Sales and Promotion of Agricultural Machineries Part I Introduction to Marketing 1.1.

Marketing Introduction Many large and small organizations seek success. Major factors contribute to making a business successful - strategy, dedicated employees, good information systems, excellent implementation. However, today's successful companies at all levels have one thing in common - they are strongly customer-focused and heavily committed to marketing. These companies share an absolute dedication to sensing, serving and satisfying the needs of customers in well-defined target markets. They motivate everyone in the organization to deliver high quality and superior value for their customers, leading to high levels of customer satisfaction. These organizations know that if they take care of their customers, market share and profits will follow. Marketing, more than any other business function, deals with customers. Creating customer value and satisfaction are at the very heart of modern marketing thinking and practice. Although we will explore more detailed definitions of marketing later in this chapter, perhaps the simplest definition is this one: Marketing is the delivery of customer satisfaction at a profit. The goal of marketing is to attract new customers by promising superior value, and to keep current customers by delivering satisfaction. Many people think that only large companies operating in highly developed economies use marketing, but some marketing is critical to the success of every organization, whether large or small, domestic or global. In the business sector, marketing first spread most rapidly in consumer packaged-goods companies, consumer durables companies and industrial equipment companies. Within the past few decades, however, consumer service firms, especially airline, insurance and financial services companies, have also adopted modern marketing practices. Business groups such as lawyers, accountants, physicians and architects, too have begun to take an interest in marketing and to advertise and to price their services aggressively.

Figure 1.1 Core marketing concepts What is Marketing? What does the term marketing mean? Marketing must be understood not in the old sense of making a sale - 'selling' - but in the new sense of satisfying customer needs. Many people think of marketing only as selling and advertising. And no wonder, for every day we are bombarded with television commercials, newspaper ads, direct mail and sales calls. Someone is always trying to sell us something. It seems that we cannot escape death, taxes or selling! Therefore, you may be surprised to learn that selling and advertising are only the tip of the marketing iceberg. Although they are important, they are only two of many marketing functions, and often not the most important ones. If the marketer does a good job of identifying customer needs, develops products that provide superior value, distributes and promotes them effectively, these goods will sell very easily. Peter Drucker, a leading management thinker, has put it this way: 'The aim of marketing is to make selling superfluous. The aim is to know and understand the customer so well that the product or service fits ... and sells itself. This does not mean that selling and advertising are unimportant. Rather, it means that they are part of a larger marketing mix - a set of marketing tools that work together to affect the marketplace. The American Marketing Association offers the following formal definition: Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stake holders. Coping with exchange processes calls for a considerable amount of work and skill. Marketing management takes place when at least one party to a potential exchange thinks about the means of achieving desired responses from other parties. We see marketing management as the art and science of choosing target markets and getting,

keeping, and growing customers through creating, delivering, and communicating superior customer value. Marketing can be defined as: 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:'' To explain this definition, we examine the following important terms: needs, wants and demands of products; Value and satisfaction; exchange, transactions and relationships; and markets. Figure 1.1 shows that these core marketing concepts are linked, with each concept building on the one before it. Marketing Core Concepts Needs States of felt deprivation, part of human makeup Physical and social needs Wants The form needs take (e.g. food => hamburger) Shaped by culture and personality Demands When wants are backed by buying power Products A product is any offering that can satisfy a need or want, such as one of the 10 basic offerings of goods, services, experiences, events, persons, places, properties, organizations, information, and ideas. Service: Any activity or benefit that one party can offer to another which is essentially intangible and does not result in ownership of anything. (Customer) Value: a ratio between what the customer gets and what he gives. The customer gets benefits and assumes costs. Is difference between value gained by owning and using a product and cost of obtaining the product. Value gained not necessarily monetary Similarly cost of obtaining not necessarily monetary Customers act on perceived value [and perceived cost] Customer satisfaction: The extent to -which a product's perceived performance matches a buyers expectations. If the product's performance falls short, of expectations, the buyer is dissatisfied. If performance matches or exceeds expectations the buyer is satisfied, or delighted. Quality: Is closely related to satisfaction Narrow definition: no defects Broad definition: ability to satisfy customer needs [circular definition!] Exchange: The act of obtaining a desired object from someone by offering something in return. Obtaining a desired object from someone by offering something in return Offerings could be money, product, service, ... Transaction: A trade between two parties that involves at least two things of value, agreed-upon conditions, a time of agreement and a place of agreement. A trade of values between two parties; marketing's unit of measurement! Monetary transactions and barter transactions

