MARKETING MANAGEMENT K L U BUSINESS SCHOOL

M KISHORE BABU ASSOCIATE PROFESSOR

MARKETING MANAGEMENT
UNIT 1 Marketing: INTRODUCTION What is Marketing? Simple Definition: Marketing is managing profitable customer relationships for long run. Goals: Attract new customers by promising superior value. Keep and grow current customers by delivering satisfaction. Marketing Definitions

A social and managerial process by which individuals and groups obtain what they need and want
through creating and exchanging products and value with others.- Philip Kotler

Marketng is a total system of Business activities designed to plan, price, promote and distribute want
satisfyng goods, services to present and potential customers. wiliam J Stanton

Delivery of standard of living Paul Mazor Creation & Delivery of standard of living- Prof. Malcom
CORE CONCEPTS 1. Needs, Wants, & Demands Need: State of felt deprivation including physical, social, and individual needs. Physical: Food, clothing, shelter, safety Social: Belonging, affection Individual: Learning, knowledge, self-expression Wants: Form that a human need takes, as shaped by culture and individual personality.

Wants + Buying Power = Demand Need / Want Fulfillment Needs combinationFulfilled through a Marketing Offer or experiences offered to a market to satisfy a need or and Wants : Some of products, services, information,
want. Need / Want Satisfiers= Products Products: * Goods * Services * Persons * Places * Organizations * Information * Ideas * Services Activity or benefit offered for sale that is essentially intangible and does not result in the ownership of anything.

Consumer Products

Products and services bought by final consumers for personal consumption.

1. 1. 2. 2. 1. 2. 3. 1. 2. 3. 4. 5. Convenience Products Purchased frequently & immediately Low priced Examples: candy, soap, newspapers Shopping Products Bought less frequently Higher price Examples: furniture, clothing, cars, appliances Specialty Products Special purchase efforts High price Unique characteristics Brand identification Few purchase locations 3. 4. Mass advertising Many purchase locations

3. 4.

Fewer purchase locations Comparison shop

4.

Examples: Home appliances, Refrigerator, Rolex Watch Unsought Products New innovations Products consumers do not want to think about Require much advertising and personal selling Examples: life insurance, cemetery plots, blood donation

Industrial Products

Those purchased for further processing or for use in conducting business. Industrial Products Materials and Parts: Raw materials, manufactured materials and parts Capital Items: Products that aid in buyers production or operations Supplies and Services: Operating supplies, repair, and maintenance items

Marketing Myopia proposed by Theodore Levite Sellers pay more attention to the specific products they offer than to the benefits and experiences produced by the products. They focus on the wants and lose sight of the needs Defining business boundaries narrowly and catering needs to identified groups. 2.

Value & Satisfaction If performance is lower than expectations, satisfaction is low If performance is higher than expectations, satisfaction is high

3. Exchange vs. Transaction Exchange: Act of obtaining a desired object from someone by offering something in return. Transaction: A trade of values between two parties. One party gives X to another party and gets Y in return. Can include cash, credit, or check. 4. Market: What is a Market? A place where the set of actual and potential buyers of a product are located. These people share a need or want that can be satisfied through exchange relationships. Marketing Management The art and science of choosing target markets and building profitable relationships with them. Marketing Management Marketing Management Philosophies (orientations) 1. Production Concept 4. Marketing Concept 2. Product Concept 5. Societal Marketing Concept 3. Selling Concept Selling vs. Marketing Selling is profit oriented and Marketing is customer satisfaction oriented Selling starts with what can be salable Marketing is based on what can be needed Seller converts products in to cash, But marketer converts needs in to products in to products to cash The Marketing Mix proposed by E. J McCarthy and name was given by Neil. H. Borden Product Price Distribution (Place) Promotion

Customer Relationship Management The process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. Customer Perceived Value Customers evaluation of the difference between all the benefits and all the costs of a marketing offer relative to those of competing offers. Customer Satisfaction: Dependent on the products perceived performance relative to a buyers expectations. Loyalty & Retention

Financial Benefits Social Benefits Structural profitable customers Focus on Ties Partner Relationship Marketing Partners insidecustomer focused the firm All employees Teams coordinate efforts toward customers Partnerschain management outside the firm Supply
Strategic alliances

Customer Loyalty & Retention Customer Lifetime Value The entire stream of purchases that the customer would make over a lifetime of patronage. Share of Customer The share a company gets of the customers purchasing in their product categories.

Company and Marketing Strategy: Partnering to Build Customer Relationships

Strategic Planning The process of developing and maintaining a strategic fit between the organizations goals and capabilities and its changing marketing opportunities.

Steps in Marketing Strategic Planning

Analyzing opportunities & Threats, competitors Defining the company mission, objectives and goals Researching & selecting target markets Designing the Marketing Strategy Developing marketing programs Organising & Controlling efforts
The Mission Statement: A statement of the organizations purpose What it wants to accomplish in the larger environment Should be market oriented and defined in terms of customer needs.

Mission Statement Should: Be realistic Be specific Fit the market environment

Be based on distinctive competencies Be motivating

Designing the Business Portfolio: The business portfolio is the collection of businesses and products that make up the company.

The company must:

analyze its current business portfolio or Strategic Business Units (SBUs), decide which SBUs should receive more, less, or no investment, develop growth strategies for growth or downsizing.

