Designing and managing

channels
 What is a Marketing Channel?
A marketing channel is interdependent
organizations involved in the process of
making a product or service available to
customer.

Dabbawalas of mumbai- excellent distribution

system
 Role of channel members
• Provide information about the market to the manufacturer
• Maintain price stability in the market
• Takes risks due to price fluctuation and demand fluctuation
• Promotion of the products in his territory
• Financing by providing the necessary working capital in the form of
advance payments for goods and services
• Middlemen also take the title of the goods and services and trade in
their own name
• Supplies products in suitable assortment as required by customer
• Provide pre sales and after sles service
• Assist in sales forecast
• Help in introducing new products
 Channel levels
Consumer Marketing Channels
Industrial Marketing Channels
 Market Market Retail spokes-restaurants,
soft drink kiosks, panwalsa,
sweetmarts
Market Market Market
Market
Market
Market
Market Market Market
Market
Market Market Market
Market
Market
Market Dealer/wholesaler
Dealer Hub

Market Market
Market
Market
Market Market
Market Market
Market
Market Franchise
Market Major Hub of
Parent Company
Market
Market
Market
Market Market Market
Market

Hub and spoke pattern of distribution of a soft drink firm

 Considerations/Factors affecting
selection of distribution channel
1) Market consideration-
a) Type of market whether consumer market or industrial market- If it
is industrial market then channel should be short ie buyer can
directly purchase from producer or through agents of
producer.However in case of consumer market the channel is long
using wholesalers and retailers etc
b) Buying habits - buying habits of customer like time spent, credit req
etc also affect channel. If customer requires time for selection then
retailers are req.
c) No. of potential buyers and their concentration- When no of
potential buyers are more then there may be a need of wholesalers
or retailers. However when potential customers are located in a
particular area then personal selling may be good . In case of widely
spread customers wholesalers and retailers are req
d) Order size- when order size is large then direct selling .when order
size is small then wholesalers and retailers.
2)Product consideration-
a)Product value- if product value is high like capital goods
,jewellery then shorter channel or direct marketing. If value
low then through wholesalers and retailers
b) perishability- if product is perishable like milk bread etc
then shorter channel or direct ditribution.
c) Standardisation – non standardised product require direct
distribution but standardised can be distributed through
long channels
d) Product volume- if product is bulky like construction
material then short channel
3)Company consideration-
a) Size- large sized firms have higher flexibility in
choosing channel because they have high
coercive and reward power small manufacturer
would use wholesaler and retailer .
b) Financial resources- financially strong co has
lower dependence on intermediaries and thus
they can choose long and short both type of
channel But a weak one will use intermediary.
c) C) Desire for control- more the desire to control
channel shorter will be the channel
d) Managerial competence- if co has competent
managers to take care of distribution tasks then
they use service of intermediary
• Middlemen consideration-
a) Cost – choice of channel would be
dependent on the associated cost . It is quite
possible that costly middlemen are
eliminated but not necessary
b) Financial ability- large manufacturers may
select financially strong middlemen
c) Sales potential- channel which offer greatest
potential for sales is selected
d) Legal constraints- legal restrictions also affect
choice of middlemen eg pharama cos market
products through licensed chemists
 Types of intermediaries
1) Merchantile Agents- They assist in buying and
selling of goods by negotiating the purchase and
sale.They do not own the product. They are of
following types-
a) Broker- he negotiates sale on behalf of seller (
as selling agent ) & purchase on behalf of buyer(
as buying agent). They do not own the product
and earn a brokerage.
b)Commission agent- He acts on behalf of a
party .he owns the goods however the risk
remains with the party. He earns commission on
sales
c) factor- he keeps goods of party for sale and
sells them in his own name. he can pledge the
goods in his possession .He earns a fixed
commission
2)Merchant middlemen-they purchase and sell goods
in their own name. They take title of goods and sell on
margin. They can be-
A) Wholesalers- they perform following functions
i) They help in estimating demand
Ii) They help in storage of goods
Iii) They help in grading and packing
Iv) take risk of demand and price fluctuations
V) They provide financial support to both manufacturer
and retailer
Vi) They help in transportation of goods
Vii) They help in promotion of products
B) Retailer- They perform following functions-
• Act as link b/w manufacturer and consumer
• they help in ascertaining customer needs
• They provide valuable customer inputs to manufacturer for
further improvements
• They help in breaking bulk to smaller quantities acc. to
customer demand
• They help in maintaining variety of product assortment
• They help in educating customer about product use etc
• They help in after sales services for long term customer
relationships
• They also provide credit facilities to customer
• They help in new product launches and effective promotion
 Channel management decisions
• To effectively manage channel members
marketer has to –
i)Selecting channel members
ii)Manage channel conflict
iii) Motivate channel members
.
i)Selecting channel members- channel members may be
selected after evaluation on following parameters:
• Product lines carried
• Financially strong
• Past performance
• Integrity
• whether it can provide technical assistance a
• After sales service
• Future growth potential
• Types of retailers associated
• Size and quality of sales force
• Help in customer acquisition
• Help in promotion
• location
ii) Channel conflict occurs when one member’s actions
prevent another channel from achieving its goal
Causes of Channel Conflict

• Goal incompatibility- producer want to penetrate by keeping

low prices But retailer want margins
• Unclear roles and rights- unclear territorial
boundaries,roles,Eg the franchisor is expected To provide
management support to franchisee.In return franchisee has to
adhere to Standard procedures.If they both unfulfill their
roles then conflict
• Resource Allocation- conflict due to disagreement over
allocation of valuable resource.Eg- Allocation of retailer b/w
manufacturer and wholesaler.A retailer is viewed both by
manufacturer and wholesaler as a valuable resource to
achieve distribution objective.The manufacturer will decide to
keep some high value retailer to sell directly to them
.However the wholesaler would consider it unfavourable .
• Perceptual difference- The channel members may perceive
same stimuli differently .For Eg POP displays provided by
manufacturer to the retailer .The manufacturer considers
them as valuable promotional tool however retailer considers
them a useless junk occupying space.
• Communication difficulties- Improper communication b/w the
channel members can also cause conflict.
 Strategies for Managing Channel Conflict

• Joint goal setting • Cooptation- putting in

• Adoption of advisory board
superordinate goals • Diplomacy- one
• Exchange of employees member of each group
• Joint membership in meeting to solve
trade associations • Arbitration- hearing of
the parties in front of a
panel of industry
experts.
• Legal recourse
 Situation 1
• Wasim, the owner of true value supply, a medium sized
wholesaler of plumbing supplies, was furious .He had just
gotten off the phone with the sales manager of high design
industries, the manufacture of a very profitable line of high
quality faucets that true value had been selling for years.”
That high design is going to start selling the big home centres
accounts directly” ,Fumed Wasim.” We have worked real hard
to establish this line and then when it finally gets to going real
volumes,high design wants to cut us out
• Discuss the possible underlying cause of conflict that seems to
be emerging
Ans-Conflict due to resource allocation
iii) Motivating channel members-channel
members can be motivated through financial
and non financial rewards
• Financial rewards- giving financial incentive
like higher margin, extended credit period,
bonus, reimbursement of expenses etc
• Non financial rewards- contests ,public
recognition for performance ,paid holidays,
training, joint sales calls
Some tactics for motivating channels-
• Pay higher slotting allowance( payment for shelf space) than competitor
• Offer higher margins than competitor
• Reward with higher margins those members performing more distribution
task
• Provide strong promotional support
• Provide more deals
• Make use of missionary sales force to support channel members sales
effort
• Develop sales quota of member based on market potential
• Provide training
• Offer financial assistance
• Offer tech support and online ordering
• Provide members market research
• Generate customer leads and pass them to channel member
 Issues in designing channels
• Three main issues:
• 1) Increasingly demanding customers, knowledgeable , time
constrained
• 2) manage multi channels including the electronic channel
effectively with minimal conflicts
• 3) globalisation of retailing,wholesaling etc. FDI
allowed.channels will have to smoothen the supply chain and
provide value to remain competitive
 Designing a
Marketing Channel System
Analyze customer needs

