MS 204 Marketing Management

MBA II Semester
Dr. Vibhuti Tripathi

Quota System, production driven market Liberalized Economy Demand driven market; Informed and Demanding Customers Focus on: Value Creation, Relationships, Retention, company and customer interface, integrated marketing programs

Defining Marketing
Term Market originates from Latin Word Marcatus, Physical place where business is conducted Has wider implications Customers Stake Holders Business Partners Competitors William J. stanton: A total system of interacting business activities designed to plan, promote and distribute want-satisfying products and services. American Marketing Association: The performance of business activities that direct the flow of goods and services through producers to consumers or users.

 Philip Kotler: A social and managerial process by which individuals and groups obtain what they need and want through creating, offering and exchanging products of value with others. Marketing is a process by which companies create value for customers and build strong Customer Relationships in order to capture value from customers in return.

Marketing: Attempt is made to convert societal needs into profitable Opportunities. In the process activities involved create time, place and possession utilities. And a Value Proposition Sales: An activity which involves order taking and delivery of Products. In the process it builds goodwill, generates Demand and does problem solving Advertising: Paid form of non personal communication of goods / services

VALUE
A Ratio between what a customer gets and what he gives. Perceived tangible and intangible benefits offered by the products / services and its cost to the customers. Customer Value Triad, QSP
Quality (Product, Features, Ingredients, Service Components)

Value
Price (Low, Competitive) Service (After Sales, Embedded, Extra Efforts

Customers

Reflects in the perceived tangible and intangible benefits offered by the product and its cost to the customers. Reflects in the cost of the product/ services and the revenue generated in the selling process. Value = Benefits / Costs

Company

Benefits: Functional + Emotional Costs: Monetary + Time + Energy + Psychic

Raise Benefits at same price Reduce Cost at same benefits Raise benefits reduce costs

Marketing is not only facilitating selling of a product but also creation of demand. Needs: State of felt deprivation. Physical, Social and Individual Needs. Physical: Social: Individual: Wants: Basic to Survival Desire to Belong Self Expression

Needs directed towards specific satisfiers.

Shaped by ones cultural influence, individual personality and the society. Demand: Wants + Purchasing Power.

Maslows Hierarchy of Needs

Self Actualisation Esteem Social Safety Physiological

Radial Tyres McDonalds Peter England

Ply Tyres Canteen Local Brand

Companies focus on wants and loose sight of needs and purchasing power

Market Segmentation and Target Market Marketers can not satisfy everyone in the market. Marketers start by dividing the market. Market Segment: consists of a group of customers who share a similar set of wants. Or fall into similar demographic, psychographic or behavioral patterns. Target Market: Lucrative for conducting business; resources and company objectives.

Marketing Process
1. Analyse and understand Markets and Prospective Customers needs and wants. (Market Segmentation, Target Marketing) 2. Design a customer driven marketing strategy with the goal of acquiring, retaining and growing target customers. (Differentiation and Positioning; Marketing Mix) 3. Create a strategy delivering superior value. 4. Build profitable customer relationships and creating customer delight. 5. Reap the rewards.

 Differentiation: Developing unique differences with the intent to influence demand. Positioning: Tailoring a product's image and presentation to appeal to a selected market segment.

Marketing Mix; includes a combination of tools like; Product, Packaging, Price, Channels of distribution, Advertising, Promotion and Personal selling to pursue the marketing objective of the company and fulfilling needs and wants of the customers.

Tools of Marketing Mix

McCarthy classified the marketing mix tools into four broad categories; 4 Ps of Marketing 1. Product: Variety, Quality, Features, Packaging, Sizes, Warranty, Guarantee 2. Price: MRP, Discounts, Allowances, Payment Options, Credit Terms 3. Place: Channels, Coverage, Locations, Inventory, Transportation 4. Promotion: Sales Promotion, Advertising, Public Relations

Robert Lauterborn suggested 4 Cs 4 Ps Correspond to the Customers 4 Cs Product Price Place Promotion Customer Solution Customer Cost Convenience Communication

7 Ps of Marketing Mix or Extended Marketing Mix Coined by Booms and Bitner, more useful for services industry . 3 Additional Tools: 5. People: All people directly involved in the consumption of services. Consultant, Employees, Management and Customers. 6. Process: Procedures, Mechanisms and Flow of Activities by which services are rendered and consumed. 7. Physical Evidence: Communication, Performance and Experience of existing customers.

Scope and Functions of Marketing Functions of Research: Marketing Research Product Planning and Development Functions of Exchange: Buying and Assembling Selling Functions of Physical Treatment: Standardization, Branding Packaging Storage and Transportation

Functions of Facilitating : Salesmanship Advertising Pricing Financing Insurance

Company Orientations and Philosophy towards market place

Production Concept: Prevailed during Industrial Revolution Assumptions: Consumers will prefer products that are widely available and Inexpensive. and Consumers are primarily interested in product availability and low prices.

Product Concept: Assumption: Consumers will favour those products that offer the most quality, performance or innovative features . Selling Concept: Companies not only produce the product but also try to convince customers to buy them. Assumptions: If consumers are left alone they will ordinarily not buy enough of Organization's products. and Consumer typically show buying dis-interest or resistance and must be coaxed into buying.

Marketing Concept: Matching a companys capabilities with customers wants. Make and-sell to Sense-and-respond Assumption: Key to achieve its organisational goals consists of a company being more effective than competitors.

Customer is the King. You are the Boss. Putting people first.

Marketing Concept Involves: Customer Orientation. Integration and unification of company operations. Focus: Customer is important.

contd.

Profit goals will be reached through satisfied customers.

Holistic Marketing Concept: Organizations keep in mind all the aspects of: - Relationship Marketing: Building mutually satisfying long-term longrelationships. - Integrated Marketing: all departments work together to serve the customers interest - Internal Marketing: recruiting, motivating and retaining staff who want to serve customers well. - Social Responsibility: focus on delivering desired satisfaction effectively and efficiently that competitors, at same time preserving consumers and societys well being.

