DRIVE-Fall 2014

PROGRAM-MBADS/ MBAFLEX/ MBAHCSN3/ MBAN2/ PGDBAN2

SEMESTER-2
SUBJECT CODE & NAME-MB0046- Marketing Management
BK ID-B1629
CREDIT & MARKS-4 Credits, 60 marks

Q1. Explain the classification of market based on nature of Competition and area.

Answer- Market may be defined as a set of consumers, potential consumers, past consumers, sellers, resellers, and
intermediaries who are involved in either the process of exchange or the process of getting involved in an
exchange process. Hence, marketplace is a physical place where buyers and sellers meet for an exchange, whereas
market space is the virtual world where buyers and sellers meet through the Internet.

 Classification:

Markets based on area – When area is used as a basis of market classification, the markets can be categorised into
the following types:

(a) Local markets – This market includes the client or customers who purchase the product in the region or area
where it is brought forth. Marketing managers must know the target customers, their location, and the distance
they are willing to travel to purchase the product.

The local market includes customers located within the region where the products or services are available. For
example, vegetable market, hairdressers, tailors, etc.

(b) National markets – This market encompasses domestic marketplace for goods and services functioning within
the borders and is governed by the regulations of a particular country. The health of national markets can be a
deciding factor for business success. For example, spice market located in Kerala, rice market located in Kolkata,
etc.

(c) International markets – This market is for products and services that are bought by consumers residing
outside the national boundaries of the country to which the manufacturing company belongs. For example, for
companies like Tata Motors, Reliance, Wipro, etc., all countries except India constitute international market.

 Markets based on the nature of competition – The most important form of market classification is based on
the nature of competition, i.e., the buyer-seller interaction. On this basis, the markets can be classified as:
(a) Perfect competition – This is a kind of market structure which reflects a perfect degree of competition and
where a single price prevails. The concept of perfect competition was propounded by Dr. Alfred Marshall. It is a
free-market situation in which the following conditions are fulfilled:

(i) Buyers and sellers are numerous but a few have a degree of individual control over the prices;

(ii) Buyers and sellers attempt to maximise their profit (income);

(iii) Buyers and sellers are free to get in or leave the market;

(iv) Buyers and sellers are endowed with the information regarding availability, price, and quality of goods being
traded; and

(v) Goods of a specific category are homogeneous; hence they are interchangeable for one another. This market
structure is also called perfect market or pure competition.

(b) Imperfect market – In a market category where individual firms exercise control over the price, there are fewer
buyers and sellers, and the firms do not sell identical products.

Q2. A brand is a composite set of beliefs and associations in the mind of consumers. In brand development, as a
part of branding strategy decision, the brand manager can decide to create new brand elements for the new
products, apply some of the existing brand elements to the new product, or use a combination of existing and new
brand elements to the existing and new products. Explain the different branding strategies used by the companies
for their range of products.
(Definition of Brand, Advantages of Brand, Explanation of different branding strategies adopted by
companies)2,2,6

Answer.

Definition of Brand

Brand is name linked to one or more items in the product line that is employed to recognise the source or character of
item(s).
Example: prudential help in recognising the source or character of an item of a product line.

Advantages of Brand
The following are the advantages of branding.
(a) A brand promises and delivers a high level of assurance to consumers.
(b) A brand serves as an assurance to the customer about the product performance. A brand helps customers to identify
the product on the shelf and helps in making an informed choice.
(c) A brand as a symbol of status and social significance gives you psychological satisfaction.
(d) The brand speaks about the product's attributes and how they perform, about the brand name and what it stands for
and about the company associated with a brand. Hence, for a consumer, the brand aids decision making by building trust,
familiarity, and assurance of a certain standard.

The brand also provides benefits to the company. It develops a loyal customer base e.g., brands like Starbucks coffee,
Harley, Lux, Kellogg's, and Horlicks have a strong loyal consumer base.
Companies use different branding strategies for their range of products. They can be categorised into the following three
types.
1. Individual branding – In this case, the company adopts a separate brand name for each product it offers. For
example, Hindustan Lever markets its range of toothpastes by different brand names such as Close-up, Pepsodent,
Pepsodent-G, and New Pepsodent. Likewise, it offers bathing soaps in different brand names such as Liril, Rexona, Lux,
Lifebouy Plus, and Lifebouy Gold. The major advantage of individual branding is that if one brand loses its market, the
others may offset sales in the particular product category.
2. Family branding – This is another type of branding strategy followed by some companies which have developed their
family names. For example, Godrej is a family name used for all its products. Likewise, Ponds uses its name for all
products that include shampoos, talcum powders, and creams. The major advantage of using family name for products is
that it minimises advertising and other promotional costs.
3. Corporate umbrella branding – Companies such as Tata, Coke, and Pepsi are not only using individual brand name
for the range of products they market but also use a corporate umbrella cover for their brands. It is
the corporate logo, symbol, or trademark which provides protection to the individual brand.
Q3. Describe the international market entry strategies in brief. (Joint ventures, Strategic alliances, Direct
investment, Contract manufacturing, Franchising) 2, 2, 2, 2, 2

