MM Notes

MARKETING MANAGEMENT 14MBA15
MARKETING MANAGEMENT
Subject Code: 14MBA15 IA Marks: 50
No. of Lecture Hours / Week: 04 Exam Hours: 03
Total Number of Lecture Hours: 56 Exam Marks: 100
Practical Component: 01 Hour / Week
Objectives:
1. To provide students an insight to basic concepts of marketing management.
2. To help students understand various marketing tools/models for solving marketing problems in the
changing business environment.
3. To understand fundamental premise underlying market driven strategies.
Module 1: (8 hours)
Introduction to Marketing: Introduction, Definitions of market and marketing, The Exchange Process,
Elements of Marketing Concept, Functions of Marketing, Old Concept or Product- oriented Concept, New
or Modern or Customer- oriented Concept, Marketing Environment, Techniques used in environment
analysis, Characteristics (Micro and Macro), Marketing to the 21st century customer
Module 2: (8 hours)
Consumer Behaviour Analysis: Meaning and Characteristics, Importance, Factors Influencing Consumer
Behaviour, Consumer Purchase Decision Process, Buying Roles, Buying Motives, Buyer Behaviour
Models
Module 3: (8 hours)
Market Segmentation, Targeting & Positioning: Concept of Market Segmentation, Benefits, Requisites of
Effective Segmentation, Bases for Segmenting Consumer Markets, Market Segmentation Strategies.
Targeting - Bases for identifying target Customer target Marketing strategies,
Positioning - Meaning, Product Differentiation Strategies, Tasks involved in Positioning.
Branding - Concept of Branding, Types, Brand Equity, Branding strategies.
Module 4: (8 hours)
Managing the Product: Concept, product hierarchy, product line, product mix, product mix strategies,
Product life cycle and its strategies, New Product Development, packing as a marketing tool, Role of
labelling in packing.
Module-5 (8 hours)
DEPT OF MBA, SJBIT Page 1

Pricing decisions: Significance of pricing, factor influencing pricing (Internal factor and External factor),
objectives, Pricing Strategies-Value based, Cost based, Market based, Competitor based, Pricing Procedure.
Marketing Channels: Meaning, Purpose, Factors Affecting Channel Choice, Channel Design, Channel
Management Decision, Channel Conflict, Designing a physical Distribution System, Network Marketing,
Module 6: (10 hours)
Integrated Marketing communication: Meaning and Importance of Marketing Communication,

Communication Objectives, Steps in Developing Effective Communication Advertising - Objectives, Ad
Budget, AIDA Model, Advertising Copy Deciding Media, Evaluating Advertising Effectiveness,
Sales Promotion - Kinds of Promotion, Tools and Techniques of Sales Promotion, Push and Pull Strategies
Personnel Selling - Concept, Features, Functions, and Steps involved in personal Selling. Publicity -
Meaning, Objectives, Types, Functions of Public relations,
Direct Marketing - Meaning, Features, Functions, Basic Concepts of E-Commerce, E-Business
Module 7: (6 hours)
Marketing Planning: Meaning, Concepts, Steps involved in marketing planning, Marketing Audit-
Meaning, Feature, Various components of Marketing Audit
Marketing Strategy-Analysis of Industry and Competition, Strategic Planning Process,
Case Studies of Indian Context
Practical Components
1. Analyze Product Life Cycle of few Products like-Electronic goods, Computers.
2. Analyze Packaging strategies used by FMCG companies
3. Analyze Marketing strategies/planning used by automobile cosmetic and FMCG companies

TABLE OF CONTENTS
MODULE NO CONTENT PAGE NO
1 Introduction to Marketing 4-31
2 Consumer Behaviour Analysis 32-46
3 Market Segmentation, Targeting & Positioning 47-63
4 Managing the Product: 64-79
5 Pricing decisions 80-103
6 Integrated Marketing communication 104-144
7 Marketing Planning, Marketing Audit & 145-163

Marketing Strategy

Module 1:
INTRODUCTION TO MARKETING MANAGEMENT

Far reaching changes have been taking place in the Indian economy during the recent past,
consequent to the opening up of our economy through globalization policies. The floodgates have
been thrown open to allow international competition for manufactured goods as well as services,
making it a question of survival of the fittest in any industry.
In the present highly competitive economy, which can be called a buyer’s market, it is the customer
who wields full power. He can make or wreck a company. No wonder that the collective battle cry
from sales and marketing people, retailers, wholesalers and advertising wizards alike is now ‘serve
the customer’ or ‘Delight the customer’. The customer who was considered the ‘king’ is now
treated almost like ‘God’, emulating the highly successful marketing people of Japan.
Market
A market is the group of potential customers with similar needs who are willing to exchange
something of value with sellers.
Introduction:
Marketing is about identifying and meeting human and social needs. One of the shortest good definitions
of marketing is “meeting needs profitably”.
The American Marketing Association offers the following formal definition: “Marketing is an
organisational function and a set of process for creating communicating and delivering value to customers
and for managing customer relationships in ways that benefit the organisation and its stakeholders”
“Marketing is a societal process by which individuals and groups obtain what they need and want through
creating, offering and freely exchanging products and services of value with others”
Features of Marketing Management
It Combines the Fields of Marketing and Management
As the name implies, marketing management combines the fields of marketing and management. Marketing
consists of discovering consumer needs and wants, creating the goods and services that meet those needs
and wants; and pricing, promoting, and delivering those goods and services. Doing so requires attention to
six major areas - markets, products, prices, places, promotion, and people.

Management is getting things done through other people. Managers engage in five key activities - planning,
organizing, staffing, directing, and controlling. Marketing management implies the integration of these
concepts.
Marketing Management is a Business Process
Marketing management is a business process, to manage marketing activities in profit seeking and nonprofit
organisations at different levels of management, i.e. supervisory, middle-management, and executive
levels. Marketing management decisions are based on strong knowledge of marketing functions and clear
understanding and application of supervisory and managerial techniques. Marketing managers and product
managers are there to execute the processes of marketing management. We, as customers, see the results of
such process in the form of products, prices, advertisements, promotions, etc.
Marketing Management is Both Science and Art
“Marketing management is art and science of choosing target markets and getting, keeping and growing
customers through creating, delivering and communicating superior customer value.” (Kotler, 2006).
Marketing management is a science because it follows general principles that guides the marketing
managers in decision making. The Art of Marketing management consists in tackling every situation in a
creative and effective manner. Marketing Management is thus a science as well as an art.
Nature of Marketing
1. Marketing is an Economic Function

Marketing embraces all the business activities involved in getting goods and services, from the
hands of producers into the hands of final consumers. The business steps through which goods
progress on their way to final consumers is the concern of marketing.
2. Marketing is a Legal Process by which Ownership Transfers

In the process of marketing the ownership of goods transfers from seller to the purchaser or from
producer to the end user.
3. Marketing is a System of Interacting Business Activities

Marketing is that process through which a business enterprise, institution, or organisation interacts
with the customers and stakeholders with the objective to earn profit, satisfy customers, and
manage relationship. It is the performance of business activities that direct the flow of goods
and services from producer to consumer or user.

4. Marketing is a Managerial function

According to managerial or systems approach - "Marketing is the combination of activities
designed to produce profit through ascertaining, creating, stimulating, and satisfying the needs
and/or wants of a selected segment of the market."
According to this approach the emphasis is on how the individual organization processes
marketing and develops the strategic dimensions of marketing activities.
5. Marketing is a social process

Marketing is the delivery of a standard of living to society. According to Cunningham and
Cunningham (1981) societal marketing performs three essential functions:-
1. Knowing and understanding the consumer's changing needs and wants;
2. Efficiently and effectively managing the supply and demand of products
and services; and
3. Efficient provision of distribution and payment processing systems.
6. Marketing is a philosophy based on consumer orientation and satisfaction
7. Marketing had dual objectives – profit making and consumer satisfaction
The Scope of Marketing
Marketing: typically seen as the task of creating, promoting, and delivering goods and services
to consumers and businesses.
 Places  Goods
 Properties  Services
 Organizations  Experiences
 Information  Events
 Ideas  Persons

EXPERIENCES
By orchestrating several services and goods, a firm can create, stage, and market experiences. Walt Disney
World’s Magic Kingdom/Wonderla allows customers to visit a fairy kingdom, a pirate ship, or a haunted
house. There is also a market for customized experiences, such as a week at a baseball camp with retired
baseball greats, a four-day rock and roll fantasy camp, or a climb up Mount Everest.
PERSONS
Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, and other professionals all get
help from celebrity marketers. Some people have done a masterful job of marketing themselves—A.R.
Rehman, Amitabh Bachchan, Sachin Tendulkar, a master at self-branding, has advised each person to
become a “brand.”
PLACES
Cities, states, regions, and whole nations compete to attract tourists, residents, factories and company
headquarters. Place marketers include economic development specialists, real estate agents, commercial
banks, local business associations, and advertising and public relations agencies.
PROPERTIES
Properties are intangible rights of ownership to either real property (real estate) or financial property (stocks
and bonds). They are bought and sold, and these exchanges require marketing. Real estate agents work for
property owners or sellers, or they buy and sell residential or commercial real estate. Investment companies
and banks market securities to both institutional and individual investors. Eagle Resorts, Golden Palm
Resorts etc.
ORGANIZATIONS
Organizations work to build a strong, favorable, and unique image in the minds of their target publics. In
the United Kingdom, Tesco’s “Every Little Helps” marketing program reflects the food marketer’s attention
to detail in everything it does, within the store and in the community and environment. The campaign has
vaulted Tesco to the top of the UK supermarket chain industry. Universities, museums, performing arts
organizations, corporations, and nonprofits all use marketing to boost their public images and compete for
audiences and funds.
INFORMATION
The production, packaging, and distribution of information are major industries. Information is essentially
what books, schools, and universities produce, market, and distribute at a price to parents, students, and
communities.
The former CEO of Siemens Medical Solutions USA, Tom McCausland, says, “[our product] is not
necessarily an X-ray or an MRI, but information. Our business is really health care information technology,
and our end product is really an electronic patient record: information on lab tests, pathology, and drugs as
well as voice dictation.”

Charles Revson of Revlon once observed: “In the factory we make cosmetics; in the drugstore we sell
hope.” Products and services are platforms for delivering some idea or benefit.
Evolution of Marketing
Phillip Kotler categorized the five major marketing eras that have evolved throughout time. Some
of the concepts developed in each era are still around today, and marketing concept remnants from
each era compete with each other as organizations conduct their marketing activities.
The Production Era
One of the oldest concept eras, it holds that consumers will favor those products that are widely
available and low in cost. Managers of production-oriented organizations concentrate on achieving
high production efficiency and wide distribution.
The Product Era
This era brought about marketing beliefs that consumers will favor those products that offer the
most quality, performance or innovative features. Marketing managers focus on making superior
products and improving them over time.
Although both production and product are important in the overall mix of healthy marketing, there
can be a problem with the remnants of both the production and product era, as they can lead to a
symptom called marketing myopia. Production- or product-oriented companies tend to design their
product with little or no customer input, as with some car manufacturers and many insurance and
financial products providers. No wonder they are such a hard sell. There is a danger with
developing a love affair with your production efficiency or product and not realizing that the
marketplace may be less turned on. Marketing managers become victims of the “better mouse
trap” fallacy, believing that a better mouse trap will lead people to their door.
The Selling/Sales Era
During this era, the primary marketing concept belief held that consumers if left alone would not
buy enough of the organization’s products; therefore, the organization must undertake an
aggressive selling and promotion effort. The selling concept assumes that the consumer must be
coaxed into buying. It also assumes that the organization has effective selling and promotional

tools to stimulate more buying. Today, this concept is still practiced most aggressively with
unsought goods, such as insurance, funeral plots and even fundraising activity by non-profit
groups. These industries have perfected various sales techniques to locate prospects and hard sell
them on their product benefits. Most firms practice the selling concept when their aim (knowingly
or unknowingly) is to sell what they make rather than make what the market wants.
In today’s competitive environment, most markets are buyer markets and sellers have to scramble
hard for customers. Prospects are bombarded with commercials, print ads, direct mail,
telemarketing and sales calls. At every turn, someone is trying to sell you something.
Unfortunately, as a result, the public often identifies marketing with hard selling and advertising.
Marketing based on hard selling is unhealthy and carries high risks, especially customer
dissatisfaction.
It is a surprise to most people when they learn that selling is not the most important part of healthy
marketing. Selling is only one part, be it an integral part, of the marketing mix. As management
and marketing guru Peter Drucker states: “There will always, one can assume, be a need for some
selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know
and understand the customer so well that the product or service fits him and sells itself. Ideally,
marketing should result in a customer who is ready to buy. All that should be needed then is to
make the product or service available.”
The Marketing Era
Evolving from and challenging the first three concept eras of marketing, this era holds that the key
to achieving organizational goals consists of being more effective than your competitors in
integrating and coordinating marketing activities toward determining and satisfying the needs and
wants of your target markets.
Marketing guru and Professor Theodore Levitt states, “Selling focuses on the needs of the seller,
marketing on the needs of the buyer. Selling is preoccupied with the seller’s need to convert his
product into cash; marketing with the idea of satisfying the needs of the customer by means of the
product and the whole cluster of things associated with creating, delivering and finally
consumering it.”
The marketing concept is the foundation of healthy marketing and rests on four pillars: target
market, customer needs, integrated marketing and profitability. The selling era concept takes an

inside-out perspective. It starts with the factory, focuses on the company’s existing products or
services and calls for heavy hitting selling and promotion to produce profitable sales. Unlike the
selling concept, the healthier modern era marketing concept takes an outside-in perspective.
Starting with a well-defined market, it focuses on customer needs, integrates all the activities that
will affect customers and produces profits by satisfying customers
The Societal Marketing Era
The newest to evolve, it holds that the organization’s task is to determine the needs, wants and
interests of target markets and to deliver the desired satisfaction more effectively and efficiently
than competitors in a way that preserves or enhances the consumers’ and the society’s well-being.
Cause-related marketing is a version of the societal marketing concept. A growing number of
companies are using cause-related marketing. Organizations run cause- related marketing
campaigns for several purposes: to enhance their corporate image, thwart negative publicity, pacify
consumer groups, launch a new product or brand, broaden their customer base and/or generate
incremental sales.
This concept calls for marketers to really balance three considerations: company profits, consumer
want and satisfaction, and public interest.
Various Marketing Orientation or Concepts
The marketing function or activities are conducted by various companies based on six
alternative concepts or orientations. They are:
1. The production concept
2. The product concept
3. The selling concept
4. The marketing concept
5. The customer concept
6. The societal marketing concept
1. The Production Concept
The production concept believes that consumers will favour products that are readily
available at reasonable prices. Improvement in production and distribution efficiency will be the
focus for managements under this concept. When the demand for a product exceeds the supply,

manufacturers have to increase production. When the product’s cost is too high, the management
has to bring it down to affordable levels.
In the example of Ford car model T, Henry Ford believed that if cost is reduced, more
people would buy it. Ford did not have any concern about customers’ preferences and joked that
the customer can have any colour for the car, provided it was black. The production concept,
through useful in some situations, could result in ‘marketing myopia’, according to Theodore
Levitt. Companies following this concept focus too narrowly on their own activities and lose sight
of the real objective of customer’s need satisfaction.
For example, In India the Indian Telephone Industry (ITI) earlier has a monopoly, and was
producing only black coloured telephone instruments. At present, due to competitors entering the
market, we can have any colour for our instruments. Similarly, household electrical appliances
like fridge, washing machine, microwave oven, etc., were available only in white colour (and
were, therefore, called ‘white goods’). Now we have a choice of different colours.
2. The Product Concept
The product concept believes that consumers will favour products that offer the most in
quality, performance, and innovative features. Continuous improvements in product and quality
are essential for companies that follow this concept. They believe that if they build better mouse
trap, the world will beat a path to their door. Actually, the consumers may want a better solution
to the mouse problem and not a better mousetrap. So, product concept may also lead to marketing
myopia.
3. The Selling Concept
The selling concept believes that consumers will not buy enough of the company’s products
unless it undertakes pressure selling tactics and heavy promotion efforts. Buyers are believed to
have a buying inertia. This concept is especially used for unsought goods which buyers normally
do not think of buying, like life insurance, cemetery plots, etc. when companies face excess
production; they follow this concept to sell what they make, without caring for customer’s needs
or satisfaction.
4. The Marketing Concept
The marketing concept believes that achieving the company’s objectives depends on
understanding the needs and wants of target markets and delivering the desired satisfaction in a
better way than what the competitors are doing. Focus on customer and value is considered the

path to successful sales and company profits in this concept. The customer is considered The King,
and the company produces and markets what the customer wants.
Start Focus Means Ends
Factory Existing Profits by

Selling &
Product Sales
Promoting
Inside Out – Selling Concept Volume
Profits by
Market Customer Integrated customer
Needs Marketing satisfaction
Outside In – Marketing Concept

5. The Customer Concept
Many companies are today moving beyond the marketing concept to the customer concept.
These companies shape separate offers, services and messages to individual customers, based on
their individual preferences. They hope to achive profitable growth through capturing a larger
share of each customer’s expenditures by building high customer loyalty and focusing on customer
lifetime value. One-to-one marketing has become possible through advances in factory
customization, computers, the internet and database marketing software. Examples: Barbie Dolls,
Levi Strauss Jeans, Dell Computers.
6. The Societal Marketing Concept
This concept believes that organizations should determine the needs, wants and interests of
target markets. It should then deliver superior value to the customers in a way that maintains or
improves the consumer’s and the society’s wellbeing. The societal marketing concept calls on
marketers to balance three consideration in setting their marketing policies: company profits,
consumer wants, and society’s interests or human welfare.
Society
(Human Welfare, Environment)
Societal Marketing
Concept
Consumers Company
(Needs, Wants, Satisfaction) (Sales volume, Profits, Growth)
Exchange and Transactions

 Exchange
 Transaction
 Barter
 Transfer
 Behavioral response
Figure: A Simple Marketing System
Figure: Structure of Flows in a Modern Exchange Economy

Figure: Two-Party Exchange Map Showing Want Lists of Both Parties
Elements of Marketing Concepts
 Marketers and Prospects
 Needs, Wants, and Demands
 Product, Offering, and Brand
 Value and Satisfaction
 Customer value triangle
 Value
Value = Benefits / Costs =
(Functional benefits + Emotional benefits) /
(Monetary costs + Time costs + Energy costs + Psychic costs)
 Relationships and Networks
 Relationship marketing
 Marketing network
 Marketing Channels

 Supply Chain
 Competition
Consumer need, want and demand concepts

 Needs
The concept of human needs is the fundamental concept underlying all marketing activities.
Human needs are states of felt deprivation. They are biogenic in origin and include physiological
needs for food, clothing, warmth, shelter and safety. Social needs are craving for belonging and
affection. Knowledge and self-expression are the other individual needs of human beings. All these
needs are basic requirements of any individual, and are not a creation by marketing people.
 Wants
Wants are the forms human needs take as they are shaped by culture and individual personality
characteristics. When an American needs food, he may want a McDonald burger, or streak, French
fries and a Coke; whereas, if an Indian needs food, he may want dosa, chapattis or rice and coffee
or tea. Wants are shaped by the society in which one lives and are described in terms of products
that will satisfy needs. The only other difference between needs and wants is that while human
needs are limited, wants are limited.
 Demand
When human wants are backed by purchasing power and willingness to buy, they become
demands. Based on their needs, wants and buying capacity, consumers ask for or demand products
which they feel will give them maximum value and satisfaction. Most of the marketing companies
take pains to study and understand their customer’s needs, wants and demands, based on which
they plan their strategies for products and promotions. Consumer behaviour studies and consumer
research are primarily for identifying and analyzing consumer needs, wants and the related buying
behaviour.
Example: Need, Want and Demand of an MBA Student
Need: Transportation – The MBA student has to reach college in time. Buses are not
dependable.
Want: The student wants a motorcycle, which looks grand, has many latest features and is
dependable.
Demand: Purchasing power is provided by the boy’s father, who also has the willingness to
buy the bike, which his son wants.

The Four P Components of the Marketing Mix
Marketing-Mix Strategy
Functions of Marketing
 Strengthening the Brands

 Measuring Marketing effectiveness
 Driving new product development based on customer needs
 Gathering meaningful customer insights
 Utilizing new marketing technology

Old Concept or Product- oriented Concept
This concept is the oldest of the concepts in business. It holds that consumers will prefer products
that are widely available and inexpensive. Managers focusing on this concept concentrate on
achieving high production efficiency, low costs, and mass distribution. They assume that
consumers are primarily interested in product availability and low prices. This orientation makes
sense in developing countries, where consumers are more interested in obtaining the product than
in its features.
New or Modern or Customer- oriented Concept
This is a business philosophy that challenges the above three business orientations. Its central
tenets crystallized in the 1950s. It holds that the key to achieving its organizational goals (goals
of the selling company) consists of the company being more effective than competitors in creating,
delivering, and communicating customer value to its selected target customers. The marketing
concept rests on four pillars: target market, customer needs, integrated marketing and profitability.
Traditional Organizational Chart versus Modern Customer-Oriented Company Organization Chart

Distinctions between the Sales Concept and the Marketing Concept:
 The Sales Concept focuses on the needs of the seller. The Marketing Concept focuses on
the needs of the buyer.
 The Sales Concept is preoccupied with the seller’s need to convert his/her product into
cash. The Marketing Concept is preoccupied with the idea of satisfying the needs of the
customer by means of the product as a solution to the customer’s problem (needs).
 The Marketing Concept represents the major change in today’s company orientation that
provides the foundation to achieve competitive advantage. This philosophy is the
foundation of consultative selling.
 The Marketing Concept has evolved into a fifth and more refined company
orientation: The Societal Marketing Concept. This concept is more theoretical and will
undoubtedly influence future forms of marketing and selling approaches.
Marketing Environment
The actors & forces outside marketing that affect marketing management’s ability to build & maintain
successful relationships with target customers

 The severe debt problems of a number of countries, along with the increasing fragility of the
international financial system.
 The increasing use of barter and countertrade to support international transactions.
 The move toward market economies in formerly socialist countries along with rapid privatization
of publicly owned companies.
 The rapid dissemination of global lifestyles.
 The gradual opening of major new markets, namely China, India, eastern Europe, the Arab
countries, and Latin America.
 The increasing tendency of multinationals to transcend their locational and national

characteristics and become transnational firms.
 The increasing number of cross-border corporate strategic alliances–for example, MCI and British
Telecom, and Texas Instruments and Hitachi.
 The increasing ethnic and religious conflicts in certain countries and regions.
 The growth of global brands in autos, food, clothing, electronics.
 Demographic Environment
 Worldwide Population Growth
 Population Age Mix
 Ethnic and Other Markets
 Educational Groups
 Household Patterns
 Geographical Shifts in Population
 From a Mass Market to Micro market

Marketing Environment
Marketing environment is composed of a microenvironment and macro environment.
Environment scanning is a constant, important activity of successful companies. This process
gathering, filtering and analyzing information related to the marketing environment. It also
includes monitoring the changes taking place in the environment and forecasting the future status
of each factor. Such analysis helps to spot the opportunities and threats in the environment, and
pinpoints the ones that are specifically relevant to the company. The company’s marketing people
have the responsibility for scanning and identifying significant changes or trends in the marketing
environment. Marketing research and marketing Intelligence System are the methods used by
companies for environment scanning and gathering vital information about changes. Customers’
behaviour and competitors’ activities are also important factors to be watched in the environment.
The marketing environment provides both opportunities and threats. Successful companies know
the vital importance of constantly scanning and adapting to the changing environment. The

environment continues to change at a rapid pace. Marketers have to study the environment, and
adapt marketing strategies to meet new market challenges and opportunities.
Microenvironment
Micro environment- The actors close to the company that affect its ability to serve its customers– the
company, suppliers, marketing intermediaries, customer markets, competitors & publics
Marketing management’s job is to build relationships with customers by creating customer value
and satisfaction. Marketing success will require working closely with other departments of the
company, suppliers, marketing intermediaries, customers, competitors and various publics, which
combine to make up the company’s value delivery network.
1. The Company
In the company, marketing managers, in formulating plans, must take into account the other
groups such as top management, finance, R & D, purchasing, manufacturing and
accounting. All these groups constitute a company’s microenvironment for the planners.
They should think about the consumer and work in harmony to provide customer value and
satisfaction.
2. The Suppliers
Suppliers form an important link in the company’s overall customer value delivering
system. They provide the resources needed by the company to produce its goals and
services. Developments in the supplier environment can have a substantial effect on the
company’s marketing operations. Price changes, supply shortages, labour strikes, and other
events can interfere with the fulfillment of delivery promises to customers and lose sales
in the short run and damage customer relationship in the long run.
3. The Marketing Intermediaries
Marketing intermediaries are firm that aid the company in promoting, selling and
distributing its goods to the final buyers. They include middlemen, physical distribution
firms, marketing service agencies and financial intermediaries. Middlemen are business
firms that help the company find customers and/or close sales with them-agents, brokers,
dealers, wholesalers, retailers, and so on. Physical distribution firms assist the company in
stocking and moving goods from the factory to their destinations. Warehousing forms
stores and protect goods; transportation firms move goods. Marketing services agencies-
marketing research firms, advertising agencies, media firms, marketing consultancy firms-

assists the company targeting and providing its products to the right markets. Financial
intermediaries include banks, credit companies, insurance companies, etc., that help with
the buying and selling of goods, and also insure against risks involved.
4. The Customer
Customers of the company belong to consumer markets, reseller markets, government
markets, and international markets. The tastes and preferences of customers keep on
fluctuating. Customers brand loyalty also keeps changing. Only by studying the market
demand and customer-related factors on a regular basis can marketers carry out their
business activities successfully. Marketers have to keep track of what the customers want,
and grab emerging market opportunities. Neglecting to watch customer preferences will be
disastrous.
5. The competitors
The company’s marketing system is surrounded and affected by a host of competitors.
These competitors have to be identified, monitored and outmaneuvered to gain and
maintain customer loyalty. Industry and competition constitute a major component of the
microenvironment. Development of marketing plans and strategy is based on knowledge
about competitor’s activities. Competitive advantage building also depends upon
understanding the status, strength and weakness of competitors in the market. Competitive
advantage is a superior or distinctive competence (in terms of customer value) of the
company relative to competition in a specific area.
Macro Environment
Analyzing the Macro environment
Successful companies recognize and respond profitably to unmet needs and trends.
Needs and Trends
Enterprising individuals and companies manage to create solutions to unmet customer needs.
 Macroeconomic trends
 Centers of economic activity will shift profoundly, not just globally, but also regionally.
 Public sector activities will balloon, making productivity gains essential.
 The consumer landscape will change and expand significantly.
 Social and Environmental trends
 Technological connectivity will transform the way people live and interact.

 The battlefield for talent will shift.

 The role and behaviour of big business will come under increasingly sharp scrutiny.
 Demand for natural resources will grow, as will the strain on the environment.
 Business and industry trend
 New global industry structures are emerging
 Management will go from art to science.
 Ubiquitous access to information is changing the economics of knowledge.
1. The Demographic Environment
The main demographic force that marketers monitor is population, because people make up
markets. Marketers are keenly interested in the size and growth rate of population in cities, regions,
and nations; age distribution and ethnic mix; educational levels; household patterns; and regional
characteristics and movements.
 Worldwide Population Growth
The world population is showing explosive growth: it totaled 6.1 billion in 2000 and will
exceed 7.9 billion by the year 2025. The population explosion has been a source of major concern.
Moreover, population growth is highest in countries and communities that can least afford it. The
less-developed regions of the world currently account for 76% of the world population and are
growing at 2% per year, whereas population in more developed countries is growing at only 0.6%
per year. Owing to a huge market for products and services, coupled with diversities in culture and
belief, South Asia provides an opportunity as well as a challenge to the marketers. This point to
the potential and importance of South Asia and India in the context of the global economy. Coupled
with economic progress and an increase in purchasing power, the market size for products and
services in the region has become very attractive.
Explosive population growth has major implications for business. A growing population
does not mean growing markets, unless these markets have sufficient purchasing power.
Nonetheless, companies that carefully analyze their markets can find major opportunities.
 Population age mix
National populations vary in their age mix. There is a global trend toward an aging
population. As per the census of India 2001, 15.35% of the population is six years of age or less.
Among people who are 12 years or above, 34% are less than 25 years of age. Another 24% of this

population belongs to the age bracket of 25 to 34 years. People who are above the age of 54 years
constitute only about 14% of the population.
Marketers are increasingly recognizing the potential of the youth segment, as this group
currently constitutes a significant proportion of the region’s population and will continue to be so
for the next several decades. Their attitude and aspirations are different from the older people and
therefore, their consumption behaviour will reflect this orientation too. These changes imply that
companies need to take serious note of the “youth power” to craft their strategies and action plans.
Some companies specifically address the concerns of parents while marketing products targeted at
children.
 Literacy levels of Population
Literacy levels vary according to gender; female population in any age group is lower in literacy
levels than the male population. For a marketer, literacy levels have important implications for a
host of decisions. The literacy levels of younger members of the society also reinforce the
importance of younger people as consumers, and as influencers of family consumption decisions.
2. Economic Environment
The available purchasing power in an economy depends on current income, prices, savings,
debt, and credit availability. Marketers must pay careful attention to trends affecting purchasing
power, because they can have a strong impact on business, especially for companies whose
products are geared to high-income and price sensitive consumers.
As per World Bank data, the GDP of South Asia is estimated at 1.1 trillion, through this
constitutes just about 2.3% of the world’s GDP. The interesting part is that the South Asian
economy is estimated to be growing at about 8.6% per annum in 2006. Individually almost in all
the countries in this region are experiencing high growth rates, with the annual GDP growth rates
for the year 2006 estimated at 6.7% for Bangladesh, 6.2% for Pakistan, 7.2% for Nepal, 7.4% for
Sri Lanka, and 9.2% for India.
 Income distribution
Macroeconomic indicators of the country provide the overall health of the economy as well as
the direction of economic growth. A marketer needs to understand the distribution of income to
reach more meaningful conclusions about taking specific decisions.

