MARKRTING MANAGEMENT UNIT - 1 INTRODUCTION MARKET:  It is a Physical place where buyers and sellers gathered to exchange the goods.

 It is a collection of buyers and sellers who transact over a particular product or product class. MARKETING: Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others. DEFINITION OF MARKETING: The American Management Association offers the following formal definition, Marketing is an Organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. DEFINITION OF MARKETING MANAGEMENT: The American Management Association offers, Marketing management is the process of planning and executing the conception,pricing,promotion and the distribution of ideas,goods,services to create exchange that satisfy individual and organizational goals. What is marketed? Marketing people market 10 types of entities: 1. Goods 3. Events 2. Services 4. Experiences 6. Places 8. Organizations 10. Ideas

5. Persons 7. Properties 9. Informations

Who Markets? Marketers and Prospectus A marketer is someone who seeks a response attention, a purchase, a vote, a donation from another party, called the prospect. If two parties are seeking to sell something to each other, we can call them both marketers. Markets traditionally a market was a physical place where buyers and sellers gathered to buy and sell goods. Economists describe a market as a collection of buyers and sellers who transact over a particular product or product class (such as the housing market or the grain market). Modern economies abound in such markets A simple marketing system 1. communication Goods and services

Industry (a collection of sellers)

Money

Market ( a collection of buyers)

Information Marketers often use the term market to cover various grouping of customers. They view sellers as constituting the industry and buyers as constituting the market. They talk about need markets (the diet-seeking market), product markets (the shoe market, demographic markets (the youth market) and geographical markets (the French market); or they extend the concept to cover other markets such as voter markets, labour markets and donor markets. Table shows the relationship between the industry and the market. Sellers and buyers are connected by four flows. The sellers send goods and services and communications such as ads and direct mail to the market; in return they receive money and information such as customer attitudes and sales data. The inner loop shows an exchange of money for goods and services; the outer loop shows an exchange of information.

STRUCTURE OF FLOWS IN A MODERN EXCHANGE ECONOMY

Resources money

Resource markets

Resources money

Taxes goods services money

Manufacturer markets

Services
Government Taxes goods markets

money
Customer markets services money

Money goods and services

Intermediary markets

money goods and services

Manufacturers go to resource markets (raw material markets, labour markets, money markets), but resources and turn those into goods and services, and then sell finished products to intermediaries who sell them to consumers. Consumers sell their labour and receive money with which they pay for goods and services. The government collects tax revenues to buy goods and services to provide public services each nations economy, and the global economy, consists of complex interacting sets of markets linked through exchange processes. Key market markets Consider the following key customer markets. Consumer, business, global and non profit.

1. Consumer markets Companies selling mass consumer goods and services such as soft drinks, cosmetics, air travel and athletic shoes and equipment spend a great deal of time trying to establish a superior brand image. 2. Business markets Companies selling business goods and services often face well trained and well-informed professional buyers who are skilled at evaluating competitive offerings. 3. Global markets Companies selling goods and services in the global market place face additional decisions and challenges. 4. Non profit and governmental market Companies selling their goods to nonprofit organizations such as churches, universities, charitable organizations and government agencies need to price carefully, because these buyers have limited purchasing power. Lower selling prices affect the features and quality the seller can build into the offering, much government purchasing calls for bids, and buyers often favor the lowest bid in the absence of extenuating factors.

CORE MARKETING CONCEPTS 1. Needs, wants and demands Needs are the basic human requirements. People need air, food, water, clothing and shelter to survive. People also have strong needs for recreation, education and entertainment. These needs become wants when they are directed to specific objects that might satisfy the need. Demands are wants for specific products backed by an ability to pay. Many people want a Mercedes: only a few are willing and able to buy one. Companies must measure not only how many people want their product, but also how many would actually be willing and able to buy it. We can distinguish among five types of needs 1. Stated needs (The customer wants an in expensive car)
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2. 3. 4.

Real needs (The customer wants a car whose operating cost, not its initial price, is low) Unstated needs (The customer expects good service from the dealer) Delight needs (The customer would like the dealer to include an onboard navigation system)

5.

Secret needs (The customer wants friends to see him as a savvy consumer.

2. Target markets, positioning and segmentation A marketer can rarely satisfy everyone in a market. Not everyone likes the same cereal, hotel room, restaurant, automobile, college or movie. Therefore, marketers start by dividing the markets into segments. They identify and profile distinct groups of buyers who might prefer or require varying product and service mixes by examining demographic, psychographic, and behavioral differences among buyers. After identifying market segments, the marketer then decides which present the greatest opportunities which are its target markets. For each, the firm develops a market offering that it positions in the minds of the target buyers as delivering some central benefit(s). 3. Offerings and Brands Companies address needs by putting forth a value proposition, a set of benefits that that offer to customers to satisfy their needs. The intangible value proposition is made physical by an offering, which can be a combination of products, services, information, and experiences. A brand is an offering from a known source. A brand name such as McDonalds carries many associations in peoples minds that make up the brand image; hamburgers, fun, children, fast food, conveniences, and golden arches. All companies strive to build a strong, favorable, and unique brand image. 4. Value and Satisfaction The offering will be successful if it delivers value and satisfaction to the target buyer chooses between different offerings based on which she perceives to deliver the most value. Value reflects the sum of the perceived tangible and intangible benefits and costs to customers.

Satisfaction reflects a persons judgments of a products perceived performance in relationship to expectations. If the performance falls short of expectations, the customer is dissatisfied and disappointed. If it matches expectations, the customer is satisfied. If it matches expectations, the customer is satisfied. If it exceeds them, the customer is delighted. 5. Marketing channels To reach a target market, the marketer uses three kinds of marketing channels. Communication channels deliver and receive messages from target buyers and include newspapers, magazines, radio television, mail, telephone, billboards, posters, fliers, CDs, audiotapes, and the Internet. Distribution channels to display sell or deliver the physical product or services to the buyer or user. They include distributors, wholesalers, retailers and agents. Service channels to carry out transactions with potential buyers. Service channels include warehouses, transportation companies, banks and insurance companies that facilitate transactions. 6. Supply chain The supply chain is a longer channel stretching from raw materials to components to final products that are carried to final buyers. The supply chain for womens purses starts with hides and moves through tanning, cutting, manufacturing and the marketing channels to bring products to customers. 7. Competition Competition includes all the actual and potential rival offerings and substitutes a buyer might consider suppose an automobile company is planning to buy steel for its cars. There are several possible levels of competition. 8. Marketing environment The marketing environment consists of the task environment and the broad environment.

COMPANY ORIENTATION TOWARDS THE MARKET PLACE (OR)CONEPTS OF MARKETING: 1. The production concept The production concept is one of the oldest concepts in business. It holds that consumers will prefer products that are widely available and inexpensive. Managers of productionoriented businesses concentrate on achieving high production efficiency, low costs, and mass distribution. 2. The product concept The product concept proposes the consumers favour products that offer the most quality, performance or innovative features. Managers in these organizations focus on making superior products and improving them over time. However, these managers are sometimes caught up in a love affair with their products. A new or improved product will not necessarily be successful unless its priced, distributed, advertised and sold properly. 3. The selling concept The selling concept holds that consumers and businesses, if left alone, wont buy enough of the organizations products. The organization must, therefore, undertake an aggressive selling and promotion effort. The selling concept is expressed in the thinking of Sergio Zeeman, Coco-colas former vice president of marketing who said; The purpose of marketing is to sell more stuff to more people more often for more money in order t make more profit 4. The marketing concept The marketing concept emerged in the mid-950. Instead of a product-centered make and sell philosophy businesses shifted to a customer-centered, sense and respond philosophy, business shifted to a customer for your products but to find the right products for your customers. The marketing concepts holds that the key to achieving organizational goals is being more effective than competitors in creating, delivering and communicating superior customer value to your chosen target markets. 5. The holistic marketing concept The holistic marketing concept is based on the development, design and implementation of marketing programs processes and activities that recognizes their breadth and
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interdependencies, holistic marketing recognizes that everything matters in marketing and that a broad, integrated perspective is often necessary. (a)Relationship marketing Relationship marketing aims to build mutually satisfying long-term relationships with key constituents in order to earn and retain their business. Four key constituents for relationship marketing are customers, employees, marketing partners (channels, suppliers, distributors, dealers, agencies and members of the financial community (shareholders, investors, analysts). (b)Integrated marketing The marketers task is to deliver marketing activities and assemble fully integrated marketing program to create communicate, and deliver value for consumers. Marketing activities come in all forms. Mc carthy classified these activities as marketing-mix tools of four broad kinds, which he called the four Ps of marketing: product, price, place and promotion.
Marketing mix

Product Product variety Quality Design Features Brand name Packaging The particular Sizes Services Warranties Returns

Price List price Discounts Allowances Payment period Credit terms

Promotion Sales promotion Advertising Sales force Public relations Direct marketing

Place Channels Coverage Assortments Locations Inventory transport

Marketing variables under each P are shown I Fig . Marketers make marketing mix decisions for influencing their trade channels as well as their final consumers. Once they understand these groups, marketers make or customize an offering or solution, inform consumers-recognizing that many other sources of information also exist set a price that offers real value, and choose places where the offering will be accessible.
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(c)Internal marketing Holistic marketing incorporates internal marketing, ensuring that everyone in the organization embraces appropriate marketing principles, especially senior management. Internal marketing is the task of hiring, training, and motivating able employees who want to serve customers well. (d)Performance Marketing Holistic marketing incorporates performance marketing and understanding the returns to the business from marketing activities and programs, as well as addressing broader concerns and their legal, ethical, social, and environmental effects. Top management is going beyond sales revenue to examine the marketing scorecard and interpret what is happening to market share, customer loss rate, customer satisfaction, product quality, and other measures. i. Financial Accountability: Marketers are thus being increasingly asked to justify their investments to senior management in financial and profitability terms, as well as in terms of building the brand and growing the customer base. As a consequence, theyre employing a broader variety of financial measures to assess the direct and indirect value their marketing efforts create. Theyre also recognizing that much of their firma market value comes from intangible assets, particularly their brands, customer base, employees, distributor and supplier relations, and intellectual capital. ii. Social responsibility marketing The effects of marketing clearly extend beyond the company and the customer to society as a whole. Marketers must carefully consider their role in broader terms, and the ethical, environmental, legal, and social context of their activities. Increasingly, consumers, demand such behavior, as Starbucks Chairman Howard Schultz has observed.

MARKETING ENVIRONMENTAL FORCES/ MARKETING ENVIRONMENT The marketing system of a firm operates within the constraints/forces of the environment. These forces are either (a) external or (b) internal to the firm (a) The external forces are those which are generally uncontrollable, and these must be fully given weight when marketing decisions are taken. These external forces consist of two broad categories: (i) macro environment and (ii) micro-environment.  Macro environment factors, which lie outside the firm and generally exist in the surrounding environment. These forces have considerable influence on the companys marketing system. They relate to : (a) demography, ( b) economic conditions, (c) social and cultural forces, (d) legal and political forces, (e) science and technology, (f) competition and (g) ecology. These external forces, which influence marketing opportunities, consumer behaviour and business action must be reflected in marketing policies , plans, strategies, programmes and decisions.  Micro-environmental factors are closely related to a specific company and are included as part of the firms total marketing system. They are the suppliers, marketing intermediaries; companys marketing organizations and the market or customers. (b) The internal forces or non-marketing resources of the firm consist of two groups. Viz (i) corporate resources (human and non-human) ie, financial and personnel capability. R & D strength location of the business, public image, etc, and (ii) the components of marketing mix a combination of inputs that constitute the core of a companys marketing system, viz., the product, the price structure, the promotional activities and the physical distribution system. To these should also be added two more factors: perception and persistence (the 6 Ps).

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(A)MACRO ENVIRONMENT Macro Environmental Forces 1. Demography 2. Economic conditions 3. Social and cultural forces 4. Legal and political forces 5. Science & technology 6. Competition 7. Ecology

Suppliers

Marketing intermediaries

Company s marketing organisation

Customer or market

The external environment of a firm The internal forces are generally controllable, and known as controllable factors. By successfully assigning different roles to these ingredients, the company is able to influence purchases. A. External forces of Marketing Environment: The Macro-environmental factors The various external forces of marketing environment are (a) Demography (c) Social and cultural forces (e)Science and technology (g)Ecology (b)Economic conditions (d) Legal and political forces (f) Competition

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(a) Demography It consists of the details about population structure, age-groups, sex-distribution, income brackets, occupations, etc. and its area distribution. Without knowing this, the marketer cannot market his product successfully because it is the poor whose needs have to be satisfied, keeping in view their wherewithal to spend, and their willingness to spend. Demographic study offers consumer profile which is essential in market segmentation and determination of target markets.
Company s marketing mix (6Ps) 1. Product planning 4. Physical 2. Price structure 5. perception 3. Promotional structure 6. persistence

Non-marketing resources in the firm 1. Production 4. Location of business 2. Financial resources 5. Research or 3. Personnel capabilities 6. Public image development

Companys marketing mix and non-marketing resources (b) Economic conditions Economic conditions influences the marketing organisation and marketing both directly and indirectly, Directly these conditions affect marketing because such organizations are themselves a part of the market place. In order to produce goods and services they must first buy and consumer goods and services ( such as raw materials and labour) and the prices of these are determined by economic conditions.

Indirectly, these conditions influence the individual consumers in the market place when they purchase products and services, for consumer habits are affected by economic conditions.

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The market or customers

Marketing plans and programmes are also influenced by such other economic factors as the interest rates, money supply, price level, consumer credit, etc Prosperity, recession, inflation, scarcity and stagflation also influence both the marketing place and marketing; prosperity and recession refer to the general state of economy: inflation, scarcity and stagflation are specific conditions that affect the economy of a nation. Each of these economic conditions may create an opportunity or threat to an industry. (c) Social and cultural forces The socio-cultural environment is a broad term, encompassing within its fold the economic, political, legal and technological forces. The people and their values and social patterns-life-styles, social values, beliefs, desires, knowledge, etc are the fundamental elements that shape the nations economy, politico-legal system and the technology used. There are three aspects of social environment:

a) Changes in life-style and social values of the people: i. ii. Changing role of women ( from that of a house wife to a worker): Shift from a thrift and savings ethnic to spending freely and buying on credit iii. iv. Emphasis on quality of goods instead of quantity of goods Greater reliance on government and other institutions instead of self reliance v. Sexual freedom and belief in permissive society rather than in sex chasitity vi. vii. Greater preference to recreational facilities rather than work Immediate gratification instead of postponed gratification.

b) Major social problems : i. ii. iii. iv. v. greater concern for our natural environment need for safety in occupations and products conservation of irreplaceable resources marketing to slum and rural areas and other low-income group people Maintenance of an ethical and socially responsible marketer.
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(c)Growing consumerism indicating consumer dissatisfaction since 1960. The social and cultural forces usually influence the welfare of a business concern in the long run. The society is always dynamic with changing social norms and valuesas a result of which ever-increasing new demands are created, whereas the old ones go into oblivion. To cope with these changes, marketing management is required to make necessary adjustments in its marketing programme and procedures. (d)Legal and political forces or public policy The marketing environment contains political, legal and regulatory forces / policies including network of laws and regulations, policy decisions, government bureaucracy, government planning and legislative enactments and processes. All these are referred to as the public policy environment. Public policy is determined by the complex interaction of legislative committees, government agencies, special interest groups (such as industries, trade unions, consumer advocates, etc ) and the general public. It is necessary that marketer must understand the impact of these forces and policies. (e)Science and technology Science and technology is the knowledge of how to accomplish tasks and goals most efficiently. Technological knowledge arises from research and has a great impact on society an on the marketing decisions and activities. (f)Competition Competition is regarded as essential to a healthy market and a democratic society, for then there are many small firms which complete for business, rather than only one firm. This situation is known as perfect or pure competition. This type of competition is preferred because concentration of power in one company (monopoly) or only in a few companies (oligopoly) can lead to practices that are harmful to both the economic and the political well-being of a society. In pure competition the economist thinks of an ideal market structure. The assumptions underlying pure competition are:
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(1) Product homogeneity: product offered to the market by all suppliers are exactly alike. (2) Rational consumers: consumers act so as to maximize their total satisfaction, given their wants and buying power levels which are stable. (3) Rational suppliers: producers act as to maximize their profits; they do this by making price changes since their products are exactly like the product of every other supplier. No other marketing effort is necessary (4) Perfect knowledge; both suppliers and consumers have full, complete and accurate knowledge of all prices and market conditions that obtain this knowledge instantaneously at no cost. (5) Market stability; there are so many producers and consumers that no individual can affect supply or demand curves, if no major disruptions (e,g) natural disaster, war, explosive population growth) occur. (6) Perfect mobility of resources: there are no barriers to entry into market; no scale economies, government licenses, cost or time lapses. (g) Ecology It is the study of relationship between living things and their surroundings. In a marketing context, it means the way in which the marketer, the producer and the consumers relate to the environment, especially so far as the utilization of natural resources are concerned. (B)MICRO ENVIRONMENT: Micro-environment implies the factors and forces in the immediate environment which affect the companys ability to serve its market. These factors are given below:  Suppliers  Market intermediaries  Customers  Competitors  Public

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(a) Suppliers Suppliers provide resources that are needed by the company. The company should go for developing specifications, searching the potential suppliers, identifying and analyzing the suppliers and thereafter choose those suppliers who offer best mix of quality, delivery reliability, credit, warranties and obviously low cost. The developments in the suppliers environment have a substantial impact on the marketing operations of the company since supply planning has become more important and scientific in recent years. (b) Market intermediaries Market intermediaries are either business houses or individuals who come to the aid of the company in promoting, selling and distributing the goods to the ultimate consumers. They are middlemen (wholesalers, retailers, agents) distributing agencies, market service agencies etc. 1. Middlemen come into being to help overcome the discrepancies in quantities, place, time, assortment and possession that would otherwise exist in a given condition. 2. It is advantageous and efficient to work through the established marketing channels instead of creating one and thus going for experiments 3. Of course, it is not easy to select and work with middlemen but the marketing managers must ensure an effective management and satisfaction of marketing channels to enlist their long-lasting support on better terms. 4. The marketing managers have to decide the most cost-effective models of transportation and balancing the considerations of cost, delivery, speed and safety. 5. The marketing management has also to constantly review the performance of both middlemen and others helping its efforts periodically, if necessary, it may take recourse to replacement of those who no longer perform at the expected level.

(c) customers The target market of a company is usually of the following five types:
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 Customer market; individuals and house holders  Industrial market; organizations buying for producing (manufacturing) other products and services for the purpose of either earning profits or fulfilling other objectives or both.  Reseller market; organizations buying goods and services with a view to sell them to other for a profit. These may be selling intermediaries and retailers.  Government and other non profit market; those buying for goods and services in order to produce public services. They transfer these goods and services to those who need them for consumption in most of the cases.  International market; individuals and organisations of nations other than homeland who buy for either consumption or for industrial use or for both. They may be foreign consumers, producers, resellers and governments. (d) Competitors No company stands alone in serving and satisfying the needs of a customer market, it faces competition. It is therefore, necessary to build an efficient system of marketing. This helps the company in facing a host of competitors with confidence and of course with better results. Identification of competitors is of utmost importance. Therefore these competitors need monitoring. This is not all. The company in order to come out successfully has to adopt means which may help it to outmaneuver the competitors and then capturing the customers loyalty is not enough. The loyalty so earned has to be maintained. For this purpose, the company has to maintain such a marketing system which may be able to maintain the loyalty for a long run. The competitive environment consists of certain basic things which every marketing manager has to take note of Philip Kotler is of the opinion that the best way for a company to grasp the full range of its competition is to take the viewpoint of a buyer. What does a buyer think about that which eventually leads to purchasing something?. Kotler has also explained the types of competition (Desire, Generic form and Brand competitions) and has summarized by pointing out that a company must keep four basic dimensions in mind, which can be called the four Cs of market positioning. It must consider the nature of the customers, channels,

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competitors, and its own characteristics as a company. Successful marketing is a matter of achieving an effective alignment of the company with customers, channels and competitors. (e) Public The actions of the company do affect the interest of other groups also. These other groups are those who form general public for the company who must be satisfied along with the consumers of the company. A public is defined as any group that has an actual or potential interest in or impact on a companys ability to achieve it objectives. Public relations are certainly broad marketing operations which must be fully taken care of. To build such goodwill and to seek favorable response, it is very much necessary to satisfy the public as well. Kotler, Companies must put their primary energy into effectively managing their relationships with their customers, distributors and suppliers, their overall success will be affected by how other public in the society view their activity. Companies would be wise to spend time monitoring all their public understanding their needs and opinions and dealing with them constructively.

MARKETING INTERFACE WITH OTHER FUNCTIONAL AREAS (OR) INTER-RELATIONSHIPBETWEEN AREAS: An organisation is definitely a whole but is constituted by individual functional activities. The success of a firm therefore depends largely on continued cooperation of various departments. Thus, it is essential to analyze, the inter-relationship between marketing and other departments in an organisation. The relationship of various departments may be suggested as follows: MARKETINGAND OTHER FUNCTIONAL

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Corporate planning

Marketing planning

Manufacturing Administration Financial

General objectivesPersonnel of the firm

General management activities and over all control Marketing inter-relationships with other functional areas. (a)Marketing and manufacturing If a firm is to be successful, continued cooperation and communication is needed between marketing and manufacturing departments. Manufacturing for instance may be working on full to keep productivity targets. So long as the volume of sales is right, there may not be problems. But when marketing is incapable of absorbing excess production of the manufacturing the problem begins. The manufacturing might have done this perhaps to keep the cost minimum. But such cost benefits will be offset by additional cost to be incurred by marketing to sell those additionally produced units. (b)Marketing and financing The finance department is responsible for the efficient management of money. It sells limits both for marketing and manufacturing departments. For instance, finance may not be interested in involving in too many bad debts and hence may restrict the credit sales. Marketing definitely has
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to adhere to this if objectives set by of marketing and manufacturing. (c)Marketing and personnel

the finance department are to come true. But financial

control system should not be imposed so rigidly that they hinder the operations and development

All firms are social organizations composed of individuals. The prosperity of the firm largely depends on the efforts of human beings it employs. Marketing particularly is dependent on getting the right personnel in jobs requiring persuasive abilities. This is highly essential in case of jobs such as sales, distribution, promotion etc. thus a high degree of cooperation between marketing and personnel is necessary. The foregoing analysis stresses the fact that marketing is the running thread through all the departments of an organisation. It must ensure cooperation from other departments. MARKETING IN GLOBAL ENVIRONMENT GLOBAL PROSPECTS AND CHALLENGES: Fundamentals of international marketing When a business crosses the borders of a nation it becomes complex. International marketing involves all the activities that form part of domestic marketing. An enterprise engaged in international marketing has to correctly identify assess and interpret the needs of the needs of the overseas customers and carry out integrated marketing to satisfy those needs. At the same time, there are several characteristics that are unique in international marketing. Environmental and cultural dynamics of global markets The environmental and cultural dynamics of the markets of different countries can be understood only by studying the respective people, their patterns of life, their tradition, their social interactions, their sensibilities their faiths and fancies. In other words the international marketer has to become a native in the foreign land. Multinational enterprise must function in a world of contrasts: old and new, primitive and modern, pious and agnostic, unutterably beautiful and sickeningly squalid, educated and ignorant, progressive and stagnant, sophisticated and nave-all in constant agitation. To interpret
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this volatile diversity, to make sense of this apparent chaos, we must try to identify the underlying forces-the prime movers-which produce the global dynamics. Main functions in international marketing Let us briefly touch upon the main functions involved in international marketing. They are : y y y y y y y y Choosing the basic route for global marketing Market selection and product selection Selection of distribution channels Developing pricing strategy International marketing communication Mastering the procedural complexities organisational adaptations Handling business ethics

Choosing the basic route A properly conceived entry strategy is the starting point. There are five basic routes to enter a foreign market: y y y y y Exports Licensing of technology and knowhow Multinational trading Joint venture Full-fledged global operation

Market selection and product selection The opportunities afforded by the various overseas markets must be carefully evaluated, keeping in view the resources distinctive capabilities and constraints of the firm, market segmentation and market targeting are concepts as useful in international marketing as they are in domestic marketing. Through careful market selection, the opportunities can be fully exploited and the risk involved in international business minimized.

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Product selection is an important as market selection. Quite often, the sheer desire for expansion pushes some firms into international marketing. These firms try to somehow push the products they already have into some foreign markets. Sometimes, a feeble attempt is made to adapt the product to the market, but in most cases, even that feeble attempt is dispensed with. Selection of distribution channels Choice of the right distribution channel in the selected foreign markets is the next task. Some of the possible alternatives in this regard are: y Appointing an importing house of the buying country as the sole dealer/ marketing agency y y y y y Appointing a few selected importers instead of a sole importer Going through an export house of ones own country Operating ones own branches in the foreign countries Operating subsidiary companies in foreign countries Tie-up with a multinational marketing firm

Pricing Basically the principles and techniques of pricing are the same in domestic and international marketing. Firms, which have only a short-term interest in the foreign markets, may opt for a cost plus pricing strategy. But firms with long-term interests cannot blindly follow this strategy. Instead they have to necessarily adopt a market-oriented pricing policy. Many Japanese firms have built markets worldwide, starting with a low price-low margin strategy, with the sole intention of penetrating the market and building up volumes and market shares. They establish their products / brands through such a strategy and only later they use them to bring home profits. For instance, Sony of Japan while launching the portable stereo. Walkman consciously priced it very low to ensure that it was affordable to the youth worldwide. In some other cases, pricing is used to counter a formidable global competition.

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Marketing communications In domestic marketing, a marketer is appealing to people who are better known to him using a known language, known symbols and familiar media. But an international marketing he has to tackle unfamiliar people, strange language and imagery unfamiliar media and unfamiliar purchase motivation. Broadly, the media choice has to be from among: y y y Transnational media offering multinational coverage National media of the chosen country Local media in chosen market segments

Mastering the procedural complexities The international businessman is required to master a variety of procedural complexities covering a variety of areas like export-import licenses, customs, foreign exchange, modes of payment, documentation (invoices and other documents), shipping/air freight procedures, insurance regulations, quality regulations and packaging regulations. Organizational adaptations The shift from domestic to international marketing involves a great deal of organizational adjustments as well. An international marketing organization needs people with a good deal of knowledge in fields such as finance and currency, international banking, taxation, tariffs and quotas. In addition to people proficient in such technical aspects, international marketing also requires certain changes in management attitudes, outlook and approaches. Handling Business Ethics Ethical aspects of business also pose problems to the international business firm. What passes as an accepted business custom in one country may be an instance of gross violation of business tradition in another. The marketer cannot refer to any ready reckoned in identifying these dos and donts of business practices in the various nations. He can gain an insight into this sensitive area only through a first-hand study of the business environment of the concerned foreign market.

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ISSUES INDIAN FIRMS HAVE TO RECKON IN GLOBAL MARKETING In the preceding section, we provided a brief account of the fundamentals of international marketing. With this background, let us now turn to the issues unique to Indian firms in their efforts at global marketing. These issues fall under two heads: (i)Indias competitive advantage as a nation (ii)Competitive advantage of the individual firm

(a) Indias Competitive Advantage as a Nation Just as individual business units shave their competitive advantage, entire nations also have their competitive or comparative advantage in the global business context. So, companies going global have to size up their national competitive advantage and develop their strategies on the strength of this competitive advantage. It would be useful to capture briefly the fundamentals of the concept of competitive advantage of nations before going into a specific discussion on Indias competitive advantage. (b) The Concept of Competitive Advantage of Nations Michael Porter of the Harvard Business School deals extensively with this concept in his book, Competitive Advantage of Nations. Competitive advantage of nations is not a vague idea. Nations do demonstrate in concrete terms their superiority in select industries. As in the case of enterprises, nations to build competitive advantage in different industries.

(c) Attributes that Decide a Nations Competitive Advantage Probing into the mechanics of building a nations competitive advantage. Porter finds certain specific attributes that account for it. Endowment of natural resources by itself does not confer any significant competitive advantage, though they are facilitating factors in the process. Porter asserts that four broad attributes of a nation shape its competitive advantage.