Relationship marketing: The process recreating, maintaining and enhancing strong, valuable relationships with customers and other stakeholders. Relationship marketing aims to build longterm mutually satisfying relations with key partiescustomers, suppliers, distributorsin order to earn and retain their long-termpreference and business. Marketing network company and all its supporting stakeholders Market Economist's definition Place (virtual or physical) where buyers and sellers meet Market Marketer's definition The set of actual and potential buyers of a product The sellers of a product are considered as the industry Industry Marketer's definition The sellers of a product 1.2. Marketing Management

Marketing management can be defined as the analysis, planning, implementation and control of programmes designed to create, build and maintain beneficial exchanges with target buyers for the purpose of achieving organizational objectives. Thus, marketing management involves managing demand, which in turn involves managing customer relationships. Most people think of marketing management as finding enough customers for the company's current output, but this is too limited a view. The organization has a desired level of demand for its products. At any point in time, there may be no demand, adequate demand, irregular demand or too much demand, and marketing management must find ways to deal with these different demand states. Marketing management is concerned not only with finding and increasing demand, but also with changing or even reducing it. Managing demand means managing customers. A company's demand comes from two groups: new customers and repeat customers. Beyond designing strategics to attract new customers and create transactions with them, companies are now going all out to retain current customers and build lasting customer relationships. Companies today are facing some new marketing realities. Changing demographics, a slowgrowth economy, more sophisticated competitors and overcapacity in many industries - all of these factors mean that there are fewer new customers to go around. Many companies are now fighting for shares of flat or fading markets. Thus, the costs of attracting new customers are rising. In fact, it costs five times as much to attract a new customer as it does to keep a current customer satisfied. Attracting new customers remains an important marketing management task. However, the focus today is shifting towards retaining current customers and building profitable, long-term relationships with them. The key to customer retention is superior customer value and satisfaction. 1.3. Consumer and Organizational Buying Behavior

1.3.1. Customers

Figure 1.2. Types of customer market The company must study its customer markets closely. Figure 1.2 shows six types of customer market. i. Consumer markets consist of individuals and households that buy goods and services for personal consumption. ii. Business markets buy goods and services for further processing or for use in their production process, whereas iii. Reseller markets buy goods and services to resell at a profit. iv. Institutional markets are made up of schools, hospitals, nursing homes, prisons and other institutions that provide goods and services to people in their care. v. Government markets are made up of government agencies that buy goods and services in order to produce public services or transfer the goods and services to others who need them. vi. International markets consist of buyers in other countries, including consumers, producers, resellers and governments. Each market type has special characteristics Chat call for careful study by the seller. At any point in time, the firm may deal with one or more customer markets: for example, Unilever has to communicate detergent brand benefits to consumers as well as maintaining a dialogue with retailers that stock and resell its branded products. 1.3.1. Consumer Buying Behavior Consumer buying behavior: the buying behavior of final consumers - individuals and households "who buy goods and services for personal consumption. Consumer market is a set of all the individuals and households who buy or acquire gvods and services fire personal consumption. The central question for marketers is; how do consumers respond to various marketing stimuli that the company might use? The company that really understands how consumers will respond to different product features, prices and advertising appeals has a great advantage over its competitors. Therefore, companies and academies have researched heavily the relationship between marketing stimuli and consumer response. Their starting point is the stimulus - response model of buyer behavior. This shows that marketing and other stimuli enter the consumer's 'black box1 and produce certain responses. Marketers must figure out what is in the buyer's black box.2 Marketing stimuli consist of the four Ps: product, price, place and promotion. Other stimuli

include significant forces and events in the buyer's environment; economic, technological, political and cultural. All these stimuli enter the buyer's black box, where they are turned into a set of observable buyer responses product choice, brand choice, dealer choice, purchase timing and purchase amount. The marketer wants to understand how the stimuli are changed into responses inside the consumer's black box, which has two parts. First, the buyer's characteristics influence how he or she perceives and reacts to the stimuli. Second, the buyer's decision process itself affects the buyer's behaviour. This chapter first looks at buyer characteristics as they affect buying behaviour, and then examines the buyer decision process. We will never know what exactly is in the black box or be able perfectly to predict consumer behaviour, but the models can help us imderstand consumers, help us to ask the right questions, and teach us how to influence them.

