Marketing Management

Sangeeta Singh

INDEX
1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16)

What Is Marketing? The Marketing Environment Marketing Management Marketing as Decision Making Analyzing Consumer Behaviour Organizational Buying Behaviour Market Segmentation Targeted Marketing The Marketing Mix The Product New Product Development Marketing Channels Physical Distribution The Promotion Effort Price Determination Price Administration

Chapter - 1

WHAT IS MARKETING?

WHATS MARKETING IS ALL ABOUT

A HUMAN ACTIVITY DIRECTED AT SATISFYING NEEDS AND WANTS THROUGH EXCHANGE PROCESSES
PHILIP KOTLER

IT IS THE PERFORMANCE OF BUSINESS ACTIVITIES THAT DIRECT THE FLOW OF GOODS AND SERVICES FROM PRODUCER TO CONSUMERS
AMERICAN MARKETING ASSOCIATION

MARKETING CONTINUED
IT IS THE PROCES OF IDENTIFYING CUSTOMER NEEDS CONCEPTUALISING THOSE NEEDS IN TERMS OF AN ORGANISATIONS CAPACITY TO PRODUCE.

CONCEPTUALISING THE CONSEQUENT OUTPUT IN TERMS OF THE CUSTOMER NEEDS EARLIER IDENTIFIED, AND COMMUNICATING THAT CONCEPTUALISATION TO THE CUSTOMER JOHN.A. HOWARD COLUMBIA UNIVERSITY 1973

What is Marketing?

Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives. More simply: Marketing is all about satisfying needs (...profitably and fairly)!!!

Marketing is an Exchange of Value

An exchange is the process by which some transfer of value occurs between a buyer and a seller.
At least two people or organizations must be willing to make a trade, and Each must have something the other values. Most exchanges occur in the form of a monetary transaction.

Marketing is an Exchange of Value

An exchange is the process by which some transfer of value occurs between a buyer and a seller.
At least two people or organizations must be willing to make a trade, and Each must have something the other values. Most exchanges occur in the form of a monetary transaction.

Why is Marketing Important?

Marketing Creates Utility

Place Utility Time Utility Possession Utility

Marketings Role in the Firm

A firms marketing-related decisions must affect and be affected by its other operations such as accounting and manufacturing.

Why is Marketing Important?

Marketings Role in Our Daily Lives Marketings Role in Society

Company Orientations Towards the Marketplace

Production Concept Product Concept
Consumers prefer products that are widely available and inexpensive
Consumers favor products that offer the most quality, performance, or innovative features Consumers will buy products only if the company aggressively promotes/sells these products Focuses on needs/ wants of target markets & delivering value better than competitors

Selling Concept
Marketing Concept

When Did Marketing Begin?

Product Orientation
Most Efficient Production & Distribution Sellers Market Marketing as a Sales Function Buyers Market

Selling Orientation

Customer Orientation

Satisfies Customers Needs and Wants Total Quality

Benefits to Customers, Plus Firms Employees, Shareholders, and Communities.

New Era Orientation

Needs, Wants &Demands

Products

Mktg is a social process by which individuals & groups obtain what they need and want through creating & exchanging products &values with others.

Value & satisfaction

Markets & marketers

Exchange & transactions

The PILLSBURY
First Era in 1869 - 1930s. The idea for the formation of the company came from the availability of high quality wheat and the proximity of water power NOT from the availability and proximity of growing major market areas or the demand for better less expensive, more convenient flour products. The principal concern here was with PRODUCTION

The PILLSBURY
In this Era The companys Philosophy might have been stated as: We are professional flour millers. Blessed with a supply of the finest North American wheat, plenty of water power, and excellent milling machinery, we produce flour of high quality. Our basic function is to mill high quality flour, and of course we must hire salesman to sell it just as we hire accountants to keep our books.

The PILLSBURY
Second Era in 1930s 60s (Sales Orientation). This was the era of sales when for the first time the co began to be highly conscious of the consumer, her wants and her prejudices as a key factor in business equation. The first step along the road to become a marketing company has been taken. The principal concern here was with SALES.

The PILLSBURY
In this Era The companys Philosophy might have been stated as: We are a flour milling company, manufacturing a number of products for the consumer market. We must have a first rate sales organization which can dispose of all the products we can make at a favorable price. We must back up this sales force with consumer advertising and market intelligence. We want our salesman and our dealers to have all the tools they need for moving the output of our plants to the consumer.

The PILLSBURY
Second Era in 60s and beyond (Marketing Orientation). This was the era of product research and for the first time co felt the need to select the best new products. The first step the co took to set up a marketing department which developed criteria for determining which products to market. The criteria was nothing more or less than those of the consumer itself. The principal concern here was with Consumer Markets

The PILLSBURY

In this Era The companys Philosophy might have been stated as: We make and sell products for consumers.

Needs, Wants &Demands

Products

Mktg is a social process by which individuals & groups obtain what they need and want through creating & exchanging products &values with others.

Value & satisfaction

Markets & marketers

Exchange & transactions

Customer Delivered Value

Starting point
Factory

Focus
Existing products

Means
Selling and promotion

Ends
Profits through sales volume

(a) The selling concept

Customer Market needs Integrated Profits through customer marketing satisfaction

(b) The marketing concept

Difference Between Selling And Marketing

Selling stats with the seller. Selling is preoccupied all the time with the needs of the seller; seller is the center of the business universe; activities start with sellers existing products. Emphasises on saleable surpluses available with in the corporation; seeks to quickly convert product into cash; concerns itself with the tricks and techniques of getting the customers to part with their cash for the products available with the salesman.

Marketing starts with the buyers and focuses constantly on the needs of the buyers; buyer is the centre of the business universe; activities follow the buyer and his needs. Emphasises on identification of a market opportunity; seeks to convert customer needs into products; emphasises on fulfilling the needs of the customers.

Difference Between Selling And Marketing

View business as a goods producing process. Over emphasises the exchange aspect without caring for the value satisfactions inherent in the exchange. Sellers convenience dominates the formulation of the marketing mix

View business as a customer satisfying process. Concerns itself primarily and truly with the value satisfactions that should flow to the customer from the exchange. Buyers determines the shape the marketing mix, should take.

Difference Between Selling And Marketing

The firm makes the product first and then figures out how to sell and make profit.

Emphasises on staying with the existing technology and reducing the cost of production. Sellers motives dominate marketing communications.

What is to be offered as a product is determined by the customer; the firm makes a total product offering that would match and satisfy the identified needs of the customers; the product is the consequence of the marketing effort; the marketing effort leads to products that the customers would actually want to buy in their own interest. Emphasis on innovation in every sphere; on providing better value to the customer by adopting the most innovative technology. Marketing communications is looked upon as the tool for communicating the benefits/satisfactions provided by the product.

