MARKETING MANAGEMENT

UNDERSTANDING MARKETING MANAGEMENT

The Importance of Marketing: Financial success mostly depends on marketing ability. Marketing happens to be a predominant factor in the list of top business priorities of CEOs. It is also one among the top 10 challenges that CEOs face. (Research year 2006) It has been the Achilles heel of many formerly prosperous companies (Sears, Levis, General Motors, Kodak, Sony and Xerox)

The Importance of Marketing

Jack Welch, GEs former CEO, repeatedly warned his company: Change or die. It requires careful monitoring of customers and competitors in order to improve their value offerings. It is not a short-term sales-driven view of a business.

Skillful marketing is a never-ending pursuit.

Success of Nirma is one of the most remarkable stories in

Indias modern business history, and Karsanbhai Patel,

who started it all, has inspired many entrepreneurs of the country.

The Scope of Marketing

What is Marketing?
Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and managing customer relationships in ways that benefit the organization and its stakeholders. Marketing is about identifying and meeting human and social needs profitably. Marketing Management is an art and science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior customer value.

The Scope of Marketing

Managers sometimes think of marketing as the art of selling products,. But the startling fact is that selling is only the tip of the marketing iceberg. Peter Drucker puts it this way: The aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customers so well that the product or service fits him and sells itself. E.g. Sonys Play station 3 game system Apples iPod Nano Digital music player Toyotas Prius hybrid automobile

The Scope of Marketing

What Is Marketed? Marketing people market 10 types of entities: 1. Goods 2. Services 3. Events 4. Experiences 5. Persons 6. Places 7. Properties 8. Organizations 9. Information 10.Ideas

The Scope of Marketing

1. Goods: Physical goods constitute the bulk of most countries production and marketing efforts. Machinery tools, machines, industrial chemicals, watches, cosmetics and other mainstays of a modern economy. 2. Services: include the work of airlines, hotels, car rental firms, barbers and beauticians, maintenance and repair people, accountants, bankers, lawyers, engineers, doctors, management consultants etc. Many market offerings consist of a variable mix of goods and services.

The Scope of Marketing

3. Events: Marketers promote time-based events, such as major trade shows, artistic performances and company anniversaries. IPL is a burning example. 4. Experiences: An amusement park or a water park creates, stages and markets experience. Theme restaurant does the same. 5. Persons: Celebrity marketing is a major business. Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, and others get help from celebrity marketers.

The Scope of Marketing

6. Places: Cities, states, regions and whole nations compete actively to attract tourists, factories, company H.Os and new residents. 7. Properties: Real and financial properties. 8. Organizations: actively work to create a strong, favorable and unique image in the minds of their target public. 9. Information: is essentially what books, schools and universities produce, market and distribute at a price. 10. Ideas: In the factory, we make cosmetics; in the store we sell hope, said Charles Revson of Revlon.

The Scope of Marketing

Marketers and Prospects: A Marketer is someone who seeks a response attention, a purchase, a vote, a donation from another party, called the prospect. Marketers are responsible for demand management. Eight demand states are possible: 1. Negative demand 2. Non-existent demand 3. Latent demand 4. Declining demand 5. Irregular demand 6. Full demand 7. Overfull demand 8. Unwholesome demand

The Scope of Marketing

MARKETPLACE: is physical, such as a store you shop in. MARKETSPACE: is digital, as when you shop on the internet. METAMARKET: is a cluster of complementary products and services that are closely related in the minds of consumers, but spread across a diverse state of industries. METAMEDIARIES: are those who assists buyers in moving seamlessly through these groups, although they are disconnected in physical space.

The Scope of Marketing

Marketing in Practice: Increasingly, marketing is not done only by marketing department. To create a strong marketing organization, marketers must think like executives in other departments and vice versa. Late David Packard of Hewlett-Packard observed, Marketing is far too important to leave to the marketing department. In practice marketing follows a logical process of: a. Analyzing marketing opportunities b. Selecting target markets c. Designing marketing strategies d. Developing marketing programs e. Managing the marketing effort

The Scope of Marketing

There are tremendous variability in the responsibilities and job descriptions for CMOs They offer eight ways to improve CMO success: i. Make the mission and responsibilities clear ii. Fit the role to the marketing culture and structure iii. Choose a CMO who is compatible with the CEO iv. Remember that show people dont succeed. v. Match the personality with the CMO type. vi. Make the line managers marketing heroes. vii. Infiltrate the line organizations. viii. Require right-brain and left-brain skills.

