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Marketing Orientation

COMPANY ORIENTATION TOWARDS MARKETPLACE

1. PRODUCTION - EASY AVAILABILITY AND LOW COST


2. PRODUCT - SUPERIOR PRODUCTS, INNOVATIVE FEATURES

3. SELLING - AGGRESSIVE SELLING & PROMOTION


4. MARKETING / CUSTOMER - FOCUS ON CUSTOMER
5. SOCIETAL MARKETING - CUSTOMER & SOCIETY

HOLISTIC MARKETING DIMENSIONS


Senior
Marketing

Management

Department

Other

Product &
Services

Communications

Channels

Departments

Integrated
Marketing

Internal
Marketing

Holistic
Marketing
Socially
Responsible
Marketing

Ethics Environment
Legal

Relationship
Marketing

Community

Customers

Channel Partners

SELLING V/S MARKETING

SELLING

MARKETING

STARTING POINT

PRODUCT

CUSTOMER NEEDS

MEANS

AGGRESSIVE
SELLING &
PROMOTION

SUPERFLUOUS SELLING

ENDS

PROFITS THRU
SALES VOLUME

PROFITABILITY
THROUGH CUSTOMER
SATISFACTION

PILLARS OF MARKETING / CUSTOMER ORIENTATION

1. CLEAR DEFINITION OF TARGET MARKET (DEMOGRAPHICS, PSYCHOGRAPHICS,


MEDIAGRAPHICS, GEOGRAPHICS)
2. PERFECT UNDERSTANDING OF CUSTOMER NEEDS
3. INTEGRATE / COORDINATE ALL ACTIVITIES (INTER & INTRA DEPT)

4. PROFITABILITY THROUGH CUSTOMER SATISFACTION

THUS CUSTOMER ORIENTATION MEANS


1. OBSESSED WITH CUSTOMER & AWARE OF COMPETITOR
2. MONITOR UNFULFILLED NEEDS CONTINUOUSLY THROUGH RESEARCH.
3. FUTURISTIC - MARKETING EXPENDITURE AN INVESTMENT
4. MARKETING CULTURE - CUSTOMER OVERRIDES ORGANISATIONAL INTERESTS

5. SPEED IN RESPONSE TO CUSTOMERS PROBLEMS


6. CONSISTENCY IN DELIVERY OF VALUES, SATISFACTION
7. CUSTOMER RETENTION STRATEGIES
8. MASS CUSTOMIZATION
9. INTERACTIVE AND CUSTOMER FRIENDLY DELIVERY SYSTEMS
10. LOOKING AT CONSUMPTION SYSTEM RATHER THAN PRODUCT FOR
AUGMENTATION
11. ALL DEPARTMENTS THINK CUSTOMER
12. CUSTOMER SATISFACTION - GOAL & MARKETING TOOL

WHAT IS MARKETING

ALL ACTIVITIES DESIGNED TO GENERATE AND FACILITATE EXCHANGE OF


PRODUCTS AND VALUES INTENDED TO SATISFY HUMAN NEEDS AND WANTS.

MARKETING MANAGEMENT IS THE PROCESS OF PLANNING AND EXECUTING


THE CONCEPTION, PRICING, PROMOTION, AND DISTRIBUTION OF IDEAS,
GOODS, AND SERVICES TO CREATE EXCHANGE THAT SATISFY INDIVIDUAL AND
ORGANIZATIONAL GOALS.

MARKETERS TASK

DEMAND MANAGEMENT (Level, Timing & Composition)


STATES OF DEMAND
NEGATIVE - Redesign Mix
NO DEMAND Connect Benefits to Need
LATENT Measure
FALLING Creative Remarketing
IRREGULAR - Use Synchro Marketing
FULL Maintain
OVERFULL Use Selective Demarketing
UNWHOLESOME Use Laws, Fear, Price Hike, Reduced Availability

CORE CONCEPTS OF MARKETING

NEEDS Deprivation of basic satisfaction


WANTS specific satisfiers of need
DEMAND-wants backed by ability and willingness to buy
PRODUCTS- anything( Physical good, service,person, idea0 that can
satisfy a need or want
UTILITY & VALUE &-SATISFACTION
EXCHANGE-A value creating process
TRANSACTION-Trade of values between parties
RELATIONSHIPS-relationship marketing V/s transaction marketing

MARKETS-all potential customers

MARKETING

PRODUCTS

SERVICES

PERSONS

PLACES

ACTIVITIES

IDEAS

The Four P Components of the Marketing Mix

Marketing Mix

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

Target market

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

11

MARKETING MIX - 7 PS

PRODUCT
PRICE
PLACE
PROMOTION
PEOPLE

PACE (PROCESS)
PROOF OF PERFORMANCE

CHOICE OF MARKETING MIX DEPENDS ON TARGET MARKET & POSITIONING

Expanded Marketing Mix For Product/Service


Product

Place

Promotion Price

Physical good features


Channel type
- Promotion blend
Flexibility
Quality level
coverage
- Salespeople
Price level
Services
Intermediaries
Number
CreditTerms
Packaging
Outlet locations
Selection
Differentiation
sizes
Training
Payment period
Warranties
Transportation
Incentives
Discounts
Storage
- Advertising
Allowance
Branding
Targets
variety
Media types
Design ,style
Types of ads
Copy thrust
- Sales promotion
- Publicity
-direct mktg
13

People
- Employees
Recruiting
Training
Motivation
Rewards
Teamwork
- Customers
Education
Training

Physical evidence
Facility design
Equipment
Signage
Employees dress
- Other tangibles
Reports
Business cards
Statements
Guarantees

Process
- Flow of activities
Standardized
Customized
- Number of steps
Simple
Complex
- Customer involvement

14

RESPONSIVE V/S CREATIVE MARKETER

1. STATED NEED - PRODUCT DEMANDED E.g. INEXPENSIVE CAR


2. REAL NEED - FUNCTIONAL BENEFIT DESIRED E.g. LOW MAINTENANCE COST
3. UNSTATED NEED - EXPECTATION FROM COMPANY E.g. DEALER SERVICE
4. DELIGHT NEED-Eg COMPLIMENTARY GIFT
5. SECRET NEED - EMOTIONAL BENEFIT - E.g. SEEN BY OTHERS AS VALUE ORIENTED
BUYER

CUSTOMER SATISFACTION V/S DELIGHT


PERCEIVED PERFORMANCE = EXPECTATIONS

OK / SATISFIED

PERCEIVED PERFORMANCE < EXPECTATIONS

DISSATISFIED/ UNHAPPY

PERCEIVED PERFORMANCE > EXPECTATIONS

DELIGHTED

DELIGHTED CUSTOMERS HAVE EMOTIONAL AFFINITY WITH BRAND & HENCE LOYALTY.
EXPECTATIONS BASED ON PAST BUYING EXPERIENCE, ADVERTISEMENTS, FRIENDS,
COMPETITORS EXPECTATIONS, PRICE, BENCHMARKING.
EXPECTATIONS DIFFER BASED ON PRODUCT, CUSTOMER.

Tools to track customer satisfaction

Complaint and suggestion systems


Customer satisfaction surveys
Ghost shopping
lost customer analysis

Cautions to be exercised in C.S. surveys


Definition in detail
Manipulation by customers and managers
17

The Customer-Development Process


Suspects

Prospects

Disqualified
Prospects

First-time
customers
Repeat
customers

Clients
Inactive of
Ex-customers
Members

Advocates

Partners
18

DEFINING CUSTOMER VALUE

EXCELLENT PRODUCT IS OF NO USE IF IT FAILS TO MEET CUSTOMER NEEDS. A


COMPANY SHOULD BE SKILLED IN MARKET ENGINEERING NOT JUST PRODUCT
ENGINEERING.

CUSTOMER DELIVERED VALUE

CUSTOMER DELIVERED VALUE is the difference between total


customer value and total customer cost. TOTAL CUSTOMER VALUE
is the bundle of benefits customers expect from a given product
or service. TOTAL CUSTOMER COST is the bundle of costs
customers expect to incur in evaluating, obtaining, and using the
product or service.

CUSTOMER DELIVERED VALUE

PRODUCT
SERVICE
PERSONNEL

TOTAL CUSTOMER
VALUE

IMAGE
CUSTOMER DELIVERED
VALUE
MONETARY VALUE
TIME COST
ENERGY COST
PSYCHIC COST

TOTAL CUSTOMER COST

DELIVERING CUSTOMER VALUE

1. MICHAEL PORTERS GENERIC VALUE CHAIN


2. BENCHMARK AGAINST COMPETITION
3. VALUE CHAIN OF SUPPLIERS, DISTRIBUTORS, CUSTOMERS TO CREATE
SUPERIOR VALUE-DELIVERY NETWORK

GENERIC VALUE CHAIN

PRIMARY ACTIVITIES
Inbound Logistics
Operations
Outbound Logistics
Marketing and Sales
Service
SUPPORT ACTIVITIES
Procurement
Technology development
Human resource Management
Firm Infrastructure

23

CORE BUSINESS PROCESS

1. NEW PRODUCT REALIZATION PROCESS


2. INVENTORY MANAGEMENT PROCESS
3. ORDER TO REMITTANCE PROCESS
4 CUSTOMER SERVICE PROCESS

MARKET SENSING PROCESS

CUSTOMER ACQUISITION PROCESS

CUSTOMER RELATIONSHIP MANAGEMENT PROCESS

CUSTOMER VALUE BUILDING APPROACHES - BERRY & PARASHURAMAN

1. ADDING FINANCIAL BENEFITS-FREQUENCY MARKETING PROGRAMS AND


CLUBS
2. ADDING SOCIAL BENEFITS-INDIUALIZING AND PERSONALIZING
RELATIONSHIPS
3. ADDING STRUCTURAL TIES-SUPPLY CUSTOMERS WITH SPECIAL EQUIPMENT
OR COMPUTER LINKAGESTHAT HELP CUSTOMERS MANAGE THEIR
ORDERS,PAYROLL, INVENTORY ETC

CUSTOMER RELATIONSHIP BUILDING

BASIC MARKETING Simply Sell


REACTIVE MARKETING Sell & encourage customer to call if any
Questions, comments or complaints.
ACCOUNTABLE MARKETING Salesman phones after sale

PROACTIVE MARKETING Salesperson contacts from time to time


with suggestions about improved product uses or new products
PARTNERSHIP MARKETING Company works continuously with
customer to discover ways to effect customer savings or help
customer perform better.