Income distribution of households in India has been changing significantly over time.
Households belonging to the lower income segment have been steadily declining over the years,
and the middle income households have been showing an increase. They are the result of economic
growth.
Classification of Indian Consumers

i. Destitute
Annual household income of Rs. 16,000; not active participants in market
exchange for a wide range of goods.
ii. Aspirants
Annual household income of Rs. 16,000-22,000; new entrants into the consumption
systems due to increase in their real income.
iii. Climbers
Annual household income between Rs.22,000- 45,000; have desire and willingness
to buy, but have limited cash at hand.
iv. Consuming class
Annual household income of Rs.45, 000- 2,15,000; household that form the
majority of consumers; have money and are willingness to spend.
v. Rich
Those who have money and own a wide range of products.
For several product categories, the demand is likely to increase as a result of growth in income
and the number of households with greater purchasing power. This provides additional
opportunities for companies to introduce new market offers that address the needs of the “new”
consumers who have just entered the market due to their income increase. In other words, changes
in the economic well-being of the population creates opportunities for companies in terms of
higher demand for existing products and services as well as for new offers. The marketing strategy
for companies needs to be focused on utilizing these opportunities that are spin-off of the economic
growth.
3. Social-Cultural Environment

Society shapes the beliefs, values, and norms that largely define consumer tastes and
preferences. People absorb, almost unconsciously, a world view that defines their relationships to
themselves, to others, to organizations, to society, to nature, and to the universe.
South Asia is a land of diversities, which is reflected not just in the topography but also in the
languages, cultures as well as religious beliefs. This region with a huge ethnic diversity is home to
almost one-fifth of the world’s population, where people practice six major religions and speak in
hundreds of different languages, and thousands of different dialects. There is a complex
intermingling of culture and subcultures.
Regional differences in language, customs, social systems, values, habits, religions, and caste
systems make the social-cultural environment of South Asia, and particularly India, very complex.
There are some elements of the culture that are common to all, but many elements that shape
the consumption behaviour of people vary in nature.
Dress codes for example, vary from region to region. Significant variation in food habits is
another aspect that reflects the diversity of India. Understanding the diversity is critical to
marketing success.
An obvious implication of the diversity, especially due to language differences, is in the
decision concerning marketing communication. It is difficult to translate an advertisement theme
originally composed in English or Hindi different regional languages with the same emotional
meaning.
Values, attitudes and aspirations of people vary significantly across different customer groups
and religions.
There are some interesting insights that come from a variety of studies. Children’s influence
on purchase decisions was also revealed in the study- a significant proportion of parents mentioned
that their children accompany them while purchasing consumer durables such as children’s
bicycle, wristwatches for children, computers, music systems, television, cars, and refrigerators.
Similarly, children have significant influences as to use which brand of biscuits, fruit juices,
shoes, toothpaste, soap, and similar fast moving consumer goods.
The implications from the cultural diversity and regional differences suggest the need to
conduct customized research on consumption behaviour and attitudes, specific to products and
services that the marketer is interested in.
4. Natural Environment

The deterioration of the natural environment is a major global problem. There is great concern
about “greenhouses gases” in the atmosphere due to the burning of fossil fuels; about the depletion
of the ozone layer due to certain chemicals and global warming; and about growing shortages of
water.
In Western Europe, “green” parties have vigorously pressed for public action to reduce
industrial pollution.
Environmentalists in India have been actively campaigning against pollution-causing
industries. The campaign against Coca-Cola by the local community in Plachimada village in
Kerala, alleging the environmental deterioration and shortage of drinking water in the vicinity of
the plant, is an example of the increasing environmental consciousness.
New regulations hit certain industries very hard. Steel companies and public utilities have to
invest billions of dollars in pollution control equipment and more environmentally friendly fuels.
The soap industry increased its products biodegradability. In India, the pollution control norms
applicable to the automobile sector have been aligned with international trends.
Corporate Environmentalism is the recognition of the importance of environmental issues
facing the firm and the integration of those issues into the firm’s strategic plans. Marketers
practicing corporate environmentalism need to be aware of the threats and opportunities associated
with four major trends in the natural environment: the shortage of raw materials, especially water;
the increased cost of energy; increased pollution levels; and the changing role of governments.
The earth’s raw materials consist of the infinite, the finite renewable, and the finite
nonrenewable. Finite nonrenewable resources-oil, platinum, zinc, silver- pose a particularly
serious problem as the point of depletion approaches. Firms engaged in research and development
an excellent opportunity to develop substitute materials.
One finite nonrenewable resource, oil, has created serious problems for the world economy.
As oil prices soar to record levels, companies are searching for practical means to harness solar,
nuclear, wind, and other alternative forms of energy.
Some industrial activities will inevitable damage the natural environment. A large market has
been created for pollution-control solutions, such as scrubbers, recycling centres, and landfill
systems. Its existence leads to a search for alternative ways to produce and package goods.

Governments vary in their concern for and efforts to promote a clean environment. In India,
the Union Government of Delhi implemented the rule that public transportation vehicles like auto
rickshaws and buses use only compressed natural gas (CNG) as fuel instead of diesel and petrol.
5. Technological Environment
One of the most dramatic forces shaping people’s lives is technology. Through the years,
technology has released such wonders as penicillin, open heart surgery, and the birth control pill,
and such horrors as the hydrogen bomb. It has also released such mixed blessings as cell phones
and video games.
Every new technology is a force for “creative destruction”. Instead of moving into the new
technologies, many old industries fought or ignored them, and their businesses declined.
Marketers should monitor the following four trends in technology
i. Accelerating pace of change
Many of today’s common products were not available 40 years ago. Electronic researchers
are building smarter chips to make our cars, homes, and offices connected and more responsive to
changing conditions. More ideas than ever are in the works and the time between the appearance
of new ideas and their successful implementation is all but disappearing. So this is the time
between introduction and peak production.
ii. Unlimited Opportunities for Innovation
Some of the most exciting work today is taking place in biotechnology, computers,
microelectronics, telecommunications, robotics, and designers materials. The Human Genome
project promises to usher in the Biological century as biotech workers create new medical cures,
new foods, and new materials. Researchers are working on AIDS vaccines, totally safe
contraceptives and nonfattening foods. They are designing robots for firefighting, underwater
exploration, and home nursing.
iii. Varying R & D budgets
Increasing opportunities emerging as a result of globalization are forcing many companies
in South Asia to increase their research and Development efforts. In India, for example, as a result
of the economy opening up to global competition and in compliance with WTO regime on
protection of intellectual property rights, all large pharmaceutical companies have started putting
greater vigor into R & D. however, investments in R & D by Indian companies are miniscule when
compared to the investments by the pharmaceutical giants of the world.

iv. Increased regulation of Technological change

Government has expanded its agencies’ powers to investigate and ban potentially unsafe
products. Under the Drug and Cosmetics Act, manufacture, sale, and distribution of drugs in India
is regulated by the state and the central government agencies. The Drugs Controller of India is
responsible for approval of new drugs, clinical trials in the country, laying down the standards for
drugs, control over the quality of imported drugs, and coordination of the activities of State Drug
Control Organizations.
6. Political Legal Environment
The political and legal environment consists of laws, government agencies and pressure groups
that influence and limit various organizations and individuals. Sometimes these laws also create
new opportunities for business. For example, mandatory recycling laws have given the recycling
industry a major boost and spurred the creation of dozens of new companies making new products
from recycled materials. Two major trends in the political-legal environment are the increase in
business legislation and the growth of special-interest groups.
 Increase in Business Legislation
Business legislation has four main purposes: to protect companies from unfair competition, to
protect consumers from unfair business practices, to protect the interests of society from unbridled
business behaviour and to change businesses with the social costs created by their products or
production processes.
Legislation affecting business has increased steadily over the years. The European
Commission has been active in establishing a new framework of laws covering competitive
behaviour, product standards, product liability, and commercial transactions for the 25 member
nations of the European Union. The US has many laws on its books covering such issues as
competition, product safety and liability, fair trade and credit practices, packaging and labeling.
In India, food companies need special approval to launch brands that duplicate what already
exists on the market, such as another cola drink or brand of rice. Also, it is mandatory that all
packaged food products should carry the “green dot” to denote pure vegetarian products and the
“red dot” to indicate non-vegetarian products. Similarly, all packaged products in India should
mention maximum retail price or MRP on the package.
 Growth of Special Interest group

An important force affecting business is the consumerist movement- an organized movement

by the citizens and the government to strengthen the rights and powers of buyers in relation to
seller. In order to protect the interests of consumers, the Government of India passed legislation
under the Consumer Protection Act, 1986. Under this act, the following six rights of the consumers
are recognized.
 Safety: the right to be protected against the marketing of goods and services that
are hazardous to life and property.
 Information: to protect the consumers against unfair trade practices, and the right
to be informed about the quality, quantity, purity, standard, and price.
 Choice: the right to choose a variety of products and services at competitive prices.
 Representation: the right to be hard and be assured that the consumer’s interests are
received due considerations at appropriate forums.
 Consumer education: the right to consumer education.
Techniques used in environment analysis
Preparing a marketing environmental analysis is an essential step in understanding the external

local, national or international forces that might affect the business. These factors are largely
outside the direct control, but a manager can adapt a competitive business and marketing strategy
to take advantage of the opportunities they present while minimizing the potential threats. A
PESTEL analysis is the most common way of undertaking such a review; PESTEL stands for the
Political, Economic, Social, Technological, Environmental and Legal factors to be considered.
Marketing to the 21st century customer
Customers increasingly expect higher quality and service and some customization. They perceive
fewer real product differences and show less brand loyalty. They can obtain extensive product
information from the Internet and other sources, permitting them to shop more intelligently. They
are showing greater price sensitivity in their search for value.
Brand manufacturers are facing intense competition from domestic and foreign brands, which is
resulting in rising promotion costs and shrinking profit margins. They are being further buffeted
by powerful retailers who command limited shelf space and are putting out their own store brands
in competition with national brands.
Store-based retailers are suffering from an oversaturation of retailing. Small retailers are
succumbing to the growing power of giant retailers and “category killers.” Store-based retailers
are facing growing competition from direct-mail firms; newspaper, magazine, and TV direct-to-
customer ads; home shopping TV; and the Internet.

As a result, they are experiencing shrinking margins. In response, entrepreneurial retailers are
building entertainment into stores with coffee bars, lectures, demonstrations, and performances,
marketing an “experience” rather than a product assortment.
**** End of Module 1****

Module 2:
Consumer Behaviour Analysis: Meaning and Characteristics
To understand the buyer, and to create a customer out of him, through this understanding, is the
purpose of buyer behaviour study. Marketing scholars and practitioners have spent enormous time
and effort on this subject. Though the subject has been approached and analyzed from different
angles and under different premises, it still remains a complex one.
Consumer behaviour:
Consumer behaviour is the study of how individuals, groups, and organizations select, buy, use,
and dispose of goods, services, ideas, or experiences to satisfy their needs and wants. Marketer
must fully understand both the theory and reality of consumer behaviour.
Consumer behaviour or buyer behaviour is defined as the behaviour that consumers display in
searching for, purchasing, using, evaluating and disposing of products and services that they expect
will satisfy their needs.
Consumer behaviour focuses on how individuals make decisions to spend their available resources
(time, money, effort) on consumption related items. That includes what they buy it, why they buy
it, when they buy it, where they buy it from, how often they buy it, how often they use it, how they
evaluate it after the purchase and the impact of such evaluations on future purchases, and how they
dispose of it.
Importance
Successful marketing requires that companies fully connect with their customers. Adopting a holistic
marketing orientation means understanding customers—gaining a 360-degree view of both their daily
lives and the changes that occur during their lifetimes so the right products are always marketed to the
right customers in the right way.
The aim of marketing is to meet and satisfy target customers’ needs and wants better than competitors.
Marketers must have a thorough understanding of how consumers think, feel, and act and offer clear
value to each and every target consumer.
Factors Influencing Consumer Behaviour
 Social Factors
 Reference Groups
 Reference groups

 Membership groups
 Primary groups
 Secondary groups
 Aspirational groups
 Dissociative groups
 Opinion leader
 Factors influencing buying behaviour

 A consumer’s buying behaviour is influenced by cultural, social, and personal factors.
Cultural factors exert the broadest and deepest influence.
 Cultural factors
 Culture, subculture and social class are particularly important influences on consumer
buying behaviour. Culture is the fundamental dominant of a person’s wants and behaviour.
The growing child acquires a set of values, perceptions, preferences, and behaviours
through his or her family and other key institutions. A child growing up in the United States
is exposed to the following values: achievement and success, activity, efficiency and
practicality, progress, material comfort, individualism, freedom, external comfort,
humanitarianism, and youthfulness.
 A child growing up in a traditional middle-class family in India is exposed to the following
values: respect and care for elders, honesty and integrity, hard work, achievement and
success, humanitarianism and sacrifice.
 Each culture consists of smaller subcultures that provide more specific identification and
socialization for their members. Subcultures include nationalities, religions, and
geographic regions. When subcultures grow large and affluent enough, companies often
design specialized marketing programs to serve them. Multicultural marketing grew out of
careful marketing research, which revealed that different ethnic and demographic niches
did not always respond favorably.
 Virtually all human societies exhibit social stratification. Stratification sometimes takes
the form of a caste system where the members of different castes are reared for certain roles
and cannot change their caste membership. More frequently, it takes the form of social

classes, relatively homogenous and enduring divisions in a society, which are

hierarchically ordered and whose members share similar values, interests and behaviour.
 Social Factors
 In addition to cultural factors, social factors such as reference groups, family, and social
roles and statuses affect our buying behaviour.
 Reference Group:
 A person’s reference groups are all the groups that have a direct (face-to-face) or indirect
influence on their attitudes or behaviour. Groups having a direct influence are called
membership groups. Some of these are primary groups with whom the person interacts
fairly continuously and informally, such as family, friends, neighbors, and coworkers.
People also belong to secondary groups, such as religious, professional, and trade-union
groups, which tend to be more formal and require less continuous interaction.
 Reference groups influence people in at least three ways. The expose an individual to new
behaviors and lifestyles, they influence attitudes and self-concept, and they create pressures
for conformity that may affect product and brand choices. People are also influenced by
groups to which they do not belong. Aspirational groups are those a person hopes to join;
dissociative groups are those whose values or behaviour an individual rejects.
 Where reference group influence is strong, marketers must determine how to reach and
influence the group’s opinion leaders. An opinion leader is the person who offers informal
advice or information about a specific product or product category, such as which of several
brands is beat or how a particular product may be used.
 Family:
 The family is most important consumer buying organization in society, and family
members constitute the most influential primary reference group. Family members
influence buying decisions. In traditional joint families, the influence of grandparents on
major purchase decisions, and to some extent on the lifestyles of the younger generations,
is still intact, though diminishing.
 Roles and Status :
 A person participates in many groups- family, clubs, and organizations. Groups often are
an important source of information and help to define norms for behaviour. A role consists
of activities a person is expected to perform. Each role carries a status. A senior vice

president of marketing has more status than the sales manager and a sales manager has
more status than an office clerk. People choose products that reflect and communicate their
role and actual or desired status in society. Marketers must be aware of the status-symbol
potential of products and brands.
 Personal Factors:
 A buyer’s decisions are also influenced by personal characteristics.
 Age and stage in the life cycle
 People buy different goods and services over a lifetime. Taste in food, cloths, furniture and
recreation is often age related. Consumption is shaped by the family life cycle. Trends like
delayed marriages, children migrating to distant cities or abroad for work leaving parents
behind, tendency of professionals/working couple to acquire assets such as a house or an
automobile in the early stages of career, has resulted in different opportunities for
marketers at different stages in the consumer life cycle.
 Occupation and Economic Circumstances:

 Occupation also influences consumption patterns. A blue-collar worker will buy work
clothes, work shoes and lunchboxes. A company president will buy dress suits, air travel,
and country club memberships. Marketers try to identify the occupational groups that have
above-average interest in their products and services and even tailor products for certain
occupational groups: computer software companies, for example, design different products
for brand managers, engineers, lawyers, and physicians.
 Product choice is greatly affected by economic circumstances: spendable income (level,
stability, and time pattern), savings and assets (including the percentage that is liquid),
debts, borrowing power, and attitudes toward spending and saving.
 Personality and self-concept:
 Each person has personality characteristics that influence his or her buying behaviour. By
personality, we mean a set of distinguishing human psychological traits that lead to
relatively consistent and enduring responses to environmental stimuli. Personality can be
a useful variable in analyzing consumer brand choices. The idea is that brands also have
personalities and consumers are likely to choose brands whose personalities match their

own. Brand personality is the specific mix of human traits that we can attribute to a
particular brand.
 Consumers often choose and use brands that have a brand personality consistent with their
own actual self-concept (how we view ourselves), although the match may instead be based
on the consumer’s ideal self-concept (how we would like to view ourselves) or even on
other’s self-concept (how we think others see us). These effects may also be more
pronounced for publicity consumed products than for privately consumed goods. On the
other hand, consumers who are high “self-monitors”-that is, sensitive to how others see
them are more likely to choose brands whose personalities fit the consumption situation.
Finally, often consumers have multiple aspects of self (serious professional, caring family
member, active fun-lover) that may be evoked differently in different situations or around
different types of people.
 Lifestyle and Values:
 People from the same subculture, social class, and occupation may lead quite different
lifestyles.
 A lifestyle is a person’s pattern of living in the world as expressed in activities, interests,
and opinions. It portrays the “whole person” interacting with his environment. Marketers
search for relationships between their products and lifestyle groups. For example, a
computer manufacturer might find that most computer buyers are achievement oriented
and then aim the brand more clearly at the achievers lifestyle.
 Consumer decisions are also influenced by core values, the belief systems that underlie
attitudes and behaviors. Core values go much deeper than behavior or attitude and
determine, at a basic level, people’s choices and desires over the long term. Marketers who
target consumers on the basis of their values believe that with appeals to people’s inner
selves, it is possible to influence their outer selves-their purchase behaviour.

Consumer Purchase Decision Process
 Purchase Decision
 Steps Between Evaluation of Alternatives and a purchase decision
 Informediaries
 Consumer Reports
 Zagats
 Unanticipated situational factors
 Perceived risk
 Brand decision
 Vendor decision
 Quantity decision
 Timing decision
 Payment-method decision
 Post purchase Behavior
 Post purchase Satisfaction
 Disappointed
 Satisfied
 Delighted
 Post purchase Actions
 Postpurchase Use and Disposal

1. Need or Problem Recognition

The buying decision process starts with the buyer’s recognition of a problem or need. The need
can be triggered by internal or external stimuli. The marketer needs to identify the circumstances
that trigger the particular need or interest in consumers.
2. Information Search
In many cases, an aroused consumers searches for information about the product. Consumer
information sources are personal sources (family, friends, neighbours), commercial sources
(advertising, sales persons, dealers, display, etc.), public sources (mass media), and experimental
sources (handling, examining and using the product)
3. Evaluation of Alternatives
Next, the consumer evaluates the alternatives. Here, the concepts involved are product attributes
weightage for important attributes, brand image, utility function and evaluation procedure.
4. Purchase Decision
After the brand choice, the consumer forms a purchase intention followed by the purchase
decision, vendor decision, quantity decision, timing decision and payment method decision.
5. Post-Purchase Behaviour
After purchasing the product, the consumers will experience some level experience some level
of satisfaction or dissatisfaction. If the product falls short of the buyer’s expectation, the buyer
will be disappointed and dissatisfied. If it meets expectations, the buyer will be satisfied. If it
exceeds expectations, the buyer will be delighted.
Most purchases result in cognitive dissonance which is a discomfort felt by the buyer due to post-
purchase conflict. The buyers wonder whether their buying decision was right, the product or brand
choice was right, etc. marketers try to avoid dissatisfaction to the customers. Excellent marketers
aim at customer delight. A satisfied buyer may tell three people about a good product experience.
But a dissatisfied customer may tell 11 people. Therefore, the marketer has to carefully monitor
customer satisfaction regularly and take corrective actions whenever necessary.
The marketer’s job is to understand the buyer’s behaviour at each stage and what influences are
operating. This understanding allows the marketer to develop a significant and effective marketing
programme for the target market.

Successive Sets Involved in Customer Decision Making
A Consumer’s Brand Beliefs about Computers
Buying Roles
Consumer decision making is a complex process. It is an interplay of reactions amongst a consumer and
his cognition, affect and behavior on the one hand, as well as the environmental forces on the other
hand. The actual transaction/ exchange is preceded by considerable amount of thought processes and
influences.
This could be explained in terms of the five “Buying Roles” viz., Initiator, Influencer, Decider, Buyer
and, User.
The marketer needs to understand these roles so as to be able to frame suitable strategies to target
them.

a) Initiator: The person who identifies a need and first suggests the idea of buying a particular product
or service.
b) Influencer: The person(s) who influences the buyer in making his final choice of the product.
c) Decider: The person who decides on the final choice: what is to be bought, when, from where and
how?
d) Buyer: The person who enters into the final transaction and exchange process or is involved in the
physical activity of making a purchase.
e) User: The person(s) who actually consumes the product or service offering. The various buying roles
can be illustrated through examples:
Example: 1
A kindergarten girl needs to buy color crayons to use in class.
i) Initiator: The girl

ii) Influencer: Her teacher or her classmates
iii) Decider: Either of the parents
iv) Buyer: Either of the parents or a sibling.
v) User: The girl herself.
Example 2:
The mother of the house is a housewife; she loves watching TV when her husband and children
go for work. She has been complaining that the present TV set at home has been giving problem.
She also says that the model is now an old one and that that the family should own a new model.
i) Initiator: The lady

ii) Influencer: Her neighbors and friends.
iii) Decider: Joint: Her husband, she herself and the children.
iv) Buyer: Husband or son or daughter or she herself.
v) User: The family.

Buying Motives
BUYING MOTIVES
Product Motives Patronage Motives
Emotional Rational Product Emotional Patronage Rational Patronage

product Motives Motives Motives Motives
Alternate Classification of Product Motives
Operational product Socio-Psychological Product Motives

Motives
Buying motives can be defined as ‘all the impulses, desires and considerations’, which induce a
buyer to purchase a given product.
 Product Motives and Patronage Motives
Buying motives are basically of two kinds: (i) Product Motives (ii) Patronage Motives. It
is often said that the dissatisfaction of human beings creates new products and new markets. And
a product is a bundle of satisfactions. At least, it is expected to be so. Why does an individual buy
a particular product? Only his buying motives can explain this. As mentioned earlier, buying
motives can be defined as all the impulses, desires and considerations of the buyer, which induce
him to purchase a given product. Those impulses, desires and considerations that make people buy
a given product are called Product motives. The influences that explain why they buy from
particular firms/shops are called Patronage motives.
 Product Motives
Product motives are of several types; and they can be classified in several ways. One
classification that is linked to the nature of satisfaction sought by the buyer puts them into the
following two categories.
 Emotional product motives.
 Rational product motives.
 Emotional and Rational product motives

Emotional product motives are those impulses that appeal to the buyer’s pride or ego, his
urge to imitate others, or his desire to be distinctive. The emotional motives may persuade a
consumer to buy a certain product without evaluating the plus and minus points of such action.
Careful reasoning or logical analysis of the intended purchase – the purpose expected to be served
by the product, the various alternatives available to the buyer, etc. relevant and valid reasons that
justify the purchase are characteristics of rational product motives.
 Alternative Classification: Operational & Socio-psychological Product Motives
This is a more meaningful classification of product motives. Products have a utility
dimension as well as a prestige dimension. A buyer can gain satisfaction from the function or
physical utility of a product and/or the socio-psychological significance he attaches to the product.
The former is the operational product motive and the latter the socio-psychological product motive.
This too, is not a perfect classification, because in most purchases, the two motives are combined
to a certain degree.
 Patronage Motive
Why does the buyer patronize certain specific shop? What are the considerations or impulses that
persuade him to do so? These questions will take us to the patronage motives.
Just like product motives, patronage motives also can be grouped into emotional and rational
categories.
 Emotional and Rational Patronage Motives
Emotional Patronage Motives are those that persuade a buyer to buy from specific shops,
without much logical reason behind that action. He may like the place for purely subjective reasons
and may consider the shop as his ‘favorite’ shopping place. However, if he selects a shop because
he knows that it offers a wide selection, or the latest models, or good after-sales service, then he is
influenced by rational patronage motives. But, as said earlier, in every patronage, there is a
combination of the rational and emotional motives.
Knowledge of patronage motives of buyers is important to marketers, as they have to attract
patronage from them.
Marketing significance of buying motives
It is obvious that people buy things for different reasons. Sometimes, different groups of
people buy the same product for different reasons. The marketer’s success lies in understanding
such motives and appealing to them through the product offer. A sound knowledge of buying

motives will facilitate the formulation of marketing programmes in such a way that the product
appeals to the relevant motives.
Buyer Behaviour Models
ORGANIZATIONAL BUYING VS HOUSEHOLD BUYING

To better understand an organizational buyer, let us first explore the differences
between such a buyer and the household buyer.
Buying Motives
The starting point to understand the difference between a household buyer and an organizational
buyer is buying motives and purposes. While the former buys for his/her own consumption the
latter buys primarily for adding value to the product which is then sold to another customer .It is
in this sense, that organizational buyer demand is a derived demand. For demand of a product is
based on organizational buyer’s customers demand Consider, for example, the demand for
transmission gears in the automobile industry. For the gear manufacturer ,the demand for his
transmission gears is based on the automobile firms’ production plans, which in turn is based on
customer’s demand for automobiles and environmental factors like government taxation and fiscal
policies .The gear manufacturer’s demand for steel forgings in turn, is dependent on his production
plans. At times, the organization buys a product for it’s own use. Consider , for example, the case
of office products like typewriters, computers, fax machines franking machines, furniture, copiers,
etc. Here, the firm buys these products for using them to improve its own efficiency and work

environment .The organizational customer’s motives is buying the product are:

1. To improve its efficiency, and
2. economy
Thus, organizational purchase decisions are primarily rational. However, psychological motives
are also important .One of the most critical psychological factor is the past experience of the buyer
with the supplier and the extent to which the supplier has taken care of the buyer’s esteem need.
When all suppliers are comparable on product specifications, technology and the level of after
sales services, the cutting edge between one supplier and another is often when one
understands the buyer better and satisfies organizational buyer’s needs.
Size Of The Buyers
The organization buyers are few but are much larger and they purchase in bulk .The household
buyer is relatively much smaller and his/ her purchase are small .Retail buying is common in the
household segment. Generally even in the case of small organizational buyers, the annual purchase
budget will run into several lakhs of rupees, but in the case of large
household purchase it will never exceed a few thousand of rupees.
Risks In Purchase
As evident from the above, the risks is organizational purchases are much higher than those in the
Household purchases .The organizational buyer always looks for alternative that will help him to
reduce these risks. Previous experience with the supplier , vendor image, supplier’s standing within
the industry, etc are some of the factors that help the organizational buyer reduce
his risks in buying decisions
Concentration Of Buyers
Organizational buyers are generally concentrated in the same geographical area, as opposed to
household buyers spread all over the country. Thus, in business –to-business marketing, a more
focused marketing strategy with an emphasis on personal selling is used as opposed to consumer
marketing, where trade channels and mass communication become
important pillars of marketing strategy.
Organizational Purchase Decisions Joint
Since the costs and risks involved in organizational purchases are high, these decisions are taken
jointly and involve several individuals All these individuals are involved in the decision-making
process in the organization. This is different from a household customer where

individual decisions are still prevalent, particularly in the case of consumer non-durables.
Adherence To Specifications
Organizational buyers want suppliers to rigidly adhere to specification laid down by them. The
reason is that buyer’s efficiency, product quality, after sales service, market share and ROI are
greatly dependent on the supplier’s ability to adhere to specifications laid down by him. The
organizational customer does not accept deviations from these specifications. The household buyer
is not really rigid about his/her specifications. The consumer is willing to accept substitutes. It is
for this reason, that in consumer marketing, brand switching and brand substitution is high, while
in industrial product marketing vendor loyalty is quite high.
CONSUMER PROTECTION ACT 1986- AN INTRODUCTION
Consumer protection consists of laws and organizations designed to ensure the rights of
consumers as well as fair trade competition and the free flow of truthful information in the
marketplace. The laws are designed to prevent businesses that engage in fraud or specified unfair
practices from gaining an advantage over competitors and may provide additional protection for
the weak and those unable to take care of themselves. Consumer protection laws are a form of
government regulation, which aim to protect the rights of consumers. For example, a government
may require businesses to disclose detailed information about products—particularly in areas
where safety or public health is an issue, such as food. Consumer protection is linked to the idea
of "consumer rights" (that consumers have various rights as consumers), and to the formation of
consumer organizations, which help consumers make better choices in the marketplace and get
help with consumer complaints.
Other organizations that promote consumer protection include government organizations and self-
regulating business organizations such as consumer protection agencies and organizations, the
Federal Trade Commission, ombudsmen Better Business Bureaus etc.
A consumer is defined as someone who acquires goods or services for direct use or ownership
rather than for resale or use in production and manufacturing.
Consumer interests can also be protected by promoting competition in the markets which directly
and indirectly serve consumers, consistent with economic efficiency, but this topic is treated in
competition law
Consumer protection can also be asserted via non-government organizations and individuals as
consumer activism

In India, Consumer Protection Act of 1986is the law governing consumer protection. Under this
law, Separate Consumer tribunals have been set up throughout India in each and every district in
which a consumer [complaint can be filed by both the consumer of a goods as well as of the
services] can file his complaint on a simple paper without paying any court fees and his complaint
will be decided by the Presiding Officer of the District Level. Appeal could be filed to the State
Consumer Disputes Redressal Commissions and after that to the National Consumer Disputes
Redressal Commission (NCDRC). The procedures in these tribunals are relatively less formal and
more people friendly and they also take less time to decide upon a consumer dispute when
compared to the year’s long time taken by the traditional Indian Judiciary. In recent years, many
effective judgments have been passed by some state and National Consumer Forums.
Organizations like Decidebay.com now (Decidebuddy.com ), Akosha.Com and Mouthshut.com
play a vital role in helping consumers articulate their concerns and resolve their problems as well.