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(d) As a nation India lack competitiveness In most of the important determinants of national competitive advantage, India lags behind. Though in the availability of skilled manpower, India is better off, her rating in the area of infrastructure is at rock bottom. When we consider the attribute of demand, in most sectors, it was never given free play it was artificially pegged at given levels by the government policies governing overall investment. The result is that in many industries, India does not have business firms with world-scale operations.

(e) Global Competitiveness Report of the World Economic Forum The Global Competitiveness Reports released by the World Economic Forum (WEF) at regular intervals provides an objective assessment of the comparative business environments of the major nations. The various economies are ranked on eight broad dimensions of the economic environment: openness to trade and investment, the role of the state, strength in finance, infrastructure, technology, management, labour and civil institutions. (f) Competitive advantage of the individual firm Competitive advantage of the individual firm is another factor to be reckoned in formulating global strategies. In fact, it is the competitive advantage of the individual firms concerned that will finally decide the choice of strategies for global markets. The competitive advantage of the firm has to serve as the backup for its strategy formulation and execution. Other problems / Nuances Conducting international advertisement campaigns While discussing the basics of international marketing at the beginning of this chapter, we saw that marketing communications is one area that bristles with complexities due to the cultural dynamics of different markets. Handling an international advertising campaign is a very difficult task.

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a) Problem of transferability of advertisements A successful advertisement in one country cannot be simply copied and transferred to another countrys market without understanding its peculiarities and the nuances of its language. The history of international marketing is replete with instances of wrong advertising damaging an otherwise good marketing programme. b) Death of multinational media Media that are truly multinational are few. The vastness of the territory involved in international marketing and the limited territorial reach of various media vehicles adds to the complexity of multinational advertising. Periodicals, radio and TV are the main media that reach several countries simultaneously. But among periodicals, there are not many which have an international coverage.

c) Handling host governments who are becoming bargainers At the beginning of this chapter while discussing the issues in cultural dynamics, we saw that one universal task for the MNC is to handle the governments of host countries. Many nations are undergoing political and economic transformation. The entry of Pepsi into the Indian market is a good example of and MNC strategically unifying its interests with the demands of the host government. Since exports were a major concern for the host government, Pepsi was careful to highlight its commitment to stand by the export obligation. Pepsis image as a partner in the programmes of the government and the life of the Indian society was played up to great advantage.

d) Going global no easy task Globalization implies that individuals Indian companies have to achieve a global presence by getting access to different markets of the world matching their global competitors in every respect. Indian companies with global ambitions will have to take on the worlds best and be as good as the best company operating in the chosen field.

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Unit-2 MARKETING STRATEGY

STRATEGY According to Michael E.Porter Strategy is a combination of the ends for which the firm is striving and the means by which it is seeking to get there. Characteristics of Strategy 1. Strategy is a comprehensive and integrated plan that determines an organization objectives and the broad direction in which the organization will move. 2. Strategy serves as a link between the organization and its external environment. Strategic decisions are primarily concerned with external forces. 3. Strategic serves as the guide for the allocation and utilization of an organization resources. 4. Strategy making is primarily the responsibility of the top management though people at all levels provide inputs for strategic decisions.

Characteristics of Marketing Strategy 1. External Market orientation 2. Long term Perspective 3. Empirical research 4. Marketing Information system base 5. Entrepreneurial thrust 6. Interdisciplinary approach

STRATAGIC FORMULATION Strategy is a game plan for getting there. Every business must design a strategy for achieving its goals, consisting of a marketing strategy and a compatible technology strategy and source in strategy.

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PORTERS GENERIC STRATEGY

Overall cost leadership This generic strategy calls for being the low cost producer in an industry for a given level of quality. The firm sells its products either at average industry prices to earn a profit higher than that of rivals, or below the average industry prices to gain market share. Firms that succeed in cost leadership often have the following internal strengths:
y

Access to the capital required to make a significant investment in production assets; this investment represents a barrier to entry that many firms may not overcome.

Skill in designing products for efficient manufacturing, for example, having a small component count to shorten the assembly process.

y y

High level of expertise in manufacturing process engineering. Efficient distribution channels.

Differentiation A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition. Firms that succeed in a differentiation strategy often have the following internal strengths:
y y

Access to leading scientific research. Highly skilled and creative product development team.

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Strong sales team with the ability to successfully communicate the perceived strengths of the product.

Corporate reputation for quality and innovation.

Focus The focus strategy concentrates on a narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. The premise is that the needs of the group can be better serviced by focusing entirely on it. A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly. Because of their narrow market focus, firms pursuing a focus strategy have lower volumes and therefore less bargaining power with their suppliers. However, firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitute products do not exist.

STRATEGIC ALLIANCES Many strategic alliances take the form of marketing alliances. These fall in to four major categories. i. Product or service alliances One company licenses another to produce its products or two companies jointly market their complementary products are a new products. Ex: The credit card industry is a complicated combination of cards jointly marketed by banks such as Bank of America, credit cards companies such as Visa, and affinity companies such as Alaska Airlines. ii. Promotional alliances One agrees to carry a promotion for another companys product or services. Ex: McDonalds teamed up with Disney for ten years to offer products related to current dismay films as part of its meals for children. iii. Logistic Alliances One Company offers logistical services for another companys product. Ex: Abbott Laboratories warehouse and delivers 3Ms medical and surgical products to hospitals across the United States.

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iv.

Pricing Collaborations One or two companies join in a special pricing collaboration. Hotels and rentals car companies often mutual price discounts.

KEY DRIVES OF MARKETING STRATEGIES: Identification of strategic marketing capabilities of the organization involves following steps. 1. Internal Analysis Internal analysis enables the strategic marketer to take informed and intelligent decisions for attaining competitive advantage. The core capabilities of an organization include its special knowledge and skills, and the business processes used to deliver value to consumers and other stakeholders. Several techniques are used internal analysis e.g. marketing audit, value chain, strategic advantage profile, SWOT analysis. 2. Identifying competitive advantage An organization can achieve a competitive advantage by placing between its capabilities and opportunities while providing superior value to customers. There are three elements of competitive advantage i. Sources of advantage: Superior skills and superior resources are the two main sources of competitive advantage for an organization. ii. Positional advantage: Superior customer value and lower relative costs provide positional advantage to an enterprise. iii. Performance Outcomes- The performance of an organization is reflected in customer satisfaction, customer loyalty, market share, and profitability. 3. Market selection Market selection involves market segmentation. The process of market segmentation leads to matching customer needs with the expected products benefits which leads to creation of product-market segments, products-market definition and the identification of related competition in that segment. The target market which is defined to have specific needs, money, and willingness to spend money must be segmented, targeted and positioning for reaping the benefits of appropriate marketing opportunities.

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STRATEGIES FOR INDUSTRIAL MARKETING

INDUSTRIAL MARKETING Industrial marketing is the marketing of goods and services from one business to another. Industrial goods are those which are used in Industry for producing a Different end product from one or more raw materials. The word "industrial" means machinery run by power to produce goods and services. But "industrial marketing" is not confined to these types of business activities. Broadly, marketing could be split into consumer marketing (B2C "Business to Consumer") and industrial marketing (B2B "Business to Business").

B2B Business to Business (or "Industrial") Typical examples of a B2B selling process are...
y

An organization is seeking to build a new warehouse building. After carefully documenting their requirements, it obtains three proposals from suitable construction firms and after a long process of evaluation and negotiation it places an order with the organization that it believes has offered the best value for money.

An organization has significant need for legal services and obtains submissions from two law firms. Analysis of the proposals and subsequent discussions determines that there is no price advantage to placing all of the work with one firm and the decision is made to split the work between the two firms based on an evaluation of each firm's capabilities.

A sales representative makes an appointment with a small organization that employs 22 people. He demonstrates a photocopier/fax/printer to the office administrator. After discussing the proposal with the business owner it is decided to sign a contract to obtain the machine on a fully maintained rental and consumables basis with an upgrade after 2 years.

The main features of the B2B selling process are...

Marketing is one-to-one in nature. It is relatively easy for the seller to identify prospective customers and to build a face-to-face relationship.

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Highly professional and trained people in buying processes are involved. In many cases two or three decision makers have to be considered in purchasing industrial products.

y y y

High value considered purchase. Purchase decision is typically made by a group of people ("buying team") not one person. Often the buying/selling process is complex and includes many stages (for example; request for expression of interest, request for tender, selection process, awarding of tender, contract negotiations, and signing of final contract).

Selling activities involve long processes of prospecting, qualifying, wooing, making representations, preparing tenders, developing strategies and contract negotiations.

B2C Business to Consumer (or "Consumer") Examples of the B2C selling/buying process are...

A family are at home on a Sunday night and are watching television. An advertisement appears that advertises home delivered pizza. The family decides to order a pizza.

Walking down a supermarket aisle, a single managed in his early 30's sees a hair care product that claims to reduce dandruff. He picks the product and adds it to his shopping cart.

A pensioner visits her local shopping mall. She purchases a number of items including her favourite brand of tea. She has bought the same brand of tea for the last 18 years.

The main features of the B2C selling process are...

y

Marketing is one-to-many in nature. It is not practical for sellers to individually identify the prospective customers nor meet them face-to-face.

y y y y y y

Lower value of purchase. Decision making is quite often impulsive (spur of the moment) in nature. Greater reliance on distribution (getting into retail outlets). More effort put into mass marketing (One to many). More reliance on branding. Higher use of main media (television, radio, print media) advertising to build the brand and to achieve top of mind awareness.
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SERVICE MARKETING: Service marketing Services marketing are a form of marketing which focuses on selling services. Services can be tricky to sell and the marketing approach for them is much different than the approach for products. Some companies offer both products and services and must use a mixture of styles; for example, a store which sells computers also tends to offer services such as helping people select computers and providing computer repair. Such a store must market both its products and the supporting services it offers to appeal to customers.

CATEGORIES OF SERVICE MIX 1. Pure tangible good

2. Tangible good with accompanying services

3. Hybrid

4. Major services with accompanying minor goods and services.

5. Pure services.

DISTINCTIVE CHARACTERISTICS OF SERVICES: 1. INTANGIBILITY:

2. INSEPARABILITY:

3. VARIABILITY:

4. PERISHABILITY:
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MANAGING SERVICE QUALITY:

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STRATEGIC MARKETING MIX COMPONENTS Marketing mix is a set of marketing tools that the firm uses to pursue its marketing objectives in the target market. Mc Carthy classified these tools into four broad groups that he called the four ps of marketing, product, price, place, and promotion. Marketing-mix decision must be made for influencing the trade channels as well as the final consumers. Figure 2 shows the company pre paring an offering mix of products, services, and prices, and utilizing a promotional mix of sales promotion, advertising, sales force, public relations, direct mail, telemarketing, and internet to reach the trade channels and the target customers. Typically, the firm can change its price, sales force size, and advertising expenditure in the short run. It can develop new products and modify its distribution channels only in the long run. Thus the firm typically makes fewer period-to-period marketing mix changes in the short run than the number of marketing-mix decision variables might suggest. Robert Lauterborn suggested that the sellers four ps correspond to the customers four cs. Four ps Product Price Place Promotion four cs Customer solution Customer cost Convenience Communication

Marketing Mix

Target Market Product Product variety Quality Design Features Brand name Price List Price Discounts Allowances Promotion

Place Channels Coverage Sales promotion Assortments Advertising Sales force

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Promotion Mix
Sales Promotion

Advertising

Products Sales force Company Services

Distribution channels

Distribution channels

Offering Mix
Prices

Public Relations

Direct mail, telemarketing and internet

Main Aspects of Marketing Mix The easiest way to understand the main aspects of marketing is through its more famous synonym of "4Ps of Marketing". The classification of four Ps of marketing was first introduced and suggested by McCarthy (1960), and includes marketing strategies of product, price, placement and promotion. The following diagram is helpful in determining the main ingredients of the four Ps in a marketing mix. 1. PRODUCT: In simpler terms, product includes all features and combination of goods and related services that a company offers to its customers. So the Air bus product includes its body parts such as the engine, nut bolts, seats, etc along with its after-sales services and all are included in the product development strategy of the Airbus.

However, a serious criticism can be raised here in terms of how marketing mix analysis will cater for companies such as ABN Amro Bank, Natwest Bank, British Airways and Fedex Corporation as they don't possess tangible products. It was argued that is it feasible to omit
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service-oriented companies with the logic that the term "services" does not start with a "P", however, it was asserted that these companies can use the terminology of "service products" under marketing mix strategy making (Kotler & Armstrong, 2004).

Lazer (1971) argued that product is the most important aspect of marketing mix for two main reasons. First, for manufacturers, products are the market expression of the company's productive capabilities and determine its ability to link with consumers. So product policy and strategy are of prime importance to an enterprise, and product decisions dictate the scope and direction of company activity. Moreover, the market indicators such as profits, sales, image, market share, reputation and stature are also dependent on them. Secondly, it is imperative to realise that the product of any organisation is both a component and a determinant of the marketing mix as it has a great influence on the other elements of the mix: advertising, personal selling, channels of distribution, physical distribution and pricing. So without proper product policy, a company can not pursue for further elements of marketing mix.

2. PRICING Pricing is basically setting a specific price for a product or service offered. In a simplistic way, Kotler and Armstrong (2004) refer to the concept of price as the amount of money that customers have to pay to obtain the product. Setting a price is not something simple. Normally it has been taken as a general law that a low price will attract more customers.

It is not a valid argument as customers do not respond to price alone; they respond to value so a lower price does not necessarily mean expanded sales if the product is not fulfilling the expectation of the customers (Lazer, 1971).Generally pricing strategy under marketing mix analysis is divided into two parts: price determination and price administration (ibid).

Price determination is referred to as the processes and activities employed to arrive at a price for a product including consideration of relative prices of products within the same line, and differences in price for similar products of differing grades and qualities.

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Price administration is referred to as the activities involved in fitting basic prices to particular sales situations such as geographic locale, functions performed by customers, position of distribution channel members, or special sales situations. An example of this is special discounted prices at, for instance, GAP, NEXT etc or Coca ColaandPepsiwheredifferent prices are set in different geographical areas considering the difference in patterns of usage as well as varying advertisement costs.

3. PLACEMENT Placement under marketing mix involves all company activities that make the product available to the targeted customer (Kotler and Armstrong, 2004). Based on various factors such as sales, communications and contractual considerations, various ways of making products available to customers can be used (Lazer, 1971). Companies such as Ford, Ferrari, Toyota, and Nissan use specific dealers to make their products available, whereas companies such as Nestle involve a whole chain of wholesaler retailers to reach its customers.

On a general note, while planning placement strategy under marketing mix analysis, companies consider six different channel decisions including choosing between direct access to customers or involving middlemen, choosing single or multiple channels of distributions, the length of the distribution channel, the types of intermediaries, the numbers of distributors, and which intermediary to use based on the quality and reputation (Proctor, 2000)

4. PROMOTION Promotional strategies include all means through which a company communicates the benefits and values of its products and persuades targeted customers to buy them (Kotler and Armstrong, 2004). The best way to understand promotion is through the concept of the marketing communication process. Promotion is the company strategy to cater for the marketing communication process that requires interaction between two or more people or groups, encompassing senders, messages, media and receivers (Lazer, 1971). Taking the example of Nokia, the sender of the communication in this case is Nokia, the advertising agency, or both; the media used in the process can be salesmen, newspapers, magazines, radio, billboards, television and the like. The
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actual message is the advertisement or sales presentation and the destination is the potential consumer or customer, in this case mobile phone users.

Limitation of Marketing Mix Analysis (4Ps of Marketing) Despite the fact that marketing mix analysis is used as a synonym for the 4Ps of Marketing, it is criticized (Kotler & Armstrong, 2004) on the point that it caters seller's view of market analysis not customers view. To tackle this criticism, Lauterborn (1990) attempted to match 4 Ps of marketing with 4 Cs of marketing to address consumer views: Product Price Placement Promotion - Customer Solution - Customer Cost -Convenience -Communication

COMPETITOR ANALYSIS

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SELECTING COMPETITORS

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Unit-3 PRODUCT PLANNING AND DEVELOPMENT

PRODUCT A product is central to the marketing operation in any organsiation. The term product has defined in narrow as well as broad sense. In a narrow sense, it is simply a set of tangible physical and chemical attributes assembled in an identifiable and readily recognizable form.

According to Kotler. A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or a need.

THE PRODUCT CONCEPT

The term product concept was used by Theodore Levitt. According to him. It refers to the augmented product or the aggregate of satisfactions that a user obtains. He explains this concept thus: When and industrial marketer sells a major item of machinery, it may augment the product in several ways. A diesel engine manufacturer might i. ii. iii. iv. Provide long term financing Assure a constant supply of maintenance and replacement parts Guarantee the performance of engine for specified period Make technicians available to advise the customer on the installation and use of the product, and v. Train the customers people who actually will operate the engine. The customer does not just buy a diesel engine; the customer purchases an augmented product-a product augmented by financial warranty, service and training benefits.

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THREE DIMENSIONS OF PRODUCT

The product concept has three dimensions as shown in this Fig

Consumer Dimension

Managerial Dimension

Core product

Social dimension

(a) Managerial Dimensions Which include the total product that the marketer puts in the market (i) the core product ( or service), which has certain identifiable characteristics and functions that distinguish it from other products or services; (ii) the related product features such as brand name, package type, safety components, etc.; (iii) the related product services such as delivery, installation, maintenance and repair, and warranty etc. since in marketing operations the product plays and important part the marketing management is involved in formulating product strategy-which sets down the objective of offering the product that balances or satisfies the needs of the consumers. (b) Consumer dimensions Consumer buys a product in the hope that it will satisfy his needs and expectations. A product conveys a message indicating a bundle of expectations to a buyer as in the case of tooth paste. If the expectations are fulfilled, its repeat demand is the result. The idea is that to the consume, the total benefits received from the products are important. These may take a tangible form (warmth or shelter) or an intangible form (status, glamour, knowledge)

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(c) Social dimensions Which presume that the society too is offered desirable or salutary product- which brings not only and immediate satisfaction but also yields long-run consumer welfare, such as tasty, nutritious eatables, readymade products, conservation and best use of scanty resources, safety to users, quality of life, concern for a cleaner and better environment etc.,

LAYERS OF PRODUCT The product has got different layer like onion and each of the layers contributes to the total product image. According to kotler product has five layers which must be distinguished, these layers are: 1. Core benefits 2. Basic product 3. Expected product 4. Augmented product and 5. Potential product 1. Core product It is the central layer of a product as it represents a bundle of benefits to its prospective buyer; the core product answers the question: What is the buyer really buying? For instance, a woman buying a washing machine is buying comfort and not a mere collection of drum, heater and nuts and bolts for their own sake; and a woman buying a lipstick is buying hope and not a set of chemical and physical attributes for their own sake. The basic job of a marketer is to sell the core benefits. 2. Basic product It is the larger packaging of a core product. The basic product is what the larger market recognizes as the offer. For instance, washing machine is recognized as collection of drum, heater, nuts and bolts; and lipstick as collection of chemical and physical elements, etc. 3. Expected product There is always certain expectation in the mind of customer about the product attributes like its features (shape, size, space etc) style (model, look etc) quality and brand (Name of company,

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Product) package (cartoon, plastic, corrugated etc) quality control, maintenance or service feature. 4. Augmented product It refers to the aggregate of satisfaction that a user obtains. It represents the totality of benefits that a person may receive or experience in getting the formal product. The augmented product of a T.V seller is not only the T.V but also the delivery, guaranteed, installation, service and maintenance etc. 5. Potential product The last layer product is its potential part, ie all the unexpected changes in technology, attributes, features, styles, colour, grade, quality etc that might change the structure and character of industry, for example, today changes in information technology have brought about changes in the processing speed of computers (8-bit, 16-bit,32-bit,64-bit.etc and 100 MHz 200 MHz, etc). This has made us to anticipate even reduction in the size of computers- a pocket computer. However till today it is still a potential part of the product (computed)

PRODUCT MIX STRATEGY Most companies whether large or small whether in manufacturing or retailing generally handle a multitude of products and product varieties. In course of time, the companies may expand new lines or contract the old lines, after the existing product or develop new uses for the existing products. These activities involve managerial strategies and policy making with respect to the companys line of products and services.

(a) Product item is a specific version of a product that has a separate designation in the sellers list, for example, Hindustan Motors Ambassador Mark II is a product item. (b) Product lines. A group of products that are closely related either because they satisfy a class of need, or used together are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges or that are considered a unit because of marketing, technical or end=use considerations. (c) Product mix products offered for sale by a firm or a business unit. In other words product mix is the full list of all a products offered for sale by a company.

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For example, kodaks cameras, photographic suppliers, chemicals, plastics and fibers are its product mix: or Tatas Hair oil, cosmetics, locomotives, textiles, iron and steel goods, Mercedes trucks etc are product mix.

PRODUCT LINE DECISION STRATEGIES Taking of decisions about change in product line depends upon a number of factors, such as the preferences of consumers, the tactics of competitors, the firms cost structures and the spillover of demand from one product to another, etc 1. Changes in market demand Changes in market demand may be due to changes in the component of population served. If there is an increase in the number of births the business would like to increase new line so baby products, such as baby food, baby shoes, perambulators, toys etc with other lines. 2. Competitive action and reaction The firm may differentiate its product line to meet price competitions, and save it from unduly low profits,. 3. Marketing influences New product line may be added for two reasons. First, to increase sales by exploiting new market or expanding the present ones, and second, to use the firms capacity more efficiently by a better use of its resources of salesmen, warehouses or branch offices. 4. Product influences A firm may changes its product mix its mix to use its manufacturing capacity more effectively, thereby reducing its net production cost. New line may be added when its production has been discontinued by another firm. To make a better use of the by-products or waste products new lines may be added. 5. Financial influences The firm may add or drop out product line as per its financial resources. The product mix may be expanded to increase a firms profitable sales volume; or a product line may be dropped to meet depression in the market.

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General management activities and over all control A company has several strategies at its disposal with respect to the width, depth and consistency of its product mix. Most of these strategies involve a change in the product mix. Major product line strategies are 1. Expansion of product mix 2. Contraction of product mix 3. Alteration of existing product 4. Development of new uses for existing product 5. Trading up and trading down 6. Product differentiation and market segmentation.

1.Expansion of product mix Expanding the line may be a valid decision if it is in an area in which consumers traditionally enjoy a wide variety of brands to choose from and are accustomed to switching from one to another or if the competitors lack a comparable product or if competitors have already expanded into this area themselves. However, the main limitation in expansion is the availability of sufficient finance time and equipment Expansion in the present product mix may be done by increasing the number of lines or the depth within a line, such new lines may be related or unrelated to the present products. For example, the large provision stores may add drugs, cosmetics and house wares while at the same time increasing their assortments of dry fruits baby foods, detergents etc 2.Contracting or dropping the product This is rather more difficult because much money has already been invested; and therefore as fast as possible, products are allowed to linger on for long until they become a loss, when contraction is decided upon, various alternatives are available to the marketers. 3.Alteration of existing products Sometimes experience may show that improving an existing product may be more profitable and less risky than developing and launching a new product. Alterations may be made either in the designs, size, colour, texture or flavor or packaging or in the use of raw materials or in the advertising appeal, or a quality may be changed.

46

4.Development of new uses for existing products The company may find out new uses for the existing product as when sway or surf may be used not only for washing clothes but also for cleaning the floor, utensils and glass product 5.Trading up and trading down It involves an expansion of the product lines as well as the promotional strategies. 6.Product differentiation and Market Segmentation These strategies are often employed by the firms who wish to engage in non-price competition in markets characterized by imperfect or monopolistic competition,. Since these strategies require large financial involvement in promotional efforts they are usually known as both promotional and product planning strategies.

THE PRODUCT LIFE CYCLE (PLC) Products like people have a certain length of life, during which they pass through different stages. For some the life cycle may be as short as a month while for others it may last for quite a sufficiently long period. The examples may be of a fashionable dress or an electrical appliance In virtually all case decline and possible abandonment are inevitable because 1. The need for the product disappears; 2. A better or less expensive product is developed to fill the same need, or 3. A competitor does a superior marketing job The product life-cycle may move through five stages 1. Introductory, pioneering or development stage 2. Growth or the market acceptance stage 3. Maturity stage 4. Saturation stage 5. Decline stage and death stage 1. Introductory pioneering or Development stage During this stage of the products life cycle, it is put in the market with full scale production and marketing programme. The company is an innovator-may be the whole industry. The product has gone through the embryonic stages of idea screening, pilot models and test marketing. The entire product may be new or the basic product may be will known but a new feature or accessory is in the introductory stage
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2. Growth or the market acceptance stage In this stage, the product is produced in sufficient untidy and put the market without delay. The demand generally continues to outpace the supply. The sales and profit curves rise, often at a rapid rate. Competitors enter in the market in large number if the profit outlook appears to be very attractive. The number of distribution outlets increase, economies of scale are introduced and prices may come down slightly. Sellers shift to buy my brand rather than to buy my product promotional strategy 3.Market maturity stage During this stage sales continue to increase but at a decreasing rate, while sales curve is leveling off, the profits of both the manufacturer and the retailers are starting to decline because of rising expenditure a lowering of prices. Marginal producer, therefore are forced to drop out of the market. Price competition becomes increasingly severe and the producer assumes a greater share of the total promotional efforts in order to retain his dealer. New models are also introduced as manufacturer broaden their line,. Supply exceeds demand for the first time, making demand stimulation essential through advertising and salesmens efforts. 4.The saturation stage During this stage, each of the characteristics mentioned under different stage is intensified. Replacement sales dominate the market. The sales curve reacts to changes in economic conditions. Owners of durables (like automobiles and appliances) are bombarded with pleas to trade in their present possessions for new and improved models, while users of non-durable goods (such as cosmetics and toiletry) are reminded constantly to keep on buying favourite brands. 5.The decline stage The stage is characterized by either the products gradual replacement by some new innovation or by an evolving change in consumer buying behaviour. For example, paper napkins replace linen napkins for being more convenient. The buyers do not buy as much as they did before, new and superior products are being introduced to the market many of which meet the consumers demand and needs more closely. The sales drop off and many of the competitors withdraw from the market. Cost control becomes increasingly important and demand drops. Advertising and other promotional expenditures are drastically curtailed as price is used more and more to obtain business.
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NEW PRODUCT PLANNING AND DEVELOPMENT STRATEGY

According to Stanton, product planning consists of activities which enable producers to determine what should constitute a companys line of products. Product planning is the starting point for entire marketing programme in a firm. It embraces all activities, which enable producers and middlemen to determine what should constitute a companys line of products. Product planning has been defined as the act of marketing out and supervising the research, screening, development, commercialization of new products; the modification of existing line and the discontinuance of marginal or unprofitable items. In other words, product planning involves three important considerations. Viz., I. II. The development and introduction of new products The modification of existing lines to suit the changing consumer needs and preferences; and III. IV. The discontinuance or elimination of unprofitable or marginal products Product plans provision in light of changing market situations.

Product development embraces the technical activities of product research, engineering and design. It requires the collective participation of production, marketing, engineering and research departments.

The scope of product planning and product development activities covers the decision making and programming in the following areas: a. Which product should the firm make and which should it buy b. Should the company expand or simplify its line c. How each item could be more useful d. Is the quality right for the intended use and market e. What brand, package and label should be used for each product f. How should the product be styled and designed and in what sizes and colours and what materials should it produce g. In what quantities should each item be produced, and what inventory control should be established h. How should the product be priced
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The decision to make or buy a product depends upon the managements analysis of several issues, such as the following: a. Relative cost of making or buying b. Extent to which specialized machinery, techniques and production resources are needed. c. Availability of production capacity d. Managerial time and talents required the amount of production supervision needed e. Secrecy of design, style and materials-the extent to which the company wants its processing methods kept secret. f. Attractiveness of the investment necessary to make a product g. Willingness to accept seasonal, cyclical and other market risks h. Risk of depending upon outside resources-will they raise the price cut off relationship. i. Extent of reciprocity present, is the supplier of item also as a customer of the firms other products.