LEVELS OF RELATIONSHIP MARKETING


HIGH
MARGIN

MEDIUM
MARGIN

LOW
MARGIN

Many customers/
distributors

Accountable

Reactive

Basic or
reactive

Medium number
of customers/
distributors

Proactive

Accountable

Reactive

Few customers /
distributors

Partnership

Proactive

Accountable

LIFE TIME VALUE OF CUSTOMER

1. Lost customer revenue


2. Lost opportunity revenue
3. Customer replacement costs

COST OF ACQUISITION

1. COST OF AVERAGE SALES CALL

(SALARY, COMMISSION, BENEFITS,

TOTAL COST
TOTAL SALES CALLS

EXPENSES)

2. AVERAGE NUMBER OF SALES CALLS


TO CONVERT AVERAGE PROSPECT
TO CUSTOMER

TOTAL SALES CALLS


TOTAL NO. OF NEW
CUSTOMERS

3. COST OF ATTRACTING NEW CUSTOMER = 2 X 1

Service Encounters or Moments of Truth


Service encounters are the building blocks of service quality &
satisfaction

- Every experience with product, service or person which


allows customer to judge/ form impressions about the quality
of service is a moment of truth.
- It takes 10 good moments of truth to wipe one bad moment
of
truth.
- Disney Corporation 74 service encounters in amusement
park. Marriott Hotels - 4 of the top 5 factors come into play in
first 10 minutes of guests stay.
Types of service encounters- remote, phone, face to face.
- In remote - tangible evidence & technical quality important.
- In phone- process quality
- In face to face - customer also play role.
30

CUSTOMER / PRODUCT PROFITABILITY ANALYSIS


Customers
C1

Products

P1

P2

P3
P4

C2

C3

Highly profitable product


Profitable product

+
High-profit
customer

Mixed-bag
customer

Losing product

Mixed bag product

Losing
customer

31

Sample Marketing Metrics

I. External

II. Internal

Awareness

Awareness of goals

Market share (volume or value)

Commitment to goals

Relative price (market share value/volume)

Active innovation support

Number of complaints (level of dissatisfaction)

Resource adequacy

Customer satisfaction

Staffing/skill levels

Distribution/availability

Desire to learn

Total number of customers

Willingness to change

Perceived quality/esteem

Freedom to fail

Loyalty/retention

Autonomy

Relative perceived quality

Relative employee satisfaction

32

Sample Customer-Performance Scorecard Measures

Percentage of new customers to average number of customers.


Percentage of lost customers to average number of customers.

Percentage of win-back customers to average number of customers.


Percentage of customers falling into very dissatisfied, dissatisfied, neutral, satisfied,
and very satisfied categories.
Percentage of customers who say they would repurchase the product.
Percentage of customers who say they would recommend the product to others.
Percentage of target market customers who have brand awareness or recall.
Percentage of customers who say that the companys product is the most preferred in
its category.
Percentage of customers who correctly identify the brands intended positioning and
differentiation.
Average perception of companys product quality relative to chief competitor.
Average perception of companys service quality relative to chief competitor.
33

STRATEGIC PLANNING

STRATEGIC PLANNING

MARKET-ORIENTED STRATEGIC PLANNING - is the managerial process of


developing and maintaining a viable fit between the organizaitons
objectives, skills, and resources and its changing market opportunities. The
aim of strategic planning is to shape and reshape the companys business and
products so that they yield target profits and growth.

Thus strategic planning is concerned with


1.

Treating business as an investment portfolio.

2.

Building game plan for each business based on industry position


opportunity, resources, mission, objectives.

3.

Future potential and not just current potential.

SEE APPENDIX 18 (THE STRATEGIC PLANNING,


IMPLEMENTATION, AND CONTROL PROCESS)
Planning

Implementing

Corporate planning

Organizing

Controlling
Measuring Results

Division planning

Diagnosing results
Business planning

Product planning

Implementing
Taking corrective
action

CORPORATE & DIVISION STRATEGIC PLANNING

DEFINING THE CORPORATE MISSION


ESTABLISHING STRATEGIC BUSINESS UNITS (SBUS)
ASSIGNING RESOURCES TO EACH SBU
PLANNING NEW BUSINESSES

DEFINING THE CORPORATE MISSION

Shaped by History, current preferences of owners and management,


market environment, resources, distinctive competences.
Provides sense of purpose, direction, and opportunity.

Good mission statements, limited number of goals and values and major
competitive scopes.
Provides direction for 10 12 years.

ESTABLISH STRATEGIC BUSINESS UNITS AND ASSIGN RESOURCES

Assigning resources by evaluating by using analytical tools for classifying its


businesses by profit potential.
1. Boston Consulting Group Model
2. General Electric Model

Boston Consulting Group Model

20%
18%
16%
14%
12%
10%
8%
6%
4%
2%

Stars

Question Marks

Cash Cow

Dogs

Relative Market Share

40

BCGs GROWTH SHARE MATRIX

1.

An unbalanced portfolio would have too many dogs or question marks and/or
too few stars and cash cows.

2.

BUILD for stars


HOLD - strong cash cows
HARVEST weak cash cows, question marks, dogs.
DIVEST dogs, question marks.

3.

SBUs - change their position in the growth-share matrix.

GENERAL ELECTRIC MODEL

Each business is rated in terms of two major dimensions, market attractiveness and
business strength.
1.

MARKET ATTRACTIVENESS Overall market size,,mkt growth rate,profit


margin,competitive intensity,inflationary vulnerability.,technological
requiremnets,environmental impact..

2.

STRENGTH OF SBU / FIRM = Market share,share growth,product quality,brand


reputation,distribution network,promotion effectiveness,production
capacity,productive effeciency,R&D performance,managerial personnel,

Each of these factors is assigned weights and business is measured of 5 point scale.

(a)

Classification

BUSINESS STRENGTH
Strong

Medium

Weak

5.00
Joints

Hydraulic
pumps
3.67

Aerospace
fittings

Clutches
Fuel
Pumps

Flexible
2.33

1.00
5.00

diaphragms

Relief
values

3.67

2.33

1.00

43

(B) Strategies

BUSINESS STRENGTH

PROTECT POSITION
Invest to grow at maximum
digestible rate.
Concentrate effort on
maintaining strength.

INVEST TO BUILD
Challenge for
leadership.
Build selectively on
strengths.
Reinforce vulnerable
areas

BUILD SELECTIVELY
Invest heavily in most
attractive segments.
Build up ability to counter
competition.
Emphasize productivity
by raising productivity.

SELECTIVITY /
MANAG FOR EARNING

PROTECT AND REFOCUS


Manage for current earnings.
Concentrate on attractive
segments.
Defend strength.

MANAGE FOR EARNINGS

Strong

BUILD SELECTIVELY
Specialize around limited
strength.
Seek ways to overcome
weaknesses.
Withdraw if indications of
sustainable growth are
lacking.

LIMITED EXPANSION
Protect existing program. OR HARVEST
Concentrate investments Look for ways to expand
without high risk;otherwise,
in segments where
profitability is good and minimize investment and
rationalize operations.
risks are relatively low.

DIVEST
Protect position in most Sell at time that will
profitable segments.
maximize cash value.
Upgrade product line.
Cut fixed costs and avoid
Minimize investment.
investment meanwhile.
Medium

Weak

44

CORPORATE NEW BUSINESS PLAN

When gap between future desired sales and projected sales, then
three options.
1. INTENSIVE GROWTH current business
2. INTEGRATIVE GROWTH build or acquire businesses related to the
companys current businesses.
3. DIVERSIFICATION GROWTH opportunities in unrelated business.

GROWTH STRATEGIES

INTENSIVE GROWTH (Ansoffs Product / Market Expansion Grid )

INTEGRATIVE GROWTH Backward, Forward, Horizontal

DIVERSIFICATION GROWTH Concentric (Same technology / Marketing


synergy), Horizontal (Appeals to current customers), Conglomerate (No
relationship to the companys current technology, products, or markets).

Current Product

New Product

Current
Markets

1. Market- penetration
strategy

3. Productdevelopment
strategy

New
Markets

2. Marketdevelopment
strategy

(Diversification
Strategy)

47

THE BUSINESS STRATEGIC PLANNING PROCESS

1.

BUSINESS MISSION

2.

SWOT ANALYSIS

3.

GOAL FORMULATION

4.

STRATEGY FORMULATION

5.

PROGRAM FORMULATION

6.

IMPLEMENTATION

7.

FEEDBACK AND CONTROL

OPPORTUNITY AND THREAT

A MARKETING OPPORTUNITY - is an area of buyer need in which a company


can perform profitably.
OPPORTUNITIES - can be classified according to their attractiveness and their
success probability.

AN ENVIRONMENTAL THREAT - is a challenge posed by an unfavorable trend


or development that would lead, in the absence of defensive marketing
action, to deterioration in sales or profit.
Threats should be classified according to their seriousness and probability of
occurrence.

CHECKLIST FOR STRENGTHS / WEAKNESSES ANALYSIS

Importance of factor(High ,Medium , Low) and performance


rating (Major/minor strengh,Neutral,,Major/Minor
weakness)on dimensions in
Marketing Company reputation,marketshare,product/service
quality,pricing/distribution/advtg/salesforce/innovation
effectiveness,geog coverage
Finance-cost/availability of capital,cash folw/,financial stability

Manufacturiing-facilities,economies of scale,capacity,mfg skill


,dedicated workforce
Organization-visionary leadership,dedicated
employees,entrepreneurial orientation,flexible/responsive

50

GOAL FORMULATION

OBJECTIVES MUST BE HIERARCHICAL


QUANTITATIVE
REALISTIC
CONSISTENT

STRATEGY FORMULATION

MICHAEL PORTERS THREE GENERIC STRATEGIES

OVERALL COST LEADERSHIP firms should be good at engineering, purchasing,


manufacturing and distribution.
DIFFERENTIATION on key customer benefit area e.g. services, quality, style,
technology.
FOCUS on narrow market segment and pursue either cost leadership or
differentiation.
CLEAR STRATEGY IMPORTANT - Dont be middle of the roaders
Firms pursuing same strategy in same to market constitute strategic group.

STRATEGIC ALTERNATIVES

Long -term
profits

Growth in
sales or market
share

Market
Development

Efficiency,
short-run profits

Market
Penetration

New
segments

Existing
Customers

Convert
nonusers

Competitors
customers

New product
developments

Decrease
inputs
Reduce
costs
Improve
asset
utilization

Increase
outputs
Increase
price
Improve
sales mix53

PROGRAM FORMULATION AND IMPLEMENTATION, FEEDBACK &


CONTROL

PROGRAM FORMULATION - Develop programs in line with strategy


e.g. Technology leadership strengths R&D, gather technological intelligence,
develop leading edge products, train technical sales force, develops ads to
communicate technology leadership.
IMPLEMENTATION The McKinsey 7-S Framework(Hardwarestrategy,structure,systems and Software-Style, Staff, Skills, Shared Values)
FEEDBACK & CONTROL - Need to review and revise implementation, programs,
strategies, or even objectives.

MARKETING PROCESS

Involves
1.

Analysing Marketing Opportunities

2.

Developing marketing strategies (Differentiating and positioning)

3.

Developing marketing programs (Marketing mix)

4.

Managing marketing effort through

- Annual plan control (Achievement of sales, profits and other goods).


- Profitability control (Analysis of profitability of products, customers, trade
channels and order sizes, Marketing profitability analysis and marketing
efficiency studies).

- Strategic control (Appropriateness of companies marketing strategy to


market conclusions through marketers audit).

A GOOD MARKETING STRATEGY

CO-ORDINATES FUNCTIONAL AREAS OF ORGANISATION


ALLOCATES RESOURCES EFFICIENTLY
HELPS PRODUCT ATTAIN MARKET POSITION
COMPETITIVE

OBJECTIVES OF MARKETING PLAN

TO,
1.

Define current situation facing the product (and how we got there)

2.

Define problems and Opportunities

3.

Establish objectives

4.

Define strategies and programs necessary to achieve objectives

5.

Pinpoint responsibility to achieve

6.

Encourage careful and disciplined thinking

7.

Establish customer-competitor orientation

CONTENTS OF A MARKETING PLAN


I.

Executive summary and table of


contents

Presents a brief over of the proposed plan

II.

Current marketing situation

Presents relevant background data on the


market, product, competition, distribution, and
macro-environment.