Difference Between Selling And Marketing

Costs determine price.

Consumer determines price; price determines costs. They are seen as vital services to be provided to the customer, keeping customers convenience in focus. Emphasis is on integrated marketing approach, an integrated strategy covering product, promotion, pricing and distribution.

Transportation, storage and other distribution functions are perceived as mere extensions of the production function. Emphasis is on somehow selling; there is no coordination among the different functions of the total marketing task.

Difference Between Selling And Marketing

Different departments of the business operate as separate watertight compartments. In firms practicing selling production is the central function of the business. Selling views the customer as the last link in the business.

All departments of the business operate in a highly integrated manner, the sole purpose being generation of consumer satisfaction. In firms practicing marketing, marketing is the central function of the business; the entire company or business is organized around the marketing function. Marketing views the customer as the very purpose of the business; sees the business from the point of view of the customer; customer consciousness, all departments and all people

How is Marketing Done?

Marketers Develop and Implement a Marketing Plan Based on the Following Information:
Organizations Strengths and Weaknesses Opportunities and Threats to the Organization in the Marketplace Organizations Overall Objectives

Needs, Wants and Benefits

Needs
Difference Between a Consumers Actual State and Some Ideal or Desired State. Im Hungry! Desire to Satisfy Needs in Ways That are Culturally and Socially Influenced. Lets go eat a cheeseburger. Outcome Sought by a Consumer That Motivates Buying Behavior. Now Im full; I feel better.

Wants

Benefits

Markets, Consumers and Demand

Market
Customers who share a common need that can be satisfied by a specific product AND who are willing, able and have the authority to make the exchange.

Customers

DEMAND Potential Customers

Traditional Organization Chart

Top Management

Middle Management
Front-line people Customers

Customer-Oriented Organization Chart

Customers
Front-line people Middle management

Top management

Evolving Views of Marketings Role

Production

Finance
Human resources

Production

Finance Human resources

Marketing

Marketing

a. Marketing as an equal function

b. Marketing as a more important function

Evolving Views of Marketings Role

Production

Marketing

Customer

c. Marketing as the major function

d. The customer as the controlling factor

Evolving Views of Marketings Role

Production Marketing
Customer

e. The customer as the controlling function and marketing as the integrative function

Changing Marketing Architecture

INDUSTRIAL AGE (Past) Customer Driven One-way Finite Reach Time Delay Information Constraints

INFORMATION AGE (Current and Future) Customer Driving Infinite Reach Time Saving Information Abundance

How Marketing is Changing?

From Exchange / Transaction to Customer Value From Suppliers Making Marketing Decisions to Customers Driving Those Decisions From Physical Channels to Seamless Channels From Market Segments to Segments of Size One From Personal Based Communication Campaign to Permission Based Communication Campaign

Views on the Marketing Processes

5-C Analysis Customer Competitor Company Context Collaborat ors

S-T-P Marketing Segmentation Targeting Positioning

4 Ps Marketing Plan Product Pricing Promotion Place

The Functional View

Views on the Marketing Processes

Understanding Customer Value

Creating Customer Value

Capturing Customer Value

Delivering Customer Value

Sustaining Customer Value

The Process View

Understanding Customer Value

Value is defined as the perceived worth in monetary units of the of the set of economic functional / technical and psychological benefits received by the customer in exchange for the price paid for a product offering, taking into consideration the available offerings and prices. - Anderson, Jain and Chintagunta(1993)

Understanding Customer Value Psychological

Functional

Economic

MARKETINGS CONTRIBUTION WITHIN THE FIRM

Corporate / Business Unit Level

The Policy Question: How to develop a Customer Focus? Marketings Answer: Bring the Voice of the customer in the organization Tools: Mkt Research, Customer Visits, Market Orientation Audits

MARKETINGS CONTRIBUTION WITHIN THE FIRM

Product Level The Policy Question: How to best adapt to the market? Marketings Answer: Develop a value proposition and competitive positioning based on customer needs Tools: Customer and Competitor analysis

MARKETINGS CONTRIBUTION WITHIN THE FIRM

Product Level The Policy Question: How to best adapt to the market? Marketings Answer: Develop a value proposition and competitive positioning based on customer needs Tools: Customer and Competitor analysis

Plea From an Anonymous Customer

Dont Sell me Clothes, Sell me a sharp appearance, style and attractiveness. Dont Sell me a House, Sell me comfort, contentment, a good investment and a pride of ownership. Dont Sell me Toys, Sell my children happy moments. Dont Sell me Insurance, Sell me peace of mind, and a great future for my family and me. Dont Sell me Books, Sell me pleasant hours and the profits of knowledge. Dont Sell me Computers, Sell me the pleasure and profits of the miracles of

The Moral is..

Dont Sell me THINGS, Sell me Ideas, Feelings, Self-respect, Home, Life and Happiness.

PLEASE DONT SELL ME THINGS

CORE MARKETING CONCEPTS

PRODUCTS AND SERVICES NEEDS, WANTS AND DEMANDS MARKETS

VALUE, UTILITY SATISFACTION QUALITY EXCHANGE

RELATIONSHIPS TRANSACTIONS

FUNDAMENTAL TERMINOLOGIES
NEEDS WANTS : FELT DEPREIVATION : FORM TAKEN BY HUMAN NEEDS AS THEY ARE SHAPED BY CULTURE AND PERSONALITY. : WANTS BACKED BY PURCHASING POWER. : ANY OFFERING TO SATISFY NEEDS AND WANTS MAINLY PHYSICAL OBJECTS, SERVICES, INFORMATION, PROPERTIES EXPERIENCES, EVENTS, PLACES, ORGANISATIONS, IDEAS, PERSONS. : PHYSICAL ATTRIBUTES OF THE PRODUCT : OPERATIONAL FEATURES OF THE PRODUCT : IMPLICIT, SUBJECTIVE OUTCOME AFTER USE OF THE PRODUCT WHICH LEADS SATISFACTION. : IT IS (FUNCTIONAL BENEFIT+ EMOTIONAL BENEFIT)/ (MONEY + TIME+ ENERGY + PSYCHIC COSTS) : PERFORMANCE VS EXPECTATION FUNCTION : OBTAINING OF SOMETHING BY OFFERING SOMETHING ELSE IN RETURN.