Portfolio Analysis An evaluation of the products and business making up the company. Resources are directed to more profitable businesses and weaker ones are phased down or dropped. Strategic Business Unit (SBU) A unit of the company that has a separate mission and objectives and that can be planned independently from other company businesses. Can be a company division, a product line within a division, or sometimes a single product or brand. BCG Growth-Share Matrix Stars Cash Cows Question Marks Dogs

Problems with Matrix Approaches Can be difficult, time consuming, and costly to implement Difficult to define SBUs and measure market share and growth Focus on current business, not future planning Can place too much emphasis on growth Can lead to poorly planned diversification

Product/Market Expansion Grid Market Penetration Product Development Market Development Diversification Marketings Role in Strategic Planning Provide a guiding philosophy Provide inputs to strategic planners Design strategies to reach objectives Value Delivery Network Companys value chain Distributors Suppliers Customers The Marketing Mix The set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market. The 4 Ps & the 4 Cs of the Marketing Mix

4 Ps - Sellers View

Product Price Place Promotion Customer Solution Customer Cost Convenience Communication

4 Cs - Buyers View

Analyzing Business Markets and Buyer Behavior

Organizational Buying 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 brands and suppliers. Organizational Buying Compared to Consumer Markets, Business Markets have . . . 1. Fewer buyers 7. Inelastic demand 2. Larger buyers 8. Professional purchasing 3. Geographically concentrated buyers 9. Multiple buying influences 4. Close relationships with their supplier10. Multiple sales calls customers 11. Direct purchasing 5. Fluctuating demand 12. Reciprocity 6. Derived demand 13. Leasing Organizational Buying The Business Market Includes For-Profit Companies and Two Specialized Groups: The institutional market Schools, hospitals, prisons, etc. with captive audiences Cost and quality standards drive purchases The government market Bidding process awards contracts

Organizational Buying Situations 1. 2. 3. New task Straight rebuy Modified rebuy

Straight rebuy:

Routine reorders from approved vendor list Low involvement, minimal time commitment Example: copier paper

Modified re-buy
Specifications, prices, delivery terms or other aspects require modification Moderate level of involvement and time commitment Example: desktop computers Purchasing a product or service for the first time High level of involvement and time commitment; multiple influences Example: selecting a web site design firm or consultant
Organizational Buying Systems Buying A single provider provides the total package for the buyers needs May involve turnkey solutions Systems Selling Manufacturers sell entire systems Supplier provides all MRO items

Participants in Business Buying 1. Initiators 2. Users 3. Influencers

4. 5. 6.

Deciders Approvers Buyers

Influences on Business Buyers Environmental Organizational Interpersonal Individual Environmental Demand level, Economic outlook, Interest rates, Technological change, Politics/regulations, Competition, Concerns for social responsibility Organizational Objectives, Policies, Procedures, Organizational structures, Systems, Interpersonal Interests, Authority, Status, Empathy, Persuasiveness, Individual Age, Income, Education, Job position, Personality, Risk attitudes, Culture

Purchasing/Procurement Process 1. Problem recognition 2. General need description 3. Product specification 4. Supplier search 5. Proposal solicitation 6. Supplier selection 7. Order-routine specification 8. Performance review The Marketing Environment Marketing Environment Consists of Factors and forces outside the organization that affect managements ability to build and maintain relationships with target customers. Environment offers both opportunities and threats. Marketing intelligence and research used to collect information about the environment.

Marketing Environment Includes:

Microenvironment: actors close to the company that affects its ability to serve its customers. Macro-environment: larger societal forces that affect the microenvironment.
Considered to be beyond the control of the organization.
The Companys Microenvironment ; Companys Internal Environment is called Micro-environment. Areas inside a company. Affects the marketing departments planning strategies. All departments must think consumer and work together to provide superior customer value and satisfaction.

The Companys Microenvironment Suppliers: Provide resources needed to produce goods and services. Important link in the value delivery system. Most marketers treat suppliers like partners. Customers: Five types of markets that purchase a companys goods and services Markets Include: Consumer, Business, Reseller, Government, International, Competitors: Those who serve a target market with products and services that are viewed by consumers as being reasonable substitutes Company must gain strategic advantage against these organizations 1. Financial 5. Local 2. Media 6. General 3. Government 7. Internal 4. Citizen-action

The Macro-environment: Demographic, Economic, Natural, Technological, Political, Cultural Demographic: The study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics. Marketers track changing age and family structures, geographic population shifts, educational characteristics, and population diversity. Income Distribution, Upper class, Middle class, Working class, Underclass

Natural Environment Factors Impacting the Natural Environment: Shortages of raw materials Increased pollution Increased government intervention Environmentally sustainable strategies Technological Environment Changes rapidly. Creates new markets and opportunities. Challenge is to make practical, affordable products. Safety regulations result in higher research costs & longer time between conceptualization and introduction of product. Political Environment Includes Laws, Government Agencies, and Pressure Groups that Influence or Limit Various Organizations and Individuals In a Given Society. Areas of concern: Increasing legislation Changing government agency enforcement Increased emphasis on ethics and socially responsible behavior Cultural Environment The institutions and other forces that affect a societys basic values, perceptions, preference, and behaviors. Core beliefs and values are passed on from parents to children and are reinforced by schools, churches, business, and government. Secondary beliefs and values are more open to change.

Societys major cultural views are expressed in peoples views of:

Themselves, Others, Organizations, Society, Nature, The universe Consumer and Business Buyer Behavior Consumer Buying Behavior Refers to the buying behavior of people who buy goods and services for personal use. These people make up the consumer market. The central question for marketers is: How do consumers respond to various marketing efforts the company might use? Culture

Culture is the Most Basic Cause of a Person's Wants and Behavior. Culture Subculture
Social Class

Groups of people with shared value systems based on common life experiences.

Societys relatively permanent and ordered divisions whose members share similar values, interests, and behaviors. Measured by a combination of: occupation, income, education, wealth, and other variables. Social Factors Groups: Membership, Reference (Opinion Leaders) Aspiration Family: Occupation Economic Situation Personal Factors Lifestyle: Pattern of living as expressed in psychographics
Activities Interests Opinions
Personality & Self-Concept Personality refers to the unique psychological characteristics that lead to relatively consistent and lasting responses to ones own environment. Self-concept suggests that peoples possessions contribute to and reflect their identities. Maslows Hierarchy of Needs Self-Actualization Esteem needs Social needs Safety needs Physiological needs Perception & Learning A belief is a descriptive thought that a person holds about something.