DEVELOPMENT OF NEW PRODUCTS Need for product objectives Before developing a new product the product objectives should be decided. It is the market which accepts or rejects the product and therefore project objectives serve as guide line for product innovation. A firms product objectives are usually oriented towards satisfaction of the customers needs and as the market or its needs change the company adjusts its product accordingly. Need for product policies Product policies are the general rules that management sets up to guide itself in making product decisions. They derive directly from product objectives and should be wholly consistent with them.Production policies can help in evaluating new product ideas by comparing the new product with existing product line in terms of : a. Inter-relationship of demand characteristics: I. The comparative advantages of having a complete line in securing distribution outlets. II. III. Complementary products, where sales of one help generate sales of others; Balancing seasonal demand patterns.
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b. Use of company know-how by spreading a unique competence over multiple products. c. Use of common production facilities d. Use of excess or idle production capacity

e. Use of common distribution channels f. Improving salesmens effectiveness and efficiently by giving them more product to sell on each call; g. Use of common raw materials.

NEW PRODUCTS PLANNING PROCESS New product planning process consists in the creation of new ideas, their evaluation in terms of sales potentials and profitability, production facilities, resources available, designing and production testing and marketing of the product. The main task of the product planners is to identify specific customer needs and expectations and align companys possibilities with the changing market demands. In each of these stages the management must decide: a. Whether to move on to the next stage, b. to abandon the product, or c. to seek additional information The product planning is the function of the top management personnel and specialists drawn from sales and marketing, research and development, manufacturing and finance. This group considers and plans new and improved products in different phases, as given below: 1. Idea Formulation 2. Evaluation or Screening of ideas 3. Concept Development and Testing 4. Business Analysis 5. Product Development 6. Test Marketing

1. Idea Formulation The beginning of a successful product is a creative idea. For the generation of now ideas knowledge about the unfulfilled needs of the consumer, their attitudes, the attributes that may be needed in a product to be of use to the customer, some useful information has to be
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gathered. The step starts with a sound need-oriented analysis and assessment of market opportunities and company resources. For shies purpose a careful inventory of a companys resources along the lines given below has to be made. Every company is unique. As a result of its history, experience, and personnel it has certain strength and certain weaknesses that distinguish it from other organizations. 2.Evaluation or Screening of Ideas The next phase is that of screening of the new product ideas against a per-determined set of criteria. This involves evaluating the companys capabilities with respect to scientific knowledge and engineering skills in terms of possible new products and product improvements. The basic idea is to find out whether and which ideas warrant further study. The screening should be rigorous enough to eliminate poor stuff, but not so rigorous as to eliminate potentially good possibilities. The list of information required in evaluating new product possibilities should be drawn up in such a way as to throw some light on the profit possibilities, the risk and cost of capital involved. Two types of techniques are used for screening new products. Both involve a comparison of potential product idea against criteria of acceptable new products. The first technique is simple check-list techniques; and the second is the rating chart. 3. Business Analysis At this stage the new product ideas are carefully evaluated for their economic worth. Estimates of sales, costs and profits are important components of business analysis, and forecasts of market penetration and market potential are essential. More precise estimates of environmental and competitive changes that may influence the products life cycle or its replacement or repeat sales are also needed to develop and launch a product. A complete cost appraisal (both manufacturing and marketing costs) is necessary besides judging the profitability of the project. While making business analysis, the following questions may be posed: y y y y Is the company capable of developing and producing the product idea? How quickly new facilities for producing a new product could be built up? Does the product fit in with the companys existing product mix and product lines? Is the necessary finance available at terms consistent with a favorable return on investment? y
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4. Test Marketing Often inter-twined with the process of product development is the process of product testing. In broad sense, this involves not only internal laboratory testing of the proposed product in terms of characteristics and pilot testing of production processes but also consumer (or mini-market testing), in which the product is tested under conditions existing, in the field. Test marketing provides these benefits to the marketers: (i) It provides an opportunity to examine a product in a natural marketing environment to obtain a measure of its sales performance. (ii) While the product is being marketed in as limited area, it is possible to identify weaknesses in the product or in the overall marketing plan. (iii) It helps the management to develop a profile of potential customers and their purchasing habits. (iv) It enables marketers to evaluate alternative marketing strategies, if need be. (v)It offers an opportunity to measure consumer reactions to the test product and competing products. 5. Commercialization or Market Introduction This is the last stage, which involves the launching of the product with a full-scale marketing programme. This introduction should be guided by a complete marketing plan which establishes sales, share-of-market, and profit goals for the introductory campaign; map oust the strategic and tactical approaches which are to be taken to reach these goals and provide for the yardsticks by which the results of the introductory programme can be measured and corrective action taken, if necessary. Channels of distribution must be filled with the product and all selling agencies fully informed about the new product, the planned marketing programme and their roles in it.While launching a product in the market, marketer has to make a choice from two alternatives:(i)whether to market to a selected market or to approach the entire market; and (ii) Whether to place the product market-by-market (known as rollout) or to get an immediate entry in the States or national market.

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Overview of the Process Fig. 11.6 provides an overview of the new product development process. At each stage, except for the first and the last, management has three alternative decisions: (1) move the proposed product on to the next stage for evaluation there; (2) terminate (drop from further consideration) the product; and (3) send the proposed product back to an earlier stage for further development or evaluation there.

Product Planning and Development

IDEA FORMULATION

Terminate
SCREENING (Eliminating ideas not having potential value)

Terminate
BUSINESS ANALYSIS (Evaluate economically)

DEVELOPMENT ( Prepare prototype)

Terminate

TEST MARKETING (Determining Revenue producing Ability)

Terminate

COMMERCIALISATION (Introduce product to the market)

Terminate

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Why Product Fail When a product does not bring in adequate profits, as expected, the product is said to fail. Symptoms of product failure include the following; (i)declining sales volume; (ii) declining profit margins; (iii) higher than expected costs; and (iv) higher than expected investment costs. The failure of a product may be traced to the managements neglect in mishandling of the product innovation or the faulty management of the product life cycle. Cundiff and Still classify the causes of product failure into six categories, as below: 1. Product Problems. Neglect of market needs or ignorance of market preferences; defects in product function; poor technical design or external appearance; poor packaging or inappropriate sizes; undependable performance or too high a variation in quality. 2. Distribution and Channel problems. Inappropriate channels of outlets, necessary middlemen, cooperation not obtained; faulty distribution; poor system of physical distribution. 3. Promotional Problems. Inadequate or ineffective promotion; advertising directed towards wrong market segments; use of wrong appeals; failure to coordinate adequately with distribution system; sales force; inadequacies in straining, motivation or supervision. 4. Pricing Problems. Bad forecast of price buyers would pay; price out of line with product quality, poor cost estimates caused asking price to be too high; inadequate margins for the middlemen. 5. Timing Problems. Product introduced too soon or too late, or at inappropriate time. 6. Failure to estimate strength of competitors. So that many product enter the market. The variety of reasons for product failure suggests that new product can be successful in the market if the management possesses high order skills not only in product innovation but also in formulating and implementing marketing strategy. He should first know the customer and then know his products. It is the products or services sold that primarily determine the firms rate of growth or rate of profit and total marketing programme. The failure of new products may be avoided by: i. ii. iii. iv. improved screening and evaluation of ideas and products; Organizational changes; Changes in procedures and communications; Strengthening research and development
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v. vi. vii.

Improvement in production and quality control Improving caliber of personnel working on new-product programmes Guarding against over-engineering an item to the point where its cost make the product non-competitive;

Product modification Product modification involves either changing the product itself or repositioning it by changing its promotional focus. The purpose is either to stimulate new sales or attract new users. A product may be modified in stimulate new sales or attract new users. A product may be modified in various ways through (a) Bringing about functional changes-which enable the product to work better or satisfy additional needs. Such changes should take into consideration a few facts that y y y y The expenses is not prohibitive Duplication by competition is minimal and it should be slow The change appeals to a broad segment of the market and The changes alienates only a small segment of the market

ii, Quality changes under which tactics the quality is upgraded or down-graded either by changing the materials from which it is prepared or by modifying the engineering process. Upgrading involves making the product more attractive while downgrading involves lowering the price of the product to serve an income group the was not served before. iii, style changes, involve changing the appearance of the product Iv, Environmental-impact changes, may be essential because of consumer pressure, or companys commitment to social responsibility. The purpose is either to make the product safe or keep the environment clean and healthy.

Product withdrawal Like adding of lines of product or their improvements, sometimes it also becomes necessary to drop certain product lines. Hence, the product manager must constantly be looking at the entire product line, evaluating the results shown by various products, appraising the opportunities for future profit from each of the line, gathering information and setting yardsticks for the appraisal process and deciding whether or not to change or eliminate products from the line.
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There are certain symptoms which indicate that a product is in trouble are needed to be eliminated or withdrawn. These are: I. II. III. IV. V. VI. VII. VIII. IX. X. XI. XII. Declining absolute sales volume Sales volume decreasing as a percentage of the firms total sales Decreasing marketing share Past sales volumes not unto expected amounts Expected future sales disappointing Future market potential for products or services of this time not favourable Return on investment below minimally accepted level Variable costs exceed revenues Various costs as a percentage of sales consistently increasing Increasingly greater percentage of executive time required Consistent need to lower price to maintain sales Consistent need to increase promotional budget to maintain sales

When a product is to be withdrawn, the company usually adopts these measures. It assesses its work either periodically or on a continuous basis and prepares a guideline for terminating products. The product withdrawal procedure should allow for general phasing out the product and phasing in a new product at the same time. Product policy Product policies are the broad philosophies, general rules set up by the management itself in making product decisions. The fundamental function of a product policy is that it guides the activities of a firm and is measured not only with the current profits, but also with the life of the firm. Product policy is primarily concerned with defining the type, volume and timing of the products a company offer for sales. The product policy of a firm includes the following I. II. III. IV. V. Product planning and development Product mix Product line Product branding, labeling and identification Product style
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VI. VII.

Product positioning Product packaging

LEVELS OF MARKET SEGMENTATION The starting point for discussing segmentation is mass marketing. In mass marketing, the seller engages in the mass production, mass distribution, and mass promotion of one product for all buyers, Henry ford epitomized this strategy when he offered the Model-T Ford in one color, black. Coca-cola also practiced mass marketing when it sold only one kind of Coke in a 6.5 ounce bottle. SEGMENT MARKETING A market segment consists of a group of customers who share a similar set of needs and wants. Rather than creating the segments, the marketers task is to identify them and decide which one(s) to target. Segment marketing offers key benefits over mass marketing. The company can often better design price, disclose and deliver the product or service and also can fine-tune the marketing program and activities to better reflect competitors marketing.. A flexible market offering consists of two parts a naked solution containing he product and service elements that all segment members value and discretionary options that some segment members value. Each option might carry an additional charge. For example, Siemens Electrical Apparatus Division sells metal-clad boxes to small manufacturers at prices that include free delivery and a warranty but it also offers installation, tests and communication peripherals as extra-cost options. Delta airlines offer all economy passengers a seat and soft drinks and charges extra for alcoholic beverages, snacks and metals. We can characterize market segments in different ways; one way is to identify preference segments. Homogeneous preferences exist when all consumers have roughly the same preferences; the market shows no natural segments. At the other extreme, consumers in diffused preferences vary greatly in their preferences. If several brands are in the market, they are likely to position themselves throughout the space and show real differences to match differences in consumer preference. Finally, clustered preferences result when natural market segments emerge from groups of consumers with shared preferences.

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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. For example where as Hertz, Avis, Alamo and others specialize in airport rental cars for business and leisure travelers. Enterprise has attacked the low-budget, insurance-replacement market by primarily renting to customers whose cars have been wrecked or stolen, By creating unique associations to low cost and convenience in an overlooked niche market. Enterprise has been highly profitable. Larger companies such as IBM have lost pieces of their market to nichers : these confrontations have been labeled guerrillas against gorillas. This is happening in the online social networking market, where my space and face book are becoming mature service providers. Basis for segmenting consumer markets We use broad groups of variables to segment consumer markets. Some researchers try to define segments by looking at descriptive characteristics geographic, demographic and psychographic. Then they examine whether these customer segments exhibit different needs or product responses. For example, they might examine the different attitudes of Professionals, blue collars, and other groups toward say, safety as a car benefit. Geographic segmentation Geographic segmentation calls for dividing the market into different geographical units such as nations, states, regions, countries, cities or neighborhoods,. The company can operate in one or a few areas, or operate in all, but pay attention to local variations. For example, Hilton hotels customize rooms and lobbies according to location. Northeastern hotels are sleeker and more cosmopolitans. South western hotels are more rustic. Major retailers such as Wal-Mart; Sears, Roebuck & Co: and kmart all allow local managers to stock products that suit the local community.

Major segmentation variables for customer markets.

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Geographic region

Pacific mountain , west north central, west south central, east north central, east south central south atlantics, middle Atlantic,. New england

City or metro size

Under 5000,5000-20000,20000-50000,50000-100000,100000250000,250000-500000,500000-1000000,10000004000000,4000000-over

Density Climate Demographic size Family size Family life cycle

Urban,suburban, rural Northern, southern Under 6, 6-11,12-19,20-34,35-49,50-64,64+ 1-2,3-4,5+ Young, single young, married, no children, young, married, youngest child under 9-6, married younger child 6 or over; older, married, with children, older, married , no children under18, older single, other

Gender Income Occupation

Male, female Under $10000,$10000-$15000,$15000-$20000, Professional and technical, managers, officials and proprietors, clerical sales, crafts people, foreperson, operatives, farmers, retired, students, homemakers, unemployed

Education

Grade school or less; some high school; high school graduate; some college; college graduate

Religion Race Generation Nationality

Catholic, Protestant, Jewish, Muslim, Hindu, other White, Black, Asian, Hispanic Baby boomers, Generation Xers North American, South American, British, French, German, Italian, Japanese

Social class

Lower lowers, upper lowers, working class, middle class, upper middles, lower uppers, upper uppers

Psychographic lifestyle

Culture oriented, sports-oriented, outdoor-oriented

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Personality Behavioral occasions Benefits User status Usage rate Loyalty status Readiness stage

Compulsive, gregarious, authoritarian, ambitious Regular occasion, special occasion Quality, service, economy, speed nonuser, ex-user, potential user, first-time user, regular user Light user, medium user, heavy user None, medium, strong, absolute Unaware, aware, informed interested, desirous, intending to buy

Attitude toward product

Enthusiastic, positive, indifferent, negative, hostile

Demographic Segmentation In demographic segmentation, we divide the market into groups on the basis of variables such as age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality, and social class. One reason demographic variables are so popular with marketers is that theyre often associated with consumer needs and wants. Another is that theyre easy to measure. Even when we describe the target market in non demographic terms (say, by personality type,), we may need the link back to demographic characteristics in order to estimate the size of the market and the media we should use to reach it efficiently. Heres how certain demographic variables have been used to segment markets. (a) AGE AND LIFE-CYCLE STAGE Consumer wants and abilities change with age.

Toothpaste brands such as Crest and Colgate offer three main lines of products to target kids, adults, and older consumers. Age segmentation can be even more refined. Pampers divides its market into prenatal, new baby (0-5 months, baby (6-12 months), toddler (1323 months), and preschooler (24 months) (b) LIFE STAGE People in the same part of the life cycle may differ in their life stage. Life stage defines a persons major concern, such as going through a divorce, going into a second marriage, taking care of an older parent, deciding to cohabit with another person,

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deciding to buy a new home, and so on. These life stages present opportunities for marketers who can help people cope with their major concerns. (c) INCOME Income segmentation is a long-standing practice in such categories as

automobiles, clothing, cosmetics, financial services, and travel. However, income does not always predict the best customers for a given product. Blue-collar workers were among the first purchasers of color television sets; it was cheaper for them to buy these sets than to go to movies and restaurants. (d) GENERATION Each generation is profoundly influenced by the times in which it

grows up the music, movies, politics, and defining events of that period. Demographers call these generational groups cohorts. Members share the same manor cultural, political, and economic experiences and have similar outlooks and values. Marketers often advertise to a cohort by using the icons sand images prominent in its experiences. Marketing Insight: Marketing to Gen Y provides insight into that key age cohort. marketing Memo: Cheat Sheet for 20-somethings looks at a key part of Gen Y. Although we can make distinctions, between them, different generational cohorts also influence each other. For instance, because so many members of Generation Y-Echo Boomers-are living with their boomer parents, parents are being influenced by what demographers are calling a boom-boom effect. Adult gadgets, such as cell phones, automobiles, and even house wares have been transformed from purely utilitarian to toylike. Vacuums come in candy-apple red and baby blue, and Target sells a Michael Graves version of a toaster shaped like a fluffy cartoon cloud. Cars such as lemon yellow Mini Coopers look like theyre designed for the toddler set.

SOCIAL CLASS Social class has a strong influence on preferences in cars, clothing, home furnishings, leisure activities, reading habits, and retailers, and many companies design products and services for specific social classes. The tastes of social classes change with the years, however. The 1990s were about greed and ostentation for the upper classes. Affluent tastes now run more conservatively, although luxury-goods makers such as Coach,

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Tiffany, Burberry, TAG Heuer, and Louis Vuitton still successfully sell to those seeking the good life.

Psychographic Segmentation Psychographics is the science of using psychology and demographics to better understand consumers. In psychographic segmentation, buyers are divided into different groups on the basis of psychological/ personality traits, lifestyle, or values. People within the same demographic group can exhibit very different psychographic profiles. The four groups with higher resources are: 1. Innovators Successful, sophisticated, active, take-charge people with high selfesteem. Purchases often reflect cultivated tastes for relatively upscale, niche-oriented products and services. 2. Thinkers--Mature, satisfied, and reflective people who are motivated by ideals and who value order, knowledge, and responsibility. They seek durability, functionality, and value in products. 3. AchieversSuccessful, goal-oriented people who focus on career and family. They favor premium products that demonstrate success to their peers. 4. ExperienceYoung, enthusiastic, impulsive people who seek variety and excitement. They spend a comparatively high proportion of income on fashion, entertainment, and socializing. The four groups with lower resources are: 1. BelieversConservative, conventional, and traditional people the concrete beliefs. They prefer familiar. U.S. products and are loyal to established brands. 2. StriversTrendy and fun-loving people who are resource constrained. They favor stylish products that emulate the purchases of those with greater material wealth. 3. MakersPractical, down-to-earth, self sufficient people who like to work with their hands. They seek U.S,-made products with a practical or functional purpose. 4. SurvivorsElderly, passive people who are concerned about change. They are loyal to their favorite brands.

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BEHAVIOURAL SEGMENTATION In behavioral segmentation, marketers divide buyers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product. DECISION ROLES : Its easy to identify the buyer for many products. In the United States,

men normally choose their shaving equipment and women choose their pantyhose; but even here marketers must be careful in making their targeting decisions, because buying roles change. When ICI, the giant British chemical company, discovered that women made 60% of decisions on the brand of household paint it decided to advertise its Dulux brand to women.

BEHAVIORAL VARIABLES: Many marketers believe behavioral variables-occasions, benefits, user status, usages rate, buyer-readiness stage, loyalty status, and attitude-are the best starting points for constructing market segments.

Occasions: Occasions can be defined in terms of the time of day week, month, year, or in terms of other well-defined temporal aspects of a consumers life. We can distinguish buyers according to the occasions when they develop a need, purchase a product or use a product. For example, air travel is triggered by occasions related to business, vacation, or family. User status Every product has its nonusers, ex-users, potential users, first-time users, and regular users. Blood banks cannot rely only on regular donors to supply blood, they must also recruit new first time donors and contract ex-donors, each with a different marketing strategy. Usage rate Markets can be segmented into light, medium and heavy product users. Heavy users are often a small percentage of the market but account for a high percentage of total consumption. For example heavy beer drinkers account for 87% of the beer consumed-almost seven times as much as light drinkers. Marketers would rather attract one heavy user than several light users. A potential problem, however is that heavy users are often either extremely loyal to one brand or never loyal to any brand and always looking for the lowest price. They also may have less room to expand their purchase and consumption.

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Buyer-Readiness Stage Some people are unaware of the product, some are aware, some are informed, some are interested, some desire the product, and some intend to buy. To help characterize how many people are at different stages and how well they have converted people from one stage to another, some marketers employ a marketing funnel. The fig displays a funnel for two hypothetical brands. A and B. Brand B performs poorly compared to Brand A at converting onetime tries to more recent tries (only 46% convert for Brand A as compared to 61% for Brand B. Loyalty status Marketers usually envision four groups based on brand loyalty status I. II. III. IV. Attitude Five attitudes about products are enthusiastic, positive, indifferent, negative and hostile. Door-todoor workers in a political campaign use voter attitude to determine how much time to spend with that voter. They thank enthusiastic voters and remind them to vote; they reinforce those who are positively disposed; they try to win the votes of indifferent voters; they spend no time trying to change the attitudes of negative and hostile voters. The convention model The convention model measures the strength of consumers psychological commitment to brands and their openness to change. To determine how easily a consumer can be converted to another choice, the model assesses commitment based on factors such as consumer attitude toward and satisfaction with current brand choices in a category and the importance of the decision to select a brand in the category. The model segments users of a brand into four groups based on strength of commitment from low to high as follows: 1. Convertible ( most likely to defect) 2. Shallow ( uncommitted to the brand and could switch-some are actively considering alternatives) Hard-core loyal- consumers who buy only one brand all the times Split loyal consumers who are loyal to two or three brands Shifting loyal consumers who shift loyalty from one brand to another Switchers- consumers who show no loyalty to any brand

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3. Average (also committed to the brand they are using but not as strongly-they are unlikely to switch brands in the short term) 4. Entrenched (strongly committed to the brand they are currently using they are highly unlikely to switch brands in the foreseeable future)

Target Market

Unaware

Aware

Not tired

Tired

Negative opinion

Neutral

Favorable opinion

Rejecters

Not yet repeated

Repeat ed

Loyal to other brand

Switcher

Loyal to brand

Light user

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Regular use

Heavy user

The model also classifies nonusers of a brand into four other groups based on their balance of disposition and openness to trying the brand from low to high, as follows. 1. Strongly unavailable (unlikely to switch to the brand-their preference lies strongly with their current brands. 2. Weakly unavailable ( not available to the brand because their preference lies with their current brand, although not strongly) 3. Ambivalent (as attracted to the brand as they are to their current brands) 4. Available (mostly likely to be acquired in the short run. MARKET SEGMENTATION There are many statistical techniques for developing market segments. Once the firm has identified its market-segment opportunities. It must decide how many and which ones to target, marketers are increasingly combining several variables in an effort to identify smaller, betterdefined target groups. Thus, a bank may not only identify a group of wealthy retired adults, but within the group distinguish several segments depending on current income, assets, and savings and risk preferences. This has led some market researchers to advocate a needs-based market segmentation approach. Roger best proposed the seven-step approach shown in table. Effective segmentation criteria Not all segmentation schemes are useful. For example, table salt buyers could be divided into blond and brunette customers, but hair color is undoubtedly irrelevant to the purchase of salt. Furthermore, if all salt buyers buy the same amount of salt each month, believe all salt is the same and would pay only one price for salt, this market would be minimally segment able from a marketing point of view.

Steps in the segmentation process

Description

Need base segmentation

Group customers into segments based on similar needs and benefits sought by customer in solving a particular consumption problem.

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Segment identification

For

each

needs-based

segment,

determine

which

demographics, lifestyles and usage behaviours make the segment distinct and identifiable ( actionable) Segment attractiveness Using predetermined segment attractiveness criteria (such as market growth, competitive intensity and market access), determine the overall attractiveness of each segment Segment profitability Segment positioning Determine segment profitability For each segment, create a value proposition and product-price positioning strategy based on that

segments unique customer needs and characteristics. Segment acid test Create segment storyboard to test the attractiveness of each segments positioning strategy Marketing mix strategy Expand segment positioning strategy to include all aspects of the marketing mix, product, price, promotion, and place

To be useful, market segments must rate favorably on five key criteria;  Measurable size, purchasing power and characteristics of the segments can be measured.  Substantial the segments are large and profitable enough to serve. A segment should be largest possible homogeneous group worth going after with a tailored marketing program. It would not pay for example, for an automobile manufacture to develop cars for people who are less than four feet tall.  Accessible the segments can be effectively reached and served  Differentiable the segments are conceptually distinguished and respond differently to different marketing mix elements and programs. If married and unmarried women respond similarly to a sale on perfume, they do not constitute separate segments.  Actionable effective programs can be formulated for attracting and serving the segments.

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EVALUATING AND SELECTING THE MARKET SEGMENTS In evaluating different market segments, the firm must look at two factors: the segments overall attractiveness and the companys objectives and resources. How well does a potential segment score on the five criteria. Does a potential segment have characteristics that make it generally attractive, such as size, growth, profitability, scale economies and low risk? Does investing in the segment make sense given the firms objectives, competencies and resources? Some attractive segments may not mesh with the companys long-run objectives, or the company may lack one or more necessary competencies to offer superior value. Single segment concentration Volkswagen concentrates on the small-car=market-its foray into the larger-car market with the phaeton was a failure in the United States-and Porsche on the sports car market. Through concentrated marketing, the firm gains a strong knowledge of the segments needs and achieves a strong market presence,. Furthermore, the firm enjoys operating economies through specialization its production, distribution and promotion. If it captures segment leadership, the firm can earn a high return on its investment.

Selective specialization A firm selects a number of segments, each objective attractive appropriate, there may be little or no synergy among the segments, but each promises to be a moneymaker. This multi segment strategy has the advantage of diversifying the firms risk. When Procter & Gamble launched Crest Whites trips, initial target segments included newly engaged women and brides-to-be as well as gay males. Product specialization The firm makes a certain product that it sells to several different market segments. A microscope manufacturer, for instance, sells to university, government, and commercial laboratories. The firm makes different microscopes for the different customer groups and builds a strong reputation in the specific product area. The downside risk is that the product may be supplanted by an entirely new technology. Market specialization The firm concentrates on serving many needs of a particular customer group. For instance, a firm can sell an assortment of products only to university laboratories. The firm gains a strong
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reputation in serving this customer group and becomes a channel for additional products the customer group can use. The downside risk is that the customer group may suffer beget cuts or shrink in size. Full market coverage The firm attempts to serve all customer groups with all the products they might need. Only very large firms such as Microsoft (software market), General Motors (vehicle market), and CocaCola (nonalcoholic beverage market) can undertake a full market coverage strategy. Large firms can cover a whole market in two broad ways: through undifferentiated marketing or differentiated marketing. Additional Considerations, Two other considerations in evaluating and selecting segments are segment-by-segment invasion plans and ethical choice of market targets. Segment-by-segment invasion plans A company would be wise to enter one segment at a time. Competitors must not know to what segment(s) the firm will move into next. Company A meets all the computer needs of airlines. Company B sells large computer systems to all three transportation sectors. Company C sells personal computers to trucking companies. A companys invasion plans can be thwarted when it confronts blocked markets. The invader must then figure out a way to break in which usually calls for a mega marketing approach. Mega marketing is the strategic coordination of economic, psychological, political, and public relations skills, to gain the coordination of economic, psychological, political, and public relations skills, to gain the cooperation of a number of parties in order to enter or operate in a given market. Pepsi used mega marketing to enter the Indian market. Ethical choice of market targets Marketers must target segments carefully to avoid consumer backlash. Some consumers may resist being labeled. Singles may reject single-serve food packaging because they dont want to be reminded they are eating alone. Elderly consumers who dont feel their age may not appreciate products that identify them as old Market targeting also can generate public controversy. The public is concerned when marketers stake unfair advantage of vulnerable groups (such as children) or disadvantaged groups (such as inner-city poor people) or promote potentially harmful products. The cereal industry has been
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heavily criticized for marketing efforts directed toward children. Critics worry that high-powered appeals presented through the mouths of lovable animated characters will overwhelm childrens defenses and lead them to want sugared cereals or poorly balanced breakfasts. Toy marketers have been similarly criticized. McDonalds and other chains have drawn criticism for pitching high-fat, salt-laden fare to low-income, inner-city residents. CHANNEL NETWORKS: Formally, marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption. They are the set of pathways a product or service follows after production, culminating in purchase and use by the final end user. The Importance of Channels A marketing channel system is the particular set of marketing channels a firm employs, and decisions about it are among the most critical ones management faces. Marketing channels also represent a substantial opportunity cost. One of the chief roles of marketing channels is to convert potential buyers into profitable customers. Marketing channels must not just serve markets, they must also make markets. In managing its intermediaries, the firm must decide how much effort to devote to push versus pull marketing. A push strategy uses the manufacturers sales force, trade promotion money, or other means to induce intermediaries to carry, promote, and sell the product to end users. Push strategy is appropriate where there is low brand loyalty in a category, brand choice is made in the store, the product is an impulse item, and product benefits are well understood. In a pull strategy the manufacturer uses advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries thus inducing the intermediaries to order it. Pull strategy is appropriate when there is high brand loyalty and high involvement in the category, when consumers are able to perceive differences between brands, and when they choose the brand before they go to the store. Channel development A firm typically starts as a local operation selling in a fairly circumscribed market, using existing intermediaries, the number of such intermediaries is apt to be limited; a few manufacturers sales MANAGEMENT (OR)MARKETING CHANNELS AND VALUE

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agent a few wheelhouses,. Deciding on the best channels might not be a problem; the problem is often to conceive the available intermediaries to handle the firms line. If the firm is successful, it might branch into new markets and use different channels in different markets and use different channels in different market. In smaller markets, the firm might sell directly to retailers in larger markets, it might sell through distributors. In rural areas, it might work with limited line merchants, in one part of the country, it might grant exclusive franchises in another, it might sell through all outlets willing to handle the merchandise. In our country, it might use international sales agents in another it might partner with a local firm. Value networks A supply chain view of a firm sees markets as destination points and amounts to a linear view of the flow. The company should first think of the target market, however, and then design the supply chain backward from that point. This view has been called demand chain planning. North westerns Don Schultz says: A demand chain management approach doesnt just push things through the system. It emphasizes what solutions consumers are looking for, not what products we are trying to sell them. Schultz has suggested that the traditional marketing four Ps be replaced by a new acronym, SIVA, which stands for solutions, information, value, and access. An even broader view sees a company at the center of a value network-a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings. A value network includes a firms suppliers and its suppliers suppliers, and its immediate customers and their end customers. The value network includes valued relations with others such as university researchers and government approval agencies. The Role of Marketing Channels y Gather information about potential and current customers, competitors, and other actors and forces in the marketing environment. y y Develop and disseminate persuasive communications to stimulate purchasing. Reach agreements on price and other terms so that transfer of ownership or possession can be affected. y y y y Place orders with manufacturers. Acquire the funds to finance inventories at different levels in the marketing channel. Assume risks connected with carrying out channel work. Provide for the successive storage and movement of physical products.
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Provide for buyers payment of their bills through banks and other financial institutions.