Analysing Marketing Environment: Marketing Environment

External

Internal
- Company Image - Location - R&D Capability -Financial Capability

Macro Economic Conditions Political and Legal Demographic Competition Technology

Micro - Customers - Intermediaries - Suppliers

-Human Resource -Production Facilities

Economic Conditions: Business Cycle Purchasing Power of Customers Inflation Interest Rates Business Cycle

Recession

Recovery Prosperity
Depression

Legal and Governmental Factors: Political Leadership Stability of Government Rules and Regulations Monetary and Fiscal Policies Patents, IPR, MRTP

Demographic and Socio-Cultural Factors: Age Structure (composition of population Age-wise) Gender Distribution Life Expectancy Population Density Household Size (Family Size) Marital Status Income and wealth distribution Employment Education Occupation Value System Consumption Patterns and attitudes

 Changing Gender Roles: Related to family Jobs Recreation Buying Behaviour A Premium on Time: Paucity of time Attitude towards gaining more free time Convenience Physical Fitness and Health; Geographical Shift in Population; Strategies: Product Development Distribution Arrangements Pricing Policies Promotion

Competitive Environment: Identify Competitive Advantage 1. What is the basis of present advantage? 2. Can these advantages be sustained?

Bargaining Power of Suppliers

Threat of New Entrants

Competitive Environment

Threat of Substitute

Bargaining Power of Buyers

Technology: Technological breakthroughs can affect markets: By starting new industries; By radically altering or virtually eliminating existing industries; By stimulating markets and industries not related to new technology;

Accelerating pace of technological changes

Analysing External Micro- Environment: Customers: - Needs - Purchasing power - Buying Behaviour Suppliers: - Raw Materials / Finished Goods - Cooperative Relationships Intermediaries: - Value Creation; facilitating organisations - Channels of distribution

Analysing Internal Environment: Company Image; Location; Production Facility; R & D Capability; Financial Resource; Human Resource;

Analysing Consumer Markets and Buying Behaviour

 Every Marketing Activity starts and ends with consumers. Marketers Identify decision makers. It is important to know : who are the people that consume the product play a role in buying decisions why they take certain decisions when they buy where they buy

Needs/ Wants Customers Disposition to Buy

Beliefs

Buying Without Wanting

Buying Without Deciding

Deciding Before Buying

Influencers on Consumers Buying Behaviour:

1. Cultural Factors; Culture, Sub-culture, Social Class Culture: Peoples shared customs, beliefs, values that are generated from generation to generation. Sub-culture: smaller groups within cultural framework with common life experiences and situations. Social Class: relatively homogeneous and enduring divisions in a society.

2. Social Factors; Reference Groups, Family, Roles and \ Status. Reference Groups: Small Social Groups to which an individual belongs or aspires to belong. Membership Groups; Primary and Secondary Aspirational Groups Dissociative Groups Opinion Leaders;

Family : Persons related by blood, marriage or adoption who reside together. Family is a major influencer on buying behaviour. Consumption Roles: Influencers; Deciders; Buyers; Users; Maintainers; Involvement and roles vary by products.

Stages in Family Life cycle: 1. Bachelor Stage 2. Newly Married Couples 3. Full Nest I 4. Full Nest II 5. Full Nest III 6. Empty Nest I 7. Empty Nest II 8. Solitary Survivor At each stage of Family Life Cycle a person behaves differently; consumption patterns are also shaped up accordingly.

Roles and Status: A person enters and exists different roles and status throughout the life.

3. Personal Factors: Age and Life Cycle Stage, Occupation, Economic Situation, Lifestyle, Personality. Age and Life Cycle Stage: Preferences to purchase goods and Render services vary over the life time. Occupation: Occupation influences consumption patterns. Economic Situation: Product Choice is greatly affected by economic circumstances like: Spendable income (stability, time duration, level), savings, credit availability Personal Income Family Income Consumer Credit

Lifestyle: a persons pattern of living in the world reflected in activities, interests, opinions. Personality: individuals distinguishing psychological Characteristics; self confidence, dominance, sociability, adaptability. Brand Personality:

4. Psychological factors: Motivation, Perception, Learning and Beliefs and Attitude. Motivation: is a drive, which propels a person towards achieving his goals. A need becomes a motive when sufficiently backed with intensity

Why do People Shop?

Freuds Theory: Psychological forces shaping up peoples behavior are largely unconscious and that a person can not fully understand his or her own motivation. Some consumers resist prune (dried plum) because prunes are wrinkled looking and remind of old age. Maslows Theory: People satisfy their most important needs first. The needs are placed in a hierarchical order.

Herzbergs Two Factor Theory: Satisfiers and Dissatisfiers. The absence of dissatisfiers is not enough for a person to be motivated to purchase there must be presence of satisfiers to motivate a purchase. A marketer should avoid the presence of dissatisfiers and absence of satisfiers. Presence of a good packaging style would not act as satisfier or the motivation for purchase. At the same a shabby packaging may lead to dissatisfaction. Quality or the utility could be a satisfier

Perception: is the process by which an individual selects, organizes and interprets information inputs to create a meaningful picture. Perceptions can vary widely among individuals exposed to same situation, Three perceptual processes; 1. Selective Attention 2. Selective Distortion 3. Selective Retention

Learning: involves changes in an individuals behavior arising from experience. Learning is a continuous process, Consumers can be made to learn the desired behaviour.

Beliefs and Attitudes: are developed by doing and learning. Marketers are interested in understanding beliefs that consumers have the product, and try to change negative beliefs.

Buying Decision Process

 When making a decision to buy a product from many competing products, a consumer unknowingly passes through a few stages of the decision process. Need Arousal is the first stage of a buying decision process. the consumer does not pass through all the stages before purchasing a product. The need for a given product is activated by internal and external stimuli.

Need/Want Recognition Deciding there is, in fact, a need or a want to be filled. Information Search Trying to determine what's available.

Stimuli: Internal External

Personal, Commercial, Experimental

Evaluation Eliminating products/services/companies and deciding who's best.

Purchase Actually buying your product/service

Post Purchase Behaviour Re-evaluate: Cognitive Dissonance

Steps Between Evaluation and Purchase Decision Evaluation of Alternatives Purchase Intention

Attitudes of Others
1. Intensity of Others Attitudes 2. Motivation to comply

Unanticipated situational Factors

Evaluation of Alternatives

Purchase sub-decisions: Brand Decision Vendor Decision Quantity Decision Timing Decision Payment Methods

Types of Buying Behaviours Consumers would demonstrate different buying behaviour based on; Involvement Nature of Products Toothpaste / Brush / Soap etc. Car / Bike Apparels Complex and expensive purchases are likely to involve more buyer deliberation and more participants.