An attitude is a persons consistently favorable or unfavorable evaluations, feelings, and tendencies toward an
object or idea. Buying Decision Process Need recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior Sources of Information Personal Commercial Public Experiential

Buying Decision Process Factors that influence purchase decision: Attitudes of others Unexpected situational factors Cognitive dissonance: a buyers doubts shortly after a purchase about whether it was the right decision.

Stages in the Adoption Process

Awareness: Consumer becomes aware of the new product, but lacks information about it. Interest: Consumer seeks information about new product. Evaluation: Consumer considers whether trying the new product makes sense. Trial: Consumer tries new product on a small scale to improve his or her estimate of its value. Adoption: Consumer decides to make full and regular use of the new product.

Product Adopter Categories Innovators Early adopters Early majority Late majority Laggards

Influence of Product Characteristics on Rate of Adoption Relative Advantage: Is the innovation superior to existing products? Compatibility: Does the innovation fit the values and experience of the target market? Complexity: Is the innovation difficult to understand or use? Divisibility: Can the innovation be used on a limited basis? Communicability: Can results be easily observed or described to others?

BUSINESS MARKETS & BUSINESS OR INDUSTRIAL BUYER BEHAVIOR The business market is vast and involves far more dollars and items than do consumer markets. Business buyer behavior refers to the buying behavior of the organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others. Business Markets Market Structure and Demand: Contains far fewer but larger buyers. Customers are more geographically concentrated. Business demand is derived from consumer demand. Types of Decisions and the Decision Process Business buyers usually face more complex buying decisions. Business buying process tends to be more formalized. Buyers and sellers are much more dependent on each other.

Types of organizational Buying Situations New Task Straight rebuy Modified rebuy Influences on Business Buyer Behavior Environmental Organizational Interpersonal Individual

The Business Buying Process Problem recognition General need description Product specification Supplier search e-Procurement Advantages for buyers: Access to new suppliers Lowers purchasing costs Hastens order processing and delivery Advantages for vendors: Share information with customers Sell products and services Provide customer support services Maintain ongoing customer relationships

UNIT II

Segmentation, Targeting, and Positioning: Market Segmentation The process of dividing a market into distinct groups of buyers with different needs, characteristics, or behavior who might require separate products of marketing programs. A market segment consists of consumers who respond in a similar way to a given set of marketing efforts. Target Marketing Involves evaluating each market segments attractiveness and selecting one or more segments to enter. Target segments that can sustain profitability.

BASES of Market Segmentation

1. 2. 3. 4. Geographical Demographic Psychographic Behavioural

Geographic: World region or country Region of country

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City or metro size Density or climate

Demographic: Age, gender, family size, income, occupation, etc. The most popular bases for segmenting customer groups. Easier to measure than most other types of variables. Age and Life-Cycle Stage Example: different toothpastes for different age groups. Avoid stereotypes in promotions Promote positive messages Gender Women make 90% of home improvement decisions. Women influence 80% of all household consumer purchases. Income Identifies and targets the affluent for luxury goods. People with low annual incomes can be a lucrative market. Some manufacturers have different grades of products for different markets.

Psychographic Social class Lifestyle Personality Behavioral Occasions:

Special promotions and labels for holidays. (e.g Archies Greeting cards) Special products for special occasions.
(e.g., Kodak disposable cameras)

Different segments desire different benefits from products.

Benefits Sought:

(e.g., P&Gs multiple brands of laundry detergents to satisfy different needs in the product category)

Geodemographic Segmenting Business Markets

User Status: Nonusers, ex-users, potential users, first-time users, regular users Usage Rate: Light, medium, heavy Loyalty Status: Brands, stores, companies

Consumer and business markets use many of the same variables for segmentation. Business marketers can also use: Operating Characteristics Purchasing Approaches Situational Factors Personal Characteristics Inter-market Segmentation
Requirements for Effective Segmentation 1. Measurable 2. Accessible 3. Substantial 4. 5. Differentiable Actionable

Evaluating Market Segments Segment Size and Growth Analyze current segment sales, growth rates, and expected profitability. Segment Structural Attractiveness Consider effects of: competitors, existence of substitute products, and the power of buyers & suppliers. Company Objectives and Resources Examine company skills & resources needed to succeed in that segment. Offer superior value & gain advantages over competitors. Micromarketing Tailoring products and marketing programs to suit the tastes of specific individuals and locations. Local Marketing: Tailoring brands and promotions to the needs and wants of local customer groups cities, neighborhoods, specific stores. Individual Marketing: Tailoring products and marketing programs to the needs and preferences of individual customers.

Choosing a Market Coverage Strategy

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Factors to Consider
1. 2. 3.

Company resources Product variability Products life-cycle stage

4. 5.

Market variability Competitors marketing strategies

Socially Responsible Marketing

Smart targeting helps both companies and consumers. Target marketing sometimes generates controversy and concern.

Vulnerable and disadvantaged can be targeted. Cereal, cigarette, beer, and fast-food marketers have received criticism. Internet has raised fresh concerns about potential targeting abuses.
Market Positioning Fixing Product locus in the minds of customer Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. Begins with differentiating the companys marketing offer so it gives consumers more value.

Positioning for Competitive Advantage Products position is the way the product is defined by consumers on important attributes. The place the product occupies in consumers minds relative to competing products. Choosing a Positioning Strategy Identify a set of possible competitive advantages on which to build a position. Choose the right competitive advantages. Select an overall positioning strategy. Identifying Possible Competitive Advantages Key to winning target customers is to understand their needs better than competitors do and to deliver more value. Competitive advantage extent to which a company can position itself as providing superior value.