DEMAND PRODUCT

FEATURES ADVANTAGES BENEFITS

VALUE

SATISFACTION EXCHANGE

CONCEPTS IN MARKETING
PRODUCTION CONCEPT : WIDELY AVAILABLE &INEXPENSIVE PRODUCTS WILL BE PREFERRED. PRODUCT CONCEPTS : MOST QUALITATIVE, HIGH PERFORMING & INNOVATIVE FEATURES ORIENTED PRODUCTS WILL BE PREFERRED. SELLING CONCEPTS : IF LEFT ALONE, CONSUMERS AND BUSINESS WONT BUY ENOUGH OF PRODUCTS SO DO AGGRESSIVE SELLING MARKETING CONCEPT : MEETING NEEDS PROFITABLY; FIND WANTS AND FILL THEM; LOVE THE CUSTOMER, NOT THE PRODUT; HAVE IT YOUR WAY BURGER KING ->YOURE THE BOSS

SELLING CONCEPT
STARTING POINT

MARKETING CONCEPT
MARKET

FOCUS

CUSTOMER NEEDS

MEANS

INTEGRATED MARKETING PROFITS THROUGH CUSTOMER SATISFACTION

ENDS

Chapter -2

THE MARKETING ENVIROMENT

MARKETING ENVIRONMENT
All companies operate with in a marketing environment.

Micro Environment
Macro Environment

Micro Environment
Five Components

Internal Environment
Marketing Intermediaries

Group of Customer
Competitors Group of publics

Macro Environment

Demographic Environment Economic Environment Natural Environment Technological Environment Political Environment Cultural Environment

A COMPANYS COMPLETE MARKETING ENVIRONMENT

ECONOMIC CONDITIONS DEMOGRAPHY COMPETITION COS MKTG PROGRAMME SUPPLIERS FINANCIAL RESOURCES HUMAN

PRODUCTION FACILITIES INTER NEDIARIES LOCATION

RESOURCE
COS IMAGE R&D

INTER MEDIARIES

MARKET

SOCIAL & CULTURAL FORCES POLITICAL & LEGAL FORCES TECHNOLOGY

THE BUSINESS CYCLE

Prosperity (Boom) Recession ( Slow Down) Depression (Bust) Recovery (Upswing)

STYLES

FASHIONS

FADS

STYLE

BASIC AND DISTINCTIVE MODE OF EXPRESSION CLOTHING FORMAL VS. CASUAL

CURRENTLY ACCEPTED OR POPULAR STYLE IN A GIVEN FIELD

FASHION

FADS

FASHION THAT ENTER QUCKLY, PEAK EARLY AND DECLINES VERY FAST

STYLE

FASHION

FAD

SALES
SALES

SALES

TIME (A)

TIME (B)

TIME (C)

PHASE- I

INTRODUCTION

STAGE JUST AFTER THE LAUNCH SALES GROWTH SLOW PROFITS MAY BE LACKING BECAUSE OF:

LOW SALES VOLUME HIGH DISTRIBUTION AND PROMOTION EXPENSES

HIGH COST OF MARKET DEVELOPMENT

TYPICAL FEATURES:
HIGH PRODUCT FAILURE RATE LITTLE COMPETITION FREQUENT PRODUCT MODIFICATION HIGH PRODUCTION AND MARKETING COST HIGH DEALER MARGINS
DIFFERENT PRICE/ PROMOTION LEVELS CAN BE COMBINE

PRICE

HIGH

PROMOTION LOW HIGH SLOW RAPID SKIMMING SKIMMING

SLOW RAPID LOW PENETRATION PENETRATION

STRATEGY

DEVELOP PRODUCT AWARENESS INTENSIVE PERSONAL SELLING SALE TO HIGH INCOME GROUPS HEAVY SAMPLING / COUPENING FOR CONVENIENCE GOODS EDUCATIONAL ADVERTISING + PERSONAL SELLING FOR SPECIALITY PDT. LIMITED DISTRIBUTION

PHASE II

GROWTH

IF PRODUCT SATISFIED MARKET .. IT WILL ENTER GROWTH PHASE SALES GROW AT INCREASING RATE COMPETITION BUILDS UP FAST NO. OF DISTRIBUTION OUTLETS GO UP PROFITS HEALTHY .. REACH AT PEAK PROMOTION/ SALES RATIO GO DOWN

STRATEGY
EFFORT IS TO SUSTAIN RAPID MARKET GROWTH RATE AND CAPTURING A DOMINANT POSITION IMPROVING PRODUCT QUALITY AND ADDING NEW FEATURES AND MODELS MORE PRODUCT EXPOSURE ENTRY INTO NEW MARKET SEGMENTS AGGRESSIVE DISTRIBUTION STRATEGY SWITCH FROM CATEGORY RELATED PROMOTION TO BRAND PROMOTION

PHASE III

MATURITY

LONGEST STAGE OF PLC MOST PRODUCTS IN THIS STAGE MOST MARKETING STRATEGIES FOR MATURE PRODUCTS THREE SUB- STAGES:

GROWTH MATURITY
RATE OF SALES GROWTH BEGINS TO DECLINE BECAUSE OF DISTRIBUTION SATURATION FULLEST POSSIBLE TAPPING OF MARKET ALREADY OVER

STABLE MATURITY SALES FLATTEN ON PER-CAPITA BASIS FUTURE SALES BY POPULATION GROWTH AND REPLACEMENT DEMAND DECAYING MATURITY ABSOLUTE LEVEL OF SALES STARTS DECLINING CUSTOMERS MOVE TO RIVAL PRODUCTS/ SUBSTITUTES

GENERAL FEATURES:
CUT- THROAT COMPETITION PROFIT EROSION WEAK AND MARGINAL COMPETITORS DROP OUT STRONG COMPETITORS TRY FOR COMPETITIVE ADVANTAGE PRICES AND PROFITS CONTINUE TO FALL DEALERS MARGINS SHRINK AND RELUCTANCE TO PUSH THE PRODUCTS

BASIC STRATEGIES IN MATURITY STAGE

(A) MARKET MODIFICATION

LIFE OF PRODUCT CAN BE EXPANDED BY MARKET STRETCHING CONCENTRATING ON MARKET SEGMENTS YET UNTAPPED STIMULATING INCREASED USAGE AMONG CURRENT USERS PROMOTING MORE VARIED USAGE AMONG CURRENT USERS - INCREASING NO. OF USE SITUATIONS USE OF BOROLINE FOR MANY PURPOSES

REPOSITIONING THE BRAND CHANGING THE CUSTOMERS PERCEPTIONS OF THE PLACE A PRODUCT OR BRAND OCCUPIES IN A GIVEN MARKET MILKMAID JOHNSONS BABY LOTION COMPLAN CHOCOLATE CADBURYS

(B) THE PRODUCT MODIFICATION

PRODUCT RELAUNCH TO BOOST UP SALES

QUALITY IMPROVEMENT INCREASING FUNCTIONAL PERFORMANCE OF PRODUCT DURABILITY, RELIABILITY ETC.

