NEHRU ARTS AND SCIENCE COLLEGE

DEPARTMENT OF INTERNATIONAL BUSINESS

E-LEARNING 2012

CLASS : I MIB
SUBJECT : INTERNATIONAL MARKETING MANAGEMENT

UNIT – I
International Marketing – Definition – National & International Marketing – Special
Features of International Marketing – Difficulties & Barriers in International Marketing – Future
of Global Marketing.

PART A
1. What is International Marketing?
International Marketing is the performance of business activities that direct the
flow of a company's goods and services to consumers or users in more than one
nation for a profit.

2. Define International Marketing.

"The international market goes beyond the export marketer and becomes more
involved in the marketing environment in the countries in which it is doing
business." Keegan (2002)

3. ------------- market is interchangeable

Global or International marketing
PART B
1. Evaluate global marketing.
Global marketing is not a revolutionary shift, it is an evolutionary process. While the
following does not apply to all companies, it does apply to most companies that begin as
domestic-only companies.
Domestic marketing
A marketing restricted to the political boundaries of a country, is called "Domestic
Marketing". A company marketing only within its national boundaries only has to
consider domestic competition. Even if that competition includes companies from foreign
markets, it still only has to focus on the competition that exists in its home market.
Products and services are developed for customers in the home market without thought of
how the product or service could be used in other markets. All marketing decisions are
made at headquarters.
The biggest obstacle these marketers face is being blindsided by emerging global
marketers. Because domestic marketers do not generally focus on the changes in the
global marketplace, they may not be aware of a potential competitor who is a market
leader on three continents until they simultaneously open 20 stores in the Northeastern
U.S. These marketers can be considered ethnocentric as they are most concerned with
how they are perceived in their home country. exporting goods to other countries.
loosener Rhett

International marketing

If the exporting departments are becoming successful but the costs of doing business
from headquarters plus time differences, language barriers, and cultural ignorance are
hindering the company’s competitiveness in the foreign market, then offices could be
 built in the foreign countries. Sometimes companies buy firms in the foreign countries to
take advantage of relationships, storefronts, factories, and personnel already in place.
These offices still report to headquarters in the home market but most of the marketing
mix decisions are made in the individual countries since that staff is the most
knowledgeable about the target markets. Local product development is based on the
needs of local customers. These marketers are considered polycentric because they
acknowledge that each market/country has different needs.

2. What are the Elements of the global marketing mix

The “Four P’s” of marketing: product, price, placement, and promotion are all affected as a
company moves through the five evolutionary phases to become a global company. Ultimately,
at the global marketing level, a company trying to speak with one voice is faced with many
challenges when creating a worldwide marketing plan. Unless a company holds the same
position against its competition in all markets (market leader, low cost, etc.) it is impossible to
launch identical marketing plans worldwide. Nisant Chakram(Marketing Management)

Product

A global company is one that can create a single product and only have to tweak elements for
different markets. For example, Coca-Cola uses two formulas (one with sugar, one with corn
syrup) for all markets. The product packaging in every country incorporates the contour bottle
design and the dynamic ribbon in some way, shape, or form. However, the bottle or can also
includes the country’s native language and is the same size as other beverage bottles or cans in
that same country.

Price

Price will always vary from market to market. Price is affected by many variables: cost of
product development (produced locally or imported), cost of ingredients, cost of delivery
(transportation, tariffs, etc.), and much more. Additionally, the product’s position in relation to
the competition influences the ultimate profit margin. Whether this product is considered the
high-end, expensive choice, the economical, low-cost choice, or something in-between helps
determine the price point.

Placement

How the product is distributed is also a country-by-country decision influenced by how the
competition is being offered to the target market. Using Coca-Cola as an example again, not all
cultures use vending machines. In the United States, beverages are sold by the pallet via
warehouse stores. In India, this is not an option. Placement decisions must also consider the
product’s position in the market place. For example, a high-end product would not want to be
distributed via a “dollar store” in the United States. Conversely, a product promoted as the low-
cost option in France would find limited success in a pricey boutique.

Promotion

After product research, development and creation, promotion (specifically advertising) is

generally the largest line item in a global company’s marketing budget. At this stage of a
company’s development, integrated marketing is the goal. The global corporation seeks to reduce
costs, minimize redundancies in personnel and work, maximize speed of implementation, and to
speak with one voice. If the goal of a global company is to send the same message worldwide,
then delivering that message in a relevant, engaging, and cost-effective way is the challenge.
Effective global advertising techniques do exist. The key is testing advertising ideas using a
marketing research system proven to provide results that can be compared across countries. The
ability to identify which elements or moments of an ad are contributing to that success is how
economies of scale are maximized. Market research measures such as Flow of Attention, Flow of
Emotion and branding moments provide insights into what is working in an ad in any country
because the measures are based on visual, not verbal, elements of the ad.

PART C

1. Explain the Advantages and Disadvantages of International marketing?

Advantages

 The advantages of global market we can introduce our product by using advertising
 Economies of scale in production and distribution
 Lower marketing costs
 Power and scope
 Consistency in brand image
 Ability to leverage good ideas quickly and efficiently
 Uniformity of marketing practices
 Helps to establish relationships outside of the "political arena"
 Helps to encourage ancillary industries to be set up to cater for the needs of the global
player
 Benefits of e Marketing over traditional marketing

Reach

The nature of the internet means businesses now have a truly global reach. While traditional
media costs limit this kind of reach to huge multinationals, e Marketing opens up new avenues
for smaller businesses, on a much smaller budget, to access potential consumers from all over the
world.

Scope

Internet marketing allows the marketer to reach consumers in a wide range of ways and enables
them to offer a wide range of products and services. E Marketing includes, among other things,
information management, public relations, customer service and sales. With the range of new
technologies becoming available all the time, this scope can only grow.

Interactivity

Whereas traditional marketing is largely about getting a brand’s message out there, e Marketing
facilitates conversations between companies and consumers. With a two way communication
channel, companies can feed off of the responses of their consumers, making them more
dynamic and adaptive.