Establish channel objectives

Identify major channel alternatives

Evaluate major channel alternatives

 Analyse customer need
• Analysing what customer want:
• Lot size- the unit of purchase preferred by customer
• Market decentralisation- whether customer prefers to buy
from nearby shop or he is willing to travel to buy the product
• Waiting time- whether customer is willing to wait or they
want immediate delivery.
• Variety- whether customer prefer to to have variety of related
product from outlet
• Service- what kind of service is expected from outlet
 Establish objective
• Channel objective will determine channel design to be adopted .
• Eg castrol India- objective is to provide locational convenience ,provide
choice. Channel designed- they have vast network of outlets having all
varieties and packs.
• Archies- objective- proximity to customer, convert low involvement
purchase into high involvement, make purchase enjoyable. Channel
deigned- outlets close to target customer, trendy interior, wide variety of
merchandise
• Channel objective clarify what is sought to be achieved by channel , It can
be-
• i) effective coverage of target market
• Ii) cost effective distribution
• Iii) convenience to customer etc
• Distribution objective should not conflict with objective in other areas of
marketing mix . For ex . If price objective is lower price then distribution
objective should support it
 Identifying Major Channel Alternatives
• Companies can choose from a wide variety of channels for
reaching customers—from sales forces, to agents,
distributors, dealers, direct mail, telemarketing, and the
Internet.
• Each channel has unique strengths as well as weaknesses.
• Most companies now use a mix of channels.
• Channel to be selected taking into consideration the factors
/considerations ( already discussed in earlier slides)
• A channel alternative has three elements:
– The types of available business intermediaries
– The number of intermediaries needed.
--- The terms and responsibilities of each channel member
• Types of Intermediaries
• A firm needs to identify the types of intermediaries available to carry on its
channel work.
• Companies should search for innovative marketing channels. We have good
examples in the form of Project shakti of HUL using self help groups, ITC e
chaupal etc
For ex automobiles cos can sell directly through their own outlet, through
dealers,mail orders,online booking etc
Even for same market sometimes channel differ HUL markets lifebuoy directly to
retailers while Nirma markets to wholesalers.

• Number of Intermediaries( channel intensity) – three options

• Selective distribution-being selective in choosing the distributors.Useful in
case of established companies
• Intensive distribution- as many members as possible.Eg- FMCG companies
,Titan watches- sold thru- world of titan,time zone,valuemart,sonata
stores,titan signet club,tanishq boutique,pvt multibrand outlets
• Exclusive distribution- Exclusive distribution means severely limiting the
number of intermediaries. It is used when the producer wants to maintain
control over the service level and outputs offered by the resellers. Ex Sony
exclusive outlet,Nokia priority, Passenger cars
• Channel intensity for ame product category can be different Maruti has more
than 150 outlets,175 dealer workshop ,750 auth service station howevr
mitsubishi ha few
• Terms and Responsibilities of Channel Members
• The producer must determine the rights and responsibilities of participating
channel members.
• Price policy- The price at which distributors will get the product and discount
schedule.It also mentions the price at which distributor will further sell
• Conditions of sale
• Distributors’ territorial rights
• Mutual services and responsibilities
 Evaluating Major Channel Alternatives
• Each channel alternative needs to be evaluated against three criteria-
• 1)Economic criteria
• 2)Control criteria
• 3)adaptive criteria
• Economic Criteria
– Each channel will produce a different level of sales and costs.
• Firms use channels to maximize demand at the lowest overall cost.
• Firms try to replace high-cost channels with low-cost channels as long as
the value added per sale is sufficient.
• Control and Adaptive Criteria
• The channel is selected keeping in mind the degree of control required
and its adaptability to the changing competitive environment
• Using a sales agency poses a control problem.
• In rapidly, changing markets, the producer needs channel structures that
provide high adaptability
 channel members may be selected after evaluation on following parameters:
• Product lines carried
• Financially strong
• Past performance
• Integrity
• whether it can provide technical assistance a
• After sales service
• Future growth potential
• Types of retailers associated
• Size and quality of sales force
• Help in customer acquisition
• Help in promotion
• location
 Recent Trends in Marketing channels
1)Vertical Marketing System-
• In traditional marketing channel the firm, wholesaler and retailer act
independently and try to maximize their profit.
• However in VMS they act as unified one like one channel member owns or
franchise or use power over the others o that they cooperate. It can be
corporate VMS ,administered VMS & Contractual VMS
• Corporate VMS In this both production & distribution is under one
ownership Eg Bata & woodlands, raymonds own their shops and also
manufacture
• Administered VMS in this the one channel members control others on the
basis of power Eg big FIRMS like HUL ,P&G,MARUTI get shelf space and
other support from channel members on the basis of their power and
brands
• Contractual VMS in this integration takes place by franchising, sponsoring
Eg Pepsi or coke franchise firms to produce or market their drinks, NIIT
uses franchising,Mcdonald franchises
2)Horizontal Marketing System
• Here two or more businesses which are unrelated join hands to exploit
opportunity
• Eg tvs ,whirlpool and onida join hands to market washing machines. TVS
Collaborated with whirlpool to manufacture while onida used its
distribution to market.
3) Multichannel Marketing- Firms have started using multichannel to market
products .in this firm ues two or more channel to reach different segment
• This increase market coverage , lowers channel cost and provide
customised selling
• Eg Firms use their sales force , online marketing ,use retailers etc
• 4)Multi level marketing- Here a firm markets
its product using distributors who are actually
the target group of customers. There is no
need of formal marketing infrastructure ,
promotions etc
• Eg AMWAY,oriflame, tupperware
• By this it Is easy to enter a new market quickly,
overhead expenses are low, no infrastructure
is required
Designing and Managing Integrated
Marketing Communications
 Role of promotions
• Since market is imperfect i.e incomplete market
information,product differentiation & emotional buying .So
promotions provide-information, help in differentiating
products, persuade buyers
• Promotions help in changing the demand curve ie increase
demand at a given price
• Promotions also affect demand elasticity . It tries to make the
demand more inelastic when price increases and more elastic
when price decrease.
• It helps in informing,persuasing and reminding customers
 Modes of Marketing Communications-
Promotional mix
• Advertising • Direct marketing
• Sales promotion • Personal selling
• Public relations &
publicity
• Word of mouth
 Communication Platforms
Advertising- paid ,non Sales Promotion consist of a collection
of incentive tools, mostly short term,
personal communication designed to stimulate quicker or
for a sponsor promoting greater purchase of particular
products etc products
• Contests, games,
• Print and broadcast ads • Sampling
• Packaging inserts • Trade shows, exhibits
• Brochures and booklets • Coupons
• Rebates
• Posters
• Billboards
• POP displays
• Logos
• Videotapes
 Direct Marketing is the use of
Personal Selling- it is consumer-direct channels to
direct presentation of reach and deliver goods and
services to customers without
of product to a using market middlemen
• Catalogs
prospective customer • Mailings
by a representative of • Telemarketing
firm • Electronic shopping
• TV shopping
• Sales presentations • Fax mail
• Sales meetings • E-mail
• Voice mail
• Blogs
• Websites
• Public relations- it encompasses
communication effort to create favourable
attitude and opinion towards organisation and
its products. Publicity is a special form of PR
that involve new stories about firm,products
for which organisation does not pay .They
appear as news and thus firm has less control
but the message has greater creadibility
• Viral Marketing- it involves creating a situation
in which consumers spread information about
the product .co intentionally stimulate it
• Weblogs or blogs are used for viral marketing
as the blogger posts comments which creates
a chain of reactions
• Permission marketing- In this firm seeks
consumer permission before sending
information about promotions, new products
etc
 Communications Process
The information the sender wants to share must be encoded into
transmittable form Eg in case of adidas “ impossible is nothing “ the message
is encoded using current & past athletes
Once the message is transmitted using media like TV here the symbols must
be decoded by recipient. The receiver then may respond by either buy or read
an autobiography of athlete etc .He may provide feedback to sender about his
thought on message . ALL THE STAGES ARE AFFECTED BY NOISE WHICH CAN
BE ANY FACTOR WHICH INTERFERES successful communication like zipping
• Various steps followed in the communication process are:
1) Identifying target audience- marketer has to understand the
following:
a) Demographic and psychographic profile – educated target
audience may look more for content in message, message also
depends on age of audience etc
B) Media habits – it is important to know the popular media to
reach the audience . Old age people prefer TV, business class
prefer magazines etc
2) Developing communication objective- Various objective could
be set like – establishing a product as necessary to satisfy a
particular need, awareness about brand, persuading audience
to buy the product.
• Various models that describe the response
stages of consumers are:
• AIDA – Awareness--- Interest---- Desire---
Action . It suggests that before making a
purchase decision a consumer has to be aware
about the product . This develops interest
which further lead to desire to buy the
product and finally the action ie purchase
decision to buy the product .
• Lavidge & Steiner model- Awareness----- knowledge-- liking-
preference--- conviction --- purchase. Lets take the case of a
LG washing machine. A housewife became aware about
washing machine through advt . She becomes inquisitive and
goes to a showroom where salesman demonstrates the
washing machines and shows other literature she thus
increase her knowledge about the product . She visits her
friend who has LG washing machine .she listens to her
positive experiences . Based on this she develops liking &
preference for LG . If on any day her maid leaves her she
becomes convinced that she needs to buy a washing machine
. She visits the store and purchases one
3) Message consideration- The words ,appeal, theme etc chosen
should be such that the message becomes a unique one. Pepsi –
oh yes abhi, coke – thanda matlab coca cola ( earlier advt) , har
ek friend zaroori hota hai ( airtel), vodafone ( zoozoos theme).
• Various appeal could be-
• Humour – Fevicol ( people stick to tempo ), chlor mint (
dimaag ki batti jala de)
• Fear- Close up ( loss of friendship)
• Emotional appeal – emotional jealousy onida ( neighbour’s
envy), Maruti ( Ghar aa gaya india) Fiat , Coke ( Crazy hoon),
cadbury ( kuchh meetha ho jaye)
• Rational appeal- MF companies, computer cos
4) selecting the communication channel-
• Channel could be personal communication
where two or more person communicate face
to face , over the phone, email etc
• Channel could be non personal like TV, radio,
newspaper,magazines,Events, public relations
etc
5) Establishing Budget:
A)Percent of sales:
• Past sale or projected future sales is used as a base
• Based on guidelines for budgeting, that advertising should
only be resorted to only if the firm can afford it
• Limitation-does not believe that advertising can influence
sales
B) Affordability:
• Ensures that there is no excessive advertising/resources are
not wasted
• Assumes that sales are independent of advertising
c) Competitive Parity:
• In other words, “follow the crowd”
• Lead to a near optimal level of spending