Different types of Buyers.

Ones who know exactly what they want. Visitors who some what know what they want. The window shoppers, Non-Prospects

Types of Buying Behaviours

High Involvement Low Involvement

Significant Differences Between Brands

Complex Buying Variety Seeking Behaviour Buying Behaviour Dissonance Reducing Buying Behaviour Habitual Buying Behaviour

Few Differences Between Brands

Complex Buying Behaviour: Highly self expressive products, Learning Process, infrequent purchases Dissonance Reducing Buying Behaviour: anxiety or conflict of pre or post purchase decision. Habitual Buying Behaviour: frequently purchased, Brand familiarity, no strong attitude towards a brand. Variety Seeking Buying Behaviour: frequent brand switching, breaking the monotony.

Factors Likely to Increase Pre-Purchase Search

Product Factors: Long inter-purchase time Frequent changes in product styling Frequent price changes Volume Purchase High Price Many Alternatives Much Variation in features Situational Factors: First Time Purchase No Past Experience Unsatisfactory past experience Purchase for gift Product is socially visible Many sources of conflicting information

INPUT

Firms Marketing Efforts 1. Product 2. Promotion 3. Price 4. Channels of Distribution

Socio Cultural Environment 1. Family 2. Informal Sources 3. Non Commercial Sources 4. Social Class, Culture

P R O C E S S

Need Recognition Pre Purchase Search Evaluation of Alternatives

Psychological Field Motivation Perception Learning, Personality

Experiences

Purchase Trial Repeat Purchase

OUTPUT

Post Purchase Evaluation

New Product Adoption Process Awareness Interest Evaluation 3. Early Majority Trial Adoption 4. Late Majority 5. Laggards Categories of Adopters 1. Innovators 2. Early Adopters

Advertisement Evaluation 1. Who is the target audience ? 2. What is the focus of the communication strategy ? 3. What bundle of attributes does the ad present for the consumers consideration? 4. What are the benefits associated with each attribute? 5. Suggest an alternative target segment and communication strategy.

Business Buying Behaviour

Business/ Industrial Buying Behaviour Business market consist of all individuals and organisations that buy goods and services for one or more purposes; The activity of marketing goods and services to business users, rather than to ultimate consumers is BusinessMarketing. A firm performing the activity is a business marketer. Primary Distinction Usage not the Product

Many transactions are required to produce and market a product.

Leather Shoes
Metal Eyelets Cattle Hide Packaging Shoe Manufacturer Wholesaler / Distributor Retailer End Consumer Tanner Heels / Soles Shoelaces

Nature of Business Market

To make other goods and services; manufacturing units To resell to other business users or to consumers; Retailers, Used Cars To conduct the organisations operations; office supplies, computer software

Components of Business Markets

Agriculture Market; Capital Investments in Farming are increasing; Retail Fresh, ITC Agribusiness Contract Farming, Food Processing Farmers are looking at increasing their productivity, cut their expenses, mobilising their cash flows. 2. Intermediary Market; buying from suppliers and reselling these essentially in the same form. Resellers create time, place, and information utilities. Retailers are also business buyers. Team of Purchasers and Merchandisers 1.

3. Government Market: Buying is based on competitive bidding Protection for certain sections of entrepreneurs Information and guidelines are available from various agencies.

4. Services Market: marketing research, advertising, accounting, Legal consultancy etc. 5. Non-business Market: Non-profit organisations, Conduct marketing campaigns

Characteristics of Business Market Demand

1. Demand is derived from the demand for the consumer products. Steel Automobiles / Refrigerators

2. Demand is relatively inelastic 3. Market is well informed

Determinants of Business Market Demand 1. Number of Buyers 2. Size of Business Users 3. Regional Concentration of Business Users 4. Number of Intermediaries

Business Buying Decision Process

Types of Decisions New Task Straight Rebuy Modified Rebuy

Need Recognition Identification of Alternatives Evaluation Purchase and Related decisions Post purchase Behaviour

Buying Practices Frequency Order Size Negotiations Service Dependability

Buyer Seller Relationship Supply Chain Loyalty

Problem Recognition General Need Description Product Specification Supplier Search Proposal Solicitation Supplier Selection Order Specification Performance Review

 New Task Buying: Most difficult and complex buying Risk is high Information needs are high Little Experience with the product Sellers too have a challenge to identify specific needs. Straight Re-buy: Routine Low-involvement Minimal Information Required No consideration for Alternatives Modified Re-buy: Average involvement of time and people.

Buying Roles Users; people who actually use the product. Influencers; people who set the specifications and other aspects of buying decision. Deciders; people who make the actual buying decision. Gatekeepers; people who control the flow of purchasing information within the organisation and between the firm and potential vendors. Buyers; people who interact with the suppliers, arrange the terms, process the actual purchase orders.

Influencers on Business Buyer Behaviour Environmental Factors; Organisational Factors; Interpersonal Factors Individual Factors

Playing the Ponies, The Strategist, Business Standard, Tuesday, 8 January 2008 Survey conducted to assess the launch of a Brand and Re-branding strategies. Parameters used Visibility Media Pressure Sales/ Market Share Likeability of advertisements Parent Company Promotional Activities POP Displays Performance of Similar Brands Word of Mouth Consumer insight-based strategy

 Three most successful brands; BINGO, VODAFONE, AXIS BANK ITC Foods Looked for opportunity in packaged snacks category 16% Market share across the country Leveraging Synergies Distribution Network Sourcing From Farmers High Decibel Advertisement

 Market Survey to find out the snacking habits of Indian Consumers They were looking for excitement in snacks. Product Development; Chefs in ITC hotel were given the task Varied Falvours with twists; Chatkila Nimbu Achar, Bindas Masti Chaas, Target Group; Youngsters in 16-30 age groups They are more experimental Advertising Targeted at youth, based on disconnected humour

 ITC dominated media of every kind, with good creative along with good product. web site: www.bingeonbingo.com with offers, games, downloads and mobile games. On television 10 to 15 spots per channel per day, 20 spots on radio channels, 1000 outdoor hoardings. Huge brand recall would ensure repeat purchase. 4 lakh large racks to display the brand at all points of sale.