Immediacy

Internet marketing is able to, in ways never before imagined, provide an immediate impact.
Imagine you’re reading your favorite magazine. You see a double-page advert for some new
product or service, maybe BMW’s latest luxury sedan or Apple’s latest iPod offering. With this
kind of traditional media, it’s not that easy for you, the consumer, to take the step from hearing
about a product to actual acquisition. With e Marketing, it’s easy to make that step as simple as
possible, meaning that within a few short clicks you could have booked a test drive or ordered
the iPod. And all of this can happen regardless of normal office hours. Effectively, Internet
marketing makes business hours 24 hours per day, 7 days per week for every week of the year.
By closing the gap between providing information and eliciting a consumer reaction, the
consumer’s buying cycle is speeded up and advertising spend can go much further in creating
immediate leads.

Demographics and targeting

Generally speaking, the demographics of the Internet are a marketer’s dream. Internet users,
considered as a group, have greater buying power and could perhaps be considered as a
population group skewed towards the middle-classes. Buying power is not all though. The nature
of the Internet is such that its users will tend to organize themselves into far more focused
groupings. Savvy marketers who know where to look can quite easily find access to the niche
markets they wish to target. Marketing messages are most effective when they are presented
directly to the audience most likely to be interested. The Internet creates the perfect environment
for niche marketing to targeted groups.

Adaptively and closed loop marketing

Closed Loop Marketing requires the constant measurement and analysis of the results of
marketing initiatives. By continuously tracking the response and effectiveness of a campaign, the
marketer can be far more dynamic in adapting to consumers’ wants and needs. With eMarketing,
responses can be analyzed in real-time and campaigns can be tweaked continuously. Combined
with the immediacy of the Internet as a medium, this means that there’s minimal advertising
spend wasted on less than effective campaigns. Maximum marketing efficiency from eMarketing
creates new opportunities to seize strategic competitive advantages. The combination of all these
factors results in an improved ROI and ultimately, more customers, happier customers and an
improved bottom line.

Disadvantages

 Differences in consumer needs, wants, and usage patterns for products

 Differences in consumer response to marketing mix elements
 Differences in brand and product development and the competitive environment
 Differences in the legal environment, some of which may conflict with those of the home
market
 Differences in the institutions available, some of which may call for the creation of
entirely new ones (e.g. infrastructure)
 Differences in administrative procedures
 Differences in product placement.
 Differences in the administrative procedures and product placement can occur

2. Explain the scope and challenges of international Marketing

Scope of International Marketing

Though international marketing is in essence export marketing, it has a broader connotation in

marketing literature. It also means entry into international market by:

(a) Opening a branch / subsidiary abroad for processing, packaging, assembly or even complete
manufacturing through direct investment.
(b) Negotiating licensing / franchising arrangements whereby foreign enterprises are granted the
right to use the exporting company, know how, viz., patents processes or trade marks, with or
without financial investment;

(c) Establishing joint ventures in foreign countries for manufacturing and/or marketing;

(d) Offering consultancy services and undertaking turnkey projects abroad;

(e) Sun contracting and counter trade; and

(f) Important for export production;

Depending upon the degree of a firm’s involvement, there may be several variations of these
arrangements.

International Trade, International Marketing and International Business:

It would be useful to discuss three terms very often used in this context, international trade,
international marketing and international business. International trade, which arises due to
divergent scarcities between nations, points out the possibilities and advantages of trade.
International marketing is the process through which international trade takes place.

Analyzing the behavioral orientation of international executives, it was found that these could be
categorized into three: ethnocentric, regiocentric and geocentric. This idea was later further
developed into the four fold classification of EPRG, where the fourth Polycentric was added. The
basic idea behind the concept is that manager’s views their home country culture in different
ways and that in turn influence their world view which in turn impact the corporate growth
process.

In ethnocentric orientation, home country is considered to be superior. Further the manager looks
for similarly in the foreign market. He supposes that products and processes which have
succeeded in the home country would also succeed abroad and should therefore be used.

The overseas market markets are considered secondary and all make planning is done in the head
office in the home country.

In polycentric orientations the manager recognizes that each country is unique. To succeed
abroad, such uniqueness has to be respected and addressed in the company’s offerings. The
centralized structured as favored in the ethnocentric culture is found to be not appropriate
structure. In this orientation local operations are given more autonomy. Subsidiaries are setup
with operational independence.

In regiocentric and geocentric approaches, the region / world is viewed as one market and the
firm seeks to develop regional / global marketing plans and strategies. The geocentric orientation
is a synthesis of the ethnocentric orientation and polycentric orientation. This is the so called
world view that sees similarities and differences in markets and countries and seeks to create a
Global strategy that is fully responsible to local needs and wants. The regiocentric orientation is
a geocentric orientation that is limited to a region. The ethnocentric company is centralized in its
marketing, polycentric company is decentralized and the regiocentric and the geocentric are
integrated.

International business includes any type of business activity that crosses international borders.
Thus, international business is wider in scope than international marketing. It includes besides
marketing, investments abroad including establishment of subsidiaries and joint ventures abroad.
Each country is a separate market having its own demand pattern, channels of distribution,
methods of promotion etc. These differences are accentuated due to the existence of government
controls and regulations. However, this is a difference of degree only. Even in one single country
there may be differences in demand characteristics in different parts of the country. This is
specially so for big countries like India and the USA whether the demand patterns differs from
state to state.

Each country has its own procedures and documentary requirements and traders have to comply
with these regulations if they want to export to or import goods from foreign countries.

********************

UNIT – II
Managing Marketing – Defining customer value & satisfaction – retaining customers –
Delivering customer value & satisfaction – Implementing total quality marketing – Competitive
Marketing strategies – Balancing customer and Customer Orientations.

PART A
1. Define customer
A person, company, or other entity which buys goods and services produced by
another person, company, or other entity.
2. Explain the term customer values
The difference between what a customer gets from a product, and what he or she
has to give in order to get it.
3. ----------- is a the non-inferiority or superiority of something
Quality (business)
PART B
1. Define Customer satisfaction

Customer satisfaction

Customer satisfaction, a term frequently used in marketing, is a measure of how products and
services supplied by a company meet or surpass customer expectation. Customer satisfaction is
defined as "the number of customers, or percentage of total customers, whose reported
experience with a firm, its products, or its services (ratings) exceeds specified satisfaction
goals."[1]

It is seen as a key performance indicator within business and is often part of a Balanced
Scorecard. In a competitive marketplace where businesses compete for customers, customer
satisfaction is seen as a key differentiator and increasingly has become a key element of business
strategy.