III.

Opportunity and issue analysis

Identifies the main opportunities/threats,


strengths/weaknesses, and issues facing the
product line.

IV.

Objectives

Defines the plans financial and marketing


goals in terms of sales volume, market share,
and profit

V.

Marketing strategy

Presents the broad marketing approach that will


be used to achieve the plans objectives.

VI.

Action programs

Presents the special marketing programs


designed to achieve the business objectives.

VII.

Projected profit-and-loss statement

Forecasts the plans expected financial


outcomes.

VIII.

Controls

Indicates how the plan will be monitored

FREQUENT MISTAKES IN PLANNING PROCESS

1.

Speed of planning

2.

Amount of data collections

3.

Who does the planning

4.

Structure

5.

Length of plan

6.

Frequency of planning

7.

Number of courses of action considered

8.

Who sees the plan

9.

Insufficient senior management leadership

10. Tying compensation to efforts

MARKETING ENVIRONMENT

MARKETING ENVIRONMENT ANALYSIS

OUTSIDE - IN VIEW TO TRACK TRENDS, OPPORTUNITIES & THREATS


FOLLOWED BY MARKET RESEARCH TO DETERMINE AN OPPORTUNITYS PROFIT
POTENTIAL.

OPPORTUNITIES CAN BE CLASSIFIED ON ATTRACTIVENESS & SUCCESS


PROBABILITY (COMPETITIVE ADVANTAGE).
THREATS ARE CLASSIFIED ON BASIS OF SERIOUSNESS & PROBABILITY OF
OCCURRENCE.

CHECKLIST FOR STRENGTHS / WEAKNESSES ANALYSIS


Importance of factor and performance rating on dimensions in
Marketing Company reputation,marketshare,product/service
quality,pricing/distribution/advtg/salesforce/innovation
effectiveness,geog coverage
Finance-cost/availability of capital,cash flow/,financial stability
Manufacturing-facilities,economies of scale,capacity,mfg skill
,dedicated workforce
Organization-visionary leadership,dedicated
employees,entrepreneurial orientation,flexible/responsive

MARKETING ENVIRONMENT
I. MAJOR FACTORS - (MACROENVIRONMENT)
A) DEMOGRAPHIC - (BREAKUP & CHANGES IN AGE, INCOME, SEX, EDUCATION,
URBAN-RURAL, LIFE EXPECTANCY, OCCUPATION, PERSONS PER HOUSEHOLD).
B) SOCIO / CULTURAL - (FAMILY STRUCTURE, DECISION-MAKING, PESTERPOWER
VALUES LIFESTYLES).
C) TECHNO LOGICAL - (CREATIVE DESTRUCTION, IMPACT ON PRODUCT,
PACKAGING, ADVERTISING).
D) POLITICAL / LEGAL - (LAWS TO PREVENT UNFAIR COMPETITION, CONSUMERS &
SOCIETY).
E) ECONOMIC - (PER CAPITA INCOME, CREDIT AVAILABILITY, SAVINGS, STAGE OF
BUS CYCLE).
F) PHYSICAL - (GOVTAL INTERVENTION, NEW OPPORTUNITIES).

MARKETING ENVIRONMENT

II. ACTORS - (MICROENVIRONMENT)


A) COMPANY
B) SUPPLIERS
C) MARKETING INTERMEDIARIES

D) CUSTOMERS
E) COMPETITORS
F) PUBLIC - ASCI, CONSUMER ACTION GROUP

CONSUMER BEHAVIOUR

7 Os FRAMEWORK

WHO BUYS - OCCUPANT

WHAT DOES HE BUY - OBJECT


WHY DOES HE BUY - OBJECTIVE
WHEN DOES HE BUY - OCCASION
WHERE DOES HE BUY - OUTLET
HOW DOES HE BUY - OPERATIONS
WHO ARE INVOLVED - ORGANISATION

MODEL OF BUYER BEHAVIOUR

Buyers
characteristics
Marketing stimuli

Other stimuli

Product
Price
Place
Promotion

Economic
Technological
Political
Cultural

Cultural
Social
Personal
Psychological

Buyers decisions
Product choice
Brand choice
Dealer choice
Purchase timing
Purchase amount

Buyers
Decision
Process

Buying roles
Buying types
Buying Stages

Factors influencing behavior

PERSONAL

CULTURAL

SOCIAL
REFERENCE

CULTURE

GROUP
FAMILY

SUBCULTURE

SOCIAL CLASS

ROLES AND
STATUSES

AGE AND LIFE


CYCLE STAGE

PSYCHOLOGICAL
MOTIVATION

OCCUPATION
PERCEPTION
ECONOMIC
CIRCUMSTANCES
LIFESTYLE
PERSONALITY
AND SELFCONCEPT

LEARNING
BELIEFS AND
ATTITUDES

BUYER

BUYING ROLES

INITIATOR

INFLUENCER
DECIDER
PURCHASER
USER

BUYING BEHAVIOUR TYPES

High Involvement

Difference
between brands
perceived

COMPLEX

Low Involvement

VARIETY
SEEKING

WB

DISSONANCE
Difference
REDUCING
between brands
not perceived B P New B

HABITUAL

WB

STAGES OF BUYING DECISION PROCESS

PROBLEM RECOGNITION
INFORMATION SEARCH Criteria, Alternatives
EVALUATION OF ALTERNATIVES
PURCHASE DECISION

POSTPURCHASE BEHAVIOUR

INFORMATION SEARCH SOURCES

PERSONAL SOURCES
COMMERCIAL SOURCES

PUBLIC SOURCES
EXPERIENTIAL SOURCES

SUCCESSIVE SETS INVOLVED IN CONSUMER DECISION MAKING

TOTAL SET

AWARENESS SET

CONSIDERATION SET

CHOICE SET

PURCHASE DECISION

POST-PURCHASE BEHAVIOUR

Profiling the Customer Buying Decision Process

1)
2)

3)
4)

Introspective method Marketers think how


they would act if they were consumers
Retrospective method Ask consumers who
have bought to recall the event
Prospective method Ask prospective
consumers who plan to buy to think aloud.
Prescriptive method Ask consumers ideal way.

74

ALTERNATIVE EVALUATIVE TECHNIQUES

COMPENSATORY MODEL
EXPECTANCY VALUE MODEL
IDEAL BRAND MODEL

NON-COMPENSATORY MODEL

CONJUNCTIVE MODEL
DISJUNCTIVE MODEL
LEXI COGRAPHIC MODEL

EXPECTANCY VALUE MODEL OF CONSUMER CHOICE


ATTRIBUTES

CAR
ENGINE
CAPACITY
WTS.

FORD ESCORT

PERCEIVED
VALUES

EXTERIORS

PRICE

MILEAGE

0.4

0.2

0.3

0.1

10

8.2

OPEL ASTRA

7.4

HONDA CITY

10

7.7

CIELO

4.8

STRATEGIES FOR MARKETERS

MODIFY THE BRAND REAL REPOSITIONING


ALTER BELIEFS ABOUT THE BRAND PSYCHOLOGICAL REPOSITIONING
ALTER BELIEFS ABOUT COMPETITORS BRAND COMPETITIVE DEPOSITIONING
ALTER IMPORTANCE WEIGHTS

CALL ATTENTION TO NEGLECTED ATTRIBUTES


SHIFT BUYERS IDEALS

PERCEIVED RISK

FINANCIAL
PHYSICAL

SOCIAL

PERSONAL

COMPETITION

79

PORTERS MODEL

Threat of new entrants


Intensity of Competitive rivalry
Bargaining power of buyers
Bargaining power of suppliers
Threat of substitutes
80

Five Forces Determining Segment Structural Attractiveness

Potential entrants
(Threat of
mobility)

Suppliers
(Supplier
power)

Industry
competitors
(Segment rivalry)

Buyers
(Buyer
power)

Substitutes
(Threat of
substitutes)

81

Identifying Competition

A. Industry Concept of Competition Group of firms


that offer a class of products that are close
substitutes classified on basis of
I. Number of sellers & degree of differentiation
a) Pure monopoly
b) Oligopoly Pure oligopoly (oil, steel) &
differentiated oligopoly (auto, computers)
c) Monopolistic competition restaurants
d) Pure competition stock market
II. Entry, mobility & exit barriers.
82

Identifying Competition Contd of Slide .

III. Cost structure shapes strategic conduct


e.g. steelmaking involves heavy
manufacturing & raw material
costs
IV. Degree of vertical integration
V. Degree of globalization some industries
are highly local (babycare) others are global
(e.g. oil, cameras)
B. Market Concept of competition
Brand/Form/Category/Desire

83

COMPETITION
WHAT DO YOU NEED TO KNOW
WHO ARE OUR COMPETITORS - IDENTIFY & SELECT

WHAT ARE THEIR OBJECTIVES

WHAT ARE THEIR STRATEGIES

WHAT ARE THEIR STRENGTHS & WEAKNESSES

WHAT ARE THEIR REACTION PATTERNS


84

IDENTIFYING COMPETITION
CORRECT DEFINITION IMPORTANT TO MARKET PLANNING
& STRATEGY
KEY QUESTION IS DEGREE EXTENT
BALANCE BETWEEN TOO MANY & TOO FEW
NOT EASY AS EMERGING COMPETITION
WRONG DEFINITION LEADS TO
a) MARKETING MYOPIA
b) AMBIGUITY IN MARKET RELATED STATISTICS

85

IDENTIFYING COMPETITORS
I. INDUSTRY CONCEPT OF COMPETITION II. MARKET CONCEPT OF COMPETITION

86

INDUSTRY CONCEPT OF COMPETITION


1)Number of sellers and degree of differentiation
a)Pure Monopoly
b)Oligopoly- a small no. of large firms Pure eg oil,steel Or
Differentiated automobiles,refrigerators
c)Monopolistic competitionMany competitors and
differentiated eg restaurants,beauty parlors
d)Pure competition eg stock market
2)Entry,Mobility,exit barriers
3)Cost structure
4)Degrree of vertical integration
5)Degree of Globalisation

87

Market concept of competition


Stimulates long run strategic market planning
Key to identify is mapping product/market grid
Opens eyes to broader set of actual & potential
competitors
a) Brand
b) Product form competition
c) Category / Generic / Industry Competition
d) Desire / Budget

88

COMPETITIVE LEVEL & TASKS


Competitive Level

Product Managers task

Brand

Convince customers brand is better


than others in product form

(inward oriented)

Product Form
(inward)

Generic / Category

Convince product form is best in


the category

Convince product category is best to


satisfy need

(Outward)

Desire / Budget

Convince Generic need / benefit is


best way to spend discretionary
income

89

METHODS FOR DETERMINING COMPETITORS


I. PREDETERMINED CATEGORIES - ORG

II. MANAGERIAL JUDGEMENT

III. CUSTOMER BASED MEASURES


a) PURCHASE DATA FOR BRAND SWITCHING MATRIX
b) CROSS ELASTICITY OF DD
c) CONSUMER JUDGEMENTS
c.1. JUDGED OVERALL SIMILARITY
c.2. SIMILARITY OF CONSIDERATION SET
c.3. PRODUCT DELETION SET
c.4. SUBSTITUTION IN USE

90

BRAND SWITCHING MATRIX


TIME (++1)

.6

.2

.2

TIME

.2

.3

.4

.1

.2

.3

.5

.1

.1

.5

.3

.1

.4

.5

91

FIGURE 3.13: METHODS VERSUS COMPETITION LEVELS AND


INFORMATION REQUIRED
Level of Competition
Approach

Typical Data Sources

Brand Product Generic Budget Primary

Secondary

Form
Existing definitions

Technology substitution

Managerial judgment

X
X

X
X

Customer behavior based:


Brand switching

Interpurchase times
Cross-elasticities

X
X

X
X

X
X

92

FIGURE 3.13: METHODS VERSUS COMPETITION LEVELS AND


INFORMATION REQUIRED
Level of Competition
Approach

Typical Data Sources

Brand Product Generic Budget Primary

Secondary

Form
Customer evaluation based:
Overall similarity

Similarity of consideration X

X
X

sets
Product deletion

Substitution in use

Note: An X indicates that either the method is useful for determining competition at
that level or it employs data of a certain type.
93

IDENTIFYING COMPETITORS STRATEGIES


A group of firms following same strategy in
given target market is called a strategic group.
Dimensions include level of technological
sophistication,geographicalscope,
manufacturing methods,marketing strategies
etc

94

ASSESSING COMPETITORS
CURRENT STRATEGY

1. TARGET MARKET
2. CORE MARKETING STRATEGY
a) POSITIONING
b) DIFFERENTIAL ADVANTAGE
3. MARKETING MIX

95

ASSESSING COMPETITORS
CURRENT OBJECTIVES
growth v/s hold v/s harvest v/s divest.