Oversee actual transfer of ownership from one organization or person to another.

Channel Functions and Flows A marketing channel performs the work of moving goods from producers to consumers. It overcomes the time, place, and possession gaps that separate goods and services from those who need or want them. Members of the marketing channel perform a number of key functions (see Table 15.1) Some functions (physical, title, promotion) constitute a forward flow of activity from the company to the cu8stomeer; other functions (information, negotiation, finance, and risk staking) occur in both directions. Five flows are illustrated in Figure 15.2 for the marketing of forklift trucks. If these flows were superimposed in one diagram, the tremendous complexity of even simple marketing channels would be apparent. A manufacturer selling a physical product and services might require three channels; a sales channel, a delivery channel, and a service channel. To sell its Bowflex fitness equipment, the Nautilus Group historically has emphasized direct marketing via television infomercials and ads, inbound/outbound call centers, response mailings, and the Internet. As sales channels; UPS ground service as the delivery channel; and local repair people as the service channel. Reflecting shifting consumer buying habits, Nautilus now also sells Bowflex s through commercial, retail, and specialty retail channels. Channel Levels The producer and the final customer are part of every channel. We will use the number of intermediary levels to designate the length of a channel Figure 15 illustrates several consumergoods marketing channels at different lengths A zero-level channel (also called as direct marketing channel) consists of a manufacturer selling directly to the final customer. The major examples are door-to door sales, home parties, mail order, telemarketing, TV selling, Internet selling and manufacturer owned stores. Avon sales representatives sell cosmetics door to door, Tupperware representatives sell kitchen goods through home parties, Franklin Mint sells collectibles through mail order; Verizon uses the telephone to prospect for new customers or to sell enhanced services to existing customers, Time-life sells music and video collections through TV commercials or longer infomercials;
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Red envelope sells gifts online and Apple sells computers and other consumer electronics through its own stores. A one-level channel contains one selling intermediary, such as a retailer, a two-level channel contains two intermediaries, in consumer markets, these are typically a wholesaler and a retailer. A three-level channel contains three intermediaries. In the meatpacking industry wholesalers sell to jobbers, who sell to small retailers. In Japan, food distribution may include as many as six levels, from the producers point of view obtaining information about end users and exercising control become more difficult as the number of channel levels increases Channels normally describe a forward movement of products from source to user, but there are also reverse-flow channels. These are important in the following cases  To reuse products or containers (such as refillable chemical carrying drums)  To refurbish products (such as circuit boards or computers) for resale  To recycle products (such as paper ) and  To dispose of products and packaging (waste products) Several intermediaries play a role in reverse-flow channels, including manufacturers redemption centers, community groups, and traditional intermediaries such as soft-drink intermediaries, trash-collection specialists, recycling centers, trash-recycling brokers, and central processing warehousing. Service sector channels Marketing channels are not limited to the distribution of physical goods. Producers of services and ideas also face the problem of marketing their output available and accessible to target population. Schools develop educational-dissemination systems and hospitals develop healthy-delivery system. These institutions must figure out agencies and locations for reaching a population spread out over an area. Marketing channels also keep changing in person marketing. Besides live and programmed entertainment, entertainers, musicians and other artists can reach prospective and existing fans online in many ways-via their own web sites, social community sites such as MySpace, and third-party Web sites. Even legendary former beetle Paul Mccartney decided to end his 45 year relationship with music conglomerate EMI to launch his new album. Memory almost full in June 2007 as the debate release from Hear music, a record label cofounded by Starbucks, to be sold at the companies coffee shops, as well as records stores and on ITunes. Politician also must
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choose a mix of channels mass media, rallies, coffee hours, spot TV ads, direct mail, billboards, faxes, e-mails, blogs, podcasts, and websites for delivering their messages to voters. Channel design decisions Deciding a marketing channel system requires analyzing customers needs, establishing channel objectives and identifying and evaluating major channel alternatives. Analyzing customers desired service output levels In designing the marketing channels, the marketer must understand the service output levels its target customers want, channels produce five service outputs 1. Lot size the number of units the channels permits a typical customer to purchase on one occasion. in buying cars for its fleer. Hertz prefers channels from which it can buy a large tot size; a house hold wants a channel that permits buying a lot size of one. 2. Waiting and delivery time The average time customers of that channel wait for receipt of the goods, customers increasingly prefer faster and faster delivery channels. 3. Spatial convenience The degree to which the marketing channels makes it easy for customers to purchase the product. Chevrolet dealers. Chevrolets greater market decentralization helps customers save on transportation and search costs in buying and repairing an automobile. 4. Product variety The assortment breadth provided by the marketing channel. Normally customers prefer a greater assortment because more choices increase the chance of finding what they need. 5. Service backup The add on services (credit, delivery, installation, repairs) provided by the channel, the greater the service backup the greater the work provided by the channel. The marketing channel designer knows that providing greater service outputs also means increasing channel costs and raising prices for customers. Different customers have different service needs. The success of discount stores indicates that many consumers are willing to accept smaller service outputs it they can save money. Establishing objectives and constraints Marketers should state their channel objectives in terms to targeted service output levels. Under competitive conditions, channel institution should arrange their functional tasks to
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minimize total channel costs and still provide desired levels of service outputs. Usually planners can identify several market segments that want different service levels. Effective planning requires determining which market segments to serve and choosing the best channels for each. Channel objectives vary with product characteristics. Perishable products require more direct marketing. Bulky products, such as building materials require channels that minimize the shipping distance and the amount of handling. Nonstandard products such as custom-built machinery and specialized business forms are sold directly by company sales representatives. Products requiring installation or maintenance services, such as heating and cooling systems are usually sold and maintained by the company or by franchised dealers. High unit value products such a generators and turbines are often sold through a company sales force rather than intermediaries.

Identifying and evaluating major channel alternatives Companies can choose from a wide variety of channels for reaching customer from sales forces to agents, distributors, dealer, direct mail, telemarketing and the internet. Each channel has unique strengths as well as weaknesses. Sales forces can handle complex products and transactions but they are expensive. The internet is much less expensive, but it may not be as effective with complex products, distributors can create sales but the company loses direct contact with customers, manufacturer reps are able to contact customers at a low cost per customer because several clients share the cost but the selling effort per customer is less intense than if company sales reps did the selling. The problem is further complicated by the fact that most companies now use a mix of channels. The idea is that each channel reaches a different segment of buyers and delivers the right products at the least cost. When this doesnt happen, there is usually channel conflict and excessive cost.

Types of intermediaries A firm needs to identify the types of intermediaries available to carry on its channel work. The channel alternatives identified by a consumer electronics company that produces cellular car phones.
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Number of intermediaries Companies must decide on the number of intermediaries to use at each channel level. Three strategies are available exclusive distribution, selective distribution and intensive distribution. Selective distribution Relies on more than a few but less than all of the intermediaries willing to carry a particular product. It makes sense for established companies and for new companies seeking distributors. The company does not need to worry about too many outlets, it can gain adequate market coverage with more control and less cost than intensive distribution, Stihl is a good example of selective distribution. In interview distribution the manufacturer places the goods of services in as many outlets as possible. This strategy is generally used for items such as snack foods, soft drinks, newspapers, candies and gum, products the consumer seeks to buy frequently or in a variety of locations. Convenience stores such as 7-Eleven, Circle K, and gas-stationlinked stores such as ExxonMobils On the Run have survived by selling items that provide just thatlocation and time convenience. Terms and responsibilities of channel members Each channel member must be treated respectfully and given the opportunity to be profitable le. The main elements in the trade-relations mix are price policies, conditions of sale, territorial rights, and specific services to be performed by each party. Price policy calls for the producer to establish a price list and schedule of discounts and allowances that intermediaries see as equitable and sufficient. Conditions of sale refer to payment terms and producer guarantees. Most producers

grant cash disc outs to distributors for early payment. Producers might also provide distributors a guarantee against defective merchandise or price deckubes, a guarantee against price declines gives distributors an incentive to buy larger quantities. Distributors territorial rights define the distributors territories and the terms under which the producer will enfranchise other distributors. Distributors normally expect to receive full credit for all sales in their territory, whether or not they did the selling. Mutual services and responsibilities must be carefully spelled out, especially in franchised and exclusive-agency channels. McDonalds provides franchisees with a
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building, promotional support, a recordkeeping system, training, and general administrative and technical assistance. In turn, franchisees are expected to satisfy company standards for the physical facilities, cooperate with new promotional programs, furnish requested information, and buy supplies from specified vendors. Channel-Management Decisions After a company has chosen a channel system, it must select, train, motivate, and evaluate individual intermediaries for each channel. It must also modify channel design and arrangements over time. Selecting Channel Members To customers, the channels are the company. Consider the negative impression customers would get of McDonalds, Shell Oil, or Mercedes-Benz if one or more of their outlets or dealers consistently appeared dirty, inefficient, or unpleasant. To facilitate channel member selection, producers should determine what characteristics distinguish the better intermediaries. They should evaluate the number of years in business, other lines carried, growth and profit record, financial strength,

cooperativeness, and service reputation. If the intermediaries are sales agents, producers should evaluate the member and character of other lines carried and the size and quality of the sales force. If the intermediaries are department stores that want exclusive distribution, the producer should evaluate locations, future growth potential, and type if clientele. Training and Motivating Channel Members A company needs to view its intermediaries in the same way it views its end users. It needs to determine intermediaries needs and construct a channel positioning such that its channel offering is tailored to provide superior value to these intermediaries. y Coercive power. A manufacturer threatens to withdraw a resource or terminate a relationship if intermediaries fail to cooperate. This power can be effective, but its exercise produces resentment and can generate conflict and lead the intermediaries to organize countervailing power. y Reward power. The manufacturer offers intermediaries an extra benefit for performing specific acts or functions. Reward power typically produces better

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results than coercive power, but it can be overrated. The intermediaries may come to expect a reward every time the manufacturer wants a certain behavior to occur. y Legitimate power. The manufacturer requests a behavior that is warranted under the contract. As long as the intermediaries view the manufacturer as a legitimate leader, legitimate power works. y Expert power. The manufacturer has special knowledge the intermediaries value. Once the intermediaries acquire this expertise, however, expert power weakens. The manufacturer must continue to develop new expertise so that the intermediaries will want to continue cooperating y Referent power. The manufacturer is so highly respected that intermediaries are proud to be associated with it, companies such as IBM, Caterpillar, and HewlettPackard have high referent power.

Evaluating Channel Member Producers must periodically evaluate intermediaries performance against such standards as sales-quota attainment, average inventory levels, customer delivery time, treatment of damaged and lost goods, and cooperation in promotional and training programs. A producer will occasionally discover that it is paying particular intermediaries too much for what they are actually doing. One manufacturer compensating a distributor for holding inventories found that the inventories were actually held in a public warehouse at its own expense. Producers should set up functional discounts in which they pay specified amounts for the trade channels performance of each agreed-upon service. Underperformers need to be counseled, retrained, motivated, or terminated. Modifying Channel Design and Arrangements A producer must periodically review and modify its channel design and arrangements. It will want to modify them when the distribution channel is not working as planned, consumer buying patterns change, the market expands, new competition arises, innovative distribution channels emerge, and the product moves into later stages in the product life cycle. No marketing channels will remain effective over the whole product life cycle. Early buyers might be willing to pay for high value-added channels, but later buyers will switch to lower-cost channels. Small office copiers were first sold by manufacturers direct sales forces, later through
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office equipment dealers, still later through mass merchandisers, and now by mail-order firms and internet marketers.

ADVERTISING AND CHANNEL PROMOTIONS (A) Developing and Managing an Advertising Program Advertising is any paid form of non personal presentation and promotion of ideas, goods, or services by an identified sponsor.
Message Message generation Mission Sales goal Advertising objectives Money Factors to consider stage in PLC market share and consumer base computer and clutter advertising frequency product substitutability Message evaluation and selection Message execution social responsibility Media review Reach, frequency, impact. Major media types. Specific media vehicles, media timing geographic media allocation

Measurement Communication impact , sales impact

Setting the Objectives The advertising objectives must flow from prior decisions on target market, brand positioning, and the marketing program. An advertising goal (or objective) is a specific communications task and achievement level to be accomplished with a specific audience in a specific period of time. To increase among 30 million homemakers who own automatic washers the number who identify brand X as a low-siding detergent, and who are persuaded that it gets clothes cleaner, from 10% to 40% in one year Advertising objectives can be classified according to whether their aim is to inform, persuade, remind, or reinforce. These goals correspond to different stages in the hierarchy-of-effects discussed.
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Informative advertising aims to create brand awareness and knowledge of new products or new features of existing products. One of the most memorable ads ever starred Australian rugby player Jacko for Energizer batteries. Jacko was dressed as a battery and burst into a subway car, repeatedly shouting out the brand name to helpless earlymorning, commuters. Unfortunately, although people remembered the brand namethey hated the ad! Brand awareness cannot come at the expense of brand attitudes.

Persuasive advertising aims to create liking, preference, conviction, and purchase of a product or service. Some persuasive advertising uses comparative advertising, which makes an explicit comparison of the attributes of two or more brands. Miller Lite took market share from Bud Lite by pointing out that Bud Lite had higher carbs. Comparative advertising works best when it elicits cognitive and affective motivations simultaneously, and when consumers are processing advertising in a detailed, analytical mode.

Reminder advertising aims to stimulate repeat purchase of products and services. Expensive, four-color Coca-Cola ads in magazines are intended to remind people to purchase Coca-Cola.

Reinforcement advertising aims to convince current purchasers that they made the right choice. Automobile ads often depict satisfied customers enjoying special features of their new car. The advertising objective should emerge from a thorough analysis of the current marketing situation. If the product class is mature, the company is the market leader, and brand usage is low, the objective is to stimulate more usage. If the product class is new, the company is not the market leader, but the brand is superior to the leader, then the objective is to convince the market of the brands superiority. Deciding on the Advertising Budget How does a company know its spending he right amount? Some critics charge that large consumer-packaged-goods firms overspend on advertising as a form of insurance against not spending enough, and industrial companies underestimate the power of company and product image building and under spend.

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FACTORS AFFECTING BUDGET DECISIONS Here are five specific factors to consider when setting the advertising budget: 1. Stage in the product life cycleNew products typically merit large advertising budgets to build awareness and to gain consumer trial. Established brands usually are supported with lower advertising budgets, measured as a ratio to sales. 2. Market share and consumer baseHigh-market-share brands usually require less advertising expenditure as a percentage of sales to maintain share. To build share by increasing market size requires larger expenditures. 3. Competition and clutterIn a market with large number of competitors and high advertising spending, a brand must advertise more heavily to be heard. Even simple clutter from advertisements not directly competitive to the brand creates a need for heavier advertising. 4. Advertising frequencyThe number of repetitions needed to put across the brands message to consumers has an obvious impact on the advertising budget. 5. Product substitutabilityBrands in less-well-differentiated or commodity-like product classes (beer, soft drinks, banks, and airlines) require heavy advertising to establish a differential image.

Developing the Advertising Campaign In designing and evaluating an ad campaign, marketers employ both art and science to develop the message strategy or positioning of an adwhat the ad attempts to convey about the brand and its creative strategyhow the ad expresses the brand claims. Advertisers go through three steps; message generation and evaluation, creative development and execution, and socialresponsibility review. CREATIVE DEVELOPMENT AND EXECUTION The ads impact depends not only on what it says, but often more important, how it says it. Execution can be decisive. Every advertising medium has advantages and disadvantages. Here, we review television, print, and radio advertising media. Television Ads Television is generally acknowledged as the most powerful advertising medium and reaches a broad spectrum of consumers. The wide reach translates to low cost per exposure. TV advertising has two particularly important strengths. First, it can be an effective means of
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vividly demonstrating product attributes and persuasively explaining their corresponding consumer benefits. Second, it can dramatically portray user and usage imagery, brand personality, and other intangibles. Print Ads - Print media offer a stark contrast to broadcast media. Because readers consume them at their own pace, magazines and newspapers can provide detailed product information and effectively communicate user and usage imagery. At the same time, the static nature of the visual images in print media makes dynamic presentations or demonstrations difficult, and print media can be fairly passive. The two main print mediamagazines and newspapersshare many advantages and disadvantages. Although newspapers are timely and pervasive, magazines are typically more effective at building user and usage imagery. Newspapers are popular for localespecially retaileradvertising. On an average day, roughly 51 million people buy a newspaper, and 124 million read one, but the numbers have been dropping steadily in recent years. Although advertisers have some flexibility in designing and placing newspaper ads, poor reproduction quality and short shelf life can diminish the ads impact. Radio Ads - Radio is a pervasive medium; Ninety-four percent of all U.S. citizens age 12 and older listen to the radio daily and, on average, for around 20 hours a week, and those numbers have held steady in recent years. Perhaps radios main advantage is flexibilitystations are much targeted, ads are relatively inexpensive to produce and place, and short closings allow for quick response. Radio is a particularly effective medium in the morning; it can also let companie4s achieve a balance between broad and localized market coverage. Deciding on Media and Measuring Effectiveness After choosing the message, the advertisers next task is to choose media to carry it. The steps here are deciding on desired reach, frequency, and impact; choosing among major media types; selecting specific media vehicles; deciding on media timing; and deciding on geographical media allocation. Then the marketer evaluates the results of these decisions. Deciding on Reach, Frequency, and Impact Media selection is finding the most cost-effective media to deliver the desired number and type of exposures to the target audience. What do we mean by the desired number of exposures? The advertiser seeks a specified advertising objective and response from the target audience.

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Reach (R) The number of different persons or households exposed to a particular media schedule at least once during a specified time period. Frequency (F) The number of times within the specified time period that an average person or household is exposed to the message Impact (I) The qualitative value of an exposure through a given medium (thus a food ad in

Good Housekeeping would have a higher impact than in Fortune magazine)

Choosing among Major Media Types Profiles of Major Media Types Medium Newspapers Advantages Flexibility, timeliness; good Limitations local Short life; poor reproduction

market coverage; broad acceptance; quality; small pass-along high believability Television Combines sight, sound, and motion; High absolute cost; high clutter;

appealing to the senses; high attention; fleeting exposure; less audience high reach selectivity

Direct mail

Audience selectivity ,flexibility; no ad Relatively high cost; junk mail competition within the same medium; image personalization

Radio

Mass

use;

high

geographic

and Audio presentation only; lower attention than television; non standardized rate structures;

demographic selectivity; low cost

fleeting exposure Magazines High geographic and demographic Long ad purchase lead time; prestige; some waste circulation; no

selectivity; credibility and

high-quality reproduction; long life; guarantee of position good pass-along readership Outdoor Flexibility; high repeat exposure; low Limited audience selectivity,

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cost; low competition Yellow Pages Excellent local coverage;

creative limitations high High competition; lead long ad

believability ; wide reach; low cost

purchase limitations

time; creative

Newsletters

Very high selectivity; full control; Costs could run away interactive opportunities; relative low costs

Brochures

Flexibility; full control; can dramatize Overproduction could lead to messages runaway costs high cost unless

Telephone

Many users; opportunity to give a Relative personal touch

volunteers are used interactive Relatively new media with a low number countries of users in some

Internet

High

selectivity;

possibilities; relatively low cost

The media planner must know the capacity of the major advertising media types to deliver reach, frequency, and impact. The major advertising media along with their costs, advantages, and limitations are profiled in Table 18.1 Media planners make their choices by; considering the following variables: y Target audience media habits. Radio and television are the most effective media for reaching teens. y Product characteristics. Media types have different potential for demonstration, visualization, explanation, believability, and color. Womens dresses are best shown in color Magazines, but high-tech products requiring dynamic presentation such as digital cameras, printers, or cell phones are best demonstrated on television. y Message characteristics. Timeliness and information content will influence

media choice. A message announcing a major sale tomorrow will require radio, TV, or newspaper. A message containing a great deal of technical data might require specialized magazines or mailings.

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Cost.

Television is very expensive, whereas newspaper advertising is relatively

inexpensive. What counts is the cost per thousand exposures. Given the abundance of media, the planner must first decide how to allocate e the budget to the major media types. Consumers are increasingly time starved. Attention is a scarce currency, and advertisers need strong devices to capture peoples attention. Alternative Advertising Options In recent years, researchers have noticed reduced effectiveness for television due to increased commercial clutter, increased zipping and zapping of commercials aided by the arrival of PVRs such as TiVo, and lower viewing owing to the growth in cable and satellite TV and DVD/VCRs. Place advertising place advertising, or out-of-home advertising, is a broad category including

many creative and unexpected forms to grab consumers attention. The rationale is that marketers are better off reaching people where they work, play, and of course, shop. Some of the options include billboards, public spaces, product placement, and point of purchase. Billboards - Billboards have been transformed and now use colorful, digitally produced graphics, backlighting, sounds, movement, and unusualeven three-dimensionalimages. Public Spaces Advertisers are placing ads in unconventional places such as movies, airlines, and lounges, as well as classrooms, sports arenas, office and hotel elevators, and other public places. Billboard-type poster ads are showing up everywhere. Transit ads on buses, subways, and commuter trainsaround for yearshave become a valuable way to reach working women Street furniturebus shelters, kiosks, and public areas is another fast-growing option.

PRODUCT PLACEMENT

Product placement has expanded from movies to all types of TV

shows. Marketers pay fees of $50,000 to $ 100,000 and even higher so that their products will make cameo appearances in movies and on television. Sometimes placements are the result of a larger network advertising deal, but other times they are the work of small product-placement shops that maintain ties with prop masters, set designers, and production executives.

POINT OF PURCHASE -There are many ways to communicate with consumers at the point of purchase (P-O-P). In-store advertising includes ads on shopping carts, cart straps, aisles, and shelves, as well as promotion options such as in-store demonstrations, live sampling, and instant
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coupon machines. Some supermarkets are selling floor space for company logos and experimenting with talking shelves.

EVALUATING ALTERNATIVE MEDIA - Ads now can appear virtually anywhere consumers have a few spare minutes or even seconds to notice them. The main advantage of nontraditional media is that they can often reach a very precise and captive audience in a costeffective manner. The message must be simple and direct. In fact, outdoor advertising is often called the 15-second sell. Its more effective at enhancing brand awareness or brand image than creating new brand associations. Selecting Specific Media Vehicles The media planner must search for the most cost-effective vehicles within each chosen media type. The advertiser who decides to buy 30 seconds of advertising on network television can pay around $100,000 for a new show, almost $ 500,000 for a popular prime-time show such as Greys Anatomy. CSI, or Survivor, or over $2.5 million for an event such as the Super Bowl. These choices are critical. The average cost to produce a national 30-second television commercial in 2005 was about $381,000. It can cost as much to run an ad once on network TV as to make it to start with! In making choices, the planner must rely on measurement services that provide estimates of audience size, composition, and media cost. Audience size has several possible measures: y y Circulation. The number of physical units carrying the advertising Audience. The number of people exposed to the vehicle (if the vehicle has

pass-on readership, then the audience is larger than circulation) y Effective audience. The number of people with target audience characteristics exposed to the vehicle y Effective ad-exposed audience -The number of people with target audience characteristics who actually saw the add. Deciding on Media Timing and Allocation In choosing media, the advertiser faces both a macro scheduling and a micro scheduling problem. The macro scheduling problem involves scheduling the advertising in relationship to seasons and the business cycle.

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Continuity means exposures appear evenly throughout a given period. Generally advertisers use continuous advertising in expanding market situations, with frequently purchased items, and in tightly defined buyer categories.

Concentration calls for spending all the advertising dollars in single period. This makes sense for products with one selling season or related holiday.

Fighting calls for advertising for a period, followed by a period with no advertising, followed by a second period of advertising activity. It is useful when funding is limited, the purchase cycle is relatively infrequent, or items are seasonal.

y Classification of advertising timing pattern level concentrated(1) Rising (2) Falling (3) (4) Alternating

(5)

(6)

(7)

(8)

continuous intermittent

(9) (10) (11) No of message per month

Pulsing is continuous advertising at low-weight levels reinforced periodically by waves of heavier activity. It draws on the strength of continuous advertising and flights to create a compromise scheduling strategy. Those who favor pulsing believe the audience will learn the message more thoroughly, and at a lower cost to the firm. A company must decide how to allocate its advertising budget over space as well as over time. The company makes national buys when it places ads on national TV networks or in nationally circulated magazines. It makes spot buys when it buys TV time in just a few markets or in regional seditions of magazines. These markets are called areas of dominant influence (ADIs) or designated marketing areas (DMAs). Ads reach a market 40 to 60 miles from a city center. The company makes local buys when it advertises in local newspapers, radio or outdoor sites.
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Evaluating Advertising Effectiveness Most advertisers try to measure the communication effects of an adthat is, its potential effect on awareness, knowledge, or preference. They would also like to measure the ads sales effect. COMMUNICATION EFFECT RESEARCH Communication-effect research, called copy testing, seeks to determine whether an ad is communicating effectively. Marketers should perform this test both before an ad is put into media and after it is printed or broadcast. There are three major methods of pretesting. The consumer feedback method asks consumers questions such as these: 1. What is the main message you get from this ad? 2. What do you think they want you to know, believe, or do? 3. How likely is it that this ad will influence you to undertake the action? 4. What works well in the ad and what works poorly? 5. How does the ad make you feel? 6. Where is the best place to reach you with this message? Portfolio tests ask consumers to view or listen to a portfolio of advertisements. Consumers are then asked to recall all the ads and their content, aided or unaided by the interviewer. Recall level indicates an ads ability to stand out and to have its message understood and remembered.