Identifying Possible Competitive Advantages 1. Product differentiation 2. Services differentiation Positioning Errors Underpositioning: Failing to really position the company at all. Overpositioning: Giving buyers too narrow a picture of the company. Confused Positioning: Leaving buyers with a confused image of a company.

3. 4.

Image differentiation People differentiation

Choosing Right Competitive Advantages 1. Important 2. Distinctive 3. Superior 4. Communicable

5. 6. 7.

Preemptive Affordable Profitable

Communicating and Delivering the Chosen Position Company must take strong steps to deliver and communicate the desired position to target consumers. The marketing mix efforts must support the positioning strategy. Must monitor and adapt the position over time to match changes in consumer needs and competitors strategies. Rest Stop: Reviewing the Concepts Define the three steps of target marketing: market segmentation, market targeting, and market positioning. List and discuss the major bases for segmenting consumer and business markets. Explain how companies identify attractive market segments and choose a target marketing strategy. Discuss how companies position their products for maximum competitive advantage in the marketplace.

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PRODUCT, SERVICES, AND BRANDING STRATEGY

What is a Product? Anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need. Includes: physical objects, services, events, persons, places, organizations, ideas, or some combination thereof.

What is a Service? A form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything. Examples: banking, hotel, airline, retail, tax preparation, home repairs.

Levels of a Product 1. 2. 3. Core product Branded Product Augmented product 4. 5. Customised Product Potential product

Individual Product Decisions (product personality) Core attributes Associated attributes: Style & Design, size, etc. Branding Packaging Labeling

Branding A brand is a name, term, sign, symbol, or design, or a combination of these, that identifies the maker or seller of a product or service. E.g. LG, Complan, TVS

Packaging Designing and producing the container or wrapper for a product. Developing a good package: Benefits 1. Packaging concept 2. Package elements 3. Product safety 4. Transportation 5. Storage 6. Appeal 7. Information

Advantages to buyers: Product identification Product quality Advantages to sellers: Basis for products quality story Provides legal protection Helps to segment markets

8. 9. 10. 11. 12. 13. 14.

Differentiation Handling Beaty Measuring Sales promotion Preservation Environmental concerns

Labeling

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

Product Support Services Assess the value of current services and obtain ideas for new services. Assess the cost of providing the services. Put together a package of services that delights the customers and yields profits for the company. Product Line Decisions Product Line Length Stretching Downward Upward Both directions Filling

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Product Mix Decisions Product Mix: all of the product lines and items that a particular seller offers for sale. Product line: Group of closely related products offered by company for sale. Width: the number of different product lines the company carries. Depth: the number of versions offered of each product in the line. Consistency: how closely related the various lines are.

Brand Positioning Can position brands at any of three levels: Product attributes Product benefits Beliefs and values Brand Name Selection Desirable qualities for a brand name include: 1. It should suggest products benefits and qualities 2. It should be easy to pronounce, recognize, and 3. It should be distinctive

4. 5.

It should be extendable It should translate easily into foreign languages 6. It should be capable of registration and legal protection

Brand Sponsorship Manufacturers brands Private brands Licensed brands Co-branding

Brand Development Line Extension: introduction of additional items in a given product category under the same brand name (e.g., new flavors, forms, colors, ingredients, or package sizes). Brand Extension: using a successful brand name to launch a new or modified product in a new category. Brand Development Multibranding: offers a way to establish different features and appeal to different buying motives. New Brands: developed based on belief that the power of its existing brand is waning and a new brand name is needed. Also used for products in new product category. Nature and Characteristics of a Service 1. Intangibility 2. Inseparability 3. 4. Variability Perishability

New-Product Development and Product Life-Cycle Strategies

New-Product Development Strategy Strategies for Obtaining New-Product Ideas: Acquisition of companies, patients, licenses Original products, improvements, modifications

New-Product Failures Only 10% of new products still on the market and profitable after 3 years. Failure rate for industrial products as high as 30%.

Reasons for new product failure:

1. 2. 3.

Overestimation of market size Design problems Incorrectly positioned, priced, or advertised

4. 5. 6. 5. 6. 7. 8.

Pushed despite poor marketing research findings Development costs Competition Business analysis Product development Test marketing Commercialization 4. Distributors 5. Suppliers

Major Stages in New-Product Development 1. Idea generation 2. Idea screening 3. Concept development and testing 4. Marketing strategy development Idea Generation 1. Company employees 2. Customers 3. Competitors

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Idea Screening Process to spot good ideas and drop poor ones. Develop system to estimate: market size, product price, development time and costs, manufacturing costs, and rate of return. Evaluate these findings against set of company criteria for new products.

Concept Development and Testing Product Idea: idea for a possible product that the company can see itself offering. Product Concept: detailed version of the idea stated in meaningful consumer terms. Product Image: the way consumers perceive an actual or potential product. Marketing Strategy Development Part One Describes: The target market, planned product positions, sales, market share, and profit goals Part Two Outlines the First Years: Products planned price, distribution, and marketing budget Part Three Describes Long-Run: Sales and profit goals, marketing mix strategy Business Analysis Involves a review of the sales, costs, and profit projections to assess fit with company objectives. If yes, move to the product development phase. Actual Product Development Develop concept into physical product Calls for large jump in investment Prototypes are made Prototype must have correct physical features and convey psychological characteristics Test Marketing Product and program introduced in more realistic market setting. Not needed for all products. Can be expensive and time consuming, but better than making major marketing mistake. Commercialization Must decide on timing (i.e., when to introduce the product). Must decide on where to introduce the product (e.g., single location, state, region, nationally, internationally). Must develop a market rollout plan. Organizing New-Product Development Sequential Approach: each stage completed before moving to next phase of the project. Simultaneous Approach: Cross-functional teams work through overlapping steps to save time and increase effectiveness.