d) Objectives and Tasks:

• An advertising objective is determined in specific
terms
• The decision maker estimates costs of each of these
tasks and the total of all these costs becomes the
advertising budget
• This method is logical as it assumes a casual flow from
advertising to sales
6) Deciding the communication mix- Each communication channel has its
unique characteristics/advantages and costs.( we will discuss them in details
in later slides)
Various factors affect the choice of communication mix or promotional mix:
A) Type of product market- If it is consumer market then sales promotion and
advertising is preferred .However in case of industrial market personal selling
is preferred .Eg for IT based co personal selling would be good
B) Buyer readiness stage- advertising and publicity are more important and
cost effective in case of awareness building stage. Comprehension is affected
by advertising and personal selling. Conviction is influenced mostly by
personal selling . Buying is more influenced by personal selling and ales
promotion. So what mix has to be chosen will depend on the stage in which
buyer is.
C) Product life cycle stage-various communication tools have different cost
effectiveness during the PLC. During introduction stage advertising, publicity
are cost effective in bringing awareness. sales promotion induces trials of
product. In the growth stage word of mouth plays major role. During maturity
advertising, events, personal selling are important to remain competitive
.During decline stage sales promotions become important.
7) Measuring communication effectiveness-
• Members of target audience are asked
whether they recognize or recall the message,
what points they can recall, change in attitude
towards the product, how many customers
bought the product after promotions
 advertising Sales Personal publicity
promotion selling
Time frame Long term Short term Short/long Long term
term
Primary appeal emotional rational rational emotional
Primary Image/brand sale Sale/relationshi goodwill
objective building p
Contribution to moderate high high low
profit
Sales Promotion
Sales promotion consists of a collection of incentive tools, mostly
short term, designed to stimulate quicker or greater purchase of
particular products or services by consumers .
 Types of sales promotion prog
• Consumer sales promotion prog- Sales promotion prog
directed towards consumers. The objective can be to induce
trials,attract new customers etc .Various techniques/methods
used for promotion are coupons, price
reduction,demonstrations etc
• Trade sales promotion prog- In these the promotional
activities are done to induce dealers to keep a large stock,
motivate them for extra efforts etc. Various methods used are
cash discount, proice deals etc
Factors Contributing to Growth of Sales Promotions:
(a) Growing consumerism in India and an upwardly mobile
Indian market
(b) Heightened inter-firm rivalry within the industry
(d) Fragmentation of viewers and readers arising out of multiple
television channels, newspapers and magazines
(e) The mass media cost has been on the rise and most companies
find sales promotion as a more cost effective alternative
(f) With technologies and products getting standardized,
differentiation between firms has got blunted and price wars
have now become a reality in most consumer goods
(g) customers have become price sensitive
(h) Sales promotion create an immediate positive impact on sales
(i) Consumers have accepted that the brands offered in sales
promotion may not necessarily be of lower quality.
 Sales-promotion benefits – or when to use it
• Sales promotions used in markets of high brand similarity can produce a high
sales response in the short run..
• Sales promotions helps Attract new users.
• Reward loyal customers.
• Increase the repurchase rates of occasional users.
• Sales promotions are often used to attract brand switchers.
• Sales promotions enable manufacturers to adjust short-term variations in
supply and demand.
• Induce consumers to try new products.
• Permit manufacturers to sell more than they would normally sell at the list
price.
• Help the manufacturer adapt programs to different consumer segment
• For retailers sales promotions may:
• Increase sales of complementary categories.
• Induce some store switching by consumers.
• Promote greater consumer awareness of prices.
Sales promotion tool description
Price deals Price deals mean that the
product is available at less
than normal list price
during deal period
Quantity deals More quantity of same
product is offered at no
extra cost or nominal price
increase
discounts Special discount
coupons Coupon is a certificate that
entitles the customer to
stated saving or claim
something free or part
payment
objective
To stimulate consumers to
try new product,
encourage immediate
sales, counter competitive
moves, clear inventory
To encourage prolonged
consumption to counter
future competitive move .
To push more stock to
trade , to get immediate
cash ., induce trial of new
product
To encourage product trial,
reward customer loyalty,
encourage continued
usage, introduce new
product
Sales promotion tool description objective
rebate Refund of money which is To encourage primary
part of price paid users to try offer
products,encourage brand
switching, loading dealers
with stocks, obtain displays
at retailers
premium It is a reward given to To encourage
customer for purchasing . purchase,build
Premium and promoted loyalty,promote product in
product may not be related off season,encourage new
product trial
sample Putting product in hand of To induce trial purchase,
customer generally free or
at a lower price

