid h(mors so as not to take attention a&ay from the message) In #ontrast; s(per stores; in the adds for staples offi#e s(pply; e+(ally m(ndane prod(#ts; fo#(s on a h(roro(s sit(ation rather than on the prod(#ts themsel*es) $ther #ompanies (se emotions to set the tone) Words- Memora'le and attention getting &orks m(st 'e fo(nd) The follo&ing themes listed on the left &o(ld ha*e had m(#h less impa#t &itho(t the #reati*e phrasing on the right) Theme Creative Cop/ 3 (p is not a #ola 8The Fn Cola: 0et (s dri*e yo( in o(r '(s instead of dri*ing yo(r #ar) 8Take the '(s an lea*e the dri*ing to (s): 1hop 'y t(rning the pages of the telephone dire#tory) 80et yo(r fingers do the &alking): We don"t rent as many #ars; so &e ha*e to do 8We try harder): more for o(r #(stomers) Bormat- The elements s(#h as ad si<; #olor; and ill(stration &ill make a differen#e in an ad"s impa#t as &ell as its #ost) A minor rearrangement of me#hani#al elements &ithin the ad #an impro*e its attention getting po&er) 0arger si%e ads gain more attention; tho(gh not ne#essarily 'y as m(#h as their differen#e in #ost) d7 1$CIA0 RE1P$N1IBI0ITM REDIEW- Ad*ertisers and their agen#ies m(st make s(re that their 8#reati*e: ad*ertising doesn"t o*erstep so#ial and legal norms) Most marketers &ork hard to #omm(ni#ate openly and honestly &ith #ons(mers) 1till; a'(ses may o##(r; and p('li# poli#y makers ha*e de*eloped a s('stantial 'ody of la&s and reg(lations to go*ern ad*ertising) > 'eci$in% on the Me$ia: The ne<t task is to #hoose ad*ertising media to #arry it) The sele#tion of media depends (pon desired rea#h; fre+(en#y; and impa#t, #hoosing among ma5or media types, sele#ting spe#ifi# media *ehi#les, de#iding on media timing, and de#iding on geographi#al media allo#ation) 9ECI9INC $N REACH; BREIFENCM; AN9 IMPACTMedia sele#tion in*ol*es finding the most #ost effe#ti*e media top deli*er the desired n(m'er of e<pos(res to the target a(dien#e) E<pos(res mean the seeking a #ertain response from the target a(dien#e) CH$$1INC AM$NC MAN$R ME9IA TMPE1- The media planner has to kno& the #apa#ity of the ma5or media types to deli*er rea#h; fre+(en#y and impa#t) Media planner make their #hoi#e among these media #ategories 'y #onsidering se*eral *aria'les; the most important of &hi#h are the follo&ing64
! / =
Target a(dien#e media ha'its- for e<ample; radio and tele*ision are the most effe#ti*e media for rea#hing teenagers) Prod(#t- Women"s dresses are 'est sho&n in #olor maga%ines; and Polaroid #ameras are 'est demonstrated on tele*ision) Message A message anno(n#ing a ma5or sale tomorro& &ill re+(ire radio or ne&spaper) A message #ontaining a great deal of te#hni#al data might re+(ire spe#iali%ed maga%ines or mailings) Cost- Tele*ision is *ery e<pensi*e; &hile ne&spaper ad*ertising is relati*ely ine<pensi*e) What #o(nts is the #ost per tho(sand e<pos(res rather than the total #ost) 1E0ECTINC 1PECIBIC ME9IA DEHIC0E1- The media planner m(st ne<t sear#h for the most #ost effe#ti*e media *ehi#les &ithin ea#h #hosen media type) Bor e<ample; the ad*ertiser &ho de#ides to '(y =4 se#onds of ad*ertising on net&ork tele*ision #an pay different amo(nts in relation to program timings; i)e) hea*y amo(nt d(ring the famo(s programs and lesser amo(nt at other times) The media planner relies on media meas(rement ser*i#es that pro*ide estimates of a(dien#e si%e; #omposition; and media #ost) A(dien#e si%e has se*eral possi'le meas(res) 9ECI9INC $N ME9IA TIMINC- In de#iding the types of