Within organizations, customer satisfaction ratings can have powerful effects. They focus
employees on the importance of fulfilling customers’ expectations. Furthermore, when these
ratings dip, they warn of problems that can affect sales and profitability. These metrics quantify
an important dynamic. When a brand has loyal customers, it gains positive word-of-mouth
marketing, which is both free and highly effective.

Therefore, it is essential for businesses to effectively manage customer satisfaction. To be able

do this, firms need reliable and representive measures of satisfaction.
In researching satisfaction, firms generally ask customers whether their product or service has
met or exceeded expectations. Thus, expectations are a key factor behind satisfaction. When
customers have high expectations and the reality falls short, they will be disappointed and will
likely rate their experience as less than satisfying. For this reason, a luxury resort, for example,
might receive a lower satisfaction rating than a budget motel—even though its facilities and
service would be deemed superior in “absolute” terms

The importance of customer satisfaction diminishes when a firm has increased bargaining power.
For example, cell phone plan providers, such as AT&T and Verizon, participate in an industry
that is an oligopoly, where only a few suppliers of a certain product or service exist. As such,
many cell phone plan contracts have a lot of fine print with provisions that they would never get
away if there were, say, a hundred cell phone plan providers, because customer satisfaction
would be way too low, and customers would easily have the option of leaving for a better
contract offer.

There is a substantial body of empirical literature that establishes the benefits of customer
satisfaction for firms.

2. Explain the types of strategies

Marketing strategies may differ depending on the unique situation of the individual business.
However there are a number of ways of categorizing some generic strategies. A brief description
of the most common categorizing schemes is presented below:

 Strategies based on market dominance - In this scheme, firms are classified based on their
market share or dominance of an industry. Typically there are four types of market
dominance strategies:
o Leader
o Challenger
o Follower
o Nicher
 Porter generic strategies - strategy on the dimensions of strategic scope and strategic
strength. Strategic scope refers to the market penetration while strategic strength refers to
the firm’s sustainable competitive advantage. The generic strategy framework (porter
1984) comprises two alternatives each with two alternative scopes. These are
Differentiation and low-cost leadership each with a dimension of Focus-broad or narrow.
o Product differentiation (broad)
o Cost leadership (broad)
o Market segmentation (narrow)
 Innovation strategies - This deals with the firm's rate of the new product development and
business model innovation. It asks whether the company is on the cutting edge of
technology and business innovation. There are three types:
o Pioneers
o Close followers
o Late followers
 Growth strategies - In this scheme we ask the question, “How should the firm grow?”.
There are a number of different ways of answering that question, but the most common
gives four answers:
o Horizontal integration
o Vertical integration
o Diversification
o Intensification
A more detailed scheme uses the categories[8]:

 Prospector
 Analyzer
 Defender
 Reactor
 Marketing warfare strategies - This scheme draws parallels between marketing strategies
and military strategies.

PART C

1. How you will measure the customer satisfaction?

Organizations need to retain existing customers while targeting non-customers.[3]

Measuring customer satisfaction provides an indication of how successful the
organization is at providing products and/or services to the marketplace.
Customer satisfaction is measured at the individual level, but it is almost always
reported at an aggregate level. It can be, and often is, measured along various
dimensions. A hotel, for example, might ask customers to rate their experience with its
front desk and check-in service, with the room, with the amenities in the room, with the
restaurants, and so on. Additionally, in a holistic sense, the hotel might ask about
overall satisfaction “with your stay.”[1]
As research on consumption experiences grows, evidence suggests that consumers
purchase goods and services for a combination of two types of benefits: hedonic and
utilitarian. Hedonic benefits are associated with the sensory and experiential attributes
of the product. Utilitarian benefits of a product are associated with the more
instrumental and functional attributes of the product (Batra and Athola 1990)[4].
Customer satisfaction is an ambiguous and abstract concept and the actual
manifestation of the state of satisfaction will vary from person to person and
product/service to product/service. The state of satisfaction depends on a number of
both psychological and physical variables which correlate with satisfaction behaviors
such as return and recommend rate. The level of satisfaction can also vary depending
on other options the customer may have and other products against which the customer
can compare the organization's products.
Work done by Parasuraman, Zeithaml and Berry (Leonard L)[5] between 1985 and 1988
provides the basis for the measurement of customer satisfaction with a service by using
the gap between the customer's expectation of performance and their perceived
experience of performance. This provides the measurer with a satisfaction "gap" which
is objective and quantitative in nature. Work done by Cronin and Taylor propose the
"confirmation/disconfirmation" theory of combining the "gap" described by
Parasuraman, Zeithaml and Berry as two different measures (perception and
expectation of performance) into a single measurement of performance according to
expectation.
The usual measures of customer satisfaction involve a survey[6] with a set of statements
using a Likert Technique or scale. The customer is asked to evaluate each statement and
in term of their perception and expectation of performance of the organization being
measured. Their satisfaction is generally measured on a five-point scale.
 Customer satisfaction data can also be collected on a 10-point scale.[1]

Regardless of the scale used, the objective is to measure customers’ perceived satisfaction
with their experience of a firm’s offerings. It is essential for firms to effectively manage
customer satisfaction. To be able do this, we need accurate measurement of satisfaction.[7]

Good quality measures need to have high satisfaction loadings, good reliability, and low
error variances. In an empirical study comparing commonly used satisfaction measures it was
found that two multi-item semantic differential scales performed best across both hedonic
and utilitarian service consumption contexts. According to studies by Wirtz & Lee (2003)[8],
they identified a six-item 7-point semantic differential scale (e.g., Oliver and Swan 1983),
which is a six-item 7-point bipolar scale, that consistently performed best across both
hedonic and utilitarian services. It loaded most highly on satisfaction, had the highest item
reliability, and had by far the lowest error variance across both studies. In the study[8], the six
items asked respondents’ evaluation of their most recent experience with ATM services and
ice cream restaurant, along seven points within these six items: “please me to displeased me”,
“contented with to disgusted with”, “very satisfied with to very dissatisfied with”, “did a good
job for me to did a poor job for me”, “wise choice to poor choice” and “happy with to
unhappy with”.