(B) SALES PROMOTION Sales promotion, a key ingredient in marketing campaigns, consists of a collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade. Objectives Sales promotion tools vary in their specific objectives. A free sample stimulates consumer trial, whereas a free management-advisory service aims at cementing a long-term relationship with retailer. Sellers use incentive-type promotions to attract new tries, to reward loyal customers, and to increase the repurchase rates of occasional users. Sales promotions often attract brand switchers, who are primarily looking for low price, good value, or premiums. If some of them would not have otherwise tried the brand, promotion can yield long-term increases in market share.

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Sales promotions in markets of high brand similarity can produce a high sales response in the short run but little permanent gain in brand preference over the longer term. In markets of high brand dissimilarity, they may be able to alter market shares permanently. In addition to brand switching, consumers may engage in stockpilingpurchasing earlier than usual (purchase acceleration) or purchasing extra quantities. But sales may then hit a post promotion dip. Advertising versus Promotion A decade ago, the advertising to sales promotion ratio was about 60:40. Today, in many consumer-packaged-goods companies, sales promotion accounts for 75% of the combined budget (roughly 50% is trade promotion and 25% is consumer promotion). Sales promotion expenditures increased as a percentage of budget expenditure annually for almost two decades, although its growth has slowed down in recent years. Several factor contributed to this rapid growth, particularly in consumer markets. Promotion became more accepted by stop management as an effective sales tool; the number of brands increased; competitors used promotions frequently; many brands were seen as similar; consumers became more prices oriented; the trade demanded more deals from manufacturers; and advertising efficiency declined. But the rapid growth of sales promotion created clutter. Incessant prices off, coupons, deals, and premiums may devalue the product in buyers minds. So there is risk in putting a wellknown brand on promotion over 30% of the time. Automobile manufacturers turned to 0% financing and hefty cash rebates to ignite sales in the soft economy of 2000-2001 but have found it difficult to wean consumers from discounts ever since. Dominant brands offer deals less frequently, because most deals subsidize only current users. Loyal brand buyers tend not to change their buying patterns as a result of competitive promotions. Advertising appears to be more effective at deepening brand loyalty, although added-value promotions can be distinguished from price promotions. Certain types of sales promotions may be able to actually enhance brand image. MAJOR DECISIONS In using sales promotion, a company must establish its objectives, select the tools, develop the program, pretest the program, implement and control it, and evaluate the results. Establishing objectives Sales promotion objectives derive from broader promotion objectives, which derive from more basic marketing objectives for the product. For consumers, objectives
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include encouraging purchase of larger-sized units, building trial among nonusers, and attracting switchers away from competitors brands. Ideally, promotions with consumers would have shortrun sales impact as well as long-run brand equity effects. For retailers, objectives include persuading retailers to carry new items and higher levels of inventory, encouraging off-season buying, encouraging stocking of related items, offsetting competitive promotions, building brand loyalty, and gaining entry into new retail outlets. For the sales force, objectives include encouraging support of a new product or model, encouraging more prospecting and stimulating off-season sales. Selecting Consumer Promotion Tools The promotion planner should take into account the type of market, sales promotion objectives, competitive conditions, and each tools cost-effectiveness. The main consumer promotion tools are summarized. Manufacturer promotions are, for instance in the auto industry, rebates, gifts to motivate test-drives and purchases, and high-value trade-in credit. Promotion Tools Manufacturers Retailer promotions include price cuts, feature advertising, retailer coupons, and retailer contests or premiums. Selecting Trade use a number of trade promotion tools. Manufacturers award money to the trade (1) to persuade the retailer or wholesaler to carry the brand; (2) to persuade the retailer or wholesaler to carry, more units than the normal amount; (3) to induce retailers to promote e the brand by festering, display, and price reductions; and (4) to stimulate retailers and their sales clerks to push the product. The growing power of large retailers has increased their ability to demand trade promotion at the expense of consumer promotion and advertising. The companys sales force and its brand managers are often at odds over trade promotion. The sales force says local retailers will not keep the companys products on the shelf unless they receive more trade promotion money, whereas brand managers want to spend the limited funds on consumer promotion and advertising. Selecting Business and Sales-Force Promotion Tools - Companies spend billions of dollars on business and sales-force promotion tools to gather business leads, impress and reward

customers, and motivate the sales force to greater effort. They typically develop budgets for tools that remain fairly constant from year to year. For many new businesses that want to make a splash to a targeted audience, especially in the B2Bwirkdm trade shows are an important tool,

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but the cost per contact is the highest of all communication options. The following example shows how one newcomer in the private jet industry makes trade shows pay. Developing the Program- In planning sales promotion programs, marketers are increasingly blending several media into a total campaign concept, such as the following promotion that received a gold medal in the 2007 Reggie Award competition from the Promotion Marketing Association.

PRETESTING, PROGRAM

IMPLEMENTING,

CONTROLLING,

AND EVALUATING

THE

Although most sales promotion programs are designed on the basis of experience, pretests can determine whether the tools are appropriate, the incentive size optimal, and the presentation method efficient. Consumers can be asked to rate or rank different possible deals, or trial tests can be run in limited geographic areas. Marketing managers must prepare implementation and control plans that cover lead time and sell-in time for each individual promotion. Lead time is the time necessary to prepare the program prior to launching it. Sell-in time begins with the promotional launch and ends when approximately 95% of the deal merchandise is in the hands of consumers. Manufacturers can evaluate the program using sales data, consumer surveys, and experiments. Sales (scanner) data helps analyze the types of people who took advantage of the promotion, what they bought before the promotion, and how they behaved later toward the brand another brands. Sales promotions work best when they attract competitors customers who then switch. Consumer surveys can uncover how many recalls the promotion, what they thought of it, how many took advantage of it, and how the promotion affected subsequent brand-choice behavior. Experiments very such attributes as incentive value, duration, and distribution media. For example, coupons can be sent to half the households in a consumer panel. Scanner data can track whether the coupons led more people to buy the product and when. Additional costs beyond the cost of specific promotions include the risk that promotions might decrease long-run brand loyalty. Second, promotions can be more expensive than they appear. Some are inevitably distribution to the wrong consumers. Third are the costs of special production runs, extra sales force effort, and handling requirements. Finally, certain promotions irritate retailers, who may demand extra trade allowances or refuse to cooperate.
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PRICING,OBJECTIVES,POLICIES AND METHODS UNDERSTANDING PRICING Price is not just a number on a tag. Price comes in many forms and performs many functions, rent, tuition, fares, fees, rates, tolls, retainers, wages, and commissions all may in some way be the price you pay for some good or service. Traditionally, price has operated as the major determinant of buyer choice. Consumers and purchasing agents have more access to price information and price discounters. Consumers put pressure on retailers to lower their prices. Retailers put pressure on manufacturers to lower their prices. The result is a marketplace characterized by heavy discounting and sales promotion. A Changing Pricing Environment Pricing practices have changed significantly in recent years. Many firms are bucking the low price trend and have been successful in trading consumers up to more expensive products and services by combining unique product formulations with engaging marketing campaigns. Even products in fiercely competitive supermarket categories have been able to enjoy price hikes for the right new offerings. Protector & Gamble launched crest Pro-Health toothpaste at a 50% premium over other premium toothpaste, as well as Olay Definite mass market skin care line with a $25 plus price point that rivaled the lower end of department store brands. Rival Unilever has struck gold with Axe deodorants which have pushed prices in the category to over &4. Even coca-cola has been able to find higher price points introducing the coke blak line extension at about $2 per 8-ounce bottle, or roughly twice what it could receive for 2 liters of regular coke. Today the Internet is also partially reversing the fixed pricing trend. As one industry observer noted, we are moving toward a very sophisticated economy. Its kind of an arms race between merchant technology and consumer technology. Here is a short list of how the Internet allows sellers to discriminate between buyers and buyers to discriminate between sellers. Get Instant price comparison from thousand of vendors

Customer can compare the prices offered by over two dozen online book stores by just clicking my simon.com. Price-scan.com lures thousands of visitors a day, most of them corporate buyers. Intelligent shopping agents (bots) take price comparison a step further and seek out products, prices and reviews from hundreds if not thousands of merchants.

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Name their price and have it met. On priceline.com the customer states the price he wants to pay for an airline ticket, hotel or rental car, and Priceline checks whether any seller is willing to meet that price. Volumeaggregating sites combine the orders of many customers and press the supplier for a deeper discount. Get products free Open source, the free software movement that started with Linux, will erode margins for just about any company creating software. The biggest challenge confronting Microsoft, Oracle, IBM and virtually every other major software producer is : How do you compete with programs that can be hold for free/ Marketing insight: Giving It All Away describes how different firms have been successful with essentially free offerings. Sellers can Monitor customer behaviour and tailor offer to individuals GE lighting which gets 35000 pricing requests a year, has Web programs that evaluate 300 factors that go into a pricing quote, such as past sales data and discounts, so it can reduce processing time from up to 30 days to 6 hours. Both buyers and sellers can: Negotiate prices in online auctions and exchanges Want to sell hundreds of excess and slightly worn widgets? Post a sale on eBay want to purchase vintage baseball cards at a bargain price? Go to www, baseballplanet.com How companies price Companies do their pricing in a variety of ways. In small companies prices are often set by the boss. In large companies, pricing is handled by division and product-line managers. Even here, top management sets general pricing objectives and policies and often approves the prices proposed by lower levels of management. In industries where pricing is a key factor (aerospace, railroads, oil companies), companies will often establish a pricing department to set or assist there in determining appropriate prices. This department reports to the marketing department, finance department or top management. Others who exert an influence on pricing include sales managers, production mangers, finance mangers and accountants. 1. Have a product or service that truly stands out- its performance, ease of use and reliability should be superior to these of current offerings.
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2. Know your up-selling plan from the beginning- before you even go it beta, make sure you have at least one paid, add-on premium service up your sleeve. Before yet, have more than one. 3. Once youve decided that a product will be given away for free, dont change your mind. The fundamental whats for free and whats for pay divide needs to be set early says Adea Ressi, CEO of Game Trust, a start up that hosts 45 free games and sells enhancements online. If you make changes. Ressi says you risk alienating customers accustomed to getting your product for free. 4. Access to your product should be just one click away- the fewer time-consuming plug-ins downloads and registration form required the best. Otherwise people may get bored or frustrated and abort 5. Make sure the major bugs have been exterminated- your product can be beta, Rimer says, but not so much in beta that it doesnt work well Harness the collective intelligence of your users- Marten Mickos, CEO of MYsql , says customer suggestions can help speed up product improvements or inspire ideas for premium services. 6. Keep improving the product to give users more reasons to stick with it- the reality is that offering a product for free can be far riskier than if you actually charged for your product, : says Howard Anderson, a lecturer at the MIT Entrepreneurship Center. Only one in 10 companies will succeed at pulling this off 7. Identify a range of revenue sources- the epocrates service which offers medical professionals both free and premium access to relevance material via PDAs doesnt charge just for the premium information. It also charges fees to pharmaceutical firms for surveys, it conducts of Epocrates customers. Similarly mysql makes money from customer service as well as from fees charged to firms that redistribute the software. 8. Timing is everything. Make sure that revenue from your premium service soon covers the cost of your free service, otherwise, cut your losses and move on to the next start-up.

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GE is responding by making pricing one of its top three initiatives and instituting a whole sale set of changes  A matrix organization dedicated to pricing has been created  The CMO reporting to CEO leads the pricing initiatives  Dedicated pricing managers focus on product pricing and in each business unit there is generally a VP or director of pricing reporting to the head of marketing.  Pricing has been added to the GE executive education curriculum and is a mandatory initiative for the commercial excellence council of top 100 GE executives.  A global pricing council, made up of pricing leaders from each GE business unit, is looking for best pricing practices across GE and seeding them throughout the organization  Within large business units, specialized industry pricing councils cater to unique industry needs. For any organization, effectively designing and implementing pricing strategies requires a thorough understanding of consumer pricing psychology and a systematic approach to setting, adapting and changing prices. Consumer psychology and pricing Many economists assume that consumers are price takers and accept prices at face value or as given. Marketers recognize that consumers often actively process price information, interpreting prices in terms of their knowledge from prior purchasing experience, formal communications (advertising , sales calls and brochures), informal communication ( friends, colleagues, or family members), point-of purchase or online resources or other factors. Reference prices Research has shown that although consumers may have fairly good knowledge of the range of prices involved, surprisingly few can accurately recall specific prices of products, when examining products; however consumers often employ reference prices, comparing an observed price to an internal reference price they remember or to an external frame to reference such as a posted regular retail Price. Price quality inferences Many customers use price as an indicator of quality, image pricing is especially effective with ego-sensitive products such as perfumes, expensive cars, and Armani T-shirts. A $ 100
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bottle of perfume might contain $ 10 worth of scent, but gift givers pay $100 to communicate their high regard to the receiver. Price and quality perceptions of cars interact. Higher priced cars are perceived to possess high quality. Higher quality cars are likewise perceived to be higher priced than they actually re. Table shows how consumer perceptions about cars can differ from reality. When alternative information about true quality is available, price becomes a les significant indicator of quality. When this information is not available, price acts a sag signal of quality. Price ending Many sellers believe prices should end in an odd number,. Customers see an item priced at $299 in the $200 rather than the $300 range. Research has shown that consumers tend to process prices in a left-to right manner rather than by rounding. Price encoding in this fashion is important if there is a mental price break at the higher, rounded price. Setting the price A firm must set a price for the first time when it develops a new product, when it introduces its regular product into a new distribution channel or geographical area, and when it enters bids on new contract work. The firm must decide where to position its product on quality and price. Most markets have three to five price points or tiers. Marriotte hotels is good at developing different brands for different price points. Marriott vacation club-vacation villas (highest price), Marriott marquis (high price) Marriott(high medium price), renaissance (mediumhigh-price). Courtyard (medium price), town place suites (medium-low price), and Fairfield Inn ( low price). Consumer often rank brands according to these price tiers in a category.\ The firm must consider many factors in setting its pricing policy. Lets look in some detail at a six step procedure.  Selecting the pricing objectives  Determining demand  Estimating costs  Analyzing competitors cost prices and offers  Selecting a pricing methods and  Selecting the final price.

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Selecting the pricing objectives The company first decides where it wants to position its market offering. The clearer a firms objective, the easier it is to set price. Five major objectives are survival, maximum current profit, maximum market share, maximum market skimming, and product quality leadership Survival Companies pursue survival as their major objective if they are plagued with over capacity, intense competition, or changing consumer wants. As long as price cover variable costs and some fixed costs the company stays in business. Survival is a short-run objective; in the long run, the firm must learn how to add value or face extinction. 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, cash flow or rate of return on investment, this strategy assumes that the firm has knowledge of its demand and cost functions, in reality these are difficult to estimate. In emphasizing current performance, the company may sacrifice long-run performance by ignoring the effects of other marketing mix variables, competitors reactions and legal restraints on price. Maximum market share Some companies want to maximize their market share. They believe that a higher sales volume will lead to lower unit costs until costs are higher long-run profit. They set the lowest price, assuming the market is price sensitive. Texas instruments (TI) practiced this market-penetration pricing for years. TI would build a large plant, set its price as low as possible, win a large market share , experience falling costs and cut its price further as costs fell. The following conditions favor adapting a market penetration pricing strategy  The market is highly price sensitive and a low price stimulates market growth  Production and distribution costs fall with accumulated production experience and  A low price discourages actual and potential competition. Maximum market skimming Companies unveilings anew technology favour setting high prices to maximize market skimming. Product quality leadership

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A company might aim to be the product-quality leader in the market. Many brands strive to be affordable luxuries- products or services characterized by high levels of perceived quality, taste and status with a price just high enough not to be out of consumers reach. Brands such as starbucks coffee, Aveda shampoo, Victorias secret lingerie. Determining demand Each price will lead to a different level of demand and will therefore have a different impact on a companys marketing objectives. The relationship between price and demand is captured in a demand curve. In the normal case, the two are inversely related. The higher the price, the lower the demand. In the case of prestige goods, the demand curve sometimes slopes upward. One perfume company raised its price and sold more perfume rather than less. Some consumers take the higher price to signify a better product. However, if the price is too high, the level of demand may fall. Price sensitivity Estimating demand curves Piece experiments Statistical analysis Estimating costs

Types of costs and level of production A companys costs take two forms, fixed and variable. Fixed costs (also known as overheads) are costs that do not vary with production level or sales revenue. A company must pay bills each month for rent, heat, interest, salaries and so on regardless of output. Variable costs vary directly with the level of production. For example, each hand calculator produced by Texas instruments incurs the cost of plastic, micro processor, chips, and packaging. These costs tend to be constant per unit produced. Total costs consist of the sum of the fixed and variable costs for any given level of production. Average cost is the cost per unit at that level of production it equals total costs divided by production. Management wants to charge a price that will at least cover the total production costs at a given level of production. There are more costs than those associated with manufacturing, to estimate the real profitability of selling to different types of retailers or customers, the manufacturer needs to use activity99

based cost (ABC) accounting instead of standard cost accounting. ABC accounting tries to identify the real cost associated with serving each customer. It allocates indirect costs like clerical costs, office expenses, and supplies and so on, to the activities that use them, rather than in some proportion to direct costs, both variable and overhead costs are tagged back to each customer. Accumulated production Suppose TI runs a plant that produces 3000 hand calculators per day. As TI gains experience producing hand calculators, its methods improve. Workers learn shortcuts, materials flow smoothly and procurement costs fell. The result as fig shows is that average cost falls with accumulated production experience. Target costing Costs change with production scale and experience, they can also change as a result of a concentrated effort by designers, engineers and purchasing agents to reduce them through target costing, market research establishes a new products desired functions and the price at which the product will sell given its appeal and competitors prices. Deducting the desired profit margin from this price leaves the target cost the marketer must achieve. Analyzing competitors costs, prices and offers Within the range of possible prices determined by market demand and company costs, the firm must take competitors costs, price and possible price reactions into account. The firm should first consider the nearest competitors price. If the firms offer contains features not offered by the nearest competitor. It should evaluate their worth to be customer and add that value to the competitors price. If the competitors offer contains some features not offered by the firm, the firm should subtract their value from its own price. Now the firm can decide whether it can charge more, the same or less than the companies. Selecting a price method Given the customers demand schedule, the cost function and competitors prices, the company are now ready to select a price. The three major considerations in price setting. Costs set a floor to the price. Competitors prices and the price of substitutes provide an orienting point. Customers assessment of unique features establishes the price ceiling. Companies select apprizing method that includes one or more of these three considerations. We will examine six

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price-setting methods; markup pricing, target-return pricing, perceived value pricing, value pricing, going rate pricing and auction type pricing. Markup pricing The most elementary pricing method is to add a standard markup to the products cost. Construction companies submit job bids by estimating the total project cost and adding a standard markup for profit. Lawyers and accountants typically price by adding a standard markup on their time and costs. Target return pricing In target return pricing, the firm determines the price that would yield its target rate of return on investment (ROI). General motors have priced its automobiles to achieve a 15% to 20% ROI. Public utilities, which need to make a fair return on investment, can also use this method. Value pricing In recent years, several companies have adopted value pricing. They win loyal customers by charging a fairly low price for a high quality offering. Value pricing is thus not a matter of simply setting lower prices; it is a matter of reengineering the companys operations to become a low-cost producer without sacrificing quality to attract a large number of value-conscious customers. Going rate pricing In going rate pricing the firm bases its price largely on competitors prices, charging the same, more or less than major competitors, in oligopolistic industries that sell a commodity such as steel, paper or fertilizer all firms normally charge the same price. The smaller firms follow the leader changing their process when the market leaders price change rather than when their own demand for costs change, some firms may charge a slight premium or slight discount, but they preserve the amount of difference. Thus minor gasoline retailers usually charge a few cents less per gallon than the major oil companies, without letting the difference increase or decrease. Auction type pricing Auction type pricing is growing more popular, especially with the growth of the internet. Breakthrough marketing Eby describes the ascent of that wildly successful internet company. There are over 2000 electronic market places selling everything from pigs t used vehicles to cargo to chemicals. One major purpose of auction is to dispose of excess inventories or used

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goods. Companies need to be aware of the three major types of auctions and their separate procedures. Selecting the final price Pricing methods narrow the range from which the company must select its final price. In selecting that price, the company must consider additional factors, including the impact of other marketing activities, company pricing policies, gain and risk sharing pricing and the impact of price on other parties. Adopting to price Companies usually do not set a single price, but rather develop a pricing structure that reflects variations in geographical demand and costs, market-segment requirements purchase timing, order levels, delivery frequency, guarantees, service contracts and other factors. As a result of discounts, allowances and promotional support a company rarely realizes the same profit from each unit of a product that it sells. Here we will examine several price-adaptation strategies; geographical pricing, price discounts and allowances, promotional pricing and differentiated pricing. Geographical pricing ( cash, countertrade, barter) In geographical pricing, the company decides how to price its products to different customers in different locations and countries. Should the company charge higher prices to distant customers to cover the higher shipping costs, or a lower price to win additional business/ how should it account for exchange rates and the strength of different currencies. Another question is how to get paid,. This issue is critical when buyers lack sufficient hard currency to pay for their purchases. Many buyers want to offer other items in payment a practice known as countertrade. US companies are often forced to engage in countertrade if they want the business. Countertrade may account for 15% to 25% of world trade and takes several forms. Barter-the buyer and seller directly exchange goods, with no money and no third party involved. Compensation deal- the seller receives some percentage of the payment in cash and the rest in products. A British aircraft manufacturer sold planes to Brazil for 70% cash and the rest in coffee.

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Buyback arrangement The seller sells a plant, equipment or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment. A US chemical company built a plant for an Indian company and accepted partial payment in cash and the remainder in chemicals manufactured at the plant. Offset The seller receives full payment in cash but agrees to spend a substantial amount of the money in that country within a stated time period. For example, Pepsi co sells it cola syrup to Russia for rubies and agrees to buy Russian vodka at a certain rate for sale in the United states. Price discounts and allowances Most companies will adjust their list price and give discounts and allowances for early payment, volume purchases, and off season buying. Companies must do this carefully or find their profits much lower than planned. Discount pricing has become the modus operandi of a surprising number of companies offering both products and services. Some product categories tend to self-destruct by always being on sale. Salespeople, in particular, are quick to give discounts in order to close a sale .but word can get around fast that the companys list price is soft and discounting becomes the norms. The discounts undermine the value perceptions of the offerings. Some companies with overcapacity are tempted to give discounts or even begin to supply a retailer with a store-brand version of their product at a deep discount. Because the store brand is priced lower however it may start making inroads on the manufacturers brand. Manufacturers should stop to consider the implication of supplying products to retailers at a discount, because they may end losing long-run profits in an effort to meet short-run volume goals.

Promotional pricing Companies can use several pricing techniques to stimulate early purchase  Loss-leader pricing- supermarkets and department stores often drop the price on well known brands to stimulate additional store traffic. This pays if the revenue on the additional sales compensates for the lower margins on the loss leader items. Manufacturers of loss-leader brands typically object because this practice can dilute the brand image and bring complaints from retailers who charge the list price. Manufacturer
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has tried to restrain intermediaries from loss-leader pricing through lobbying for retail price maintenance laws, but these laws have been revoked.  Special event pricing- sellers will establish special prices in certain seasons to draw in more customers. Every august there are back to school sales.  Cash rebates- auto companies and other consumer-goods companies offer cash rebates to encourage purchase of the manufacturers products within a specified time period. Rebates can help clear inventories without cutting the stated list price.  Low interest financing- instead of cutting its price, the company can offer customer low interest financing. Automakers have used no interest financing to try to attract more customer.  Longer payment terms.- sellers, especially mortgage banks and auto companies stretch loans over longer periods and thus lower the monthly payments. Customers often worry less about the cost (the interest rate) of a loan and more about whether they can afford the monthly payment.  Warranties and service contracts- companies can promote sales by adding a free or low cost warranty or service contract.  Psychological discounting-this strategy sets an artificially high price and then offers the product at substantial savings. For example was $299 now $299. The Federal trade commission and better business bureaus fight illegal discount tactics. Discounts from normal prices are a legitimate form of promotional pricing. Promotional pricing strategies are often a zero-sum game. If they work, competitors copy them and they lose their effectiveness. If they dont work, they waste money that could have been put into other marketing tools, such as building up product quality and service or strengthening product image through advertising. Differentiated Pricing Companies often adjust their basic price to accommodate differences in customers, products, locations, and so on. Lands End creates mens shirts in many different styles, weights, and levels of quality. A mens white button-down shirt may cost as little as $18.50 or as much as $48.00

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Price discrimination occurs when accompany sells a product or service at two or more prices that do not reflect as proportional difference in costs, in first-degree price discrimination, the seller charges a separate price to each customer depending on the intensity of his or her demand. In second-degree price discrimination, the seller charges less to buyers who buy a larger volume. In third-degree price discrimination, the seller charges different amounts to different classes of buyers, as in the following cases;  Customer-segment pricing. Different customer groups pay different prices for the same product or service. For example, museums often charge a lower admission fee to students and senior citizens.  Product form pricing. Different versions of the product are priced differently, bust not proportionately to their costs. Evian prices a 48-ounce bottle of its mineral water at $2.00. It takes the same water and packages 1.7 ounces in a moisturizer spray for $6.00. Through product-form pricing. Evian manages to charge $3.50 an ounce in one form and about $.04 an ounce in another.  Image pricing. Some companies price the same product at two different levels based on image differences. A perfume manufacturer can put the perfume in one bottle, give it a name and image, and price it at $ 10 an ounce. It can put the same perfume in another bottle with a different name and image and price it at $30 an ounce.  Channel pricing. Coca-cola carries a different price depending on whether the consumer purchases it in a fine restaurant, a fast-food restaurant, or a vending machine.  Location pricing. The same product is priced differently at different locations even though the cost of offering it at each location is the same. A theater varies its seat prices according to audience preferences for different locations.  Time pricing. Prices are varied by season, day. Or hour. Public utilities vary energy rates to commercial users by time of day and weekend versus weekday. Restaurants charge less to early bird customers and some hotels charge less on weekends. Initiating and Responding to Price Changes Companies often need to cut or raise prices.

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Initiating Price Cuts Several circumstances might lead firm to cut prices. One is excess plant capacity. The firm needs additional business and cannot generate it through increased sales effort, product improvement, or other measures. Companies sometimes initiate price cuts in a drive to dominate the market through lower costs. Either the company starts with lower costs than its competitors, or it initiates price cuts in the hope of gaining market share and lower costs. Cutting prices to keep customers or beast competitors often encourages customers to demand price concessions, however, and trains salespeople to offer them. A price-cutting strategy can lead to other possible traps:  Low-quality trap. Consumers assume quality is low.  Fragile-market-share trap. A low price buys market share but not market loyalty. The same customers will shift to any lower-priced firm that comes along.

Before Price $10.10

After (a 1% price increase)

Units sold

100

100

Revenue

$1,000

$1,010

Costs

-970

-970

Profit

$30

$40

(a 33% profit increase)

 Shallow-packets trap. Higher priced competitors match the lower prices but have longer staying power because of deeper cash reserves.  Price-war trap. Competitors respond by lowering their prices even more,

triggering a price war. Customers often question the motivation behind price changes. They may assume the item is about to be replaced by a new model; the item is faulty and is not selling well; the firm is in

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financial trouble; the price will come down even further; or the quality has been reduced. The firm must monitor these attributions carefully. Initiating Price Increases A successful price increase can raise profits considerably. For example, if the companys profit margin is 3% of sales, a 1% price increase will increase profits by 33% if sales volume in unaffected. This situations illustrated in Table 14.6. The assumption is that a company charged $10 and sold 100 units and had costs of $970, leaving a profit of $30, or 3% on sales. By raising its price by 10 cents (a 1% price increases), it boosted its profits by 33%, assuming the same sales volume. A major circumstance provoking price increases is cost inflation. Rising costs unmatched by productivity gains squeeze profit margins and lead companies to regular rounds of price increases. Companies often raise their prices by more than the cost increase, in anticipation of further inflation or government price controls, in a practice called anticipatory pricing. Another factor leading to price increases is over demand. When a company cannot supply all its customers, it can raise its prices, ration supplies to customers, or both. The price can be increased in the following ways, each of which has a different impact on buyers.  Delayed quotation pricing. The company does not set a final price until the product is finished or delivered. This pricing is prevalent in industries with long production lead times, such as industrial construction and heavy equipment.  Escalator clauses. The company requires the customer to pay todays price and all or part of any inflation increase that takes place before delivery. An escalator clause bases price increases on some specified price index. Escalator clauses are found in contracts for major industrial project, such as aircraft construction and bridge building.  Unbundling. The company maintains its price but removes or prices separately one or more elements that were part of the former offer, such as free delivery or installation. Car companies sometimes add antilock brakes and passenger-side airbags as supplementary extras to their vehicles.  Reduction of discounts. The company instructs its sales force not to offer its normal cash and quantity discounts.