The Product Life Cycle Stages:

Introduction Growth Maturity Saturation Decline

Product Life Cycle Applications Product class has the longest life cycle (e.g., gas-powered cars) Product form tends to have the standard PLC shape (e.g., dial telephone) Brand can change quickly because of changing competitive attacks and responses (e.g., Tide) Style is a basic and distinctive mode of expression (e.g., formal clothing, modern furniture) Fashion is a popular style in a given field (e.g., business casual) Fad is a fashion that enters quickly, is adopted quickly, and declines fast (e.g., pet rocks) Practical Problems of PLC Hard to identify which stage of the PLC the product is in. Hard to pinpoint when the product moves to the next stage. Hard to identify factors that affect products movement through stages. Hard to forecast sales level, length of each stage, and shape of PLC. Strategy is both a cause and result of the PLC.

Introduction Stage of PLC

Sales: low

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Costs: high cost per customer Profits: negative Marketing Objective: create product awareness and trial Product: offer a basic product Price: use cost-plus formula Distribution: build selective distribution Promotion: heavy to entice product trial
Growth Stage of PLC Sales: rapidly rising Costs: average cost per customer Profits: rising Marketing Objective: maximize market share Product: offer extension, service, warranty Price: penetration strategy Distribution: build intensive distribution Promotion: reduce to take advantage of demand Maturity Stage of PLC Sales: peak Costs: low cost per customer Profits: high Marketing Objective: maximize profits while defending market share Product: diversify brand and models Price: match or best competitors Distribution: build more intensive distribution Promotion: Increase to encourage brand switching Maturity Stage of the PLC Modifying the Market: Increase the consumption of the current product. How? Look for new users and market segments Reposition the brand to appeal to larger or faster-growing segment Look for ways to increase usage among present customers Modifying the Product: Changing characteristics such as quality, features, or style to attract new users and to inspire more usage. How? : Improve durability, reliability, speed, taste Improve styling and attractiveness Add new features Expand usefulness, safety, convenience Modifying the Marketing Mix: Improving sales by changing one or more marketing mix elements. How? Cut prices Launch a better ad campaign Move into larger market channels Offer new or improved services to buyers

Decline Stage of PLC Sales: declining Costs: low cost per customer Profits: declining Marketing Objective: reduce expenditures and milk the brand Product: phase out weak items Price: cut price Distribution: selective--phase out unprofitable outlets Promotion: reduce to minimal level

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UNIT III

Pricing Considerations and Strategies What is a Price? Narrowly, price is the amount of money charged for a product or service. Broadly, price is the sum of all the values that consumers exchange for the benefits of having or using the product or service. Dynamic Pricing: charging different prices depending on individual customers and situations. Internal Factors Affecting Pricing Decisions Marketing Objectives of Pricing:

Company must decide on its strategy for the product. General Objectives:

Survival, current profit maximization, market share leadership, and product quality leadership.

Internal Factors Affecting Pricing Decisions Marketing Mix Strategy: Price decisions must be coordinated with product design, distribution, and promotion decisions to form a consistent and effective marketing program. Target costing: Pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met. Internal Factors Affecting Pricing Decisions Costs: Fixed Costs: Costs that do not vary with production or sales level. Variable Costs: Costs that vary directly with the level of production.

FACTORS AFFECTING PRICE:

Internal Factors Affecting Pricing Decisions Organizational Considerations: Must decide who within the organization should set prices. This will vary depending on the size and type of company.

External Factors Affecting Pricing Decisions The Market and Demand: Costs set the lower limit of prices. The market and demand set the upper limit. Five Cs of Pricing: 1. Customer needs 2. Company skills 3. Competition 4. Collaborators 5. Culture Context Pricing methods in Different Types of Markets 1. Cost based: 1. Cost-Plus Pricing: Adding little profit on the cost of the product 2. Absorption cost: Price based on cost of manufacturing, selling, administration plus profit 3. Mark-up: Adding a standard markup realised by the seller based on demand in the market 4. Break- Even Pricing: No profit no loss price 5. Marginal Pricing: Fixing uniform margins as per trade practices 2 Value-Based Pricing Uses buyers perceptions of value, not the sellers cost, as the key to pricing. 3. Competition-Based Pricing a. Premium pricing b. Discounted pricing c. Parity pricing

4. Demand based pricing: New Product pricing a) Market-Skimming Set a high price for a new product to skim revenues layer by layer from the market. Company makes fewer, but more profitable sales. b) Market-Penetration A. Set a low initial price in order to penetrate the market quickly and deeply. B. Can attract a large number of buyers quickly and win a large market share. c) In line pricing: As per the market practices

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5. Going-Rate Pricing: Firm bases its price largely on competitors prices, with less attention paid to its own costs or to demand. 6. Sealed-Bid Pricing: Firm bases its price on how it thinks competitors will price rather than on its own costs or on demand. 7. Psychological Pricing: Bata pricing Rs. 289.95 Considers the psychology of prices and not simply the economics. Consumers usually perceive higher-priced products as having higher quality. Consumers use price less when they can judge quality of a product.