Core Marketing Concepts

Needs are the basic human requirements. 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. Five types of needs: 1. Stated needs 2. Real needs 3. Unstated needs 4. Delight needs 5. Secret needs

Core Marketing Concepts

Target Markets, Positioning and Segmentation:
As because one-size-fits-all mindset has long before become history, marketers start by dividing the market into segment. Segmenting, therefore, is the process by which they identify and profile distinct groups of buyers who might prefer or require varying product or service mixes by examining demographic, psychographic, and behavioral differences among buyers. Target markets, are the market segments which present the greatest opportunity in the light of market offering. Positioning is securing/instilling the central benefit(s) of market offering in the minds of the target buyers. E.g. Volvo, Indica.

Core Marketing Concepts

Offerings and Brands: Value Proposition is a set of benefits that companies offer to customers to satisfy their needs. The intangible value proportion 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, and at times renowned, source. A brand carries many associations in peoples minds that make up the brand image.

Core Marketing Concepts

Value and Satisfaction:
Value reflects the sum of the perceived tangible and intangible benefits and costs to customers. It is primarily a combination of quality, service and price (qsp) called the customer value triad. Value is a central marketing concept. Satisfaction reflects a persons judgments of a products perceived performance in relationship to expectations.

If performance falls short of expectations, the customer is dissatisfied.

If it matches expectations, the customer is satisfied. If it exceeds them, the customer is delighted.

Marketing Channels

Core Marketing Concepts

To reach a target market, the marketer uses three kinds of marketing channels. 1. Communication channels deliver and receive messages from target buyers and include newspapers, magazines, radio, TV, mail, telephone, billboards, posters, internet etc. 2. The marketer uses distribution channels to display, sell or deliver the physical product or services to the buyer or user. They include distributors, wholesalers, retailers and agents. 3. The marketer also uses service channels to carry out transactions with potential buyers. Service channels include warehouses, transportation companies, banks and insurance companies.

Core Marketing Concepts

Supply Chain
The supply chain is a longer channel stretching from raw materials to components to final products that are carried to final buyers.* Each company captures only a certain percentage of the total value generated by the supply chains value delivery system. A company makes premeditated strategic moves to capture a higher percentage of supply chain value. Competition Competition includes all the actual and potential rival offerings and substitutes a buyer might consider. - Purchase of steel for cars

Core Marketing Concepts

Marketing Environment
Marketing environment consists of task environment and broad environment. The task environment includes the actors engaged in producing, distributing and promoting the offering. These are the company, suppliers, distributors, dealers and the target customers. The broad environment consists of six components: 1. Political Environment 2. Legal Environment 3. Global Environment 4. Demographic Environment 5. Socio-cultural Environment 6. Technological Environment

Company Orientation toward the Marketplace

1. The Production Concept: One of the oldest concepts in business Consumers will prefer widely available and inexpensive products. Managers concentrate on achieving high production efficiency, low costs and mass distribution. 2. The Product concept: It proposes that consumers favor products that offer the most qualitative, performance and innovative features. Managers focus on making superior products and improving them over time.

Company Orientation toward the Marketplace 3. The Selling Concept: Consumers and businesses, if left alone, wont buy enough of the organizations products. The organization must, therefore, undertake an aggressive selling and promotion effort. Sergio Zyman, Coca Colas former vice president of marketing, said: The purpose of marketing is to sell more stuff to more people more often for more money in order to make more profit. Practiced most aggressively with unsought goods.

Company Orientation toward the Marketplace

4. The Marketing Concept: Emerged in the mid 1950s. Instead of make-and-sell philosophy, business shifted to sense and respond philosophy. Focus was on finding the right products for your customers. E.g. Dell Computer 5. The Holistic Marketing Concept: Is based on the development, design, and implementation of marketing programs, processes and activities that recognizes their breadth and interdependencies.

Marketing dept, mgmt, other dept.

Senior

Communications, Products & services, channels

Internal Marketing

Integrated Marketing

Holistic Marketing

Performance Marketing Sales revenue, Brand & customer equity, Ethics, Environment, Legal, Community.

Relationship Marketing Customers, Channel and Partners

Holistic Marketing Concept

1. Relationship Marketing: Aims to build mutually satisfying long-term relationships with key constituents in order to earn and retain their business. Four key constituents of relationship marketing are customers, employees, marketing partners and members of the financial community. Ultimate outcome of relationship marketing is a unique company asset called a marketing network. A marketing network consists of the company and its supporting stakeholders. Another goal of relationship marketing is to place much more emphasis on customer retention. Why?