2. A semantic differential (4 items) scale (e.g., Eroglu and Machleit 1990)[9] , which is a
four-item 7-point bipolar scale, was the second best performing measure, which was
again consistent across both contexts. In the study, respondents were asked to evaluate
their experience with both products, along seven points within these four items: “satisfied
to dissatisfied”, “favorable to unfavorable”, “pleasant to unpleasant” and “I like it very
much to I didn’t like it at all”.[8]
The third best scale was single-item percentage measure, a one-item 7-point bipolar scale
(e.g., Westbrook 1980)[10]. Again, the respondents were asked to evaluate their
experience on both ATM services and ice cream restaurants, along seven points within
“delighted to terrible”.[8]
It seems that dependent on a trade-off between length of the questionnaire and quality of
satisfaction measure, these scales seem to be good options for measuring customer
satisfaction in academic and applied studies research alike. All other measures tested
consistently performed worse than the top three measures, and/or their performance
varied significantly across the two service contexts in their study. These results suggest
that more careful pretesting would be prudent should these measures be used.[8]
Finally, all measures captured both affective and cognitive aspects of satisfaction,
independent of their scale anchors.[8] Affective measures capture a consumer’s attitude
(liking/disliking) towards a product, which can result from any product information or
experience. On the other hand, cognitive element is defined as an appraisal or conclusion
on how the product’s performance compared against expectations (or exceeded or fell
short of expectations), was useful (or not useful), fit the situation (or did not fit),
exceeded the requirements of the situation (or did not exceed).

3. Explain customer orientation.

 Customer orientation

 Customer orientation is of ultimate importance to deliver value added products. There are
4 basic stages for customer orientation
o Develop
 Development has to be done keeping customer needs into mind.
 Products should be customer oriented.
 The development cycle time should be minimal
o Manufacture
 As per the product, the manufacturing should be such that it gives the best products to the
customer
 Quality should not be compromised
 Manufacturing cycle time should be reduced
o Market
 Identifying and targeting the right customer
 Processing the demand as early as possible
 Customization of the products for the market
o Deliver
 Deliver to the target customer
 Reduce delivery time
 Value for money products
 Thus by these 4 steps, A value added product is delivered

UNIT – III
International Marketing decisions – Products strategies and product planning – Branding
and Packaging decision – Pricing strategies.

PART A

1. ___________is a set of benefits offered for exchange and can be tangible (that is,
something physical you can touch) or intangible (like a service, experience, or
belief).
Product
 2. ___________ is a marketing strategy

Branding
3.____________ Method of pricing in which all costs is recovered
Absorption pricing

Absorption pricing

PART B
1. briefly explain branding
The American Marketing Association (AMA) defines a brand as a "name, term, sign, symbol or
design, or a combination of them intended to identify the goods and services of one seller or
group of sellers and to differentiate them from those of other sellers.

Therefore it makes sense to understand that branding is not about getting your target market to
choose you over the competition, but it is about getting your prospects to see you as the only one
that provides a solution to their problem.

The objectives that a good brand will achieve include:

 Delivers the message clearly

 Confirms your credibility
 Connects your target prospects emotionally
 Motivates the buyer
 Concretes User Loyalty

To succeed in branding you must understand the needs and wants of your customers and
prospects. You do this by integrating your brand strategies through your company at every point
of public contact.

Your brand resides within the hearts and minds of customers, clients, and prospects. It is the sum
total of their experiences and perceptions, some of which you can influence, and some that you
cannot.

A strong brand is invaluable as the battle for customers intensifies day by day. It's important to
spend time investing in researching, defining, and building your brand. After all your brand is the
source of a promise to your consumer. It's a foundational piece in your marketing
communication and one you do not want to be without.
2. Explain pricing strategies

Competition-based pricing

Setting the price based upon prices of the similar competitor products.

Competitive pricing is based on three types of competitive product:

 Products have lasting distinctiveness from competitor's product. Here we can assume
o The product has low price elasticity.
o The product has low cross elasticity.
o The demand of the product will rise.
  Products have perishable distinctiveness from competitor's product, assuming the product
features are medium distinctiveness.
 Products have little distinctiveness from competitor's product. assuming that:
o The product has high price elasticity.
o The product has some cross elasticity.
o No expectation that demand of the product will rise.

Cost-plus pricing

Cost-plus pricing is the simplest pricing method. The firm calculates the cost of producing the
product and adds on a percentage (profit) to that price to give the selling price. This method
although simple has two flaws; it takes no account of demand and there is no way of determining
if potential customers will purchase the product at the calculated price.

This appears in 2 forms, Full cost pricing which takes into consideration both variable and fixed
costs and adds a % markup. The other is Direct cost pricing which is variable costs plus a %
markup, the latter is only used in periods of high competition as this method usually leads to a
loss in the long run.

Creaming or skimming

Selling a product at a high price, sacrificing high sales to gain a high profit, therefore ‘skimming’
the market. Usually employed to reimburse the cost of investment of the original research into
the product: commonly used in electronic markets when a new range, such as DVD players, are
firstly dispatched into the market at a high price. This strategy is often used to target "early
adopters" of a product or service. These early adopters are relatively less price-sensitive because
either their need for the product is more than others or they understand the value of the product
better than others. In market skimming goods are sold at higher prices so that fewer sales are
needed to break even.

This strategy is employed only for a limited duration to recover most of investment made to
build the product. To gain further market share, a seller must use other pricing tactics such as
economy or penetration. This method can come with some setbacks as it could leave the product
at a high price to competitors.[1]

Limit pricing

A limit price is the price set by a monopolist to discourage economic entry into a market, and is
illegal in many countries. The limit price is the price that the entrant would face upon entering as
long as the incumbent firm did not decrease output. The limit price is often lower than the
average cost of production or just low enough to make entering not profitable. The quantity
produced by the incumbent firm to act as a deterrent to entry is usually larger than would be
optimal for a monopolist, but might still produce higher economic profits than would be earned
under perfect competition.