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Given strong consumer resistance to price hikes, marketers go to great lengths to find alternative approaches that will allow them to avoid increasing prices when they otherwise would have done so. Here are a few popular ones.  Shrinking the amount of product instead of raising the price. (Hershey Foods maintained its candy bar price but trimmed its size. Nestle maintained its size but raised the price.)  Substituting less-expensive materials or ingredients. (Many candy bar companies substituted synthetic chocolate for real chocolate to fight price increases in cocoa.)  Reducing or removing product features. (Sears engineered down a number of its appliances so they could be priced competitively with those sold in discount stores)  Removing or reducing product services, such as installation or free delivery.  Using less-expensive packaging material or larger package sizes.  Reducing the number of sizes and models offered.  Creating new economy brands. (Jewel food stores introduced 170 generic items selling at 10% to 30% less than national brands.) Responding to Competitors Price Changes How should a firm respond to a price cut initiated by; a competitor? In general, the best response varies with the situation. The company must consider the products stage in the life cycle, its importance in the companys portfolio, the competitors intentions and resources, the markets price and quality sensitivity, the behavior of costs with volume, and the companys alternative opportunities. In markets characterized by high product homogeneity, the firm can search for ways to enhance its augmented product. If it cannot find any, it may need to meet the price reduction. If the competitor raises its price in a homogeneous product market, other firms might not match it if the increase will not benefit the industry as a whole. Then the leader will need to roll back the increase.

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Pricing decision Setting pricing policy:

1. Selecting the pricing objective: The clearer a firms objectives, the easier it is to set price. A company can pursue any of six major objectives through its pricing: survival, maximum current profit, maximum current revenue, maximum sales growth, maximum market skimming, or product-quality leadership.

2. Determining demand: Each price that the company might charge will lead to a different level of demand and will therefore have a different impact on its marketing objectives. The relation between alternative prices that might be charged in the current time period and the resulting current demand is captured in a demand curve. In normal case demand and price are inversely related. That is the higher the price, the lower the demand, and the lower the price, the higher the demand. In the case of prestige goods, the demand curve sometimes slopes upward.

3. Estimating cost: Demand sets a ceiling on the price that the company can charge for its product. And company costs set the floor. The company wants to change a price that covers its cost of producing, distributing and selling the product, including a fair return for its effort and risk.

4.Analyzing competitors costs, prices, and offers: Within the range of possible prices determined by market demand and cost, competitors costs prices. And possible price reactions help the firm establish where to set its prices. The company needs to benchmark its costs against its competitors costs to learn whether its is operating at a cost advantage or disadvantage. The company also needs to learn the price and quality of competitors offer.

5.Selecting a pricing method: Given the three cs-the customer demand schedule, the cost function, and competitors price the company is now ready to select a price. The price will be somewhere between one
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that is too low to produce a profit and one that is too high to produce enough demand. Company resolve the pricing issue by selecting a pricing method that includes one of more of these three considerations. The pricing method will then lead to a specific price. We will examine the following price-setting methods: markup pricing, target-return pricing, perceived value pricing, value pricing, going rate pricing and sealed bid pricing. 6.Selecting the final price: Pricing methods narrow the price range from which the company must select its final price. In selecting the final price, the company must consider additional factors, including psychological pricing, the influence of other marketing mix elements on price, company pricing policies, and the impact of price on other parties.

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UNIT 4 BUYER BEHAVIOUR UNDERSTANDING INDUSTRIAL AND BUYER BEHAVIOUR

CONSUMER BEHAVIOUR AND BUYING MOTIVES According to Webster buyer behavior is all psychological, social and physical behaviour of potential customer as they become aware of evaluate, purchase, consume and tell other people about products and services. Consumer behavior is the process whereby individuals decide what, when, how and from whom to purchase goods and services Buyer behavior may by view as an orderly process whereby the individual interacts with his environment for the purpose of making market decisions on products and services. Thus, the chief characteristics of buyer behaviour are: 1. It consists of the mental and physical activities which consumers undertake to acquire goods and services and obtain satisfaction from them. 2. It includes both observable physical activities, such as walking through the market to examine merchandise, and making a purchase and mental activities-such as forming attitudes, perceiving advertising materials, and learning to prefer particular brands. 3. Consumer behaviour is very complex and dynamic too-constantly changing; and therefore, managements need to adjust with the change, otherwise market may be lost. 4. The individuals specific behaviour in the market place is affected by internal factors, such as needs, motives, perception, and attitudes, as well as by external or environmental influences such as the family, social groups, culture, economic and business influences. To achieve a better understanding of the consumer behaviour study of those disciplines which may provide some explanation as to why people behave as they do is required. Such disciplines are economics, sociology, psychology and anthropology. Economics explains consumer behaviour in relation to economic factors. Sociologist and cultural anthropologists advance explanations concerning the influences of family and group behaviour upon individual behaviour, the diffusion of new products and ideas among various groups and the impact of culture on its members.

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Marketing action (Determination of buying behaviour)

Cultural factors (Anthropology) Social factors

Sociology, social psychology

Individual factors (psychology and Economics)

Buyers

Predispositions

Economic and physical reality Family Face to face contacts

Reference groups Social class

External influences on consumer behaviour The consumer behavior is influence by culture forces such as social and cultural factors, Sub - external reference groups, social classes, status symbols etc.,
Culture 112

1. Social and cultural influences: Particularly all buyer behavior is influenced by other people, ie individual is influenced by members of his family, friends, members of the community. Social influences act in two directions-one, they provide information and second, standard of behavior against which alternatives buying behaviors are measured. 2. The family The impact of family on the formulation of values, attitudes and purchasing patterns is considerable,. The family defines purchase needs and also puts financial strains within which the buying is to be done. Different members play different roles viz, initiator (who senses the need for purchase), influencer (who provides inputs into the purchase decision), decider (who finally decides what to purchase), and the user (who directly uses the product or service). Marketers, therefore, must know and study the influence o who makes the decision-whether the head of the family or husband and wife or both or childrens views also influence the decision (as in the case of snacks, toys or childrens views also influence the decision (as in the case of snacks, toys, pet accessories). 3.Culture It refers to the social heritage of the society. It encompasses the social values, attitudes towards work, social intercourse, language, belief, art, morals, law, customs, traditions and any other capabilities and habits acquired by man as a member of the society. Cultural influences are so pervasive that they are hard to identify and analyse. However, these cultural influences can provide an important basis for market segmentation, product development, advertising etc. 4.Social class On the basis of income category, the population is generally divided into upper class, middle class and lower class. In USA warner has categorized six classes: Upper-upper class and Lowerupper class (3%); Upper middle class (12%), lower middle class (30%). 5.Reference groups These are collection of individuals (may be father, husband / wife, lawyer, a firm-fan, a player or a leader) providing the individual a sense of identity, accomplishment and stability. These groups influence the individuals opinion, beliefs and aspirations. Such groups play key roles in marketing. If they try or use a product their followers are prone to do the same. Marketers ,
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therefore, often target their promotional efforts to reach such groups and through them reach their followers by words of mouth or other subtle influences extended by the group. 6.Status symbols Sociologists explain the status symbols by holding that  People express their personalities not so much in words as in symbols (e g) mannerisms, dress, ornaments, possessions), and  Most people are increasingly concerned about their social status, different products vary in their status symbol value.

INTERNAL INFLUENCING FACTORS ON CONSUMER BEHAVIOUR Internal or intra-personal influences are reflected in motivation, perception, learning, attitudes and personality of buyers. These are also known as the psychological determinants of consumer behaviour. Motivation Motivation is a complex network of psychological and physiological mechanisms. Motives can be instinctive or learned; it can be product or patronage, primary or selective; or it can be conscious or unconscious, rational or irrational they can range from most biogenic needs, such as hunger, sex, food or drink and bodily comforts which arise from physiological states of tension to the most advanced psychogenic needs (such as the desire to invent means for harnessing solar energy, or to carry on some most advanced scientific and cultural pursuits that arise from psychological states of tension). Perception Perception is the sensing of stimuli external to the individual organisation-the act or process of comprehending the world in which the individuals exists. It is the complex process by which people select, organize and interpret sensory stimulation into a meaningful and coherent picture of the world. Perception determines what is seen, felt, heard, smelt or tasted by the consumers when numerous stimuli are directed to them, since perception leads to thought and thought leads to action, marketing is concerned with understanding and process of perception.

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Learning Learning is the process of acquiring knowledge and the basic factors influencing learning are: repetition, motivation, conditioning and relationship and origination. Attitude, or an individuals consciousness, feeling, beliefs, values form the emotional part of the mind (termed as mind sets). Attitudes develop gradually as the result of experience and they emerge from interactions with family friends and reference groups. There are three main components of attitude; 1 the cognitive component 2. The affective component 3. Cognitive component Personality It reflects individual differences in behaviour, ie, and individual responds with a certain amount of consistency to similar stimuli. Personality traits that influence behaviour include degrees of dominance, adventurousness, sociability, responsibility etc.

Determinants of organizational buyer behaviour Organizational buyer behaviour Environmental factors Geographical Technological Organizational factors Goals Resources Organizational Psychological participants users Buyers factors Motivation Perception Organsiational decision process Problem recognition Selection alternatives Economic Structure Influencers Personality Outline specifications Political Legal Cultural Deciders Learning Search for suppliers Analysis of proposals Selection of suppliers Post evaluation purchase of of

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Buying motives Motives which induce an ultimate consumer, industrial consumer or user, organizational consumer or merchant buyer to purchase a product are known as buying motives. These motives are controlled by the socio-economic and psychological and other factors some of which operate from outside and some of which form within a person and which impel, stimulate him to realize his need or want. Choose a product or service that will satisfy it, select the place from where to purchase it and decide upon the price he will be willing to pay and also decide upon the time when he may actually purchase it. Model of the buying organizational behaviour

Technology relevant for buying tastes buying

Buying decision process

Individual consumer and his buying motives

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Individual consumer and his buying motives

An individual consumer purchases product for three important reasons  He has a desire which needs to be satisfied  He has an urge which induces him to purchase and  He has a reasoning Classification of buying motives (a) Primary buying motives relate to the reasons why consumers buy one class of goods rather than another. Such motives result directly form the needs and wants, and include the desire to achieve recognition, physical well-being, preservation of self-image, relaxation, beauty creation, knowledge, money gain, etc. the seller must discover the customers primary motives (for they are often unaware of these) and then direct his appeal as effectively as possible. (b) Selective buying motives relate to causes that induce a consumer to purchase certain class or quality goods. Selection is based on such selective as he desire for bah economy and convenience. Some of the most common selective buying motives include desire for convenience, versatility, economy, dependability and durability. (c) Patronage buying motives are those that cause a customer to buy products from a particular manufacturer or retailer. Important patronage motives are those concerned with fashion, exclusiveness, dependable repairing service, convenience of location, quality, large selections, price, friendship for or reliability of the seller, punctuality in delivery, variety of selection, etc. Barriers to Recognizing Buying Motives Rational and emotional buying motives are usually present in almost any selling and buying situation, However, there are some barriers to be recognized for these motives in the customers, viz., First, the customer may be unaware of his own motives and this unawareness prevents customer from communicating to the seller his desires for wanting certain goods and services. In such cases, the salesman must become a detective, during his talks with the customer, in order to gain necessary knowledge and insight regarding buying motives of the customers.

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Second, the customers sometimes are unwilling to disclose their real motive this requires a great tact on the part of the marketer to induce them to express their needs. Third, the actual motives are so complex or independent that recognizing them is very difficult, if not impossible. Barriers to Buying. The barriers that most often prevent the customer from buying what he wants are: (i) Incompatibility of the product with a self-concept, which occurs if the product does not coincide with or support a self-concept or how the customer really thinks of himself. When this happens the customer reacts negatively to sales representation. (ii) (iii) (iv) Lack of authority to buy or power to make purchase of a particular product. The risk of moving away from ones ideal self-image, The feeling of guilt.

Buying Motives of Industrial Consumers or Organizational Market Industrial consumers may be defined as business or institutional organizations that buy products and services either to use in making other goods and services or to use in their own business. According to Canfield, there are three types of industrial consumers, viz., (i) Manufacturers, who purchase goods for turning them into finished goods such as cotton, pig iron or steel sheets, and all types of raw materials,. (ii) Manufacturers and service organizations which buy goods for consumption in the operation of their business, such as lighting equipment and furniture and fixture, fitting in a cinema hall. (iii) Industrial distributors who buy for resale to industrial consumers. Industrial consumers are concentrated in industrial areas where a large number of industries are developed and located. Typical industrial buyers are in extractive, processing, construction and transportation industries, public utilities, services and distributive industries, governmental institutions, commercial institutions, specialized service industries (hotels, restaurants, theatres, laundries, dry cleaners, tailoring and barber shops, etc).

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The organizational market differs from consumers market in many respect, e.g., (i) The organizational market has a derived demand, i.e., the demand does not exist as an independent force but is dependent upon the demand for consumer goods and services. (ii) (iii) (iv) (v) It has fewer buyers, as compared to millions of buyers in case of consumer goods. It is more concentrated than the consumer market, which is usually widely dispersed. It is more valuable to fluctuating demand. It has a greater cash flow than the consumer market.

Items (1) 1. Product Considerations (i)

Ultimate Consumers (2)

Industrial Consumers (3)

Total volume of Smaller sales market

than

industrial Larger

than

ultimate

consumer market. Virtually unlimited

(ii)

Variety

of Virtually unlimited

products offered (iii) Making products buyers specifications (iv) Number of For most products For most products of Uncommon to Very common

product suppliers (v)

comparatively large

Comparatively small Very large

Average size of small purchase

(vi)

Nature demand

of Sets pace for industrial Derived goods demand

from

ultimate

consumer demand.

2.Promotional Consideration (i)Advertising Extensive use of mass More selective-little use if

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media (ii) Personal selling direct to Very limited consumer (iii)Use of trade shows and Minor exhibits (iv)Rationality in purchase Limited decision making (v)Purchasing skills (vi)Number involved decision (vii)Visibility of purchasing Open, easy to observe behavior (viii)Reason for purchase in of limited

mass media. Very extensive.

Major

Great

Sophisticated

people Usually one, sometimes Usually several.

purchasing two or more.

Closed behind the scenes

Satisfy personal or house- Satisfy hold need institutional

business, or

governmental need. 3.Pricing Considerations (i) Price policy Usually one price to sell Often negotiated

According to Nystrom the following motives impel industrial consumers to purchase 1. Efficiency-performance, practicability and increased capacity 2. Economy in money, in use or in time 3. Good quality materials and workmanship 4. Simplicity in construction, operation and application 5. Increased salability of users product 6. Ease of operation such as easier handling, greater convenience, handiness or light touch 7. Space saving ie compactness, ease for storage and holding 8. Obsolescence which needs improvement, replacement or additions 9. Safety to employees, clients and customers 10. Cleanliness in plant, users product or workmen

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What industrial consumers buy Industrial consumers generally purchase a wide variety of goods. According to vergil Reed, those are 1. Building and sites- factories, warehouses, piers, car, casks, store buildings, office buildings, land, mining properties and drilling rights. 2. Installations and or major equipments-boilers, generators, rolling mills, conveyor systems, seamless tube mills, furnaces, kilns and other items of a stationery or installed nature constituting the major operating equipment and involving usually a high cost per unit 3. Accessory or secondary equipment-meters, gauges, hand-drills, time systems hand trucks, saltier, jacks and pinion pullers, office equipment-typewriters, accounting machines, furniture etc 4. Suppliers-finished goods comprising  Operating goods-lubricating grease and oil, graphite, grinding or polishing compound, welding wire coal  Maintenance-paint, nails, light bulbs, cleaning supplies and  Administrative goods-typewriters, ink, pencil, clips,etc 5. Fabricated or semi-finished material-steel bars, billets, wires, rods, scalp, steel sheets, blank stampings, grey cotton piece goods, wood planks. 6. Process materials- dyestuffs, acids, waxes, gums, compositions, alloys and other products of chemical processes or combinations 7. Parts-finished or about to be assembled needed for grinding, polishing, fitting and other finishing operations, 8. Complementary equipments-finished goods of one manufacturer purchased by another to be supplied with his product at the time of sale and for the purpose of increasing its utility or aiding in its operation-eg, jacks supplied with coal mining machines and dredges, clamshell buckets supplied with dredges and cranes, tools supplied with trucks an automobiles, tool supplied with milling and grinding machines. 9. Receptacles and packages-bottles, jars, cans, cartoons, cases, drums, barrels and bags, wrappers, labels and stickers, etc

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10. Services electric power, telephone and telephone and telegraph, insurance, banking, advertising, research, legal, medical and dental assistance, employment, credit, transportation, warehousing and business consulting.

Segmentation on the basis of consumer characteristics

The buying decision process: the five stage model

Understanding consumer behaviour Who buys our product or service Who makes the decision to buy the product Who influences the decision to buy the product How is the purchase decision made? Who assumes what role? What does the customer buy? What needs must be satisfied? where do they go or look to buy the product or service When do they buy? Any seasonality factors How is our product perceived by customers What are customers attitude toward our product What social factors might influence the purchase decision Do customers lifestyles influence their decisions How do personal or demographic factors influence the purchase decision Why do customers buy a particular brand?

The five stage model of the consumer buying process

Problem recognition

Information search 122

Evaluation of alternatives

Purchase decision

Purchase decision

Post purchase behaviour

Purchase decision

Attitudes of others

Unanticipated situational factors

Purchase intention

Evaluation of alternatives 123

In the evaluation stage, the consumer forms preferences among the brands in the choice set, the consumer may also form an intention to buy the most preferred brand. In executing the purchase intension, the consumer may make up to five sub decisions: brand (brandA), dealer (dealer2), quantity (one computer), timing (weekend) and payment method (credit card). Non compensatory models of consumer choice, The expectancy value model is a compensatory model, in that perceived good things for a product can help to overcome perceived bad things. But consumers often take mental shortcuts using simplifying choice heuristics, Heuristics are rules of thumb or mental shortcuts in the decision processes With non compensatory models of consumer choice, positive and negative attribute considerations dont necessary net out. Evaluating attributes in isolation makes decision making easier for a consumer, but it also increase the likelihood that she would have made a different choice if she had deliberated in greater detail. We highlight three such choice heuristics here. 1. With the conjunctive heuristic, the consumer sets a minimum acceptable cutoff level for each attribute and chooses the first alternative that meets the minimum standard for all attributes. For example, if Linda decided all attributes had to rate at least a 5, she would choose compute B 2. With the lexicographic heuristic, the consumer chooses the best brand on the basis of its perceived most important attribute, with this decision rule, linden would choose computer C 3. With the elimination by aspects heuristic, the consumer compares brands on an attributes selected probabilistically-where the probability of choosing an attributes it positively related to its importance-and eliminates brands that do not meet minimum acceptable cutoffs. Our brands or product knowledge, the number and similarity of brand choices and timer pressure involved and the social context all may affect whether and how we use choice heuristics Consumers dont necessarily use only one type of choice rule. Sometimes, they adopt a phased decision strategy that combines two or more. For example, they might use a non compensatory decision rule such as the conjunctive heuristic to reduce the number of brand choices to a more manageable numbered and then evaluate the remaining brands. One reason
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for the runaway success of the Intel inside campaign in the 1990s was that it made the brand the first cutoff for many consumers-they would only buy a personal computer that had and Intel micro processor. Personal computer makers such as IBM, Dell, and Gateway had no choice but to support Intels marketing efforts. Intervening factors Even if consumers form brand evaluations, two general factors can intervene between the purchase intention and purchase decision. The first is the attitudes of others; the extent to which another persons attitude reduces our preference for an alternative depends on two things 1. The intensity of the other persons negative attitude toward our preferred alternative 2. Our motivation to comply with the other persons wishes The more intense the other persons negativism and the closer the other person is to us, the more we will adjust our purchase intention. The converse is also true. Related to the attitude of others is the role played by infomediaries who publish their evaluations. Example includes consumer reports, which provides unbiased expert reviews of all types of products and services. J D Power which provides consumer base ratings of cars, financial services and travel products and services, professional movie, book, and music reviewers, customer reviews of books and music on Amazon.com and the increasing number of chat rooms, bulletin boards, blogs and so on where people discuss products, services and companies. Consumers are undoubtedly influenced by these evaluations as evidenced by the success of a small budget movie such as napoleon dynamite which cost only $400,000 to make buy grossed over $44 million at eh box office 2004 thanks to a slew of favorable reviews by moviegoers on many web sites The second factor in unanticipated situational factors that may erupt to change the purchase intention. Linda might lose her job, some other purchase might become more urgent, or a store salesperson may turn her off. Preferences and even purchase intentions are not completely reliable predictors of purchase behaviour A consumers decision to modify, postpone, or avoid a purchase decision is heavily influenced by perceived risk. Consumers may perceive many types of risk in buying and consuming a product. 1. Functional risk-the product does not perform up to expectations
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2. Physical risk-the product poses a threat to the physical well being or health of the user or other 3. Financial risk- the product is not worth the price paid 4. Social risks- the product results in embarrassment from others 5. Psychological risk the product affects results in an opportunity cost of finding another satisfactory product. 6. The amount of perceived risk varies with the amount of money at stake, the amount of attribute uncertainty and the amount of consumer self-confidence, consumers develop routines for reducing the uncertainty and negative consequences of risk such as decision avoidance, information gathering from friends and preferences for national brand names and warranties. Marketers must understand the factors that provoke a feeling of risk in consumers and provide information and support to reduce perceived risk. The amount of perceived risk varies with the amount of money at stake, the amount of attribute uncertainty and the amount of consumer self confidence, consumer develop routines for reducing ht uncertainty and negative consequences of risk, such as decision avoidance, information gathering from friends and preference for national brand names and warranties. Marketers must understand the factors that provoke a feeling of risk in consumers and provide information and support to reduce perceiver risk. Post purchase behaviour After the purchase, the consumer might experience dissonance that stems from noticing certain disquieting features or hearing favourable things about other brands and will be a laser to information that supports his or her decision, marketing communications should supply beliefs and evaluations that reinforce the consumers choice and help him feel good about the brand. The marketers job therefore doesnt end with the purchase, marketers must monitor post purchase satisfaction, post purchase actions, and post purchase product users. Post purchase satisfactions Satisfaction is a function of the closeness between expectations and the products perceived performance. If performance falls short of expectations, the consumer is disappointed, if it meets expectations, the consumer is satisfied. If it exceeds expectations the consumer is

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delighted, these feelings make a difference in whether the customers buys the predict again and talks favorably or unfavorably bout it to others. Post purchase actions If the consumer is satisfied she is more likely to purchase the product again, the satisfied customer will also tend t say good things about the brand to others. On the other hand, dissatisfied consumers may abandon or return the product, they may seek information that confirms its high value. They may take public action by complaining to the company, going to a lawyer or complaining to other groups. Private actions include deciding to stop buying the product or warning friends The CRM program designed to build long-term brand loyalty. Post purchase communications to buyers have been shown to result in fewer product returns and order cancellations. Computers companies, for example can send a letter to new owners congratulating them on having selected a fine computer. They can place ads showing satisfied brand owners. they can solicit customer suggestions for improvements and list the location of available services. They can write intelligible instruction booklets. They can send owners a magazine containing articles describing new computer applications. In additions they can provide good channels for speedy redress of customer grievances. How customer user or dispose of products
Give it away Trade it To be sold

Get rid of it temporarily y

Rent it

Lent it product Get rid of it permanent ly Use it to serve original purpose Keep it Convert it to serve new 127 Store it

Sell it

To be used

Direct to consumer Throw it away Through middlemen

To intermediary

Post purchase use and disposal Marketers should also monitor how buyers use and dispose of the product. A key driver of sales frequency is product consumption rate-the more quickly buyers consume a product, the sooner they may be back in the market to repurchase it. One opportunity to increase frequency of product use occurs when consumers perception of their usage differ from reality. Consumers may fail to replace products with relatively short life spans soon enough because they overestimate its product life. One strategy to speed up replacement is to tie the act of replacing the product to a certain holiday, event or time of year. For oral B has run toothbrush promotions tied in with the springtime switch to daylight savings time, another strategy is to provide consumers with better information about either; 1. When they first used the product or need to replace it 2. Its current level of performance, batteries have built in gauges that show how much power they have left; toothbrushes have color indicators to indicate when the bristles are worn; and so on. Perhaps the simplest way to increase usage is to learn when actual usage is less than recommended and persuade customers of the merits of more regular usage, overcoming potential hurdles.If consumers throw the product away he marketer needs to know how they dispose of it especially if-like batteries, beverage containers, electronic equipment and disposable diapers-it can damage the environment.

Customer Relationship Management Definition of customer relationship management Customer relationship management (CRM) a well defined business strategy, is a fusion of a series of functions, skills, processes and technologies which together allows companies to more profitably manage (acquire and retain) customers as tangible assets.CRM a comprehensive approach for creating, maintaining and expanding customer relationship.

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Customer relationship management is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer. CRM Process framework:The broad framework suggests that CRM process comprises the following forms of sub-process Customer relationship formation process    Relationship management and governance process Relational performance evaluation process and CRM evolution or enhancement process depicts the CRM process frame work. CRM process framework Formation management and governance performance

Purpose Increase effectiveness

Team structure

Relationship performance Strategic

Improve efficiency

Role specification

Financial marketing Retention

Programs Account management

Planning process Satisfaction Planning alignment Loyalty

Retention marketing Co-op agreements Strategic partnership Monitoring process communication

Employee motivation Partners Criteria process Evolution 129 Enhancement, improvement Employee training

CRM is an interactive process CRM is not just about the technology, process thinking causes firms to expand their thinking to strategy, tactics and skills set as well. The second step is to understand that CRM is a highly complex interplay of these five areas. The rest of the picture becomes clear when enterprises realize that these five areas are all inter-connected (ie., technology can drive strategy: processes impact skills sets; tactics can be developed to utilize technology). As such, the interplay of the five areas will be iterative process. This means that successful CRM practitioners need to keep updating all five areas as circumstances change. The CRM market arena The CRM market is widely acknowledged as being the fastest growing software application segment. CRM is a diverse subject; in the context of technology based CRM solutions there is an array of different packages and systems available in the market. According to the likes of Garter, CRM embraces the following components         Technology enabled marketing (TEM) Technology enabled selling (TES) E-commerce Customer service and support (CSS) Telephony Integration middleware (e,g back office) External service provider (ESP) Application service provider (APS).