Short term v/s long term profits, satisfycing v/s maximizing


profits, cash flow,,market
sharegrowth,,technological/,service /cost leadership
objectives shaped by size, history, management
perspective, financial situation, place in larger organisation
objectives can be assessed

a) from strategy
b) geographical home of parent
c) ownership of firm - private / public/ government

96

ASSESSING COMPETITORS
STRENGTHS & WEAKNESSES
1. THROUGH
- SECONDARY DATA
- PERSONAL EXPERIENCE
- PRIMARY SOURCES (CUSTOMERS, SUPPLIERS, DEALERS)
2. ANALYSIS SHOULD BE FOR BOTH CORPORATE & BRAND LEVELS
3. ANY INVALID ASSUMPTIONS THAT COMPETITOR IS MAKING
4. SHARE OF MARKET, MIND, HEART
5. SATISFACTION / DISSATISFACTION AREA
6. COMPARISION VIS-A-VIS OUR BRAND

97

ESTIMATING COMPETITORS
REACTION PATTERNS

DEPENDS ON

a) IMPORTANCE OF BUSINESS OR PRODUCT


b) HOW COMMITTED IS THE COMPETITOR (PHILOSOPHY,
MIND-SET)

c) AGGRESSIVENESS OF MANAGERS

98

ESTIMATING COMPETITORS
REACTION PATTERNS

TYPES OF COMPETITORS

LAID BACK
SELECTIVE
TIGER
STOCHASTIC

99

DESIGNING COMPETITOR
INTELLIGENCE SYSTEM

1. COSTLY SIGNALS

2. CHEAP TALK SIGNALS

PRODUCT MANAGER MUST COLLECT BOTH TYPES OF


INFORMATION BUT BE WARY OF (2)

100

SOURCES OF INFORMATION OF COMPETITORS

I. SECONDARY
II. PRIMARY
III. OTHERS

IV. UNETHICAL

101

SELECTING COMPETITION
1. LEVEL
2. SELECTING COMPETITOR FOCUS
CHOOSING WHO TO COMPETE HAS IMPLICATIONS ON
PERFORMING STDS (MARKET SHARE) & COMPETITIVE
STRATEGY
DEPENDS ON
a) TIME HORIZON

b) STAGE OF PLC
c) RATE OF CHANGE OF TECHNOLOGY
102

SELECTING COMPETITORS TO ATTACK & AVOID

1. STRONG V/S WEAK COMPETITORS


2. CLOSE V/S DISTANT
3. GOOD V/S BAD

103

BALANCING CUSTOMER & COMPETITOR ORIENTATION

104

COMPETITIVE POSITIONS
DOMINANT-Controls behavior of other competitors ,wide
choice of strategic options

STRONG-can take independent actions and maintain its


long term position
FAVOURABLE-exploitable strength and above average
opportunity to improve position
TENABLE-exists at sufferance of dominant company and
has lesser than average opportunity to improve position
WEAK-poor performance.must change or exit
NON-VIABLE-poor performance and no opportunity for
improvement
105

MARKET LEADER STRATEGIES

I.

EXPANDING TOTAL MARKET

II.

DEFENDING MARKET SHARE

III EXPANDING MARKET SHARE

106

Market- Leader Strategies


Expanding Total Market
NEW USERS :
Non-users or competitors users (Market penetration)
Different segments (New Market Strategy)

Geographical segments (Geographical Expansion Strategy)


NEW USES :For example Vaseline as lubricant. Skin
ointment, healing agent, hair dressing.
MORE USAGE :Shampoo
107

MARKET LEADER DEFENSIVE STRATEGIES


Through continuous innovation, increasing competitive
effectiveness and value to customers.
a) POSITION DEFENSE not enough today. e.g. Coke has
also diversified.
b) FLANK DEFENSE Erect outposts to protect a weak front
or serve as an invasion base for counter attacking. E.g. Asian
Paints Tractors.
c) PREEMPTIVE DEFENSE Launch attack before enemy
starts offense across market with many models.
108

Market Leader Defensive Strategies


d) COUNTER OFFENSIVE DEFENSE e.g. HLL reaction to Tide.
e) MOBILE DEFENSE Stretch Domain over new territories
through market broadening i.e. shifting focus from current
product to generic need E.g. Bank to insurance, Mutual
Funds etc. Aquafina & Kinley
f) CONTRACTION DEFENCE- Recognising that there is no sense
to spread too thin. (Strategic withdrawal)

109

EXPANDING MARKET SHARE


Increased market share above 40% earns ROI
of 38.5%,more than 3 times that of those
firms with shares under 10%

But important to consider 3 factors


Provoking monopolist action
Economic costholdout customers
Wrong marketing mix
110

MARKET CHALLENGER STRATEGIES

Firms that occupy 2nd,3rd or lower ranks


are called runner ups. These firms can
either attack leader and make aggressive
bid for further market share( market
challenger ) or play ball and not rock
boat ( market follower)
111

Market challenger strategies

1. Can attack Market leader- high risk-high


payoff.Makes good sense if false leader
2. Can attack firms of own size that are not
doing well or are under financed.

3. Small and regional firms


112

MARKET CHALLENGER STRATEGIES

FRONTAL ATTACK-attacking opponents strength rather


than weakness.Matching opponent on
product,advertising,price with 3:1 advantage otherwise cant
succeed
MODIFIED FRONTAL ATTACK-Match leaders offer on all and
beat on price
FLANK ATTACK-Blind spots. Flank attack can be geog or
segmental eg Nirma. Much more likely to succeed than
frontal attack

113

MARKET CHALLENGER STRATEGIES

ENCIRCLEMENT ATTACK-Comprehensive Blitz attack on


front,sides rear.Offer everything opponent offers and more
BYPASS ATTACK-is an indirect assault strategy.like
diversifying into unrelated products,new geographical
markets and leapfrogging into new technology

GUERRILLA ATTACK-waging small intermittent attacks.


Harass , Demoralise eg price cuts, promotional blitz,legal
action
114

MARKET FOLLOWER STRATEGIES

Company prefers to follow than to challenge.


1. COUNTERFEITER

2. CLONER-The cloner emulates the leaders


products,distribution, advertising etc Sudar dust
3. IMITATOR-copies some things of leader but maintains
differentiation on packaging, advertising, pricing etc
4. ADAPTER adapts or improves leaders product. Can
become future challenger E.g. Japanese firms

115

MARKET NICHER STRATEGIES

SPECIALIZATION- Customer, geographic product line,


MULTIPLE NICHING BETTER THAN SINGLE NICHING

116

MARKETING ROLES NICHE SPECIALIST ROLES


The key idea in successful nichemanship is specialization. Here are some possible niche roles:

End user specialist:

Vertical-level specialist:

Customer-size specialist:

Specific-customer specialist:

Geographic specialist:

Product or product line specialist:

Product - feature specialist:

Job shop specialist:

Quality price specialist:

Service specialist:

Channel specialist:
117

Marketing Information System

118

Marketing Information System


Helps develop &manage information necessary
to conduct marketing activities.

MARKETING
INFORMATION

MARKETING
ENVIRONMENT

Macro
environment

MARKETING INFORMATION
SYSTEMS
INTERNAL
REPORTS
SYSTEM

MARKETING
RESEARCH
SYSTEM

Competition
Public

MARKETING
MANAGERS
Analysis

Planning

Target market
Marketing
channels

MARKETING
INFORMATION

Implementation
Control
MARKETING
INTELLIGENCE
SYSTEM

ANALYTICAL
MARKETING
SYSTEM

MARKETING DECISIONS & COMMUNICATIONS

Marketing Information System


Internal Records System (result data) - Order to payment
cycle (invoices, bills), sales reporting system (sales reports,
call reports).
Marketing intelligence system(happening data)*
Newspapers, trade publications, talking to
customers, suppliers, distributors, trade show, analyzing
products & ads. talking to competitors, employees,
syndicated reports (ORG).
*Need to train sales representatives & motivate
distributors & retailers.
Marketing research - formal study of specific problem /
situation.
Marketing decision support systems - Statistical tools,
models & optimization routines.

SCOPE OF MARKETING RESEARCH


1. NEW PRODUCTS - Concept testing,Brand name generation,&
testing,Product testing,packaging tests, Test-marketing, Market feasibility.
2.

PRODUCT RESEARCH - Competitive - product studies,

3.

SALES & MARKET - Market potential, Market characteristics, Market share


analysis, Sales analysis, Distribution channel studies.

4. PROMOTION - Copy research, Media research, Ad effectiveness, sales


promotion effectiveness.,public image studies, sales force effectiveness
5. BUSINESS & CORPORATE RESEARCH - Business trend studies,, International
scope studies, Internal employees studies, Operations research, Location
studies etc.
6.

CORPORATE RESPONSIBILITY - Ecological studies, Values

7.

PRICING-Competitive pricing analysis,price elasticity

8.

BUYING BEHAVIOUR-Brand preference, attitude,product


satisfaction,purchase behaviour,purchase intentions,brand
awareness,segmentation studies

THE RESEARCH PROCESS

I.

DEFINE THE PROBLEM - not too broad or narrow, watch for symptoms.

II. RESEARCH OBJECTIVES - measurable and specific (except exploratory)


III. RESEARCH DESIGN APPROACHES
A) EXPLORATORY

B) DESCRIPTIVE

CONCLUSIVE

C) CAUSAL
IV. DEVELOP RESEARCH PLAN
A) DATA SOURCES

SECONDARY

CENSUS

PRIMARY

B) SAMPLING PLAN

SAMPLE

SAMPLE UNIT SAMPLING


FRAME SAMPLE SIZE
SAMPLING PROCEDURE
A) PROBABILITY
NON-PROBABILITY

B)

THE RESEARCH PROCESS

E) CONTACT METHODS

-MAIL,TELEPHONE,PERSONAL(ARRANGED,INTERCEPT)
COLLECT INFORMATION-Problems of not at

home,non co-operation,biased,dishonest
answers or fudging
vi) DATA ANALYSIS
vii) REPORT & PRESENTATION

Sampling procedures
A) PROBABILITY SAMPLING :
1. Simple Random Sampling : random selection through lottery without
replacement.
Unrestricted random sampling is with replacement.
2. Systematic Sampling : involved a system of selecting every nth item in
sampling frame after 1st name / unit is selected at random.
3. Random Route sampling: used for sampling households, shops etc.
An address is selected at random & every nth address is selected
therefrom.
4. Stratified Random Sampling: Population is divided into mutually
exclusive groups & within each group, units are selected through
random methods.
5. Cluster (Area) sampling: The area to be surveyed is broken into
smaller areas. A few of these areas are then selected by random
methods. Every unit or some units randomly selected may be
interviewed in these selected areas.