Dealing with Competition

Steps involved in Dealing with Competition 1. Identifying the Competitors Direct or Indirect Competitors

Soft Drinks

Market Leaders; 40% of the market Market Challengers; 30% Market Followers; 20% Market Nichers; 10%

2. Analysing Competitors; Strategies; Product Line, Cost, Service Levels, Price Objectives; Profitability, Market Share growth, technological leadership, service leadership, Expansion Plan Strengths and Weaknesses; each competitor. Share of Market; Share of Mind Share of Heart gather information on

3. Designing Competitive Strategies; A. Market Leader Strategies; Expanding the Total Market, New Uses, More Usage, New Markets Defending Market Share Position Defense Flank Defense Preemptive Defense Counteroffensive Defense Mobile Defense Contraction Defense

 Expanding Market Share: Increase served target market Increase Awareness Product Innovation Quality Enhancement Line-Extension (increasing No. of Products under same brand) Multi Brand (several brands in the same product category) Heavy Advertising & Sales Promotion Financing System Full Line Strategy Superior Service Extensive and Efficient Dealership System

B. Market Challenger Strategies; General Attack Strategies Frontal Attack Flank Attack Encirclement Attack Bypass Attack Specific Attack Strategies Price Discount Lower Price Goods Prestige Goods Product Proliferation Product Innovation Distribution Innovation Intensive Advertising & Promotion

C. Market Follower Strategies: Counterfeiter; duplicates Cloner; slight variation Imitator; Adapter D. Market Nicher Strategies: End-user specialist Customer-size specialist Specific-customer specialist Geographic Specialist Product or Product-line specialist Service specialist Channel specialist

Developing Marketing Strategies

Market Segmentation A company can not serve all customers in a category. Customers differ widely in terms of Perception Values Preferences Buying habits Potential Market; A company has different alternatives; according to their products or objectives.

Mass Marketing; A company appeals to a broad range of consumers through a single basic marketing program.

Companies consider large potential markets. Assumptions; 1. People have similar characteristics and wants for a product category. 2. One Marketing Mix Strategy will satisfy them. 3. People do have different characteristics and wants but it is not worth to develop separate marketing mix.

 The elements of the marketing mix do not change for different consumers, all elements are developed for all consumers.

Major objective is to maximize sales

Single Marketing Mix Strategy consists of: 1 Pricing strategy 1 Promotional program aimed at everybody 1 Type of product with little/no variation 1 Distribution system aimed at entire market Maruti 800 in 1980s, News Papers, Surf

 Pure Mass Marketing approach is dying rapidly. Intense Competition Much Aware Customer Technological Up-gradations Process Information Companies are turning to micro marketing by adopting different approaches based on Segmentation, Target Identification and Positioning. Market Segmentation: Process of identifying smaller groups of people that exist within a larger market. Market Segment : consists of a group of customers who share a similar set of wants, tastes and preferences. A marketer does not create segment.

 Effective Segments are; Measurable; Accessible; Substantial; Actionable; Differentiable;

The purpose is to design a Marketing Mix that more precisely matches the needs of individuals in a selected market segment.

Approaches to build Market Segment: Homogeneous Demand- uniform, everyone demands the product for the same reason Diffused Demand- Product differentiation more costly and more difficult to communicate. Cosmetic market, need to offer hundreds of shades of lipstick. Firms try to modify consumer demand to develop clusters of at least a moderate size. Clustered Demand- consumer demand classified in 2 or more identifiable clusters. Automobiles: luxury, cheap, Sporty, Spacious

Process of Market Segmentation Analyse the needs of customers Analyse the characteristics of consumers Dis-integrate the viable, profitable, lucrative segments Formulate different market mix for different segments Feedback of various segments Select the higher potential segments

Market Segmentation Strategies Concentration Strategy: A single market segment with one Marketing Mix.

Segment A Marketing Mix Segment B Segment C Segment D

Multi-segment strategy 2 or more segments are sought with a Marketing Mix for each segment, different marketing plan for each segment. Marketing Mix Marketing Mix

Segment A

Segment B Segment C

Marketing Mix

Segment D

Bases for segmenting Markets. Two Broader groups of variables used by companies. Consumer Characteristics: Geographic, Demographic and Psychographic. Different attitudes of professionals and workers for a product. Looking at customer responses to benefits, use occasion or brands. May examine whether people who want quality in buying a product differ in their geographic, demographic and psychographic makeup.

Major Segmentation Variables Geographic: Companies can operate in one or few geographic areas, or operate in all areas with separate Marketing Mix Regionally. Cities, Regions Retailers, Fast Food Chains, Tyres Demographic: most popular basis. Easier to measure. Age, Gender, Income, Family Size, Education, Occupation etc. Psychographic: refers to as lifestyle analysis.

 Behavioural: buyers are divided on the basis of their knowledge attitude use response to a product. Occasions: Life events, transitions, festivals Benefits: people vary in the benefits they seek from the same product User Status: non users, ex-users, potential users, first time Users Usage Rate: light, medium and heavy usage. Loyalty Status: Hard core, split, shifting, switchers.

Attractiveness of a Market Segment Size of the segment Growth Rate of the segment Competition in the segment Brand Loyalty of existing customers Required market share to break even Whether the company can offer superior value to the customers Impact of catering to the specific segment on companies image Access to distribution channels

Identifying Target Markets. A company can adopt alternative Targeting Strategies.

Alternative Strategies

Broad Coverage

Narrow Coverage Differentiated Marketing

Undifferentiated Marketing

Micro Marketing

Single Segment Concentration / Concentrated Strategy:

Selecting a single segment and one marketing mix. Choice of Smaller companies with limited resources. M1 P1 P2 M2 M3 M4

P3

Selective Specialisation Strategy / Differentiated Strategy: Multiple segments catered. Different Marketing Mix to different segments. Product itself may or may not be different. Some of the Marketing Mix Tools may vary. M1 P1 P2 M2 M3 M4

P3

Product Specialisation: Company Specialising in a single product. Company builds up strong reputation.

M1 P1 P2

M2

M3

M4

P3

Market Specialisation: Serving many needs of particular segment groups.