AMBASSADOR AMBASSADOR- NOVA

PREMIER PADMINI

NEW LATCHES UPHOLSTRY, ETC.

FEATURE IMPROVEMENT ADDING UP NEW FEATURES THAT EXPANDS PRODUCTS VERSTALITY, SAFETY, OR CONVENIENCE FORHANS COLGATE FORHANS FLOURIDE COLGATE FLOURIGUARD

ONE PROBLEM: FEATURES HIGHLY IMITABLE

STYLE IMPROVEMENT
INCREASING AESTHETIC APPEAL IN CONTRAST TO FUNCTIONAL APPEAL CHANGE IN COLOR / TEXTURE / PACKAGE

(C) MARKET MIX MODIFICATION SALES STIMULATION BY ALTERING MARKETING MIX SLASHING PRICES TO ATTRACT NEW CONSUMERS MORE EFFECTIVE ADVERTISING CAMPAIGNS HEAVY USE OF SALES PROMOTION TECHNIQUES ALTERING DISTRIBUTION - CHANNELS

PROBLEM:

ALL METHODS ARE HIGHLY IMITABLE

PHASE-IV

DECLINE

WARNING SIGNAL: PERMANENT DROP IN SALES MOST PRODUCTS EVENTUALLY ENTERS IN DECLINE PHASE RATE OF DECLINE DEPENDS ON: CHANGE IN CONSUMERS TASTES AND ADOPTION OF SUBSTITUTE PRODUCTS TECHNOLOGICAL INNOVATIONS DEVELOPMENT OF EFFECTIVE SUSTITUTES

DECLINING DEMAND . FORCE MANY COMPETITORS OUT OF MARKET PROMOTION BECOMES SELECTIVE LESS EXPOSURE

STRATEGY IN DECLINE PHASE

IDENTIFY WEAK PRODUCTS THROUGH COMPREHENSIVE MARKETING RESEARCH DETERMINE APPROPRIATE RESPONSE: TO STAY ON OR TO DROP THE PRODUCT IF DECISIONS IS TO STAY:

THREE OPTIONS:
(A) CONTINUATION STRATEGY - CONTINUE PAST PRACTICES

(B) CONCENTRATION - CONCENTRATE RESOURCES IN STRATEGY STRONGEST MARKETS (C) HARVESTING STRATEGY - REDUCING EXPENSES TO INCREASE PROFITS

IF DECISION IS TO DROP: -WHEN PRODUCTS RATING FAIL TO MEET COMPETITION ON CERTAIN KEY CRITERIA

OPTION

DROPPING IT COMPLETELY
SELLING OR TRANSFERING IT TO OTHER COMPANY

TYPES OF MARKET STRUCTURE

Pure Competition
Many Small Buyers , Small Buyers, Homogeneous Product, Easy Entry & Exit, Perfect information

Monopolistic Competition
Many Sellers & buyers and each is offering something different. No close subsitute

Oligopoly
Few large independent firms account for bulk of the industry sales Each oligopolist has vast industry customers. Action of one firm tend to directly affect the others in the industry. Each firm tries to anticipate what the others will do.

Pure Monopoly
Its the opposite of pure competition

Chapter - 3

MARKETING MANAGEMENT

THE BCG GROWTH-SHARE MATRIX

 Stars: High growth high share businesses or productsrequire heavy investmenteventually they will become cashcows. Cash Cows: high share pproducts less investment to hold their market shareand provides the company with the money to support other SBUs (Strategic Business Unit) Question Marks: High Growth, they require a lot of resources to hold their market sharemanagement has to decide which Q mark can become stars & which should be phased out.

 Dogs: Low growth low share SBUs They may generate enough money to sustain themselves, but cannot contribute to the corporate kitty.

Chapter - 4
MARKETING AS DECISION MAKING AND INFORMATION GATHERING

MARKETERS PROBLEMS
Marketers need to find solution of two problems Determining Goals Developing Plans to achieve them

Marketing Information Systems (MIS)

Its a structured and interacting complex of persons, machines and procedures designed to generate an orderly flow of pertinent information collected from intra- and extra company resources, for use as the basis for decision making in specific responsibility areas of marketing management.

MARKETING INFORMATION SYSTEM

Define the Problem or opportunity. Available Information

Is the value of Additional information worth the cost? yes no

Make Decisions Gather Additional Information

MIS External Data State of the Economy Political Environment Competitive Situation Customer Data Data Bank Process, Analyses Data

Data Processing

Information Bank Internal Data Sales Costs Marketing Objectives Marketing Research Marketing Mix

Gather, Store, Retrieve Data

Evaluate, Disseminate Information

MARKET RESEARCH

The systematic gathering and recording and analysing of data about problems relating to the marketing of goods and services.

THE CONSUMER RESEARCH PROCESS

DEVELOP OBJECTIVES COLLECT SECONDARY DATA
DESIGN QUALITATIVE RESEARCH DESIGN QUANTITATIVE RESEARCH

METHOD SCREENER QUESTIONNAIRE DISCUSSION GUIDE

EXPLORATORY STUDY

METHOD SAMPLE DESIGN DATA COLLECTION INSTRUMENT

COLLECT PRIMARY DATA (USUALLY BY FIELD STAFF)

CONDUCT RESEARCH (USING HIGHLY TRAINED INTERVIEWERS)

ANALYZE DATA (SUBJECTIVE)

ANALYZE DATA (OBJECTIVE)

PREPARE REPORT

PREPARE REPORT

THE MARKETING RESEARCH PROCESS

1) Identify & Define the Problem/Opportunity. 2) Conduct a Preliminary Exploration. 3) Determine the Research Process. 4) Determine Data Needs 5) Determine Data Sources. 6) Create the Research Design A) Functional Categories i) Exploratory Research ii) Descriptive Research iii) Casal Research iv) Predictive Research. B) Methodological Categories i) Historical Research ii) Survey Research iii) Experimental Research iv) Motivational Research 7) Collect the Data A) Primary Data B) Secondary Data 8) Analyse the Data and convert to Information 9) Communicate the information.

Defining the problem and Research Objectives A marketing research project might have one of three types of objectives. The objective of exploratory research is to gather preliminary information that will help define the problem and suggest hypotheses. The objective of descriptive research is to describe things such as the market potential for a product or the demographics and attitudes of consumers who buy the product. The objective of casual research is to test hypotheses about cause-and-effect relationship.