Module 3:
Market Segmentation, Targeting & Positioning
 Target marketing requires marketers to take three major steps:
 Identify and profile distinct groups of buyers who differ in their needs and preferences
(market segmentation).
 Select one or more market segments to enter (market targeting).
 For each target segment, establish and communicate the key distinctive benefit(s) of the
company’s market offering (market positioning).
Concept of Market Segmentation
All corporate marketing activities have to be necessarily carried out in such a way that they lead to
generation of surplus funds. Even in case of non-profit and non-manufacturing set-ups, it becomes
important to achieve marketing goals in the most economical way. This is so primarily because of
budgetary constraints in such organizations. One of the ways to obtain economies in marketing is to
concentrate and focus the marketing effort in respect of a well-defined homogeneous cluster of potential
customers. This approach known as market segmentation helps in optimizing the marketing mix for a
segment.
Market segments refer to the sub-classes of the market reflecting sub-classes of wants and the process
of conceptually distinguishing segments is known as the process of market segmentation.
Market Segmentation
Meaning
“Market segmentation is the process of dividing a market into distinct subgroups of consumers
with distinct needs, characteristics, or behavior, who might require separate products or marketing
mixes”.
Factors influencing segmentation
 Sustainability
A segment must be large enough to warrant developing and maintaining a special marketing mix.
This criterion does not necessarily mean that a segment must have many potential customers.
Marketers of custom-designed homes and business buildings, commercial airplanes, and large
computer systems typically develop marketing programs tailored to each potential customers to
make commercial sense. In the 1980s, home banking failed because not enough people owned

personal computers. Today, large number of people own computers, and home banking is a
growing industry.
 Identifiability and measurability
Segments must be identifiable and their size measurable. Data about the population within
geographic boundaries, the number of people in various age categories, and other social and
demographic characteristics are often easy to get, and they provide fairly concrete measures of
segment size. Suppose that a social service wants to identify segments by their readiness to
participate in a drug and alcohol program or in prenatal care. Unless the agency can measure how
many people are willing, indifferent, or unwilling to participate, it will have trouble gauging
whether
Market Aggregation
Well market aggregation means mass marketing or undifferentiated marketing, is simply
marketing a product to the largest audience possible this leads to heavy exposure of the brand and
product. This also leads to reduced cost in marketing the product. Usually undifferentiated
marketed products are simple and seen as necessities such as toothpaste or toilet paper. The key
disadvantage to mass marketed products is that it leaves opportunities for competitors to set up
business and market a product to a individual segmented market, meaning it is more difficult to
satisfy the needs and wants of customers in the total market. The key advantage is it operates in a
larger market and hence more opportunities.
An example would be let's say for toothpaste, toothpaste for sensitive teeth would be segmentation
whereas toothpaste for the entire market would be using market aggregation theory.
Market segmentation is referring in this case to a more niche market or differentiated marketing;
it is simply a product which is marketing to a distinct target market. That is the product is marketed
to a specific segment of the total market and thus it is more easily tailored to satisfy the needs and
wants of the target market. This has a key advantage to satisfy the customers but has the
disadvantage of a smaller market and hence less opportunities.
An example would be for computers, computers which we're sold in the earlier days were standard
and sold to the entire market with the exact specifications, and computers today sold by certain
vendors are sold with customized specifications.
Benefits, Requisites of Effective Segmentation

1. Segmentation helps a company to exploit its market better by selecting market niches
(suitable segments) that are compatible with its resources
2. Segmentation helps in focusing strategies more sharply on target groups
3. Segmentation is more likely to result in instilling customer `loyalty ' since the firm's
offering is better matched to those in the segment.
Basis for Segmentation

We use two broad groups of variables to segment consumer markets. Some researchers try to
define segments by looking at descriptive characteristics: geographic, demographic, and
psychographic. Then they examine whether these customer segments exhibit different needs or
product responses. For example, they might examine the differing attitudes of “professionals”,
“blue collars”, and other groups toward, say, “safety” as a car benefit.
Geographic Segmentation
Geographic segmentation calls for division of the market into different geographical units such as
nations, states, regions, countries, cities, or neighborhoods. In the South Asian context, geographic
segmentation assumes importance due to variations in consumer preferences and purchase habits
across different regions, across different countries, and across different states in these countries.
One of the major geographical segmentation variables relevant for marketers in South Asia is the
division of markets into rural and urban areas. Rural and urban markets differ on a number of
important parameters such as literacy levels, income, spending power, and availability of
infrastructure such as electricity, telephone network, and roads; as well as social and cultural
orientations of people that affect the market potential, and buying patterns and habits.
Demographic Segmentation
In demographic segmentation we divided the market into groups on the basis of variables such as
age, family size, family life cycle, gender, income, occupation, education, religion, race,
generation, nationality and social class. One reason demographic variables are so popular with
marketers is that they are often associated with consumer needs and wants. Another is that they
are easy to measure. Even when we describe the target market in non-demographic terms (by
personality type), we may need the link back to demographic characteristics in order to estimate
the size of the market and the media we should use to reach it efficiently.
Psychographic Segmentation

Psychographics is the science of using psychology and demographics to better understand

consumers. In psychographic segmentation, buyers are divided into different groups on the basis
of psychological / personality traits, lifestyle, or values. People within the same demographic
group can exhibit very different psychographic profiles. Values and lifestyles significantly affect
product and brand choice of consumers.
The four groups with higher resources are:
Innovators - Successful, sophisticated, active, “take-charge” people with high self-esteem.
Purchases often reflect cultivated tastes for relatively upscale, niche-oriented products and
services.
Thinkers - Mature, satisfied, and reflective people who are motivated by ideals and who value
order, knowledge, and responsibility. They seek durability, functionality and value in products.
Achievers - Successful, goal-oriented people who focus on career and family. They favor premium
products that demonstrate success to their peers.
Experiencers - Young, enthusiastic, impulsive people who seek variety and excitement. They
spend a comparatively high proportion of income on fashion, entertainment, and socializing.
The four groups with lower resources are:
Believers - conservative, conventional, and traditional people with concrete beliefs. They prefer
familiar products and are loyal to established brands.
Strivers - Trendy and fun-loving people who are resource constrained. They favour stylish
products that emulate the purchases of those with greater material wealth.
Makers - Practical, down to earth, self-sufficient people who like to work with their hands. They
seek products with a practical or functional purpose.
Survivors – elderly, passive people who are concerned about change. They are loyal to their
favorite brands.
Behavioural Segmentation
In behavioural segmentation marketers divide buyers into groups on the basis of their knowledge
of, attitude toward, use of, or response to a product.
Decision Roles – People play five roles in a buying decision: Initiator, Influencer, Decider, Buyer
and User.

Behavioural variables – Many marketers believe behavioural variables-occasions, benefits, user

status, usage rate, buyer-readiness stage, loyalty status, and attitude- are the best starting points for
constructing market segment.
The conversion Model – The conversion Model measures the strength of consumers’
psychological commitment to brands and their openness to change. To determine how easily a
consumer can be converted to another choice, the model assesses commitment based on factors
such as consumer attitudes toward, and satisfaction with, current brand choices in a category and
the importance of the decision to select a brand in the category.
Segmentation for Consumer markets
The segmentation of consumer markets requires the creation of sub-groups from a larger
population to more specifically target them. There are virtually dozens of ways that a market might
be segmented and the segments chosen will depend on the business and the products or services it
offers. Basically, segmentation is all about identifying specific groups of people based on common
characteristics.
Demographics
One common way of segmenting a market is through the use of demographics. Demographics are
quantitative characteristics of a group of people. These characteristics might include sex, age,
income or geography (where they live). Businesses that segment their market based on
demographics are attempting to target specific market segments that are more likely to be
interested in what they have to offer. The cosmetics industry, for example, primarily targets
women. The hunting industry might be more likely to target men. Luxury car makers target their
markets based on income. Marketers are likely to consider multiple demographic characteristics
when segmenting their consumer markets.
Psychographics
Psychographics are qualitative attributes of a market and refer to the way people think and what
they like to do. Psychographics is sometimes categorized with the acronym IAO which stands for
Interests, Activities and Opinions. It can be difficult for marketers to segment their markets into
these types of categories on their own. Nielsen is one organization that offers access to consumer
lists based on their specific classifications. They have divided U.S. households into 66 distinct
types or segments to help marketers focus on market segments based on psychographic

characteristics. Psychographics are personal attributes related to personality, values, attitudes,

interests, or lifestyles.
For using psychographic segmentation you will have to collect data for developing a profile of the
consumer. One life style approach that has been developed uses psychographic data concerned
with the activities, interests and opinions (called AIO inventories) in addition to the demographic
variables of those in the market.
Consider the following example:
Purchase Behaviors
An important way for businesses to segment their consumer markets is through purchase behavior.
Keeping good records of customers and their purchases, allows marketers to identify those who
have purchased certain types of products or spent at certain levels and to then target them with
similar offers. Marketers are also able to target customers of other businesses through by renting
lists, which can be used in direct marketing efforts through traditional mail or, increasingly, online.
Pulling It Together
The more segments that marketers are able to identify and combine to specifically target groups
of individuals most likely to be interested in what they have to offer, the more effective--and cost
effective--their marketing efforts can be. Toward this end, businesses attempt to learn as much as
they can about their customers--where they live, their age, their income levels, what they purchase,
what their hobbies are and what their likes and dislikes are. This information can then be used to
"clone" these customers by reaching out to non-customers who share similar traits and
characteristics.
Segmentation for Industrial markets

Industrial markets can be segmented with many of the same variables used in consumer
market segmentation. Business buyers can be segmented geographically, demographically, or by
benefits sought, user status, usage rate and loyalty status. Marketers also use some additional
variables such as:
Operating variables – Technology
User-non-user status
Purchasing approaches – Centralized / Decentralized
Purchasing power structure
Purchase policies, criteria
Situational Factors - Urgency
Specific application
Size of order
Personal Characteristics - Buyer-seller similarity
Attitude towards risk
Loyalty
As in consumer segmentation, many marketers believe that buying behavior and benefits provide
the best basis for segmenting business markets.
Market Targeting
Meaning
Choosing an appropriate market for a given product. Marketers of a given product need to evaluate
the different market segments and decide which and how many to serve. To do this effectively,
they must examine three general factors: (1) segment attractiveness (i.e., the impact of
competitors); (2) segment size and growth; (3) company objectives and resources.
Market targeting differs from target marketing in that a product is already established and decisions
must be made as to which market is most appropriate for it. In target marketing, a company finds
a market it wants to serve and then develops a product appropriate for that market.
Basis for identifying target customers
 Single-segment concentration
The farm-equipment division of Mahindra & Mahindra concentrates on tractors, primarily targeted
at agricultural markets. Specialty hospitals focus on specific therapeutic areas such as cancer care,
heart specialty, etc. through concentrated marketing; the firm gains knowledge of the segment’s

needs and achieves a strong market presence. Furthermore, the firm enjoys operating economies
through specializing its production, distribution, and promotion. If it captures segment leadership,
the firm can earn a high return on its investment.
 Selective specialization
A firm selects a number of segments, each objectively attractive and appropriate. There may be
little or no synergy among the segments, but each promises to be a moneymaker. This
multisegment strategy has the advantage of diversifying the firm’s risk.
Product Specialization
The firm makes a certain product that it sells to several different market segments. A microscope
manufacturer, for instance, sells to university, government and commercial laboratories. The firm
makes different microscopes for the different customer groups and builds a strong reputation in
the specific product area. The downside risk is that the product may be supplanted by an entirely
new technology.
 Market Specialization
The firm concentrates on serving many needs of a particular customer group. For instance, a firm
can sell an assortment of products only to university laboratories. The firm gains a strong
reputation in serving this customer group and becomes a channel for additional products the
customer group can use. The downside risk is that the customer group may suffer budget cuts or
shrink in size.
 Full Market Coverage
The firm attempts to severe all customer groups with all the products they might need. Only very
large firms, such as Microsoft (Software market), General Motors (Vehicle Market), and Coca-
Cola (nonalcoholic beverage market), can undertake a full market coverage strategy. Large firms
can cover a whole market in two broad ways: through undifferentiated marketing or differentiated
marketing.
In undifferentiated marketing, the firm ignores segment differences and goes after the whole
market with one offer. It designs a product and a marketing program that will endow the product
with superior image and appeal to the broadest number of buyers, and it relies on mass distribution
and advertising. Undifferentiated marketing is “the marketing counterpart to standardization and
mass production in manufacturing”.

In differentiated marketing, the firm operates in several market segments and designs different
product for each. Cosmetic brands that appeal to women (and men) of different tastes.
Differentiated marketing typically creates more total sales than undifferentiated marketing.
However it also increases the cost of doing business. Because differentiated marketing leads to
both higher sales and higher cost, nothing general can be said about the profitability of this strategy.
Target market strategies
Choosing target market and formulation of marketing strategy are intimately linked. Choosing the
target market is a part of marketing strategy formulation, the other two parts being positioning and
marketing mix formulation. Without right targeting, the firm cannot formulate an effective
strategy. It is through careful segmentation and targeting that the firm picks up the right groups of
consumers. Also, it is through this process that the firm gains vital knowledge about the needs and
buying behavior of the consumers in each segment and the differences between one segment and
the other. And it is by using this knowledge that the firm develops marketing programmes that
matches the specific requirements of the different segments. In other words, segmentation and
targeting help the firm understand not only the characteristics of each of the segments but also the
“distinctive excellence” that is required for catering to the specific needs of the consumer in each
of them.
Undifferentiated Marketing Strategy
In the absence of a proper mechanism to classify the market into number of market segments and
analyze their potential, many firms decide on the mass marketing strategy. In this case marketer
goes against the idea of differentiated market and instead decides to sell the product to the whole
market. This strategy keeps the overall marketing costs low and makes it easier to manage and
track the market forces uniformly. The marketer tries to find out commonalities across various
segments rather than focusing on the differences among segments. The marketing planner designs
the marketing programme in such a way that it will appeal to the largest number of buyers with a
mass distribution and mass advertising programme. In undifferentiated marketing, the firm ignores
segment differences and goes after the whole market with one offer. It designs a product and a
marketing program that will endow the product with superior image and appeal to the broadest
number of buyers, and it relies on mass distribution and advertising. Undifferentiated marketing is
“the marketing counterpart to standardization and mass production in manufacturing”.
Differentiated Marketing Strategy

Many marketers chose to target several segments or niches with a differentiated marketing offer
to suit each market segment. Maruti is the leading automobile company, which has the distinction
of having products for different market segments. Maruti 800 is sold to upcoming middle class.
Swift is targeted for the upper rich class people and Maruti Omni is targeted for large families and
taxi operators. In differentiated marketing, the firm operates in several market segments and
designs different product for each. Cosmetic brands that appeal to women (and men) of different
tastes. Differentiated marketing typically creates more total sales than undifferentiated marketing.
However it also increases the cost of doing business. Because differentiated marketing leads to
both higher sales and higher cost, nothing general can be said about the profitability of this strategy.
Concentrated Marketing Strategy
In this alternative strategy the marketing manager decides to enter into a select market segment
instead of all of the available market segments. When resources as well as market access are
limited and the company has to face intense competition, the marketing manager has to stretch the
budget for market coverage. In this case the company is likely to follow the concentrated marketing
strategy. The marketing manager decides to cover a large niche rather than fighting for a small
share in large market. It is an excellent strategy for small manufacturers that can serve the segments
closely and cater to the emerging needs of closed loop customers. This strategy will help them
gather market share in small markets against strong and large competitors.
Positioning
Meaning
Developing a specific marketing mix to influence potential customers’ overall perception of the
brand, product line, or organization in general.
Positioning is the perception or the image that customers have of the company and its products. It
is customer’s beliefs about the company’s product being of, say high quality, or low price, or
durable, etc. this perception is the stimulus of customers’ attitude and behavior towards company’s
products. Customers’ positive perceptions will derive the business of the company and negative
perceptions will sink it
Product differentiation Strategies
A positioning strategy that some firms use to distinguish their products from those of competitors.
In competitive market however, firms may need to go beyond these. Consider these other
dimensions, among the many that a company can use to differentiate its market offerings:

 Personal differentiation: Companies can have better-trained employees. Singapore Airlines

is well regarded in large part because of its flight attendants. Similarly, kingfisher Airlines
in India differentiated itself partly by the courteous behavior of their smartly dressed flight
attendants.
 Channel Differentiation: Companies can more effectively and efficiently design their
distribution channels’ coverage, expertise, and performance. Eureka Forbes, marketers of
vacuum cleaners and water purifiers in India, achieved differentiated positioning through
their direct-to-home channel.
 Image Differentiation: Companies can craft powerful, compelling images. The primary
explanation for Marboro’s extraordinary worldwide market share (around 30%) is that
Marlboro’s “macho cowboy” image has struck a responsive chord with much of the
cigarette-smoking public. In the readymade apparel and accessory category, brands suchas
Park Avenue, Louis Philippe, Color plus, Allen Solly, and other work hard to develop a
distinctive image for their brands. Even a seller’s physical space can be a powerful image
generator.
Tasks involved in positioning

Determining Positioning Strategy
All of us know that it is a complex and difficult task to identify and select a positioning strategy.
Let’s us discuss the steps involved in positioning strategy, there are basically six-step that are
adopted.
In each of the steps, marketing research techniques can be employed to get the necessary
information. These steps are discussed as follows:
(1) Identifying the Competitors - A first step is to identify the competition. This step is not as
simple as it seems to be. For example, ‘Pepsi ‘ might define its competitors as follows:
(1) Other cola drinks
(2) Non-diet soft drinks
(3) All soft drinks
(4) Non-alcoholic beverages,
(5) All beverages except water

One thing, which should be clear to you, is that there is basically two types of competitors
-Primary competitors i.e., competitors belonging to the same product class
-Secondary competitors, those belonging to other product category.
In the above example other cola drinks are primary competitors and other drinks and beverages
are secondary competitors.
(2) Determining how the Competitors are Perceived and Evaluated - The second step is related
to determining the product positioning which is basically done so as to see, when the competitors
products are purchased by the customers. It is to see comparative view. An appropriate set of
product attributes should be chosen. The term ‘attributes’ includes not only product characteristics
and consumer benefits but also product associations such as product use or product users. In any
product category, there are usually a host of attribute possibilities.
(3) Determining the competitor’s positions – Our next focus should be to determine how
different brands (including our own brand) are positioned with respect to the relevant attributes
selected under the previous step. At this point we should be clear about what is the image that the
customer has about the various product brands? You have to see how are they positioned in respect
to each other? Which competitors are perceived as similar and which as different? This judgment
can be made subjectively. However a research can be taken up for getting the answer
of these questions.
(4) Analysing the Customer – Now you need to analysis the customers habits and behaviour in a
particular market segment. The following questions need attention while understanding the
customer and the market – (i) how is market segmented? (ii) What role does the product class pay
in the customers life style? What really motivates the customers? And what habits and
behavior patterns are relevant?
The segmentation question is, of course, critical. There are various approaches to segmentation
but out of all benefit segmentation is relevant here, which focuses upon the benefits or attributes
that a segment believes to be important. In order to specify that benefit segments, it is useful to
highlight the role of ‘ideal object’ as a tool.
(5) Making the positioning Decision - The above four steps provide you a useful backgrounds
and are necessary to be conducted before taking any decision about positioning. The managers can
carry these steps or exercises. After these four exercises, the following guidelines can be
offered to reach a positioning decision:

(i) An economic analysis should guide the decision.

(ii) Positioning usually implies a segmentation commitment.
(iii) If the advertising is working, the advertiser should stick to it
(iv) Do not try to be something, you are not
(v) In making a decision on position strategy, symbols or set of symbols must be considered.
(6) Monitoring the position - An image objective, like an advertising objective should be
measurable. It is necessary to monitor the position overtime, for that you have variety of techniques
that can be employed it can be on the basis of some test and interviews which will help to monitor
any kind of change in the image.
Thus, the first four steps in the process provide a useful background. The fifth one only is taken to
make the position decision. The final step is to evaluate and measure and follow up.
Branding
Concept of branding
Branding is the process by which companies distinguish their product offerings from completion.
Marketers develop their products into brands which help to create a unique position in the minds
of customers. A brand is created by developing a distinctive name, packaging and design, and
arousing customer expectations about the offering. By developing an individual identity, branding
permits customers to develop associations like prestige and economy with the brand. Buying a
brand reduces the risk of the customer and eases his purchase decisions. Branding shapes customer
perceptions about the product. Brand superiority leads to high sales, the ability to charge price
premiums, and the power to resist distribution power.
Brand types
Traditionally, manufacturers branded their products and sold them to customers by using the
distribution channel. Wholesaler, distributors and retailers sold only the manufacturer’s brands.
Manufacturers were thus able to exert control over these distribution channel members. In the past
few decades however, some distribution channel members, particularly retailers have started
selling their own brands, called private labels. These brands are usually of comparable quality with
the manufacturers’ brands, though they are priced lower. These private labels are given more
prominence in the retail stores, thus enabling the transfer of power from manufacturers to retailers.
 Manufacturer Brands

They are created by producers and bear their brand name. The responsibility for marketing the
brand lies with the producer. Most manufacturer brands are supported by massive advertising
budgets. They also have to manage long distribution channels to reach the final customers. The
producer is an expert in designing and manufacturing the product. Though the producers may
eventually become great marketing organizations, like Proctor & Gamble and Uniliver have, their
main prowess lie in technologies and processes underlying the product. A manufacturer brand is
likely to be more advanced and may have more innovative features than other brands in its
category.
 Own label or Distributor or Store Brands
They are created and owned by channel intermediaries. Most of these brands are owned by big and
powerful retailers. The retailers do not manufacture these brands and may not have any knowledge
about the underlying technologies and processes of the product. Retailers almost completely
outsource manufacturing. Since retailers are in contact with customers they can give very
important information about the likings and disliking of customers, whom the manufactures of
distributor brands can incorporate in the products they manufacture for the retailer.
Brand Equity
A brand is an intangible asset for an organization. The concept of brand equity originated
in order to measure the financial worth of this significant, yet intangible entity.
Brand equity is the value and power of the brand that determines its worth. The brand equity can
be determined by measuring:
 The price premium that the brand charges over unbranded products.
 By assessing the additional volume of sales generated by the brand as compared to other
brands in the same category and/or segment.
 From the share prices that the company commands in the market (particularly if the brand
name is the same as the corporate name, or customers can easily associate the performance
of all the individual bands of the company with the financial performance of the corporate)
 Returns to shareholders
 Assessing the image of the brand for various parameters that are deemed important
 Assessing the future earnings potential of the brand.
Brand equity comprises the following elements
Awareness

Awareness of the brand name among target customers is the first step in the equity building
process. Awareness essentially means that customers know about the existence of the brand, and
also recall what categories the brand is in. the lowest level of awareness is when the customer has
to be reminded about the existence of the brand name, and its being a part of the category.
Thereafter is the stages of aided recall, i.e., upon the mention of the category, the customer can
recognize the company’s brand among that the customer can recall upon the mention of the product
category is the company’s brand. This is called top-of-mind recall.
Brand Associations
Anything that is connected to the customer’s memory about the brand is an association. Customers
form associations on the basis of quality perceptions, their interactions with employees and the
organization, advertisements of the brand, price points at which the brand is sold, product
categories that the brand is in, product displays in retail stores, publicity in various media, offerings
of competitors, celebrity associations and from what others tell them about the brand. And this is
not an exhaustive list.
Perceived Quality
Perceived quality is also a brand association, though because of its significance, it is accorded a
distinct status while studying brand equity. Perceived quality is the perception of the customer
about the overall quality of a brand. In assessing quality, the customer takes into consideration the
performance of the brand on parameters that are important to him and makes a relative judgment
about quality by assessing competitor’s offerings as well. Therefore, quality is a perpetual entity,
and consumer judgments about quality vary.
Brand Loyalty
Brand loyalty is said to occur when a customer makes the choice of purchasing one brand from
among a set of alternatives consistently over a period of time. In the traditional sense, brand loyalty
was always considered to be related to repetitive purchase behavior. For some products such as
purchasing a house or an automobile, repetitive purchase behavior may not occur. In these
situations, attitudinal brand loyalty, i.e., consumer feelings about the brand that was purchased,
and their inclination to recommend the brand to others are measured. Brand loyalty is uaually rated
as the most important indicator of brand equity. The reason for this is that loyalty develops post
purchase and indicates a consistent patronage of a customer over a long period of time whereas all
other elements of brand equity may or may not translate into purchase.

Branding strategy
A firm’s branding strategy reflects the number and nature of both common and distinctive
brand elements it applies to the product it sells. Deciding how to brand new products is especially
critical. When a firm introduces a new product, it has three main choices:
1. It can develop new brand elements for the new product.
2. It can apply some of its existing brand elements.
3. It can use a combination of new and existing brand elements.
When a firm uses an established brand to introduce a new product, the product is called a Brand
Extension. When marketers combine a new brand with an existing brand, the brand extension can
also be called a subbrand, like Maruthi swift automobile, and ICICI Prudential Life Insurance.
Brand extension fall into two general categories. In a line extension, the parent brand covers a
new product within a product category it currently serves, such as with new flavours, forms, colors,
ingredients, and package size. Lifebuoy soap from Hindustan Unilever has many line extensions
and each one is identifies by specific names following the parent name such as lifebuoy care
lifebuoy deofresh, lifebuoy nature, and lifebuoy total, in addition to the lifebuoy liquid soap. In a
category extension, the parent brand is used to enter a different product category from the one it
currently serves. Honda has used its company name to cover different products such as
automobiles, motorcycles, snowblowers, marine engines, and snow mobiles. This allows Honda
to advertise that it can fit “six Hondas in a two-car garage”.
A brand line consists of all products- original as well as line and category extensions-sold under
a particular brand. A Brand Mix ( or brand assortment) is the set of all brand lines that a particular
seller makes available to buyers. Many companies are now introducing branded variants, which
are specific brand line supplied to specific retailers or distribution channels. They result from the
pressure retailers put on manufacturers to provide distinctive offerings. A camera company may
supply its low-end cameras to mass merchandisers while limiting its higher-priced items to
specialty camera shops.
A licensed product is one whose brand name has been licensed to other manufacturers that
actually make the product.
Branding Decisions
The first branding strategy decision is whether to develop a brand name for a product. Today,
branding is such a strong force that hardly anything goes unbranded. Assuming a firm decides to

brand its products or services, it must then choose which brand names to use. Four general
strategies are often used:
 Individual names:
Proctor & Gamble (India) has several individual brands in different product categories such as
Vicks (health care), Ariel and Tide (fabric care), Pantene, Head & Shoulders, Rejoice (hair care)
and Pampers(baby care). A major advantage of an individual-names strategy is that the company
does not tie its reputation to the product. If the product fails or appears to have low quality, the
company’s name or image is not hurt.
 Blanket Family names:
This policy is followed by Tata. The blanket family name of the company is used in diverse product
categories such as salt, tea, coffee, automobiles, and steel. Development cost are lower with
blanket names because there is no need to run “name” research or spend heavily on advertising to
create recognition. Sales of new product are likely to be strong if the manufacturer’s name is good.
Corporate-image associations of innovativeness, expertise, and trust worthiness have been shown
to directly influence consumer evaluations. Finally, a corporate branding strategy can lead to
greater intangible value for the firm.
 Separate family names for all products
The Aditya Birla group in India follows this policy to a great extent. It uses separate family names
for its various products. Hindalco for Aluminum, Ultra Tech for cement, Grasim and Graviera for
suitings are some examples. If a company produces quite different products like these, one blanket
name is often not desirable. Swift and company developed separate family names for its hams
(Premium) and fertilizers (Vigoro).
 Corporate name combined with individual product name
Kellogg combines corporate and individual names in Kellogg’s Rice Krispies, Kellogg’s Raisin
Bran, and Kellogg’s Corn Flakes. The company name legitimate, and the individual name
individualizes, the new product.

Module 4:
Concept
Product:
A product can be defined as a collection of physical, service and symbolic attributes which yield
satisfaction or benefits to a user or buyer. A product is a combination of physical attributes say,
size and shape; and subjective attributes say image or "quality".
Product Decision
According to Peter Drucker- So long as product is not bought and consumed, it remains a raw
material. The product is almost always a combination of tangible and intangible benefits.
Product hierarchy
The product hierarchy stretches from basic needs to particular items that satisfy those needs. We
can identify six levels of the product hierarchy, using life insurance as an example:

Need family – The core need that can satisfy a core with reasonable security.
Product family – All the product classes that can satisfy a core need with reasonable effectiveness.
Example: savings and income.
Product class – A group of products within the product family recognized as having a certain
functional coherence. Also known as product category. Example: financial instruments
Product line – A group of products within a product class that are closely related because they
perform a similar function, are sold to the same customer groups, are marketed through the same
outlets or channels, or fall within given price ranges. A product line may consist of different
brands, or a single family brand, or individual brand that has been line extended. Example: life
insurance.
Product type – A group of items within a product line that share one of the several possible forms
of the product. Example: term life insurance.
Item (or also called stock keeping unit or product variant) – A distinct within a brand or product
line distinguishable by size, price, appearance, or some other attribute. Example: ICICI Prudential
renewable term life insurance.
New product development
A new product is any product which is perceived by the customer as being new. This could involve
repositioning of existing products or offering the existing products at low prices, or making
improvements in the existing product, or adding new product items to the existing product line, or
for that matter, taking up a product line which is totally new to the organization or new to the
world.
New product development process plays a crucial role in deciding the future of the organization.
Whatever may be the size and nature of the operation of a firm, product planning and development
is necessary for its survival and growth in the long run. The life of an existing product is visualized
like that of a human life. Every product have a life of its own and it becomes obsolete after a certain
period of time. It is essential to develop new products or alter or improve the existing ones to meet
the oft-changing customer needs.