Contests and sweepstakes Consumer are invited to To create interest or

compete on the basis of excitement ,create brand
their general knowledge, awareness,build traffic at
skills,luck or chance retail store,get consumer
feedback,attract new
customers
Sales promotion tool description objective
Dealer gifts Useful gifts are offered to To improve relations with
dealers for personal use dealers,
Push money Money paid to trade sales To motivate sales force
force for pushing
additionally a specific
product
demonstration Product demonstrations To convince
explaining usage etc customer,motivate
dealer,build store traffic,
Trade allowance Temporary price reduction Motivate dealer
or reimbursement of
expenses incurred by
dealers
Buy back allowance A secondary incentive given To encourage repurchase
to traders in the form of of promoted product and
money for each additional cooperation of trade
unit bought over and above
deal quantity
 Push and pull promotion strategy
Push strategy
In this the marketing efforts are directed
at wholesaler,retailer
Purpose is for product selling
Suitable when low brand loyalty,
substitute available, for new product
Tools- dealer contestss,discounts, rebate,
gifts etc
Pull strategy
In this the marketing effort are directed at
consumer and consumer promotions
Purpose is demand creation
Suitable when high brand loyalty and
consumer make brand choices before
reaching store
Samples,coupons,demos
Sales promotion and the Brand’s stage in its life cycle-
• Introductory Stage- advertising helps awareness creation &
brand positioning while sales promotion induces trial
• Growth Stage- Advertising helps competitive differentiation &
market expansion,while sales promotion helps to create and
reward loyalty.
• In Maturity market advertising helps reminding customer about
product availability,while promotion helps maintain customer
loyalty and attract new customers.
Planning the Sales promotion Programmes- planning approach
involves –
1)Review of the Product Market Situation –Marketer should
examine trends in his brand sales and product category sales. Are
there any fluctuations in brand sales, competitor’ sales,promotions
of competitor, level of involvement as it is found that in case a
consumer has been high involvement product purchased during
sales promotions generally the loyalty is high 17.28
2) Consumer Purchase Patterns- analysing consumer purchase pattern ie a heavy user ,a
loyalist etc. marketer should plan to provide incentive for long time so that heavy users get
an opportunity to benefit in their normal purchase cycle. In case of regular users generally
the sales come in the last phase of sales promotion because they stock a product . In case of
a loyalist it would be good if promotions are on other sizes to induce trial.
3)Deciding on Sales Promotion Objectives- few Objective can be
• Stimulating demand for a product
• Induce trial, attract new customers
• Improving performance of middlemen
4) Determining Budget- budgeting methods can be all you can afford, percentage of sales,
objective and task, competitive parity etc
5) Deciding the sales promotion technique and choosing the product for promotions-
techniques already discussed.
6) Establishing the condition for participation- is it for everyone or select few
7) Promotion timing ,duration and frequency- optimal frequency is about 3 weeks per
quarter. Optimal duration is equal to length of average purchase cycle
8) selecting the distribution method- price off coupons can be distributed in the package,
by mail ,or in advertising
9)Evaluating the program- the effectiveness of prog can be evaluated using sales data,
consumer survey etc
17.29
 Personal selling
• It is direct presentation of product to a
prospective customer by a representative of
firm and persuading the prospective buyer to
buy the product .
 Role of salesperson
• Prospecting- searching for prospective customers
• Targeting- deciding how to allocate their time among
prospects and customers
• Communicating- Communicating information about products
• Selling- approaching,presenting,answering ques,overcoming
objections and closing sale
• Servicing- Providing services-technical asistance,arranging
finance etc
• Information gathering- Conducting market research and
intelligence
• Allocating- Deciding which customer will get scarse product
during shortage
 Kinds of salesmen
• Deliverer- sales person whose major tak is the delivery of
product
• Order taker- Sale person who is behind counter and takes
order
• Missionary- A salesperson who does not take order but rather
they build goodwill or educate the potential user
• Technician- Salesperson with technical knowledge
• Demand creator- A salesperson who uses creative methods to
sell products
• Solution vendor- A salesperson who is a expert in solving
customer problem
 Selling process
1) Prospecting and qualifying- It involves identifying the
prospective customers and qualifying them on the basis of their
interest level and financial capability
2) Preapproaching-
• The salesperson learns about the prospective customer like its
need,decision makers etc, puying style,personal
characteristics of buyer etc.
• The sales person sets objective like to qualify the customer,
gather information,make an immediate sale etc
• The sales person chooses the approach to contact like a
personal visit, phone call etc
3) Presentation and demonstration- the salesperson informs about the
product its features ,advantage etc and if required gives a demonstration of
the product
4) Overcoming objections- customers usually have objection-like objection to
price, delivery schedule, product characteristics .They may also have
resistance due to preference to some vendor etc
• Handling objections is an opportunity to convince customer. It also give
salesperson to provide comparison to competitive products.
• Salesperson must maintain a positive approach to handle queries .He
must answer in such a way that the buyer himself answers his queries,
denies his objection or it is turned into a reason to buying
5) Closing- the buyer may provide closing signs like statements ,questions or
some positive physical action. Salesperson can also induce the buyer to close
by offering special price, extra quantity ,gift etc. While closing the salesperson
asks for an order
6) Follow up and maintenance- these are necessary for customer satisfaction.
the salesperson should schedule a follow up call after delivery to ensure
proper installation ,instructions ,servicing etc
 Managing sales force
• Recruiting and selecting- The recruitment is done from references by sales force,
employment agency, placing job ads, campus interviews. Selection is done using
employment tests ( aptitude ,intelligence, personality, occupational tests) followed
by interview.
• Training – The salespeople are offered training which can be on the job training
and off the job training like role playing, audio video tapes, empathy training,
• Motivating sales force- Monetary and non-monetary incentives to motivate
Monetary:
• Straight salary
• Commissions only
• Combination plans
Non-monetary:
• Include incentives like contests, sales meetings, conventions at holiday resorts and
training
 advertising
• Advertising is any paid form of nonpersonal
presentation and promotion of ideas, goods,
or services by an identified sponsor.

• They then can make the five major decisions

known as “the 5Ms”:
– Mission: What are the advertising objectives?
– Money: How much to spend?
– Message: What message should be sent?
– Media: What media should be used?
– Measurement: How should the results be evaluated?
 Advertising Campaign
• Various steps involved are-
1) Analysis of Target Market
2) Setting objective
3) Determining Ad.Budget
4) Deciding media and creative strategy
5) Create ad,pre test
6) Evaluate final result
• 1) Setting the Objectives
• The advertising objectives must flow from prior decisions on target market, brand
positioning, and the marketing program.
• Advertising objective can be classified according to whether their aim is to:
• A)Informative advertising-Information advertising aims to create brand awareness
and knowledge of new products or new features of existing products.
• B)Persuasive advertising- Persuasive advertising aims to create liking, preference,
conviction, and purchase of a product or service.
• C)Reminder advertising- Reminder advertising aims to stimulate repeat purchase
of products and services.
• D)Reinforcement advertising -Reinforcement advertising aims to convince
purchasers that they made the right choice.
2) Deciding On the Advertising Budget
• How does a company know if it is spending the right amount?
• Although advertising is treated as a current expense, part of it really is an
investment in building brand equity.
• Factors affecting budget decisions. Here are five specific factors to
consider when setting the advertising budget:
• A)Stage in the product life cycle
• B)Market share and consumer base
• C)Competition and clutter
• D)Advertising frequency
• E)Product substitutability

