Marketing Management

Swati Sisodia swati.sisodia@nmims.edu

Introduction to Marketing

What is Marketing ?
Marketing is the management process that identifies, anticipates and satisfies customer requirements profitably

What is marketing?
The right product, in the right place, at the right time, and at the right price

What is marketing ?
Marketing is the human activity directed at satisfying human needs and wants through an exchange process

Management definition
It 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 goals.

What is Marketed?
Goods Services Events Experiences Persons Places Properties Organizations Information Ideas

Implications of Marketing
Who are our existing/potential customers? What are their current/future needs? How can we satisfy these needs/ Can we offer a product/service that the customer would value? Can we communicate with our customers? Can we deliver a competitive product or service? Why should customers buy from us?

CUSTOMER VALUE AND SATISFACTION

Customer Value & Customer Cost

Customer value Customer cost Is the bundle of costs customers expect to incur in evaluating, obtaining, and using the product or service

Is the bundle of benefits customer expect from a given product or service

Total Customer Cost is the summation of: -Monetary Cost -Time Cost -Energy Cost -Psychic Cost

Customer Satisfaction
Is a persons feelings of pleasure or disappointment resulting from comparing a products perceived performance in relation to his or her expectations

Maximizing Customer Lifetime Value

The key to retaining customers is relationship marketing Losing profitable customers can dramatically affect a firms profits. The cost of attracting a new customer is estimated to be five times the cost of keeping a current customer happy Cultivating Customer Relationships Customer Relationship Management (CRM)

CONSUMER BEHAVIOUR

Definitions, concepts and Interpretations

. Consumer behavior may be defined as: .... . the decision process and physical activity individuals engage in when evaluating, acquiring, using, or disposing of goods and services Definitions of the consumer and the customer vary from context to context...
Consumption based understanding

- Consumers are the individuals engaged in the final act of using the good - Customers may be merely buying the good for the consumer
Consumer Customer + Consumer Customer

Participants in buying process

Purchase process

Initiator

Influencer

Decider

Buyer

User

The person who identifies the products need

The person who decides the process brand of purchase

One who decides

The person who physically procures

The person who applies

The five dimensions of consumer behaviour

Psychology Study of the behavior and mental processes of individuals

Sociology Study of the collective behavior of people in groups

Social psychology Study of how individuals influence and are influenced by groups

Economics Study of people's production, exchange, and consumption of goods and services

Anthropology. Study of people in relation to their culture

Developing Marketing Strategy

Where are we going and how will we get there?

Benefits of Strategy
Coordinate efforts of entire company Specify what resources will go where Leads to superior market position

Elements of product strategy

Objective(s) for product Strategic alternatives Customer target(s) Core strategy Supporting marketing mix Supporting functional program

Setting objectives
Where do we want to go with the product?
Growth
Sales revenues Market share

Profitability
Cash flow Maximize stock value

Quality
Brand equity Satisfaction

All the above

Elements of objectives
Clearly quantified Challenging but doable Specific time frame

Market Segmentation, Targeting, and Positioning

Definition.
Segmentation is the process of classifying customers into groups which share some common characteristic Targeting involves the process of evaluating each segments attractiveness and selecting one or more segments to enter Positioning is arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the mind of the consumer

Advantages of segmentation as a process . . .

The closer matching of a companys products and capabilities with customers needs and more specifically, directing resources to the most potentially profitable segments

A greater understanding of how to most effectively communicate with

customers in the market, including quantifying the responses of segments already established An insight into the first signs of behavioural changes of consumers, allowing for such things as product repositioning The identification of new product/service opportunities from segments that have not been previously exploited , although marketing research oriented toward this area has been limited Improving strategy by not competing head on with larger organisations with superior resources
Dr.Deshpande : Market segmentation 4

Steps in Market Segmentation, Targeting & Positioning

Market Segmentation Market Targeting Market Positioning

1. Identify segmentation variables and segment the market. 2. Develop profiles of resulting segments

3. Evaluate attractiveness of each segment 4. Select the target segment(s)

5. Identify possible positioning concepts for each target segment 6. Select, develop, and communicate the chosen positioning concept

Dr.Deshpande : Market segmentation

Basis for Segmenting Consumer Markets

Geographic
Nations, states, regions or cities

Demographic
Age, gender, family size and life cycle,

Psychographic
Social class, lifestyle, or personality

Behavioral
Occasions, benefits, uses, or responses

Dividing markets

A logical base set for segmentation

Dr.Deshpande : Market segmentation

Requirements for Effective Segmentation

Measurable Measurable
Size, purchasing power, profile of segments can be measured. Segments must be effectively reached and served. Segments must be large or profitable enough to serve. Segments must respond differently to different marketing mix elements & actions. Must be able to attract and serve the segments.