New product development process

The process of new product development may vary from one firm to another but, generally, one
can see stages as outlined.
Stage I: Idea Generation
The process of new product development starts with the search for product ideas. To be successful,
it is important that this search should not be casual. Top management should spell out the corporate
mission and objectives for new products. Also, it should spell out the role of new product
development in the firm’s growth strategy. Until now, in most Indian companies, the new product
development process has been casual and ad hoc. In these firms, new product development is a top
management prerogative and often reflects the chairman, chief executive, or owner’s perspective
of the market and the firm.
The stage of generating new ideas is characterized by creativity. Hence, to generate these ideas,
group techniques like brain storming, synaptic, need/problem identification, and attribute listing
could be used. Most firms use the last two mentioned techniques.
Stage II: Identifying Prospects and Defining Target Market
The second stage is that of identifying prospects or target customer groups. It is important that the
firm defines its target customer group in specific terms. It should also examine the cost of serving
this group. These factors are important as they will help the firm narrow down its decision field.
At this stage, the firm should also identify success factors in different product ideas. For example,
some ideas may require strength in this distribution network, others may require strength in
technology, and yet others may demand a high brand image. If the firm does not have the required
strength, it should investigate how it can acquire the same and whether the pursuit of the new
product ideas will result in adequate profits.
Stage III: Concept development and Testing
Having defined the target group, the next stage is that of developing product concepts and testing
them. Many firms skip this stage in the belief that if they have great idea, customers will pick them
up by themselves. Nothing can be further from the truth. As Theodore Levitt puts it, customers
buy concepts and not just the tangible product. To better appreciate this stage, let us understand
three key terms, namely, (a) product idea, (b) product concept, (c) product image.
Product Idea – A possible that the company might offer to the market.
Product Concept – An elaborated version of the idea expressed in meaningful consumer terms

Product Image – The particular picture that consumers acquire of an actual or potential product.
A concept is an elaborated version of a product idea. Consider the example of a leading soft drink
manufacturer in the country which wanted to stretch its product line by adding a new range of fruit
juices. To convert this product idea into a product concept, the possible use situations. Following
these definitions, some concepts like the following may emerge:
Concept I: Fresh fruit juice for children and adolescents as a health supplement at breakfast time.
Concept II: Fresh bottled fruit juice for the young as a fun, thirst quenching, refreshing, and
nutritious health drink to be had at any time.
Concept III: Fresh bottled mango juice for the young and the grownups as a fun, thirst quencher,
and refreshing beverage to be has at any time.
Concept IV: Fresh bottled mango juice for adults as health supplement.
Assume that the third concept looks to be promising, then the next issue is to decide how the new
product will differ from the existing soft drinks. The firm may consider two product attributes-
taste and packaging. The firm may position it on other attributes too. The firm can also position
the brand against competing ones on several features like use situation, price, calories and
convenience. The moment it does so, the product concept now becomes a brand concept.
After the product and brand concepts have been developed, the stage is now set for testing them.
These concepts are tested on a sample of target customer group. Most often, at this stage, visuals
of proposed product concepts are shown to the sample respondents. However the validity of tests
increases if the product is shown to the customer group in the physical form, that is a prototype or
sample.
Stage IV: Feasibility Analysis
Once the product concepts have been tested, the next step is to conduct a market feasibility study.
This study involves the following:
 Estimation of demand in the target market at different price levels
 Forecasting sales based on demand estimation and competitive analysis
 Estimate the cost of serving the market segment, taking into account cost of transportation,
warehousing, margins required by the trade to market the new product, promotion
expenses, and salesforce cost (if additional salesforce required)
 Based on the cost and anticipated sales revenue, calculate the break-even price and the
sales volume.

Once the product concept is found to be feasible, the firm takes the concepts to the next stage-that
of product development.
Stage V: Product Development
This is the stage where the product ideas now move from the concept and design boards to R&D
and manufacturing for physical development. Both these departments should keep the customer
feedback in mind while developing the physical version of the product. Also, they must ensure
that the product is easy and safe to use by the customer. This becomes all the more important
durables and other industrial products where the user may not have the same level of knowledge
and understanding as the R&D scientists. For example, consider the toy computer made for a 10-
12 year old child. If the child has to depend on his/her parents’ assistance to understand, use it and
play on, then the product is a failure. The product form (like the keyboard and the software) should
be simple enough for an average driven firm takes a step forward, ahead of the others.

Idea generation
Identifying prospective
customers/Defining target market
Concept development and testing
Feasibility analysis
Product development
Test marketing
Commercialization
Stage V: Test marketing

The new product is now tested on four parameters: trial, first purchase, adoption (repeat purchase)
frequency, and the volume bought each time. A marketer has to be careful in avoiding pitfalls.
On account of the risks involved in test marketing, most companies avoid it. But those who do it
know that it can yield valuable information about customers, dealers, marketing mix, and strategy.
Stage VI: Commercialization

Once the test marketing is completed and the firm has favourable results, it is then ready to
commercialize the product or, in other words, launch the new product. The launch plan must
consider the following: i) timing, ii) place, iii) strategy.
Diffusion process
Marketing literature today suggests that new product ideas or innovations take time to diffuse and
get adopted in the market-place. The pace at which they diffuse differ from one market to another
depending on factors like the extent to which an economy an economy is open to new products,
media, transportation, warehousing, and the distribution network. It also depends on customer
awareness and knowledge.
The theory and process of diffusion of new products/innovations was first propounded by Everett
M Rogers. According to this theory, people differ in terms of their risk taking and attitude towards
change. This affects their willingness to try and adopt a new product. Based on these two
parameters and the time they take to try a new product, customers can be grouped as:
a. Innovators, b. Early adopters, c. Early majority, d. Late majority
e. Laggard
1. Innovators: Innovators in any product market situation are 2.5% of the total market. These
individuals are high on risk taking and hence more open to change. They are more aware and are
perceived as opinion leaders in the market. In fact, they hold the same opinion about themselves.
Others look upto them for guidance and recommendation. They are brand switchers. Once the
innovators have brought the new product or brand and feel satisfied, they talk about it to their
friends, neighbors, relatives, and peer group.
2. Early adopters: Immediately next in buying the new products are the early adopters who
constitute 13.5% of the total market. They have the same characteristics as innovators but take a
little more time to buy and adopt the new product.
3. Early majority and Late majority: They constitute 68% and hence represent a significant
proportion of the market. These customers wait for positive recommendations from innovators and
early adopters who are perceived as opinion leaders by them. They are moderate on risk taking.
4. Laggards: These constitute 16% of the total market and display high resistance to change. They
are averse to risk-taking and until it is 100% safe to use the product, they generally do not buy it.
They are loyal to existing brands and products.

Product life cycle

The concept of product life cycle is one of the popular concepts in marketing. This concept has
been used as a tool for forecasting and also for developing marketing strategy. In its simplest form,
this model explains the market response to a new product introduced in the market over a period
of time.
Stages in product life cycle
 Introduction stage:
Research or engineering skill leads to new product development. The product is put on the market
at the stage of commercialization. The concept of product life cycle starts from the
‘commercialization’ stage of new product development. At this stage, product awareness and
acceptance among prospective customers are minimal. As the sales are low, there are high
promotional costs. This is due to the fact that the company has to spend money for advertising,
sales promotion and other forms of promotion. The major obstavle to rapid market penetration at
this stage is poor distribution strategy. Many retailers will not support a new product launch and
will wait till they hear well about the brand. Many companies prefer regional roll outs in which
the new product is introduced market-by-market, region-by-region. This system of new product
introduction often brings physical distribution and logistics problem to the forefront.
The consumer acceptance of a new product is also low as very few customers are ready to accept
the new product. As explained in the diffusion process, only innovative customers buy the product.
It is assumed at this stage that the product does not have a perfect competitor. The competition
will be in the form of imperfect substitutes available in the market and by the availability of
existing products.

 Growth Stage:
The product begins to make rapid sales gains because of the cumulative effects of introductory
promotion, distribution and word-of –mouth influence. High and sharply rising profits are
witnessed at this stage. However, for sustained growth, consumer satisfaction must be ensured at
this stage. This stage begins when demand grows rapidly. In the case of repeat buying situation,
the innovators move from trial purchase to adoption stage. If the innovators are satisfied with the
products, they influence other buyers through word of mouth and referral communication. Deeper
penetration in market by intense distribution strategy and increase in store visibility and usage tend
to bring new buyers in the market. The competitors also start their advertising and sales promotion
making the total category demand to increase in the market. Growth stage also contributes in
increasing profit levels.
 Maturity Stage:
Sales growth continues, but at a diminishing rate, because of the declining number of potential
customers who remain unaware of the product or who have taken no action. The last of the
unsuccessful competing brands will tend to withdraw from the market. For this reason, sales are
likely to continue to rise while the survivors mop up the customers for the withdrawn brands. There
is no improvement in the product but changes in selling efforts are common. Profit margins slip
despite sales due to higher cost in acquiring new customers. Sales reach and remain on a plateau
marked but the level of replacement demand. There is little additional demand to be stimulated.
This is the stage in which it becomes difficult to maintain effective distribution and the competition
is more on the basis of price than any other component.
 Decline Stage:
Eventually, sales start declining due to multiple reasons. Changes in customer preferences,
competitive structure in the market, technology and other environmental forces lead to the
declining of sales. Sales begin to diminish absolutely as the customers begin to get bored with the
product. If the decline is for the product category, the marketer may decide to prune the product
portfolio and drop the declining brands or may plan to re-introduce brands with product
modifications. The category may gradually be edged out by better products or substitutes, e.g., dial
telephones and petrol jeeps led to eventual dropping of the brand by the firms. The product decline
happens due to entry of new competitors with advanced technology; and reduction in consumer

interest. The marketer is left with an option of price reduction, which puts pressure on the profit
margins leading to deletion of products.
Product mix strategies
A product mix is the total set of brands marketed by the company. The width of product mix is
the number of product line that a company offers. Companies increase the width of their product
mix to spread their risk across many product lines rather than depend on one or a few of them.
They also widen their product mix to capitalize on their established brand equity.
The efficient fulfillment of the marketer’s goal to supply goods and services to consumer for
satisfaction of their needs can be possible if due attention is given to three issues which govern the
product mix, namely sales growth, sales stability and profits.
Sales growth can be achieved either by increasing its share in existing markets or by finding new
markets. Following are the four ways in which product mix can be adjusted to achieve
organizational goals.
 Market Penetration, under which market share is increased by expanding sales of present
products in existing uses. Attempt increased penetration in the existing market with the
existing products. Brand building is one method. Existing customers may become more
brand loyal (less switching), new customers may buy the brand, existing users may use the
product more often and in greater quantity.
 Market Development, under which markets are expanded by creating new uses of present
products. Current products are sold in new markets. The company may move into new
geographic markets or move into new market segments.
 Product Development, where market share is increased by developing new products to
satisfy existing needs. Improve present products or develop new products for current
markets. By improving style, performance and comfort, the aim is to gain higher sales
among its present market.
 Diversification, where market is expanded by developing new products to satisfy new
consumer needs. New products are developed for new markets. This is risky. But if there
is synergy between existing and new products this strategy is likely to work.
Merchandise planning and strategies
Effective merchandising means having the right product, in the right amount, in the right place, at
the right price, at the right time, all the time!

 Essential components of merchandising plan

Have you thought about these essential components of your merchandising plan?
 Overall Budget
For most retailers, inventory is typically one of the biggest investments so having a budget
that is strategic and flexible is critical.
 Product Categories
Having a thoughtful, on-brand and edited category strategy will not only help build
credibility with target customers (they can really count on you as the expert in these
categories) but can also help in buying power with vendors if we build up enough volume.
 Product Assortment
Developing a compelling assortment is one of the most enjoyable and rewarding aspects
of merchandising—but can also be one of the most challenging. Constantly being out in
the marketplace, knowing what products are hot before everyone else does and really
tailoring your buying strategy to target market needs will help give you competitive
advantage and drive $ into the register.
 Private Label Products and Packaging- As private label is a great differentiator for many
businesses—providing competitive advantage and terrific mark-up, it is a strategy worth
exploring for many retail businesses.
 Purchase Order System
A purchase order system can be a big investment so it is critical to choose one that truly
fits your needs. Often times retailers purchase POS systems that are too complex and robust
so instead of being a useful tool, it becomes an overwhelming and ineffective one.
 Pricing and Markdown Strategy
Strategically planning your markup and markdown strategy can make all the difference in
the profitability of your store. Being very attune to the market and proactively anticipating
customer behavior will ensure you are maximizing product potential and always making
room to bring new and exciting merchandise to your store.
 Shortage Control
Even in the smallest and most intimate store environments, shortage is an issue. Proactive
strategies need to be implemented to create an intolerant environment for theft, for both
customers and staff alike.

Packaging/ labeling
Packaging and labeling are used for various products in retail and wholesale establishments.
Packaging provides a convenient way for customers to lift and transport products. Labeling helps
consumers identify a product. Without labels, for example, all fruit drinks on a shelf would look
the same. Certain types of packaging and labeling also appeal to consumers. Customers may prefer
a certain product brand because of the packaging and labeling. There are several key reasons
packaging and labeling are important in marketing.
Packaging as marketing tool
Packaging was once the stepchild of marketing, simply thought of as the container for the product,
a cost to be minimized as much as possible.
These days, marketers recognize the value of packaging, understanding the vital role it can play i
n generating sales by connecting with shoppers at the point-of-purchase.
And the expense incurred in developing an effective package is seen as a worthwhile
investment that provides a huge return. But with this higher profile comes greater scrutiny and
higher expectations. There is a need to establish criteria for effectiveness, and create metrics to
determine if those criteria have been met.
The fundamental criteria for effective packaging are:
 To be seen on shelf
 To engage shoppers
 To communicate key messages/point-of-difference
 To close the sale.
In addition, the most effective packaging also provides functional benefits such as handling,
storage, opening/re-closing, dispensing/usage and disposal/sustainability.
Let’s consider each of these aspects in more detail.
VISIBILITY
Unless the package is noticed on shelf, it cannot be selected for purchase –fundamentally, unseen
is unsold.
 Even in today’s very crowded store aisles, there are many ways that a package can be
designed to get more visibility. The key is to create contrast against the surroundings. This
can be achieved via:

 Shape: If the category norm is to use rectangular cartons (as in readyto-eat cereal) and the
same shaped carton of every different brand blends together, then something different, such
as an oval shaped carton (such as that of Archer Farms) will stand apart quite readily.
 Color: Creating a unifi ed block of color can provide visibility, especially if the brand has
a limited number of facings. Pillsbury did so with its blue frozen breakfast packaging that
had to compete with the more prominent sea of yellow established by Egg-O. And using
color consistently can help unify a brand across an array of categories – as the white color
of Walmart’s Great Value packaging does.
 Graphic element: Packaging can be made to stand out by using a strong visual element –
typography or device that is noticeable and distinctive, and especially if it can unite a line
of products. Duane Reade’s recently introduced line of paper products does this brilliantly
with the use of iconic New York City-scapes created in a unique black and white style
ENGAGEMENT
Of course, while a package cannot be purchased if it is not seen, creating visibility alone does not
guarantee purchase. After all, train wrecks attract attention, but not in a good way.
Once it has managed to catch the shopper’s attention, the package must then draw the shopper in
and get her to spend some of her precious time looking at it in more detail. The fastest and most
effective way to do this is by using a visual. A picture truly is worth a thousand words, as it acts
quickly, holds attention and is highly credible. No one needs to be told how delicious a slice of
cake will be if it looks rich, moist and fl avorful. On the other hand, no amount of words will
convince someone that a piece of cake that appears dry, chalky and stale will be worth tasting.
But while seeing is believing, feeling is convincing. Having a positive emotional reaction to a
package (like with most things), is more likely to result in a desire to engage with it. And often
times, there are elements on a package that we have a reaction to which we are not aware of, or
cannot easily articulate.
COMMUNICATION
The next step on the path toward purchase is to convey a meaningful message to the shopper. This
can be done with an attention-getting announcement about this being a new product, that the
product has been changed (now with Beta-carotene) or that it is selling for a lower price (10 percent
off). It can also be a compelling claim about the product ingredients (All Natural), its place of
manufacture (U.S.A.), or the outcome of using it (cholesterol lowering).

There also are functional messages such as form and flavor descriptions that are critical to the
shopping process and must be executed effectively. When developing the packaging for a brand
line containing a range of types, there is an important balance to strike between creating a strong
family look, and also clearly differentiating the different varieties within the line. Otherwise, the
shopper will either miss the brand, or struggle to find a particular item being sought.
In addition to the content of the message, the visual execution is an important factor impacting
how engaging the message will be. Just as creating contrast helps a package stand out from its
surroundings, so too, a message will stand out if it contrasts against its surroundings.
The tools here are size, color, shape and placement. Importantly, placing a message at the top of
the package is not always best, nor is making it the largest element the only effective treatment. It
is most important to consider the hierarchy of communication because a shopper can only process
two to three messages and will ignore the rest. It is critical, therefore, to determine which messages
are the most vital and be sure that these are the ones that are emphasized.
FUNCTIONALITY
Structural packaging can provide an effective way for a brand to stand out on shelf, or create
meaningful consumer benefits that set a brand apart.
The Go-Gurt brand was created by creating a new delivery mechanism for yogurt, a squeezable
tube. And the lightweight, shatterproof squeezable bottle for ketchup, mustard and most recently
mayonnaise, has provided tremendous consumer benefits in terms of dispensing these ubiquitous
products that had long been the source of considerable user frustration.
Target’s proprietary bottles for prescription medication created new paradigms by providing
packaging that could actually save lives by being easy to comprehend, use and distinguish.
CLOSING SALES
Much of what makes a package more effective can add to the products’ cost of goods, and is
sometimes resisted by the manufacturer. This can include higher quality packaging materials,
better printing, more attractive photography, etc. But just because these add to the production cost,
that doesn’t mean that the bottom line will be adversely affected. In fact, better packaging can
result in higher sales, or the ability to charge more as shoppers believe the product is worth more.
But how do I know if my package is effective?
While knowing what makes a package effective in general is useful, it’s even more important to
know if the investment made to make your brand’s package effective has paid off.

Using consumer research as part of the design process is like taking out an insurance policy – it
costs a little bit, but the payoff is tremendous in both avoiding costly mistakes and ensuring that
the optimal direction is pursued.
There are many different techniques that can be employed and they can be used at various points
in the process.
In the early stages of designing the packaging, qualitative research can be very useful to determine
if the designs are generally resonating – if the communications are meaningful and the imagery is
appropriate.
Prior to introducing the package in the marketplace, it is useful to determine how the shopper will
react to this offering in the context of a realistic shelf display that includes competitive products,
pricing and merchandising variables. Ideally, the technique will be quantitative in nature and
include measures of shelf impact, package viewing and emotional response.
Specifically, one must determine if the package is:
 Visible: In the few seconds that a shopper glances at the aisle, does she even notice your
package among the vast array she’s faced with?
 Communicating: If shoppers are confused about what they’re seeing (is it still my brand,
what’s the benefit of this one, will it taste as good/perform as well?), they may resort to
purchasing a competitive offering.
 Compelling: Even if seen on shelf and clearly understood, the proposition must be
sufficiently meaningful, amidst all of the other options available, to actually be purchased.
Simply hearing people pay lip service to how wonderful the idea is can be dangerously
misleading.
Our firm’s shopping exercises reveal both impulse and planned buying behavior at shelf that can
be expected from a given package design. These measures have been validated as being highly
indicative of in-market performance and offer critical learning prior to introduction.
Packaging is one of the most cost-effective weapons in a marketer’s arsenal. It requires a relatively
modest investment, lasts a long time, and is encountered by a tremendous number of
shoppers (in promotion, at the point-of-purchase and during use). Applying a few fundamental
principles to its creation, and employing appropriate consumer research prior to launching, can
ensure that this valuable tool provides a very high return-on-investment for many years.
Requirement of good packaging

Functional– effectively contain and protect the contents

* Provide convenience during distribution, sale, opening, use, reuse, etc.
* Be environmentally responsible
* Be cost effective
*Appropriately designed for target market
*Eye-catching (particularly for retail/consumer sales)
*Communicate attributes and recommended use of the product and package
* Compliant with retailers’ requirements
*Promotes image of enterprise
*Distinguishable from competitors’ products
*Meet legal requirements for product and packaging
* Point of difference in service and supply of product.
* For a perfect product, perfect colour.
Role of labeling in packaging
A labels main function is to inform about contents and give directions
Labeling on product provides the following important information:
 Shipper's mark
 Country of origin
 Weight marking (in pounds and in kilograms)
 Number of packages and size of cases (in inches and centimeters)
 Handling marks (international pictorial symbols)
 Cautionary markings, such as "This Side Up."
 Port of entry
 Labels for hazardous materials

Module-5
Pricing decisions
Pricing is the process of determining what a company will receive in exchange for its product or
service. Pricing factors are manufacturing cost, market place, competition, market condition, brand,
and quality of product. Pricing is also a key variable in microeconomic price allocation theory.
Pricing is a fundamental aspect of financial modeling and is one of the four Ps of the marketing mix.
(The other three aspects are product, promotion, and place.) Price is the only revenue generating
element amongst the four Ps, the rest being cost centres. However, the other Ps of marketing will
contribute to decreasing price elasticity and so enable price increases to drive greater revenue and
profits.
Pricing is the manual or automatic process of applying prices to purchase and sales orders, based
on factors such as: a fixed amount, quantity break, promotion or sales campaign, specific vendor
quote, price prevailing on entry, shipment or invoice date, combination of multiple orders or lines,
and many others. Automated systems require more setup and maintenance but may prevent pricing
errors. The needs of the consumer can be converted into demand only if the consumer has the
willingness and capacity to buy the product. Thus, pricing is the most important concept in the
field of marketing, it is used as a tactical decision in response to comparing market situation. Price
is the attached value given to a quantity of goods and services
Significance of Pricing
Factor influencing pricing (Internal factor and External factor)
Pricing decisions are usually determined/influenced by cost, demand and competition. We shall
discuss each of these, factors separately. We take demand first.
Demand
The popular `Law of Demand' states that "higher the price; lower the demand, and vice versa, other
things remaining the same’’. In season, due to plentiful supplies of certain, agricultural products,
the prices are low and because of low prices, the demand for them increases substantially. You can
test the validity of this law yourself in your daily life. There is an inverse relationship between

price and quantity demanded. If price rises, demand falls and if the price falls, the demand goes
up. Of course, the law of demand assumes that there should be no change in the other factors
influencing demand except price. If any one or more of the other factors, for instance, income, the
price of the substitutes, tastes and preferences of the consumers, advertising, expenditures, etc.
vary, the demand may rise in spite of a rise in price, or alternatively, the demand may fall in spite
of a fall in price. However, there are important exceptions to the law of demand.
There are some goods which are purchased mainly for their `snob appeal'. When prices of such
goods rise, their snob appeal increases and they are purchased in larger quantities. On the other
hand, as the price of such goods falls, their snob appeal and, therefore, their demand falls.
Diamonds provide a good example.
In the speculative market, a rise in prices is frequently followed by larger purchases and a fall in
prices by smaller purchases. This is especially applicable to purchases of industrial raw materials.
More important than the law of demand is the elasticity of demand. While the law of demand tells
us the direction of change in demand, elasticity of demand tells us the extent of change in demand.
Elasticity of demand refers to the response of demand to a change in price.
Competition
The degree of control over prices which the sellers may exercise varies widely with the competitive
situation in which they operate. Sellers operating under conditions of pure competition do not have
any control over the prices they receive. A monopolist, on the other hand, may fix prices according
to his discretion. Sellers operating under imperfect competition may have some pricing discretion.
The marketer, therefore, needs to know the degree of pricing discretion enjoyed by him. Let us
take up each of these cases individually.
Perfect competition is said to exist when (i) there are a large number of buyers and sellers, (ii) each
purchasing and selling such a small quantity that their withdrawal from the market will not affect
the total demand and supply, (iii) the products sold by sellers are homogeneous in nature.
Prices under perfect competition are determined by the forces of supply and demand.

Prices will be fixed at a point where supply and demand are at an equilibrium. This is illustrated
in the following figure:
In pure competition, all that the individual seller can do is to accept the price prevailing in the
market, i.e. he is in the position of a Price Taker. If he wants to charge a higher price, buyers will
purchase from other sellers. And he need not charge less since he can sell his small supply at the
going market price,
Under monopoly, a single producer has complete control of the entire supply of a certain product.
Railways and telephones are examples of monopoly. The main features of monopoly are (i) there
is only one seller of a particular good or service and (ii) rivalry from the producers of substitutes
is so remote that it is almost insignificant. As a result, the monopolist is in a position to set the
price himself. Thus, he is in the position of a Price Setter.
Cost
There is a popular belief that costs determine price. It is because the cost data constitute the
fundamental element in the price setting process. However, their relevance to the pricing decision
must neither be underestimated nor exaggerated. For setting prices, apart from costs, a number of
other factors have to be taken into consideration. Demand is of equal, and, in some cases, of greater
importance than costs. An increase in cost may appear to justify an increase in prices yet the

demand situation may not permit such an increase. On the other hand, an increase in demand may
make increase in prices possible, even without any increase in costs.
Very often, price determines the cost that may be incurred. The product is tailored to the
requirements of the potential consumers and their capacity to pay for it. The radio manufacturers
in India realised that if they have to capture the mass market prevailing in India, they have to price
it at low level which could be done only by reducing costs-reducing the number of wave-bands in
the radio. And now a single wave radio is available at around Rs. 100. Given the price, we arrive
at the cost working backwards from the price consumers can afford to pay. Over a period, cost and
quality are adjusted to the given price.
If costs were to determine prices, why do so many companies report losses? There are marked
differences in costs as between one producer and another. Yet the facts remains that the prices are
quite close for a somewhat similar product. This is, if anything, is best evidence of that costs are
not the determining factor in pricing.
Price decisions cannot be based merely on cost. It is very difficult to measure costs accurately.
Costs are affected by volume, and volume is affected by price. The management has to assume
some desire price and volume relationship for determining costs. That is why costs play even a
less important role in case of new products as compared to existing products. It is not possible to
determine costs without having an idea of what volumes or numbers can be sold. But, since there
is no experience of volumes, costs and prices, one starts with the going market price for similar
products.
Objectives of pricing
Before a marketer fixes a price, he should keep in mind certain basic considerations.
The price policy he adopts is closely related to his other policies, like production programme, advertising
policy and selling methods.
For example, it may be necessary to reduce the price to offset the probable loss of sales from a lower
advertising budget or to enable fuller utilisation of plant capacity more quickly.
Aggressive sales campaign may be necessary to meet the advent of a new competitor. Your price should
not be so high that it attracts others to compete with you.

A low price policy may result in such a high volume of sales and low unit costs that profits are maximized
even at low prices.
"My policy is to reduce the price, extend the operations and improve the article. You will note that the
reduction of price comes first. I have never considered any costs as fixed. Therefore, I first reduce the price
to a point where I believe more sales will result. The new price forces the costs down. (by forcing)
everybody in the plant to the highest point of efficiency," Henry Ford quoted in Phillip and Duncan,
Marketing, 3rd Edition, 1956, p. 696.
Pricing concept for establishing value

Price is not just a number on a tag. Price comes in many forms and performs many functions. To
a manufacturer, price represents the quantity if money (or goods and services in a barter system)
received by the firm or seller for its products. To a customer, it represents a monetary sacrifice;
hence his perception of the value of the product.
Pricing strategies
Value based
There is an increasing trend to price the product on the basis of the customer’s perception of its
value. This method takes into account all other elements of the marketing mix and the positioning
strategy of the firm, as the value of the product is a function of all these variables. This method
helps the firm in reducing the thread of price wars. In fact, it can help the firm steer out of the
ugliest of price wars. But the key to this method is to correctly understand customer’s perception
of product value and not to overestimate the firm’s product value. Marketing research can play an
important role here.
It is important to the marketer to understand the perceived value of a product, which is based on:
i. Acquisition value
ii. Transaction value
i. Acquisition value
Acquisition value refers to the perceived benefits and the sacrifice made by the customer to get it.
The marketer needs to research how the customer perceives this sacrifice. Accordingly, the
acquisition value of a product is:
 Perceived benefits/Perceived Sacrifice
The perceived benefits in a product seen by a buyer, sacrifice a function of the buyers’ experience,
or experience of his or her reference groups and the publicity or news items appearing about the

product. For example, Air India has a low perceived value when compared to other airlines. This
is contributed by an image of unreliability and indifferent anf discourteous cabin crew. So, when
the customer decides to buy an Air India ticker, though it may be the lowest priced, he or she is
paying much more.
ii. Transaction value
Transaction value is determined by comparing the buyer’s reference price to the actual
price that he or she pays.
 Direct price rating method
Here, the customers are asked to estimate the price of each brand or model of the product
which is demonstrated to them.
 Direct perceived value rating
Here, the buyers are asked to allot a point scale, say from 0 to 100 points, to all the
competing brands. The brand having the highest points has the highest perceived value.
 Diagnostic method
Here, the buyers are asked to evaluate competing brands on different attributes, which they
first prioritize. By multiplying the importance weights against each company’s ratings, we
can find the brand that has the highest perceived value.
 Economic value to the customer
This is calculated by comparing a product’s total cost against the benefit of the product that
the customer is currently using, also called the reference product. This method can be used
by a firm to decide which market segments to be targeted for its products.
Cost based
There are two pricing methods under this group. One is based on the full cost, the other on variable
cost.
1. Full cost or mark up price
In this method, the marketer estimates the total cost of producing or manufacturing a product
and then adds a mark up or the margin that the firm wants. This is indeed the most
elementary pricing method and many services and products are priced accordingly. To
arrive at the mark up price, one can use the following formula
Mark up price= Unit cost / (1-r)

Where, r=Expected return on sales expressed as a percent

For example, if the fixed costs for making 10,000 shirts is Rs. 45. Now the firm expects
30% return on sales. Keeping this figure in mind, the mark up price will be
Mark up price = 45/ (1-0.3) = Rs. 64.28
This approach ensures that all costs are recovered and the firm makes a profit. Indeed it
satisfies the finance oriented executives, but this method ignores the fact that it is not
necessary that the firm is able to sell its entire merchandise at this price. It does not consider
customer value perception and also the competitor’s reaction. Some firms use this as a
launch strategy, but this could prove fatal if competition already exists within the industry.
It may be a useful method if everyone in the industry adopts it, for this can minimize price
wars.
2. Marginal cost or Contribution Pricing
Here, the company may work on the premise of recovering its marginal cost and getting a
contribution towards its overheads. This method works well in a market already dominated
by giant firms or characterized by intense competition and the objective of the firm is to get
a foothold in the market. In the example of shirts discussed earlier, the variable cost is Rs.
30 per shirt. As long as firm is able to recover this cost and get a contribution towards its
overheads, it is an acceptable pricing method. This will also work when the firm has an
inventory of finished goods and it wants to liquidate it. At that time the prime concern is to
recover the direct costs. The problem with this method, however, is that it often sparks price
war which is not beneficial to any firm in the industry.
Market based
 Differential Pricing Strategy
This strategy involves a firm differentiating its price across different market segments. The
assumption in this strategy is that different market segments do not communicate or have
different search costs and value perceptions of the product. In other words, heterogeneity
in the market motivates a firm to adopt this strategy. Consider the example of passenger
seats sold by an airline. A business executive buys a seat on a full fare basis while an
individual or family going on a holiday pay a discounted fare. While the first is termed as

full economy fare, the latter is termed as excursion fare. Service firms like consulting,
accounting and banks, and medical professionals are frequent users of this strategy.
The differential pricing strategy may not work if customers in one segment communicate
with their counterparts in other segments and also if customers do not have search costs.
Competitor based
 Going Rate or “Follow the Crowed”
In this method, the firm prices its products at the same level as that of the competition. This method
assumes that there will be no price war within the industry. This is a method commonly used in an
oligopolistic market. Despite its advantage of preventing price wars, the method suffers from
serious limitations. The first is that it is not necessarily true that all firms or the leader firm is
operating efficiently. In case it is not, it will mean that the follower firm will also adopt a price
level which reflects the leader’s inefficiency rather its own efficiency. Besides, it is not always
true that a decision taken in collective wisdom is the best. It may certainly not be so from the
customer’s point of view.
 Sealed Bid Pricing
Another form of competition oriented pricing is the sealed bid pricing. In a large number of
projects, industrial marketing, and marketing to government, suppliers are asked to submit their
quotations as a part of a tender. The price quoted reflects the firm’s cost and its understanding of
competition. If the firm was to price its offer only at this cost level, it may be lowest bidder and
may even get the contract but may not make any profit out of the deal. So, it is important that the
firm uses expected profits at different price levels to arrive at the most profitable price. This can
be arrived at by considering the profits and profitability of getting a contract at different prices.
This method obviously assumes that the firm has complete knowledge or information about the
competition and the customer.
New product pricing
 Price skimming
One of the most commonly discussed strategies is the skimming strategy. This strategy refers to a
firm’s desire to skim the market by selling at a premium price. This strategy delivers results in the
following
a. When the target market associates quality of the product with its price, and high price is
perceived to mean high quality of the product.

b. When the customer is aware and willing to buy the product at a higher price just to be am
opinion leader
c. When the product is perceived as enhancing the customer’s status in society.
d. When competition is non-existent or the threat from potential competition exists in the
industry because of low entry and exit barriers.
e. When the product represents significant technological breakthroughs and is perceived as a
‘high technology’ product.
In adopting the skimming strategy the firm’s objective is to achieve an early break-even
point and to maximize profits in a shorter time span or seek profits from a niche.
 Penetration pricing
As opposed to the skimming strategy, the objective of penetration price strategy is to gain a
foothold in a highly competitive market. The objective of this strategy is to attain market share or
market penetration. Here, the firm prices its product lower than the others in competition. This
strategy delivers results in the following situations:
a. When the size of the market is large and it is a growing market.
b. When customer loyalty is not high; customers have been buying the existing brands more
because of habit rather than for a specific preference for it.
c. When the market is characterized by intensive competition.
d. When the firm uses it as an entry strategy
e. Where price-quality association is weak.
A large number of South-east Asian firms have used this strategy to enter forgin markets. The
1970s saw Japanese firms using this strategy to gain a foothold in European and North
American markets. In India, we have been witnessing the launching of several products that
have deliberately been priced lower than the leader firm.
The problem with this strategy is that it often heralds a price war within the industry which
could, in turn, prove fatal to all firms.
Marketing Channels/Distribution
Meaning
Distribution
The commercial activity of transporting and selling goods from a producer to consumer.
Eg: distribution of milk to the consumers

Decision
A position or opinion or judgment reached after consideration.
Distribution decision
Activities involved in making products available to customers when and where they want to
purchase them.
Institutional
Distribution Elements
Physical
Institutional distribution
The middle man between producer and end user who may take title and change the form of the
product handled. E.g. Wholesaler, retailer, agent, distributors, etc.
Physical distribution
The logistics of the distribution system including transport, storage and order processing.
Distribution is called third ‘P’ (place) in marketing.
Management of distribution is called third ‘P’ (place) in marketing. This involves processes to
place finished goods from a manufacturer to a customer for final consumption and usage. This
encompasses flow of goods and ownership from a manufacturer to a customer.
Most producers do not sell their goods directly to the final users; between them stands a set of
intermediaries performing a variety of functions. These intermediaries constitute a marketing
channel (also called a trade channel or distribution channel). Formally, marketing channels are sets
of independent organizations involved in the process of making a product or service available for
use or consumption. They are the set of pathways a product or service follows after production,
culmination in purchase and use by the final end user.
Some intermediaries-such as wholesalers and retailers-buy, take title to, and resell the
merchandise; they are called merchants. Others-brokers, manufacturers’ representatives, sales
agent-search for customers may negotiate on the producer’s behalf but do not take title to the
goods; they are called agents. Still others-transportation companies, independent warehouses,
banks, advertising agencies-assist in the distribution process but neither take title to goods nor
negotiate purchases or sales; they are called facilitators.
Purpose
 Make availability of product in good number and at the right time in the target market.