The problem with limit pricing as strategic behavior is that once the entrant has entered the
market, the quantity used as a threat to deter entry is no longer the incumbent firm's best
response. This means that for limit pricing to be an effective deterrent to entry, the threat must in
some way be made credible. A way to achieve this is for the incumbent firm to constrain itself to
produce a certain quantity whether entry occurs or not. An example of this would be if the firm
signed a union contract to employ a certain (high) level of labor for a long period of time.

Loss leader
A loss leader or leader is a product sold at a low price (at cost or below cost) to stimulate other
profitable sales.

Market-oriented pricing

Setting a price based upon analysis and research compiled from the targeted market.

Penetration pricing

The price is deliberately set at low level to gain customer's interest and establishing a foot-hold
in the market.

Price discrimination

Setting a different price for the same product in different segments to the market. For example,
this can be for different ages or for different opening times, such as cinema tickets.

Premium pricing

Premium pricing is the practice of keeping the price of a product or service artificially high in
order to encourage favorable perceptions among buyers, based solely on the price. The practice
is intended to exploit the (not necessarily justifiable) tendency for buyers to assume that
expensive items enjoy an exceptional reputation or represent exceptional quality and distinction.

Predatory pricing

Aggressive pricing intended to drive out competitors from a market. It is illegal in some places.

Contribution margin-based pricing

Contribution margin-based pricing maximizes the profit derived from an individual product,
based on the difference between the product's price and variable costs (the product's contribution
margin per unit), and on one’s assumptions regarding the relationship between the product’s
price and the number of units that can be sold at that price. The product's contribution to total
firm profit (i.e., to operating income) is maximized when a price is chosen that maximizes the
following: (contribution margin per unit) X (number of units sold)..

Psychological pricing

Pricing designed to have a positive psychological impact. For example, selling a product at $3.95
or $3.99, rather than $4.00.

Dynamic pricing

A flexible pricing mechanism made possible by advances in information technology, and

employed mostly by Internet based companies. By responding to market fluctuations or large
amounts of data gathered from customers - ranging from where they live to what they buy to
how much they have spent on past purchases - dynamic pricing allows online companies to
adjust the prices of identical goods to correspond to a customer’s willingness to pay. The airline
industry is often cited as a dynamic pricing success story. In fact, it employs the technique so
artfully that most of the passengers on any given airplane have paid different ticket prices for the
same flight.

Price leadership
An observation made of oligopic business behavior in which one company, usually the dominant
competitor among several, leads the way in determining prices, the others soon following.

Target pricing

Pricing method whereby the selling price of a product is calculated to produce a particular rate of
return on investment for a specific volume of production. The target pricing method is used most
often by public utilities, like electric and gas companies, and companies whose capital
investment is high, like automobile manufacturers.

Target pricing is not useful for companies whose capital investment is low because, according to
this formula, the selling price will be understated. Also the target pricing method is not keyed to
the demand for the product, and if the entire volume is not sold, a company might sustain an
overall budgetary loss on the product.

Absorption pricing

Method of pricing in which all costs are recovered. The price of the product includes the variable
cost of each item plus a proportionate amount of the fixed costs. A form of cost plus pricing

High-low pricing

Method of pricing for an organization where the goods or services offered by the organization
are regularly priced higher than competitors, but through promotions, advertisements, and or
coupons, lower prices are offered on key items. The lower promotional prices are targeted to
bring customers to the organization where the customer is offered the promotional product as
well as the regular higher priced products.[3]

Premium Decoy pricing

Method of pricing where an organisation artificially sets one product price high, in order to boost
sales of a lower priced product.

Marginal-cost pricing

In business, the practice of setting the price of a product to equal the extra cost of producing an
extra unit of output. By this policy, a producer charges, for each product unit sold, only the
addition to total cost resulting from materials and direct labor. Businesses often set prices close
to marginal cost during periods of poor sales. If, for example, an item has a marginal cost of
$1.00 and a normal selling price is $2.00, the firm selling the item might wish to lower the price
to $1.10 if demand has waned. The business would choose this approach because the incremental
profit of 10 cents from the transaction is better than no sale at all.

Value Based pricing

Pricing a product based on the perceived value and not on any other factor. pricing based on the
demand for a specific product would have a likely change in the market place.

PART C

1. Explain the new product development

The process
1. Idea Generation is often called the "fuzzy front end" of the NPD process
o Ideas for new products can be obtained from basic research using a SWOT
analysis (Strengths, Weaknesses, Opportunities & Threats), Market and consumer
trends, company's R&D department, competitors, focus groups, employees,
salespeople, corporate spies, trade shows, or Ethnographic discovery methods
(searching for user patterns and habits) may also be used to get an insight into
new product lines or product features.
o Lots of ideas are being generated about the new product. Out of these ideas many
ideas are being implemented. The ideas use to generate in many forms and their
generating places are also various. Many reasons are responsible for generation of
an idea.
o Idea Generation or Brainstorming of new product, service, or store concepts - idea
generation techniques can begin when you have done your OPPORTUNITY
ANALYSIS to support your ideas in the Idea Screening Phase (shown in the
next development step).
2. Idea Screening
o The object is to eliminate unsound concepts prior to devoting resources to them.
o The screeners should ask several questions:
 Will the customer in the target market benefit from the product?
 What is the size and growth forecasts of the market segment/target
market?
 What is the current or expected competitive pressure for the product idea?
 What are the industry sales and market trends the product idea is based
on?
 Is it technically feasible to manufacture the product?
 Will the product be profitable when manufactured and delivered to the
customer at the target price?
3. Concept Development and Testing
o Develop the marketing and engineering details
 Investigate intellectual property issues and search patent data bases
 Who is the target market and who is the decision maker in the purchasing
process?
 What product features must the product incorporate?
 What benefits will the product provide?
 How will consumers react to the product?
 How will the product be produced most cost effectively?
 Prove feasibility through virtual computer aided rendering, and rapid
prototyping
 What will it cost to produce it?
o Testing the Concept by asking a sample of prospective customers what they think
of the idea. Usually via Choice Modelling.
4. Business Analysis
o Estimate likely selling price based upon competition and customer feedback
o Estimate sales volume based upon size of market and such tools as the Fourt-
Woodlock equation
o Estimate profitability and break-even point
5. Beta Testing and Market Testing
o Produce a physical prototype or mock-up
o Test the product (and its packaging) in typical usage situations
o Conduct focus group customer interviews or introduce at trade show
o Make adjustments where necessary
o Produce an initial run of the product and sell it in a test market area to determine
customer acceptance
6. Technical Implementation
 oNew program initiation
oFinalize Quality management system
oResource estimation
oRequirement publication
oPublish technical communications such as data sheets
oEngineering operations planning
oDepartment scheduling
oSupplier collaboration
oLogistics plan
oResource plan publication
oProgram review and monitoring
oContingencies - what-if planning
7. Commercialization (often considered post-NPD)
o Launch the product
o Produce and place advertisements and other promotions
o Fill the distribution pipeline with product
o Critical path analysis is most useful at this stage
8. New Product Pricing
o Impact of new product on the entire product portfolio
o Value Analysis (internal & external)
o Competition and alternative competitive technologies
o Differing value segments (price, value, and need)
o Product Costs (fixed & variable)
o Forecast of unit volumes, revenue, and profit