Chapter - 5

ANALYZING CONSUMER BEHAVIOUR

Consumer Behaviour
The Behavior that consumer display in searching for purchasing using evaluating & disposing of products and services that they expect will satisfy their needs. Study of how individuals make decisions to spend their available resources (Time.MoneyEffort) on consumption related items.

The Substance of Marketing Want To Enter the Watch Business!!!

You Must Make A Set Of Important (Marketing Related) Decisions!!!

WHAT ARE THESE DECISIONS???

The Probable Decisions are!!!

To which consumer should I sell my watches? How should I define the consumer I hope to serve? Should I think in terms of geography, perhaps the country in which my consumer lives? Or may be the consumers income or sex or fashion orientation is more important?

The Probable Decisions are!!!

To which consumer should I sell my watches? How should I define the consumer I hope to serve? Should I think in terms of geography, perhaps the country in which my consumer lives? Or may be the consumers income or sex or fashion orientation is more important?

The Probable Decisions are!!!

To which consumer should I sell my watches? How should I define the consumer I hope to serve? Should I think in terms of geography, perhaps the country in which my consumer lives? Or may be the consumers income or sex or fashion orientation is more important?

The Probable Decisions are!!!

Should I sell direct to consumers or through stores, and if through stores, what type of stores? Do I want to offer my product in several types of outlet or only in one type? How do I select and service the particular outlets I Chose? Finally, How do I convince the store to carry my brand?

The Probable Decisions are!!!

How should I communicate to the consumers to whom I wish to sell? Do I use advertising, and if so in what media? How do I reach the stores? Do I use sales people? Should the salespeople visit the stores or should they just telephone them?

FRAMEWORK FOR ANALYZING CONSUMER BEHAVIOUR

ENVIRONMENTAL AND INDIVIDUAL ANFLUENCES O U T C O M E

TYPE OF BUYING SITUATION

BUYER DECISION PROCESS

SOME CONSUMER BEHAVIOUR ROLES

Role Description ----------------------------------------------------------------------Initiator The person who determines that some need or want is not being met. Influencer The person who intentionally/unintentionally influencesthe decision to buy the actual purchase and/or use of product or service. The person who actually makes the purchase. The person who actually uses or consumes the product or service.

Buyer User

Studying consumer behaviour

EXTERNAL ENVIRONMENT SUBCULTURAL INFLUENCES CULTURAL INFLUENCES

DETERMINANTS INDIVIDUAL
M OT IV AT IO N & IN VO LV EM EN T

INFORMATION PROCESSING`
LE AR NI NG & ME M OR Y

OT HE R IN FL UE NC ES

PROBLEM RECOGNITION

FE ED BA CK

INFORMATION SERACH & EVALUATION PURCHASING PROCESS POST PURCHASE BEHAVIOUR

DE CIS IO N PR OC ES S

SO CI AL CL AS S IN FL UE NC ES

PERSONALITY & SELF-CONCEPT

ATTITUDES

SO CI AL GR OU P IN FL UE NC ES`

PERSONAL INFLUENCES

FAMILY INFLUENCES

FACTORS INFLUENCING CONSUMER BEHAVIOUR

CULTURAL

Culture Sub-Culture Social Class

SOCIAL

Reference Groups Family Roles Status

PERSONAL

Age & Life Cycle Stage Occupation Economics Circumstances Life Style Personality & Self

PSYCHOLOGICAL

Motivation Perception Learning Beliefs Attitudes

BUYER

SOCIAL CLASSES

Upper-Upper Lower-Uppers Upper-Middles Middle Class Working Class Upper Lowers Lowers Lowers

FAMILY LIFE CYCLE

FOUR TYPES OF BUYER BEHAVIOUR HENRY ASSEL 2X2 MATRIX

HIGH INVOLVEMENT SIGNIFICANT DIFFERENCES BETWEEN BRANDS COMPLEX DECISION MAKING MEDICAL SERVICES AUTO,FINANCIAL PLANNING SERVICES BRAND LOYALTY PERFUMES CIGARETTE BEVERAGES LOW INVOLVEMENT IMPULSE PURCHASING CEREALS SNACKS

FEW DIFFERENCES BETWEEN BRANDS

INERTIA

LIGHT BULBES SOAPS

TYPES OF PURCHASE DECISION

CONSUMER BUYING DECISION PROCESS

PROBLEM RECOGNITION

INFO. SEARCH

EVALUATION BEHAVIOUR

POST-PURCHASE BEHAVIOUR

PURCHASE DECISION

Chapter - 6

ORGANIZATIONAL BUYING BEHAVIOUR

INDUSTRIAL MARKETING

The decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate and choose among alternative brands & suppliers.

Key Linkages
External Environment Internal Organization

External Linkages

Internal Linkages

Customer

Marketing

Manufacturing

Derived Demand Complex Buying Process Concentrated Customer base

Emphasis on Technology High Level of Customization Made to Order

CONTRASTING INDUSTRIAL MARKETING & CONSUMER MARKETING

` Market structure INDUSTRIAL MARKETS CONSUMER MARKETS geographically concentrated dispersed Fewer buyers mass markets Oligopolistic competition Monopolistic competition Technical complexity Standardised Customised Service, delivery and availability Very important somewhat important functional involvement Rational/task motives dominate technical expertise stable interpersonal relations reciprocity distinct, observable stages Short, More direct, Fewer linkages emphasis on personal selling Competitive bidding Negotiating on complex purchases List prices on standard items family involvement social/psychological motives predominate less tech expertise nonpersonal relations Unobservable, mental Stages Indirect, Multiple linkages emphasis on advttg. list prices

Products

Buyer behavior

Decision making Channels Promotion Price

ORGANISATIONAL CUSTOMER

Raw material Extraction

Material Processing

Manufacturing of parts and Assembly

Final assembly

Distribution

Stage 1

Stage 2

Stage 3

Stage 4

Stage 5

The chain Indicative of the Zone of the Organisational Customer

ORGANIZATIONAL BUYING BEHAVIOUR

External Environment * Economic * Infrastructural * Social * Political * Competition * Regulatory

Organizatioanl * * * * Objectives Policies Procedures Organizational structure * System

Interpersonal * * * * Authority Status Empathy Persuasiveness

Individual * Age * Income * Education * Job Position * Risk Attitude

Organizational Buyer

INDUSTRIAL MARKETING
THE INDUSTRIAL CUSTOMERS BUYER MOTIVES The Industrial Buyer Is Motivated By Budgetary Considerations Like Profit Goals, Expense Quotas And The Cost Benefit Guidelines. The Major Objective Variables Derived From The Above Are QUALITY Consistency Which Can Also Result In The Savings On The Inventory, Standardisation SERVICE : Products And Materials, Technical, Sales & Replacement Parts, Delivery, Information. PRICE : Evaluated Price / Perceived Prices SAVINGS : Motivation Provided By Savings Even More In The Accelerating Costs Times ASSURANCE OF : The Confidence On Timely Supplies SUPPLY BUYER : Personal Feelings And Emotions As Well As Some Extraneous TEMPERAMENT Important Factors :

The Reseller Market

Utilities Produced : Time Place Possession

Buying Decisions in Reseller Make

What Assortment to carry? What Vendors to buy from What prices & terms to negotiate?