 To decide the path or route for the goods and services.

 Smooth movement of the product and ownership from manufacturer to the customer.
 Cost effective and economic distribution.
 For control of intermediaries.
 It helps to avoid an expensive affair of direct marketing /distribution channel.
 Information communication from the producer to the consumer.
Channel alternatives
Companies can choose from a wide variety of channels for reaching customers-from sales forces
to agents, distributors, dealers, direct mail, telemarketing, and the internet. Each channel has
unique strength as well as weaknesses. Salesforce can handle complex products and transactions,
but they are expensive. The internet is much less expensive, but it may not be as effective with
complex products. Distributors can create sales, but the company loses direct contact with
customers. Manufacturers’ reps are able to contact customers at a lowest cost per customer because
several clients share the cost, but the selling effort per customer is less intense than if company
sales reps did the selling.
The problem is further complicated by the fact that most companies now use a mix of channels.
The idea is that each channel reaches a different segment of buyers and delivers the right products
at the least cost. When this doesn’t happen, there is usually channel conflict and excessive cost.
A channel alternative is described by three elements: the types of available business intermediaries,
the number of intermediaries needed, and the terms & responsibilities of each channel member.
Channel Alternatives
Producer Intermediaries Customer
Levels Distribution Channels

0 Producer Consumer (Direct Marketing)
1 Producer Distributor/Retailer Consumer
2 Producer Distributor/Wholesaler Retailer Consumer
3 Producer Distributor Wholesaler Retailer Consumer

4 Producer Agent Distributor Wholesaler Retailer Consumer
Identifying major distribution alternatives (Types)

There are three distribution alternatives
 Intensive distribution
This alternative involves all possible outlets that can be used to distribute the product. This is
particularly useful in products like soft drinks where distribution is a key success factor. Here, soft
drink firms distribute brands through multiple outlets to ensure their easy availability to the
customer. Hence, on the one hand these brands are available in restaurants and five star hotels and
on the other hand they are also available through countless soft drink stalls, etc. any possible outlet
where the customer is expected to visit is also an outlet for the soft drink.
 Selective distribution
This alternative is the middle path approach to distribution. Here, the firm selects some outlets to
distribute its products. This alternative helps focus the selling effort of manufacturing firms on a
few outlets rather than dissipating it over countless marginal ones. It also enables the firm to
establish a good working relationship with channel members. Selective distribution can help the
manufacturer gain optimum market coverage and more control but at a lesser cost than intensive
distribution. Both existing and new firms are known to use this alternative.
 Exclusive distribution
When the firm distributes its brand through just one or two major outlets in the market who
exclusively deal in it and not all competing brands, we say that the firm is using an exclusive
distribution strategy. This is a common form of distribution in products and brands that seek a high
prestigious image. Typical examples are of designer wear, major domestic appliances and even
automobiles. By granting exclusive distribution rights, the manufacturer hopes to have control over
the intermediary’s price, promotion, credit inventory, and service policies. The firm also hopes to
get the benefit of aggressive selling by such outlets.
Factors affecting channel choice
Distribution patterns, channel objectives, and constraints are influenced by a host of variables.
 Market characteristics
Market characteristics play an influencing role on distribution decisions. For example, if the
customer wants a high level of service, manufacturers will have to ensure that its channel members

are able to provide it or else the firm will have to provide it. The latter alternative may be costly
but it may ensure a high level of customer confidence. In an automobile dealership, for example,
the automobile manufacturer insists on investment in tools, equipments, and manpower training
ensuring a high level of precision in servicing. Therefore, the manufacturer trains the dealer’s
employees in servicing the automobiles. Likewise, firms have today opened call centers which
respond to customer’s service calls on a 24/7 basis. Not only so, they have appointed independent
service agents who receive these calls in a seamless manner.
Customer characteristics also imply the attitude towards waiting time, expectations with regard to
special conveniences, and preference for buying in comfortable and more relaxed environments.
 Company characteristics
The next variable is company characteristics and objectives. The channel design is influenced by
the company’s long-term objectives, financial resources, manufacturing capacity, marketing mix,
and even its corporate philosophy. For example, if the firm’s manufacturing capacity can only
meet 25% of the total market demand it may be well advised to either follow selective distribution,
distribute only through selected outlets in few markets or adopt intensive distribution, cater to all
outlets in a given geographical market or distribute it exclusively all over the country.
 Product characteristics
The next variable influencing the distribution decision is product characteristics. Here, the key
issues for analysis are product value, perceived risk, and the nature of the product. It the product
value and hence the perceived risk, is high, as in case of capital equipment or precious stones and
gems, a shorter channel and direct marketing is the most preferred alternative. Here the firm sells
the product through its own sales force. Likewise if the product is perishable in nature, direct
distribution or a shorter channel is advisable. For example, milk, bread, eggs, fruits and flowers
require direct or short channels to reach the customer. Hence, a dairy supplies milk in bulk to
wholesaler or distribution points who then redistribute it directly to the customer either from their
outlets or through their own delivery boys. But this is not so in the case of non-perishable goods
like textiles, footwear, etc., hence the longer channel. The next product related factor to be
considered is whether it’s standardized or non-standardized. The latter demands direct distribution
example, a suit tailored to fit specific customer’s size and fashion preference will demand direct
marketing by the tailoring firm. But when the same firm makes shirts in different collar sizes,
colours, and styles so as to appeal to different customer groups, it can adopt a longer channel of

distribution because this product is standardized. The product volume will also determine the
length of the channel. Bulky products like construction material, chemicals, or soft drinks require
shorter channels to economically reach the customer. Lastly, the desired brand image sought by
the firm will determine the distribution structures.
 Middleman characteristics
This refers to middleman’s aptitude for service, promotion and handling negotiations, storage,
contract and credit. Channel design reflects the strength and weakness of different intermediaries.
 Intensity of Competition
The nature and intensity of competition in the industry will determine the distribution pattern
adopted by a firm. Some firms may adopt an intensive distribution strategy and be indifferent to
multiple brand outlets. Here, these firms are aim at getting the highest share from such outlets.
Other firms may have the policy of exclusive distribution-insisting that the intermediary deals in
no other brand.
 Environmental characteristics
Environmental characteristics like government policy, statutory provisions, state of the economy,
and technological and infrastructure developments also affect distribution decisions in the firm.
Channel Design Decisions
 Analyzing Customer’s Desired Service Output level
In designing the marketing channel, the marketer must understand the service output levels its
target customers want. Channels produce five service outputs:
1. Lot size: The number of units the channel permits a typical customer to purchase on one
occasion. In buying cars for its fleet, Hertz prefers a channel from which it can buy a large
lot size; a household wants a channel that permits buying a lot size of one.
2. Waiting and delivery time: The average time customers of that channel wait for receipt of
the goods.
3. Spatial convenience: For example Bata and Exide batteries have made it easier for
customers to access them through a substantial expansion of their distribution outlets in the
last few years.
4. Product variety: The assortment breadth provided by the marketing channel.
5. Service backup: The add-on services (credit, delivery, installation, repair) provided by the
channel.

 Establishing Objectives and Constraints

Marketers should state their channel objectives in terms of targeted service output levels. Under
competitive conditions, channel institutions should arrange their functional tasks to minimize total
channel costs and still provide desired levels of service outputs. Usually, planners can identify
several market segments that want different service levels. Effective planning requires determining
which market segments to serve and choosing the best channels for each.
 Identifying and Evaluating Major Channel alternatives
There are three distribution alternatives
 Intensive distribution
This alternative involves all possible outlets that can be used to distribute the product. This is
particularly useful in products like soft drinks where distribution is a key success factor. Here, soft
drink firms distribute brands through multiple outlets to ensure their easy availability to the
customer. Hence, on the one hand these brands are available in restaurants and five star hotels and
on the other hand they are also available through countless soft drink stalls, etc. any possible outlet
where the customer is expected to visit is also an outlet for the soft drink.
 Selective distribution
This alternative is the middle path approach to distribution. Here, the firm selects some outlets to
distribute its products. This alternative helps focus the selling effort of manufacturing firms on a
few outlets rather than dissipating it over countless marginal ones. It also enables the firm to
establish a good working relationship with channel members. Selective distribution can help the
manufacturer gain optimum market coverage and more control but at a lesser cost than intensive
distribution. Both existing and new firms are known to use this alternative.
 Exclusive distribution
When the firm distributes its brand through just one or two major outlets in the market who
exclusively deal in it and not all competing brands, we say that the firm is using an exclusive
distribution strategy. This is a common form of distribution in products and brands that seek a high
prestigious image. Typical examples are of designer wear, major domestic appliances and even
automobiles. By granting exclusive distribution rights, the manufacturer hopes to have control over
the intermediary’s price, promotion, credit inventory, and service policies. The firm also hopes to
get the benefit of aggressive selling by such outlets.
 Evaluating the Major Alternatives

Each channel alternative needs to be evaluated against economic, control, and adaptive criteria.
 Economic Criteria:
Each channel alternative will produce a different level of sales and costs. As an example of an
economic analysis of channel choices, consider the following situation. A Delhi-based branded
furniture manufacturer wants to sell furniture in the southern markets. The manufacturer has to
decide between two alternatives:
1. Hiring 10 new sales representatives who will operate from offices in Bangalore, Chennai,
and Hyderabad. They would receive a base salary plus commissions. Also, the company
will have to meet the expenses of setting up the office-cum-residence for these employees.
2. Using a Bangalore-based industrial distributor dealing in furniture with offices in Chennai
and Hyderabad. The distributor has 30 sales representatives, who would receive
commission based on their respective sales.
The first step in the analysis has to estimate how many sales are likely to be generated by
a company salesforce or a sales agency. On one hand, a company salesforce will concentrate
on the company’s products; will be better trained to sell those products. On the other hand, the
sales agency has 30 representatives, not just 10; it may be just as aggressive as a direct sales
force, depending on the commission; it may be better received by customers as more
independent; and it may have extensive contact and marketplace knowledge. The marketer
needs to evaluate all these factors in formulating a demand function for the two different
channels.
The next step is to estimate the costs of selling different volumes through each channel.
The fixed cost of engaging the sales agency are lower than those of establishing new company
sales office, but cost rise faster through an agency because sales agents get a larger commission
than company salespeople.
 The final step is comparing sales and costs.
 Control and Adaptive criteria
Using a sales agency posses a control problem. A sales agency is an independent firm
seeking to maximize its profits. Agents may concentrate on the customers’ who buy the most,
not necessarily on those who buy the manufacturer’s goods. Furthermore, agents might not
master the technical details of the company’s product or handle its promotion materials
effectively.

To develop a channel, members must make some degree of commitment to each other for
a specified period of time. Yet these commitments invariably lead to a decrease in the producer’s
ability to respond to a changing marketplace. In rapidly changing, volatility, or uncertain product
markets, the producer needs channel structures and policies that provide high adaptability.
Channel Management Decisions
After a company has chosen a channel system, it must select, train, motivate, and evaluate
individual intermediaries for each channel. It must also modify channel design and arrangements
over time.
Selecting Channel members
The ability to recruit and use intermediaries varies from producer to producer. Some powerful
brand owners can always go for stronger distributors and deeper distribution. New producers often
find it difficult to include their product assortments with established retailers. The marketing
managers should identify what characteristics distinguish better intermediaries. Selecting
marketing channels can be a complicated process, particularly if part of the channel is outside the
producer’s direct control. In addition, there is not an endless supply of available intermediaries
sitting around waiting for producer’s to give them a call. The elements that managers examine as
they define channel strategies can be grouped into market factors, product factors and producer
factor.
 Market factors:
Analyzing and understanding the target market is the first step in selecting marketing channels.
There are several factors that an analysis of the market should explore, ranging from customers to
types of competitive presence.
 Customer preferences: The channel, which is more preferred by customers.
 Organizational customers: Organizational customers frequently have buying habits that are
different from those of other consumers.
 Geography: Customer location is another important factor, determining the type of channel
to be used.
 Competitors: Often a good channel choice is a channel that has been overlooked or avoided
by competitors. In some cases, the marketer may try to duplicate his competitors’ channel
in order to have his products end up on store shelves meant for competitors’ products.
 Product Factors

Even products that end up at the same retail location may need different intermediaries earlier
in the channel. Following are the product related factors that influence the channel selection
decision.
 Life Cycle: A product category’s stage in the life cycle can be an important factor in
selecting a channel, and channels may have to be adjusted over time. Customers require
less support once the product has established itself.
 Product Complexity: Some products are so complicated and require so much support
that producers need to stay closely involved. This indicates either a direct sales force
or a limited number of highly qualified intermediaries. Scientific equipments, jet
aircraft, nuclear reactors, pharmaceuticals, and computers are products whose
complexity affects the way in which they are marketed.
 Product value: Value of the product also affects distribution channel choices. Items
with low cost and high volume are usually distributed through large, well-established
distribution networks, such as grocery wholesaler.
 Product size and weight: A product with significant size and weight can face restricted
distribution channel options, particularly if it is also of low value.
 Consumer perceptions: The perceptions customers have of products and producers also
play a role in channel decision.
 Other factors: Depending on the product in question, other factors may enter into the
decision as well. Some of these include whether a product is fragile or perishable and
whether or not it requires significant customization.
 Producer/manufacturer Factor
Finally there are several selection factors that involve the producers themselves. Following are the
producer factors influencing channel selection:
 Company Objective: The overall objective of a company influences its marketing channel
choice.
 Company resources: Various distribution options require different levels of resources and
investment.
 Desire for control: The need to control various aspects of the marketing process influences
a producer’s selection of the channel system. This control can encompass pricing,
positioning, brand image, customer support and competitive presence.

 Breadth of product life: Producer with several products in a related area faces a channel
situation that is different from those with one or two products.
Channel conflicts
Situation when a producer or supplier bypasses the normal channel of distribution and sells directly
to the end user. Selling over the internet while maintaining a physical distribution network is an
example of channel conflict.
Channel conflict occurs when manufacturers (brands) disintermediate their channel partners,
such as distributors, retailers, dealers, and sales representatives, by selling their products direct
to consumers through general marketing methods and/or over the internet through ecommerce.
Channel conflict can also occur when there has been over production. This results in a surplus of
products in the market place. Newer versions of products, changes in trends, insolvency of
wholesalers and retailers and the distribution of damages goods also affect channel conflict. In this
connection, a company's stock clearance strategy is of importance. To avoid a channel conflict in
a click-and-mortar, it is of great importance that both channels are fully integrated from all points
of view. Herewith, possible confusion with customers is excluded and an extra channel can create
business advantages.
Types of Channel Conflicts
Horizontal Channel Conflict
In this type of channel conflict, a manufacturer not using third-party retailers faces a struggle
between two of its own sales divisions, such as its online and offline departments. Usually one
division starts to cut into the sales and profit of the other division, devaluing the latter. Horizontal
channel conflicts occur between two departments on the same level of importance.
Vertical Channel Conflict
Vertical channel conflict arises when manufacturer tries to sell on their own while still maintaining
working relationships with third-party retailers and distributors. This leads to competition for sales
where retailers and distributors often get lower profits for selling the same product or service as
the manufacturer is selling. Since it is primarily the retailers and distributors role to build
awareness of the product, this can lead to an overall decrease in sales. This situation is called a
vertical channel conflict because it affects two different levels of business, third-party sales and
bottom-line sales.

Multilevel Channel Conflict

Multilevel channel conflicts arise when a manufacturer creates competition between its own sales
and promotion arms, while also having business relationships with third-party retailers and
distributors. The reason for this approach may be to aggressively and more quickly expand its sales
and promotion network, but it can create both internal and external discord between the various
divisions and third-parties.
Dangers of Channel Conflict
Although the ultimate aim of any business is to avoid the creation of channel conflicts, sometimes
they do occur. The practice of conflict regulation and control is known as channel conflict
resolution, and is considered to be a branch of strategic business management. If manufacturer's
do not recognize channel conflicts quickly, the sales bottom-line will be adversely affected. To
resolve a channel conflict, manufacturer's may need to temporarily change their approach to create
a more level playing field for all parties involved. Without expedient resolution of channel
conflicts, dissatisfaction in the internal workforce and third-party disloyalty may arise.
Distribution system
The following distribution designs are available to the marketer for his distribution system:
1. Direct Distribution Systems
2. Indirect Distribution Systems
3. Multi-Channel or Hybrid Distribution Systems
1. Direct Distribution Systems
In direct distribution system the marketer reaches the target consumer directly without the
use of any intermediary. The distribution chain is small and no other party can take
ownership of the product being distributed. The direct distribution system can be further
sub-divided on the basis of the methods of communication that takes place during sale
between marketer and consumer. These methods are:
 Direct Marketing Systems
In this system the consumer buys the product based on information gained from impersonal contact
with the marketer like by visiting the marketer's website or ordering from the marketer's catalog.
Or he buys based on information gathered through some personal communication with a customer
service personnel who is not a salesperson and can be reached through a toll-free number.

 Direct Retail System

In this type of system the marketer operates his own retail stores. A perfect example of this system
is Starbucks.
 Personal Selling Systems
In this system the distribution of the product is carried forward by people whose main
responsibility is creating and managing sales (for instance a salesperson). He persuades the buyers
into placing an order. This order may not be handled by the salesperson but through websites or
toll-free telephone numbers. The sales person plays a vital role here in generating sales.
 Assisted Marketing System
In this form of distribution system the marketer handles the distribution of his product and helps it
reach directly to the end user. However he needs assistance from others to spread awareness about
his product among the customers. An example of assisted marketing system is e-bay, here the
buyers and sellers are brought together for a fee. Agents and brokers can also be included in this
category.
2. Indirect Distribution System
In indirect distribution system the marketer includes intermediaries or other members in his
distribution chain. These resellers make sure the product reaches the end user, while performing
their duties they take complete ownership of the product. However the reseller may sell products
on a consignment basis wherein the reseller pays for the product only when the product is sold.
The resellers may be expected to take up a few responsibilities to help boost the sales of the
product.
Indirect methods include the following:
 Single-Party Selling System
In this system the marketer involves another party to sell and distribute his product to the end user.
An example of single-party selling can be when the product is sold through large store-based retail
chains or through online retailers. In this case the distribution system is also referred to as trade
selling system.
 Multiple-Party Selling System
In multiple-party selling system the distributor involves two or more reseller in the distribution
process before the product reaches the end user. This is most likely to happen when a wholesaler
buys the product from the manufacturer and then sells it to the retailer.

3. Multi-Channel (Hybrid) Distribution System

A marketer is said to be using a multi-channel or hybrid distribution system when he utilizes more
than one distribution design. As we have studied earlier in the example of Starbucks, multiple
distribution designs are put to use in the distribution of its product. It uses a direct retail system
when it sells its products in company-owned stores, a direct marketing system by selling via direct
mail and single party selling system is put to use when its products are sold through grocery stores.
Apart from these other distribution systems are also put to use.
Multi-Channel distribution system is advantageous as it expands the distribution system and more
customers can be reached. The possible disadvantage again is channel conflict of which the
marketer should always be cautious.
Multilevel marketing (Network Marketing)

Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated
not only for sales they personally generate, but also for the sales of the other salespeople that they
recruit. This recruited sales force is referred to as the participant's "downline", and can provide
multiple levels of compensation. Other terms for MLM include pyramid selling, network
marketing, and referral marketing.
Most commonly, the salespeople are expected to sell products directly to consumers by means of
relationship referrals and word of mouth marketing. Some people use direct selling as a synonym

for MLM, although MLM is only one type of direct selling, which started centuries ago with
peddling.
MLM companies have been a frequent subject of criticism as well as the target of lawsuits.
Criticism has focused on their similarity to illegal pyramid schemes, price fixing of products, high
initial start-up costs, emphasis on recruitment of lower-tiered salespeople over actual sales,
encouraging if not requiring salespeople to purchase and use the company's products, potential
exploitation of personal relationships which are used as new sales and recruiting targets, complex
and sometimes exaggerated compensation schemes, and cult-like techniques which some groups
use to enhance their members' enthusiasm and devotion.
Direct selling, network marketing, and multi-level marketing
Network marketing and Multi-level marketing have been described by author Dominique Xardel
as being synonymous, and as methods of direct selling According to Xardel, direct selling and
network marketing refer to the distribution system, while the term "multi-level marketing"
describes the compensation plan. Other terms that are sometimes used to describe multi-level
marketing include "word-of-mouth marketing", "interactive distribution", and "relationship
marketing". Critics have argued that the use of different terms and "buzzwords" is an effort to
distinguish multi-level marketing from illegal Ponzi schemes, chain letters, and consumer fraud
scams. Some sources classify multi-level marketing as a form of direct selling rather than being
direct selling.
The Direct Selling Association, a lobbying group for the multi-level marketing industry, reported
that in 1990 twenty-five percent of members used MLM, growing to 77.3 percent in
1999.Companies such as Avon, Electrolux, Tupperware, and Kirby all originally used single level
marketing to sell their goods and later introduced multi-level compensation plans. By 2009, 94.2%
of members were using MLM, accounting for 99.6% of sellers, and 97.1% of sales. The DSA has
approximately 200 members while it is estimated there are over 1,000 firms using multi-level
marketing in the United States alone.

Multi-level marketing is a marketing approach that motivates its participants to promote a certain
product among their friends. The popularity of this approach increases due to the accessibility of
modern social networks, however, it existed in one form or the other long before the Internet age
began (the infamous Pyramid scheme that dates back at least a century is in fact a special case of
multi-level marketing).
****End of Module 5****

Module 6:
Integrated marketing communication

Concept of communication mix
A marketing communications mix is the same as a promotion mix and is just another term for
promotion mix. There are five marketing communications to put into the mix: Advertising, Sales
Promotion, Public Relations, Personal Selling, and Direct Marketing. This basically all boils down
to a mix of promotional efforts to bring in sales and increase brand equity.
Promotion describes the communications activities of advertising, personal selling, sales
promotion and publicity/public relations.
Advertising is a non-personal form of mass communication, paid for by an identified sponsor.
Personal selling involves a seller attempting to persuade a potential buyer to make a purchase.
Sales promotion encompasses short-term activities such as giving coupons, free samples, etc. that
encourage quick action by buyers. The company has control over these three variables, but has
little control over the fourth variable, publicity/public relations. This is another non-personal
communication method that reaches a large number of people, but it is not paid for by the company
and is usually in the form of news or editorial comment regarding a company’s product or service.
Companies can gain some control over the publicity it receives by the release of news items.
Put together, these promotional activities make up the promotional or communications mix with
varying emphasis on each element according to the type of product or service, characteristics of
consumers and company resources. Company size, competitive strengths and weaknesses and style
of management all influence the promotional mix.
Other communications elements with which promotion must be coordinated are the product itself,
price and distribution channels used. Product communication, including brand name, design of
packaging and trade-marks are all product cues which convey a message about the total product
offering. Price can communicate different things under varying circumstances, for instance
conveying ‘prestige appeal’ for those buyers who perceive that a high price is equal to quality and
prestige. The place in which the products are to be found also has notable communications value.
Retail stores have ‘personalities’ that consumers associate with the products they sell. Products
receive a ‘halo effect’ from the outlets in which they can be found and two stores selling similar
products can project entirely different product images. For example, a perfume sold through an
upmarket store will have a much higher quality image than one sold through supermarkets

A company’s total marketing communications mix, or promotion mix, consists of the specific
blend of advertising, personal selling, sales promotion, and public relations tools that the company
uses to pursue its advertising and marketing objectives.
 The five major types of promotion are:
• Advertising: Any paid form of non-personal presentation and promotion of ideas, goods, or
services by an identified sponsor.
• Personal selling: Personal presentation by the firm’s sales force to make sales and build customer
relationships.
• Sales promotion: Short-term incentives to encourage the purchase or sale of a product or service.
• Public relations: Building good relations with the company’s publics by obtaining favourable
publicity, building up a good “corporate image,” and handling or heading off unfavourable
rumours, stories, and events.
• Direct marketing: Direct communications with carefully targeted individual consumers to
obtain an immediate response—the use of mail, telephone, fax, e-mail, and other non-personal
tools to communicate directly with specific consumers or to solicit a direct response.
Communication objectives
Intended goals of an advertising or promotional program. Possible communications objectives
include (1) creating awareness, (2) imparting knowledge, (3) projecting an image, (4) shaping
attitudes, (5) stimulating a want or desire, and/or (6) effecting a sale.

Marketing communication objectives are long-term goals where marketing campaigns are
intended to drive up the value of your brand over time. In contrast to sales promotions, which are
short-term inducements to buy, communication goals succeed when you persuade customers
through consistent reinforcement that your brand has benefits they want or need.
Increase Awareness
Increased brand awareness is not only one of the most common marketing communication
objectives, it is also typically the first for a new company. When you initially enter the market,
you have to let people know your company and products or services exist. This might include
broadcast commercials or print ads that depict the image of your company and constant repetition
of your brand name, slogans and jingles. The whole objective is to become known and memorable.
Established companies often use a closely-related goal of building or maintaining top-of-mind
awareness, which means customers think of you first when considering your product category.
Change Attitudes
Changing company or brand perceptions is another common communication objective.
Sometimes, misconceptions develop in the market about your company, products or services.
Advertising is a way to address them directly. In other cases, negative publicity results because
your company is involved in a business scandal or unsettling activities. BP invested millions of
dollars in advertising to explain the company's clean up efforts to the public following its infamous

Gulf of Mexico oil spill in mid-2010. Local businesses normally don't have that kind of budget but
local radio or print ads can do the trick.
Influence Purchase Intent
A key communication objective is to motivate customers to buy. This is normally done through
persuasive advertising, which involves emphasis of your superior benefits to the user, usually
relative to competitors. It is critical to strike a chord with the underlying need or want that triggers
a customer to act. Sports drink commercials showing athletes competing, getting hot and sweaty
and then taking a drink afterward is a common approach to drive purchase intent. The ads normally
include benefits of the drink related to taste or nutrients.
Stimulate Trial Purchase
Two separate but closely related communication objectives are to stimulate trial use and drive
repeat purchases. Free trials or product samples are common techniques to persuade customers to
try your product for the first time. The goal is to take away the risk and get the customer to
experience your brand. Once you get them on the first purchase, you have to figure out how to
convert that into a follow-up purchase. Discounts on the next purchase or frequency programs are
ways to turn one-time users into repeat buyers and, ultimately, loyal customers.
Drive Brand Switching
Another objective closely tied to stimulating trial use is driving brand switching. This is a specific
objective of getting customers who buy competing products to switch to your brand. Tide detergent
is normally pitted against "other leading brands" in comparative ads intended to motivate brand
switching. The advantage with this goal is that customers already buy within your product
category. This means need is established. You just need to persuade them that your product or
service is superior and induce them to try it out.
Steps in developing effective communication
In preparing marketing communications, the communicator’s first task is to identify the target
audience and its characteristics. Next, the communicator must define the response sought, whether
it be awareness, knowledge, liking, preference, conviction, or purchase. Then a message should be
constructed with an effective content and structure. Media must be selected, both for personal and
non-personal communication. Finally, the communicator must collect feedback by watching how
much of the market becomes aware, tries the product, and is satisfied in the process. We now
examine the steps in developing an effective integrated communications and promotion program.