New-Product Pricing Strategies

Market-Skimming Set a high price for a new product to skim revenues layer by layer from the market. Company makes fewer, but more profitable sales. Market-Penetration A. Set a low initial price in order to penetrate the market quickly and deeply. B. Can attract a large number of buyers quickly and win a large market share. In line pricing: As per the market practices Product-Line Pricing Involves setting price steps between various products in a product line based on: Cost differences between products Customer evaluations of different features Competitors prices

Optional- and Captive-Product Pricing Optional-Product Pricing optional or accessory products sold with the main product (e.g., ice maker with the refrigerator). Captive-Product Pricing products that must be used with the main product (e.g., replacement cartridges for Gillette razors). Pricing Strategies By-Product Pricing Product Bundle Pricing Discounts and Allowances Discounts A. Cash B. Quantity Allowances Trade-in Promotional

C. Functional D. Seasonal

Segmented Pricing Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs. Types: Customer-segment Product-form Location pricing Time pricing

Promotional Pricing Low-Interest Financing Longer Warranties Free Maintenance

Geographical Pricing 1. FOB-origin pricing 2. Uniform-delivered pricing 3. Zone pricing Initiating Price Changes A. Price Cuts: B. Excess capacity C. Falling market share

4. Basing-point pricing 5. Freight-absorption pricing

D. Dominate market through lower costs E. Price Increases: F. Over-demand

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Public Policy and Pricing 1. Price fixing 2. Predatory pricing 3. Retail price maintenance

4. Discriminatory pricing 5. Deceptive pricing

UNIT IV Marketing Channels and Supply Chain Management

DISTRIBUTION MANAGEMENT
Distribution comprise of Two components Channels of Distribution Physical Distribution

Marketing or Distribution Channel A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.

How Channel Members Add Value The use of intermediaries results from their greater efficiency in making goods available to target markets. Offers the firm more than it can achieve on its own through the intermediaries: Contacts Experience Specialization Scale of operation

CHANNELS OF DISTRIBUTION TYPES (CONSUMER GOODS) Channel Functions 1. Information 2. Promotion Channel Behavior 1. The channel will be most effective when: 2. Each member is assigned tasks it can do best. 3. Contact 4. Matching 3. all members cooperate to attain overall channel goals. 4. If this does not happen, conflict occurs:

Conflict among Channel members: Horizontal Conflict occurs among firms at the same level of the channel (e.g., retailer to retailer). Vertical Conflict occurs between different levels of the same channel (e.g., wholesaler to retailer). Some conflict can be healthy competition. Vertical Marketing System A distribution channel structure in which producers, wholesalers, and retailers act as a unified system One channel member owns the other, has contracts with them, or has so much power that they all cooperate.

Types of Vertical Marketing Systems Corporate VMS Contractual VMS Administered VMS

Franchise Organization Manufacturer-Sponsored Retailer Franchise System Ford and its independent franchised dealers Manufacturer-Sponsored Wholesaler Franchise System Coca-Colas licensed bottlers Service-Firm Sponsored Retailer Franchise System McDonalds, Avis, and Holiday Inn

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Innovations in Marketing Systems

Vertical Marketing System Horizontal Marketing System Hybrid Marketing System

Changing Channel Organization Disintermediation means that more and more, product and service producers are bypassing intermediaries and going directly to final buyers, or that radically new types of channel intermediaries are emerging to displace traditional ones.

Channel Design Decisions 1. Analyzing Consumer Needs 2. Setting Channel Objectives 3. Identifying Major Alternatives Types of Intermediaries Company sales force Manufacturers agency Industrial distributors

4. Types of intermediaries 5. Number of intermediaries 6. Responsibilities of intermediaries

Number of Intermediaries depends on type of distribution: Intensive distribution Exclusive distribution Selective distribution Evaluating the Major Alternatives Economic Criteria: A company compares the likely sales, costs, and profitability of different channel alternatives. Control Issues: How and to whom should control be given? Adaptive Criteria: Consider long-term commitment vs. flexibility.

Channel Management Decisions Selecting channel members Managing and motivating channel members Evaluating channel members

Public Policy and Distribution Decisions Exclusive distribution Exclusive dealing Exclusive territorial agreements Tying agreements Major Logistics Functions Warehousing Inventory management Transportation Logistics information management Warehousing How many, what types, and where? Storage warehouses Distribution centers Automated warehouses Inventory Management Must balance between too much and too little inventory. Just-in-time logistics systems RFID, AutoID, or Smart Tag technology Transportation Trucks Railroads Water carriers Pipelines Air Internet Intermodal transportation Integrated Logistics Management The logistics concept that emphasizes teamwork, both inside the company and among all the marketing channel organizations, to maximize the performance of the entire distribution system. Involves: Cross-functional teamwork inside the company Building logistics partnerships

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Third-party logistics
Retailing and Wholesaling
Retailing: Retailing includes all the activities involved in selling products or services directly to final consumers for their personal, non-business use. Types of Retailers Retailers are classified based on: Amount of service they offer Breadth & depth of product lines Relative prices charged How they are organized Amount of Service Self-Service Retailers: Serve customers who are willing to perform their own locate-compare-select process to save money. Limited-Service Retailers: Provide more sales assistance because they carry more shopping goods about which customers need information. Full-Service Retailers: Usually carry more specialty goods for which customers like to be waited on.

Product Line Classification Specialty stores Department stores Supermarket Convenience stores Superstores Category killers

Relative Prices Classification Discount stores Off-price retailers Factory outlet Independent off-price retailers Warehouse club Organizational Classification Chain Stores Voluntary chain Retailer cooperative Franchise Merchandising conglomerates Assortment and Service Decisions Product assortment Services mix Store atmosphere

Price and Promotion Decisions Price policy must fit its target market and positioning, product and service assortment, and competition. Can use any or all of the promotion toolsadvertising, personal selling, sales promotion, public relations, and direct marketingto reach consumers Place Decisions Retailers can locate in various types of shopping centers, strip malls, or power centers.