Figure 1.3 Model of consumer behavior Characteristics affecting consumer behavior Cultural factors Culture Most basic cause of wants and behavior, largely learned Cultural influences on buying behavior vary greatly Cultural shifts e.g. shift to concern for health => new market opportunities Subculture Groups of people with shared value systems based on common life experiences and situations such as nationalities, religions, ractial groups, geographic location Social class Society's relative permanent and ordered divisions Members share similar values, interests, and behavior Class is defined by a combination of occupation, income, eduaction, wealth, and other variables Social Factors Groups Membership groups Person belongs to, and has a direct influence on the person Reference groups Serve as points of comparison in forming attitudes or behavior Does not require membership in the group E.g. aspirational group a group to which the person wants to belong

Opinion leaders People in a reference group who because of some characteristics exert influence on others Family-most important buying organization

Roles and status Role = activities people are expected to perform according the the persons around them Status = reflects the general esteem given to role by society Personal factors Age and life-cycle stage Tastes in food, clothes, furniture etc are age related Occupation Blue collar => more rugged clothes, white collar => more business suits Economic situation Buying behavior affected by e.g. income/wealth and business cycle Lifestyle Activities (work, hobbies, shopping, sports, social events) Interests (food, fashion, family recreation) Opinions (about themselves, social issues, business, products), etc. Personality and self-concept Personality = unique psychologicla characteristics that lead to relatively consistent and lasting responses to one's own environment Self-concept = self-image = people's possessions contribute to and reflected their identities (we are what we have) Psychological factors Motivation Motive (drive) = need sufficiently pressing to direct the person to seek satisfaction Drive = strong internal stimulus that calls for action Motive = drive actualized towards a stimulus object Cues = minor stimuli, determine where, when, and how persons responds Beliefs and attitudes Belief = descriptive thought that a person has about something can be Business Markets The business market consists of all the organizations that buy goods and services to use in the production of other products and services that are sold, rented or supplied to others. It also includes retailing and wholesaling firms that acquire goods for the purpose of reselling or renting them to others at a profit. The business buying process is the decision-making process by which business buyers establish the need for purchased products and services, and identify, evaluate and choose among alternative brands and suppliers.2 Companies that sell to other business organizations must do their best to understand business markets and business buyer behaviour. Characteristics of Business Markets In some ways, business markets are similar to consumer markets. Roth involve people who assume buying roles and make purchase decisions to satisfy needs. However, business markets differ in many ways from consumer markets. The main differences are in market structure and demand, the nature of the buying unit, and the types of decision and the decision process involved. Market Structure and Demand

The business marketer normally deals with far fewer but far larger buyers than the consumer marketer does. Business markets are also more geographically concentrated. Further, business demand is derived demand - it ultimately derives from the demand for consumer goods. Mercedes buys steel because consumers buy cars. Many business markets have inelastic demand: that is, total demand for many business products is not affected much by price changes, especially in the short run. Finally, business markets have more fluctuating demand. The demand for many business goods and services tends to change more Nature, of the Buying Unit Compared with consumer purchases, a business purchase usually involves more buyers and a more professional purchasing effort. Often, business buying is done by trained purchasing agents, who spend their working lives learning how to buy well. The more complex the purchase, the more likely that several people will participate in the decision-making process. Buying committees made up of technical experts and top management are common in the buying of primary goods. Therefore, business marketers must have well-trained salespeople to deal with well-trained buyers.

Figure 7.2 A model of business buyer behavior Model for buying behavior The environment Marketing stimuli Product, price, place, promotion Other stimuli Economic, technological, political, cultural, competetive The buying organization The buying center = people participating in buying process Buying decision process Influences from the rest of the organization Buyer responses Product or service choice Supplier choice Order quantities

 Delivery terms and times Service terms Payment

Major types of buying situations i. Straight rebuy buyer reorders without modification, based on past satisfaction => very few participants ii. Modified rebuy buyer wants to modify product specifications, price, terms, or suppliers => involves more participants iii. New-task first time purchase => the riskier and larger the purchase, the more participants Participants in the business buying process Users who will use the product or service Influencers help define specifications, e.g. technical personnel Buyers formal authority, major role in selecting and negotiating, influence specifications slightly Deciders formal or informal power to select or approve final suppliers; in routine buying often same as buyers Gatekeepers control the flow of information between participants, e.g. purchasing agents have authority to prevent seller from seeing the buyer Major challenge Roles sometimes difficult to recognize Highest rank not necessarily same as highest influence 1.3.1 Marketing mixes Marketing Mix Marketers use numerous tools to elicit the desired responses from their target markets. These tools constitute a marketing mix: Marketing mix is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market. Ps of marketing: product, price, place, and promotion. Marketing-mix decisions must be made to influence the trade channels as well as the final consumers. Typically, the firm can change its price, sales-force size, and advertising expenditures in the short run. However, it can develop new products and modify its distribution channels only in the long run. Thus, the firm typically makes fewer period-to-period marketingmix changes in the short run than the number of marketing- mix decision variables might suggest. Robert Lauterborn suggested that the sellers four Ps correspond to the customers four Cs. Four Ps Four Cs Product Customer solution Price Customer cost Place Convenience Promotion Communication

Winning companies are those that meet customer needs economically and conveniently and with effective communication.