Assortment Strategies
Exclusive Assortments Deep Assortment Broad Assortment Scrambled Assortment

Chapter - 7

MARKET SEGMENTATION

MARKETERS-MARKET
To the marketer, the term market means:-

1. People ( as individuals or members of an organization.) 2. People with Desires 3. People with willingness and ability (Buying power) to satisfy their desires. 4. People who can become customers because they have been authorized to buy.

STRATEGIES FOR IDENTIFYING TARGET MARKETS

Mass Market Strategy Organizations Single Marketing Mix

Mass Market

Concentration Strategy

Organizations Single Marketing Mix

A B C D

E Market F G Segmentati on H

Multi Segment Strategy

Organizations Several Marketing Mixes

A B C D

E F G H

Market Segmentati on

Advantages 1. Can thoroughly research the segments wants and run a much lower risk of not being able to satisfy its target market. 2. Long productions run may be possible. 3. Distribution, promotion and price can be keyed to satisfy one segment.

Disadvantages 1. The organizational cannot spread its risk. Thus, a decline in the selected segments buying power, or a change in taste or the entry of rivals can have a negative impact on profitability. 2. Sometimes a firm that focuses exclusively on one segment develops a specialist image in that segment. As a result it may encounter difficulties in directing its efforts to other segments.

THE CONCENTRATION STRATEGY

MULTI-SEGMENT STRATEGY
Advantages
1. 2.

Can serve a greater number of potential consumers. Can utilize excess capacity to serve additional segments.

Disadvantages
1. 2. 3.

The Organizations may spread itself too thinly as a result. Productions costs may go up Marketing costs also tend to go up.

SEGMENTING CONSUMER MARKETS

GEOGRAPHY DEMOGRAPHICS PSYCHOGRAPHICS PRODUCT RELATED CONSUMER CHARACTERI STICS Amount of Usage Types of usage Brand Loyalty Benefits Soughts

POTE NTIAL CON SUM ER SEG MENT S

Nation/ Region State/ Region City/ Nbhrhd Climate/Terain Population Density Mkt Density

Age, Sex, Buying

Social Class

Power, Personality Expenditure Life Style Patterns, Occuptn, Eductn, Race, or Nationality, Family Life Cycle

Chapter - 8

TARGETED MARKETING

DEVELOPING MARKETING STRATEGY

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

Define the relevant market Analyze characteristics and wants of potential customers. Identify bases for segmenting the market Define and describe market segments. Analyze competitors positions Evaluate market segments Select the market segment (s) Finalize the marketing mix (es)

1) Segmentation consists of marketers identifying & profiling distinct groupsof buyers who require separate market offerings 2) Targeting consists of selecting one or more of these segments. 3) Positioning consists of establishing& communicating the products key distinctive benefits in the market
123

SALES FORECASTING METHODS

1) 2) 3) 4) 5) 6) 7)

Simple Trend Analysis Correlation Methods Executive Judgment Sales Force Composite Surveys of Buyers Intentions Market Tests Substitute Method

The Four Ps: The Tools

The Four Cs: The Ends

Marketing Mix Product

Place
ConvenPromotion ience Communication

Customer Solution

Price Customer Cost

The Other 4Cs: The Participants

The Participants Competitors

Company

Consumer

Channel

Marketings Tools: The Marketing Mix

Product
Good, Service, Idea, Place, Person

Price
Assignment of Value

Tools that Are Used Together to Create a Desired Response Among a Set of Defined Customers

Place
Availability of Product

Promotion
Activities to Inform Consumers

Chapter - 9

THE MARKETING MIX

THE PRODUCT/ MARKET EXPANSION GRID

Marketer creates the product that will meet the identified needs of the consumer. Carries out function as transportation so that the product can conveniently reach the consumer. Price that is acceptable to the consumer. Communicates the benefits of the offer.

Nuts &bolts

Sole Vehicle for Creating Customer Value

James Culliton coined the term Marketing Mix as marketing mgr is a mixer of ingredients. Jerome Mccarthy the American professor first described the marketing mix in terms of 4 Ps.

MARKETING MIX

4Ps
Product

4Cs
Customer needs & wants

Price
Place Promotion

Cost to the Company

Convenience Communication

MARKETING MIX
The Four Ps of the Marketing Mix
MARKETING MIX

Quality Features Options Style Brand Name Packaging Sizes Services Warranties Returns

PRODUCT

PLACE

TARGET MARKET
PRICE
List Price Discounts Allowances Payment Period Credit terms

Channels Coverage Locations Inventory Transport

PROMOTION
Advertising Personal Selling Sale promotion Public Relations

MARKETING MIX STRATEGY

Promotion Mix Sales Promotion Offer Mix Advertising

Company

Products Services Prices

Sales force

Channels

Customers

Public relations Direct mail and telemarketing

Environmental Variables Of Marketing

Competition Consumer Government of the land Forces of nature MM can control the marktg mix but not these. He can not dictate what the competitor should or should not do. Environmental Variable is also known as non controllable variables & Marktg Mix is controllable variables

Marketing can basically be looked upon as interaction between the MarktgMix & EV. MMix elements can be combined in an infinite number of ways. MMix in effect signifies the manner in which the mrktg effort or mrktg budgets distributed. MMix expressed in Rs terms becomes the marketing budget.

Chapter - 9

PRODUCT

THREE LEVELS OF PRODUCT

Installation
Augmented Product

Packaging

Tangible Product
Features

Delivery and credit

Brand name

Core benefit or service

After Sale service

Core Product

Quality

Styling

Warranty

PRODUCTS CLASSIFICATION SYSTEMS

Consumer Products Used by ultimate consumers or households and can be used without any commercial processing

Industrial Products Sold Primarily for use in producing other goods or rendering services

Maggie
Bas 2 mints, Fast to cook & good to eat. Health bhi taste bhi no MSG group Maggie is Nestle Flagship brand& globally also Maggie came to India 25 years ago1983 as 2mts noodles In the80s market was beginning to change with the noodles category& consumer fancy was Chinese Noodles.Maggie understood what was happening with the consumer. Key need for a product that provides good quality & convenience.This allowed mother to add her own inputs like vegetables.