Board areas of CRM There are five broad areas of CRM and these are: Strategies, skills, technology, tactics and processes (SSTTP). All these areas are highly interactive and dynamic in nature. Thus, technology drives strategy process impacts sill sets and tactics developed to utilize technology. The different areas of CRM are discussed hereunder 1. Strategy-CRM is a business strategy, it would evolve differently at different enterprises depending on what strategy is developed. First step is to develop an appropriate CRM strategy on the basis of the enterprises business strategy. For example, a strategy to become a customer centre and support multiple-channels-requires different solutions than
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a strategy designed to maximize the life time value of the customer through forming close relationships between the customer and the enterprise with independent agents. Both seem to be valid and the results are different. The CRM strategy drives structure and technology as it shown in
Finance Growth Logistics

Customer relationship management strategy

Shareholders management

Marketing

Policies

sub matrix

Organisational structure measures controls

Reporting

2. Skill sets- the skill sets required to use the technology is important. Hence, buying the technology without skill sets would beimplementation true for employees and customers. Technology a waste. This is The technologys usage and its value has to be understood by one and all. The person using the technology must find its real value. Enterprises, therefore are to make sure that everyone who is a stake holder in CRM-internal and external, has the right skill sets to use the technology effectively. 3. Technology- is one of the important areas needed at the right place as and enabler. By simply installing a software package, CRM is not done. The other four areas are to be aligned with this fifth and a valuable solution is found out. The general feeling is that if technology is good. CRM would work well. It is a wrong notion. CRM implementations
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have filed in spite of good technology, where as with mediocre technology it has flourished. Hence technology is to be put in the right place an enabler of the other four areas that is strategy, tactics processes and skill sets. 4. Tactics- tactics are considered as the daily components of the strategy. Once the strategy is decided, enterprises would decide how CRM will manifest itself daily to the customers. The enterprise is to develop tactics to implement its CRM strategy by answering certain questions put regarding.    Enterprises unified view of the customer Customers feeling about their dealing with distinct entities within the firm. Website designed is for marketing, sales service (two of these or all the three)

5. Processes- the various employees like sales force, marketing of human resources. IT (operations), finance etc various processes found in various enterprises which have not changed over the years. Enterprises have to re-assess their processes to adjust to the strategy and technical decisions made. There might have been a problem identified long back, which occurred once, however forgotten. Enterprises might have automated he same without assessing automated bad/costly processes. Accordingly the re-engineering of the processes may be needed, the data capture process is needed to keep a customer database accurate and usable. Elements of CRM The concept of road map makes us to understand CRM better. The road map for a complete CRM solution is better understood, after understanding each of the complex interconnections of the applications within it. Once an enterprise has looked at these other non-technology areas, it can begin to concentrate on the technology aspect with greater understanding of the whole, which the technology must support. Once an enterprise understands its processes, it needs to understand what tools and technologies it must bring together to automate its environment. First level components of CRM (front office automation) Phone Web E-mail Direct mail Telemarketing M In person -

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Telesales Call centre Personalisation E-Commerce E-service E-mail marketing systems Sales force automation E-mail response management system Campaign management system Field service M; Market; Sa-sales; Se-service support.

Sa Se -

M Sa Se -

M Sa Se -

Sa M,Sa -

Sa Se

Architecture of CRM
Independent software vendors (ISVs) Customer relationship planning (CRP)

customer analysis campaign management Relationship optimization

Channels partners

Consultants

field sales tele sales

call centre

Tel web

customer contact point

Customer interaction (CSI ) systems

CRM customer Relationship

Management

second level components of CRM (source: Gartner Research)

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Architecture element of CRM solutions The various elements involved are Customers information repository Campaign management Event triggers / business logic/ rules repository Decision support tools Higher level statistical analysis (Analytics / data mining tools) Forecasting / planning tools True channel management Workflow management Collateral management CRM development cycle Business starts with customers; hence any successful CRM initiative is highly dependents on a solid understanding of customers. A typical CRM life cycle undergoes through the following phases: 1. Understand and differentiate 2. Development and customize 3. Interact and deliver 4. Acquire and retain 5. Prioritizing and changes 6. Creating an action plan 7. Measuring success Understand and differentiate Organizations cannot have a relationship with customer unless they understand them. True understanding is based on a combination of detailed analysis and action. The important activities are: Profiling to understand demographics, purchase patterns and channel preference Segmentation to identifying logic unique groups of customers that tend to look alike and behave in a similar fashion Primary research to capture needs and attitudes.

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Customer valuation to understand profitability as well as life time value or long term potential.

Development and customize In the product-oriented world of yesterday, companies developed products and expected customers to buy them. In a customer-focused world, products and channel development has to follow the customers lead. Most organizations today are not able to cost effectively customize products for individual customers; the extent of customizations should be based on the potential value delivered by the customer segments. Interact and deliver Interaction is also a critical component of a successful CRM initiative. It is important to remember that interaction doesnt occur through marketing and sales channels. Customers interaction is in many different areas of the organization, including distribution and shipping customer service and online. To foster relationships organizations need to ensure that:  All areas of the organization have easy access to relevant information.  All areas are trained to use customer information to tailor interactions based on customer needs. Delivering value is a corner-stone of the relationship. Value is not just based on the price of the product or the discounts offered. In fact, customer perceptions of value are based on a number of factors including the quality of products and services, convenience, speed, ease of the use and service excellence. (iv) Acquire and retainThe more organizations learn about customers, the easier it is to pinpoint, those that are producing the greatest value for the organization. And because they will continue to learn about what is valuable to each segment, they will be more likely to score a win with the right channel, the right media, the right product, right offer, right timing and the most relevant message. Successful customer retention basically involves getting it right on an ongoing basis. Successful customer retention is also based on the organisations ability to constantly deliver on three principles:  Maintain interaction. Never stop listening.
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 Deliver on the customers definition of value and  Remember that customers change as they move through differing life stage. (v) prioritizing the changesAs there might be many gaps, an organization will need to make prioritization critical, the organization should evaluate each of the strategies identified to resolve gaps based on:  Costso as to implement including initial onetime costs, as well as anticipated ongoing expenses.  Overall benefitsome changes may have larger impacts on the organizations ability to increase customer value and loyalty.  Feasibility based on organization nee, data and systems support, resource skill-sets and a number of other factors.  Timerequired including the time necessary for training and addressing cultural change management issues related to specific strategy. (vi) Creating an action planwhile the complete plan might span three or more years, it should be based on six-month phases with clear deliverables that will demonstrate both progress and quick hits or measures of success. One more key success factor for the planning process will be a leadership action plan. (vii) Measuring successimplementing CRM happens to be time consuming and hence needs a significant commitment across the organisation and it is crucial that the action plan:  Establish means of measuring the progress on CRM initiatives.  Establish enterprise wide measures of success and metrics that can be applied to all of the CRM initiatives and  Apply these metrics on an ongoing basis to ensure continued finding of your CRM initiatives. CRM Implementation Issues One of the most interesting aspects of CRM development is the multitude of customer interface that a company has to manage in present context. An effective CRM implementation requires a front-line information system that shares relevant customer information across all interface units. Relational databases, data warehousing and data mining tools are, thus, very valuable for CRM systems and solutions.

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However, the challenge is to develop an integrated CRM platform that collects relevant data input at each customer interface and simultaneously provides knowledge output about the strategy and tactics suitable to win customer business and loyalty.
Sales Group internet

Data output

knowledge
Market Developm ent

input Integrated marketing information platform information content

Call centre

marketing Customer Operation/ services

The key components in next generation CRM strategies  Web capabilities  Multiple channel optimization  Enterprise wide integration  Personalization  Globalised products eptions individuals have of themselves and the products they buy, lie in the realm of psychology. The internal and external forces and influences interact in highly complex ways, affecting the individuals total pattern of behaviour as well as his buying behaviour.

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Cultural factors (Anthropology) Social factors

Sociology, social psychology

Individual factors (psychology and Economics)

Buyers

Predispositions

Economic and physical reality Family Face to face contacts

Reference groups Social class

Sub - culture Culture 138

UNIT - 5 MARKETING RESEARCH AND TRENDS IN MARKETING INTRODUCTION Marketing research is a method of getting facts to be used by the executive in formulating policies and plans. MARKETING INFORMATION SYSTEM According to Philip Kotler "marketing information system" (MIS) is a system that consists of people, equipment, and procedures to gather, sort, analyse, evaluate, and distribute needed, timely, and accurate information to marketing decision maker. The marketing information system encompasses the anlaysis, planning, implementation and control function of marketing management. The overall objective of MIS is to provide input from target markets, marketing channels, competitors, publics, and other forces for creating, changing and improving the marketing decisions. The MIS inputs are generally provided through (i) internal record system (information on orders, sales, prices, inventory levels, receivables, payables, and so on) (ii) marketing intelligence system (everyday information about pertinent developments in the marketing environment)/ (iii) marketing research system (design collection, analysis and reporting of data and findings relevant to a specific marketing situation facing the company), and (iv) analysis of information (a coordinated collection of data, system, tools and techniques with supporting software and hardware by which an tools and techniques with supporting software and hardware by which an organization gathers and interprets) and turns it into a basis for marketing action. The term "Marketing Information System" has gained lot of prominence in the present century and modern era due to technological advancement, consumer consciousness and computerized information systems. It may be defined as "a structured, interacting complex of persons, machines, and procedures designed to generate an orderly flow of pertinent information, collected from both intra-and extra-firm sources, for use as the basis for decision - making in specified responsibility areas of marketing management".
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Marketing Research - Meaning and Definition The term market research is loosely used as synonymous with marketing research. "The first term, market research, is more narrowly defined by modern marketing men as the study of those who buy or distribute. Marketing research, on the other hand, is a broad and widely used term and is inclusive of marketing research activities. Marketing research is a wider-term and includes market research. Market research merely deals with the discovery of the capacity of the market to absorb a particular product. Other areas covered by marketing research include location of the market, nature of the market, product analysis, time, place and media of advertising, personal selling and channels of distribution. According to Cox and Good, "Marketing information system is a set of procedures and methods for regular and planned collection, analysis and presentation of information in marketing decisions". It includes internal record system, marketing decision support system, marketing research system and information analysis system. Kotler says, "Some companies use the term 'market research' instead or 'marketing research'. The former term is accurate for describing research into markets: their size, geographical distribution, incomes and so forth. However, it fails to cover the idea of research into the effects of marketing efforts on market, for which the term marketing research is more accurate. Marketing research is increasingly coming into favour as the term describing both ideas. He defines marketing research as 'a systematic problem analysis, model building and fact finding for purpose of improved decision - making and control in the marketing of goods and services". However diverse, most definitions contain the following common elements: (1) It involves intensive, and systematic study of a marketing problem. This it does by adopting a planned procedure of investigation and analysis. (2) It adopts scientific method and objectively in the solution of marketing problem. In so doing rational outlook (based on reason and logic) is used; the purpose o enquiry and the

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problem under investigation are clearly defined; accuracy in calculation, in observation and in reporting is strictly ensured; and a standardized process used.

(3) It is an aid or a tool for decision - making and control in the marketing of goods. It is an integral part of information system. Problem in Marketing Research Reilly groups these problems under three major head as follows: 1. Those which relate to the product itself: 2. Those which relate to consumer markets ; and 3. Those which relate to each phase of the marketing process. The Product itself or product Research Studies which relate to the product itself involve investigations of price at which the product is offered to the public, of present and potential uses, and of weaknesses and improvements in the physical content or packing of the product. As a result of market investigation of this character the manufacturer has been able to adopt his product so that it will meet more nearly the requirements of the consumer for whom it is suppose to have been made. For instance had it not been for this type of study, fountain pen manufacturers might have been delayed in finding out that consumers are found of coloured fountain pens, or ball-point pens. For example, Pond's India tested its new product Pond's Toothpaste, But it did not launch the toothpaste with the same package as was for concept test and test marketing, it resulted into failure of the product as consumer's perceived to resemble taking of Talcum powder into their mouth.

Consumer Market Marketing is concerned with the creation of customers. Consumer research is the careful and systematic investigation of the consumer's attitudes, actions, preferences, and other reactions to the particular problem under survey. For such a research the customers are grouped according to age, sex, race, religion, occupation, class, education, intelligence, income, material possession

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and standard of living; of securing data concerning consumer's buying motives and habit, and the finding out of the likes and dislikes of present and prospective customers. The marketing process Studies which relate to each phase of marketing process include those present in the various marketing functions. However, the marketing manager. In actual practice thinks of them in connection with the actual departments present in his own business organization. The most common of these departments include (a) advertising, (b) sales and (c) transportation. Significance or uses of Marketing Research Marketing research is a careful and systematic investigation of the buying and selling carried on by wholesalers and retailers. Among the more important facts that a manufacturer may get from properly conducted marketing research are : (i) an estimate of the total market in which his product is competing, and the trend of this total market; (ii) an estimate of the position of his product, and of competitive products, within the market; (iii) the level of the retailer's stocks; (iv) the number of retailers stocking the product, and (v) the level of retailer's purchases. The major significance of marketing research are: (1) To implement the marketing concept. (2) To synchronies the production and consumption. (3) It brings to the notice of the advertising manager the need ofr changing the form of existing appeal on the need for appealing to new class of customers. (4) It provides insurance cover for the survival and growth of the business in a dynamic economy. (5) It is a tool for evaluating the marketing plans, policies, programmes and procedures and in reducing and minimizing all marketing costs. (6) It enables the marketers to make goods acceptable and saleable and to see that they reach the market easily, cheaply, and profitably without scarifying consumer interest. According to Crisp, marketing research benefits the marketing management in the following manner (i) It tells management where the company stands in its industry. (ii) It tells management what industry trends are and are likely to be.

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(iii) It is an essential tool in appraising and improving sales management effectiveness. Specific activities in this area include measuring variation in territorial sales yield, market share, and sales effectiveness.

Objectives of Marketing Research Marketing research aim at providing the following information to the marketing manager (1) To define his present market situation together with the long-range trends which have led up to it.

(2) To discover what major and underlying factors are dominating that situation and how these factors can be influenced or controlled. (3) To set up a plan for keeping in touch with the behavior of these dominating factors and for measuring the results of any efforts made to influence or control them. The objectives of Marketing Research are shown in Fig 14.3 below Marketing research may be used in the following ways. (1) Market and their potentialities. A study of the market, its location and its potentialities. (2) Consumers, Information concerning who they are, where they live, and their buying habits, motives and preferences. (3) Dealers. An investigation of present dealers and their business methods with a view to determining the best type of dealer to choose as official representative. (4) Selling Policies. Collection of data concerning the correctness and improvement of present policies and the testing of present policies. (5) Sales Territories. An analysis of present territories with a study of the best territorial divisions and routing within them. (6) The finding of correct facts upon which to base and to develop a sales quota. (7) Merchandising policies. The study of old policies and the finding and testing of new ones. (8) Products. The discovery of desirable new products, their use and improvements, together with a determination of best sizes, prices, and qualities. (9) Packages. The designing and testing of appropriate packages. (10) Trade mark and slogans. The compilation, testing and choosing the best trademarks and slogans.
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(11) Advertising. The determination of the efficiency of advertising and the testing of window displays, etc. (12) Copy appeals. Finding out why people buy one product rather than another from one firm in preference to another. (13) Magazine. Information with reference to the reading habits of consumers and retailers. (14) Competition. Determination of policies and practices, etc., of competitors and the strength and weakness of each competitor's position.

EVOLUTION OF MARKETING RESEARCH Marketing research activity is said to have begun around 1900 and developed as more companies began to be interested in regional and then national markets. The field was expanded markedly by the development of sampling techniques in the 1930s and the application of physchological interviewing and measurement techniques. Kotler gives how various technique began to be substantially considered or used in marketing research. MARKETING RESEARCH PROCESS/ STEPS In marketing research no two tastes are exactly identical, nor is there any singles procedure that can be followed in all investigations. however, the general procedure given here is applicable to most projects. Some of the steps are interrelated, some overlap and some are unnecessary in every project. 1. Defining the objectives, and the problem. 2. Conducting a situation analysis. 3. Determining the Information needed; and the sources or information. 4. Deciding Research Design. 5. Tabulating analyzing and interpreting the data. 6. Preparing research report. 7. Follow-up recommendations.

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1. Define the Objectives and Identify the Problem In order for marketing research to be conducted, marketers must have precise objectives. They must be clear about what information is needed and how it should be used. Usually this means defining a problem. The first basic step is to define the marketing problem in specific terms. Only if the marketing researcher knowns what problem management is trying to solve can he do an effective job in planning and designing a research project that will provide the needed information. This includes, according to Crisp, the establishment of a general framework of major marketing elements and the company elements. The marketer may consider some devices for pinpointing specific problems, such as. (i) Studying records and reports of the firms; (ii) careful observation of processes in the firm; (iii) Purposeful conversation with other qualified persons in the firm; (iv) careful observation and study of the procedures and techniques of the most efficient and successful firms in the industry; (v) reading pertinent published materials; (vi) use of check lists in evaluating the operations of the firm; and (vii) "brain storming"- intensified discussion within a group of interested persons.

Conduct Situation Analysis After the problem has been defined, the researcher's task is to learn as much about it as the time permits. This involves getting acquainted with the company, its business, its products and market environment, advertising, etc., by means of library consultation and extensive interviewing of company's officials. The researchser tries to get a "feel" for the situation surrounding the problem. He analyses the company, its market, its competition is known as situation analysis. This phase of preliminary exploration is known as situation analysis. This analysis enables the researcher to arrive at a hypothesis or a tentative presumption on the basis of which further investigation may be done.

Determining the Information Needed

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The researcher should then determine the specific information needed to achieve the research objectives. For successful operation of production and sales departments, what information is required depends to a large extent on the nature of product and the method used for placing it in the hands of the consumers. In general, the producer, manufacturer, the wholesaler, and the retailer try to find out four things, namely, (1) what to sell, (2) when to sell, (3) where to sell, and (4) how to sell, so as the get better prices, and to satisfy consumer needs. Information Needed by farmers No define account can be given about the information the farmer needs without knowing something about the product in which he specializes. Determining the source of information The investigation must identify the source from which the different items of information are obtainable and select those that he will use. He may collect information from primary data, secondary data or both. Primary data are those which are gathered specifically for the project at hand, directly-e.g, through questionnaires and interviews. primary data sources include company salesman, middleman, consumers, buyers, trade associations, executives, and other businessmen and even competitors. Secondary data are generally published sources, while have been collected originally for some other purpose. They are not gathered specifically to achieve the objectives of the particular research project at hand, but are already assembled. Such sources are internal company records; government publication; reports and journals; trade professional and business association, publications and reports; private business firms' records, advertising media, University research organization, and libraries. Primary Sources (1) The consumer (i) Product uses. (ii) Characteristics of market. (iii) Consumer brand recognition, acceptance or preference (iv) product likes and dislikes (v) Consumer buying habits (vi) Media uses (vii) Effect of merchandising and sales service
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(viii) Effect upon consumers fo company of advertising. (ix) Character of competing product. The characteristics on which the competition of other product is base. 4. Develop the Research Design The heart of marketing research is the research design. "It is an over all plan that specifies information needed and that specifies how investigation to obtain it will be conducted. A complete research design would include the following elements: (1) Statement of the evidence necessary to solve a problem and the basic scheme whereby the solutions will become revealed or validated. (2) Specification of the evidence - where and how it will be obtained. (3) Anticipation of how the data will be analyzed to produce answers to the problem. (4) Guidelines for the calculation and approval of the feasibility and cost of the project"

MARKETING RESEARCH PROGRAMME FOR MARKETING A NEW PRODUCT The fundamental principles of marketing are on and the same and in no case affected by the size of the business. The only problem is of adoption. For a new concern with small capital it is advisable that its proprietor should take special care to avoid business hazards and mistakes in marketing. A critical study of the methods used by other successful business institutions selling the same or similar product should be made and adopted, if it is clear that they would be helpful and innovations on adopcurative medicine for marketing. In the early stages it would be better to start on a small scale and concentrate on a limited area or a local town, which can be served efficiently and expeditiously, and gradually when experience is gained and profits earned territories may be approached. Available means may be analysed, investigated and results, wherever possible and if advantageous, can be adopted first on a small scale. Market Analysis Who are its logical consumers? Who are its marginal consumers? Where are they to be found? Who are its logical distributors?

Market Investigation Product Analysis

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What fundamental human instincts does the use or consumption of the product satisfy? What interests and desires does it appeal to? Howe well does it meet the requirements of the user or consumer? Can any improvements or modifications be made which would strengthen its appeal? Are there any use for it not hitherto thought of? What are its selling points? What should be the unit or units of sale? Selection of Marketing Method Will it be better to employ salesmen alone? or should it use advertising alone? or to use a combination? What subsidiarly forms of selling should be used? What will be the relative costs of marketing by these methods? Selection of the Channels of Distribution Should the product be sold to the consumer or user through the manufacturer's oranisation? Or through retailers? Would the employment of wholesalers are advantageous? What would be the benefits of using special selling agents, (a) throughout the area served(b) in areas difficult to reach through the other distribution channels? What are the relative costs and net profits likely to be a result of using each of these methods.

Budgeting Planning and Building the Sales Organisation Determining Sales Policies. Has the basis of relationship with dealers and customers been decided and codified? Have prices, terms, replacement, etc. been provided for? What will be the basis of relations with employees? How will competitors be treated.

Advertising If advertising is to be used, what plan should be followed? Can an advertising department be maintained, or an advertising manager employed, or should this responsibility be placed upon the sales manager and the services of a good advertising agent Used? To whom will the advertising be directed, (a) Consumers or users (b) dealers, or (c) to both? What is the basic selling ides of the product? What media will be used? Who will prepare the copy and the responsible for the publication or appearance of th advertising. Sampling
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Should samples be distributed? If so how should this be done in smaller than standard packages or in standard packages? Is it necessary to first make the sample acceptable to those who are to try. It? Should demonstration be used in conjunction with samples distribution.

Helping the Dealers to sell What plans have been made to induce people to go into the shops of the dealers to buy the new product? Has the cooperation of dealers been obtained? Do the plans appeal to them? When will they be put into effect? Who will be responsible for seeing that they are carried out? How long will this help be extended to the dealers? Is it possible to educate the dealer and his staff in selling the product to his customers.

Organizational Structure of Marketing Research Typically, after marketing research activities have been budgeted by a company, the fund are sent at the discretion of the marketing research manager. He may either develop his own staff or may rely heavily on outside consultants. In any event, he will attempt to run his department in a result-oriented manner.

Function of the Marketing director 1. 2. The objective of the job should be established The researcher should obtain as much information on the history and background of the problem as is possible in the time available. 3. The principal factors affecting the outcome should be identified early so the research can concentrate on them. 4. 5. 6. 7. The job should be engineered to the need and the time available. When dealing with problems relating to sales, the total market should be identified. Answer should be checked several ways. A clear presentation of the problem, analysis and recommendation should be developed.

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Consumer behavior Meaning: How individuals, group, and organizations select, buy, use and dispose of goods, services, ideas, or experience to satisfy their needs and desires.
CULTURAL
y SOCIAL
PERSONAL

y Reference Group y Culture

Age and life cycle stage y Family Occupation Economic Circumstances

PSYCHOLOGICAL

y Motivation y Perception y Learning Belief and attitudes

BUYER

y Subculture
Life Style Personality and self concept y Roles and Statuses

y Social

Major factors influencing buying behavior: Cultural factors: Culture: Culture is the most fundamental determinant of a persons wants and behavior. The growing child acquires a set of values, perceptions, preferences, and behavior through his or her family and other key institutions. Social class: Social classes are relatively homogenous and enduring divisions in a society which are hierarchically ordered and whose members share similar values, interests, and behavior. Sub culture:
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It includes nationalities, religions, racial groups, and geographical regions.

Many

subcultures make up important market, segments, and marketers often design products and marketing programs tailored to their needs.

Social factors: Reference group: It consists of all groups that have a direct or indirect influence on the persons attitudes or behavior. Group having a direct influence on a person called membership groups. Family: Who has more power or expertise? a. Husband dominant: life insurance, automobiles, television b. Wife dominant: washing machine, carpeting, furniture c. Equal: Vocation, housing, outside entertainment

Roles and statuses: A person participates in many groups throughout life- family, clubs, and organizations. The role consists of the activities that a person is expected perform. Each role carries a status. A Supreme Court justice has more status than a sales manager, and a sales manager has more status than an office Clark. Personal factors: Age & stage on life cycle: People buy different goods and services over their lifetime. Consumption is also shaped by the family life cycle, along with the financial situation and typical product interests of each group. Marketers often choose lifecycle groups as their target market. Occupations: Blue-collar worker will buy work clothes, work shoes, and lunch boxes. A company president will buy expensive suits, air travel country club membership, and a large sailboat. Economic circumstances: People economic circumstances consist of their spend able income (its level, stability, and time pattern), savings and assets ( including the percentage that is liquid), debts, borrowing power, and attitude toward spending versus saving. Life Style:
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A persons lifestyle is the persons pattern of living in the world as expressed in the persons activities, interest, and opinions.

Personality and self-concept: Personality, we mean a person distinguishing psychological characteristics that lead to relatively consistent and enduring responses to his or her environment. Psychological Factor: Motivation: One who drives to do the work. Perception: It is the process by which an individual select, organizes, and interprets information inputs to create a meaningful picture of the world. Learning: Permanent changes in the mind. Belief: It is a descriptive though that a person hold about something. Attitude: It is a persons enduring favorable or unfavorable evaluations, emotional feelings, and action tendencies toward some object or idea.

Types of buying behavior: Complex buying behavior: Consumers engage in complex buying behavior when they are highly involved in a purchase and aware of significant different among brands. Dissonance reducing buyer behavior: Sometimes the consumer is highly involved in a purchase but sees little difference in the brands. The high involvement is based on the fact that the purchase is expensive, infrequent, and risky. In this case, the buyer will shop around to learn what is available but will buy fairly quickly, perhaps responding primarily to a good price or to purchase convenience. Habitual buying behavior: Many products are bought under conditions of low consumer involvement and absence of significant brand differences. Variety-seeking buying behavior:

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Some buying situation characterized by low consumer involvement but significant brand different consumers often do a lot of brand switching. Think about cookies. The consumer has some beliefs about cookies, choose a brand of cookies without much evaluation, and evaluates the product during consumption. But next time, the consumer may reach for another brand out of boredom or a wish for a different taste. Because switching occurs for the sake of variety rather than dissatisfaction. Challenger firms will encourage variety seeking by offering lower prices, deal, coupons, free samples, and advertising and presents reason for trying something new. The stages of buying decision process: Problem recognition: The buying process start when the buyer recognizes a problem or need. The buyer senses a difference between his or her actual state and a desired state. The need can be triggered by internal or external stimuli. Information search: Consumer information sources fall into four groups. a. Personal sources: family, friends, neighbors, acquaintances, b. Commercial sources: Advertising, sales persons, dealers, packaging, displays, c. Public sources: Mass media, consumer-rating organizations, d. Experiential sources: handling, examining, and using the product Evaluation of alternatives: How does the consumer process competitive brand information and make final judgment of value? There is no simple and single evaluation process used by all consumers or by one consumer in all buying situations. There are several decision evaluation processes, the most current models of which see the consumer evaluation process as cognitively oriented. That is, they; see the consumer as forming product judgments largely on a conscious and rational basis. Purchase decision: In evaluation stage, the consumer forms preference among the brand in the choice set. The consumer may also form an intention to buy the most preferred brand. How ever, two factors can intervene between the purchase intention and purchase decision. The first factor is the attitudes of others and unanticipated situation factors. Post purchase behavior: After purchasing the product, the consumer will experience some level of satisfaction or dissatisfaction. The marketers job does not end when the product is bough but continues into
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the post purchase period. Marketers must monitor post purchase satisfaction, post purchase actions, and post purchase product use and disposal.

ADVERTISING

What is Advertising? The word advertising is derived from the Latin word, viz, "advertero" "ad" meaning towards and "verto" meaning. "I turn". Literally it means "to turn people's attention to a specific thing". Advertising has been defined by different experts. Some of the oftquoted definitions are : American Marketing Association has defined advertising as "any paid form of nonpersonal presentation and promotion of ideas, goods or services by an identified sponsor. The medium used are print, broadcast, and direct. Advertising is "any paid form of non-personal presentation of ideas, goods or services by an identified sponsor". Basic Features of Advertising On the basis of various definitions, referred to above, it may be stated that advertising possesses certain basic features, such as: (1) It is a mass non-personal communication, reaching large groups of buyers. It is not delivered by an actual person, nor is it addressed to a specified person. (2) It is a matter of record, giving information for the benefit of buyers. It guides them to a more satisfactory expenditure of their hard earned money. The contents of an advertisement are what the advertiser wants. (3) It persuades buyers to purchase the good advertised, which means that advertising devoid of persuasion is ineffective. To persuade the buyers the advertiser makes his products buyer - satisfying. (4) It is a mass paid communication, the ultimate purpose of which is to impart information, develop attitudes and induce action beneficial to the advertiser (i.e. the sale of a product or service). (5) The communication media is diverse such as print (newspapers and magazines) broadcast (radio and television), and direct (mail, billboards, motion pictures).
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(6)

It is also called printed salesmanship, because information is spread by means of the written and printed words and pictures so that people may be induced to act upon it.