M1 P1 P2

M2

M3

M4

P3

Full Market Coverage: A company attempts to serve the entire market, Single undifferentiated marketing strategy, or Separate marketing mix for each segment. M1 P1 P2 M2 M3 M4

P3

Benefits of Segmentation Opportunity for rapid growth; specially for medium size companies Opportunity for rapid growth More focused; increases profitability Helpful in formulating strategies Minimising the risk of failure Broadens the loyalty base of satisfied customers

Positioning

 Positioning: is the act of designing the companys offering and image to occupy a distinctive place in the mind of the target market. End result of positioning is the successful creation of a customer Value Proposition. Product Positioning Vs. Brand Positioning.

Steps Involved in Positioning Task ?

Steps Involved in Positioning Task: 1. Identifying Competitive advantage 2. Choosing right competitive advantage 3. Selecting an overall Positioning Strategy 4. Developing a positioning statement 5. Communicating and delivering chosen positioning.

1. Identifying Competitive Advantage a. Product; Features; Performance; Durability; Reliability; Reparability; Style; Design; Quality b. Service; Delivery; After Sales Services; Customer Care; Installation; c. People; Competence; Courtesy; Credibility; Responsiveness; Communication. d. Image; e. Channels; coverage, expertise, performance

2. Choosing right competitive advantage How many differences to choose? USP Unique Selling Proposition More differentiators; useful in intense competition

Which differences to promote? Criteria to select differences; 1. Importance 2. Distinctive 3. Superior 4. Communicable 5. Preemptive 6. Affordable 7. Profitable

3. Selecting an overall strategy More

Same

Less

More Marginal Proposition Benefits

Same

Loosing Proposition

Less

Loosing Loosing Proposition Proposition Price

4. Developing a Positioning Statement Reflected in;

Need Recognition: Target Segment: Solution: Concept: Differentiation:

5. Communicating and delivering the chosen position More More Same

COMPETITIVE

Less

QUALITY

VALUE

Same

Less

 Single Benefit Positioning: rare to find in intense competition

Double Benefit Positioning: more distinctive

Triple Benefits Positioning: challenging to communicate and convince; COUNTER SEGMENTED

Why Repositioning ?

1. Under Positioning: Vague idea about the brand. Pepsi in Vanilla Flavour 2. Over Positioning: Narrow image of the brand. Tanishque 3. Confused Positioning: Confused image in the mind of customers. Maruti Versa and Maruti Omni VAN 4. Doubtful Positioning: hard to believe the brand claims.

Product

Product
A product is anything that might satisfy a want or need, whether it is a

Goods

Service

Event

Person

Business or Organization

Combination

Experience

The Good/Service Continuum

Pure Tangible Goods

Tangible Goods with accompanying Service

Hybrid Offer

Services with accompanying Minor Goods

Pure Services

Soap

Automobile With Repair Services

Restaurant

Airline Trip With Accompanying Snacks

Financial Consultant

Experience, a new dimension added to product and services

Levels of Goods and Services

Goods and Services Classifications

CONSUMER PRODUCTS INDUSTRIAL PRODUCTS ORGANISATIONS PLACES AND IDEAS

Convenience Products Bought Frequently Low Priced Many Purchase Locations Includes: Staple goods Impulse Goods Emergency Goods

Shopping Products
Bought Less Frequently Information Search Fewer Purchase Locations Compare for Suitability Quality Price and Style

Specialty Products
Special Purchase Efforts Unique Characteristics Brand Identification Few Purchase Locations

Unsought Products
New Innovations Products consumers dont want to think about Require much advertising and personal selling.

Industrial Products
Materials and Parts: Raw Material Manufacture Material Parts Supplies and services: Installations Operating Supplies Repair and maintenance items

Organizations, Places and Ideas

Space Selling Event Marketing Social Advertising Concept Selling Destination Selling

Developing a Product or Service Involves Defining The benefits it will offer:

Product Quality Ability to perform its core functions and levels & consistency

Product Features

Differentiates the product from Competitors

Product Style & Design

Process of designing products style & design

Developing and Marketing a Product Important Considerations Product Attributes: Branding: Packaging and Labeling: Product Support Services:

Packaging: involves designing and producing container or wrapper for a product. Functions: Contain Safety .
Primary Container

Secondary Container

Shipping Package

Main purposes to packaging:

Utilitarian Implement Strategy To Increase Profit

Packaging is an important tool in Marketing Mix

Steps in Developing a good package: Packaging Concept Develop specific elements of package Elements must support products position and marketing strategy.

Labels ???

Labeling : Printed information appearing on or with the package Performs certain functions: Identifies product or brand Describes several things about the product Promotes the product through attractive graphics

Product Support Services ???

Product Support Services 1. After Sales Services 2. Distribution 3. Customer Care Marketer must periodically asses the; The value of current services to obtain new ideas The cost of providing the services

Customer Delight and Company Profits Branding ???

Branding Strategy: Building Strong Brands Brand: a name, term, sign, symbol or design OR a combination of all these. Intended to identify the goods or services of seller. Differentiate from competitors. Legal Protection for product

Classification of Brands
Individual Brands: Separate brand names are used For different items by a single company Attract various segments. These brands have distinct images and appeals and marketed differently One brand name is used for two or more individual products. Family branding is more effective for specialised companies Positive fall out on other products. Buyers refer the type of product they want by producers brand name. Dangerous for the company. Retailers are creating their own brands.

Family / Blanket Brands :

Generic Brands :

Private Labels:

INDIVIDUAL BRANDS Hindustan Unilever Limited Home and Personal Care Category: Lux Surf Excel Fair & Lovely Sunsilk Pepsodent Axe Lakme Ayush Dove Wheel Ponds Clinic Closeup Rexona Liril Rin Vaseline

FAMILY / BLANKET BRANDS Dabur India Limited : Quality Ayurvedic and nature-based Health care, Personal Care, Food Products Health Care: Chyawanprash, Glucose D, Hajmola, Pudin hara, Dabur Lal Tail, Shankh Pushpi etc. Personal Care: Amla Hair Oil, Vatika hair oil, Vatika Face Pack, Dabur Lal Toothpaste and Dant Manjan, Babool, Meswak. Food Products: Real Juices, Coolers, Homemade

GENERIC BRANDS DALDA, SURF, NIRMA, XEROX PRIVATE LABELS KORYA, Tasty Treat, Star and Sitara : BIG BAZAR Life, Kashish and Vittorio Fratini : SHOPPERS STOP

Brand Equity ???