Wholesaling: Wholesaling includes all activities involved in selling goods and services to those buying for
resale or business use. Functions Provided by Wholesalers Selling and promoting Buying and assortment building Bulk-breaking Warehousing Transportation

Types of Wholesalers Merchant Wholesalers Largest group of wholesalers Account for 50% of wholesaling

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Two broad categories: Brokers and Agents

Full-service wholesalers Limited-service wholesalers

Do not take title to goods Perform fewer functions Brokers bring buyers and sellers together Agents represent buyers on more permanent basis Manufacturers agents are most common type of agent wholesaler

Manufacturers Sales Branches and Offices Wholesaling by sellers or buyers themselves rather than through independent wholesalers. Trends in Wholesaling Must Constantly Improve Services and Reduce Costs Distinction Between Large Retailers & Wholesalers is Blurry Will Continue to Increase the Services Provided to Retailers Wholesalers Are Now Going Global
INTEGRATED MARKETING COMMUNICATION: ADVERTISING, PERSONAL SELLING, SALES PROMOTION, AND PUBLIC RELATIONS Promotion Mix Advertising Sales Promotion Public Relations, Publicity Personal Selling

The Need for IMC Using IMC, the company carefully integrates and coordinates its many communication channels to deliver a clear, consistent, and compelling message about the organization and its brands Advertising Can reach masses of geographically dispersed buyers. Can repeat a message many times. Is impersonal, one-way communication. Can be very costly for some media types.

Personal Selling Involves personal interaction between two or more people. Allows relationship building. Most expensive promotion tool. Sales Promotion Wide assortment of tools. Attracts consumer attention. Offers strong incentives to buy. Invites and rewards quick consumer response. Effects are short-lived. Public Relations Very believable. Reaches people who avoid salespeople and ads. Can dramatize a company or product. Tends to be used as an afterthought. Planned use can be effective and economical. Direct Marketing Many forms that share four characteristics: Nonpublic Immediate Customized Interactive Well suited to highly targeted marketing. Advertising Advertising has been used for centuries. Advertising is used by: Business firms Nonprofit organizations

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Professionals Social agencies Government

Setting Advertising Objectives An advertising objective is a specific communication task to be accomplished with a specific target audience during a specific period of time. Classified by purpose: Inform Persuade Compare Remind

*Setting the Advertising Budget*

Affordable Percentage-of-Sales Competitive-Parity Objective-and-Task

Developing Advertising Strategy Consists of two major elements:

Creating advertising messages Selecting advertising media

The Message Strategy Identify Customer Benefits Develop Compelling Creative Conceptthe Big Idea Advertising Appeals Should Be: Meaningful, Believable, & Distinctive Message Execution Slice of Life Lifestyle Fantasy Mood or Image Musical Message Execution Choose a tone Use memorable, attention-getting words Choose correct format elements Illustration Headline Copy Selecting Advertising Media Reach Percentage of people exposed to ad Frequency Number of times a person is exposed to ad Media Impact The qualitative value of a message exposure through a given medium Choosing Media Type Factors to consider: Media habits of target consumers Nature of the product Type of message Cost Media vehicles Specific media within each general media type Deciding on Media Timing Must decide how to schedule the advertising over the course of a year. Follow seasonal pattern Oppose seasonal pattern

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Same coverage all year Choose the pattern of the ads Continuity Pulsing
Evaluating Advertising Measure the communication effects of an adCopy Testing Measure the sales effects of an ad Is the ad increasing sales?

Sales Promotion Sales promotion consists of short-term incentives to encourage the purchase or sales of a product The idea behind sales promotion is to generate immediate sales.
Rapid Growth of Sales Promotion Sales promotion can take the form of consumer, business, trade, or sales force promotions. Rapid growth in the industry has been achieved because: Product managers are facing more pressure to increase their current sales Companies face more competition Advertising efficiency has declined Consumers have become more deal oriented Sales Promotion Objectives

Consumer Promotions Trade Promotions Sales Force Promotions

A. Consumer Sales Promotion Tools Samples Coupons Rebates Cents-off Deals Premiums Advertising Specialties B. Trade Promotion Objectives: Persuade resellers to carry a brand Give a brand shelf space Promote brand in advertising Push brand to customers Tools: Discounts, allowances, free goods, push money, specialty advertising items C. Business Promotion Objectives: Generate business leads Stimulate purchases Reward customers Motivate salespeople Tools: Conventions, trade shows, sales contests

Developing the Sales Promotion Program Decide on the Size of the Incentive Set Conditions for Participation Decide How to Promote and Distribute the Promotion Program Decide the Length of the Program Evaluate the Program

Public Relations

Public relations involves building good relations with the companys various publics by obtaining Product publicity

favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories, and events. Public Relations Functions Press relations or press agency

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Public affairs
Public Relations Tools 1. News 2. Speeches 3. Special events 4. Buzz marketing 5. Mobile marketing 6. Written materials

UNIT V
Marketing Control
Management is all about Planning Executing Control

Marketing Organisation 1. Functional 2. Geographic 3. Product/Brand management

4. Market Management 5. Matrix

Any strategy is as good as its implementation Marketing Implementation is the process that converts plans into assignments, which after successful achievement accomplishes the plans stated objectives Marketing Control techniques: Budget Profitability Efficiency (Productivity) Strategic

Budget Control Measurement of results against monthly/quarterly budgets (goals) Reasons for deviations (variances) Remedial steps to be taken to close the gaps between performance and goals Review performance in the next month/quarter and assess results Benchmarks for Efficiency 1. against last year 2. against budget 3. against targets Marketing Expense 1. Sales Force 2. Advertising 4. % growths 5. % variances 6. % market share 3. Sales Promotion 4. Market Research

Sales Administration Public Relations Direct Marketing

Financial Analysis

RONW - Net Profits/Net Worth profit margin *asset turnover*financial leverage Increase margins by increase in sales or reduction in costs or both Increase asset turnover by increasing sales or reducing the assets (inventories, debtors) against a given level of
sales Market based scorecard analysis Customer Analysis Stakeholder Analysis