Holistic Marketing Concept

2. Integrated Marketing: The marketers task is to devise marketing activities and assemble fully integrated marketing programs to create, communicate and deliver value for consumers. McCarthy classified these activities as marketing-mix tools of four broad kinds, which he called the four Ps of marketing: 1. Product 2. Price 3. Place 4. Promotion Marketers make marketing-mix decisions for influencing their trade channels as well as their final consumers.

Marketing Mix

PRODUCT: Variety Quality Design Features Brand Name Packaging Sizes Services Warranties Returns

PRICE: List Price Discounts Allowances Payment Period Credit terms

PLACE:
Channels Coverage Assortments Locations Inventory Transport

PROMOTION: Sales Promotion Advertising Sales Force Public Relations Direct Marketing

The four Ps represent sellers view for influencing buyers.

Holistic Marketing Concept

From buyers point of view, each marketing tool is designed to deliver a customer benefit. Those are (SIVA): 1. Solution: How can I solve my problem? 2. Information: Where can I learn more about it? 3. Value: What is my total sacrifice to get this solution? 4. Access: Where can I find it? Two key themes of integrated marketing are: 1. Many different marketing activities communicate and deliver value. 2. When coordinated, marketing activities maximize their joint effects.

Holistic Marketing Concept

3. Internal Marketing: Ensures 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. It makes no sense to promise excellent service before the companys staff is ready to provide it. Internal marketing must take place on the following two levels: 1. The various marketing functions. 2. Other departments must also think customer.

Holistic Marketing Concept

4. Performance Marketing: Connotes understanding the returns to the business from marketing activities and programs as well as addressing broader concerns and their effects. It includes: A. Financial Accountability: aims at justifying their investments to senior management. B. Social Responsibility Marketing: Marketers must carefully consider their role in broader terms, and the ethical, environmental, legal and social context of their activity. This realization calls for a new term that enlarges the marketing concept. Its called societal marketing concept.

TEN DEADLY SINS OF MARKETING

1. The company is not sufficiently market focused and customer driven. 2. The company does not fully understand its target customers. 3. The company needs to better define and monitor its competitors. 4. The company has not properly managed its relationship with its stakeholders. 5. The company is at loss in finding new opportunities. 6. The companys marketing plans and planning process are deficient. 7. The companys product and service policies need tightening. 8. The companys brand-building and communications skills are weak. 9. The company is not well organized to carry on effective and efficient marketing. 10. The company has not made maximum use of technology.

TEN COMMANDMENTS OF MARKETING

1. The company segments the market and develops a strong position in each chosen segment. 2. The company maps its customers needs, perceptions, preferences and motivates its stakeholders for honoring them. 3. The company knows its competitors well. 4. The company builds partners out of its stakeholders and generously rewards them. 5. The company develops systems for identifying, ranking and choosing the best opportunities. 6. The company manages a marketing planning system that leads to insightful long-term and short-term plans. 7. The company exercises strong control over its product and service mix. 8. The company builds strong brands cost effectively. 9. The company builds marketing leadership among its various departments. 10. The company constantly adds technology that gives it a competitive advantage in the marketplace.

PRODUCT LIFE CYCLE (PLC)

Here, we describe the concept of the product life cycle (PLC) and the changes that companies make as the product passes through each stage of the life cycle. To say that a product has a life cycle is to assert four things: 1. Products have a limited life; 2. Product sales pass through distinct stages with different challenges, opportunities, and problems for the seller; 3. Profits rise and fall at different stages of the product life cycle; and 4. Products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each stage.

PRODUCT LIFE CYCLE (PLC)

Most product lifecycle curves are portrayed as a bellshape. This PLC curve is typically divided into four stages:

PRODUCT LIFE CYCLE (PLC)

1. Introduction Stage: A period of slow sales growth as the product is introduced in the market. Profits are nonexistent in this stage because of the heavy expenses incurred with product introduction. 2. Growth Stage: A period of rapid market acceptance and substantial profit improvement. 3. Maturity: A period of a slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits stabilize or decline because of increased competition. 4. Decline: Sales show a downward drift and profits erode.

PRODUCT LIFE CYCLE (PLC)

SUMMARY OF PLC CHARACTERISTICS, OBJECTIVES AND STRATEGIES:
Characteristics Sales Costs Profits Customers Competitors Introduction Low sales High cost per customer Negative Innovators Few Growth Rapidly rising sales Maturity Peak sales Decline Declining sales Low cost per customer Declining profits Laggards Declining number Reduce expenditure and milk the brand Phase out weak products.