Brand Equity In a market where products are similar, branding can have a large effect on the price that customers will pay. Brands add value to a basic product or service. Brand equity is an intangible asset that depends on associations made by the consumer. Negative Brand Equity:

Implications: Financial - One way to measure brand equity is to determine the price premium that a brand commands over a competitor. Facilitates a more predictable income stream. Increases cash flow by increasing market share, reducing promotional costs, and allowing premium pricing.

Brand extensions - A successful brand can be used as a platform to launch related products. Leveraging of existing brand awareness

 Consumer-based - A strong brand increases the consumer attitude toward the product associated with the brand. Brand equity is an asset that can be sold or leased.

Building a Brand Decisions Involved: Brand Positioning Brand Name Brand Sponsorship Brand Development

 Attribute Positioning : features Benefit Positioning: benefits Competitor Positioning: better than competitor Product Category Positioning: leader in certain product category Quality and Price Positioning: emphasizing quality or price Beliefs / Value Positioning:

Brand Name Good brand name leads to success of the product . suggestive easy to pronounce, recognize and recall distinctive could be translated easily in other languages capable of registration and legal protection

Distribution Method / Brand Sponsorship 1. Manufacturers Brand: 2. Private labels: 3. Licensing: 4. Co-branding:

Brand Development Four Options for developing a brand.

Existing

New

Line Existing Extension Multi New Brands

Brand Extension New Brands

Brand

Product Categories

Line Extension: introducing additional items in a given product category under same brand name. 1. Low cost, low risk 2. Consumers desire for variety 3. use excess capacity 4. command more shelf space Brand Extension: using successful brand name to introduce new or modified products in a new category. 1. Instant Recognition 2. Saves costs

Multi Brands: introducing new brands or additional brands in the same category. 1. Catering to different segments and motives 2. Each brand may obtain only a small market share none may be very profitable 3. Resources are spread up

New Brands: Company may create a new brand in a new product category.

Managing the Brand ??

Managing the Brand 1. Brands Positioning must be continuously communicated. 2. Developing Brand Experience (Managing the touch points) 3. Building a Brand asset Management Team 4. Re-orientation towards customer centric approach 5. Encouraging Intermediaries in Brand Building 6. Periodical Audit of Brands Strengths and Weaknesses 7. Re-branding if necessary

Product Line Decisions: The group of related company products that are similar in their target markets, pricing, and distribution channels Decisions Involve: Product Line Length: Line Stretching: going beyond current range Downward or upward Stretching can be done. Product Line Filling: adding more items within present range

Product Mix Dimensions: Product Mix Width: Number of different product lines a company offers. Product Mix Length: Total number of items a company carries within its product line. Product Mix Depth: Number of versions offered in each product in line.

Product Mix Decisions

Services Marketing

Nature and Characteristics of a Service

Marketing Strategies for Service Firms The Service- profit chain consists of: Internal Service Quality Satisfied and productive service employees Greater service Value Satisfied and loyal customers

Types of Service Marketing

Train and Motivate Customer-Contact Internal Marketing Employees External Marketing All the rest of Marketing Interactive Marketing Quality of the Buyer-Seller Interaction

New Product Development

Need for New Product Development ??

Stages in New Product Development

1. Idea Generation For every 1000 ideas generated only 10% will have enough commercial viability. Major sources of New Product Development: Internal External Idea Management Systems are developed by companies.

2. Idea Screening Product development at later stage costs huge amount of money. Screening can be done on various parameters; Target market Competition Estimation of Market Size Price Development time and costs ROI

3. Concept Development and Testing Product Idea vs. Product Concept Product Concept could be A moderately priced product for family A medium priced product appealing to young generation

4.Marketing strategy development

5. Business Analysis Involves; review of sales, costs, and profit projections Satisfying companys objectives. 6. Product Development Developing the product into a physical product Developing a prototype Tests for performance, safety, efficiency etc.

7. Test Marketing: Testing in real market It gives an experience Different approaches to test market a product Standard Test Market: small market, full marketing campaign Controlled Test Market: selected stores Simulated Test Market: simulated environment created for a sample. 8. Commercialisation

Product Life Cycle

 A product can not sell forever at the same levels Its sales volume and revenues generated follow a typical pattern The length of the life cycle, the duration of each phase can vary widely for different products.

Product Sales

Introduction

Growth

Maturity

Decline

 Product Life cycle (PLC) can be useful framework for describing how products and markets work. Introduction Stage: Sales --- Profits -- Investments ---- Product ------ Price ----- Distribution Network -----Low Minimal or Negative High Limited Models Premium / Competitive Selective / Scattered

Intensive personal selling to retailers and wholesalers is required.

 Promotions ----- High Media Pressure, Repetitive Focus ----- Early Adopters, Product Benefits, Developing Product Awareness. Growth Stage: Sales -------- Profits ------------ Investments ---------- Promotions -------------------- Focus ------------------

 Maturity Stage: Consider Modifying the markets, Products, Marketing Mix. Modifying The Market: Increase consumption New Users or Market Segments Repositioning Modifying The Product: Change characteristics of the product improve performance improve attractiveness Modifying the Marketing Mix:

 Decline Stage: Management may decide to Harvest the product . May Decide to drop the product May Sell the product to another company.

Some Dimensions of the Product Life Cycle 1. Length of the Product Life Cycle There is no exact time that a product takes to move through its life cycle consumer products usually have shorter life cycles than business products Rate of technological change shortens product life cycles.

2. Shape of the Product Lifecycle:

Significant education of the customer is required.

Extended introductory period.

 Sales begin immediately Little learning is required by the consumer Benefits of purchase are readily understood.

Most often appear in apparels Length of the cycles may be very long It could be repetitive

 Rapid

sales on introduction

Equally rapid decline. Often novelties and have a short life cycle.

Innovators

2.5%

Eager to try new ideas and products Have higher incomes Much more reliant on group norms Oriented to the local community Tend to be opinion leaders. Collect more information Evaluate more brands than early adopters. Rely on friends, neighbors, and opinion leaders for information and norms. Adopt because most of their friends have already done so. For them, adoption is the result of pressure to conform. Are older than the others

Early Adopters

13.5%

Early Majority

34%

Late Majority

34%

Do not rely on the norms of the group.