Profitability Control 80 : 20 rule Product rationalisation Customer rationalisation Costing Analysis

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Efficiency Control 1. Sales force efficiency 2. Advertising efficiency Sales force Efficiency 1. No. of calls per salesperson per day 2. Average revenue per sales call 3. Average cost per call

3. Sales promotion efficiency 4. Distribution efficiency 4. Average call time per call 5. No. of new customers per period 6. Sales force cost per unit sales

Advertising Efficiency CPT Before and after measure of attitude towards the product No. of enquiries per ad Cost per enquiry

Sales Promotion Efficiency 1. % sales sold on promotion 2. Display cost per sales rupee 3. % coupons redeemed Distribution Efficiency Time taken to execute orders % order executed service levels

4. No. of enquiries resulting from a demonstration

Other Control Measures Marketing Effectiveness Review - customer philosophy, integrated marketing organization, adequate marketing information, strategic orientation and operational efficiency

Marketing Audit
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comprehensive , systematic, independent and periodic review of a companys business environment, objectives, strategies and activities with an idea to identify areas of weaknesses and recommend a plan of action to improve on such areas.

Green Marketing: Also called as Environmental Marketing, Ecological Marketing, Eco-Marketing.

Green marketing refers to the process of selling products and/or services based on their environmental benefits. Such a product or service may be environmentally friendly in itself or produced and/or packaged in an environmentally friendly way. Assumption of green marketing is that potential consumers will view a product or service's "greenness" as a benefit and base their buying decision accordingly. While green marketing is growing greatly as increasing numbers of consumers are willing to back their environmental consciousnesses. The activities include: 1. Fair marketing practices 6. Less carbon emitting products 2. Recyclable products 7. Use of scarce materials optimally 3. Eco-friendly ingredients 8. Restoring eco balance 4. Culturally honored products 9. Public awareness campaigns on 5. Honoring food preferences environments (vegetarians) 10. Not violating societal rules Legal Aspects of Marketing in India Indian laws, which influence the marketing decision-making process in the business organizations. The provisions of the laws are explained and supported by the court judgments which has to be considered in marketing to understand the legal implications of their day-to-day or strategic decisions in product or service marketing. Marketing manager need not be a legal expert, but he should have enough knowledge about the laws of the land to avoid two things, one falling into the legal trap and two to face the consequences like imprisonment, penalty or defamation for himself and for the organization he is representing. Basics of law, various Indian Acts influencing marketing decisions and consumer rights. The major Acts like Consumer Protection Act, Competition Acts, Sales of Goods Act, Hire Purchase Act, Contract Act and Negotiable Instruments Act prominent. Intellectual Property Rights (i.e. patents, copyrights, trademarks, designs and geographical indications) covers various Indian Acts for protecting these rights in light of TRIPS provisions enforced through WTO (World Trade Organization) in the member countries. 4Ps of marketing (i.e. product, price, promotion and place) to cover the provisions of various Acts to curb the prevailing unfair and restrictive trade practices in marketing of goods and services. The book covers the e-Marketing legislation to curb the fraudulent practices in cyberspace. The 'marketing abuses need to be identified for winning the confidence of society and consumer in particular.

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Internet Marketing: Internet marketing, (also referred to as i-marketing, web-marketing, online-marketing, or e-Marketing, ) is the marketing of products or services over the Internet. The Internet has brought media to a global audience. The interactive nature of Internet marketing in terms of providing instant response and eliciting responses is a unique quality of the medium. Internet marketing is sometimes considered to have a broader scope because it not only refers to the Internet, e-mail, and wireless media, but it includes management of digital customer data and electronic customer relationship management (ECRM) systems. Internet marketing ties together creative and technical aspects of the Internet, including: design, development, advertising, and sales. Internet marketing is associated with several business models: e-commerce this is where goods are sold directly to consumers (B2C) or businesses (B2B) Publishing this is the sale of advertising lead-based websites this is an organization that generates value by acquiring sales leads from its website affiliate marketing this is process in which a product or service developed by one person is sold by other active seller for a share of profits. The owner of the product normally provide some marketing material (sales letter, affiliate link, tracking facility). Local internet marketing - this is the process of a locally based company traditionally selling belly to belly and utilizing the Internet to find and nurture relationships, later to take those relationships offline. blackhat marketing - this is a form of internet marketing which employs deceptive, less than truthful methods to drive web traffic to a website or affiliate marketing offer. This method sometimes includes spam, cloaking within search engine result pages, or routing users to pages they didn't initially request. Advantages 1. Relatively inexpensive 2. Can reach a wide audience 3. Allows consumers to research and purchase products 4. Convenience. 5. Bring results quickly. 6. Of measuring statistics easily and inexpensively. 7. Marketing campaign can be traced, measured, and tested. The advertisers can use a variety of methods: pay per impression, pay per click, pay per play, or pay per action. Therefore, marketers can determine which messages or offerings are more appealing to the audience. The results of campaigns can be measured and tracked immediately because online marketing initiatives usually require users to click on an advertisement, visit a website, and perform a targeted action. Such measurement cannot be achieved through billboard advertising, where an individual will at best be interested, then decide to obtain more information at a later time. Sections of Product/Brand Plan 1. Executive summary 2. Current marketing situation 3. Analysis of threats and opportunities 4. Objectives for the brand Marketing Department Organization Functional Organization Geographic Organization Product Management Organization Market or Customer Organization Combination

5. 6. 7. 8.

Marketing strategy Action programs Marketing budget Controls

Marketing Control Process Set Goals Measure Performance Evaluate Performance Take Corrective Action

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