SAMPLING PROCEDURES
B) NON - PROBABILITY SAMPLING used when
a) Probability sampling not feasible because population not
known or no suitable sampling frame.
b) Random sampling too costly & time consuming.
c) When information is exploratory in nature.

SAMPLING PROCEDURES
B) Non probability sample:
1. Convenience sample: The researcher selects the easiest
population members from which to obtain information.
2 Judgement sample: The researcher uses his/ her judgement
to select population members who are good prospects for
accurate information.
3. Quota sample: The researcher decides on prescribed no. of
people in each category (age, gender, income) & then finds &
interviews.

Contact Methods
Contact Methods

TELEPHONE
- Quick
- Interview should be
short.
- Cannot be
personal.
- Not strictly
representative.
- Screening of calls.
- Non-verbal cues

MAIL
- Poor response

rate
- No chance of
clarification

PERSONAL
- Most versatile
- Non- verbal cues
-Costly
- Bias
- Cold calls
to prevent mall intercept
interviews.

QUESTIONNAIRE

Open - ended

Close - ended

(Useful in exploratory
research)

(Easy to interpret and


tabulate)

1. Completely unstructured

1. Dichotomous (2 choice)

2. Word association

2. Multiple choice (3 or more)

3. Sentence completion

3. Likert scale 5 point scale of agreedisagree

4. Story completion
5. Picture completion
6.

Thematic apperception test (TAT)

4. Semantic Differential
5. Importance Scale
6.

Monadic Rating

7.

Intention to buy scale

QUESTIONNAIRE

Most common instrument must be carefully developed, tested and


debugged before they are administered on a large scale.
Each question should contribute to research objectives.
Logical sequence

Wording / Styling Simple, direct, and unbiased.


Not too long. Lead question should be interesting.
Sensitive questions at the end and give range.

A QUESTIONABLE QUESTIONNAIRE

1. What is your total income to the nearest dollar.


2. Are you an occasional or frequent flyer.
3. Do you like this restaurant?
4. How many ads did you see on TV last week?

5. What are the most salient factors in buying a car ?


6. Do you think it is right for the government to ban common salt and deprive
a lot of people of jobs ?

Characteristics of good Marketing Research


Scientific method

Creativity
Multiple methods
Value & cost of information
Look at background - Classic failure of coke. Dont look at
problem in isolation.
Dont give in to temptations of giving management what
they want to hear.

Emerging Trends in Marketing

133

Emerging Trends in Marketing


Markets
1. Cause related marketing - Social cause, (P & G) ecological cause (Orchid Hotels).
2. Ambush Marketing (Coke 1996 world cup official sponsor, Reebok Atlanta
Olympics 1996).
3. Viral Marketing - hotmail
4. Mousetrapping - (on internet)
5. Guerilla marketing - (unconventional & creative attention grabbing techniques).
E.g. Burger king used McDonalds Ronald.
6. Buzz marketing - By revealing only partial information. (JJKN).
7. Glocalization - McDonalds, Coca-Cola, L & G Sampoorna, Nokia 1100.
8. Permission marketing (Seth Godin)
9. Experience Marketing - Sonys CD stores,Parryware experiencentres, Shoppers
Stop
10. Collaborative Marketing - design (DC car )
Pricing (Zodiac grill) segmentation
(Dell) Co creation of products- eg starbucks asking customers to create a coffee
and acknowledging customers contribution
11.Lifestyle marketing - adopt promotional activity to customers lifestyle. E.g.
Cellphones.
12. Ethical marketing - Pfizer, J & J Tylenol
13. Use of social media in mktg and emarketing and ecommerce
14. Rise of consumerism-seller beware
15. Strategic alliances in product,branding,distribution,advertising,sales promotionetc

Customer Management :
1. Relationship management - Jet airways flying returns,Shoppers stop First Citizens
Club.
2. Affinity group & online communities.
Product & Branding :
1. Mass customization - e.g. Scorpio, Asian Paints, Dell.
2. Umbrella Branding
Pricing :
1. Target pricing
2. Announcing price upfront

1.
2.
3.

Packaging :
Sachet marketing
Packaging innovations
New inforamtion necessary on packages eg dot to indicate veg/nonveg,expiry date

Distribution :
1. Non- traditional methods - Multilevel (Avon , Oriflame ),Party plan (Tupperware)
2. Organised retail and power shift from manufacturer to retailer

Advertising, Media, sales promotion:


1.
In film advertising - Baghban, Castaway (Fedex)
2.
Surrogate advertising.
3.
Comparative advertising.
4.
Use of new, unconventional media, below the line
media. (e.g.. Surf Vans).
5.
Increase in sales promotion.
6.
Using colours & sensory methods - e.g. Blue (Cool),
Red (Hot).

SEGMENTATION, TARGETING & POSITIONING

Levels of Market Segmentation

1)
2)
3)
4)

Segment Marketing
Niche Marketing
Local Marketing
Customerization or segments of one or
customized marketing or one to one
marketing.

138

Steps in the Segmentation Process


Description
1.

Need-Based Segmentation

Group customers into segments based on similar needs


and benefits sought by customer in solving a particular
consumption problem.

2.

Segment Identification

For each needs-based segment, determine which demographics, lifestyles, and usage behaviors make the
segment distinct and identifiable (actionable).

3.

Segment Attractiveness
and market
of each

Using predetermined segment attractiveness criteria


(such as market growth, competitive intensity,
access), determine the overall attractiveness
segment.

4.

Segment Profitability

Determine segment profitability.

5.

Segment Positioning

For each segment, create a value proposition and


product-price positioning strategy based on
segments unique customer needs and

that
characteristics.
6.

Segment Acid Test

Create segment storyboards to test the attractiveness of


each segments positioning strategy.

7.

Marketing-Mix Strategy

Expand segment positioning strategy to include all


aspects of the marketing mix: product, price,
and place.
139

promotion

REQUIREMENTS FOR EFFECTIVE MARKET SEGMENTATION

RELEVANT
MEASURABLE
SUBSTANTIAL
ACCESSIBLE
ACTIONABLE

STEPS IN SEGMENTATION

1. IDENTIFY BASES OF SEGMENTATION


2. PROFILING

BASIS FOR SEGMENTING CONSUMER MARKETS


I. CONSUMER CHARACTERISTICS
1. GEOGRAPHIC (REGION, URBAN-RURAL)
2. DEMOGRAPHIC (AGE, SEX, OCCUPATION, INCOME, EDUCATION, FAMILY LIFE CYCLE,
FAMILY SIZE).
3. PSYCHOGRAPHICS (SOCIAL CLASS, LIFESTYLE, PERSONALITY)
II. CONSUMER RESPONSES
1. BENEFITS SOUGHT

2. OCCASIONS
3. USAGE RATE (HEAVY, MEDIUM, LIGHT)
4. USER STATUS (EX, CURRENT, NON, POTENTIAL, REGULAR, 1ST TIME)
5. LOYALTY STATUS (HARDCORE, SOFT CORE, SHIFTING, SWITCHERS)
6. BUYER READINESS (UNAWARE, AWARE, INFORMED, INTERESTED)
7. ATTITUDE TO PRODUCT (ENTHUSIASTIC, POSITIVE, INDIFFERENT, NEGATIVE, HOSTILE).

MAJOR SEGMENTATION VARIABLES FOR BUSINESS MARKETS


DEMOGRAPHIC
1. Industry : which industries should we serve?
2. Company size: What size companies should we serve?
3. Location: Which geographical areas should we serve ?
OPERATING VARIABLES
4.Technology : What customer technologies should we focus on?
5. User / customer status: Should we serve heavy users, medium users, light users, or nonusers?
6. Customer capabilities: Should we serve customers needing many or few services?
PURCHASING APPROACHES
7. Purchasing -function organization : Should we serve companies with highly centralized
or decentralized purchasing organizations?
8. Power structure: Should we serve companies that are engineering dominated,
financially dominated, and so forth?
9. Nature of existing relationships: Should we serve companies with which we have strong
relationships or simply go after the most desirable companies?
10. General purchase policies: Should we serve companies that prefer leasing?
Service contracts? Systems purchases? Sealed bidding?
11. Purchasing criteria: Should we serve companies that are seeking quality? Service? Price?

MAJOR SEGMENTATION VARIABLES FOR BUSINESS MARKETS


SITUATIONAL FACTORS
12. Urgency: Should we serve companies that need quick and sudden
delivery or service?
13. Specific application: Should we focus on certain applications of our
product rather than all applications?
14. Size of order: Should we focus on large or small orders?

PERSONAL CHARACTERISTICS
15. Buyer-seller similarity: Should we serve companies whose people and
values are similar to ours?
16. Attitudes toward risk: Should we serve risk- taking or risk-avoiding
customers?
17. Loyalty: Should we serve companies that show high loyalty to their
suppliers?

STEPS IN MARKET TARGETING

1. DEVELOP MEASURE OF SEGMENT ATTRACTIVENESS AND EVALUATE.


2. SELECT TARGET SEGMENTS.

BASIS FOR EVALUATION & SELECTION OF TARGET SEGMENTS

1. SIZE
2. GROWTH
3. STRUCTURAL ATTRACTIVENESS (PORTERS MODEL)
4. OBJECTIVES & RESOURCES
5. ECONOMIES OF SCOPE

PATTERNS OF TARGET MARKET SELECTION

1. SINGLE SEGMENT CONCENTRATION


2. MARKET SPECIALISATION
3. PRODUCT SPECIALISATION
4. SELECTIVE SPECIALISATION
5. FULL MARKET COVERAGE

ALTERNATIVE TARGETING STRATEGIES

COS MARKETING MIX

WHOLE MARKET

UNDIFFERENTIATED MARKETING

MARKETING MIX 1

SEGMENT 1

SEGMENT 2

SEGMENT 3

DIFFERENTIATED MARKETING

SEGMENT 1
MARKETING MIX

SEGMENT 2
SEGMENT 3
CONCENTRATED MARKETS

Additional Considerations

1)
2)
3)
4)

Segment by segment invasion plans mega


marketing to counter blocked markets
Updating segmentation schemes market
partitioning
Ethical choice of Target markets
Counter segmentation.

149

DIFFERENTIATION & POSITIONING

DIFFERENTIATION IS THE ACT OF DESIGNING A SET OF MEANING DIFFERENCES


TO DISTINGUISH THE COMPANYS OFFERS FROM COMPETITORS OFFERS.
POSITIONING IS THE ACT OF DESIGNING COMPANYS OFFER AND IMAGE SO THAT
IT OCCUPIES A DISTINCT AND VALUED PLACE IN THE TARGET CUSTOMERS MIND.