The marketing communicator must: identify the target audience; determine the response sought;
choose a message; choose the media through which to send the message; select the message source;
and collect feedback.
Identifying the Target Audience
A marketing communicator starts with a clear target audience in mind. The audience may be
potential buyers or current users, those who make the buying decision or those who influence it.
The audience may be individuals, groups, special publics, or the general public. The target
audience will affect the communicator’s decisions on what will be said, how it will be said, when
it will be said, where it will be said, and who will say it.
Determining the Desired Response
After defining the target audience, the marketing communicator must decide what response is
desired. In most cases, the final response is purchase. But purchase is the result of a long process
of consumer decision making. The target audience may be in any of six buyer readiness stages,
the stages that consumers typically pass through on their way to making a purchase. These stages
are awareness, knowledge, liking, preference, conviction, and purchase. The marketing
communicator needs to know where the target audience is now and to what stage it needs to be
moved. The marketing communicator’s target market may be totally unaware of the product, know
only its name, or know little about it. The communicator must first build awareness and
knowledge. When Nissan introduced its Infiniti automobile line, it began with an extensive “teaser”
advertising campaign to create name familiarity. Initial ads for the Infiniti created curiosity and
awareness by showing the car’s name but not the car. Later ads created knowledge by informing
potential buyers of the car’s high quality and many innovative features. Assuming target
consumers know the product, how do they feel about it? Once potential buyers know about the
Infiniti, Nissan’s marketers want to move them through successively stronger stages of feelings
toward the car. These stages include liking (feeling favourable about the Infiniti), preference
(preferring Infiniti to other car brands), and conviction (believing that Infiniti is the best car for
them). Infiniti marketers can use a combination of the promotion mix tools to create positive
feelings and conviction. Advertising extols the Infiniti’s advantages over competing brands. Press
releases and other public relations activities stress the car’s innovative features and performance.
Dealer salespeople tell buyers about options, value for the price, and after-sale service. Finally,
some members of the target market might be convinced about the product, but not quite get around

to making the purchase. Potential Infiniti buyers may decide to wait for more information or for
the economy to improve. The communicator must lead these consumers to take the final step.
Actions may include offering special promotional prices, rebates, or premiums. Salespeople may
call or write to selected customers, inviting them to visit the dealership for a special showing.
Marketing communications alone cannot create positive feelings and purchases for Infiniti. The
car itself must provide superior value for the customer. In act outstanding marketing
communications can actually speed the demise of a poor product. The more quickly potential
buyers learn about the poor product, the more quickly they become aware of its faults. Thus, good
marketing communication calls for “good deeds followed by good words.”
Designing a Message
Having defined the desired audience response, the communicator turns to developing an effective
message. Ideally, the message should get attention, hold interest, arouse desire, and obtain action
(a framework known as the AIDA model). In practice, few messages take the consumer all the way
from awareness to purchase, but the AIDA framework suggests the qualities of a good message.
In putting together the message, the marketing communicator must solve three problems: what to
say (message content), how to say it logically (message structure),
and how to say it symbolically (message format).
Stages in designing message
Message Content
The communicator must identify an appeal or theme that will produce the desired response. There
are three types of appeals: rational, emotional, and moral.
Rational appeals relate to the audience’s self-interest. They show that the product will produce
the desired benefits. Rational appeal messages may show a product’s quality, economy, value, or
performance. In its ads, Mercedes offers cars that are “engineered like no other car in the world,”
stressing engineering design, performance, and safety. Buckley’s Mixture took its most
recognizable quality, the bad taste of its cough syrup, and turned it into an award-winning
campaign linked by the tag line, “It tastes awful. And it works.”
Emotional appeals attempt to stir up either negative or positive emotions that can motivate
purchase. Communicators can use such positive emotional appeals as love, pride, joy, and humour.
Advocates for humorous messages claim that they attract more attention and create more liking
and belief in the sponsor. Cliff Freeman, the advertiser responsible for Little Caesars’ humorous

“Pizza, Pizza” ads, contends that: “Humour is a great way to bound out of the starting gate. When
you make people laugh, and they feel good after seeing the commercial, they like the association
with the product.” But others maintain that humour can detract from comprehension, wear out its
welcome fast, and overshadow the product. Communicators can also use negative emotional
appeals such as fear, guilt, and shame, which get people to do things they should (brush their teeth,
buy new tires), or to stop doing things they shouldn’t (smoke, drink too much, eat fatty foods).
One Crest ad invokes mild fear of cavities when it claims: “There are some things you just can’t
afford to gamble with.” Etonic ads ask: “What would you do if you couldn’t run?” and go on to
note that Etonic athletic shoes are designed to avoid injuries—they’re “built so you can last.” A
Michelin tire ad features cute babies and suggests, “Because so much is riding on your tires.”
Moral appeals are directed to the audience’s sense of what is “right” and “proper.” They often
are used to urge people to support such social causes as a cleaner environment and aid to the needy,
or combat such social problems as drug abuse, discrimination, sexual harassment, and spousal
abuse. An example of a moral appeal is the March of Dimes appeal: “God made you whole. Give
to help those He didn’t.”
Message Structure
The communicator must decide which of three ways to use to structure the message. The first is
whether to draw a conclusion or leave it to the audience. Early research showed that drawing a
conclusion was usually more effective; however, more recent research suggests that the advertiser
is often better off asking questions and letting buyers draw their own conclusions. The second
structure issue is whether to present a one-sided argument—mentioning only the product’s
strengths—or a two-sided argument—touting the product’s strengths while also admitting its
shortcomings. Buckley’s Mixture built its entire business around this technique: Usually, a one-
sided argument is more effective in sales presentations—except when audiences are highly
educated, negatively disposed, or likely to hear opposing claims. In these cases, two-sided
messages can enhance the advertiser’s credibility and make buyers more resistant to competitor
attacks. The third message structure issue is whether to present the strongest arguments first or
last. Presenting them first gets strong attention, but may lead to an anti-climactic ending.
Message Format
The marketing communicator needs a strong format for the message. In a print ad, the
communicator has to decide on the headline, copy, illustration, and colour. To attract attention,

advertisers can use novelty and contrast; eye-catching pictures and headlines; distinctive formats;
message size and position; and colour, shape, and movement. If the message will be carried over
the radio, the communicator must choose words, sounds, and voices. The “sound” of an announcer
promoting banking services, for example, should be different from one promoting quality
furniture.
If the message is to be carried on television or in person, then all these elements plus body language
have to be planned. Presenters plan their facial expressions, gestures, dress, posture, and hair style.
If the message is carried on the product or its package, the communicator has to watch texture,
scent, colour, size, and Buckley’s Mixture has won world renown by using simple and humorous
two-sided advertising—“It tastes awful, and it works.” shape. Colour plays a major communication
role in food preferences. When consumers sampled four cups of coffee that had been placed next
to brown, blue, red, and yellow containers (all the coffee was identical, but the consumers did not
know this), 75 percent felt that the coffee next to the brown container tasted too strong; nearly 85
percent judged the coffee next to the red container to be the richest;
nearly everyone felt that the coffee next to the blue container was mild; and the coffee next to the
yellow container was seen as weak. Therefore, if a coffee company wants to communicate that its
coffee is rich, it should probably use a red container along with label copy boasting the coffee’s
rich taste.
Marketing communications can be defined as the process of:
1. presenting an integrated set of stimuli to a market target with the aim of raising a desired
set of responses within that market target;
2. setting up channels to receive, interpret and act on messages from the market to modify
present company messages and identify new communications opportunities.
As both a sender and a receiver of market-related messages, a company can influence customers
to buy its brands in order to make profit. At the same time it can stay in touch with its market so
that it can adjust to changing market conditions and take advantage of new communications
opportunities.
The source of the message
Receivers of a message are often greatly influenced by the nature of its source. If an audience
perceives a communicator as credible, then they will be more likely to accept his or her views. If,
on the other hand, the audience believes that the communicator has underlying motives,

particularly ones of personal gain, then he or she will be less persuasive than someone the audience
perceives as being objective. Some advertisers use ‘candid’ television interviews with
homemakers in order to enhance their credibility and eliminate intent to persuade, sometimes
asking ‘consumers’ to explain why they buy a particular brand or asking them to trade their chosen
brand for another.
Another method used by companies to increase credibility is to have the product endorsed by an
expert with appropriate education and knowledge on a given subject. This source will be more
successful in changing audience opinions. Specialized sources of information are often perceived
as expert sources, and are successful due to the fact that messages are aimed at selected audiences,
for example the use of sports professionals as promoters for brands.
The credibility of a source is also a function of its perceived status or prestige. The higher the
perceived status of a source, the more persuasive it will be. If a receiver likes a source, it will be
more persuasive. It is clear that age, sex, dress, mannerisms, accent and voice inflection all affect
source credibility and subtly influence the way an audience judges a communicator and his/her
message.
A source high in credibility can change the opinion of receivers, but available evidence suggests
that this influence disperses in a short time after the message is received. It has also been observed
that where an audience initially receives a message from a low-credibility source, their opinion
change increases over time in the direction promoted by the source. This is referred to as the sleeper
effect. Another aspect of this is that when a high-credibility source is reinstated, for example by a
repeat advertisement, it has been found that audience agreement with the source is higher after a
period of time than if the source had not been reinstated. For a low-credibility source, reinstatement
results in less agreement with the source than with no reinstatement, and it is said that under these
circumstances reinstatement negates the ‘sleeper effect’.
Advertising
The American Marketing Association has adopted the following as a definition of advertising.
"Any paid form of non-personal presentation and promotion of ideas, goods or services by an
identified sponsor."
As advertising is paid for it is a commercial transaction. It is non-personal, which means that
advertising messages are directed at a mass audience and not directly at individuals.
Advertising objective

Some specific objectives include:

1. To build primary demand.
2. To introduce a price deal.
3. To inform about a product's availability.
4. To build brand recognition or brand preference or brand insistence.
5. To inform about a new product's availability or features or price.
6. To help salesmen by building an awareness of a product among retailers.
7. To create a reputation for service, reliability or research strength.
8. To increase market share.
9. To modify existing product appeals and buying motives.
10. To increase frequency of use of a product.
11. To inform about new uses of a product.
12. To increase the number or quality of retail outlets.
13. To build the overall company image.
14. To effect immediate buying action.
15. To reach new areas or new segments of population within existing areas.
16. To develop overseas markets.
Generally advertising will be more effective if the external environment is favourable: the product
is a superior good, and incomes are rising; there is a boom in the economy; i.e. in general, if there
is an expanding market.
Advertising budget
An estimation of a company's promotional expenditures over a period of time. An advertising
budget is the money a company is willing to set aside to accomplish its marketing objectives. When
creating the advertising budget, a company must weigh the trade-offs between spending one
additional advertising dollar with the amount of revenue that dollar will bring in as revenue.
The advertising budget of a business is typically a subset of the larger sales budget and, within
that, the marketing budget. Advertising is a part of the sales and marketing effort. Money spent on
advertising can also be seen as an investment in building up the business.
In order to keep the advertising budget in line with promotional and marketing goals, a business
owner should start by answering several important questions:

1. Who is the target consumer? Who is interested in purchasing the product or service, and
what are the specific demographics of this consumer (age, employment, sex, attitudes,
etc.)? Often it is useful to compose a consumer profile to give the abstract idea of a "target
consumer" a face and a personality that can then be used to shape the advertising message.
2. What media type will be most useful in reaching the target consumer?
3. What is required to get the target consumer to purchase the product? Does the product lend
itself to rational or emotional appeals? Which appeals are most likely to persuade the target
consumer?
4. What is the relationship between advertising expenditures and the impact of advertising
campaigns on product or service purchases? In other words, how much profit is likely to
be earned for each dollar spent on advertising?
Answering these questions will help to define the market conditions that are anticipated and
identify specific goals the company wishes to reach with an advertising campaign. Once this
analysis of the market situation is complete, a business must decide how best to budget for the task
and how best to allocate budgeted funds.
BUDGETING METHODS
There are several allocation methods used in developing a budget. The most common are listed
below:
 Percentage of Sales method
 Objective and Task method
 Competitive Parity method
 Market Share method
 Unit Sales method
 All Available Funds method
 Affordable method
It is important to notice that most of these methods are often combined in any number of ways,
depending on the situation. Because of this, these methods should not be seen as rigid but as
building blocks that can be combined, modified, or discarded as necessary. Remember, a business
must be flexible—ready to change course, goals, and philosophy when the market and the
consumer demand such a change.

Percentage of Sales Method
Due to its simplicity, the percentage of sales method is the most commonly used by small
businesses. When using this method an advertiser takes a percentage of either past or anticipated
sales and allocates that percentage of the overall budget to advertising. But critics of this method
charge that using past sales for figuring the advertising budget is too conservative, that it can stunt
growth. However, it might be safer for a small business to use this method if the ownership feels
that future returns cannot be safely anticipated. On the other hand, an established business, with
well-established profit trends, will tend to use anticipated sales when figuring advertising
expenditures. This method can be especially effective if the business compares its sales with those
of the competition (if available) when figuring its budget.
Objective and Task Method
Because of the importance of objectives in business, the task and objective method is considered
by many to make the most sense and is therefore used by most large businesses. The benefit of this
method is that it allows the advertiser to correlate advertising expenditures with overall marketing
objectives. This correlation is important because it keeps spending focused on primary business
goals.
With this method, a business needs to first establish concrete marketing objectives, often
articulated in the "selling proposal," and then develop complementary advertising objectives
articulated in the "positioning statement." After these objectives have been established, the
advertiser determines how much it will cost to meet them. Of course, fiscal realities need to be
figured into this methodology as well. Some objectives (expansion of area market share by 15
percent within a year, for instance) may only be reachable through advertising expenditures
beyond the capacity of a small business. In such cases, small business owners must scale down
their objectives so that they reflect the financial situation under which they are operating.
Competitive Parity Method
While keeping one's own objectives in mind, it is often useful for a business to compare its
advertising spending with that of its competitors. The theory here is that if a business is aware of
how much its competitors are spending to advertise their products and services, the business may

wish to budget a similar amount on its own advertising by way of staying competitive. Doing as
one's competitor does is not, of course, always the wisest course. And matching another's
advertising budget dollar for dollar does not necessarily buy one the same marketing outcome.
Much depends on how that money is spent. However, gauging one's advertising budget on other
participants' in the same market is a reasonable starting point.
Market Share Method
Similar to competitive parity, the market share method bases its budgeting strategy on external
market trends. With this method a business equates its market share with its advertising
expenditures. Critics of this method contend that companies that use market share numbers to
arrive at an advertising budget are ultimately predicating their advertising on an arbitrary guideline
that does not adequately reflect future goals.
Unit Sales Method
This method takes the cost of advertising an individual item and multiplies it by the number of
units the business wishes to sell. This method is only effective, of course, when the cost of
advertising a single unit can be reasonably determined.
All Available Funds Method
This aggressive method involves the allocation of all available profits to advertising purposes. This
can be risky for a business of any size it means that no money is being used to help the business
grow in other ways (purchasing new technologies, expanding the work force, etc.). Yet this
aggressive approach is sometimes useful when a start-up business is trying to increase consumer
awareness of its products or services. However, a business using this approach needs to make sure
that its advertising strategy is an effective one and that funds which could help the business expand
are not being wasted.
Affordable Method
With this method, advertisers base their budgets on what they can afford. Of course, arriving at a
conclusion about what a small business can afford in the realm of advertising is often a difficult

task, one that needs to incorporate overall objectives and goals, competition, presence in the
market, unit sales, sales trends, operating costs, and other factors.
Advertising copy
Text of a print, radio, or television advertising message that aims at catching and holding the
interest of the prospective buyer, and at persuading him or her to make a purchase all within a few
short seconds. The headline of an advertising copy is said to be the most important part, and quite
often a small change in its wording brings disproportionate results. Although a short advertising
copy is more common in consumer-product advertising, according to the UK advertising guru
David Ogilvy (1911-1999) people do read (and listen or attend to) lengthy advertisements if they
are skillfully written. Most advertising copy is based on advertising/consumer research and is
composed by professional copywriters hired by advertising agencies. Also called advertisement
copy, ad copy, or just copy.
Print ads generally have four written parts — headline, support copy, call to action, and company
name — plus a strong visual that draws the eye and explains what you’re selling.
Strategy and copy
• The most important step is to set a single objective for the ad. Are you featuring a new product
or service? Promoting brand awareness? Driving traffic to your website? Looking for a response
to an offer? Your objective will dictate all factors of target audience, message, and timing.
• Your headline should clearly define your chosen objective. Assume that you have only five
seconds to get the attention of your reader. Your ad’s headline is often the only part of an ad that
is read and so should refer to a benefit that appeals to your target market. Think of it as the final
“mind-changing comment.” It is not so much the words, but the ideas they express that sell.
Determine your message, and then find words to convey it.
• Put yourself in the shoes of your audience and try to appeal to their needs and perspective. Speak
your audience’s language. A best practice before writing ad copy is to study the content of the
magazine in which you are advertising.
• Write clear body copy in a consistent, apt tone and language. Keep jargon at a minimum. Copy
should be concise but substantive enough to explain the headline premise and add secondary
benefits. Where appropriate, use bulleted lists and call-out boxes. Following this copy, a sign-off
is a call to action that urges the reader to respond (“Call for an appointment today,” or “Visit our
website for more information.”).

- List benefits followed by features. Your prospects want to know what’s in it for them. The benefit
is the need you’re offering to fulfill; the feature is how you intend to do so. Avoid any claim that
could be construed as deceptive.
- Make sure the overall tone of your ad is upbeat and appealing. Emphasize the solutions you
provide, not the problems you address. Your call to action should be crystal clear. Prospects should
know precisely how to obtain the product or service.
- Don’t forget contact information. Keep it minimal. A phone number and website URL are ideal.
Your company name, traditionally placed at the bottom of the ad, should include your website as
the most prominent point of contact, but also include a phone number. The company logo should
appear in a consistent area and should not compete with other visuals. Make your URL larger to
help stimulate Web visits.
- Proof and proof again. There is nothing more embarrassing than a typo, and nothing turns off
prospects more than the wrong phone number or e-mail address when they are calling to buy! Get
outside opinions on your new advertising concepts to be certain they carry the personality and
message that you intend.
AIDA Model
AIDA is an acronym used in marketing and advertising that describes a common list of events that
may occur when a consumer engages with an advertisement.
 A - Attention (Awareness): attract the attention of the customer.
 I - Interest: raise customer interest by focusing on and demonstrating advantages and
benefits (instead of focusing on features, as in traditional advertising).
 D - Desire: convince customers that they want and desire the product or service and that it
will satisfy their needs.
 A - Action: lead customers towards taking action and/or purchasing.
Using a system like this gives one a general understanding of how to target a market effectively.
Moving from step to step, one loses some percent of prospects.

Advertising agency Decision

Delivering an effective marketing message through advertising requires many different decisions
as the marketer develops their advertising campaign. For small campaigns, that involve little
creative effort, one or a few people may handle the bulk of the work. In fact, the Internet has made
do-it-yourself advertising an easy to manage process and has especially empowered small
businesses to manage their advertising decisions. As we will see, not only can small firms handle
the creation and placement of advertisements that appear on the Internet, new services have even
made it possible for a single person to create advertisements that run on local television. For
instance, a company called SpotRunner allows users to select from a list of high-quality television
ads that can be customized and then placed within local cable television programming.
For larger campaigns the skills needed to make sound advertising decisions can be quite varied
and may not be easily handled by a single person. While larger companies manage some
advertising activities within the company, they are more likely to rely on the assistance of
advertising professionals, such as those found at advertising agencies, to help bring their
advertising campaign to market.
Advertising Copy Deciding Media, Evaluating Advertising Effectiveness
After choosing the message, the advertiser’s next task is to choose media to carry it. The steps here are
deciding on desired reach, frequency, and impact; choosing among major media types; selecting Specific
media vehicles; deciding on media timing; and deciding on geographical media allocation. Then the
marketer evaluates the results of these decisions.

Deciding on Reach, Frequency, and Impact

Media selection is finding the most cost-effective media to deliver the desired number and type of
exposures to the target audience. What do we mean by the desired number of exposures? The advertiser
seeks a specified advertising objective and response from the target audience—for example, a target level
of product trial. This level depends on, among other things, level of brand awareness.
Suppose the rate of product trial increases at a diminishing rate with the level of audience awareness, as
shown in Figure .If the advertiser seeks a product trial rate of T *, it will be necessary to achieve a brand
awareness level of A*.The next task is to find out how many exposures, E *, will produce a level of audience
awareness of A*. The effect of exposures on audience awareness depends on the exposures’ reach,
frequency, and impact:
• Reach (R). The number of different persons or households exposed to a particular media schedule at
least once during a specified time period
• Frequency (F). The number of times within the specified time period that an average person or
household is exposed to the message
• Impact (I). The qualitative value of an exposure through a given medium (thus a food ad will have a
higher impact in Bon Appetit than in Fortune magazine).
Figure below shows the relationship between audience awareness and reach. Audience awareness will be
greater, the higher the exposures’ reach, frequency, and impact. There are important trade-offs here.
Suppose the planner has an advertising budget of$1,000,000 and the cost per thousand exposures of
average quality is $5.This means 200,000,000 exposures ($1,000,000 ÷ [$5/1,000]).If the advertiser seeks
an average exposure frequency of 10, it can reach 20,000,000 people (200,000,000 ÷ 10) with the given
budget. But if the advertiser wants higher-quality media costing $10 per thousand exposures, it will be
able to reach only 10,000,000 people unless it is willing to lower the desired exposure frequency.
The relationship between reach, frequency, and impact is captured in the following concepts:
• Total number of exposures (E). This is the reach times the average frequency; that is, E = R × F, also
called the gross rating points (GRP).If a given media schedule reaches 80 percent of homes with an average
exposure frequency of 3, the media schedule has a GRP of 240 (80 × 3). If another media schedule has a
GRP of 300, it has more weight, but we cannot tell how this weight breaks down into reach and frequency.
• Weighted number of exposures (WE). This is the reach times average frequency times average impact,
that is WE = R × F × I.

Reach is most important when launching new products, flanker brands, extensions of well-known brands,
or infrequently purchased brands; or when going after an undefined target market.
Frequency is most important where there are strong competitors, a complex story to tell, high consumer
resistance, or a frequent-purchase cycle.
A key reason for repetition is forgetting. The higher the forgetting rate associated with a brand, product
category, or message, the higher the warranted level of repetition. However, advertisers should not coast
on a tired ad but insist on fresh executions by their ad agency. GEICO- (The Government Employees
Insurance Company is an auto insurance company. It is the second largest auto insurer in the United States,
after State Farm) has found advertising success by keeping both its campaigns and their executions fresh.
Sales promotion
Stimulation of sales achieved through contests, demonstrations, discounts, exhibitions or trade
shows, games, giveaways, point-of-sale displays and merchandising, special offers, and similar
activities.
“Sales promotion includes incentive-offering and interest-creating activities which are generally
short-term marketing events other than advertising, personal selling, publicity and direct
marketing.

The purpose of sales promotion is to stimulate, motivate and influence the purchase and other
desired behavioral responses of the firm’s customers.”
Sales promotion mix
There are five main aspects of a promotional mix These are:

 Advertising- Presentation and promotion of ideas, goods, or services by an identified
sponsor. Examples: Print ads, radio, television, billboard, direct mail, brochures and
catalogs, signs, in-store displays, posters, motion pictures, Web pages, banner ads, and
emails.
 Personal Selling- A process of helping and persuading one or more prospects to purchase
a good or service or to act on any idea through the use of an oral presentation. Examples:
Sales presentations, sales meetings, sales training and incentive programs for intermediary
salespeople, samples, and telemarketing. Can be face-to-face selling or via telephone.
 Sales Promotion- Media and non-media marketing communication are employed for a pre-
determined, limited time to increase consumer demand, stimulate market demand or
improve product availability. Examples: Coupons, sweepstakes, contests, product samples,
rebates, tie-ins, self-liquidating premiums, trade shows, trade-ins, and exhibitions.
 Public relations - Paid intimate stimulation of supply for a product, service, or business
unit by planting significant news about it or a favorable presentation of it in the media.
Examples: Newspaper and magazine articles/reports, TVs and radio presentations,
charitable contributions, speeches, issue advertising, and seminars.

 Direct Marketing is a channel-agnostic form of advertising that allows businesses and

nonprofits to communicate straight to the customer, with advertising techniques such as
mobile messaging, email, interactive consumer websites, online display ads, fliers, catalog
distribution, promotional letters, and outdoor advertising.
 Corporate Image- Corporate image may also be considered as the sixth aspect of
promotion mix. The Image of an organization is a crucial point in marketing. If the
reputation of a company is bad, consumers are less willing to buy a product from this
company as they would have been, if the company had a good image. Sponsorship is
sometimes added as a seventh aspect.
Kinds of promotion
Product and service promotion is the most common form of marketing. Promotional activities can
include:
 Advertising - you can advertise your product, service or brand in newspapers, radio,
television, magazines, outdoor signage and website. Learn more about how to make your
advertising successful.
 personal selling or telemarketing - effective personal selling relies on good interpersonal
and communication skills, excellent product and service knowledge and the ability to sell
product benefits to prospective customers
 Publicity - created by sending media releases to print and broadcasting media, giving
interviews to the media and from word-of-mouth. Learn more about public relations.
 Short-term sales promotions - market your product or service using coupons,
competitions and contests.
 direct marketing - involves sending letters, emails, pamphlets and brochures to individual
target clients, often followed by personal selling or telemarketing Learn more about direct
marketing.
Tools and techniques of sales promotion
To increase the sale of any product manufactures or producers adopt different measures like
sample, gift, bonus, and many more. These are known as tools or techniques or methods of sales
promotion. Let us know more about some of the commonly used tools of sales promotion. (i) Free
samples: You might have received free samples of shampoo, washing powder, coffee powder, etc.
while purchasing various items from the market. Sometimes these free samples are also distributed

by the shopkeeper even without purchasing any item from his shop. These are distributed to attract
consumers to try out a new product and thereby create new customers. Some businessmen
distribute samples among selected persons in order to popularize the product. For example, in the
case of medicine free samples are distributed among physicians, in the case of textbooks, specimen
copies are distributed among teachers.
(ii) Premium or Bonus offer: A milk shaker along with Nescafe, mug with Bournvita, toothbrush
with 500 grams of toothpaste, 30% extra in a pack of one kg. are the examples of premium or
bonus given free with the purchase of a product. They are effective in inducing consumers to buy
a particular product. This is also useful for encouraging and rewarding existing customers.
(iii) Exchange schemes: It refers to offering exchange of old product for a new product at a price
less than the original price of the product. This is useful for drawing attention to product
improvement. ‘Bring your old mixer-cum-juicer and exchange it for a new one just by paying
Rs.500’ or ‘exchange your black and white television with a colour television’ are various popular
examples of exchange scheme.
(iv) Price-off offer: Under this offer, products are sold at a price lower than the original price.
‘Rs. 2 off on purchase of a lifebuoy soap, Rs. 15 off on a pack of 250 grams of Taj Mahal tea, Rs.
1000 off on cooler’ etc. are some of the common schemes. This type of scheme is designed to
boost up sales in off-season and sometimes while introducing a new product in the market.
(v) Coupons: Sometimes, coupons are issued by manufacturers either in the packet of a product
or through an advertisement printed in the newspaper or magazine or through mail. These coupons
can be presented to the retailer while buying the product. The holder of the coupon gets the product
at a discount. For example, you might have come across coupons like, ‘show this and get Rs. 15
off on purchase of 5 kg. of Annapurna Atta’. The reduced price under this scheme attracts the
attention of the prospective customers towards new or improved products.
(vi) Fairs and Exhibitions: Fairs and exhibitions may be organised at local, regional, national or
international level to introduce new products, demonstrate the products and to explain special
features and usefulness of the products. Goods are displayed and demonstrated and their sale is
also conducted at a reasonable discount. ‘International Trade Fair’ in New Delhi at Pragati Maidan,
which is held from 14th to 27th November every year, is a well-known example of Fairs and
Exhibitions as a tool of sales promotion.