• Various methods that are being used for budgeting – competitive parity
method, affordability method,objective and task, % of sales method.
3) Deciding media & creative strategy-
• Creative brief addresses following questions-
A) Who- who is the potential customer and his personality
profile
B)why - does the consumer have specific need that should be
focussed in message
C) what- are there any features of product to satisfy the need
• How is the product positioned
• Brand personality
• Strength/weakness of brand
D)When,where & how- at what time, in which mkt area and
through what medium
E) What Style ,approach or tone of message - emotional appeal
or factual etc
• Media planning is the process of delivering of adv message to the target
audience in most effective manner through media mix at lowest cost
• Types of media- Print ( newspaper, magazine), Electronic ( TV,radio) , Out
of home( pamphlets,hoardings etc) direct media( direct mail),Interactive
media( Internet )

• Media planning will involve selection of the media , deciding the

geographical coverage and scheduling .
• Media selection- Every advertising medium has specific advantages and
disadvantages
 Television
Advantages Disadvantages
• Reaches broad spectrum of • Brief
consumers • Clutter
• Low cost per exposure • High cost of production
• Ability to demonstrate • High cost of placement
product use • Lack of attention by viewers
• Ability to portray image and
brand personality
 Print Ads
Advantages Disadvantages
• Detailed product • Passive medium
information • Clutter
• Ability to • Unable to
communicate user demonstrate product
imagery use
• Flexibility
• Ability to segment
• Media planner should consider following before selecting a media based
on their strength and weakness-
• A) Target audience media habits- for eg to reach rural customer TV ,To
Reach urban youth may be social media will work
• B) Product characteristics- Products which require demonstration requite
TV as a medium
• C) Message Characteristics- In case a technical message is to be advertised
then Specialised magazine
• D) Media cost- depending on budget and cost of respective medium for eg
TV advt is costly
• Scheduling- media scheduling is calendar of adv plan ie timing of adv in media.
• 3 approaches to scheduling are-
• A) Continuity- In this approach the advt is shown regularly(
daily,weekly,monthly)without any gap. It is used when product recall increases
when exposed to advt and declines incase of no advt.eg in case of consumer goods
like softd rinks etc
• B) Flighting- In this approach there is less regular schedule of advertising. There
are intermitted periods of advertising and no advertising . It is used when
advertising objective is to change attitude . First initial advt changes attitude which
do not decay rapidly so followed by no advt.. Eg consumer durable goods like
refrigerator etc
• C) Pulsing- It is a combination of continuity and flighting . In this we advertie
continuously for a period and during some period the advt is increased .Eg advt of
cars,refrigerator,clothing during festive season
• 4) Testing and evaluation- Pre testing and post testing
• Pre Testing- done before launching the advt.various methods are-
A) direct questioning- questions about advt are asked from respondent
B) focus group testing
C) clutter test-test advt along with other advt is shown to respondent and
then respondents are asked to recall.
D) pupillometre device testing- dilation of pupill is measured after expoing to
advt
E) eye movement camera testing- cameras record the eye movement to judge
the effectiveness of advt.
Post testing- Testing after the advt is launched. Various methods are-
a) Gallup and robinson test- test advt are shown to respondent in
magazines .Then a telephonic interview is conducted second day to
assess the advt.
b) DAR ( day after recall ) test- it is used in broadcast industry. Commercials
are shown in a prog and then interviews are conducted next day and
respondents are asked whether they recall the message
• PUBLIC RELATIONS
• Public relations (PR) involves a variety of programs designed to promote or protect a
company’s image to its individual products
• PR departments perform the following five functions:
• Press relations- presenting news and information about organisation in a positive manner
• Product publicity- sponsoring events to publicize products
• Corporate communications- promoting understanding of organisation
• Lobbying- dealing with govt and regulatory bodies to promote or defeat regulations
• Counseling- advising management about public issues ,company poition
Marketing Public Relations
• Many companies are turning to marketing public relations (MPR) to support corporate or
product promotion and image making.
MPR plays an important role in the following tasks:
• Launching new products
• Repositioning a mature product
• Building interest in a product category
• Influencing specific target groups
• Defending products that have encountered public problems
• Building the corporate image in a way that reflects favorably on its products
 Place

In services, the importance of distribution is even

more critical than goods

Location is the key to successful marketing of

services-

because in a service market, a customer is often

present at the same place that a service is
“manufactured” and delivered

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 Also because services are usually offered in a limited
geographical area or part of town

Customers often choose a conveniently located

supplier of services over the best service provider
located far away

This can be used to advantage, to build up loyalty

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 Location Strategies: Illustrative
Cases

Wal-Mart located its sprawling discount stores in

suburbs of cities, or in small towns, where its
competitors did not go.

It reaped the advantages of cheaper real estate and

larger store space, utilising it to expand the product mix
on its shelves, thus attracting large enough crowds of
shoppers to make itself sustainable.

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 Location Strategies

McDonald’s is another example of good location, in

residential and coomercial hubs, and next to highways

A typical Indian example would be that of a saree

shop in a city. It has to be located in an area
frequented by city shoppers

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 Crossword- experimenting with a small selection of
books in a larger number of locations, unlike
Gangaram’s of Bangalore and Oxford in Kolkata,
large stores with lot of browsing space

Foodworld has rapidly expanded its reach in the last

few years through opening stores that are smaller
than the international norm

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 Services Intermediaries
 Franchisees
 service outlets licensed by a principal to deliver a unique service
concept it has created
 e.g. McDonald’s

 Agents and Brokers

 representatives who distribute and sell the services of one or more
service suppliers
 e.g., travel agents, independent insurance agents

 Electronic Channels
 all forms of service provision through electronic means
 e.g., ATMs, university video courses,

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 Table 14.1

Benefits and Challenges for

Franchisers of Service
 Benefits:  Challenges:
 Leveraged business format  Difficulty in maintaining and
for greater expansion and motivating franchisees
revenues  Highly publicized disputes
 Consistency in outlets and conflict
 Knowledge of local markets  Inconsistent quality
 Shared financial risk and  Control of customer
more working capital relationship by intermediary

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 Table 14.1 (Continued)

Benefits and Challenges for

Franchisees of Service
 Benefits:  Challenges:
 An established business  Encroachment
format  Disappointing profits and
 National or regional brand revenues
marketing
 Lack of perceived control
 Minimized risk of starting a over operations
business
 High fees

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 Table 14.2
Benefits and Challenges in Distributing
Services through Agents and Brokers

 Benefits:  Challenges:
 Reduced selling and  Loss of control over pricing
distribution costs  Representation of multiple
 Intermediary’s possession of service principals
special skills and knowledge
 Wide representation
 Knowledge of local markets
 Customer choice

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 Table 14.3
Benefits and Challenges in Electronic
Distribution of Services
 Benefits:  Challenges:
 Consistent delivery for  Price competition
standardized services  Inability to customize with
 Low cost highly standardized services
 Customer convenience  Lack of consistency due to
 Wide distribution customer involvement
 Customer choice and ability  Changes in consumer
to customize behavior
 Quick customer feedback  Security concerns
 Competition from widening
geographies

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 Common Issues
Involving Intermediaries
 conflict over objectives and performance

 difficulty controlling quality and consistency across outlets

 tension between empowerment and control

 channel ambiguity

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 Causes of Conflict

 Goal incompatibility- producer want to penetrate by keeping

low prices But retailer want margins
 Unclear roles and rights- unclear territorial
boundaries,roles,Eg the franchisor is expected To provide
management support to franchisee.In return franchisee has to
adhere to Standard procedures.If they both unfulfill their roles
then conflict
 Resource Allocation- conflict due to disagreement over
allocation of valuable resource.Eg- Allocation of retailer b/w
manufacturer and wholesaler.A retailer is viewed both by
manufacturer and wholesaler as a valuable resource to
achieve distribution objective.The manufacturer will decide to
keep some high value retailer to sell directly to them .However
the wholesaler would consider it unfavourable
McGraw-Hill/Irwin
.
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
  Perceptual difference- The channel members may
perceive same stimuli differently .For Eg POP
displays provided by manufacturer to the retailer
.The manufacturer considers them as valuable
promotional tool however retailer considers them a
useless junk occupying space.
 Communication difficulties- Improper
communication b/w the channel members can also
cause conflict.