Developing a Positioning Strategy

Involves:
1) Defining the Target Market
2) Competitive frame of reference
3) Points of Parity & Points of Difference

151

Choosing POPs & PODs


POP are driven by needs of category membership (to create category POPs) &
need to negate competitors PODs ( to create competitive POPs).
Consumer desirability criteria for PODs.
1)

Relevance e.g. tallest hotel (irrelevant)

2)

Distinctive

3)

Believable & credible

152

Choosing POPs & PODs Contd. Of slide


Deliverability criteria
1)

Feasibility in terms of resources,image of company

2)

Communicability Verifiable evidence or proof points need


to be created e.g. zpto

3)

Sustainability enduring

Marketers must decide at which level (s) to anchor brands


PODs At lowest level are brand attributes, then brand
benefits & at top are brand values.
153

EFFECTIVE POSITIONING REQUIRES

1. DETERMINING IMPORTANT DIMENSIONS


2. ASSESSING IDEAL POSITIONS
3. ASSESSING CURRENT POSITION OCCUPIED BY COMPETITORS

STEPS IN POSITIONING

1. DEVELOP ALTERNATIVE POSITIONING CONCEPTS


2. SELECT POSITIONING STRATEGY
3. SIGNAL THROUGH MARKETING MIX

Positioning Strategy
1.
2.
3.
4.
5.
6.
7.
8.

ATTRIBUTE for e.g. clinic with zpto


BENEFIT
USE/ APPLICATION
USER
COMPETITOR
LEADERSHIP quality , technology, service
PRODUCT CATEGORY DISASSOCIATION
EXCLUSIVE CLUB

156

POSITIONING STRATEGY TO BE AVOIDED

1. UNDERPOSITIONING - VAGUE IDEA


2. OVERPOSITIONING - TOO NARROW AN IMAGE
3. CONFUSED POSITIONING
4. DOUBTFUL POSITIONING

PRODUCT REPOSITIONING

1. CHANGING TARGET CONSUMER PROFILE


2. COMPETITOR TOO CLOSE
3. INCREASE MARKET - E.g. CADBURY
4. COMMUNICATE TECHNOLOGICAL ADVANCEMENT / UPGRADATION IN THE
PRODUCT - E.g. SURF.
5. CHANGING CUSTOMER NEED.

158

DIFFERENTIATION VARIABLES

PRODUCT SERVICES PERSONNEL

CHANNEL IMAGE

Features
Performance
Conformance
Durability
Reliability
Reparability
Style
Design

Competence
Coverage
Symbol
Courtesy
Expertise
Written and
Performance
audiovisual
Reliability
media
Responsiveness
Atmosphere
communication
Events

Ordering ease
Delivery
InstallationCredibility
Customer training
Customer consulting
Maintenance and
repair
Miscellaneous

MEASURING CUSTOMER EFFECTIVENESS VALUE - METHOD FOR


COMPETITIVE ADVANTAGE SELECTION
FEATURE

COMPANY COST

CUSTOMER VALUE

(1)

Rear window defrosting


Cruise control
Automatic transmission

(2)

$100
600
800

$200
600
2400

CUSTOMER
EFFECTIVENESS
(3 = 2/ 1)

2
1
3

160

Methods for competitive - Advantage selection


1
Competitive
Advantages

Technology
Cost
Quality
Service

4
2
3
Company Competitor Importance
of
Standing Standing
Improving
Standing
(H-M-L)*

8
6
8
4

8
8
6
3

L
H
L
H

5
Affordability
and speed
(H-M-L)

L
M
L
H

6
Competitors
Ability to
Improve
standing
(H-M-L)

M
M
L
L

7
Recommend
ed
Action

Hold
Monitor
Monitor
Invest

* H = High; M = Medium; L= Low

161

PRODUCT & BRANDING

5 LEVELS OF PRODUCT

1. CORE BENEFIT
2. BASIC PRODUCT - FEATURES, BENEFITS, DESIGN & STYLE, PACKAGING,
BRAND NAME.
3. EXPECTED PRODUCT - CREATES NO PREFERENCE

4. AUGMENTED PRODUCT - TOTAL CONSUMPTION SYSTEM


5. POTENTIAL PRODUCT
THE 5 LEVELS CONSTITUTE CUSTOMER VALUE HIERARCHY WITH EACH LEVEL
ADDING MORE CUSTOMER VALUE.

CLASSIFICATION OF PRODUCTS-CONSUMER GOODS


DURABILITY & TANGIBILITY
1.

NON-DURABLE GOODS tangible, consumed in few uses. Many


locations, small mark up, heavy advertising.

2.

DURABLE GOODS personal selling, guarantees, higher margin.

3.

SERVICES intangible, variable, credibility of supplier very


important.

SHOPPING HABITS

4.

CONVENIENCE GOODS staples, impulse & emergency goods

5.

SHOPPING GOODS comparison shopping .Homogenous &


heterogenous strategies differ.

6.

SPECIALITY GOODS goods with unique characteristics and or brand


identification.Location should be advertised.

7.

UNSOUGHT GOODS advertising and personal selling.

Classification Of Products

Most goods
Easy to
evaluate

High in search qualities

High in experience qualities

Most services

Difficult to
evaluate

High in credence qualities

The Product Hierarchy

1) Need family thirst


2) Product family All product classes that
serve a core need with reasonable
effectiveness Non-alcoholic beverages,
alcoholic beverages
3) Product class A group of products within a
product family having certain functional
coherence e.g. Aerated soft drinks

166

The Product Hierarchy Contd of Slide .

4) Product line A group of products within a


product class that are closely related
because they perform a similar
function,
are sold to same customer groups, are
marketed through same outlets or channels
or fall within price ranges. Soft drink
5) Product type share same form. Cola drink.
6) Item (SKU or variant) Coke 300 ml.

167

Product systems & Mixes

A product system is a group of diverse but related


items that function in a compatible manner.
A product mix (product assortment is set of all
products & items a particular seller offers for sale.
A product mix has width, length, depth &
consistency.

168

BRAND

A BRAND IS ESSENTIALLY A SELLERS PROMISE TO CONSISTENTLY DELIVER A


SPECIFIC SET OF FEATURES, BENEFITS AND SERVICES TO BUYERS.A BRAND IS
ABOUT INTANGIBLE AND TANGIBLE ASSOCIATIONS

Brand

A brand is a product or service that is


differentiated on dimensions functional,
rational, tangible (brand performance) and/or
symbolic, emotional, intangible (what brand
represents).

170

BRANDING DECISIONS

1. BRAND OR NOT Advantages of branding easy processing, legal


protection, brand loyalty, segmentation ,corporate image. Also
distributors and consumer s prefer brands.

2.

SPONSOR Manufacturer / Distributor / Licensed

3.

BRAND NAME Individual / Blanket / Separate family / Co. + Individual.


Company names legitimizes and individual name individualizes

4.

BRANDING STRATEGY Line extensions (success rate higher), Brand


extensions (risk of brand dilution test association), Multi-brands, New
brands, Co brands (also called dual branding).

5.

REPOSITIONING shifting customer preferences or competitor too close.

Devising a Branding Strategy


4 General Strategies:
1)
2)
3)
4)

Individual names or house of brands


Blanket family names or branded house
Separate family names
Corporate name + individual product name.

172

Devising a Branding Strategy Contd of Slide .

- Brand extension line extensions & category


extensions
- Parent brand & sub brand
- Brand line consists of all products original as well
as line and category extensions sold under a
particular brand.
- Brand mix (or brand assortment) is the set of all
brand lines that a particular seller makes available to
buyers.
- Licensed brands, co-branding, ingredient branding.
173

ESSENTIALS OF A GOOD BRAND NAME

1.

Easy to pronounce, spell and remember.

2.

Suggest about benefits, quality, use or action.

3.

Unique, distinctive.

4.

Versatile can be added to new products / global reach.

5.

Registered and protected.

BRAND NAME TESTS

A. ASSOCIATION TEST
B. LEARNING TESTS (PRONOUNCABILITY)
C. MEMORY
D. PREFERENCE
E. GLOBAL REACH

PACKAGING TESTS

1. ENGINEERING
2. VISUAL
3. DEALER & CONSUMER TESTS

BRAND - MEANING

1. ATTRIBUTES
2. BENEFITS - FUNCTIONAL & EMOTIONAL
3. VALUE
4. CULTURE
5. PERSONALITY
6. USER

DEEP V/S SHALLOW BRAND

BRAND ASSOCIATIONS

Product attributes

Intangibles
Country/geographic area
Customer benefits

Competitors

Brand-name
and symbol

Product class

Lifestyle/personality

Relative price

Use/application

Celebrity/person

User/customer

HOW VALUES AFFECT BRAND CHOICE

FUNCTIONAL
VALUE

SOCIAL
VALUE

CONDITIONAL
VALUE

BRAND CHOICE

EMOTIONAL
VALUE

EPISTEMIC
VALUE

BRAND EQUITY (DAVID AAKER)

1. BRAND AWARENESS
2. PERCEIVED BRAND QUALITY AND FUNCTIONALITY
3. POSITIVE BRAND MENTAL & EMOTIONAL ASSOCIATIONS
4. BRAND LOYALTY
5. OTHER ASSETS - PATENTS, TRADEMARKS ,CHANNEL RELATIONSHIPS

ATTITUDE TOWARDS BRAND

1. CUSTOMER WILL CHANGE BRAND FOR PRICE REASONS


2. CUSTOMER IS SATISFIED - NO REASON TO CHANGE
3. CUSTOMER IS SATISFIED & WOULD INCUR COSTS BY CHANGING BRAND
4. CUSTOMER VALUES THE BRAND AND SEES IT AS A FRIEND
5.

CUSTOMER IS DEVOTED TO BRAND.

BRAND EQUITY IS RELATED TO 3, 4, 5.

IMPORTANCE OF PROPER PACKAGING

1.

PROTECTION

2.

ADVERTISING VALUE

3.

CONVENIENCE TO CONSUMERS

4.

BENEFIT TO RETAILERS

5.

AFTER-USE VALUE

6.

IDENTIFICATION

7.

INFORMATION

181

FACTORS TO BE CONSIDERED FOR PACKAGE DESIGNING

1.

LANGUAGE

2.

COLOUR

3.

SIZE

4.

CLIMATE

5.

NATURE OF THE PRODUCT

6.

LENGTH OF DISTRIBUTION CHANNEL

7.

ACCEPTED NORMS

8.

METHOD OF TRANSPORT USED

9.

TRENDS IN PACKAGING

10. COST-BENEFIT ANALYSIS

182

PACKAGING

1.

PRIMARY

2.

SECONDARY

3.

SHIPPING

DECISIONS
1.

The first task is to establish packaging concept. What packaging should


be or do. e.g. protection, novel dispensing method, visibility.

2.

Decision on packing elements

3.

Tests engineering tests, visual tests, dealer tests and consumer tests.

4.

Labeling identify, describe and promote.

183

Pricing methods
Cost based
Customer based
Competitor based

Selecting the Pricing Method


Markup pricing
Target return pricing
Perceived value pricing
Value pricing
Going rate pricing
Sealed bid pricing

Pricing strategies at entry


Skimming
Penetration

Some pricing terminology


Target costing(pricing)- due to psychological
price barrier
Psychological pricing(odd end,psychological
..
discounting)
Loss leader pricing
Referencing pricing - fair price, price bandwidth

DISTRIBUTION

A COMPANY LAUNCHING A PRODUCT NEEDS


1. SALES CHANNEL (TALKING ABOUT PRODUCT)
2. DELIVERY CHANNEL (HOME DELIVERY, INSTALLATION)
3. SERVICE CHANNEL
THE 3 NEED NOT BE SAME.