 Tagline

fast to cook & good to eat was also to educate the consumer about the advantages of using it. The jingle for the Maggie was was pretty catchy & went down well with Children

In some areas they were ahead of their times like the launch of sweet noodles. Not that everything always workbut what pulled them through is the fact that they have been able to be ahead of their times. Nestle gauged the needs & requirements of the consumer in depth. Evolve the instant noodles categorywhile retaining the companys DNA focus of wellness & nutrition.

Improving further the goodness Quotient in the products Company moved away from not so healthy maida to Atta & Rice noodles. Also enriched traditional range with Protien & Calcium Push was mainly on Taste bhi health bhi

After noodles it launched Ketchup& maggie hot N sweets Nestle world widespends a lot of money on research & development in terms of taste health & convenience.

CONSUMER PRODUCT CLASSIFICATIONS

Consumer Products

Convenience Products

Shopping Product

Specialty Product

Unsought Product

Staples

Impulse

Emergency

Homogeneous

Heterogeneou s

Regularly

New

SERVICES
Characteristics of Services
1) 2) 3) 4) 5)

Sold Exclusively on the basis of benefits Can not produce in anticipation of demand. Time Utility is crucial Cannot be produced in one location for consumption in another. Perishing upon offering

6)
7)

Once consumed it can not be returned to seller.

Quality control.

Product Mix & Product Line

They are two expressions denoting the range & variety of the products of the firm. Product mix- Denotes the complete set of all products offered for sale by a company Product Line- It is the number of item brands in the line. Line stretching is a measure firms under take frequently in to enter a new price slot & a new market segment. Eg HLL, Ariel , Parker , Prestige ,

PRODUCT MIX

Width - number of different product lines Length - total number of items within the lines Depth - number of versions of each product Product Mix all the product lines offered

Chapter - 10
NEW PRODUCT DEVELOPMENT AND LIFE CYCLE STRATEGIES

STAGES IN NEW PRODUCT DEVELOPMENT

SIX CATEGORIES OF NEW PRODUCTS

New-to-the-world product. New-product line. Additions to existing product lines. Improvements in/revisions to existing products. Repositioning. Cost reductions.

Chapter - 12

MARKETING CHANNELS

MARKETING CHANNELS
Marketing channels can be viewed as sets of interdependent organizations involved in the process of making a product or service available for use of consumption.

Functions and Flows

Information Promotion Negotiation Ordering Financing Risk Taking Physical Possession Payment Title

NUMBER OF CHANNEL LEVELS

Manufacturer

Zero-level channel (M-C)

One-level channel (M-R-C) Two-level channel
(M-W-R-C) Three-level channel (M-W-J-R-C)

Retailer

Wholesaler

Retailer

Wholesaler

Jobber

Retailer

(a) Consumer marketing Channels

Consumer

NUMBER OF CHANNEL LEVELS

Industrial distribution Manufacturer Industrial consumer

Manufacturers representative

Manufacturers sales branch

(b) Industrial marketing channel

CHANNEL-DESIGN DECISIONS Establishing Analyzing the channel Consumer Objectives and Needs for Constraints

Service Outputs

Lot size Waiting time Spaital convenience Product variety

Product Characteristics Middlemen Characteristics Competitive Characteristics Company Characteristics Environmental

CHANNEL PLANNING

The Types of Middlemen

Dual Distribution Facilitating Distribution

Determining the Number of Middlemen

Intensive Distribution Selective Distribution Exclusive Distribution

Determining which specific middlemen to use Determining how to motivate middlemen

WHOLESALING
Nature and Importance :
Wholesaling includes all activities involved in selling goods or service to those who buy for resale or business use. Function of Wholesalers
Selling and promoting Buying and assortment building Bulk-breaking Warehousing Transportation Financing Risk bearing Market information Management services and counseling

TYPE OF WHOLESALERS
FULL-SERVICE

WHOLESALERS

Wholesale merchants Industrial distribution

LIMITED-SERVICE

WHOLESALEERS

Cash-and-carry wholesalers Truck wholesalers Producers cooperatives Mail-order wholesalers

Chapter - 13

PHYSICAL DISTRIBUTION

PHYSICAL DISTRIBUTION
It Involves
1)

Moving raw material from their source destination to the beginning of the production process.

2) Moving raw materials, semi finished products & finished products through warehouse 3) Moving finished products to Middleman or final buyers as required.

THE SUBSYSTEMS OF PD

Warehousing
Number Location Size

Inventory Control
Order Timings Order Quantity

Materials Handling

Order Processing
Transportation

MODES OF TRANSPORTATION

Rail Roads

Motor Carriers
Air Freight Pipelines Water Transportation

PHYSICAL DISTRIBUTION
Transportation
Cost per Unit (Rupees)

Total cost per unit

Determining Optimal Order Quantity

Inventory carrying cost per unit

Order-processing cost per unit Q* Order Quantity

Chapter - 14

THE PROMOTION EFFORT

THE COMMUNICATION PROCESS

Sender

Encoding

Message
Media

Decoding

Receiver

Noise Feedback Response

 Positioning is the platform for the brand Positioning is the fact of fixing locus of the product offer in the minds Al Ries & Jack Trout Positioning is what you do to the mind of the prospect.That is you position the product to the mind of the prospect. To create a perception of brand in consumers mind

Positioning

MARKETING COMMUNICATION
Major tools Advertising Sales promotion Publicity Personal selling Packaging Public Relation

COMMON COMMUNICATION/PROMOTION TOOLS

--------------------------------------------------------------------------Advertising Sales Promotion Publicity Personal Selling Sales presentations Sales meetings Telemarketing Incentive programs Salesmen samples Fairs and trade shows

--------------------------------------------------------------------------Print and Contests,games Press kits broadcast ads sweepstakes, Speeches Packaging-outer lotteries Seminars Packaging inserts Premiums and gifts Annual reports Mailings,Catalogs Sampling Motion pictures Fairs and trade show donations House magazines Exhibits Public relations Brochures and Demonstrations booklets Couponing,Rebates Reprints of ads Low-interest financing Billboards Entertainment Display signs Trade-in allowances Point-of-purchase Trading stamps display Tie-ins Audiovisulas material Symbols and logos

OBJECTIVES OF PROMOTIONAL ACTIVITIES

1) 2) 3) 4) 5) 6) 7)