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 Strategies for Managing Channel Conflict
 Joint goal setting
 Adoption of superordinate goals
 Exchange of employees
 Joint membership in trade
associations
McGraw-Hill/Irwin
 Cooptation- putting in
advisory board
 Diplomacy- one member of
each group meeting to solve
 Arbitration- hearing of the
parties in front of a panel of
industry experts.
 Legal recourse
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
 Situation 1

 Wasim, the owner of true value supply, a medium sized

wholesaler of plumbing supplies, was furious .He had just
gotten off the phone with the sales manager of high design
industries, the manufacture of a very profitable line of high
quality faucets that true value had been selling for years.”
That high design is going to start selling the big home centres
accounts directly” ,Fumed Wasim.” We have worked real hard
to establish this line and then when it finally gets to going real
volumes,high design wants to cut us out
 Discuss the possible underlying cause of conflict that seems
to be emerging

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 Ans-Conflict due to resource allocation

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 Situation 2

“This is really out of bounds”,remarked Hitesh ,the

buyer of athletic footwear for a large chain of sporting
goods stores.Hitesh was referring to a new policy by
Nike,that required retailers to place some of its low
moving items also.”This makes life difficult for us –
where is the space .Other brands don’t have such
policy”,remarked hitesh.
Does Nike understand the role of retailer ?

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 Impact of the internet
Indian Railways now offer the facility of booking a
railway ticket through the net.

Cinema tickets can also be booked over the net

 Potentially, lawyers and doctors could also answer

their clients’ queries on the net.

LIC, Banks have net-based services

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

  Nike using coercive power .The retailer has little choice as
the retailer could not afford to do without the better Nike
products

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 There are potentially two ways in which the internet
can affect services marketing. 1.
Dissemination of information about a service. Thus,
anyone can now find out a reservation availability on a
train without physically going to the railway station.

2. Delivery or sale of a service using the net as a

channel.

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 Advantages of the Net

Apart from location becoming less important from

the sales viewpoint, it may also provide other
advantages. For instance, recording of complaints
can be automated and centralised if required, or
decentralised according to the company and
customer needs.

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Pricing
Price- Quality
• Price as an indicator of quality.High price is
perceived as a high quality of product e.g in
case of ego sensitive products like premium
cars,premium watches, paintings,
clothes,perfumes .
Determinants of price – factors
affecting pricing
Internal factors
1) Objective of firm -The five major objectives are: survival, maximum
current profit, maximum market share, maximum market skimming,
and product-quality leadership.
A)Survival
• Companies pursue survival as their major objective when they have
overcapacity, intense competition, or changing consumer wants.
Survival is a short-run objective.

B)Maximum Current Profit

• Many companies try to set a price that will maximize current profits.
They estimate the demand and costs associated with alternative
prices and choose the price that produces maximum current profit,
c)Maximum Market Share
• Some companies want to maximize their market share.
They believe that a higher sales volume will lead to
lower unit costs and higher long-run profit.
• This practice is called market-penetration pricing.
• The following conditions favor setting a low price:
• 1) The market is highly price-sensitive, and a low price
stimulates market growth.
• 2) Production and distribution costs fall with
production experience.
• 3) A low price discourages actual and potential
competition.
d)Maximum Market Skimming
• Companies producing a new technology favor setting high
prices to maximize market skimming.
• This is also called market-skimming pricing, where prices start
high and are slowly lowered over time.
• Market skimming makes sense under the following conditions:
• 1) A sufficient number of buyers have a high current demand.
• 2) The unit costs of producing a small volume are not so high
• 3) The high initial price does not attract more competitors to
the market.
• 4) The high price communicates the image of a superior
product.

E)Product-Quality Leadership
• A company might aim to be the product- quality leader in the
market
2) The image sought by firm through pricing
3) The stage of the product in the PLC
4)Cost of manufacturing and marketing the
product
5)Extent of differentiation.Customers pay more
prices for products which have unique desighn
,package etc
6) Composition of product line and whether buy
products as bundle.
• External Factors-
1) Price elasticity of demand- more inelastic the
demand more the price
2)Bargaining power of customers – more the
bargaining power less the price
3) Bargaining power of supplier- more the
bargaining power more the prices
4)Competitors pricing strategies
5)Govt Regulation- control meaures affect
control of prices by govt
Pricing process
Select the price objective

Determine demand

Estimate costs

Analyze competitor price mix

Select pricing method

Select final price

Step 1: Selecting the Pricing Objective

• Survival
• Maximum current
profit
• Maximum market
share
• Maximum market
skimming
• Product-quality
leadership
Step 2: Determining Demand
• In pricing it is necessary to estimate demand at
different price levels and measure the price
sensitivity.
• One of the technique used to measure price
sensitivity is controlled experimentation. In this
customer are offered different brands at different
prices and customer response is collected. Then
the firm’s product prices are changed and
customer responses at each price level is
recorded.The price at which demand declines is
the point at which customer is sensitive.
• A) Generally speaking, customers are most price-
sensitive to products that cost a lot or are bought
frequently.
• B) Customers are less price-sensitive to low-cost
items or items they buy infrequently.
• C) They are also less price-sensitive when price is
only a small part of the total cost of obtaining,.
• D) Companies prefer customers who are less price-
sensitive
Step 3: Estimating Costs
• Demand sets a ceiling on the price the company
can charge for its product. Costs set the floor
• Management wants to charge a price that will at
least cover the total production costs at a given
level of production
Step 4-Analyzing Competitors’
Costs, Prices, and Offers
• the firm must take competitors’ costs, prices, and
possible price reactions into account while pricing .
• The firm should first consider the nearest competitor’s
price.
• The introduction of any price or the change of any
existing price can provoke a response from customers,
competitors, distributors, suppliers, and even the
government.
Step 5: Selecting a Pricing Method/ policy/ pricing strategies- Pricing policy
constitute the general framework within which pricing decisions should be taken
to achieve objective. Pricing policies should be tailored to meet various
competitive situations. Various types of policies/methods are:

• Cost Based Pricing- In this firm uses production cost as key

factor in determining pricing. Various types of cost based
pricing are-
1. mark up pricing – the total cost of production is estimated & a mark
up or the margin that the firm wants is further added.
• It ignores current demand, perceived value, and competition
• Advantage-
• Sellers can determine costs much more easily than they can
estimate demand.
• Ensures all costs are recovered
• By tying the price to cost, sellers simplify the pricing task.
• Where all firms in the industry use this pricing method, prices tend to
be similar.
• Many people feel that cost-plus pricing is fairer to both buyers and
sellers.
• Disadvantages-
• It ignores the level and nature of demand
• It does not reflect competition in the market
• It fails to charge what a customer is willing to pay
• It presumes fixed margin of profits .But in real practice companies
increase margin based on demand