Laggards

16%

Independent because they are tradition-bound Are suspicious of new products

Common reasons for resisting a product in the introduction stage are

Usage barriers Value barriers Psychological barriers

Product is incompatible with existing habits

Product provides no incentive to change

Physical, economic, social or Image

Pricing

Pricing is an important strategic issue because it is related to product positioning. It affects other marketing mix elements such as product features, channel decisions, and promotion.

Steps Involved in Setting up Pricing

Steps Involved In Fixing up Pricing Strategy Develop marketing strategy Make marketing mix decisions Estimate the demand curve Calculate cost Understand environmental factors Set pricing objectives Determine pricing
Set Up Pricing Objectives

Set pricing objectives Current profit maximization: Current revenue maximization: Quality leadership: Partial cost recovery: Survival: Status quo:

Determining Pricing Cost-plus pricing: Break-even pricing: Value-based pricing: Psychological pricing: Competition Based pricing: Dynamic Pricing:

Pricing strategies: Product Line: Setting price steps between product line items. Optional Product: Pricing optional or accessory products Captive Product: Pricing products that must be used with the main product By-Product: Pricing low value by product to get rid of them Product Bundle: Pricing bundles of products sold together

Companies often adjust their basic prices according to various customer differences and situations.

Discount Pricing: Cash, Quantity, Functional, Seasonal Segmented Pricing: Customer Segment, Location Psychological Pricing: Reference Pricing: Then and Now pricing cues Promotional Pricing: special event pricing, zero-interest, free maintenance Geographical Pricing: different prices for customers in different parts of the world

New Product Pricing Penetration Pricing: Setting up low pricing New buyers are attracted, or existing buyers will buy more Lower costs per unit to achieve Economies To use up spare resources May also promote complimentary and captive products

Penetration Pricing Works when: Market is highly price sensitive Production and distribution costs fall as sales volume increases Low price must help keep out the competition

Price Skimming: Setting up relatively higher price for a short time. Skim off customers who are willing to pay more to acquire the product sooner. Prices are lowered later when demand from the early adopters falls. High prices can be enjoyed in the short term where demand is relatively inelastic. A company can build a high-quality image for its product.

Skimming Pricing Works when:

Quality and image support the higher price Enough buyers want the product at that price Cost of producing a small volume cannot be high Competitors should not be able to enter the market easily

Quality Low Low High

P R I C E

ECONOMY

PENETRATION

SKIMMING
High

PREMIUM

Initiating Price Changes 1. Price Cuts 2. Price Increase: Buyers Reaction to Price Change Competitors Reaction to Price Change

increase in Price can be done by :

Revise the discount structure Change the minimum order size Charge for delivery and special services Collect interest on overdue accounts Produce less of the lower margin models in the line Change the physical characteristics of the product substitute cheaper materials

 Responding to Price Changes: Maintain Price: Maintain Price and Add Value: Reduce Price: Increase Price and Improve Quality: Launch a Low Price (fighter line):

Distribution

Distribution-activities that make products available to customers when and where they need them. A channel of distribution or marketing channel is a group of individuals and organizations that directs the flow of products from producers and customers. Marketing Intermediaries link producers to other intermediaries or to the ultimate users of the product. Operate between the producer and the final buyer.

Distribution Types of utility distribution offers TIME. PLACE POSSESSION Value

Channel of Distribution for Consumer Products Zero Level: Products are directly distributed to consumers Through showrooms. One Level: Products are sold to consumers through retailers.

Two level: products are distributed through distributors / dealers and retailers Three level: products are distributed through agents, distributors and retailers. Producers of Consumers Goods

Ultimate Consumers

Channel of Distribution for Industrial Products A variety of channels are available to reach organizations that will incorporate the products into their manufacturing process Or to use them in their operations. Producers of Consumers Goods

Business Users

Factors Influencing the Channel Selection Choosing a marketing channel is a decision that should be made with care because of certain reasons: 1. If the marketing channel is not appropriately chosen it will be expensive 2. Poor channel selection would lead to ineffective presentation of the product, limited purchase opportunities by customers, poor customer service, loss of control. Factors to be considered: 1. Number of customers and frequency of purchase 2. Cost of the product

3. Level of service required 4. Geographical concentration of the market 5. Degree of channel control desired 6. Financial position of the company 7. Propensity of risk 8. Services provided by middlemen

Market Coverage Intensive Distribution: Maximum Market Coverage, used For convenience products or when customers are not Willing to spend much time on the products. Selective Distribution: Moderate market coverage, used for Consumer shopping products

Exclusive Distribution: Restrictive coverage, used for Specialty products

Retailing and Wholesale Retailing includes all activities involved in selling or renting consumer products directly to end consumers. Functions of retailing: 1. Breaking the bulk into individual units 2. Creating time and place utility 3. Keeping variety of goods 4. Providing credit facility to customers 5. Provide Information to the customers and to manufacturers

6. Estimating demand and arranging purchase of the product 7. Connecting Link Wholesalers different from Retailers: 1. Pay less attention to promotion, atmosphere, location, Customer services. 2. Covers Larger trade area 3. Transactions are larger

Functions of Wholesalers: 1. Anticipating customer needs 2. Information Dissemination 3. Communicating 4. Financing 5. Breaking Bulk 6. Transportation 7. Storage 8. Risk Taking

Retail Market in India

Unorganized
Experimentation with formats

Fragmented Store design

Unorganized retailing is getting organized Consumption Boom:

Favorable Demographics, Rise in income Level, Double Income Families, Rising Aspirations, Shifting Consumption Patterns

Characteristics of Organised and Unorganised Retailing

Organised Retailing leveraging technology adherence to corporate laws effective inventory management sales forecast high investment skilled manpower conducive environment

Unorganised Retailing Un- managed inventories low cost of operations individually owned/managed less focus on technology usage minor overheads low taxes unskilled manpower

Classification Organised Retailing

1. Ownership Based Franchisee Independent Retailer Co-operatives 2. Merchandise on Offer Food Retailers General Merchandisers Combination 3. Store Based Department Store Hyper Market Specialty Stores Malls 4. Non Store Based Vending Machines Web Portals

Unorganised Retailing

Semi organised Retailing

Marketing Communication Mix

Consists of five modes of communication. Advertising: Any paid form of non personal presentation and Promotion of ideas, goods or services by an identified Sponsor. Sales Promotion: A variety of short term incentives to Encourage trial or purchase of a product or service. Public Relations and Publicity: A variety of programs designed to promote or protect a companys image or its individual product or change the attitude of customers. Personal Selling: Face-to-face interaction with one or more prospective customers for the purpose of making presentations, answering questions and procuring orders. Direct Marketing: Use of mail, telephone, fax, e-mail or internet to communicate directly with the customers