Marketing Channels & Value Networks

Marketing channel/trade channel/distribution channel are set of


intermediaries involved in process of making product or service available
for use or consumption.
Merchants (wholesalers, retailers)
Agents (Brokers, sales agents, manufacturers representatives)
Facilitators (transportation companies, independent warehouses, banks,
insurance companies)
In Managing its intermediaries, a firm must decide how much effort to
devote to push vs. pull strategies.

189

CHANNEL LEVELS

EACH INTERMEDIARY WHO BRINGS PRODUCT AND ITS TITLE CLOSER TO BUYER
CONSITUTES CHANNEL LEVEL.
ZERO CHANNEL(Direct marketing channel) - Door to door ,home parties,

mail order, telemarketing, TV selling,,internet selling manufacturer


stores.
ONE LEVEL
TWO LEVEL

THREE LEVEL

Intermediaries
No. of Intermediaries Intensive,selective
exclusive
Types of intermediaries eg for cellphones

INTRODUCTION TO INTEGRATED
MARKETING COMMUNICATIONS

by AAAA
a concept of marketing communications
planning that recognizes the added value of
a comprehensive plan that evaluates the
strategic roles of a variety of
communications disciplines-for example,
general advertising, direct response, sales
promotion and public relations-and
combines these disciplines to provide
clarity, consistency, and maximum
communications impact through the
seamless integration of discrete messages

Thus IMC can help us deliver


Different media for same message:
Consistency over time: Lux
Different message over different audience:
Fair & Lovely- Urban Vs Rural areas
Same message in different languages: Coke

MARKETING COMMUNICATIONS MIX

ALSO CALLED PROMOTION MIX CONSISTS OF


1.

ADVERTISING

2.

SALES PROMOTION

3.

PUBLIC RELATIONS AND PUBLICITY

4.

PERSONAL SELLING

5.

DIRECT MARKETING

6.

MERCHANDISING

7.

EVENT SPONSORSHIP

8.

PRODUCT DESIGN

9.

ONLINE ADVERTISING

10. WORD OF MOUTH RECOMMENDATION

COMMON COMMUNICATION PLATFORMS


ADVERTISING

SALES
PROMOTION

PUBLIC
RELATIONS

PERSONAL
SELLING

DIRECT
MARKETING

Print and broadcast


ads
Packagingouter
Packaging inserts
Motion pictures
Brochures & booklets
Posters and leaflets
Directories
Reprints of ads
Billboards
Display signs
Point-of-purchase
displays
Audio-visual material
Symbols and logos
Videotapes

Contests, games,
sweepstakes,
lotteries
Premiums and gifts
Sampling
Fairs & trade
shows
Exhibits
Demonstrations
Coupons
Rebates
Low-interest
financing
Entertainment
Trade-in
allowances
Continuity
programs
Tie-ins

Press kits
Speeches
Seminars
Annual
reports
Charitable
donations
Sponsorships
Publications
Community
relations
Lobbying
Identity media
Company
magazine
Events

Sales
presentations
Sales meetings
Incentive
programs
Samples
Fairs and trade
shows

Catalogs
Mailings
Telemarketing
Electronic
shopping
TV shopping
Fax mail
E-mail
Voice mail

PROMOTIONAL TOOLS
UNDERSTANDING UNIQUE CHARACTERISTICS AND COSTS OF EACH
1.

ADVERTISING Strategic and long term, most economical form of


consumer contact, transforms products into brands.
Persuasive, expressive public presentation hence perceived as legitimate
but impersonal .

2.

SALES PROMOTION Short term, tactical


Creates
quick response but not effective in building long-run brand preference.

3.

PUBLIC RELATIONS & PUBLICITY High credibility, dramatization, catch


buyers off guard.

4.

PERSONAL SELLING Useful in later stages but long-term cost


commitment.

5.

DIRECT MARKETING Customized, interactive, secrecy.

6.

MERCHANDISING or Point of Purchase activity for traffic building in outlets


especially self-service outlets

PROMOTIONAL TOOLS

7.

EVENT SPONSORSHIP should be relevant target audience,involving.

8.

PRODUCT DESIGN and packaging and brand name acts as silent


salesmen.

9.

ONLINE ADVERTISING internet users few, but interactive.

10. WORD OF MOUTH recommendations need to be stimulated through


proper identification of opinion leaders

PRODUCT LIFE CYCLE

199

PLC PHASES

1. INTRODUCTION
2. GROWTH

3. MATURITY
4. DECLINE

200

PRODUCT LIFE CYCLE


THE LAUNCH PHASE

DEFINING THE POSITIONING;


ACHIEVING WHOLESALE DISTRIBUTION;
ACHIEVING RETAIL DISTRIBUTION;
AROUSING CONSUMER AWARENESS;
ATTRACTING CONSUMER TRIAL;

CONVERTING CONSUMERS TO THE PRODUCT; AND


ACHIEVING BUYING CONTINUITY
201

FOUR INTRODUCTORY MARKETING STRATEGIES

Promotion
High
High

Low

Low

Rapidskimming
strategy

Slowskimming
strategy

Rapidpenetration
strategy

Slowpenetration
strategy

202

PRODUCT LIFE CYCLE


THE GROWTH PHASE
INCREASING THE USER BASE;

EXPANDING DISTRIBUTION;
EXPANDING SHELF FACINGS;
INCREASING PURCHASE FREQUENCY;

SHIFT FROM PRODUCT AWARENESS ADVERTISING TO


BRAND PREFERENCE ADVERTISING;
LOWER PRICES TO ATTRACT NEW LAYER OF PRICE SENSITIVE
BUYERS
ENSURING ADEQUATE INVENTORIES AT WHOLESALE AND
RETAIL LEVELS; AND

EXPLORING LINE EXTENSIONS

203

MATURITY PHASE

1. GROWTH MATURITY - SALES GROWTH RATE DECLINE,


LAGGARDS
2. STABLE MATURITY - SALES FLATTEN; SALES GOVERNED BY
POPULATION GROWTH & REPLACEMENT DEMAND
3. DECAYING MATURITY - ABSOLUTE LEVEL OF SALES STARTS
TO DECLINE, CUSTOMERS SWITCHING TO OTHER
PRODUCTS

204

PRODUCT LIFE CYCLE

THE MATURITY PHASE


RETAINING CURRENT USERS;
ATTRACTING NEW USERS;
RETAINING DISTRIBUTION;

OPTIMISING PRODUCT LINE AND PACKAGING; AND


OPTIMISING PRODUCT COSTS

205

MATURITY PHASE
1. MARKET MODIFICATION
VOLUME = NO. OF BRAND USERS X USAGE PER USER
a) INCREASING USERS
CONVERT NON-USERS
ENTER NEW MARKET SEGMENTS
SNATCH COMPETITORS CUSTOMERS
b) INCREASING USAGE
MORE FREQUENT USE
MORE USAGE PER OCCASION
NEW AND MORE VARIED USES
2. PRODUCT MODIFICATION
3. MARKETING MIX MODIFICATION

206

PRODUCT LIFE CYCLE

REJUVENATION
DEVELOP AND QUALIFY MAJOR PRODUCT IMPROVEMENT;
REPOSITION PRODUCT VIA ADVERTISING;
ACHIEVE NEW DISTRIBUTION OUTLETS;

ACHIEVE CONSUMER TRIAL AND CONVICTION; AND


ATTRACT NEW USERS AND NEW USES.

207

PRODUCT LIFE CYCLE

DECLINE PHASE

RETARDING ATTRITION IN USER BASE;


ATTRACTING BARGAIN BUYERS;
RESTRICTING PRODUCT LINE;

REDUCING PRODUCT COSTS;


RETARDING DISTRIBUTION LOSSES;
MAXIMISING IMMEDIATE PROFITS

208

PRODUCT LIFE CYCLE


THE NEW PRODUCT / ESTABLISHED PRODUCT DISTINCTION

FOR THE NEW PRODUCT:

ASCERTAIN THAT YOU REALLY HAVE A VIABLE PRODUCT BEFORE YOU START
MARKETING IT;
CONCENTRATE EFFORTS ON DEVELOPING EFFECTIVE POSITIONING AND
ADVERTISING THAT REFLECTS THAT POSITIONING OPTIMALLY;
WITH THE TRADE, AIM AT DISTRIBUTION BEFORE ANYTHING ELSE;
CLEARLY ESTABLISH THE PRICE LEVEL THAT YOU WANT.

209

PRODUCT LIFE CYCLE


THE NEW PRODUCT / ESTABLISHED PRODUCT DISTINCTION
FOR THE ESTABLISHED PRODUCT:

DO NOT WANTONLY CHANGE POSITIONING OR ADVERTISING UNLESS YOU


HAVE REAL EVIDENCE THAT THEY ARE FUNDAMENTALLY WRONG;
ENSURE YOUR PRODUCT HAS SUFFICIENT SUPERIORITY TO THE
COMPETITION TO MAKE IT VIABLE IN THE MARKET;

CONCENTRATE AS A FIRST PRIORITY ON HOLDING THE VOLUME YOU HAVE


INHERITED AND THE USER BASE THAT HAS BEEN BUILT UP;
SEEK TO FIND EXPANSION POSSIBILITIES FOR NEW VOLUME - NEW USERS,
NEW TRADE OUTLETS, VOLUME PACKS AND PROMOTIONS;

UNDERSTAND AND RESPECT THE PRODUCTS AND THE BRANDS HERITAGE.

210

PRODUCT LIFE CYCLE STRATEGIES


APPENDIX NO.6)

S
a
l
e
s

(SEE

Introduction
Growth

Maturit
y

Decline

Time

211

Characteristics
Sales

PRODUCT LIFE CYCLE STRATEGIES

Low sales
sales
High cost
per
customer

Costs

Profits

Customers
Competitors

Rapidly rising

Average cost per


customer

Peak sales
sales

Low cost per


customer
High profits

Declining

Low cost per


customer
Declining profits

Negative

Rising profits

Innovators

Early adopters

Middle majority

Growing number

Stable number
beginning to decline

Declining number

Maximize profit while


defending market share

Reduce
expenditure and
212
milk the brand

Few

Laggards

Marketing Objectives
Create product
Maximize market
awareness and trial share

Strategies

Product

Price

Distribution

Advertising

Sales
Promotion

Offer product
Offer a basic product extensions, service,
warranty

Charge cost-plus

Build selective
Distribution

Price to penetrate
market

Build intensive
distribution

Diversify brands
and models

Price to match or
Best competitors

Build more intensive


Distribution

Build product
Build awareness and Stress brand
awareness among interest in the mass
differences and
early adopters and Market
Benefits
dealers
Reduce to take
Use heavy sales advantage of heavy
promotion to enticeconsumer demand
trial

Phase out weak


items
Cut price

Go selective:
Phase out
unprofitable
Outlets
Reduce to level
Needed to retain
Hard-core loyals

Increase to encourage Reduce to


minimal
Brand switching
level
213

Innovators

2.5%

Early
Adopters
13.5%

Early
Majority
34%

Late
Majority
34%

Laggards
16%

Percentage of Adopters by Category Sequence


214

Adopter Categories
ADOPTER
CATEGORY

DESCRIPTION

Innovators

Venturesome - very eager to try new Ideas


acceptable if risk is daring; more
cosmopolite social relationships;
communicates with other innovators.