• 2. Marginal cost or contribution pricing- the company tries to

recover its marginal costs & getting a contribution towards its
overheads.
• Advantage –
• It works well in case of market with intense competition and
objective of firm is to get a foothold in the market.
• When a firm ha number of products marginal cost pricing is useful
because it gives flexibility to firm to recover fixed cost through
different products
• Demand Based Pricing:Here pricing is done on the basis of
Demand.Following methods belong to demand based pricing
1) Skimming Pricing-In this a firm skims the market by selling at a
premium price to maximise profit in short span. It is used
• When target market associate quality with price
• When product enhances status
• When competition Is not there
• When product is a technological breakthrough
• Eg Telecommunication firms
2) Penetration pricing- In this a firm prices its product lower than
competitor to get a foothold in the highly competitive market.It is used
when
• When size of market is large
• When there is intense competition
• When price quality association is weak
• Competition based pricing: In this competitor’s
prices act as reference point. Various strategies
in such pricing are-
• 1) Premium pricing- Pricing above the level
adopted by competitor
• 2) Discount pricing- pricing below the level
adopted by competitor
• 3) Going rate pricing- charging similar to
competitor
• Charging to capture value ( Value based
pricing)- Pricing what customers perceive as
value. Price is determined by buyer’s perception
of value of the product.
strategies
• Skimming
• Penetration
• Differential- In This strategy a firm differentiates its price
across different market segments. Eg Health care-
different prices for opd, emergency etc
• Price bundling- Firm bundles the products and charges
price for the bundle Eg makemy trip bundles hotel
rooms,air ticket etc
• Captive Pricing- In this two or more complementary
products are bundled and sold together Eg Gillette mach
3
• Loss leader – This involves dropping the price on well
known brand to generate more demand and traffic
• Psychological – pricing odd like 99,199 etc
Step 6: Selecting the Final Price

• Impact of other marketing activities

• Company pricing policies
• Gain-and-risk sharing pricing
• Impact of price on other parties
Promotional Pricing Tactics

• Loss-leader pricing
• Special-event pricing
• Cash rebates
• Low-interest financing
• Longer payment terms
• Warranties and service
contracts
• Psychological
discounting
Differentiated Pricing

• Customer-segment
pricing
• Product-form pricing
• Image pricing
• Channel pricing
• Location pricing
• Time pricing
• Yield pricing
 20
Introducing
New Market Offerings

Marketing Management
A South Asian Perspective, 13th ed
Categories of New Products

New-to-the-world

Additions

Improvements

Repositionings

Cost reductions
 The New Product Development Process

Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd.

20-3
Idea Generation
Common Sources of New Product Ideas
• Changing customer needs & trends in consumer
markets
• Competitors
• R & D scientists
• Employees
• Trade channels
• Top management
• Developments in the market
• Changes in demographics,geographic & psycho
graphic characteristics.
Idea Generation: Creativity Techniques
• Attribute listing- listing all features and then modifying one
by one Eg if one feature is wool of blanket then may be
replacing it with artificail wool
• Reverse assumption analysis-thinking just opposite. Eg
providing what you have produced than what customer
want
• New contexts-put cases in new situations Eg instead of
menu card using smart phones for displaying menu
• Mind mapping- start mapping various things like car-
merc-germany
• Lateral Mapping- combining two products or ideas EGas
stations + food- gas stations stores,Cafeteria + Internet-
cafetaria,Candy + toy- kinderjoy,Audio + portable-
walkman
Idea Screening
• Technological feasibility- whether it can be
produced
• Market feasibility- whether it can be
marketed
• Cost feasibility- whether it can be
affordable of dpo we have the resources to
produce
Concept development
• Ideas to be developed into concepts ie elaborated
version of idea in terms of consumer
• Consumers buy concepts not idea
• Eg idea – powder to be added to milk to increase its
nutritional value
• Concepts- 1) instant breakfast drink for adult
• 2) snack for children as midday refreshment

• Lets assume conceprt (1) is good then it would

compete with milk cornflakes,bread egg, parantha etc
Concept Testing- presenting concept in
front of customer and seek feedback on
following areas:
• Communicability and believability- clarity of
benefits
• Need level- is product a need
• Gap level- what other products fulfilling that
need
• Perceived value- value vs price is the price
reasonable
• Purchase intention- would they buy
• User targets, purchase occasions, purchasing
frequency- who uses when and how often
Marketing Strategy
• Target market’s size, structure, and behavior
• For Eg for breakfast drink the target market if families
with children and looking for nutritious less costly
breakfast
• Planned price, distribution, and promotion for year one .
The co may fix price at Rs 10 per 200 gm case .
Distributed through dealers who will be offered initial
discount of 10% . Coupons with 10 % discount will also
be distributed to customer through newspaper. First year
adv budget would be 10 cr.
• Long-run sales and profit goals and marketing-mix
strategy over time- Co wants 20 % market share , initially
price would be low with 20% of sales as adv budget
Business Analysis
• Estimation of demand in the target market at
different price levels.
• Forecasting sales based on demand estimation
& competitive analysis
• Estimating the cost of serving the market
segment.
• Based on the cost & anticipated sales
revenue,calculate break even price and sales
volume.
Development & Prototype
Testing
• the product ideas in this stage now moves from the concept and
design boards to R &D & manufacturing for physical
development.The prototype is then tested

• Alpha testing- testing product within firm

• Beta testing- testing with customers
 Rank-order method- ranking various options of different
competitive products
 Paired-comparison method- different pairs are formed and
customer is asked to choose the preferred one in the pair
• Market testing
Commercialisation-
Timing of Market Entry
• First entry- first mover advantage
• Parallel entry- at same time as competitor so
that customer pay more attention
• Late entry- so that low cost of creating
awareness about new product as competitor
has already entered and educated customers

• Where to launch- in single city or national

market bsed on resources
• How to launch- a concrete action plan for
new product dev
 8
Identifying
Market Segments
and Targets

Marketing Management
A South Asian Perspective, 13th ed
• Target marketing includes three activities:
market segmentation, market targeting, and
market positioning.
• We can target markets at four levels:
segments, niches, local areas, and individuals
Niche Marketing
• A niche is a more narrowly defined customer group seeking a
distinctive mix of benefits.
• Marketers usually identify niches by dividing a segment into
sub-segments.
• Niche marketers presumably understand their customers’
needs so well that the customers willingly pay a premium.
Local Marketing
• Target marketing is leading to marketing programs tailored to
the needs and wants of local customer groups.
• Local marketing reflects a growing trend called grassroots
marketing.
 The Revolution
brand of ready-
made women’s
apparel
successfully
focuses on the
niche segment of
plus-size clothes.
Individual Marketing
• The ultimate level of segmentation leads to
“customized marketing”, or “one-to-one marketing”
• Customerization combines mass customization with
customized marketing in a way that empowers
consumers to design the product and service offering
of their choice
 What is a Market Segment?
A market segment consists of a group of
customers who share a similar set of
needs and wants.
 Why Segmentation is Necessary

• Consumer needs
differs
• Differentiation helps
products compete
• Segmentation helps
identify media
• Makes the Marketing
Effort More Efficient
and Economic
7
 How segmentation helped HUL

• Nirma Vs HUL’s brands

• HUL conducted research and found that different group of
customers had different expectations from washing powders and
also found that different colour of washing powder were associated
with different fabrics.
• Yellow coloured washing powder used by lower middle or lower
income people .they washed all their clothes with yellow powder.
• Middle class used blue rin or white for washing expensive clothes
so white was associated with middle or upper class for cleaning
• Green was associated with extra cleaning.
• So HUL LAUNCHED Sunlight ( yellow),Rin ( blue), Surf ultra ( white),
catering to different segment
Segmentation Bases

Demographics

Geographic

Psychographic

Behavioural

Sociocultural
 Demographic Segmentation -
Income,
Family Life-
Age Gender Marital Status Education, and
cycle
Occupation

Age segmentation includes segments such as the baby

boomers and generations X and Y. Eg. Pepsi for gen Y.
Family life-cycle is based on the premise that many families
pass through similar phases in their lives and share major
life events such as marriage, birth of a child, and retirement.
Eg Johnson baby soaps for child , retirement plans, pogo for
kids ,shadi.com for unmarried
Gender- Dove for women, AXE for male
Income, education, and occupation tend to tie together and
lead to segmentation based on social class.Eg Nano for low
income people, trade india .com for businessman, HUL
washing powder on the basis of income
 Geographic Segmentation