Average cost per Low cost per customer customer Rising profits Early adopters Growing number Maximize market share Offer product extensions, service, warranty High profits Middle majority Stable number beginning to decline Maximize profit while defending market share Diversify brands and items models.

Marketing objectives

Create product awareness and trail

Product strategy Offer a basic product

PRODUCT LIFE CYCLE (PLC)

SUMMARY OF PLC CHARACTERISTICS, OBJECTIVES AND STRATEGIES:
Characteristics Price strategy Introduction Growth Maturity Price to match or best competitors Build more intensive distribution Decline Cut price

Charge cost-plus Price to penetrate market Build selective distribution Build intensive distribution

Distribution strategy

Go selective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyals

Advertising

Build product awareness among early adopters and dealers Use heavy sales promotion to entice trial

Build awareness Stress brand and interest in differences and the mass market benefits

Sales Promotion

Reduce to take Increase to advantage of encourage heavy consumer brand switching demand

Reduce to minimal level

Levels of Market Segmentation

To compete more effectively, many companies are now embracing target marketing. Instead of scattering their marketing efforts, theyre focusing on those consumers they have the greatest chance of satisfying. Effective target marketing requires that marketers: 1. Identify and profile distinct group of buyers who differ in their needs and preferences (market segmentation). 2. Select one or more market segments to enter (market targeting). 3. For each target segment, establish and communicate the distinctive benefit(s) of the companys market offering (market positioning). Lets crystalize all the three steps in detail..

Levels of Market Segmentation

The starting point for discussing segmentation is mass marketing. Henry Ford optimized this strategy when he offered the Model-T Ford in one color, black. Coca-Cola also practiced mass marketing when it sold one kind of Coke in 6.5ounce bottle. The argument for mass marketing is that: i. It creates the largest potential market. ii. Which leads to the lowest costs. iii. Which in turn can lead to lower prices or higher margins. However, mass marketing is failing due to splintering of the market. Some claim that mass marketing is dying. Most companies are turning to micromarketing at one of four levels: i. Segments ii. Niches iii. Local areas iv. Individuals

Levels of Market Segmentation

SEGMENT MARKETING:
A market segment consists of a group of customers who share a similar set of needs and wants. Segment marketing offers key benefits over mass marketing. However, even a segment is partly a fiction, in that not everyone wants exactly the same thing. Thats why the concept of flexible market offering emerged for catering all members of a segment. A flexible market offering consists of two parts: 1. Naked Solution: the product and service elements that all segment members value and 2. Discretionary options: the product and service elements that some segment members value Each option carries an additional charge. E.g. Domestic Airlines.

Levels of Market Segmentation

SEGMENT MARKETING:
We can characterize market segments in different ways: 1. Homogeneous preferences: exist when all consumers have roughly the same preferences; the market shows no natural segments. 2. Diffused preferences: Here, consumers 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. 3. Clustered preferences: result when natural market segments emerge from groups of consumers with shared preferences.

Levels of Market Segmentation

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 subsegments. E.g. Ezee from Godrej, Crack from Paras Pharmaceuticals, Itchguard from Paras, Neem Active by Henkel India, Vicco Vajradanti, Meswak and Babool. Several TV channels today are niche focused, though the size of the audience may be large. E.g. Aastha, QTV, STAR Cricket. Likewise there are also magazines like better photography, Autocar India, lifestyle etc.

Levels of Market Segmentation NICHE MARKETING:

What does an attractive niche look like? i. The customers have a distinct set of needs; ii. They will pay a premium to the firm that best satisfies them; iii. The niche is fairly small but has size, profit, and growth potential and is likely to attract many other competitors iv. And the nicher gains certain economies through specialization. Larger companies like IBM have lost pieces of their market to nichers. These confrontations have been labeled guerrillas against gorillas. Some large companies have even turned to niche marketing. E.g. Hallmark.

Levels of Market Segmentation

LOCAL MARKETING:
Marketing programs tailored to the needs and wants of local customer groups in trading areas, neighborhoods, even individual stores. E.g. specialized bank branches, in-city courier companies, release of movies in different local languages are the result of local marketing. Local marketing reflects a growing trend called grassroots marketing. Marketing activities concentrate on getting as close and personally relevant to individual customers as possible. Bharat Matrimony has victoriously adopted local marketing as a key reason for its success.