(vii) Trading stamps: In case of some specific products trading stamps are distributed among the
customers according to the value of their purchase. The customers are required to collect these
stamps of sufficient value within a particular period in order to avail of some benefits. This tool
induces customers to buy that product more frequently to collect the stamps of required value.
(viii) Scratch and win offer: To induce the customer to buy a particular product ‘scratch and win’
scheme is also offered. Under this scheme a customer scratch a specific marked area on the
package of the product and gets the benefit according to the message written there. In this way
customers may get some item free as mentioned on the marked area or may avail of price-off, or
sometimes visit different places on special tour arranged by the manufacturers.
(ix) Money Back offer: Under this scheme customers are given assurance that full value of the
product will be returned to them if they are not satisfied after using the product. This creates
confidence among the customers with regard to the quality of the product. This technique is
particularly useful while introducing new products in the market.
Push-pull strategies of promotion

Push Strategy
A push promotional strategy involves taking the product directly to the customer via whatever
means to ensure the customer is aware of your brand at the point of purchase.
"Taking the product to the customer"
A push promotional strategy works to create customer demand for your product or service through
promotion: for example, through discounts to retailers and trade promotions. Appealing package
design and maintaining a reputation for reliability, value or style are also used in push strategies.
One example of a push strategy is mobile phone sales, where manufacturers offer discounts on
phones to encourage buyers to choose their phone. Push promotional strategies also focus on
selling directly to customers, for example, through point of sale displays and direct approaches to
customers.
A "push" promotional strategy makes use of a company's sales force and trade promotion
activities to create consumer demand for a product. The producer promotes the product to
wholesalers, the wholesalers promote it to retailers, and the retailers promote it to consumers.
A good example of "push" selling is mobile phones, where the major handset manufacturers such
as Nokia promote their products via retailers such as Carphone Warehouse. Personal selling and

trade promotions are often the most effective promotional tools for companies such as Nokia - for
example offering subsidies on the handsets to encourage retailers to sell higher volumes.
A "push" strategy tries to sell directly to the consumer, bypassing other distribution channels (e.g.
selling insurance or holidays directly). With this type of strategy, consumer promotions and
advertising are the most likely promotional tools.
Pull Strategy
A pull strategy involves motivating customers to seek out your brand in an active process. "Getting
the customer to come to you"
A pull promotional strategy uses advertising to build up customer demand for a product or service.
For example, advertising children's toys on children's television shows is a pull strategy. The
children ask their parents for the toys, the parents ask the retailers and the retailers the order the
toys from the manufacturer. Other pull strategies include sales promotions, offering discounts or
two-for-one offers and building demand through social media sites such as YouTube.
A "pull" selling strategy is one that requires high spending on advertising and consumer
promotion to build up consumer demand for a product.
If the strategy is successful, consumers will ask their retailers for the product, the retailers will
ask the wholesaler, and the wholesalers will ask the producers. A good example of a pull is the
heavy advertising and promotion of children's' toys - mainly on television.
Consumers will go to ToyRUs and ask for a toy that was advertised on the television, then ToyRus
will ask the wholesalers who will then ask the producers go get busy and meet the demand.
Personal selling
Concept
It is a personal communication of information to influence a prospective customer to buy
something- a good, service, or idea that satisfies an individual’s needs.
Personal selling is where businesses use people (the “sales force”) to sell the product after meeting
face-to-face with the customer.
The sellers promote the product through their attitude, appearance and specialist product
knowledge. They aim to inform and encourage the customer to buy, or at least trial the product.
A good example of personal selling is found in department stores on the perfume and cosmetic
counters.

A customer can get advice on how to apply the product and can try different products. Products
with relatively high prices, or with complex features, are often sold using personal selling. Great
examples include cars, office equipment (e.g. photocopiers) and many products that are sold by
businesses to other industrial customers.
Delivery of a specially designed message to a prospect by a seller, usually in the form of face-to-
face communication, personal correspondence, or a personal telephone conversation. Unlike
advertising, a personal sales message can be more specifically targeted to individual prospects and
easily altered if the desired behavior does not occur. Personal selling, however, is far more costly
than advertising and is generally used only when its high expenditure can be justified. For example,
the marketing of a sophisticated computer system may require the use of personal selling, while
the introduction of a new product to millions of consumers would not. Two other forms of personal
selling that are not used with high-end products are door-to-door selling and home demonstration
parties. These two personal selling methods are primarily used for personal care products,
cosmetics, cookware, encyclopedias, books, toys, food, and other items of special interest to
homemakers. Ideally, personal selling should be supported by advertising to strengthen its impact.
Features
1. Feedback - As it is a face to face process the feedback from the clients are directly received
by the sales personal.
2. Persuasion - clients or customers can be persuaded to buy the product or the salesman can
put interest in them to buy the product.
3. Flexibility - the sales presentation can be adapted according to the situations or clients.
4. Builds relationships - A bond is made between the company and the customer through
personal selling. Ie marketing relationship is created between 2 people.
5. Efficient communicative interchange - it is a 2 fold communication where the message is
conveyed and the reply is also received back immediately.
6. Dyadic communication - it is dyadic in nature i.e. it is one on one communication.
7. Process - It is a set of activities and not a single activity. The process continues infinitely
8. Mutual benefit - It is a 2 way process, both the buyer and the seller are benefited from this.
9. Supplies of information - the customers are made aware about the company's product. I.e.
valuable information is supplied to the customers about the availability of the product,
special features, uses etc.

10. Promotes sales - the end objective is achieved thru this .i.e. promotion of sales is achieved.
11. Expensive - recruiting, training, and development of the sales force is an expensive
procedure as in PS this factor is very essential. Ie trained salespersons.
12. Assures the buyers - the buyers are assured of future services for the product and so as to
influence them on taking the product.
Functions
Order Getting
Seeking out customers
New Business Development
Creative selling
Pioneering
Account management
Order Taking
Routine
Writing up orders
Checking invoices
Assuring prompt order processing
Suggestive selling
Steps/Process involved in Personal selling
1. Prospecting and Evaluating
Seek names of prospects through sales records, referrals etc., also responses to advertisements.
Need to evaluate if the person is able (Undergraduate degree to attend a graduate program), willing
and authorized to buy. Blind prospecting-rely on phone directory etc.
2. Pre-approach (Preparing)
Review key decision makers especially for business to business, but also family assess credit
histories prepare sales presentations identify product needs.
Helps present the presentation to meet the prospects needs.
3. Approaching the Customer
This process commences with self-introduction in the same manner in which the sales person
contacts the potential customer. First impression of the sales person is lasting and therefore

important. Strive to develop a relationship rather than just push the product. Can be based on
referrals, cold calling or repeat contact
4. Opening the Sales Interview
This involves the immediate creation of rapport through the use of information acquired during
the pre- approach stage.
5. Making the Presentation
Need to attract and hold the prospects Attention to stimulate Interest and stir up Desire in the
product so the potential customer takes the appropriate Action. AIDA -Try to get the prospect to
touch, hold or try the product. Must be able to change the presentation to meet the prospect needs.
6. Handling Objections
Seek out objections and address them. Anticipate and counter them before the prospect can raise
them. Try to avoid bringing up objections that the prospect would not have raised. Price objection
is the most common
7. Closing
Ask prospect to buy product/products. Use trial closes, IE ask about financial terms, preferred
method of delivery. 20% sales people generally close 80% sales. Popular closing techniques:
Trial Close (Minor decision close)
Assumptive close (Implied consent close)
Urgency close
Ask for the sale close
8. Following Up
Must follow up sale; determine if the order was delivered on time, installation OK etc. Also helps
determine the prospects future needs.
Follow Up Accomplishes four objectives:
i. Customer gain short term satisfaction
ii. Referrals are stimulated
iii. In the long run, repurchase
iv. Prevent cognitive dissonance
Publicity/ Public relation
Meaning

Public relations includes ongoing activities to ensure the overall company has a strong public
image. Public relations activities include helping the public to understand the company and its
products. Often, public relations are conducted through the media that is, newspapers, television,
magazines, etc. As noted above, public relations is often considered as one of the primary activities
included in promotions.
Publicity is mention in the media. Organizations usually have little control over the message in the
media, at least, not as they do in advertising. Regarding publicity, reporters and writers decide
what will be said.
Public relations involves the cultivation of favorable relations for organizations and products with
its key publics through the use of a variety of communications channels and tools. Traditionally,
this meant public relations professionals would work with members of the news media to build a
favorable image by publicizing the organization or product through stories in print and broadcast
media.
Objectives
Building product awareness: Marketer can use PR element that generate consumer attention and
awareness through media placements and special events.
Creating interest: Stories in the media can help entice a targeted audience to try the product.
Providing information: PR can be used to provide customers with more depth information about
products and services.
Stimulating demand: A positive article in newspaper, on a TV news show, often results in a
discernible increase in product sales.
Reinforcing the brand: Maintaining positive relationships with key audiences, and thereby aiding
in building a strong image. A strong image helps the company build its business and it can help
the company in times of crisis as well.
Types of publicity
Press Release
A press release is often used in an attempt to generate publicity for a product, service, organization,
individual, or event. Even in the age of blogs and RSS feeds, a press release is still the simplest
and most effective way to gain media attention. The news exposure and coverage that results from

a carefully planned and executed press release is one of the best marketing values available to
small businesses. The price of sending a press release is a fraction of what would be paid for
comparable advertising costs and exposure.
Sponsorship
Sponsorship of an industry event, contest, or public service announcement can generate interest as
well as industry good-will. Sponsorship is often used as a tool to gain publicity, and to reinforce
or establish a corporate brand, while at the same time providing valuable, beneficial, and often
much-needed financial support to the recipient.
Partnerships with Charities
Partnering with a charity or donating a percentage of sales to a specific charity draws upon the
consumer's emotions. Charitable donations are another great method of generating publicity, and
like sponsorships, it also provides a positive impact for the recipient. A charitable business shows
that helping others triumphs over corporate greed. Supporting non-controversial charitable
organizations can generate a positive result for everyone involved.
A Good Story
Everyone loves a good story. Consider pitching a feel-good story about how a company's product
or service saved a life, changes a life for the better, or otherwise positively affected an individual
on a personal level. Life-changing events make great stories and can generate terrific publicity.
Contests
In general, people love contests. The thought of beating the odds and "winning" something brings
out the competitor in many people. Contests can generate positive public relations.
Survey Results
Survey results or studies that show unusual or unexpected results can be a great angle for publicity.
Sponsoring, collating, or publishing the survey results in a meaningful way can be a good angle
for publicity.
Companies can manage their public relations by spinning their publicity. Remember: publicity is
essentially a public relations effort focused on generating editorial media coverage for an
organization and/or its products.
Types of public relation
Types Of Marketing Public Relations

There are two types of MPR consisting of proactive and reactive. They are regarded as a
cycle, i.e. the proactive strategy is required to act first, and the reactive will be performed later.
However, they are explained in more detail as follows:
1. Proactive: The technique that influences the company’s strengths through long-term marketing
objectives and policy, i.e. the marketer tries to release the company’s benefits and its products or
services in order to achieve its goal; gain the highest sale and good image and the highest revenue.
This type of this PR strategy is “offensive rather than defensive, opportunity-seeking rather than
problem-solving, and proactive rather than reactive”.
In other words, for this PR form, the marketer tries to seek the opportunity that is influenced
by internal factors such as its reputation, reliability, and life-long history, instead of dealing with
problems. At the same time, the marketer pushes such opportunities to support and publicize the
matters that the company wants. As a result, the output of this type will be positive.
The process of this PR form, like PR process, consists of decision making, planning and
programming. The company makes a decision which opportunity is offered, then, it is planned
how to use that chance to meet the required goal, what medium/media should be used to carry the
message, and what kind of event should be created, and eventually communicated to the
consumers. However, all of them are foreseeable, if not entirely controllable. To conclude, the
proactive technique provides the company with how to do it, but not what to do.
2. Reactive: Unlike the proactive, the reactive seeks to find a solution to solve a problem that is
regarded as weaknesses of the company. As a consequence, the company want to defend itself and
get rid of all of the facets that threaten the company, with the purpose of restoring the company’s
reputation, preventing market erosion, and regaining lost sales. For this method, the company
needs to concern itself with both how to do and what to do. That is to
say, in terms of how to do, which channel and media as well as event should be used; on the other
hand, which performance to use and what is to be done
Functions of public relations
Community Relations. Any organization must be seen as a good community citizen and should
have the goodwill of the community in which it operates. An effective community relations
program will need to be continuing and comprehensive. Organizations can implement various
programs to improve community relations on a regular or even ongoing basis. So, clearly, one of
the major functions of public relations is to bridge the business/community gap. When

organizations support activities and programs that improve quality of life in their communities
their image and reputation will be enhanced.
Employee Relations. Maybe the most important resource that a company has are its employees
and the customer service they provide. The functions of public relations in regards to the
company’s employees is the maintenance of employee goodwill. The image and reputation of a
company among its employees is also another responsibility of public relations in its function of
employee relations.
Product Public Relations. When new products are introduced to the market the role that public
relations plays is crucial for creating awareness and differentiating the product in the public’s eyes
from other similar products. When existing products need a push public relations is often
called on the improve product visibility. Sometimes there are changes instituted in existing
products and public relations has to focus the attention of consumers on the product. If a product
needs to be positioned in the market a properly executed public relations campaign, much like an
effective viral marketing campaign, it can overcome buyer inertia and remove negative perceptions
on the part of the public.
Financial Relations. This function involves communication with the wide variety of individuals
and groups that the company deals with in the course of its operations. This includes the
stockholders and investors but is not limited to them.
Financial analysts and potential investors have to be informed about the company’s finances. A
well planned and executed financial relations campaign can increase the value of the company’s
stock because of improved image and reputation. This improved image can also make it easier to
gather additional capital.
And if you are seeking free money for your small business, your pr will put you in a better position
to be seen in a good light, by the people that write the checks.
Political and Government Relations. The wide range of activities that public relations has to
cover in the political arena includes influencing legislation that can be hindrances to the proper
operation of the company. Public relations in politics may have to stage debates and seminars for
government officials. So one of the functions of public relations can actually be to not only change
the way your community works, but your state, and even your nation.
Crisis Communications. When anything untoward happens like an accident in a production plant
it is the job of public relations to provide honest and accurate information so that the uncertainty

by the people involved directly or indirectly can be assuaged. Natural disasters, management
wrongdoings, bankruptcies and product failures are crises which public relations must play a large
part.
Direct marketing
Meaning
Direct marketing is a channel-agnostic form of advertising that allows businesses and nonprofits
organizations to communicate straight to the customer, with advertising techniques that can
include Cell Phone Text messaging, email, interactive consumer websites, online display ads,
fliers, catalog distribution, promotional letters, and outdoor advertising.
Direct marketing is just what it sounds like - directly reaching a market (customers and potential
customers) on a personal (phone calls, private mailings) basis, or mass-media basis (infomercials,
magazine ads, etc.).
Direct marketing is often distinguished by aggressive tactics that attempt to reach new customers
usually by means of unsolicited direct communications. But it can also reach out to existing or past
customers. A key factor in direct marketing is a "call to action." That is, direct marketing
campaigns should offer an incentive or enticing message to get consumers to respond (act).
Direct marketing involves the business attempting to locate, contact, offer, and make incentive-
based information available to consumers.
Features
1. Customer or subscriber or prospect databases that make targeting possible
2. A view of customers as assets with life time value

3. Ongoing relationship and affinity with customers

4. Data based market segment
5. Research and experimentation (test)
6. Benefits oriented direct response advertising
7. Measurement of result and accountability for costs
8. Interactivity
9. Multi-media promotion
10. Multi-channel distribution
Functions
 DM’s essential profession is sales. DM speaks to customers, tempting and activating them
to buy.
 DM can also teach, guide and inform.
 DM also builds and strengthens a company’s recognisability, image and brand.
 DM reaches a wider target group, but can also be targeted towards a more clearly defined
segment or target group.
 DM reaches your customers personally; print ends up in the homes and hands of its target
group, e-direct in the personal mailbox and mobile direct in the screen of one’s own phone.
Basic concept of e-commerce

E-marketing must be defined to include the management of the consumer’s online experience of
the product, from first encounter through purchase to delivery and beyond. Digital marketers
should care about the consumer’s online experiences for the simple reason that all of them -- good,
bad, or indifferent -- influence consumer perceptions of a product or a brand. The web offers
companies’ ownership and control of all interactions with customers and thus creates both the
ability and the need to improve their overall experience. There are two reasons for building the
concept of e-marketing around consumer experiences. First, this approach forces marketers to
adopt the consumer’s point of view. Second, it forces managers to pay attention to all aspects of
their digital brand’s interactions with the consumer, from the design of the product or service to
the marketing message, the sales and fulfillment processes, and the after-sales customer service
effort.

e-business
Electronic business, commonly referred to as "eBusiness" or "e-business", or an internet
business, may be defined as the application of information and communication technologies (ICT)
in support of all the activities of business. Commerce constitutes the exchange of products and
services between businesses, groups and individuals and can be seen as one of the essential
activities of any business. Electronic commerce focuses on the use of ICT to enable the external
activities and relationships of the business with individuals, groups and other businesses.
e-business may be defined as the conduct of industry,trade,and commerce using the computer
networks. The term "e-business" was coined by IBM's marketing and Internet teams in 1996.
Electronic business methods enable companies to link their internal and external data processing
systems more efficiently and flexibly, to work more closely with suppliers and partners, and to
better satisfy the needs and expectations of their customers. The internet is a public through way.
Firms use more private and hence more secure networks for more effective and efficient
management of their internal functions.
In practice, e-business is more than just e-commerce. While e-business refers to more strategic
focus with an emphasis on the functions that occur using electronic capabilities, e-commerce is a
subset of an overall e-business strategy. E-commerce seeks to add revenue streams using the World
Wide Web or the Internet to build and enhance relationships with clients and partners and to
improve efficiency using the Empty Vessel strategy. Often, e-commerce involves the application
of knowledge management systems.
e-marketing
E-Marketing Defined
E-Marketing complements your overall marketing strategy perfectly, and offers your advertising
campaigns proven, measurable results that can take your current marketing campaign to the next

level. For product promotion, event invitations, query responses and newsletters,
Email provides an all-in-one solution.
E-Marketing offers businesses and other advertising organisations with an easily customised,
efficient form of marketing to complement existing advertising strategies and close in on the
profitable and interactive market. Convenient, highly targeted and most importantly, cost-
effective, Exa's E-Marketing System is an easy choice!
Benefits of E-Marketing
 Target: allows you to target specific recipient groups and reach a defined, engaged
audience
 Penetration: overcomes geographical parameters that exist with other communication
methods
 Efficient: messages can be distributed to multiple recipients at one click
 Cost: requires minimal investment to set up an appropriate technical system
 Speed: messages are delivered straight to the recipients' inboxes, instantly
m-commerce
Mobile Commerce, or m-Commerce, is about the explosion of applications and services that are
becoming accessible from Internet-enabled mobile devices. It involves new technologies, services
and business models. It is quite different from traditional e-Commerce. Mobile phones impose
very different constraints than desktop computers. But they also open the door to a slew of new
applications and services. They follow you wherever you go, making it possible to look for a
nearby restaurant, stay in touch with colleagues, or pay for items at a store.
The phrase mobile commerce was originally coined in 1997 to mean "the delivery of electronic
commerce capabilities directly into the consumer’s hand, anywhere, via wireless technology.

“Many choose to think of Mobile Commerce as meaning "a retail outlet in your customer’s
pocket."
Uses of m-commerce:
Mobile Money Transfer
In Kenya money transfer is mainly done through the use of mobile phones. This was an initiative
of a multimillion shillings company in Kenya. Mobile money transfer services in Kenya are now
provided an (ZAP). The oldest has and is now generally used to refer to mobile money transfer
services even by other companies other than.
Mobile ATM
With the introduction of mobile money services for the unbanked, operators are now looking for
efficient ways to roll out and manage distribution networks that can support cash-in and cash-out.
Unlike traditional ATM, SICAP Mobile ATM have been specially engineered to connect to mobile
money platforms and provide bank grade ATM quality. In Hungary, Vodafone allows cash or bank
card payments of monthly phone bills. The Hungarian market is one where direct debits are not
standard practice, so the facility eases the burden of queuing for the postpaid half of Vodafone’s
subscriber base in Hungary.
Mobile ticketing
Tickets can be sent to mobile phones using a variety of technologies. Users are then able to use
their tickets immediately, by presenting their mobile phone at the ticket check.
Mobile vouchers, coupons and loyalty cards
Mobile ticketing technology can also be used for the distribution of vouchers, coupons, and loyalty
cards. These items are represented by a virtual token that is sent to the mobile phone. A customer
presenting a mobile phone with one of these tokens at the point of sale receives the same benefits
as if they had the traditional token. Stores may send coupons to customers using location-based
services to determine when the customer is nearby.

Content purchase and delivery
Currently, mobile content purchase and delivery mainly consists of the sale of ring-tones,
wallpapers, and games for mobile phones. The convergence of mobile phones, portable audio
players, and video players into a single device is increasing the purchase and delivery of full-length
music tracks and video. The download speeds available with 4G networks make it possible to buy
a movie on a mobile device in a couple of seconds.
Location-based services
Main article: Location-based service

The location of the mobile phone user is an important piece of information used during mobile
commerce or m-commerce transactions. Knowing the location of the user allows for location-
based services such as:
 Local discount offers
 Local weather
 Tracking and monitoring of people
Information services
A wide variety of information services can be delivered to mobile phone users in much the same
way as it is delivered to PCs. These services include:
 News
 Stock quotes
 Sports scores
 Financial records
 Traffic reporting
Customized traffic information, based on a user's actual travel patterns, can be sent to a mobile
device. This customized data is more useful than a generic traffic-report broadcast, but was
impractical before the invention of modern mobile devices due to the bandwidth requirements.
Mobile banking

Banks and other financial institutions use mobile commerce to allow their customers to access
account information and make transactions, such as purchasing stocks, remitting money. This
service is often referred to as Mobile Banking, or M-Banking.
Mobile brokerage
Stock market services offered via mobile devices have also become more popular and are known
as Mobile Brokerage. They allow the subscriber to react to market developments in a timely
fashion and irrespective of their physical location.
Auctions
Over the past three years mobile reverse auction solutions have grown in popularity.Unlike
traditional auctions, the reverse auction (or low-bid auction) bills the consumer's phone each time
they place a bid. Many mobile SMS commerce solutions rely on a one-time purchase or one-time
subscription; however, reverse auctions offer a high return for the mobile vendor as they require
the consumer to make multiple transactions over a long period of time.
Mobile Browsing
Using a mobile browser—a World Wide Web browser on a mobile device—customers can shop
online without having to be at their personal computer.
Mobile Purchase
Catalog merchants can accept orders from customers electronically, via the customer's mobile
device. In some cases, the merchant may even deliver the catalog electronically, rather than
mailing a paper catalog to the customer. Some merchants provide mobile websites that are
customized for the smaller screen and limited user interface of a mobile device.
In-application mobile phone payments
Payments can be made directly inside of an application running on a popular smartphone operating
system, such as Google Android. Analyst firm Gartner expects in-application purchases to drive

41 percent of app store (also referred to as mobile software distribution platforms) revenue in 2016.
In-app purchases can be used to buy virtual goods, new and other mobile content and is ultimately
billed by mobile carriers rather than the app stores themselves. Ericsson’s IPX mobile commerce
system is used by 120 mobile carriers to offer payment options such as try-before-you-buy, rentals
and subscriptions.
Mobile marketing and advertising
In the context of mobile commerce, mobile marketing refers to marketing sent to mobile devices.
Companies have reported that they see better response from mobile marketing campaigns than
from traditional campaigns. Mobile campaigns must be based on the global Content Generation or
what is called Generation C and four other 'C's: Creativity, Casual Collapse, Control, and
Celebrity. A brief introduction... Creativity: let's face it, we're all creatives, if not artists! (Notice
we didn't mean talented artists ;-). And as creativity normally leads to content, the link with
GENERATION C is obvious. Which then brings us to Casual Collapse: the ongoing demise of
many beliefs, rituals, formal requirements and laws modern societies have held dear, which
continue to 'collapse' without causing the apocalyptic aftermath often predicted by conservative
minds. From women's rights to gay marriage to not wearing a tie to work if you don't feel like it.
Research demonstrates that consumers of mobile and wireline markets represent two distinct
groups who are driven by different values and behaviors, and who exhibit dissimilar psychographic
and demographic profiles. As a result, successful mobile commerce requires the development of
marketing campaigns targeted to this particular market segment.
m-marketing
Mobile marketing is marketing on or with a mobile device, such as a cell phone. Mobile
marketing can also be defined as “the use of the mobile medium as a means of marketing
communication”, the “distribution of any kind of promotional or advertising messages to customer
through wireless networks”. More specific definition is the following: “using interactive wireless
media to provide customers with time and location sensitive, personalized information that
promotes goods, services and ideas, thereby generating value for all stakeholders".
Mobile marketing is commonly known as wireless marketing, although viewing advertising on a
computer connected to a home local area network is not considered to be mobile marketing

Types of m-marketing
SMS marketing
Marketing through cellphones' SMS (Short Message Service) became increasingly popular in the
early 2000s in Europe and some parts of Asia when businesses started to collect mobile phone
numbers and send off wanted (or unwanted) content. On average, SMS messages are read within
four minutes, making them highly convertible.
Over the past few years SMS marketing has become a legitimate advertising channel in some parts
of the world. This is because unlike email over the public internet, the carriers who police their
own networks have set guidelines and best practices for the mobile media industry (including
mobile advertising). The IAB (Interactive Advertising Bureau) and the Mobile Marketing
Association, as well, have established guidelines and are evangelizing the use of the mobile
channel for marketers. While this has been fruitful in developed regions such as North America,
Western Europe and some other countries, mobile SPAM messages (SMS sent to mobile
subscribers without a legitimate and explicit opt-in by the subscriber) remain an issue in many
other parts or the world, partly due to the carriers selling their member databases to third parties.
In India, however, government's efforts of creating National Do Not Call Registry have helped
cellphone users to stop SMS advertisements by sending a simple SMS or calling 1909.
MMS
MMS mobile marketing can contain a timed slideshow of images, text, audio and video. This
mobile content is delivered via MMS (Multimedia Message Service). Nearly all new phones
produced with a color screen are capable of sending and receiving standard MMS message. Brands
are able to both send (mobile terminated) and receive (mobile originated) rich content through
MMS A2P (application-to-person) mobile networks to mobile subscribers. In some networks,
brands are also able to sponsor messages that are sent P2P (person-to-person).
Good examples of mobile-originated MMS marketing campaigns are Motorola's ongoing
campaigns at House of Blues venues, where the brand allows the consumer to send their mobile
photos to the LED board in real-time as well as blog their images online.
Push notifications
Push Notifications were first introduced to smartphones by Apple with the advent of the Iphone in
2007. They were later further popularized with the Android operational system, where the
notifications are shown on the top of the screen. It has helped application owners to communicate

directly with their end users in a simple and effective way. If not used wisely it can quickly alienate
users as it causes interruptions to their current activities on the phone. It can be much cheaper if
compared to SMS Marketing for the long run, but it can become quite expensive on the short run,
because the cost involved in application development. Once the application is download and
installed provided the feature is not turned off .It is practically free, because it uses internet
bandwidth only. SMS and Push Notifications can be part of a well-developed Inbound Mobile
Marketing Strategy.
In-game mobile marketing
There are essentially four major trends in mobile gaming right now: interactive real-time 3D
games, massive multi-player games and social networking games. This means a trend towards
more complex and more sophisticated, richer game play. On the other side, there are the so-called
casual games, i.e. games that are very simple and very easy to play. Most mobile games today are
such casual games and this will probably stay so for quite a while to come.
Brands are now delivering promotional messages within mobile games or sponsoring entire games
to drive consumer engagement. This is known as mobile advergaming or Ad-funded mobile game.
Advertising on web pages specifically meant for access by mobile devices is also an option. The
Mobile Marketing Association provides a set of guidelines and standards that give the
recommended format of ads, presentation, and metrics used in reporting. Google, Yahoo, and other
major mobile content providers have been selling advertising placement on their properties for
years already as of the time of this writing. Advertising networks focused on mobile properties,
SMS reseller and advertisers are also available. Additionally, web forms on web pages can be used
to integrate with mobile texting sources for reminders about meetings, seminars and other
important events that assume users are not always at their computers.
e-networking
e-networking is the art of meeting people in your field and developing a list of contacts that you
can use to build friendships and professional relationships. Traditional networking takes place face
to face either at conferences or other professional meetings.
Advantages of E-Networking
The biggest advantage of e-networking is that it eliminates the intimidation factor. Some people
are naturally good at person to person interactions. They are confident and always seem to know

what to say. For others, however, talking with others can be a struggle.
E-networking gives those who are shy or get nervous in social situations a chance to make contacts
and meet people. The computer tends to make people feel anonymous so they won’t have a
problem emailing someone or replying to someone on a forum or in an online network. And even
if you do not get nervous in social situations, you are limited by the time frame so you may not
meet as much people as you would like. With the internet, you can network whenever you like.
Just make sure to stay organized when developing contacts otherwise all your efforts
will be for nothing.
Another advantage to e-networking is that a lot of people simply do not have time to attend a
conference, seminar, or attend a networking event. Between working and spending time with
family, there is not a lot of time that one can spare to attend these events. In order for networking
to be done well, it needs to be tended to regularly. Taking a few minutes to compose an email is
a lot better than spending a few hours at a conference where you may or may not meet potential
contacts.
****End of Module6****

Module 7:
Meaning
Marketing Planning: A systematic approach to the development of marketing strategy and the
achievement of goals.
Marketing planning is simply a logical sequence and a series of activities leading to the setting of
marketing objectives and the formulation of plans for achieving them (McDonald)
Marketing plan: a specification of an organization’s marketing intentions and objectives.
Concept of marketing planning
Marketing is the process of developing and implementing a plan to identify, anticipate and satisfy
consumer demand, in such a way as to make a profit. The two main elements of this plan are
market research to identify and anticipate customer requirements and the planning of an
appropriate marketing mix to meet these requirements. Market research involves gathering and
recording information about consumers, market, product, and the competition in an organised way.
The information is then analysed and used to inform marketing decisions. There are three
main ways of gathering information for market research:
1.From internal information already held by an organisation, e.g. details of existing customers
and their spending habits.
2. External primary information - i.e. information collected at first hand by interviewing customers
and potential customers to get their views about a company, products and services.
3. External secondary information - using published sources of information e.g. those produced
by marketing organizations about products, markets and brands.
Marketing planning can then be used:
1. To assess how well the organization is doing in its markets.
2. To identify current strengths and weaknesses in these markets.
3. To establish marketing objectives to be achieved in these markets.
4. To establish a marketing mix for each market designed to achieve organisational objectives.
Service organisations like the Inland Revenue and Abbey will carry out marketing to find out about
the sort of service that their customers and clients require in order to create an appropriate
marketing plan. Manufacturing organisations like Cadbury Schweppes, Corus, Audi and Nissan
will carry out product research in order to create an appropriate marketing plan for their products

(as well as associated services).