Creating Awareness Providing Information Explaining Company Actions Inducing Product Trials Inducing Middlemen to Stock Product Retaining Loyal Customers Increasing Amount & Frequency of use

8)
9)

Learning about Customers

Reducing Sales fluctuations

Public presentation Pervasiveness Amplified expessiveness Impersonality

ADVERTISING

Personal selling
Personal confrontation Cultivation Response

Sales Promotion
Communication incentive invitation

Publicity
High credibility Off guard Dramatization

Major Decisions in Advertising Management

Message decision
Message generation Message evaluation and selection Message execution
Objectives setting
Communication Objectives Sales Objectives

Budget decisions
Affordable approach Percent of sales Competitive parity Objectives and task

Advertising evaluation Communication impact Sales impact

Media decision
Reach, frequency, impact Major media types Specific media vehicles Media timing

Chapter - 15

PRICE DETERRMINATION

NINE MARKETING-MIX STRATEGY ON PRICE

Price
High High
1. Premium Strategy

Medium
2. High-value Strategy

Low
3. Superb-value Strategy

Product Quality

Medium

4. Overcharging Strategy

5. Average Strategy

6. Good-value Strategy

Low

7. Rip-off Strategy

8. False economy Strategy

9. Economy Strategy

SELECTING THE PRICE OBJECTIVE

Survival

Maximum Current Profit

Maximum Current Revenue Maximum Sales Growth Maximum Market Skimming Product-Quality Leadership

DETERMINING DEMAND
1. Unique value effect. Buyers are less price-sensitive when the product is more unique. 2. Substitute awareness effect. Buyers are less pricesensitive when they are less aware of substitutes. 3. Difficult comparison effect. Buyers are less price-sensitive when they cannot easily compare the quality of substitutes. 4. Total expenditure effect. Buyers are less price-sensitive the lower the expenditure is as a ratio to their income. 5. End-benefit effect. Buyers are less price-sensitive the less the expenditure is to the total cost of the end product. 6. Shared cost effect. Buyers are less price-sensitive when part of the cost is borne by another party. 7. Sunk investment effect. Buyers are less price-sensitive when the product is used in conjuction with assets previously bought. 8. Price-quality effect. Buyers are less price-sensitive when the product is assumed to have more quality, prestige, or exclusiveness. 9. Inventory effect. Buyers are less price-sensitive when

INELASTIC AND ELASTIC DEMAND

P2 P1
D

P2

P1

Q2 Q1
Quantity Demanded per Period (a) Inelastic demand

Q2

Q1

Quantity Demanded per Period (b) Elastic demand

PRICING METHOD
Low Price ------------No possible profit at this price Competitors prices Product and costs prices of substitutes Unique product features High Price ------------No possible demand at this price

Major Considerations in Setting a Price D o l l o r s ( I n `0 0 0 )

1,200

1,000
800 600

Total revenue Target Profit Total Cost

400

Fixed Cost
200 0 10 20 30 40 50 (Sales Volume in unit 0000)

Break-even Chart for Determining Target Return Price & Break-Even Volums

Promotional Pricing & Discriminatory Pricing

PROMOTIONAL PRICING

Special event pricing Cash rebates Low-interest financing Psychological discounting

DISCRIMINATORY PRICING Customersegment pricing Product-form pricing Image pricing Location pricing Time pricing

HOW TO ADD VALUE THROUGH DIFFERENTIATED PRICING

Plan for premium pricing

Set price well above highest price-point

Ensure matching value

Determine product benefits

Check whether extraordinary pricing is possible

Convey price differential

Set price well below lowest price point

Reinforce positioning through marketing mix

Plan predatory pricing

Ensure matching benefits

Ensure increase in customer value

BREAKEVEN ANALYSIS

All costs incurred are allocated to particular cost centres direct costs, indirect costs, semi variable costs and selling costs Allocates indirect costs more accurately to the point where the cost occurred

Absorption Costing

The cost of producing one extra unit of output (the variable costs) Selling price MC = Contribution Contribution is the amount which can contribute to the overheads (fixed costs)

Marginal Costing

Total Revenue

Total Revenue = Price x Quantity Sold

Price can be raised or lowered to change revenue price elasticity of demand important here
Different pricing strategies can be used penetration, psychological, etc.

Quantity Sold can be influenced by amending the elements of the marketing mix 4Ps

Total Revenue

Break Even

Costs/Revenue

TR

TR

TC

VC

TheInitially theis Totalbreak even revenue The lower a firm pointoutputless determined is will incur fixed As occurs where price, the by The total costs total revenuethe the costs, charged price generated, steep thethese therefore total equalsnot incur anddo willcurve. the quantity firm total costs revenue depend (assuming the on outputthis soldfirm, in this again or variable accurate costs example, will sales. would be these vary forecasts!) is the have to sell Q1 to determined by the directly with sum of FC+VC generate expected sufficient amount revenue to cover its forecast sales produced. costs. initially.

FC

Break Even Analysis Q1

Output/Sales

Costs/Revenue

Break Even Analysis

TR (p = 3) TR (p = 2)

TC

VC

If the firm chose to set price higher than 2 (say 3) the TR curve would be steeper they would not have to sell as many units to break even

FC

Q2

Q1

Output/Sales

Break Even Analysis

Costs/Revenue
TR (p = 1) TR (p = 2)

TC

VC

If the firm chose to set prices lower (say 1) it would need to sell more units before covering its costs.

FC

Q1

Q3

Output/Sales

Break Even Analysis

Costs/Revenue
TR (p = 2)

TC VC

Profit

Loss FC

Q1

Output/Sales

Importance of Price Elasticity of Demand

Higher prices might mean fewer sales to break even but those sales may take a longer time to achieve
Lower prices might encourage more customers but higher volume needed before sufficient revenue generated to break even

Break Even Analysis

Links of break even to pricing strategies and elasticity Penetration pricing high volume, low price more sales to break even Market Skimming high price low volumes fewer sales to break even

Elasticity what is likely to happen to sales when Break Even Analysis prices are increased or decreased?

Chapter - 15

PRICE ADMINISTRATION

1)

Quantity Discount
Cumulative Quantity Discounts Non-Cumulative Quantity Discounts

2) 3) 4) 5) 6) 7) 8)

Trade Discounts Seasonal Discounts Cash Discounts Trade-in Allowances Damaged good Allowances Brokerage Allowances Promotional Allowances

DISCOUNTS & ALLOWANCES

Prestige Pricing

Leader Pricing
Odd Pricing Competitive Bidding
Expected Profit =P (Bid Price Cost Estimate) P = Probability of winning the bid

PSYCHOLOGICAL PRICING

Thank you!!!
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