Levels of Market Segmentation

INDIVIDUAL MARKETING:
The ultimate level of segmentation leads to segments of one, customized marketing, or one-to-one marketing. Today consumers are taking more initiative in determining what and how to buy. There is a massive movement towards customerizing the firm. Customerization combines operationally driven mass customization with customized marketing in a way that empowers consumers to design the product and service offering of their choice. Despite the odds of customization, it has worked well for: Paint companies, Arvind Mills, Galleria Picture Card offered by UBL, Pakistan.

BASES FOR SEGMENTING CONSUMER MARKET

We use two broad groups of variables to segment consumer markets. They are: 1. Descriptive characteristics (geographic, demographic and psychographic) 2. Behavioral considerations (consumer responses to benefits, loyalty status, readiness stage etc) Regardless of which type of segmentation scheme we use, the key is adjusting the marketing program to recognize customer differences. The major segmentation variables are: 1. Geographic 2. Demographic 3. Psychographic 4. Behavioral

BASES FOR SEGMENTING CONSUMER MARKET

Geographic Segmentation (GS): Calls for division of the market into different geographical units such as nations, states, regions, countries, cities or neighborhoods. GS assumes importance due to variations in consumer preferences and purchase habits across different regions, countries and states. GS is done on the basis of: 1. Region: South India, Western Region, North, East. 2. City: Class-I cities, Class-II cities, metro cities, cities with a population of 0.5 million to 1 million, cities with a population of over 1 million. 3. Rural and semi-urban areas: Rural villages with a population of over 10,000; semi-urban areas; small towns with a population between 20,000 and 50,000.

BASES FOR SEGMENTING CONSUMER MARKET

Demographic segmentation (DS): In DS we divide the market into groups on the basis of variables such as: 1. Age: Under 6 years, 6-11 years, 12-19 years, 20-34 years, 3549 years, 50-60 years, 60+ years 2. Family size: young, single; young, married, nuclear; young, married, joint etc. 3. Gender: Male, Female. 4. Income: Low (up to Rs. 40,000 p.a.), lower middle (Rs. 40,001 - 80,000 p.a.) etc. 5. Occupation: Unskilled worker, skilled worker, petty traders, shop owners, businessman/industrialist, self-employed etc. 6. Education: Illiterate, school up to 4 years, school between 5 and 9 years, SSC/HSC, graduate/postgraduate (general), graduate/postgraduate (professional)

BASES FOR SEGMENTING CONSUMER MARKET

Psychographic Segmentation (PS): Calls for division of market on the basis of: Socio-economic classification (SEC) Lifestyle: culture-oriented, sports-oriented, outdoororiented etc. Personality: compulsive, gregarious, authoritarian, perfectionist, ambitious etc. Values

BASES FOR SEGMENTING CONSUMER MARKET

Behavioral Segmentation (BS): In BS marketers divide buyers into groups on the basis of their knowledge of, attitude toward, use of or response to a product. 1. Decision roles 2. Behavioral variables like: I. Occasions II. Benefits III. User status IV. Usage Rate V. Buyer-Readiness stage VI. Loyalty status VII. Attitude

CRAFTING THE BRAND POSITIONING

Developing and Communicating a Positioning Strategy: All marketing strategy is built on STP If a company does a poor job of positioning, the market will be confused. Positioning is the act of designing the companys offering and image to occupy a distinctive place in the minds of the target market. The result of positioning is the successful creation of a customer-focused-value proposition. Positioning requires that similarities and differences between brands be defined and communicated.

CRAFTING THE BRAND POSITIONING

Competitive Frame of Reference:
A starting point in defining a competitive frame of reference for a brand positioning is to determine category membership and nature of competition. Category membership means the product or sets of product with which a brand competes and which functions as close substitute. Points-of-Difference and Points-of-Parity: PODs are attributes or benefits consumers strongly associate with a brand, positively evaluate, and believe they could not find to the same extent with competitive brand. POPs are associations that are not necessarily unique to the brand but may in fact be shared with other brands.

CRAFTING THE BRAND POSITIONING

Establishing Category Membership Straddle Positioning: Communicating category membership by: 1. Announcing category benefits 2. Comparing to exemplars 3. Relying on the product descriptor Creating POPs and PODs One common difficulty in creating a strong competitive brand positioning is that many of the attributes or benefits that make up PODs and POPs are negatively correlated.

CRAFTING THE BRAND POSITIONING

Differentiation Strategies: To avoid commodity trap, marketers must start with the belief that you can differentiate anything. Competitive advantage is a companys ability to perform in one or more ways that competitors cannot or will not match. But few competitive advantages are sustainable. At best they may be leverageable. Companies use the following dimensions to differentiate its market offering: 1. Personnel differentiation 2. Channel differentiation 3. Image differentiation