• Based on geography – density of area ( urban

,rural),region ( UP, Raj,Delhi) etc
• People who live close to one another are
similar
• “Birds of a feather flock together”
• Eg Mitti cool – segment is rural,
• Eg Pharma cos. segment market on the basis
of region also.
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 Psychographic
In this elements like lifestyle, attitude, personality
form the base for segmentation
• Lifestyle Includes activities, interests, and
opinions
• Attitude - +VE AND –VE
• Personality- extrovert ,introvert, aggressive,
innovator,
• Eg Café coffee day – segment is youth as they
can come and hang out
• Titan – sonata for value for money, fastrack for
youth, nebule for premium class.
• Nazar suraksha kavach for –ve attitude people.
• Samsumg S4 for innovators
• Maggi for time constrained individual
• Femina for modern thinking women
 Socio-Cultural

• In this Segmentation is done on the basis of

culture ( Indian , american), Religion , Social
class ( lower class, middle class, upper class)
• Eg Pvt Banking for upper classes
• Aastha channel for Hindus
Behavioural segmentation

Usage rate

Usage situation

Benefit segmentation

Perceived brand
loyalty

Brand relationship
• Usage rate- Usage rate is often based on
whether a group of consumers are heavy,
medium, light, or nonusers of a product
• Eg. mobile operator
• Usage-situation segmentation
– Segmenting on the basis of special occasions or
situations
– Example :
– chocolate and flowers for Valentine’s Day
– Archies card for various occasion
• Benefits sought – segmentation on the basis
of benefits sought like convenience,value for
money,long lasting etc
• Eg Amaron for long life benefit
• Cinthol for escape from body odour
• Maruti for value for money
 Loyalty status

• Customer loyalty is also used a basis for segmenting

the market and evolving a marketing strategy for each
segment.
• Based on loyalty status groups can be divided into-
• a) Hard core loyals- those who buy a brand all time
• b) Split loyals- those who are loyal two 2-3 brands
• c) Shifting loyals- those who shift loyalty from one
brand to another
• d) Switchers – those who are not loyal to any brand
• Eg in industries like banking, hospitality ,airlines
segmentation is done on this basis .
Effective Segmentation Criteria
Measurable- size ,purchasing power and
other characteristics can be measured
Substantial- segment should be large
and profitable
Accessible-segment can be
reached & served
Differentiable-segments
should respond differently to
marketing mix
Actionable- effective
prog can be framed for
serving it
 Targetting

• Targeting is the second stage of the (STP)

process. After the market has been separated
into its segments, the marketer will select a
segment or series of segments and 'target'
it/them. Resources and effort will be targeted
at the segment
• To target a segment a firm looks at its
attractiveness ( size,growth,profitability) and
the objective and resources of company .
 Targeting strategies

• Standardisation- firm offers same product to different

markets.It is also called mass marketing .The objective is to
achieve economies of scale.
• Eg- Coke and pepsi
• Differentiation- firm differentiates its product to suit different
segments.Eg Airlines- 1st class,business class and economy
• Focus- firm targets only a specific group .Also called as niche
when higher income group are targetted only .Eg BMW
 Target Market Selection

A)Single-segment concentration
• Through concentrated marketing, the firm gains a strong knowledge of the
segment’s needs and achieves a strong market presence.
• However, there are risks, a market segment can turn sour, or a competitor
may invade the segment.
• For these reasons, many companies prefer to operate in more than one
segment
• cancer hospital targeting cancer patients,mahindra
tractors for farmers
 Target Market Selection

B)Selective specialization
• The firm selects a number
of segments, each
attractive.
• This multi-segment strategy
has the advantage of
diversifying the firm’s risks
• horlicks initially for kids
above 3 but now also for 2
yrs
Bajaj initially scooters for
businessman etc but now
bikes for various segments
C)Product specialization
• 1) The firm makes a certain product that it sells to several
different market segments. Eg microscope to schools
,colleges,univ,labs etc desktop to individual
male,female,schools
D) Market Specialization
• 1) The firm concentrates on serving many needs of a
particular customer group. Eg for sports loving people
shoes,track suits and other sports gear
 Patterns of
Target Market Selection
E)Full market coverage
• The firm attempts to serve
all customer groups with all
the products they might
need.
• In undifferentiated
marketing, the firm ignores
segment differences and
goes after the whole market
with one offer. Window
XP,WINDOWS 7
 What is Positioning?

Positioning is the act of designing the

company’s offering and image to occupy a
distinctive place in the mind of the target
market.
 Defining Associations
Points-of-difference Points-of-parity
(PODs) (POPs)
• Attributes or benefits • Associations that
consumers strongly are not
associate with a brand, necessarily
positively evaluate, and unique to the
believe they could not brand but may be
find to the same extent shared with other
with a competitive brands
brand
Differentiation Strategies

Product Personnel

Channel Image
 Product Differentiation
• Product form- size,shape
• Features- added features along with basic product- zen
estillo vxi with airbags
• Customization- DELL,Levis
• Performance-low,high,avg- Honda high performance engine
• Conformance- degree to which all products are identical-if
all LED tv are identical in quality output then they have high
conformation
• Durability- product’s life. Nokia durable
• Reliability-probability that product will not malfunction at a
cetain time period.Maruti
• Style- Harley davidson
Design Differentiation
 Channel differentiation

• Eureka forbes – direct marketing

• Amway- multilevel mkting
• Lakme- 3 distict channels
• Neighbourhood shops for skin products like moisturiser,sun
screen lotions
• Bigger shops in central places for complete range of personal
care products
• Exclusive Hul lakme saloons for elite customers carrying
premium cosmetics etc
Personnel Differentiation:
Singapore Airlines
Image Differentiation-

SX4- Sturdy image

 Bases for positioning
1) Positioning by Product feature/Consumer Benefits
This is commonly used strategy and consists in associating an
object with a product feature or customer benefit.
• “Colgate is a cavity fighter.” or colgate with salt
moov- remove backache
gillette- one drop for smooth shave
Sometimes, a new product can be positioned with respect to
product characteristics that competitors have ignored.
• “The toothpaste with clove oil.”
2)positioning by competitor-This type of positioning strategy consists in
making consumers think that your brand is better than, or as good as the
competitors. The competition is used as the point of reference. This
positioning strategy can be used to advantage in certain cases.
• •First, when the competitor has an established image that has been built
up over the years, this image can be used as “bridge” to communicate
another image. For example, if someone wants to know where a particular
office is, it would be easier to say it is net to the City Bank building rather
than describing the various streets to get there.
• •Secondly, sometime it is not important how good customers think you
are. It is more important that they think that you are at least as good as
the competition
• IIPM – Dare to think beyond iim
4)Positioning on the basis of price
Harpic Rs 45
Zenith – MNC Quality indian price
5)Positioning by use occasion & time-Associating the product
with a specific use is another commonly used positioning
strategy
Vicks vaporub for child’s cold at night
burnol for burns
Clinic All Clear: “The dandruff-control shampoo
6) Positioning by corporate identity
In this corporate credentials are used to position the product
Dokoma – a tata product
7) positioning by product category
• it is used so that brand is perceived to belong to
another product category
• dove- positioned as skin cleanser
8) Positioning by Product User
• This is a strategy of associating the product with a
particular type or class of user. One way of doing this
is through celebrity endorsements.
• E.g. Lux-earlier their positioning was ‘Filmi Sitaroan
Ka Saboon’, now new Aishwarya’s advertise says that
by using Lux you can also become a star
• 8)positioning through guarantee
pure it – issse behtar aur kahan 1cr
guarantee
 Repositioning

• It is the process of changing the positioning of

products if it is faulty and has failed to
achieve desired results
• Eg repositioning of lifebuoy- earlier lifebuoy
was positioned as healthy soap for rural
people . But now it is positioned for urban
• Milkmaid- milkmaid was positioned as
convenient form of milk for tea but later
repositioned as a milk for all purpose including
sweets