These steps may be iterated as needed. Some steps may be eliminated. To reduce the time that
the NPD process takes, many companies are completing several steps at the same time (referred
to as concurrent engineering or time to market). Most industry leaders see new product
development as a proactive process where resources are allocated to identify market changes and
seize upon new product opportunities before they occur (in contrast to a reactive strategy in
which nothing is done until problems occur or the competitor introduces an innovation). Many
industry leaders see new product development as an ongoing process (referred to as continuous
development) in which the entire organization is always looking for opportunities.

For the more innovative products indicated on the diagram above, great amounts of uncertainty
and change may exist, which makes it difficult or impossible to plan the complete project before
starting it. In this case, a more flexible approach may be advisable.

Because the NPD process typically requires both engineering and marketing expertise, cross-
functional teams are a common way of organizing projects. The team is responsible for all
aspects of the project, from initial idea generation to final commercialization, and they usually
report to senior management (often to a vice president or Program Manager). In those industries
where products are technically complex, development research is typically expensive, and
product life cycles are relatively short, strategic alliances among several organizations helps to
spread the costs, provide access to a wider skill set, and speeds the overall process.

Also, notice that because engineering and marketing expertise are usually both critical to the
process, choosing an appropriate blend of the two is important. Observe (for example, by looking
at the See also or References sections below) that this article is slanted more toward the
marketing side. For more of an engineering slant, see the Ulrich and Eppinger, Ullman
references below.[1][2]

People respond to new products in different ways. The adoption of a new technology can be
analyzed using a variety of diffusion theories such as the Diffusion of innovations theory.
A new product pricing process is important to reduce risk and increase confidence in the pricing
and marketing decisions to be made. Bernstein and Macias describe an integrated process that
breaks down the complex task of new product pricing into manageable elements.[3]

The Path to Developing Successful New Products[4] points out three key processes that can
play critical role in product development: Talk to the customer, Nurture a project culture,and
Keep it focused.
2. Explain Business Strategy vs. Product Strategy

In keeping with recent theme of product planning, I'd like to focus in this article on an important
distinction and source of frustration in many companies, and that has to do with the differences
between business strategy and product strategy.

Many companies confuse or blur the two, and the result is easy to spot. The senior executives
want to focus on the business strategy, but they find they are forced to make decisions at a level
far below where they're comfortable or usually even interested, such as which specific products,
projects and even features to invest in, and what the interdependencies are between these features
and projects, and often what is on the actual page and how to resolve conflicts.

And on the other side, the product managers feel like they don't understand the reasons behind
decisions that directly impact their products, they feel like the strategy is guard-railing every few
months, and they don't feel empowered to do their jobs.

Very often I'll attend a product planning session with senior executives and they're being
presented with lots of detailed product plans but without the business context. When I ask where
the business strategy is, I'll often get a blank look. The team wants to make more money so these
are the features they want to add, or so their reasoning goes.

Business strategy is about identifying your business objectives and deciding where to invest to
best achieve those objectives. For example, moving from a direct sales model (your own sales
force selling directly to customers) to an online sales model (your customers buy from your site)
is a business strategy. Deciding whether to charge for your services with subscriptions or
transactions fees or whether you have an advertising-based revenue model is a business strategy.
Deciding to move into an adjacent market is a business strategy.

Now, clearly there are some big product implications to each of these business strategies. But
they are not one in the same. There are lots of ways to sell online, lots of ways to monetize value,
and lots of ways to develop or acquire and integrate an adjacent offering. The product strategy
speaks to how you hope to deliver on the business strategy.

Moreover, while the business may believe something is a great business opportunity, you don't
yet know if your company can successfully deliver on this opportunity. Maybe it will cost too
much to build. Maybe customers won't value it enough to pay for it. Maybe it'll be too
complicated for users to deal with. This is where product strategy and especially product
discovery come into play.

The business maintains a portfolio of investments, and the business can and should adjust that
portfolio mix as businesses and markets develop.

Take as an example Amazon. They've got a portfolio of investments including their core e-
commerce offerings by category, they've got third-party selling, they've got an infrastructure
technology (cloud computing) business, and they've even got their own growing consumer
electronics business (love that Kindle 2). I especially like Amazon as an example because they
illustrate so many points of good business strategies (and good product strategies).
Amazon may have made their business in selling hardcopy books and they've been a great
innovator there, but instead of spending all their time trying to protect that business, they've also
got an investment that could one day revolutionize that entire business. To Amazon's credit, they
realize that if they don't pursue this someone else probably will. Similarly, they have worked
hard to create innovative technologies to allow them to provide a differentiated e-commerce
customer experience, yet they also have been leaders in making that technology available to
others (Amazon Web Services) because it's possible that cloud computing business will one day
be even
larger than what they can ever do themselves as an online retailer.