Answer:
International Market Entry Strategies
There are two methods to entry into foreign markets. They are indirect exporting and direct exporting. In the first
method, the manufacturers take the help of merchant exporters to get products exported to foreign markets.
In direct exporting, the manufacturers decide to export themselves. Thus, the manufacturers have to decide, whether they
will go directly for exports or take the help of merchant exporters who are very often recognised as export houses,
trading houses, etc. Some government trading organisations like State Trading Corporation, MMTC, and National Small
Industries Corporations also act as trading houses.

There are two specific reasons for why a manufacturer may resort to direct exporting:
1. Success in foreign markets can boost the manufacturer’s image in the domestic market.
2. There are a number of benefits available to exporters as, for example, exemption from income tax for export profits.

Joint venture

A joint venture is a strategic alliance where two or more parties, usually businesses, form a partnership to share markets,
intellectual property, assets, knowledge, and profits. A joint venture differs from a merger, in the sense that there is no
transfer of ownership in the deal.

For example, Best Price Modern Wholesale is a joint venture between Wal- Mart and Bharti Enterprises. American retail
giant Wal-Mart chose this route to enter the Indian market.

Strategic alliance
A strategic alliance is formed when two or more businesses join together for a set period of time. The companies,
generally, are not in direct competition, but have similar products or services that are directed towards the same target
group. For example, Tata Motors and Fiat entered into a strategic alliance to cooperate in areas like research and
development, and marketing.

In the new economy, strategic alliances enable business to gain competitive advantage through access to a partner's
resources, including markets, technologies, capital, and people. Choosing a strategic alliance as the entry mode will
overcome some of those problems like established competition, hostile government regulations, and operating
complexity. In the process, it will help reduce the entry cost.

Direct investment
Through Foreign Direct Investment a firm invests directly in facilities to produce and/or market a product in a foreign
country. For example, in the early 1980’s, Honda, a Japanese automobile company, built an assembly plant in Ohio and
began to produce cars for the North American market.
These cars were substitutes for imports from Japan. Once a firm undertakes
FDI, it becomes a Multinational Enterprise (The meaning of Multinational being “more than one country”).
Contract manufacturing
Contract manufacturing is a process that establishes a working agreement between two companies. As part of the
agreement, one company will custom produce parts or other materials on behalf of their client. In most cases, the
manufacturer will also handle the ordering and shipment processes for the client. As a result, the client does not have to
maintain manufacturing facilities, purchase raw materials, or hire labour in order to produce the finished goods.
Companies like D-Link, TVS Electronics, and WeP Peripherals offer contract manufacturing services.

Franchising
Franchising is basically a specialised form of licensing in which the franchiser not only sells intangible property
(normally a trademark) to the franchisee, but also insists the franchisee to abide by strict rules with respect to how
business is done. The franchiser will also often assist the franchisee to run the business on an ongoing basis.
While licensing works well for manufacturers, franchising is often suited to the global expansion efforts of service and
retailing. McDonald’s, Tricon Global Restaurants (the parent of Pizza Hut, Kentucky Fried Chicken, and Taco Bell), and
Hilton Hotels have all used franchising to build a presence in foreign markets.

Q4. Personal selling focuses in on ‘personal’ or ‘one to one’ selling. It involves an individual salesman or a sales
team establishing and building a profitable relationship with customers over a period of time through a series of
steps. Explain the steps in the personal selling process which helps in the successful sales.

(Definition of Personal Selling, Explanation of steps in the Personal selling process) 2, 8

Answer.

Definition of Personal Selling

Personal selling is an activity which involves a face-to-face interaction with the customers wherein there is a quick
response and personal confrontation. This allows for more specific adjustment of the message. Here, the communication
message can be adjusted as per the customer’s specific needs or wants. It offers you the opportunity to develop long-term
familiarity and relationship.

Steps in the Personal selling process

Process or steps in personal selling include the following:

1. Prospecting – This is the beginning of sales process, which covers searching for customers with potential demand.
2. Targeting – This is the process of deciding how to allocate sales time among prospects and existing customers.
3. Pre-approach – In this step, the salesperson plans methods to approach the customers and to collect company and
customer information.
4. Communication and approach – This is the process of communicating and contacting the customers. It involves
developing a system to greet the customers and meet them for the sale. Homer B. Smith has recommended different
approaches. The following are some proven techniques:
 Ask questions – Questions should preferably be relevant to sales presentation.
 Use a referral – Someone favourably known to the potential customer.
 Offer a benefit or service – This can be quite effective if relevant to customer’s need.
 Complement the prospect – It is a good way to establish rapport if there is anything that the prospect has
achieved.
5. Presentation and demonstration – In this stage, the salesperson gives a sales presentation and if required
demonstrates features, advantages, and benefits and value propositions of the product.
6. Customer objection handling – Customers always pose objections during presentations or when asked to order.
Psychological resistance and logical resistance are the two types of resistance seen at this stage. The psychological
resistance includes resistance to interference, preference for established brands, apathy, reluctance to give up something,
etc. The logical resistance includes objections to price, delivery schedule, or certain companies.
7. Closing – Some salespeople do not get to this stage or do not do it well. The salespeople try to close sales after
handling the customer objections.
8. Follow up and maintenance – The salesman does follow up and retains the relationship with customers to obtain
repeated orders and referrals and ensures customer satisfaction and repeated business. In the case of consumer durables,
salespeople take care of maintenance.

Q5. Describe the stages in consumer decision making process.

(Explanation of the stages in consumer decision making process) 10

Answer.

Stages in consumer decision making process

Consumer buying decision process is explained through a number of stages and is influenced by one’s psychological
framework comprising the individual’s personality, learning process, levels of motivation, perception towards products
and brands, and formation of positive attitude towards the brand. Figure below depicts the process of consumer decision-
making in detail.
1 Problem recognition
A buying process starts when a consumer recognises that there is a substantial discrepancy between his/her current state
of satisfaction and expectations in a consumption situation.

2 Information search
After need arousal, the behaviour of the consumer leads towards collection
of available information about various stimuli. In this case, information about
products and services are gathered from various sources for further
processing and decision-making.

3 Alternative evaluation
Once interest in a product(s) is aroused, a consumer enters the subsequent stage of evaluation of alternatives. Evaluation
leads to formation of buying intention that can be to either purchase or reject the product/brand. The final purchase will
however depend on the strength of the positive-intention, which is the intention to buy.

4 Purchase decision
Finally the consumer arrives at a purchase decision. Purchase decisions can be any one of the three - no buying, buying
later, and buy now. No buying takes the consumers to the problem recognition stage as their consumption problem is not
solved and they may again get involved in the process as we have explained.

5 Post-purchase behaviour
Post-purchase behaviour refers to the behaviour of consumers after their commitment to a product has been made. It
originates out of consumers’ experience regarding the use of the product and is indicated in terms of satisfaction. This
behaviour is reflected in repeated purchases or abstinence from further purchase. A satisfied product-use experience
leads to repeated purchase, referrals from satisfied customers to new customers, higher usage rate, and also brand
advocacy.

Q6. Do you think the argument of some theorists that the traditional Ps are not enough for services marketing?
Give suitable examples to prove your point.

(Define Service Marketing, Explanation of 4p’s, Explanation of Additional 3 p’s) 2, 4, 4

Answer.

Define Service Marketing

Service sector is one of the key contributing factors for the growth of our economy and civilisation. Though marketing
literature is dominated by manufacturing and product-centric business practices, service marketing constitutes a strategic
area, which has propelled growth and success for many organisations. Pure services and products are hypothetical
extremes as every product today is associated with some level of service.

Marketing Mix – The Traditional 4PS

These four elements are adjusted until the right combination that serves the needs of the customers, while generating
optimum income for the company is found. Figure depicts the constituents of a marketing mix namely product, price,
place, promotion (the traditional 4Ps), people, process, and physical evidence (the additional 3Ps).
Let us now study the traditional 4Ps of marketing in detail.
Product
In marketing mix, the product or service is the most important element. Customers acquire products for a singular reason
that they are perceived as the means to satisfy their needs and wants.
Price
The second element is the price, which impacts the volume of sales. It is a value that will purchase a specific quantity,
weight, or other measure of a product.
Place
This is another key marketing mix tool, which encompasses the various activities the company attempts to make the
product available to the target customers.
Promotion
This includes the methods to communicate the features and benefits of the products or services to its target customers.
Some common methods include advertising, sales promotion, direct selling, public relations, and direct marketing. For
example, Toyota promotes its brands by advertising, sales promotions, public relations, sponsorships, etc.

The Modern Components of the Mix – The Additional 3PS

The traditional 4Ps were not enough to market services. Considering the increasing role of services in the economy and
customer-orientation, additional 3Ps were added to the marketing mix. These 3Ps are people, process, and physical
evidence. They play a greater role in the marketing of services than in the marketing of products.
People
This is a very important element of the modern marketing mix or the service mix.
Process
This refers to the way in which a service is delivered to the end customer. For example, when you go to McDonalds
drive-through, you are first greeted by an attendant who asks you for your order.
Physical evidence
Physical evidence is the tangible part of a service. Service customers experience a greater perceived risk as they cannot
rate a particular service until it is consumed. Therefore, service providers should try to attach an element of tangibility to
their service offering.