1.1.1. Market Segmentation, Targeting and Positioning Market segmentation The traditional argument for mass marketing is that it creates the largest potential market, which leads to the lowest costs, which in turn can translate into either lower prices or higher margins. However, many factors now make mass marketing more because... Customers too scattered Customers too varied in buying practices Companies vary in their ability to serve a segment Firms are focusing on the buyers who have greater interest in the values they create best (rifle approach in contrast to shotgun approach) Market segmentation means dividing a market into distinct groups of buyers with different needs, characteristics or behaviours, who might require separate products or marketing mixes.

The company identifies different ways to segment the market and develops profiles of the resulting market segments. Market targeting involves evaluating each market segment's attractiveness and selecting one or more of the market segments to enter. Market positioning is setting the competitive positioning for the product and creating a detailed marketing mix. We discuss each of these steps in turn. Markets consist of buyers, and buyers differ in one or more ways. They may differ in their wants, resources, locations, buying attitudes and buying practices. Through market segmentation, companies divide large, heterogeneous markets into smaller segments that can be reached more efficiently with products and services that match their unique needs. In this section, we discuss seven important segmentation topics: levels of market segmentation, segmenting consumer markets, segmenting business markets, segmenting international markets, multivariate segmentation, developing market segments and requirements for effective segmentation.

Segmentation
3. Identify bases for segmenting the market 4. Develop profile of resulting segments

Targeting
5. Develop measures of segments attractiveness 6. Select the target segment(s)

positioning
1. Develop positioning for each target segment 2. Develop marketing mix for each target segment

Levels of segmentation Mass marketing Mass producing, distributing, and promoting the same product to all consumers Argument: largest potential market => lowest costs => low prices or high profits Nowadays problematic because of (a) splintering of consumer segments and (b) proliferation of distribution channels and advertising media Segment marketing Broad segment, adapt offering to closely match the needs of the market Benefits market more efficiently, only consumers it can serve best, fine-tune products/prices/programs, face fewer competitors Niche marketing Focus on subgroups within segments = Narrowly defined segment, or a sub segment of a segment Normally only one or a few competitors Opportunity for small companies Customers need to be willing to pay a price premium In todya's markets, niches are the norm

Micromarketing Local marketing Cities, neighborhoods, specific stores E.g. Citibank offers customized banking services to different neighborhoods May have problems reduce economies of scale, logistics problems, dilution of brand image Individual marketing = one-to-one or customized marketing, markets-of-one marketing Mass customization moden technology allows for efficient production of customized products, e.g. Dell Computer Market targeting Evaluating market segments Segment size and segment growth Right size and growth rate Structural factors competitors and substitutes Relative power of buyers and suppliers Note: largest size or growth not necessarily most desirable a small company might aim for a segment with less absolute size or growth if it has less competitors Company objectives and resources Company should have strengths that can provide basis for competing in the segment => offer superior value and gain advantage over competitors Selecting market segments Target market = set of buyers who share common needs or characteristics that the company decides to serve Market coverage strategies Undifferentiated marketing = mass marketing Focus on what is common in all buyers, appeal to that Mass distribution, mass marketing, etc Often difficult to compete with focused competitors Differentiated marketing Target several segments and design separate offers for each Claim developing a stronger position within several segments creates more total sales than undifferentiated marketing across all segments Concentrated marketing Firm goes after a large share of one or a few segments / niches Shared marketing mix for all segments Attractive when resources are limited Choosing a coverage strategy is based on: Company resources limited => concentrated Product variability low => undifferentiated Product life cycle stage => undifferentiated in the beginning Market variability (how differentiated market?) - low => undifferentiated Competitors' marketing strategy => if competitors already using differentiated or concentrated marketing, undifferentiated may be suicidal Positioning Product position = The way the product is defined by consumers on important attributes

The place the product occupies in the consumers' minds relative to competing products Consumers simplify their buying process by categorizing => positioning Choosing a positioning strategy 1) Identifying a set of possible competitive advantages to build on 2) Choosing the right competitive advantages 3) Selecting an overall positioning strategy The company must then communicate and deliver the chosen position to the market