That's a business strategy and you can see their portfolio planning. Now each of these businesses
has one or more product strategies. As an Amazon user you can see the evolution of the e-
commerce retailing business. You can also see the evolution of the Amazon Web Services
product line; every few months another piece of the puzzle is launched. You can see the
evolution of the electronic reader and the supporting technologies.

Think of it this way. The business strategy and business portfolio planning provides a budget and
a set of business metrics. The product organization then lives within that budget to pursue as
aggressively as possible the best ways to hit those business metrics.

Some product strategies will prove more successful than others, and this will impact the business
portfolio planning. And not every business of course will resonate with customers, so a big part
of business strategy is knowing when to continue to invest and knowing when to cut your losses
so that you can invest elsewhere.

Two key techniques to help with these investment decisions are Opportunity
Assessments (see http://www.svpg.com/blog/files/assessing_product_opportunities.html) and
Product Discovery (see http://www.svpg.com/blog/files/product-discovery.html). What's most
important however is to make sure you're asking the right questions and making the hard
decisions (see http://www.svpg.com/blog/files/seven-deadly-sins-of-product-planning.html).

So business owners and senior executives are responsible for the business strategy and the
business portfolio planning, and the product organization (especially the directors of product
management) are responsible for the product strategy and the product portfolio planning. Keep
these two concepts straight and I think you'll find that you will have more clarity and
understanding in terms of objectives and responsibilities, as well as better managed business and
product portfolios.

UNIT – IV
Managing direct and on-line marketing – the growth and benefits of direct marketing –
indirect marketing – major channel for direct marketing – on-line marketing –conducting on-line
marketing – Challenges of on-line marketing.

PAT A
1. Define online Marketing
In its simplest form, the term online marketing refers to using the power of
Internet advertising to generate a response from your audience. Also known as
Internet marketing or web marketing, online marketing is used by companies
selling goods and services directly to consumers as well as those who operate on a
business-to-business model.
 2. _____________also known as digital marketing, web marketing, online marketing,
search marketing or e-marketing
 Internet marketing

PART B

1. Advantages and Limitations of Internet marketing

Advantages
Internet marketing is inexpensive when examining the ratio of cost to the reach of the
target audience. Companies can reach a wide audience for a small fraction of traditional
advertising budgets. The nature of the medium allows consumers to research and to
purchase products and services conveniently. Therefore, businesses have the advantage of
appealing to consumers in a medium that can bring results quickly. The strategy and
overall effectiveness of marketing campaigns depend on business goals and cost-volume-
profit (CVP) analysis.
Internet marketers also have the advantage of measuring statistics easily and
inexpensively; almost all aspects of an Internet marketing campaign can be traced,
measured, and tested. The advertisers can use a variety of methods, such as pay per
impression, pay per click, pay per play, and pay per action. Therefore, marketers can
determine which messages or offerings are more appealing to the audience. The results of
campaigns can be measured and tracked immediately because online marketing initiatives
usually require users to click on an advertisement, to visit a website, and to perform a
targeted action.
Limitations
However, from the buyer's perspective, the inability of shoppers to touch, to smell, to
taste, and "to try on" tangible goods before making an online purchase can be limiting.
However, there is an industry standard for e-commerce vendors to reassure customers by
having liberal return policies as well as providing in-store pick-up services

2. Benefits of Online marketing

Benefits to Consumers:
(1) Convenient— customers can shop 24 hours a day from anywhere without going to the
store physically.
(2) Interactive & Immediate— consumers can interact with the seller's site to find the
information, products,
or services they desire, then order or download them on the spot.
Benefits to Marketers:
(1) Customer Relationship Building— companies can interact with customers to learn
more about their
needs and to build customer databases.
(2) Reduce Costs & Increase Efficiency— avoid the expense of maintaining a physical
store, costs of rent,
insurance, and utilities. Digital catalogs cost less to produce than printing and mailing
paper catalogs.
(3) Greater Flexibility— unlike a paper catalog whose products and prices are fixed until
the next printing,
an online catalog can be adjusted daily or even hourly, adapting product availability,
prices, and
promotions to match changing market conditions.
 (4) Access to Global Markets— The Internet is a global medium, which allows buyers
and sellers to click
from one country to another in seconds.
Four Ways to Conduct Online Marketing:
(1) Creating an Electronic Storefront— companies can buy space on a commercial online
service or it can
open its own Web site. These sites are designed to engage consumers in an interaction
that will move
them closer to a purchase or other marketing outcome.
(2) Placing Ads Online— companies can place online ads in three ways:
(a) classified ads in special sections of major commercial online services
(b) ads in certain Internet newsgroups set up for commercial purposes
(c) buy online ads that pop up while people are surfing the web. Such ads include banner
ads, pop-up
windows, "tickers" (banners moving across screen), and "road-blocks" (full-screen ads
that users
must go through to get to other screens they wish to view)
(3) Participating in Internet Forums, Newsgroups, or Web Communities— companies
may participate in or
sponsor Internet forums, newsgroups, and bulletin boards that appeal to specific special
interest groups
(4) Use Online E-mail or Webcasting— companies can send out customer newsletters,
special product or
promotion offers based on customer buying histories. Webcasting or "push"
programming delivers
information of interest to consumers' desktops