Accessible

Accessible

Substantial Differential Actionable

Market Targeting
Once the firm has identified its marketsegment opportunities, it has to decide how many and which ones to target
Decisions relating to segment targeting are taken on the growth/ risk parameters

Criteria for well chosen markets Can be defined with some precision, a niche Well timed, within market window Customers accessible Growing fast enough Not owned by one established vendor Expansion paths to other niches Well suited to strengths

Criteria for poorly chosen markets Vague Too large Premature, or too late No clear way to reach customers Static or declining Already owned by others Not suited to strengths

Dr.Deshpande : Market segmentation

10

Product Differentiation

Form

Features

Performance

Quality

Conformance Quality

Durability

Reliability

Repair-ability Style

Design

Dr.Deshpande : Market segmentation

16

Positioning Basis
Attribute

Positioning is
the act of designing the companys offering and image to occupy a distinctive place in the target markets mind relative to competitors Positioning Basis

Price and Quality

Use or Application

Product User

Competitor

Product management

Product assortment Product dynamics Breadth

Number of different product lines

HLL perspective

Length
Total number of items the company carries

Depth
Number of versions offered of each product in the line HLL: Toothpaste has close-up as a brand with Blue and Red variants

Consistency
Closeness of end use, production etc.

HLL: Detergents, cosmetics, Toiletries, Food etc..

HLL: Detergents category, Surf & Wheel

HLL: Detergent manufacturing process is the same for all brands

The product life cycle

A typical case

Sales and Profits (Rs)

Sales

Profits Introduction Growth Time Maturity Decline

Product Development

Losses/ Investments (Rs)

Exercise Which phase of product life cycle shall we place the following products?
1. 2. 3. 4. Desktop Laptop Mobile Tablet PC

Creating reputation
A brand is name, term, sign, symbol or design or a combination of them used to signal value and differentiate offerings

Branding

Product brands Fevicol from Pidilite

Single brands

Corporate brands

Tatas , L&T etc

Umbrella brands

Multi brands

Lux, Dove , Liril all brands of soap from Hindustan Lever

Park Avenue for personal grooming products

Pricing Strategies
Pricing strategy will depend mainly on Targeted segment Expected positioning Growth plans Profitability expectation etc.

Pricing Strategy
how does a company decide what price to charge for its products and services? what is the price anyway? doesnt price vary across situations and over time? some firms have to decide what to charge different customers and in different situations they must decide whether discounts are to be offered, to whom, when, and for what reason

Market Entry Pricing Strategies

Market-Skimming Pricing: Setting a high initial price for a new product. Works if product is new, distinctive and desired Early in Product Life Cycle, when demand inelastic Protected by entry barriers, e.g. patents Market-Penetration Pricing: Setting a low initial price for a new product. Works if large market, elastic demand Economies of scale are possible Fierce competition

Discounts and Allowances

Quantity discount: The more you buy, the cheaper it becomes-cumulative and non-cumulative. Trade discounts: Reductions from list for functions performed-storage, promotion. Cash discount: A deduction granted to buyers for paying their bills within a specified period of time, (after first deducting trade and quantity discounts from the base price)

Everyday Low Price (EDLP) vs. High/Low Pricing

In EDLP pricing, a retailer charges a constant, low price with no temporary discounts. For example: Wal-Mart, Big Bazar D Mart In high-low pricing, a retailer charges higher prices but then runs frequent promotions in which prices are temporarily lowered.

Pricing strategies & tactics

Skimming Launching with a high price when there is little competition, then reducing the price later. Often used with technology. Low price charged initially to penetrate the market and build brand loyalty; price is then increased e.g. introductory offers on magazines. A similar price is charged to that of competitors products. A price is set which customers perceive as lower than it is e.g. Rs 39 instead of Rs40.

Penetration

Competitive Psychological

ACTIVITY

How should you price if your product is a lifesaving drug?

Marketing Mix
The marketing mix principles are controllable variables which have to be carefully managed and must meet the needs of the defined target group. All elements of the mix are Linked and must support each other.