A simple definition of market research is 'keeping those who provide goods and services in touch
with the needs and wants of those who buy the goods and services.'
Steps involved in planning

1. Determine the firm’s mission. Your mission statement reflects why your firm is in business,
provides basic guidelines for further planning, and establishes broad parameters for the future.
2. Set company goals. Goals define the overall results you wish to achieve, guide the development
of a marketing plan, and shape the strategies needed to implement it.
3. Perform external analysis. An external analysis examines trends in the marketplace, the local
economic outlook, market types, available financing, and market needs.
4. Perform internal analysis. An internal analysis looks at your firm’s strengths and weaknesses.
It should include a client review of your firm’s performance.
5. Establish marketing goals. Marketing goals should reflect what you think your firm can
accomplish through marketing in the coming years: the amount of new business vs. old or repeat
business, job and client profiles, and promotional and sales goals.
6. Define strategies to achieve your goals. Strategies are specific activities to achieve stated
marketing goals over two or three years. They range from pursuing a new type of client to
expanding an existing market geographically or even adding or changing a specialty.
7. Research and refine strategies. Focus your energies as much as possible, selecting only those
strategies that will make it possible to reach your goals.
8. Create and refine promotional and sales tactics. Tactics are short-term, immediate, planned
actions undertaken to implement strategies. Tactics are specific reactions to research. Limit tactical
planning to those tasks necessary to accomplish marketing goals.
9. Implement the plan. Once the plan is put into action, good coordination and record keeping
are critical to its success.
10. Evaluate the plan in action. The entire marketing planning process must be continuously
evaluated and updated. Conduct regular evaluations of your efforts to achieve your marketing
goals, studying both successes and failures.
Marketing organizations

Weihrich and Koontz (1994) observe that organization is a word many people use loosely. But it
implies a formalized intentional structure of roles or positions. Fifield and Gilligan (2000) believe
that the way in which an organization develops and implements its plans is inexorably linked to
its structure and managerial culture and determine organizational efficiency and effectiveness.
Boyd et al (2002) explain that successful implementation of a given strategy is more likely when
the business has the functional competencies demanded by its strategy and supports them with
substantial resources relative to competitors; is organized suitably for its technical, market, and
competitive environment; and has developed appropriate mechanisms for coordinating efforts and
resolving conflicts across functional departments.
Factors influencing the size of marketing organization
Factors influencing marketing org can be categorized into internal and external factors.
Internal:
1. Top Management Philosophy: Organizational planning and its working is greatly influenced
by philosophy which can be good or bad eg: Centralization Vs Decentralization
2. Product policy: the width of product line of an org determines its size as the product offerings
becomes increasingly diverse. Eg: There could be a need to move away from straight functional
approach to product group approach.
3. People: The size of the organization is not an important factor in terms of number of people but
it is important with respect to human values which are critical and correct decisions regarding
people cannot be made unless taking into consideration
Number
Qualifications
Capabilities
Personality
Attitude
Fear
Suspicion
Ambition
Are some of the above intangible factors which affect the marketing organization?
External Factors:

1. Business Environment: With regards to business environment three points are

important.
a. The type of environment in which the firm is operating in terms of operations
and size.
b. The Nature of particular requirement for success in a given business which
again determines the size.
c. The rate of change in industries being served which again decides on its size
and working.
2. Markets: This is the factor which again affects the marketing organization i.e. one
should note about its
a. Size
b. Scope
c. Nature
d. Location
Based on the above aspects we need to design the size of the organization.
3. Consumer requirements and expectations: Consumers have their own set of
requirements and expectations from the organization. The more varied and vivid
services they expect that the usual requirements. as a marketer we need to increase the
workload depending upon the consumer requirements and expectations
4. Channels of distribution: It is the type of channel of distribution which a marketing
firm selects based on its size. Egg : Incase the company opts for indirect channel or
channels it depends on outside sales force and hence the organization gets thinner
.When the organization selects direct channel its size is increased as it has its own sales
force.
Various types of marketing structures/organization
An organization consists of two interrelated dimensions: the formal structure and informal
structure. The formal structure relates to the authority hierarchy, the division of labour to job
specifications. The informal organization is concerned with the social dimensions and
relationships within the business. It can be used both for getting things done and for creating
obstacles. For effective implementation of plans, these two structures should be recognized.

Types of marketing organization structures: The marketing organization of a business can be

structured on any of the following basis:
a. Line and staff organization
b. Functional Organization
c. Product oriented marketing organization
d. Customer oriented marketing organization
e. Geography oriented marketing organization
f. Matrix form / Combined base
1. Line and Staff Organization: In most business forms especially medium size the marketing
job is structured around few line functions and few staff functions i.e. Major staff functions is
organized into separate department and the line function is responsible for sales department. The
required coordination between the line and staff function is managed by the executive at higher
level.
Merits:
1. Provides expert advice from specialists
2. Relives line executes of routine, specialize functions
3. Enables young sales executive to acquire expertise
4. Helps in achieving effective coordination
5. Easy to operate
6. Less Expensive
Demerits:
1. Produce confusions arriving from indeterminate authority relationships
2. Curbs the authority of experts
3. Too much is expected from executives
4. Decision making is taken by top management
Head marketing
Marketing service manager sales manager Marketing research manager Promotional manager
Area sales manager-1 Area sales manager-2 Area sales manager-3 Area sales manager-4

Sales People Sales People Sales People Sales People

2. Functional: Under the organization the departments are created on the basis of specified
functions to be performed i.e. The Activities related to marketing, distribution etc
Merits:
1. Division of work base on specialization
2. Relives line executives of routine and specialized functions
3. Promotes application of expert knowledge
4. Helps to increase overall efficiency
Demerits:
1. Leads to complex relationships
2. Makes coordination ineffective
3. Promotes centralization
4. Lack of proper coordination
5. Delay in taking decisions
Head Marketing
Marketing service Manager sales manager marketing research manager promotional manager
Area sales manager
Salespeople
3. Product Oriented Marketing Organization: Organizations that produce wide variety of
products often organize marketing, training and promotion with respect to a product.
Merits:
1. The salesmen can render better customer service as they possess good
knowledge of product and may have close contacts with customers.
2. It makes individual departments responsible for the promotion of specific
products.
3. It facilitates effective coordination
Demerits:
1. It increases the employment of a number of managerial personal

2. Many salesmen of same enterprise attend same customer each representing a

separate product which creates confusion in the minds of the customer.
3. There may be duplication of activities
4. Customer Oriented Marketing Organization: When the departmentation of sales

organization is done on customer basis it is called customer oriented marketing organization.
Departmentation by customer may be done in enterprise engaged in providing specialized services
to different classes of customers.
Merits:
1. It takes into account needs of each class of customers.
2. IT provides specialization among the enterprise staff
Demerits:
1. It makes coordination difficult
2. It may lead to underutilization of resources in same department
3. There may be duplication of activities
4. These types of sales organizations are not suitable for small enterprises.
Research design team operation team
Customer research
production, Product /service design
Quality assurance, Systems engineering,
Strategic Planning Accounts, Finance
Human Resource, Chief operation officer
Planning team
Customer support team customer satisfaction

Service sales and marketing
Training pricing, promotion
Information channels, logistics
5. Geography/Territory: In a territory oriented marketing organization , the responsibilities for

marketing of various products rests almost entirely with line executives .The territory managers

are given varying nomenclatures like depot manager, district manager, area manager, zonal
manager , divisional manager etc.
Merits:
1. It leads to economy in terms of times and money
2. It helps in taking knowledge of local customers
3. It helps in effective control
Demerits:
1. It requires employment of number of managerial personnel.
2. It dilutes control from head quarters
Marketing Audit
Meaning
The marketing audit has certain similarities to a financial audit in that it is a review or appraisal of
your existing marketing activities. Carrying out the marketing audit provides the opportunity to
review and appraise your whole marketing activity, enabling you to assess past and present
performance as well as to provide the basis for evaluating possible future courses of action.
Because the business environment is constantly changing, the marketing audit should be used as a
reference tool, with constant updates reflecting changes in the external environment and your own
internal business experiences.
Strategic tool used to review the effectiveness of a marketing program. A marketing audit is a
comprehensive, systematic, periodic evaluation of a company's marketing capabilities. The audit
examines the goals, policies, and strategies of the marketing function as well as the methods of the
organization and the personnel who carry out the goals, policies, and strategies of the marketing
function. Marketing audits are performed on a regular basis by an unbiased, independent company
and are used to improve a company's overall marketing performance or to establish new marketing
plans.
Features of marketing audit
1. Comprehensive. The marketing audit covers all the major marketing activities of a
business. A comprehensive marketing audit is more effective in locating the real source of
company’s marketing problems.

2. Systematic. Marketing audit is an orderly examination of the organisation’s total

marketing environment, marketing objectives and strategies, marketing systems, and
specific marketing activities. The diagnosis is followed by a corrective action plan to
improve the organisation’s overall marketing effort.
3. Independent. Marketing audit is an independent and intelligent activity in that it can be
conducted in six ways: self-audit, audit from across, audit from above company auditing
office, company task force audit and outsider audit. Generally speaking, the best audits
come from outside audit consultants.
4. Periodic. A sound marketing audit is one which is conducted periodically as a weapon to
signal the troubles or the signs of success. Typically, marketing audits are initiated only
after sales have turned down, salesforce morale has fallen, and other company problems
have occurred.
OTHER CHARACTERISTICS
 Environment – the circumstances or conditions surrounding the agency, both within
and without
 Objective – worked toward or striven for and measurable
 Strategies – plans of action
 Activities – specified and supervised fields of action
 Resources – an available supply that can be drawn on when needed
 Problem areas – situations that present uncertainty, perplexity or difficulty
 Plan of action – process of doing or performing
Various components of marketing audit

Marketing audit should start with the market place at beginning and should explore the changes
that are happening in the marketplace. Then the marketing audit will move to examine the
company‟s marketing objectives and strategies, organization and systems. The marketing auditor
may move to examine one or two key functions in more detail that are important to the marketing
performance of the company. The marketing audit follows the following areas as components of
marketing audit:
1. Environmental Audit
2. Macro Environmental Audit

3. Task Environmental Audit

4. Marketing Strategy Audit
5. Marketing Organization Audit
6. Marketing System Audit
7. Marketing Productivity Audit
8. Marketing Functions Audit
1. MARKETING ENVIRONMENT AUDIT

The auditor is firstly started their audit by looking at the factors that affect all companies operating
in marketplace, and also looking at their customers and their profits. Under marketing environment
audit, following two environments are concerned, because these are very important under the
marketing audit.
2. THE MACRO-ENVIRONMENT
The Macro-environmental component examines six main areas, the detail depending on the
involvement of the business and involvement required by the industry. Under marketing audit, the
macro environment covers some environmental factors, like, Demographics – major demographic
developments and trends pose opportunities, Economical factors - developments in income, prices,
savings and credit will affect the company under that, Environmental factors, Technological
factors - changes occurring in product and process technology and company's position in these
technologies, Political factors - changes in laws and regulations might affect marketing strategy
and tactics and the changes in the areas of pollution control, equal employment opportunity,
product safety, advertising, price control, that affects the marketing strategy of company, Cultural
- public's attitude towards business and toward the company's products and changes in customer
lifestyles and values might affect the company,
3. THE TASK ENVIRONMENT
How competitive is the marketplace? What are competitors doing, and are they doing it well? What
might they be preparing to do? These are all vital to understand in preparing yourselves for the
battle. The task environment audit is evaluated under Markets - market size, growth, geographical
distribution and profits and major market segments, under customers - customers' needs and
buying processes and also product quality, service, sales force and price, Competitors, Distribution
& dealers, Suppliers, Facilitators & marketing firms and Publics.

4. MARKETING STRATEGY AUDIT

The marketing strategy audit is vital for company, and the marketing audit is make sure that the
company’s marketing strategy is fit with company’s marketing goals and objectives as well as
corporate goals and objectives. Under the marketing strategy audit, the auditor evaluate marketing
performance by evaluating marketing goals and objectives, company mission the move to the
strategy of organization. Under strategy evaluation, the auditor may concern following type of
questions:
Has the management articulated a clear marketing strategy for achieving its marketing objectives?
Is the strategy convincing?
Is the company using the best basis for market segmentation?
Does the company have clear criteria for rating the segments?
Has the company developed an effective positioning and marketing mix for each target segment?
5. MARKETING ORGANIZATION AUDIT
The marketing organization audit is mainly considered effectiveness of the organization activities
as well as efficiency of operation of company. Here all the activities and main management
functions are considered such as manufacturing, purchasing, financing as well as research and
development. Here the marketing auditor must make sure that the company is actually achieved
the effectiveness within the organization and also within the marketplace. And also following types
of questions are considered by marketing auditors: Are there good communications and working
relations between marketing and sales?
Is the product-management system working effectively?
Are product managers able to plan profits or only sales volumes?
5. MARKETING SYSTEM AUDIT
Here the marketing auditor is considered whether the company is using appropriate marketing
systems to collect the information, plan the activities, control the operations and to maintain
smoothly their day to day activities and whether these systems are properly worded within the
company or not. Those are the main things, the marketing auditor must consider under marketing
systems audit. Most of the organizations are today having different type of marketing systems to
collect the information and control the operation. Such as marketing information systems,
marketing planning systems, marketing control systems and new product development systems.

These systems have its own functions. Here the marketing auditor task is to make sure whether the
systems are properly worked or not.
6. MARKETING PRODUCTIVITY AUDIT
Most of the companies are operating to earn so much of profits. The marketing productivity audit
is focused on evaluate the company profits and revenue. So the marketing productivity audit is
very important to evaluate the marketing performance. The marketing auditor is used profitability
analysis and cost effectiveness analysis for their evaluation process. Under the marketing
productivity audit, following type question asked by marketing auditor:
What is the profitability of the company's different products, markets, territories and channels of
distribution?
Should the company enter, expand, contract or withdraw from any business segments?
Do any marketing activities seem to have excessive costs?
Can cost-reducing steps be taken?
7. MARKETING FUNCTION AUDIT
Under the marketing function audit, the auditor is using marketing mix elements to analyze
company functions such as product, price, place and promotion. Here marketing auditor evaluates
marketing performance by asking questions under product, price, place and promotion such as
What are the company's product-line objectives?
Which products should be phased out?
Which products should be added to?
What are the company's pricing objectives, policies, strategies and procedures?
To what extent are the prices set on cost, demand and competitive criteria?
Do the customers see the company's prices as being in line with the value of its offer?
What is the organization’s advertising objectives?
Is there adequate market coverage and service?
Should the company consider changing its distribution channels?
Is the right amount being spent on advertising?
What do customers and the public think about the advertising?
Marketing Strategy-Analysis of Industry and Competition, Strategic Planning Process
Key ingredients of the marketing management process are insightful, creative strategies and plans
that can guide marketing activities. Developing the right marketing strategy over time requires a

blend of discipline and flexibility. Firms must stick to a strategy but also constantly improve it.
They must also develop strategies for a range of products and services within the organization.
Founded in 1994 by Web-surfing Stanford University grad students, Yahoo! grew from a tiny
upstart surrounded by Silicon Valley heavyweights to a powerful force in Internet media.
Yahoo! worked hard to be more than just a search engine. The company proudly proclaims it is
“The only place anyone needs to go to find anything, communicate with anyone, or buy anything”
Its range of services includes e-mail, news, weather, music, photos, games, shopping, auctions,
and travel. A large percentage of revenues comes from advertising, but the company also profits
from subscription services such as online personal ads, premium e-mail,and small-business
services.
Although Yahoo! strives to achieve a competitive advantage over rival Google with its vast array
of original content, Google’s ascension to the runaway leader in search, e-mail, and related services
has made it a darling with advertisers. Yahoo!’s acquisition of photo-sharing service Flickr, social
bookmark manager Delicious and online video editing site Jump cut strengthened its capabilities.
Yahoo! has also continued to grow globally in Europe and Asia, helped in part by the acquisition
of Kelkoo, a European comparison- shopping site, for $579 million, and of 46 percent of Alabama
Chinese e-commerce Company, for $1 billion in cash. Discussions with Microsoft about a possible
merger culminated in a 10-year deal in June 2009 that gave Microsoft full access to the Yahoo!
search engine, to be used in future Microsoft projects for its own search engine, Bing. CEO Carol
Bartz faced many questions, however, about how Yahoo! should best move forward.
The task of any business is to deliver customer value at a profit. In a hypercompetitive economy
with increasingly informed buyers faced with abundant choices, a company can win only by fine-
tuning the value delivery process and choosing, providing, and communicating superior value.
The Value Delivery Process
The traditional view of marketing is that the firm makes something and then sells it, with marketing
taking place in the selling process. Companies that subscribe to this view have the best chance of
succeeding in economies marked by goods shortages where consumers are not fussy about quality,
features,or style—for example,basic staple goods in developing markets.
This traditional view will not work, however, in economies with many different types of people,
each with individual wants,perceptions,preferences,and buying criteria.The smart competitor must
design and deliver offerings for well-defined target markets. This realization inspired a new view

of business processes that places marketing at the beginningof planning.Instead of emphasizing

making and selling,companies now see themselves as part of a value delivery process. We can
divide the value creation and delivery sequence into three phases. 2 First, choosing the value
represents the “homework” marketing must do before any product exists. Marketers must segment
the market,select the appropriate target,and develop the offering’s value positioning.The formula
“segmentation,targeting,positioning (STP)”is the essence of strategic marketing.The second phase
is providing the value. Marketing must determine specific product features, prices, and
distribution. The task in the third phase is communicating the value by utilizing the sales
force,Internet, advertising, and any other communication tools to announce and promote the
product.
The value delivery process begins before there is a product and continues through development
and after launch. Each phase has cost implications.
The Value Chain
Harvard’s Michael Porter has proposed the value chain as a tool for identifying ways to create
more customer value. 3 According to this model, every firm is a synthesis of activities performed
to design, produce, and market, deliver, and support its product. The value chain identifies nine
strategically relevant activities—five primary and four support activities—that create value and
cost in a specific business.
The primary activities are (1) inbound logistics, or bringing materials into the business ;(2)
operations, or converting materials into final products; (3) outbound logistics, or shipping out final
products; (4) marketing, which includes sales; and (5) service. Specialized departments handle the
support activities—(1) procurement,(2) technology development,(3) human resource
management, and (4) firm infrastructure. (Infrastructure covers the costs of general management,
planning, finance, accounting, legal, and government affairs.) .The firm’s task is to examine its
costs and performance in each value-creating activity and look for ways to improve it. Managers
should estimate competitors’ costs and performances as benchmarks against which to compare
their own. And they should go further and study the “best of class “practices of the world’s best
companies. We can identify best-practice companies by consulting customers, suppliers,
distributors, financial analysts, trade associations, and magazines to see whom they rate as doing
the best job. Even the best companies can benchmark, against other industries if necessary, to
improve their performance. To support its corporate goal to be more innovative, GE has
benchmarked against P&G as well as developing its own best practices.
The firm’s success depends not only on how well each department performs its work, but also on
how well the company coordinates departmental activities to conduct core business processes.
These processes include:

• The market-sensing process. All the activities in gathering and acting upon information about the
market
• The new-offering realization process. All the activities in researching, developing, and launching
new high-quality offerings quickly and within budget
• The customer acquisition process. All the activities in defining target markets and prospecting
for new customers
• The customer relationship management process. All the activities in building deeper
understanding, relationships, and offerings to individual customers
• The fulfillment management process. All the activities in receiving and approving orders,
shipping the goods on time, and collecting payment Strong companies are reengineering their work
flows and building cross-functional teams to be responsible for each process. 6 At Xerox, a
Customer Operations Group links sales, shipping, installation, service, and billing so these
activities flow smoothly into one another. Winning companies excel at managing core business
processes through cross-functional teams.AT&T, LexisNexis, and Pratt & Whitney have
reorganized their employees into cross-functional teams; cross-functional teams exist in nonprofit
and government organizations as well.
To be successful, a firm also needs to look for competitive advantages beyond its own operations,
into the value chains of suppliers, distributors, and customers. Many companies today have
partnered with specific suppliers and distributors to create a superior value delivery network, also
called a supply chain.
Sony In May 2009, Sony announced it would cut its number of suppliers in half over the next two
years (to 1,200), increasing the volume of parts and materials from each and thus reducing unit
costs and overall procurement spending. Some stock analysts received the news positively as
evidence of the company’s commitment to restructuring. Others were less optimistic, such as
Mizuho Investors Securities analyst Nobuo Kurahashi: “I’m not sure how effective this is because
it’s just operational streamlining and wouldn’t simply push up earnings or bear fruit immediately.”
Core Competencies
Traditionally, companies owned and controlled most of the resources that entered their
businesses—labor power, materials, machines, information, and energy—but many today
outsource less-critical resources if they can obtain better quality or lower cost.
The key, then, is to own and nurture the resources and competencies that make up the essence of
the business. Many textile, chemical, and computer/electronic product firms do not manufacture
their own products because offshore manufacturers are more competent in this task. Instead, they
focus on product design and development and marketing, their core competencies .A core
competency has three characteristics: (1) It is a source of competitive advantage and makes a

significant contribution to perceived customer benefits. (2) It has applications in a wide variety of
markets.
(3) It is difficult for competitors to imitate.
Competitive advantage also accrues to companies that possess distinctive capabilities or excellence
in broader business processes. Wharton’s George Day sees market-driven organizations as
excelling in three distinctive capabilities: market sensing, customer linking, and channel bonding.
In terms of market sensing, he believes tremendous opportunities and threats often begin as “weak
Signals “from the “periphery “of a business. 10 He offers a systematic process for developing
peripheral vision, and practical tools and strategies for building “vigilant organizations” attuned to
changes in the environment, by asking three questions each related to learning from the past,
evaluating the present, and envisioning the future.
Competitive advantage ultimately derives from how well the company has fitted its core
competencies and distinctive capabilities into tightly interlocking “activity systems. Competitors
find it hard to imitate Southwest Airlines, Walmart, and IKEA because they are unable to copy
their activity systems.
The Central Role of Strategic Planning
Successful marketing thus requires capabilities such as understanding, creating, delivering,

capturing, and sustaining customer value. Only a select group of companies have historically stood
out as master marketers These companies focus on the customer and are organized to respond
effectively to changing customer needs. They all have well-staffed marketing departments, and
their other departments accept that the customer is king.
To ensure they select and execute the right activities, marketers must give priority to strategic
planning in three key areas: (1) managing a company’s businesses as an investment portfolio, (2)
assessing each business’s strength by considering the market’s growth rate and the company’s
position and fit in that market, and (3) establishing a strategy. The company must develop a game
plan for achieving each business’s long-run objectives.
Most large companies consist of four organizational levels: (1) corporate, (2) division, (3) business
unit, and (4) product. Corporate headquarters is responsible for designing a corporate strategic plan
to guide the whole enterprise; it makes decisions on the amount of resources to allocate to each
division, as well as on which businesses to start or eliminate. Each division establishes a plan
covering the allocation of funds to each business unit within the division. Each business unit
develops a strategic plan to carry that business unit into a profitable future. Finally, each product
level (product line, brand) develops a marketing plan for achieving its objectives.
The marketing plan is the central instrument for directing and coordinating the marketing effort. It
operates at two levels: strategic and tactical. The strategic marketing plan lays out the target

markets and the firm’s value proposition, based on an analysis of the best market opportunities.
The tactical marketing plan specifies the marketing tactics, including product features, promotion,
merchandising, pricing, sales channels, and service. The complete planning, implementation, and
control cycle of strategic planning is shown in Figure. Next, we consider planning at each of these
four levels of the organization.
Some corporations give their business units freedom to set their own sales and profit goals and
strategies. Others set goals for their business units but let them develop their own strategies.
Still others set the goals and participate in developing individual business unit strategies.
All corporate headquarters undertake four planning activities:
1. Defining the corporate mission
2. Establishing strategic business units
3. Assigning resources to each strategic business unit
4. Assessing growth opportunities
Defining the Corporate Mission
An organization exists to accomplish something: to make cars, lend money, provide a night’s
lodging. Over time, the mission may change, to take advantage of new opportunities or respond to
new market conditions. Amazon.com changed its mission from being the world’s largest online
book-store to aspiring to become the world’s largest online store; eBay changed from running
online auctions for collectors to running online auctions of all kinds of goods; and Dunkin’ Donuts
switched its emphasis from doughnuts to coffee.
To define its mission, a company should address Peter Drucker’s classic questions: What is our
business? Who is the customer? What is of value to the customer? What will our business be?
What should our business be? These simple-sounding questions are among the most difficult a
company will ever have to answer. Successful companies continuously raise and answer them.
Organizations develop mission statements to share with managers, employees, and (in many cases)
customers. A clear, thoughtful mission statement provides a shared sense of purpose, direction,
and opportunity.
Mission statements are at their best when they reflect a vision, an almost “impossible dream” that
provides direction for the next 10 to 20 years. Sony’s former president, Akio Morita, wanted
everyone to have access to “personal portable sound,” so his company created the Walkman and

portable CD player. Fred Smith wanted to deliver mail anywhere in the United States before 10:30
AM the next day, so he created FedEx.
Good mission statements have five major characteristics.
1. They focus on a limited number of goals. The statement “We want to produce the highest-
quality products, offer the most service, achieve the widest distribution, and sell at the lowest
prices “claims too much.
2. They stress the company’s major policies and values. They narrow the range of individual
discretion so employees act consistently on important issues.
3. They define the major competitive spheres within which the company will operate. Table 2.2
summarizes some key competitive dimensions for mission statements.
4. They take a long-term view. Management should change the mission only when it ceases to be
relevant.
5. They are as short, memorable, and meaningful as possible. Marketing consultant Guy Kawasaki
advocates developing three- to four-word corporate mantras rather than mission statements, like
“Enriching Women’s Lives “for Mary Kay.
Establishing Strategic Business Units
Companies often define themselves in terms of products: They are in the “auto business” or the
“clothing business. “Market definitions of a business, however, describe the business as a
customer- satisfying process. Products are transient; basic needs and customer groups endure
forever. Transportation is a need: the horse and carriage, automobile, railroad, airline, ship, and
truck are products that meet that need. Viewing businesses in terms of customer needs can suggest
additional growth opportunities. Table 2.3 lists companies that have moved from a product to a
market definition of their business. It highlights the difference between a target market definition
and a strategic market definition.
A target market definition tends to focus on selling a product or service to a current market. Pepsi
could define its target market as everyone who drinks carbonated soft drinks, and competitors
would therefore be other carbonated soft drink companies. A strategic market definition, however,
also focuses on the potential market. If Pepsi considered everyone who might drink some-thing to
quench their thirst, its competition would include noncarbonated soft drinks, bottled water, fruit
juices, tea, and coffee. To better compete, Pepsi might decide to sell additional beverages with
promising growth rates.
A business can define itself in terms of three dimensions: customer groups, customer needs, and
technology. Consider a small company that defines its business as designing incandescent lighting

studios, such as infrared or ultraviolet lighting or perhaps environmentally friendly “green”

fluorescent bulbs.
Large companies normally manage quite different businesses, each requiring its own strategy. At
one time, General Electric classified its businesses into 49 strategic business units (SBUs).
An SBU has three characteristics:
1. It is a single business, or a collection of related businesses, that can be planned separately from
the rest of the company.
2. It has its own set of competitors.
3. It has a manager responsible for strategic planning and profit performance, who controls most
of the factors affecting profit.
The purpose of identifying the company’s strategic business units is to develop separate strategies
and assign appropriate funding. Senior management knows its portfolio of businesses usually
includes a number of“yesterday’s has-beens”as well as “tomorrow’s breadwinners.” Liz Claiborne
has put more emphasis on some of its younger businesses such as Juicy Couture, Lucky Brand
Jeans, Mexx, and Kate Spade while selling businesses without the same buzz (Ellen Tracy, Sigrid
Olsen, and Laundry). Campbell Soup has out-paced the stock market for close to a decade by
developing or keeping only products that ranked number one or number two in the categories of
simple meals, baked snacks, and veggie-based drinks and that had a strong emphasis on value,
nutrition, and convenience.

MM Notes

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

MM Notes

Uploaded by

Copyright:

Available Formats

MARKETING MANAGEMENT 14MBA15

Subject Code: 14MBA15 IA Marks: 50

No. of Lecture Hours / Week: 04 Exam Hours: 03

Total Number of Lecture Hours: 56 Exam Marks: 100

Practical Component: 01 Hour / Week

1. To provide students an insight to basic concepts of marketing management.

3. To understand fundamental premise underlying market driven strategies.

Targeting - Bases for identifying target Customer target Marketing strategies,

Positioning - Meaning, Product Differentiation Strategies, Tasks involved in Positioning.

Branding - Concept of Branding, Types, Brand Equity, Branding strategies.

DEPT OF MBA, SJBIT Page 1

Module 6: (10 hours)

Integrated Marketing communication: Meaning and Importance of Marketing Communication,

Direct Marketing - Meaning, Features, Functions, Basic Concepts of E-Commerce, E-Business

Marketing Strategy-Analysis of Industry and Competition, Strategic Planning Process,

Case Studies of Indian Context

1. Analyze Product Life Cycle of few Products like-Electronic goods, Computers.

2. Analyze Packaging strategies used by FMCG companies

3. Analyze Marketing strategies/planning used by automobile cosmetic and FMCG companies

DEPT OF MBA, SJBIT Page 2

2 Consumer Behaviour Analysis 32-46

3 Market Segmentation, Targeting & Positioning 47-63

4 Managing the Product: 64-79

5 Pricing decisions 80-103

6 Integrated Marketing communication 104-144

7 Marketing Planning, Marketing Audit & 145-163

DEPT OF MBA, SJBIT Page 3

INTRODUCTION TO MARKETING MANAGEMENT

Features of Marketing Management

It Combines the Fields of Marketing and Management

DEPT OF MBA, SJBIT Page 4

Marketing Management is a Business Process

Marketing Management is Both Science and Art

1. Marketing is an Economic Function

2. Marketing is a Legal Process by which Ownership Transfers

3. Marketing is a System of Interacting Business Activities

DEPT OF MBA, SJBIT Page 5

4. Marketing is a Managerial function

5. Marketing is a social process

7. Marketing had dual objectives – profit making and consumer satisfaction

The Scope of Marketing

DEPT OF MBA, SJBIT Page 6

DEPT OF MBA, SJBIT Page 7

The Production Era

The Product Era

The Selling/Sales Era

DEPT OF MBA, SJBIT Page 8

The Marketing Era

DEPT OF MBA, SJBIT Page 9

The Societal Marketing Era

DEPT OF MBA, SJBIT Page 10

DEPT OF MBA, SJBIT Page 11

Factory Existing Profits by

Needs Marketing satisfaction

Outside In – Marketing Concept

Exchange and Transactions

DEPT OF MBA, SJBIT Page 12

Figure: A Simple Marketing System

Figure: Structure of Flows in a Modern Exchange Economy

DEPT OF MBA, SJBIT Page 13

Figure: Two-Party Exchange Map Showing Want Lists of Both Parties

Elements of Marketing Concepts

 Marketers and Prospects

 Needs, Wants, and Demands

End of Module 1