PART C
1. Explain the Channels of marketing
 Direct mail
 The most common form of direct marketing is direct mail sometimes called junk mail,
used by advertisers who send paper mail to all postal customers in an area or to all
customers on a list.
 Junkmail
 Any low-budget medium that can be used to deliver a communication to a customer can
be employed in direct marketing. Probably the most commonly used medium for direct
marketing is mail, in which marketing communications are sent to customers using the
postal service. The term direct mail is used in the direct marketing industry to refer to
communication deliveries by the Post Office, which may also be referred to as "junk
mail" or "admail" and may involve bulk mail.
 Direct mail includes advertising circulars, catalogs, free trial CDs, pre-approved credit
card applications, and other unsolicited merchandising invitations delivered by mail or to
homes and businesses, or delivered to consumers' mailboxes by delivery services other
than the Post Office. Bulk mailings are a particularly popular method of promotion for
businesses operating in the financial services, home computer, and travel and tourism
industries.
 In many developed countries, direct mail represents such a significant amount of the total
volume of mail that special rate classes have been established. In the United States and
United Kingdom, for example, there are bulk mail rates that enable marketers to send
mail at rates that are substantially lower than regular first-class rates. In order to qualify
for these rates, marketers must format and sort the mail in particular ways – which
reduces the handling (and therefore costs) required by the postal service.
 Advertisers often refine direct mail practices into targeted mailing, in which mail is sent
out following database analysis to select recipients considered most likely to respond
 positively. For example a person who has demonstrated an interest in golf may receive
direct mail for golf related products or perhaps for goods and services that are appropriate
for golfers. This use of database analysis is a type of database marketing. The United
States Postal Service calls this form of mail "advertising mail" (admail for short).
 Telemarketing
 Another common form of direct marketing is telemarketing, in which marketers contact
consumers by phone. The unpopularity of cold call telemarketing (in which the consumer
does not expect or invite the sales call) has led some US states and the US federal
government to create "no-call lists" and legislation including heavy fines. This process
may be outsourced to specialist call centres.
 In the US, a national do-not-call list went into effect on October 1, 2003. Under the law,
it is illegal for telemarketers to call anyone who has registered themselves on the list.
After the list had operated for one year, over 62 million people had signed up.[8] The
telemarketing industry opposed the creation of the list, but most telemarketers have
complied with the law and refrained from calling people who are on the list. (The list
does not apply to non-profit organizations.)
 Canada has passed legislation to create a similar Do Not Call List. In other countries it is
voluntary, such as the New Zealand Name Removal Service.
 Email Marketing
 Email Marketing is a third type of direct marketing. A major concern is spam. As a result
of the proliferation of mass spamming, ISPs and email service providers have developed
increasingly effective E-Mail Filtering programs. These filters can interfere with the
delivery of email marketing campaigns, even if the person has subscribed to receive
them,[9] as legitimate email marketing can possess the same hallmarks as spam. There are
a range of e-mail service providers that provide services for legitimate opt-in emailers to
avoid being classified as spam.
 Door-to-Door Leaflet Marketing
 Leaflet distribution services are used extensively by the fast food industries, and many
other business focussing on a local catchment. Business to consumer business model,
similar to direct mail marketing, this method is targeted purely by area, and costs a
fraction of the amount of a mailshot due to not having to purchase stamps, envelopes or
having to buy address lists and the names of home occupants.
 Broadcast faxing
 A fourth type of direct marketing, broadcast faxing, is now less common than the other
forms.[citation needed] This is partly due to laws in the United States and elsewhere which
make it illegal.[citation needed]
 Voicemail Marketing
 A fifth type of direct marketing has emerged out of the market prevalence of personal
voice mailboxes, and business voicemail systems. Due to the ubiquity of email
marketing, and the expense of direct mail and telemarketing, voicemail marketing
presented a cost effective means by which to reach people directly, by voice.
 Abuse of consumer marketing applications of voicemail marketing resulted in an
abundance of "voice-spam", and prompted many jurisdictions to pass laws regulating
consumer voicemail marketing.
 More recently, businesses have utilized guided voicemail (an application where pre-
recorded voicemails are guided by live callers) to accomplish personalized business-to-
business marketing formerly reserved for telemarketing. Because guided voicemail is
used to contact only businesses, it is exempt from Do Not Call regulations in place for
other forms of voicemail marketing.
 Another variation is voicemail courier (an application where pre-recorded voice messages
are couriered into voicemail by live callers) to accomplish personalized voicemail
marketing. Voicemail courier is used for both business-to-business marketing and also
business-to-consumer applications.
  Couponing
 Couponing is used in print media to elicit a response from the reader. An example is a
coupon which the reader cuts out and presents to a super-store check-out counter to avail
of a discount. Coupons in newspapers and magazines cannot be considered direct
marketing, since the marketer incurs the cost of supporting a third-party medium (the
newspaper or magazine); direct marketing aims to circumvent that balance, paring the
costs down to solely delivering their unsolicited sales message to the consumer, without
supporting the newspaper that the consumer seeks and welcomes.
 Direct-response television marketing
 Direct marketing on TV (commonly referred to as DRTV) has two basic forms: long
form (usually half-hour or hour-long segments that explain a product in detail and are
commonly referred to as infomercials) and short form, which refers to typical 30-second
or 60-second commercials that ask viewers for an immediate response (typically to call a
phone number on screen or go to a Web site).
 TV-response marketing—i.e. infomercials—can be considered a form of direct
marketing, since responses are in the form of calls to telephone numbers given on-air.
This both allows marketers to reasonably conclude that the calls are due to a particular
campaign, and allows the marketers to obtain customers' phone numbers as targets for
telemarketing. Under the Federal Do-Not-Call List rules in the US, if the caller buys
anything, the marketer would be exempt from Do-Not-Call List restrictions for a period
of time due to having a prior business relationship with the caller. Firms such as QVC,
Thane Direct, and Interwood Marketing Group then cross-sell and up-sell to these
respondents.
 One of the most famous DRTV commercials was for Ginsu Knives by Ginsu Products,
Inc. of RI. Several aspects of ad, such as its use of adding items to the offer and the
guarantee of satisfaction were much copied and came to be considered part of the formula
for success with short-form direct-response TV ads (DRTV)
 Direct selling
 Direct selling is the sale of products by face-to-face contact with the customer, either by
having salespeople approach potential customers in person, or through indirect means
such as Tupperware parties.
 Popularity of Direct Advertising
 A report[10] produced by the Direct Marketing Association found that 57% of the
campaigns studied were employing integrated strategies. Of those, almost half (47%)
launched with a direct mail campaign, typically followed by e-mail and then
telemarketing.

UNIT – V
Case Studies (based on the above units).
BOOKS FOR REFERENCE:
1. Marketing Management : Philip Kotler (Millennium edition)
2. International Marketing : Sak Onkvist & John J. Shaw
3. Principles of International Marketing : Philip Kotler & Gray Armstrong
4. Global Marketing Management : Keegan
5. International Marketing Management : Varshney and Bhattac