PRODUCT Product refers to the functions and features of a good or service Should satisfy the needs of the customer May have a Unique Selling Proposition (USP) Product also includes a range of factors such as packaging, quality, warranties, after-sales service and branding

PRICE The price of a product will depend on: The cost to make it The amount of profit desired Other objectives of the business The price competitors charge The price customers are willing to pay Is there a high demand? Is demand sensitive to changes in price?

PLACE Products should be conveniently available for customers to buy

PROMOTION The aims of promotion are to: Raise awareness Encourage sales Create or change a brand image Maintain market share

The use of e-commerce (promoting and selling on the internet) has grown massively over the last few years

Extended Marketing Mix

Service industry

Channels of distribution
Manufacturers Wholesaler Retailer Consumer

Promotion Strategy
Above-the-line promotion This uses advertising media over which a firm has no direct control e.g. television, radio and newspapers Below-the-line promotion This uses promotional media which the firm can control e.g. direct mail, sales promotions and sponsorship

Marketing Communications
Communication by marketers that informs, persuades, and reminds potential buyers of a product in order to influence an opinion or elicit a response not only informs, but is also used
Purposes of Marketing Communications to differentiate the sellers products/services Informs, persuades and reminds Is part of the marketing mix Includes all the means by which a company communicates directly with potential customers. Atempts to influence feelings, beliefs, or behaviour.

Marketing Communication Methods

Personal selling: The direct presentation of a product to a prospective customer by a representative of the selling organization. Advertising: A paid, impersonal mass communication with a clearly-identified sponsor. Sales promotion: Demand-stimulating activity designed to supplement advertising and facilitate personal selling. Publicity: A special form of public relations that involves news stories about an organization or its products. Public relations: A planned communication effort by an organization to contribute to generally favourable attitudes and opinions toward an organization and its products.

BCG Matrix

BCG MATRIX

MARKET SHARE
Market share is the percentage of the total market that is being serviced by your company, measured either in revenue terms or unit volume terms.

RELATIVE MARKET SHARE

RMS = Business unit sales this year Leading rival sales this year The higher your market share, the higher proportion of the market you control.

MARKET GROWTH RATE

Market growth is used as a measure of a markets attractiveness. MGR = Individual sales - individual sales this year last year Individual sales last year Markets experiencing high growth are ones where the total market share available is expanding, and theres plenty of opportunity for everyone to make money.

THE BCG GROWTH-SHARE MATRIX

It is a portfolio planning model which is based on the observation that a companys business units can be classified in to four categories: Stars Question marks Cash cows Dogs It is based on the combination of market growth and market share relative to the next best competitor.

STARS
High growth, High market share
Stars are leaders in business. They also require heavy investment, to maintain its large market share. It leads to large amount of cash consumption and cash generation. Attempts should be made to hold the market share otherwise the star will become a CASH COW.

CASH COWS Low growth , High market share

They are foundation of the company and often the stars of yesterday. They generate more cash than required. They extract the profits by investing as little cash as possible They are located in an industry that is mature, not growing or declining.

DOGS
Low growth, Low market share

Dogs are the cash traps. Dogs do not have potential to bring in much cash. Number of dogs in the company should be minimized. Business is situated at a declining stage.

QUESTION MARKS
High growth , Low market share

Most businesses start of as question marks. They will absorb great amounts of cash if the market share remains unchanged, (low). Why question marks? Question marks have potential to become star and eventually cash cow but can also become a dog. Investments should be high for question marks.

WHY BCG MATRIX ?

To assess : Profiles of products/businesses The cash demands of products The development cycles of products Resource allocation and divestment decisions

MAIN STEPS OF BCG MATRIX

Identifying and dividing a company into SBU. Assessing and comparing the prospects of each SBU according to two criteria : 1. SBUS relative market share. 2. Growth rate OF SBUS industry. Classifying the SBUS on the basis of BCG matrix. Developing strategic objectives for each SBU.

BENEFITS
BCG MATRIX is simple and easy to understand. It helps you to quickly and simply screen the opportunities open to you, and helps you think about how you can make the most of them. It is used to identify how corporate cash resources can best be used to maximize a companys future growth and profitability.

LIMITATIONS
BCG MATRIX uses only two dimensions, Relative market share and market growth rate. Problems of getting data on market share and market growth. High market share does not mean profits all the time. Business with low market share can be profitable too.

Exercise
Lets work out the BCG model for Maruti Suzuki

Though BCG MATRIX has its limitations it is one of the most FAMOUS AND SIMPLE portfolio planning matrix , used by large companies having multi-products.