media to (se the ad*ertiser fa#es ma#ro s#hed(ling pro'lem and a mi#ro s#hed(ling pro'lem) Ma#ro s#hed(ling Pro'lem- It #alls for de#iding ho& to s#hed(le the ad*ertising in relation to seasonal and '(siness #y#le trends) Mi#ro s#hed(ling Pro'lem- It #alls for allo#ating ad*ertising e<pendit(res &ithin a short period to o'tain the ma<im(m impa#t) 9ECI9INC $N CE$CRAPHICA0 ME9IA A00$CATI$N- A #ompany has to de#ide ho& to allo#ate its ad*ertising '(dget o*er spa#e as &ell as o*er time) The #ompany makes 8national '(ys: &hen it pla#es ads on national TD net&orks or in nationally #ir#(lated maga%ines) Eval*atin% A$vertisin% E((ectiveness: Cood planning and #ontrol of ad*ertising depends #riti#ally on meas(res of ad*ertising effe#ti*eness) yet the amo(nt of f(ndamental resear#h on ad effe#ti*eness is appallingly small) Most ad*ertisers try to meas(re the #omm(ni#ation effe#t of an ad that is; its potential effe#t on a&areness; kno&ledge; or preferen#e) They &o(ld also like to meas(re the Ad"s sales effe#t '(t often feel it is too diffi#(lt to meas(re) Met 'oth #an 'e sear#hed) C$MMFNICATI$N EBBECT RE1EARCH- seeks to determine &hether an ad is #omm(ni#ating effe#ti*ely) Also #alled #opy testing; it #an 'e done 'efore an ad is p(t into media and after it is printed or 'road#ast) There are three ma5or methods of ad*ertising pretesting) The dire#t rating method asks #ons(mer to rate alternati*e ads) These ratings are (sed to e*al(ate an ad"s attention; read thro(gh; #ogniti*e; affe#ti*e; and 'eha*ior strengths) Portfolio test- ask #ons(mers to *ie& and listen to a portfolio of ad*ertisements; taking as m(#h time as they need) #ons(mers are then asked to re#all all the ads and their #ontent; aided or (naided 'y the inter*ie&er) Their re#all le*el indi#ates and ad"s a'ility to stand o(t and to ha*e its message (nderstood and remem'ered) 0a'oratory Tests- (se e+(ipment to meas(re #ons(mers" physiologi#al rea#tions to an ad) These tests meas(re an ad"s attention getting po&er '(t re re*eal nothing a'o(t its impa#t on 'eliefs; attit(des; or intentions) 1A0E1 EBBECT RE1EARCH- Comm(ni#ation effe#t ad*ertising resear#h helps ad*ertisers assess ad*ertising"s #omm(ni#ation effe#ts '(t re*eals little a'o(t its sales impa#t) What sales are generated 'y an ad that in#reases 'rand a&areness 'y /4L and 'rand preferen#e 'y !4L) Ad*ertising"s sales effe#t is generally harder to meas(re that its #omm(ni#ation effe#t) 1ales are infl(en#ed 'y many fa#tors 'esides ad*ertising; s(#h as the prod(#t"s feat(res; pri#e; a*aila'ility and #ompetitors" a#tions) The fe&er or more #ontrolla'le these others fa#tors are; the easier it is to meas(re ad*ertising"s effe#t on sales) A$vertisin% E((ectiveness: A s*mmar/ o( C*rrent Research: Altho(gh #ompanies need to do more resear#h into ad effe#ti*eness; professional resear#hers ha*e dra&n some general #on#l(sions that are (sef(l to marketers) !) Impa#t of Ad on Brand 1&it#hing- Ad*ertising appears effe#ti*e in in#reasing the *ol(me p(r#hased 'y loyal '(yers '(t less effe#ti*e in &inning ne& '(yers) Ad*ertising appears to 'e (nlikely to ha*e some #(m(lati*e effe#t that leads to loyalty, rather; feat(res; displays; and espe#ially pri#e ha*e a stronger impa#t on response that dose ad*ertising) /) The effe#t of s(rro(ndings- Ads may 'e more effe#ti*e &hen their message is #ongr(ent &ith their s(rro(ndings) =) The effe#t of positi*e *ers(s negati*e messages- Cons(mers may sometimes respond more to negati*e messages than to positi*e messages) >) Ad*ertising *ers(s sales promotions- In a re#ent st(dy a market resear#h firm st(dying the effe#ts of ad*ertising fo(nd that 34L of the ad #ompaigns 'oosted sales immediately; '(t that the effe#t &as strong only in =4L of the #ases) $nly >@L of the #ompaigns appeared to res(lt in a long term sales 'oost) !ALE! PROMOTION:
65
It is a key ingredient in marketing #ompaigns) !ales Promotion #onsist of a di*erse #olle#tion of in#enti*e tools; mostly short term; designed to stim(late +(i#ker and greater p(r#hase of parti#(lar prod(#tsJser*i#es 'y #ons(mers or the trade) Ad*ertising offers a reason to '(y &hile sales promotion offers an in#enti*e to '(y) 1ales promotion in#l(des tools for cons*mer promotion 6e)g) samples; #o(pons; #ash ref(nd offers pri#es off; pri%es; patronage re&ards; free trials; &arranties; tie in promotions; #ross promotions; point of p(r#hase displays and demonstrations et#)7 tra$e promotion 6pri#es off; ad*ertising and display allo&an#es; and free goods7 and 7*siness an$ sales (orce promotion 6trade sho&s and #on*entions; #ontests for sales reps; and spe#ialty ad*ertising)7 P*rpose o( !ales Promotion: 1ales promotion tools *ary in their spe#ifi# o'5e#ti*es a free sample stim(lates #ons(mer trial; &hile a free management ad*isory ser*i#e aims at #ementing a long term relationship &ith a retailer) Today; many marketing managers firs estimate &hat they need to spend in trade promotion; then &hat they need to spend in #ons(mer promotion Whate*er is left they &ill '(dget for ad*ertising) There is a danger 1ales promotions yield faster and more meas(ra'le responses in sales than ad*ertising does) 1ales promotions do not tend to yield ne&; long term '(yers in mat(re markets 'e#a(se they attra#t mainly del prone #ons(mers &ho s&it#h among 'rands as deal 'e#ome a*aila'le) 0oyal 'rand '(yers tend not to #hange their '(ying patterns as a res(lt of #ompetiti*e promotion) ad*ertising appears to 'e #apa'le of deepening 'rand loyalty) Ma?or 'ecisions in !ales Promotion: In (sing sales promotion; a #ompany m(st esta'lish its o'5e#ti*es; sele#t the tools; de*elop the program protest the program; implement and #ontrol it and e*al(ate the res(lts) ! E1TAB0I1HINC THE 1A0E1 PR$M$TI$N $BNECTIDE1- 1ales promotion o'5e#ti*es are deri*ed from 'roader promotion o'5e#ti*es; &hi#h are deri*ed from more 'asi# marketing o'5e#ti*es de*eloped for the prod(#t) The spe#ifi# o'5e#ti*es set for sales promotion *ary &ith the target market) Bor #ons(mer; o'5e#ts in#l(des; en#o(raging p(r#hase of larger si%e (nits) '(ilding trail among non(sers; attra#ting 1&it#hers a&ay from #ompetitors" 'rands) Bor retailers o'5e#ti*es in#l(de pers(ading retailers to #arry ne& items and higher le*els of in*entory; en#o(raging off season '(ying ; en#o(raging sto#king of related items; offsetting #ompetiti*e promotions; '(ilding 'rand loyalty; and gaining entry into ne& retail o(tlets) Bor the sales for#e o'5e#ti*es in#l(de en#o(raging s(pport of a ne& prod(#t or model en#o(raging more prospe#ting; and stim(lating off season sales) / 1E0ECTINC THE 1A0E1 PR$M$TI$N T$$01- Many sales promotion tools are a*aila'le) The promotion planner sho(ld take into a##o(nt the type of market; sales promotion o'5e#ti*es; #ompetiti*e #onditions; and ea#h tool"s #ost effe#ti*eness) Cons(mer Promotion Tools- The main #ons(mer promotion tools are I7 samples; ii7 #o(pons6#ertifi#ates to pro*ide '(yer some gift &ho fill and mail the #o(pon7; iii7 Cash ref(nd 6'y the man(fa#t(rer to #ons(mer &ho pro*es that he has p(r#hased the prod(#t7; i*7 Pri#e pa#ks- $ffering 'y 5ointing many (nits in one pla#e at dis#o(nted pri#e *7 Premi(m- 6Cift7 Pro*iding goods at reasona'ly lo& pri#e as an in#enti*e to p(r#hase a parti#(lar prod(#t) *i7 Pri%es- offers of the #han#e to &in #ash; trips; or mer#handise as a res(lt of p(r#hasing something) *ii7 Patronage A&are- Dal(es in #ash or other form that are proportional to one"s patronage of a #ertain *endor or gro(p of *endors) *iii7 Bree Trails- In*ite prospe#ti*e p(r#hasers to try the prod(#t &itho(t #ost in the hope that they &ill '(y the prod(#t i<7 Prod(#t Warranties- E<pli#it or impli#it promises 'y sellers that the prod(#t &ill prefer as spe#ified or that the seller &ill fi< it or ref(nd the #(stomer"s money d(ring a spe#ified period) <7 Tie in Promotions- T&o or more #ompanies that team (p or #o(pons; ref(nds and #ontests to in#rease their p(lling po&er) <i7 Cross promotion- In*ol*e (sing one hand to ad*ertise another non#ompeting 'rand) <ii7 Point of P(r#hase 9isplays and 9emonstrations) Trade Promotion Tools- Pers(ading the retailer or &holesaler to #arry the 'rand; more than the normal amo(nt) Its ma5or tools are66
I7 Pri#e off- A straight dis#o(nt off the list pri#e on ea#h #all p(r#hased d(ring a stated time period) ii7 Allo&an#e- An amo(nt offered in ret(rn for the retailer"s agreeing to feat(re the man(fa#t(rer"s prod(#ts in some &ay) iii7 Bree goods- $ffers of e<tra #a(ses of mer#handise to intermediaries &ho '(y a #ertain +(antity or &ho feat(re a #ertain fla*or or si%e) B(siness and 1ales Bor#e Promotion Tools- These tools are (sed to gather '(siness leads impress and re&ard #(stomers and moti*ate the sales for#e to greater effort) Its ma5or tools are I7 Trade 1ho&s and Con*entions- $rgani%e ann(al trade sho&s) ii7 1ales Contests- a #ontest in*ol*ing the sales for#e or dealer; aimed at in#l(ding them to in#rease their sales res(lts o*er a stated period) iii7 1pe#ialty Ad*ertising- #onsist of (sef(l lo& #ost items 'earing the #om'ines name and address and sometimes ad*ertising message) 1ales people gi*e these items to prospe#ts) = PRE1ENTINC THE 1A0E1 PR$M$TI$N PR$CRAM- Al > IMP0EMENTINC AN9 C$NTR$00INC THE 1A0E1 PR$M$TI$N PR$CRAM? EDA0FATINC THE RE1F0T1P4BLIC RELATION!: A p*7lic is any gro(p that has an a#t(al or potential interest in or impa#t on a #ompany"s a'ility to a#hie*e its o'5e#ti*es) P*7lic Relations +PR, in*ol*es a *ariety of programs designed to promote and or prote#t a #ompany"s image or its indi*id(al prod(#ts) P('li# relations departments perform the follo&ing fi*e a#ti*ities; not all of &hi#h s(pport marketing o'5e#ti*es) !) Press relations- Presenting ne&s and information a'o(t organi%ation in the most positi*e light) /) Prod(#t p('li#ity- 1ponsoring *ario(s efforts to p('li#i%e spe#ifi# prod(#ts) =) Corporate Comm(ni#ation- Promoting (nderstanding of the organi%ation &ith internal and e<ternal #omm(ni#ations) >) 0o''ying- 9ealing &ith legislators and go*ernment offi#ials to promote or defeat legislation and reg(lation) ?) Co(nseling- Ad*ising management a'o(t p('li# iss(es and #ompany positions and image) This in#l(des ad*ising in the e*ent of a prod(#t mishap &hen the p('li# #onfiden#e in a prod(#t is shaken)
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Notes on Marketing Management Notes Prepared By Name of Book Written By Ch Ali Imran Marketing Management Philip Kotler