RELATIVE PERCENTAGE
POPULATION WITHIN THE
THAT EVENTUALLY
ADOPTS
2.5%

Early Adopters Respect - more integrated into the local


social system; the persons to check with
before adopting a new idea; category contains
greatest number of opinion leaders; are role
models.

Early Majority deliberate - adopt new ideas just prior to the


average time; seldom hold leadership positions;
deliberate for some time before adopting.

13.5%

34.0

Late Majority Skeptical- adopt new ideas just after the average
time; adopting may be both an economic necessity
and a reaction to peer pressures;innovations
approached cautiously.
Laggards

Traditional - the last people to adopt an innovation;


most localite in outlook; oriented to the past;
suspicious of the new.

34.0

16.0

100.0%

215

Forecasting & Demand Measurement

Demand can be measured at 6 product levels (item, form, line, company


sales, industry sales, all sales), 5 space levels (customer, territory, region,
country, global) & 3 time levels (short-term, medium & long-term).

216

Market can be defined as.


a) Potential market = interest in a market offer.
b) Available market = interest + income + access.
c) Qualified available market = interest + income + access + qualifications (beer
21 yrs.)
d) Target market = part of qualified available market that company decides to
pursue.
e) Penetrated market
These definitions are a useful tool for market planning.

217

Market Demand
Market demand for a product is the total volume that would be bought by
a defined customer group in a defined geographical area in a defined time
period in a defined marketing environment. (e.g. recession V/s prosperity)
under a defined marketing program. Hence, market demand is a function.
Market minimum (base sales) & market potential (upper limit).

218

Market sensitivity of demand (expansible market V/s non-expansible


market)

Organizations selling in non-expansible market must accept the market


size (level of primary demand for product class) & direct effort to winning
larger market share (selective demand).
Market penetration index (current level of market demand vis--vis
potential demand level) & companys share penetration index (current
market share vis--vis potential market share).
Market forecast is market demand corresponding to one level of industry
marketing expenditure.

219

Company Demand
Company demand is companys estimated share of market demand at
alternative levels of company marketing effort in a given time period. This
depends on size & effectiveness of marketing expenditure relative to
competitors.

Company sales forecast is expected level of company sales based on chosen


marketing plan and an assumed marketing environment.

220

Sales quota is sales goal set for a product line, company division or sales
representative. Sales quota higher than sales forecast.

Sales budget is conservative estimate used for current purchasing,


production & cash flow decisions.
Company sales potential is maximum company demand as company
marketing effort increases relative to competition.
This will always be less than market potential.

221

Estimating Current Demand


1)

Total Market Potential

a)

Total Market Potential = Potential No. of Buyers X Average Quality


purchased by a buyer X Price

b)

Chain Method Potential for sweetened milk for urban adults = Urban
population above 18 years X Personal discretionary income (urban) per
capita X Average percentage of discretionary income spent on food X
Average percentage of amount spent on food that is spent on beverages
X Average percentage of amount spent on beverages that is spent on
dairy beverages X Expected percentage of amount spent on dairy
beverages that will be spent on sweetened milk.

222

2)

Market Buildup Method Identify all potential buyers in each market


& estimating their potential purchases (based on some norm e.g. lathes
per hundred employees or per Rs. 1 million sales).

3)

Multiple-factor Index Method can use existing market indices or


develop own market indices based on assumptions.
RK Swamy BBDO Guide for urban markets uses 18 variables.
MICA Rural Market Ratings for rural markets uses 6 variables.

a)

b)

Developing own market indices.

223

MULTIPLE FACTOR BUYING POWER INDEX


Step 1.
Specific customer profile in terms of factors. E.g. Demographic > 30
years
Economic MHI > 20,000
Step 2.
For each market, calculate percentage of each factor V/s total
e.g. Demographic % = Markets men > 30 years
All India men> 30 years
Step 3.
Determine importance weight of each factor
Demographic = 40%
Economic
= 60%
Step 4.
BPI of a market = 0.4 X Demographic % + 0.6 X Economic %
224

CATEGORY DEVELOPMENT INDEX


ESTIMATED
SALES (BASED
ON BPI)
BPI

2,00,000

100

2,00,000

CDI

NATIONAL
MUMBAI

ACTUAL SALES

28,000
14

56,000
200
14,000

BANGALORE

42,000
300
10,000

DELHI

10,000
100

2,000
CALCUTTA

1,000
50
225

BRAND DEVELOPMENT INDEX


SAY FIRM A HAS A MARKET SHARE OF 15% = 30,000
ESTIMATED
SALES (BASED
ON BPI)
ACTUAL SALES
BPI
30,000
60,000
100
NATIONAL
4,200
8,400
14
MUMBAI
2,100
4,200
7
BANGALORE
1,500
2,250
5
DELHI
300
300
1
CALCUTTA

BDI
-

200

200

150

100

226

Estimating Future Demand


1)

Time series

2)

Econometric Models of forecasting involving 3 stages macroeconomic


forecast, industry forecast, company sales forecast.

3)

For business buyers-- buyer-intention surveys.

227

All forecasts are based on


a)

What people say survey of buyers opinions or those close to them.

b)

What people do test market.

c)

What people have done analysing records of past buying behaviour or


using time-series analysis or statistical demand analysis.

228

Methods
1)

Surveys of buyers intentions eg. Consumer durables, industrial


products. Buyers should have clear intentions, will be implementing
them, willing to disclose.

2)

Composite of sales force opinion need to take with pinch of salt as


pessimistic or optimistic. Also tend to be unaware of larger economic
developments. May deliberately underestimate, or have no time.
To encourage better estimating ,share records of past forecasts with
actual sales & also description of company assumptions on business
outlook, competitor behaviour & market plans. Benefits are that sales
force best single group, greater confidence & incentive to achieve (as
self driven) & the grass roots forecast provides detailed estimates
broken down by product, territory, customer & sales rep.

3)

Expert Opinion Dealers, Distributors, suppliers, marketing


consultants, Trade associations.
Group discussion method or pooling of individual estimates or Delphi
method.
229

4)

Past-sales analysis

a)

Time Series break down past sales into trend, cycle, seasonal & erratic
& project into future.

b)

Exponential smoothing consists of projecting the next periods sales


by combining an average of past sales and the most recent sales, giving
more weight to the latter.

c)

Statistical demand analysis consists of measuring the impact level of


each of a set of causal factors (e.g., income, marketing expenditures,
price) on the sales level.

d)

Econometric analysis consists of building sets of equations that


describe a system, and proceeding to fit the parameters statistically.

5)

Market test method- especially desirable in forecasting new product


sales or established product sales in new distribution channel or
territory.
230

Organizational Buying Behavior

231

Organizational buying behaviour


Organizational Buying is the decision-making process by which

formal organizations establish the need for purchased products and


services and identify , evaluate, and choose among alternative brand
and suppliers.
Organizations could be corporate, manufacturing firms,Service firms,
Institutional & Government markets.

Business Market V/S Consumer Market


1. Fewer buyers
2. Larger buyers
3. Close supplier-customer relationship - Customization
4. Geographically oriented buyers
5. Derived demand -business marketer must closely monitor buying
patterns of ultimate consumers.
6. Inelastic demand - in short run as producer cannot make quick
changes in production methods, also small percentage of items total
cost.
7. Fluctuating demand - given 10% increase in consumer demand can
cause 200% increase in business demand.
8. Professional purchasing - Policies, constraints, requirements.
9. Several buying influences - buying committees
10. Direct purchasing
11. Leasing - e.g. Heavy construction equipment, computers, etc.
12. Reciprocity - Chemical manufacturer & Paper manufacturer

Buying Situations
1. Straight rebuy - recorder on routine basis automatic recording
system from approved list of suppliers. Insuppliers & outsuppliers
strategy.
2. Modified rebuy - modifying in product specifications. Prices,
delivery requirements or other terms.
3. New

task - Buying for first time


* Greater cost or risk, more the decision participants & greater
the information gathering.
* Missionary sales force used by marketer
* Mass media in awareness stage, stage sales people in interest
stage & technical sources in evaluation stage.

Participants in Business Buying Process


Straight rebuy & modified rebuy situations- purchasing
agent important.
New buy- engineering or other departments.
Purchasing agent dominate in selecting suppliers.

Buying roles in Buying centre


1. Initiators - Users or others.
2. Users - Users may initiate & help define product
requirements.
3. Influencers - help define specifications & provide
information for evaluating alternatives technical
personnel.
4. Decider - decide on product requirements & suppliers.
5. Approver - authorize actions of decider buyer.
6. Buyer - formal authority to select suppliers, negotiate.

7. Gatekeeper - Prevent sellers or info reaching buying


center.
e.g. - purchasing agents, telephone, operators,
receptionists.

Major influences on Industrial


Buying Behaviour
Business buyers responds both to economic & personal
factors. Personal (treatment etc)when similarity in
supplier offers.
ENVIRONMENTAL
Level of demand
Economic outlook
Interest rate
Rate of technological
change
Political and
regulatory
developments
competitive
developments
Social responsibility
concerns

ORGANIZATIONAL
Objectives
Policies
Procedures

Organizational
Structures
Systems

INTERPERSONAL

INDIVIDUAL
Interest
Authority
Status
Empathy
Persuasiveness

Age
Income
Education
Job position
Personality
Risk attitudes
Culture

BUSINESS
BUYER

Trends in Organizational Buying


1. Purchase department upgrading
2. Centralized purchasing - in multidivisional companies
3. Decentralized purchasing for small ticket items.
4. Long-term contracts
5. Purchasing performance evaluation & rewards hence
pressure put on suppliers.
6. Just- in-time
7. Single sourcing & early supplier involvement.

Purchasing / Procurement Process


(Buy Phases)
1.

2.

Problem recognition - as a result of internal or external stimuli


General need description - items general characteristics, attributes &
quantity.

3.
4.

Product specification- Technical specifications.


Supplier search - buyer can examine trade directories, computer search, trade
shows, advertisements, recommendations of others.

5.

Proposal solicitation - Buyer invites qualified suppliers to submit proposal,


make presentations.

6.

Supplier selection - based on important factors e.g. product reliability,


technical service, price, supplier flexibility, reputation.

7.

Routine order specification - Trend especially in MRO items is


blanket contract/ stockless purchase plan.

8.

Performance review

Buying stages in buying classes


BUYCLASSES
NEW TASK

BUYPHASES

1. Problem recognition Yes


2. General need description
3. Product specification Yes
4. Supplier search
5. Proposal solicitation
6. Supplier selection
7. Order-routine specification
8. Performance review

Maybe
Yes
Yes
Yes
Yes
Yes
Yes
Yes

MODIFIED
REBUY
No
Maybe
Yes
Maybe
Maybe
Maybe
Maybe
Yes

STRAIGHT
REBUY
No

No
No
No
No
Yes

Vendor analysis
An example of vendor Analysis
Rating scale
ATTRIBUTES IMPORTANCE
WEIGHTS

Price
Supplier reputation
Product reliability
Service reliability
Supplier flexibility

.30
.20
.30
.10
.10

(1)

(2)

(3)

(4)

POOR

FAIR

GOOD

EXCELLENT

X
X
X
X

Total score: .30(4) + .20(3) + .30(4) + .10(2) + .10(3) = 3.5