Promotion : Definition After the product has been planned, the channels of distribution and physical distribution of the product decided, and the price - structure evolved; the next step is to decide upon the promotional strategy that the firm may follow. Promotional strategy is the second key element in overall marketing strategy. The first key element being product market strategy; which focuses upon filling the product and its features to the target market's need and wants. Promotion strategy focuses upon making the product flow through the marketing channels to the target market. Promotion is concerned with the marketer's activities in communication both with members of the target market and the middlemen to increase the chances that the planned sequence of sales (i.e. ownership transfers) takes place smoothly and efficiently. Promotion is "any marketing effort whose function is to inform or persuade actual or potential consumers about the merits of a (given) product or service for the purpose of introducing a consumer either to continue or to start purchasing the firms product or service at same (given) price".

'Selling' and 'Promotion' "Selling" and "Promotion" are often used synonymously. Selling has been defined as "the personal or, impersonal process of assisting and/or persuading a prospective customer to buy a commodity or a service or to act favourably upon an idea, that has commercial significance to the seller. "Promotion" is the all inclusive term representing the broad field - advertising, personal selling, and sales promotion. The promotional mix, therefore, deals with coordination of the sales force activities, the advertising programmes, and other promotional efforts, which may include packaging, branding, direct solicitation, point of purchase display, premiums, holding trade shows and exhibitions, use of sample or gifts".

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Sales Promotion and Advertising There seems to be a universally accepted distinction between these two terms. Advertising includes all forms of mass media communication directing towards influencing the end consumers. Whereas, Sales Promotion includes the forms of mass communication directed towards informing and influencing the channels of distribution (e.g. distributors, wholesalers, retailers etc.

The Purposes of Promotion There are three broad purposes of promotion and these are : (i) To communicate; (ii) To convince; and (iii) To compete. Communication is the basis of marketing, it is not enough merely to communicate, but communication should be convincing enough to supplement and provide adequate advantages as compared to competitors product.

Types of Promotion Thus promotion may be primarily informative or primarily persuasive. Informative promotion is a necessity for firms bringing out discontinuous innovations such as automatic kitchen were, colour television, radios, pocket calculators, and home video machinery. Informative promotion is needed when of firm has distinctly new product for sale. On the other hand, persuasive promotion is needed where continuous and dynamically continuous innovations are brought out, and the consumer needs to be persuaded that an item is better than the substitutes in the market is very similar to other products. Promotion and Non-Business Activity Promotion is not limited to business activity only. It is also used to the greatest extent by non-business organizations. For instance, a university or professional institution uses promotion to get students join, and enroll. The promotional techniques used by political candidates holding of meetings. Issuing election manifestoes, radio talks, aim at winning votes. Charitable institutions solicit donations through advertising media, door-to-door visits and collection boxes at specified centers.

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Need for Promotional Activities First, the physical separation of the consumers and producers, and an increase in the number of potential customers, have given significance to communication system. The physical gap is closed by good, channel management. Second, improvements in physical distribution facilities have expanded the areal limits of the markets, with which establishment of communication system becomes a necessity. Third, a large number of wholesalers and retailing middlemen have developed the producers and the users, which has necessitated that not only the consumers be informed abut the benefit of the product, but also the middlemen need be informed about products. Fourth, when sale begins to decline, either due to preference for a new product brought out by the competitor.

Functions of Advertising For many firms advertising is the dominant element of the promotional mix-particularly for those manufacturers who product convenience goods such as detergents, non-prescription drugs; cosmetics, soft drinks and grocery products. Advertising is also used extensively by makers of automobiles, home appliances etc. to introduce new product and new product features - its uses, its attributes, it availability etc. Advertising can also help to convince potential buyers that a firm's product or service is superior to competitor's product in make, in quality, in price, etc. It can create brand image and reduce the likelihood of brand switching even when competitors lower their prices or offer some attractive incentives. Advertising is particularly effective in certain other spheres too, such as : (i) when consumers' awareness of products or services is at a minimum; (ii) when sales are increasing for all terms in an industry; (iii) when a product is new and incorporates technological advances not immediately apparent; (iv) when the need for product differentiation is strong; and (v) when primary buying motive exists. It performs the following functions: (i) Promotion of sales (ii) introduction of new product awareness, (iii) creation of good public image, (iv) mass production facilitation (v) carry out research (vi) education of people, and (vii) support to press/media.
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Advertising and Advertisement It may be noted that significant difference exists between 'advertising' and an 'advertisement'. First, advertisement is simply the message itself, whereas advertising is a process - a proramme or a series of activities necessary to prepare the message and bring it to the intended persons. Second, public knows the person behind advertising because the sponsor is openly identified in the advertisement itself. Finally, payment is made by the sponsor to the media which carries the advertisement.

Type of Advertising (a) Product Advertising : The main purpose of such advertising is to inform and stimulate the market about the advertiser's products or services, and to sell these. This type of advertising usually promotes specific, branded products in such a manner as to make the brands seem more desirable. It is used by business, government organisations, and private non-business organization to promote the uses, features, image sand benefits of their services and products Indirect - action advertising hopes to stimulate demand over a long period of time, increasing the buyer's respect for the manufacturers brand. Brand acceptance and approval are built up against a future purchase. (b) Institutional Advertising - It is designed to create a proper attitude toward the sellers and

to build company's image or goodwill, rather than to sell specific product or service. Its purpose is to create a frame of mind and to implant feeling favourable to the advertiser's company. Its assignment is to make friends for the institution or organization. It is sub-divided into three categories: patronage, public relations and public service institutional advertising: (i) In patronage institutional advertising the manufacturer tells his prospects and customers about himself, his policies and his personnel. He appeals to the patronage motivation of buyers. If successful, he convinces buyers that his operation entitles him to the money spent by them. (ii) Public relations institutional advertising is used to create a favorable image of the firm among employees, stockholders or the general public. (iii) Public service institutional advertising urges public support. For example, the Government uses public service to sell ideas and attitudes about such matters as conservation of natural or human resources, saving, security, family planning, tourist or industry location etc.
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(c)

Other Types - Adverting may also be classed as national, general or local. When it is

sponsored by manufacturers it is known as national and when it is placed by retailers it is local. Advertising may be consumer advertising, when it is aimed at ultimate consumers who purchase for personal use; or industrial advertising, where an industrial user is urged. Reinforcement advertising tries to assure current users that they have made the right choice and tells them how to get the utmost satisfaction from the product. The purpose of reminder and reinforcement advertising is to prevent a loss in sales or market share.

Evolution of Advertising Nothing definite can be said as to how old is the method of advertisement. It was originally used to warn public against something either to drive away or attract the public for something bad or good. It is presumed that the first advertisement was somewhat in the form of stenciled inscriptions which were found on earthern bricks prepared by the Babylonians about the three thousands years before Christ. "The bricks carry the name of the temple in which they were used, the name of the king who built it just as a modern public building contains a corner or foundation stone or tablet with the names of official in office when the structure was erected. The method was to cut a stencil in hand stone and with it stamp each brick while the clay was still soft. The kings who did advertise themselves to such of their subjects as could read hieroglyphics. Advertising Objectives The long term objectives of advertising are broad and general, and concern the contribution advertising should make to the achievement of overall company objectives. Most companies regard advertising's main objective as that of providing support to personal selling and other forms of promotion. But advertising is a highly versatile communications tool and may therefore by used for achieving various short and long-term objectives. Among these objectives are the following. 1. 2. 3. 4. To do the entire selling job (as in mail order marketing) To introduce a new product (by building brand awareness among potential buyers) To force middlemen to handle the product (pull strategy) To build brand preference (by making it more difficult for middlemen to sell substitutes)
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5. 6.

To remind users to buy the product (retentive strategy) To publicize some change in marketing strategy (e.g., a price change, a new model, or an improvement in the product)

7. 8. 9.

To provide rationalization (i.e. socially acceptable excuses) To combat or neutralize competitor's advertising To improve the morale of dealers and / or sales people (by showing that the company is doing its share of promotion)

10.

To acquaint buyers and prospects with the new uses f he product (to extend the product's life cycle).

Advertising is thought to be an art of creating demand. it is a subsidiary market force and its uses is primarily considered as being both complementary and supplementary to other methods of inducing sales. Prof. Reed has listed over 40 benefits. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Increase sales volume thereby reducing unit production costs. Stabilizes the companies business Increase the percentage of net profit Secures leadership or domination Establishes the character of the management in the public mind as reputation Sells the institution as well as the product or service Sets a standard for organization performance, or creates an ideal for attainment. Protects a company from the consequences of revolutionary competitor tactics. Establishes value which cannot be destroyed or dissipated as the tangible properties Establishes standards of value for the product or service over a wider area.

Benefits of Advertising (1) It leads to cheaper prices. "No advertiser could live in the highly competitive arena of modern business if his methods of selling were more costly than those of his rivals." (2) enjoy. (3) It increases demand for commodities and this results in increased production. Advertising It acquaints the public with the features of the goods and advantages which buyers will

: (a) creates and stimulates demand, opens and expands the markets. (b) creates goodwill, which

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leads to an increase in sales volume; (c) reduces marketing costs, particularly product selling costs, (d) satisfies consumer demands by placing in the market what he needs. (4) It reduces distribution expenses in as much as it plays the part of thousands of salesmen

at a time. (5) It ensures the consumers better quality of goods. A good name is the breath of life to an

advertiser. (6) By paying the way for large - scale production and increased industrialization,

advertising contributes its quota to the profit of the companies, the prosperity of the shareholders, the uplifts of the wage - earners and the solution of the unemployment problem. (7) It raises the standard of living of the general public by impelling it to use the articles of

modern types which may add to his material well being. (8) It establishes the goodwill of the concern for the best articles produced by it and in course

of time they sell like hot cakes. Consumers search for satisfaction of their needs when they purchase goods. What they want from it is beauty, superiority, economy, comfort, approval, popularity, power, safety, convenience, sexual gratification and so on. The manufacturer, therefore, tries to improve his goodwill and reputation by knowing the buyer behavior. To sum up, it may be said that advertising aims at committing the producer, educating the consumer, supplementing the salesman, converting the dealer to eliminate the competitor, but above all, it is a link between the producer and the consumer.

Group Involved in Advertising Five groups are generally involved in product promoting advertising, viz, buyers, media, middlemen, advertising agencies and advertisers. Buyers may be persons who are individuals who do not use the advertiser's product, such as electric razors, instant coffee, or deodorants. Secondly, there are consumers who buy the kind of product the advertiser sells, but from the advertiser's competitors. Thirdly the consumers who purchase from the advertisers. For these three types of buyers, the advertiser may adopt different devices ie. the first type may be converted t use the product; the second type may be taken away from their present suppliers; and the third type may be held and their frequency of purchase increased.

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Media is the second group involved. It is a commercial vehicle that carries advertiser's message. to his prospects - such media may be newspapers, magazines, radio, outdoor and transit. Middlemen, the wholesalers and retailers, through whom the goods advertised may be purchased. Advertising agencies, are the organizations which construct the actual advertisements that consumers se and here. Advertisers may be retailers and manufacturers.

Advertisability Objectives of Promotion 1. 2. 3. Exposure, means to expose an adequate number of target consumers to the messages. Attention, It refers to the state of focusing one's mind upon something. Comprehension, means to have the ability to understand or receive communicated knowledge. 4. 5. Attitude change. Attitudes are states or readiness to respond in a particular way. Inducing Behaviour or Action. The promotional programs may encourage consumers to take action in any of these forms: (i) buy the make/brand for the first time; (ii) continue to buy it; (iii) buy more of this brand; (iv) urge others to buy it; (v) visit retail shops; (vi) see demonstrations; and (vii) ry out the make. Thus the broad objectives of promotion are ; i. To provide information ii. To stimulate demand iii. To differentiate the products iv. To highlight the utility of the product v. To counter competition and stabilize prices and sales and vi. to build image.

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COMMUNICATION AND PROMOTION The word "communication" is derived from the Latin word "communis", meaning common. There is communication only if there is "commonness" in the words or symbols used by both the sender and the receiver i.e., message must mean one and the same thing to both. Communication means "sharing of meaning". Implicit in this definition is the notion of transmission of information because sharing necessitates information. Communication is concerned with who says what to whom, through which channel, and with what effect.

The Communication System / Process According to Crane a communication process requires only three elements or stages: a message, a source of this message and a receiver. But some more elements have also been added to it so that five distinct stages are recognized in communication a source encoding, message channel, destination and feedback. A marketer's promotional message must be communicated by the manager and received by middlemen and/or the target consumers, if it is to achieve its objectives. At the first stage, the information source originates the communication, i.e. there must be a person with idea to communicate. For instance the marketing executive may have ideas, information, instructions, to communicate to his subordinates, sales force and the target markets; or the middlemen about the product/ service. In the second stage, the idea / information has to be encoded by means of sales manuals, charts, copy, artwork, news release, sales promotion merchandise etc. The various promotional methods make use of a variety of promotional channels - mass communication (by advertising), personal contact (by personal selling), mail, telephone etc. In the third stage, the message carrying the idea is transmitted from the marketer to the receiver either by print media, some signs and symbols (words - written or spoken), gestures and facial expression and images. These have to be sent through some appropriate channel - may be simply by air waves that carry voices in a room; the electricity that carries voices through a telephone connection, the postal service and the like; In the fourth stage, the message is decoded ie. interpreted in the light of the experience of the receiver or frames of reference. Whether the message is recognized or not depends upon the individual's threshold of awareness. Attitudes, motives, experience, expectations, perceptional
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consistency, and perceptional, defences all combined to raise or lower a person's sensitivity to the message. In the final stage, if the sender's message has reached the receiver in its intended form, the receiver will respond with feedback of some kind - he may make further communication, or accept and take action on it, feed back gives an idea whether and to what extent the message has been received or learn by the receiver.

PROMOTION DECISIONS Promotion decisions are usually structured by previous decisions concerning the target market, channel of distribution to be used, price, and product. Such decisions must be compatible with the firm's overall policies. Plan and practices and must be adapted to the legal and competitive environment. The steps necessary in taking promotion decisions are : 1. Setting of the clear objective. For the promotion programmes, should reflect a thorough knowledge of the market, the type of the product and the stage in the product cycle. These objectives may be general or specific, as we have already seen. 2. Determining promotion budget. Which should reflect the financial resources available for undertaking the programme. Allocation of a reasonable amount for promotion is necessary to fulfil its role in the marketing strategy. If the budget is too large, funds are wasted that might have been better used elsewhere. Various methods may be used for determining the size of the budget: (i) The judgement of the experienced managers; (ii) imitating competitors, i.e., spending sum that approximate the actual amounts or percentage of sales or profit that rivals spend; (iii) percentage of sales or profits of the firm; and (iv) the nature of the programme neeed in light of the objectives. 3. Knowing about the target market which can be identified by special demographic and geographic characteristics and should accordingly reflect to what particular type of customers goods are to be offered. 4. The appeal - its nature and timing, needs as to how customers could be informed, persuaded, reminded or stimulated to take action; to know what type of appeals should be made? When and how often ? i.e. it should clearly show what benefits the prospects are likely to enjoy if they use the product sponsored by the firm.
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5. The promotion - mix patterns, which should reflect how effective and efficient methods should be applied.

PROMOTIONAL MIX By "promotional mix" is meant the combination, types and amounts of different forms of promotion used by a marketer. Promotion mix or Media/Methods of promotion comprise: personal selling, direct marketing, advertisement, sales promotion, publicity and public relation. In terms of impact and cost, the two most important and prevalent media are the first two.

Advertising It is an interpersonal presentation and promotion of ideas, goods or services, by an identified sponsor. Thus, it is an interpersonal method of communicating messages regarding products or services from an identified source to a particular segment of the consumers market or prospective buyers. The basic goals of advertising are to (1) sell products and services (2) create favourable images of products and firms and (3) allow firms to compete successfully. In most cases, it is designed to encourage repeat purchases.

Sales Promotion The term sales promotion is a catch - all for a wide variety of promotional activities. It has been defined as : Those marketing activities, other than personal selling, advertising and publicity, that stimulate consumer purchasing an dealer effectiveness, such as displays, shows and demonstration, expositions and various non-current selling efforts, non in ordinary routine. Sales promotion activities are impersonal and usually non-recurring and are directive to ultimate consumers, industrial users, and middle-men. Sales promotion serves as a bridge between advertising and personal selling and it supplements and co-ordinates efforts in these two areas. Sales Promotion Activities Sales promotion activities may be classified as those done for consumers and those for the dealers.
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Consumer's Sale Promotion Programmes Sampling - Free samples may be distributed among the prospective customers for arousing their interest in the product. Sampling is an effective sales promotion device when the product is frequently purchased, convenience goods such as detergents, soap, tea or coffee, deodorants and sausages etc. Contents - These may be conducted to attract new customers or to introduce new product by asking the prospects to state in a few words why they prefer a particular product. For entering into the contest, the prospect is first required to purchase a product and submit the evidence (e.g. a label or package or card attached to the product) with entry form for a contest. Through such contests even the persons who are not inclined to purchase otherwise, also get interested in using the product. Demonstrations. This devise is generally used when products are complex and of a technical nature, such as rotary duplicators, computers. Field machinery, electrical pumping set, chemical fertilizers, cosmetics, or apparel. Cosmeticians may provide free lessons on proper use of makeup. Couponing - Coupons are generally supplied along with product, which entitle the holder to either a specified savings on a product or a cash refund. Most coupons are designed to (a) introduce anew product (b) increase sale of an established product, (c) sell new and larger sizes of a product, (d) induce customers to switch brands, or (e) encourage repeat sales. Coupons are used for consumer convenience goods. The may be distributed by mail or door to door inserted in packages, or part of magazine or newspaper advertisements. When coupons are used to promote a product caution must be exercised to prevent fraud.

PROMOTIONAL STRATEGIES / DECISIONS Promotional strategy consists of design of the four promotion elements (personal selling, advertising, promotion and publicity/ public relations) and the development of a strategy to put this design into practice. Most promotional strategies use various combinations, types, and amounts of different forms of promotion. Usually a combination of two or more promotional methods may be used; single methods are rarely used. For example, advertising may be supported by personal selling or

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display. Similarly, personal selling can be effective if it is supported by some sort of advertisement. (i) Nature of the Product Different products require different promotional methods. For example, convenience or consumer goods will always be sold through manufacturer's advertising with emphasis on dealer displays. Personal selling will play a very significant part. (ii) The Nature of the Customer Different customers may be best reached through a combination of promotional methods. For example, where markets are small and local and the number of buyers few. Personal selling would be adequate but in more widely spread markets and large potential buyers, advertising would be preferably used. Further, if the targets is the household consumers, advertising would be preferred but if the retailers are to be contacted, personal selling would be used. (iii) Life cycle of the product. The nature of demand varies according to the stage in the

product life cycle. In the pioneering stage, seller usually tries to stimulate primary demand (ie. demand for a type of product) as contracted to selective demand (i.e. demand for a particular brand). In this stage, necessary information about the product and its benefits are made known to the prospective customers. In the maturity stage emphasis is placed on advertising as a tool to persuation, In the decline stage, the promotional activities may be slowed down or entirely stopped. In the case of promoting a new product or pioneering in a new market, heavy emphasis is put on personal selling. (iv) Funds Available or promotion Budget The various methods of promotion vary considerably in the cost per message delivered. When the funds available are small, a combination of relatively low - cost promotional inputs is used even though a more costly combination might prove mere productive. Small or financially weak concerns may rely on personal selling, dealer displays of joint manufacturer retailer advertising. However, the last two methods may bring message to a large number of people at a much lower cost per person than personal selling. (v) Brand Differentiation Individual brands of product have little to differentiate them from those of the competitor's brand. Therefore, their promotion emphasizes personal selling to get the product

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stocked by as many retailers as possible, and to secure maximum shelf space display. When products are clearly distinguishable, advertising is given preference. (vi) Purchase Frequency Purchase frequency for a particular product also influences promotional strategy. When final buyers buy a product frequently (as consumers buy bathing soap or industrial buyers buy machinery). the market invests a large amount of money in advertising than when a product is purchased frequently. Emphasis then is placed on personal selling to persuade the retailers to keep enough stock of the product and to push it over competitive brands. (vii) Market Penetration When a brand is already known to the final consumer and middleman has a substantial market share, a sustaining promotional strategy. (i.e., strategy aimed at sustaining this market position) is most widely used. But, when the brand is new or has not penetrated the market fully, a developmental promotional strategy is adopted. This is generally done in two ways : (a) push strategy is adopted for a brand with insignificant market penetration, whereby the dealers are persuaded to stock and push the brand ; and (d) pull strategy is used where the final buyers ask their dealers to handle the brand or to convince them to go out and buy.

ONLINE MARKETING In recent years internet has become a popular medium for many types of human interactions including marketing. Meaning of Online Marketing On line marketing may be defined as the process of building and maintaining customer relationships through online activities of facilitate the exchange of ideas, products, and services that satisfy the goals of both the seller and the buyer. Online marketing is also known as internet marketing and web marketing. According to Philip Kotler, "an online marketing channel is one that a person can reach via computer and modern. A modem connects the computer to a telephone line so that the computer user cap reach various online information services. "There are two types of online channels. 1. Commercial online channels : Some companies have set up online information and marketing services that can be accessed by those who have signed up for the service and pay a
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monthly fee. These online channels offer information, entertainment, shopping, dialogue and email services. 2. The Internet - This is a global web of some 45,000 computer networks that has made instant and decentralization communication possible. Users can send e-mail- exchange views, shop for products and access news and business information. The internet itself is free, though individual users may need to pay a commercial service for hooking upto it. 1. A Process - Online marketing is a process consisting of seven interrelated steps. Setting corporate and business unit strategy, framing the market opportunity, formulating the marketing strategy, designing the customer experience, developing the marketing programme, crafting the customer interface, and evaluating the results of the marketing programme. 2. Online- Online marketing involves the use of the web and related digital technologies to achieve marketing objectives. These technologies include the internet media and digital media such as wirelss, cable and satellite. 3. Customer Relationships - The goal of online marketing is to build and maintain lasting relationships with customers. The online marketing programme seeks to satisfy and nurture a sufficient number of committed and loyal customers who use both online and offline services. 4. Exchange - Like traditional marketing in online marketing the core is exchange concept. An online marketing programme must be evaluated in terms of its overall exchange impact. Business firms must be sensitive to the cross - channel effects of online and offline marketing programmes. 4. Goal Satisfaction- Online marketing aims at satisfying the goals of both the seller and the buyer. Exchange will be balanced only when the interests of both the parties are served.

Online Marketing Channels 1. Creating an Electronic Storefront - Several companies have set up a home page on the Internet. These homepages serve as electronic storefronts and offer a wide variety of information to users about the company and its products or services. For example, GE Plastics has placed more than 1,500 pages of information on its Internet site. Customers can obtain information about its products anytime and from any where in the world. If a company decides to open an electronic storefront, it has two choices. It can open it's own store on the Internet. Alternatively,
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it can buy a location on a commercial online service. Companies attract prospects to their homepages through e-mail, mailing lists, newspaper ads, and online ads. Companies must regularly update their homepages to keep them fresh and existing. 2. Participating in Forums, News Groups and Bulletin Boards. A company may participate in various groups that are not organized specifically for commercial purposes. Forums are discussion groups located on commercial online services. It may operate a conference room for realtime chatting or a library. The Forum's homepage will show icons for conference rooms, libraries, newsflashes, etc. Newsgroups are the Internet version of forums. Internet users can participate in newsgroups without subscribing. Bulletinboard Systems are specialized online service that center on a specific topic or group. 3. Placing Advertisements Online. Firms can place ads on commercial online services in three ways. First, the major commercial online services offer an ad section for listing classified ads. Second, ads can be places in certain newsgroups that are set up for commercial purposes. Finally, ads can be put on online billboards. 4. Using E-mail - A company can encourage prospects and customers to send questions, suggestions and complaints through its e-mail address. It can respond quickly via e-mail. The company may also obtain the names of prospects or customers and send information to their email address. Marketing Ethics Marketing ethics may be defined as principles that define acceptable conduct in marketing. These principles or standards encourage marketers to conform to society's expectations. Marketing ethics goes beyond legal issues though the distinction between ethical and legal issues often gets blurred in decision-making. The legal system provides a formal venue for marketers to resolve ethical disputes as well as legal ones. Marketing ethics requires that marketers practice virtues of honesty. Fairness and transparency. High-level of personal morality alone may not be sufficient. It is necessary to codify standards into meaningful policies so as to spell out what is not acceptable behavior.

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Need for Marketing Ethics Ethical behavior is necessary in marketing due to the following reasons. 1. To maintain Public Confidence. Unethical marketing practices on the part of a new business firms can erode public confidence in marketing. Companies can restore and increase the confidence of public by setting and enforcing high ethical standards in marketing. It is in the very interest of business itself to be ethical because consumers are the mainstay of business. 2. To Avoid Government Regulation. Unethical marketing practices increase the probability of government control on business. Honest and fairy dealings with consumes help business firms to avoid such control and thereby retain the freedom of operations. 3. To Regain Social Power. Marketers can regain and improve their power and influence over society by fulfilling their responsibility to consumers and other groups in society. They need to use their power in a manner that is acceptable to society. 4. To Boost Public Image. People form an opinion about a business enterprise on the basis of their experience. When marketers care for consumers, customers form a positive opinion. Ethical marketing behavior can protect the image of the enterprise. 5. For Enlightened Self-Internet. Many marketers engage in ethical behavior due to enlightened self-internet or in the expectation that "ethics pays". They believe that if they do not act in the public interest, the public and customers will strike back in one way or the other. When marketing practices deviate from accepted standards, the exchange process can break down, resulting in customer dissatisfaction, and lack of trust. Customers avoid marketers who are perceived to be unethical. Study and application of marketing ethics can help marketers to better recognize, understand and resolve ethical conflicts. Such a conflict occurs when it is not clear whether to apply one's personal values or the firm's in a decision. Research has shown that the values of and examples set by the organization often have more influence on ethical decisions in marketing that a person's own values.

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CONSUMER BEHAVIOUR: Consumer behavior is the study of when, why, how, and where people do or do not buy a product. It blends elements from psychology, sociology, social anthropology and economics. It attempts to understand the buyer decision making process, both individually and in groups.

It studies characteristics of individual consumers such as demographics and behavioral variables in an attempt to understand people's wants. It also tries to assess influences on the consumer from groups such as family, friends, reference groups, and society in general.

Customer behaviour study is based on consumer buying behaviour, with the customer playing the three distinct roles of user, payer and buyer. Relationship marketing is an influential asset for customer behaviour analysis as it has a keen interest in the re-discovery of the true meaning of marketing through the re-affirmation of the importance of the customer or buyer.

A greater importance is also placed on consumer retention, customer relationship management, personalisation, customisation and one-to-one marketing. Social functions can be categorized into social choice and welfare functions.

20.6.2 Ethical Issues in Marketing Awareness of ethical issues is important in understanding and improving marketing ethics. An ethical issue is an identifiable problem, situation or opportunity that requires an individual or organisation to choose from among several actions that must be evaluated as right or wrong. Ethical or unethical. An ethical issue in marketing arises whenever consumers feel manipulated or cheated. For example, when marketers knowingly bring an unsafe product to market under pressure of the company to increase profit or market share, an ethical issue arises. Improving Ethical Behaviour in Marketing Some of the steps that can be taken to improve ethical behavior in marketing are given below. (i) Organisational commitment to ethical behavior.

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(ii) Improving the organisation's ethical standards. (iii) Screening out unethical persons in the organization. (iv) Redesigning the organization's image and culture so that it conforms to industry and societal norms of ethical behaviour. (v) Programme to encourage ethical decision-making when marketers understand the policies and requirements for ethical conduct, they can more easily resolve ethical conflicts. (vi) Codes of conduct which consist of formalised rules and standards that describe what the company expects of its employees. Such codes guide markets in dealing with ethical dilemmas and they know the punishment for violating the rules. (vii) Appointing ethics officers to disseminate code of ethics, to answer questions about ethical issues, to take action on possible code violations, to review and modify the code of conduct. (viii) Open communication and coaching on ethical issues to nurture ethical behaviour. This means providing employees with ethics training, clear channels of communication, and follow up support throughout the organization. Some firms setup ethics hotlines to handle employee question on ethical issues. (ix) Imposing penalties or punishment on those who violate codes of conduct.

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