Prepared by Ch Ali Imran

CHAPTER ! Assessing Marketing"s Criti#al Roll in $rgani%ational Performan#e

Notes on Marketing Management

Prepared by Ch Ali Imran

Notes on Marketing Management

Prepared by Ch Ali Imran

CHAPTER / B(ilding C(stomer 1atisfa#tion Thro(gh I(ality; 1er*i#e; and Dal(e

Notes on Marketing Management

Prepared by Ch Ali Imran

Notes on Marketing Management

Prepared by Ch Ali Imran

Notes on Marketing Management

Prepared by Ch Ali Imran

CHAPTER = Winning Markets Thro(gh Market $riented 1trategi# Planning

Notes on Marketing Management

Prepared by Ch Ali Imran

Notes on Marketing Management

Prepared by Ch Ali Imran

Notes on Marketing Management

Prepared by Ch Ali Imran

Notes on Marketing Management

Prepared by Ch Ali Imran

Notes on Marketing Management

Prepared by Ch Ali Imran

Notes on Marketing Management

Prepared by Ch Ali Imran

AN O-ER-IEW O3 3ORECA!TING AN' 'EMAN' MEA!4REMENT

Notes on Marketing Management

Prepared by Ch Ali Imran

CHAPTER ? 1#anning the Marketing En*ironment

Notes on Marketing Management

Prepared by Ch Ali Imran

Notes on Marketing Management

Prepared by Ch Ali Imran

Notes on Marketing Management

Prepared by Ch Ali Imran

CHAPTER @ Analy%ing Cons(mer Markets and B(yer Beha*ior

Notes on Marketing Management

Prepared by Ch Ali Imran

Notes on Marketing Management

Prepared by Ch Ali Imran

Notes on Marketing Management

Prepared by Ch Ali Imran

Notes on Marketing Management

Prepared by Ch Ali Imran

CHAPTER 3 Analy%ing B(siness Markets and B(siness B(yer Beha*ior

Notes on Marketing Management

Prepared by Ch Ali Imran

Notes on Marketing Management

Prepared by Ch Ali Imran

Notes on Marketing Management

Prepared by Ch Ali Imran

CHAPTER E Analy%ing the Ind(stries and Competitors

Notes on Marketing Management

Prepared by Ch Ali Imran

Notes on Marketing Management

Prepared by Ch Ali Imran

Notes on Marketing Management

Prepared by Ch Ali Imran

CHAPTER 2 Identifying Market 1egments and 1ele#ting Target Markets

Notes on Marketing Management

Prepared by Ch Ali Imran

ii7 iii7 i7 7 *i7 @