 Encoding - Translating Thoughts Into Symbolic Form Message - Common Experience Decoding and Receiving - Selective Attention
- Selective Distortion (Amplification & Leveling) - Selective Recall Long Term Memory (Rehearsal & Positive Attitude) - Short Term Memory

 Response (Attitudes) are influenced by the following factors Monopoly on Attention, In Line With Existing Opinion, Reference Group Approval, Source Credibility: Expertise, High Status, Objectivity, Likability, Power

Steps in Developing Promotional Plan 1. Identify Target Audience 2. Determine The Communication Objective 3. Design The Message 4. Decide on The Promotional Mix 5. Allocate The Promotional Budget 6. Measure The Results 7. Manage And Coordinate The Process

1. Identify Target Audience Potential new buyers Current users Influencers People who may not buy but influence decisions of those who may purchase

2. Set the Objectives

3. Design the Message

What To Say (Message Content) - Appeal (Rational, Emotional, Moral), Theme, Idea How To Say It Logically (Message Structure) - Conclusion Drawing, One vs. Two Sided Messages How To Say It Symbolically (Message Format) -Print (Color, Headline, Illustration, Demonstration, Testimonial,Payoff, Image); Radio (Voice, Vocalization, Script); TV (All above) Who Should Say It? - Source Credibility

Step 4 - Decide On Promotional Mix Advertising Sales Sales Promotion Publicity and Public Relations

5. Set the Budget Affordable method: Budget what is thought affordable Percentage of sales method Competitive parity method Objective and task method: Define specific objectives, Determine tasks necessary to achieve objectives, Estimate costs of performing these tasks

6. Measure the Results Attitude and awareness objectives; Prepromotion level vs. post-promotion level Behavioral objectives Changes in sales Test markets

Marketing of Services
Services are intangible products, exchanged directly from producer to the user, can not be transported or stored and are almost instantly perishable. Service products are often difficult to identify as they come Into existence at the same time they are bought and consumed They are composed of intangible elements that are inseparable, Can not be sold in the sense of ownership transfer.

Characteristics of Services: Services are perishable Buyers are involved in in the development and distribution of Services. Services are intangible Services quality is highly variable Standardization of services is difficult Services are inseparable from the service provider

Five Rs of Customer Service

Reachable: when customer needs our help Responsive: handle a customers problem or request promptly Readable: Communicating clearly and concisely Reliable: Reasonable:

International Marketing Home Country Host Country International Marketing involves the marketing of goods or Services outside an organisations home country. Reasons for International Marketing: To sell out the surplus To achieve sales and promotion stability To lower the cost of business To reduce business risk

Marketing Planning and Marketing Audit

Planning defined
A systematic process of forecasting the future business environment and deciding on the most appropriate goals, objectives and positions for best exploiting that environment. Planning is an activity and a process.

The marketing plan

Provides clear and unambiguous statement about the strategies and actions that will be implemented, by whom, when and with what outcomes.

Criteria for Differentiating Plans

Organisational - long term and strategic in focus. Divisional - implementation focus within a shorter time span and within clearly specified parameters. Timing. Regularity - longer term plans have annual reviews whilst short term plans are often part of a hierarchy linking strategy with operations.

Focus - organisational, functional, etc.

Benefits of Planning

The marketing planning process

(1)- Objectives, targets and mission

Quantitative targets - e.g. financial, operating, etc.

Philosophical targets - vision and values.

Qualitative targets - service levels, etc.

Qualitative targets

Objective trade offs

Short term v long-term growth. Profit margin v market positioning. Direct sales effort v market development. Penetrating existing markets v developing new ones. Profit v non-profit goals. Growth v stability. Change v stability. Low risk v high risk.

(2)- The marketing audit Takes stock of a companys marketing health.

Is the launching pad for the marketing plan.

Encourages management to reflect on the environment and companys ability to respond.

Encompasses the external and internal audit.

Marketing audit issues

Macro environment.

Task environment

Markets.

Strategic issues.

Marketing mix. Marketing organisational structure and organisation.

(3)- Marketing analysis

S - strengths. W - weaknesses. O - opportunities. T- threats.

(4)- Marketing objectives

Four fundamental areas related to marketing objectives:

Achieving market share growth or maintenance The maintenance or improvement of profitability Establishing an opening marketing position Maximising cash flow, harvesting

(5)- Marketing strategies and actions

The means by which a company sets out to achieve its marketing objectives. This can be by: Repositioning the product. Improving product packaging. Amending prices. Improving productivity. Standardisation. Changing sales or customer mix.

(6)- Marketing programmes Precisely specify actions, responsibilities, timescales (7)- Marketing budget Precise and detailed: to justify the resources requested; to permit detailed control and evaluation Flexibility: to cope with changing circumstances (8)- Marketing control and evaluation Short-term and long-term

Market and sales potential

The maximum level of demand available within the total market over a given period.

Difficulties in estimating market potential: Maximum level of demand. Total market. Level of competitive activity and trends. Sales potential.

Estimating market and sales potential

Breakdown methods - based on total market measurement or statistical series analysis.

Build up methods - census, survey and secondary data.

Market and sales forecasting

The sales and market forecasts provide the basis for all subsequent planning and decision making.

Forecasting indicates what will happen in a given environment if a specific set of decisions and actions is implemented with no subsequent changes.

Forecast characteristics (Wheelwright and Makridakis, 1977)

Based on historical information from which projections can be made. Look forward over a specific, clearly defined time period. Make clearly specified assumptions, since uncertainty characterises the future.

The four stage approach to forecasting (Wolfe 1966)

Forecasting methods

Different ways of organising marketing activities

Function. Product. Geographically. Segments. Matrix.

Functional organisation

Product organisation

Regional organisation

Matrix organisation

The marketing control process

Examples of marketing performance evaluation methods

Sales analysis.

Costs and profitability analysis.

Sales analysis

Marketing costs and profitability analysis

Figure 21.9

Problems estimating marketing costs according to Wilson et al 1992

Long term or lagged effects. Joint costs. Isolating effects.