MARKETING MANAGEMENT

For

MBA-SEM II-Bharathiar University, CBE

BY

PROF. NARAYAN PRASAD

BE ( MECH. ), PGD-MM, MBA. INTERNATIONAL INSTITUTE OF BUSINESS STUDIES, BANGALORE.

E-Mail : vnp1410@gmail.com CELL PHONE : 9481778351

Unit - I
Marketing Concepts & Tasks. Defining & delivering customer value & satisfaction. Value Chain : Delivery Network, Marketing Environment, Adapting Marketing to new liberalised economy. Digitalisation, Customisation, Changing Marketing Practices, e-business : settingup web sites. Marketing Information System, Strategic
Marketing Planning & Organisation.
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Reference Books
SL. No.

NAME

AUTHOR

1 Marketing Management

Kotler, Keller, 13th Edition-A South Asian Perspective Koshy & Jha

( Pearson Education-Prentice Hall )

2 Marketing Management
( Tata McGraw Hill Publication )

Rajan Saxena Arun Kumar & N.Meenakshi

Biplab .S. Bose

3 Marketing Management ( Vikas Publications )

4 Marketing Management

Philip Kotler

FUNDAMENTALS OF

MARKETING
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Definition of Market
Market is a geographical region or a place which facilitates interaction & exchange between Buyers & Sellers. It can be an actual or conceptual place, where in forces of demand & supply operate.

Types of Markets
On Geographic or Area basis 1. Local market 2. National market 3. International market or Global market On Economic basis 1. Perfect market 2. Imperfect market On the basis of Business 1. Wholesale market 2.Retail market On the basis of Customer type 1. Consumer market 2. Business market or Industrial market

What is Marketing ?

Definition of Marketing
Traditional Definition : Marketing is a

management process that identifies, anticipates & satisfies customer needs profitably, in order to achieve the organizational goals & objectives.
Modern Definition : Marketing is an organizational function and a set of processes for creating, communicating & delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.
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Needs, Wants & Demands

Need : Something you have to have

Want : Something you would like to have

Demand : Want accompanied by buyers ability to buy

Needs, Wants & Demands Needs: are the basic human

requirements, such as : food, air, water, clothing, shelter, etc.
People also have strong needs for recreation, education & entertainment. A Human need is a state of felt deprivation of some basic necessity or satisfaction.

Marketers cannot create basic Needs, but constantly try to create specific Wants

Wants
Wants: Needs become Wants when they are directed to specific objects that may satisfy the needs.
Wants are shaped by ones Society, Culture & Individual Personality. Wants are desires for specific satisfiers of these deeper needs.

Eg: An American Needs food, but Wants burger. An Indian also Needs food but Wants Rice. So basic human Needs are the same as outlined above, but human Wants keep on changing & can be unlimited.

Demands
Demands: are wants for specific products, backed by an ability to pay & willingness to buy them.
Companies must not only measure how many people want the product, but how many would actually be willing & able to buy them.

Customer Needs & Wants are fulfilled through a Marketing offering, which may be products, services, information or experiences or a combination thereof, offered to a market to satisfy a need or want.

The American Marketing Association (AMA) defines Marketing as The process of planning & executing the conception, pricing, promotion and distribution of ideas / goods / services to create exchanges that satisfy individual & organizational goals.
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Marketing starts with identifying customer needs and wants and ends with satisfying them through a coordinated set of activities that also allows a firm to achieve its own goals, profitably. Marketing lays emphasis on providing the right type of products to customers at the right place, at the right price, at the right time and in the right form i.e. Marketing provides Form, Time, Place & Possession Utilities to customers. { The extent
to which a product / service satisfies customer needs / wants is called Utility }. Communication of information about

the product helps customers determine whether the product satisfies their needs.
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The Core Concepts of Marketing

1 3 2

Needs Wants
Demands
4

Value Cost
Satisfaction
6 5

Products

Exchanges Transactions Relationships

Marketing

Markets

Marketers

Marketing Management
Marketing Management is a business discipline which is focused on the practical application of marketingtechniques & the management of a firm's marketing resources & activities.

Functions of Marketing

Importance of Marketing
(A) Importance of marketing to society 1. Delivery of standard of living 2. Provides Employment 3. Decrease in distribution cost 4. Increase in national income (B) Importance of marketing to the Firm 1. Helpful in business planning & decision-making 2. Helpful in increasing profits 3. Helpful in communication between firm & society

THE EVOLUTION OF MARKETING

The stage of barter The stage of money economy The stage of industrial revolution The stage of competition The emergence of marketing

DISTINCT CONCEPTS OF MARKETING The Exchange concept The Production concept The Product concept The Sales concept The Marketing concept

Evolution of Marketing
1. Product Era : 1600 1750 2. Production Era : 1780 1920 3. Sales Era : 1920 - 1955

4. Marketing Era : 1955 - 1985

5. Modern Marketing : Since late 1980s

Marketing Concept :
i. ii. iii. iv. Customer Orientation Long - term Profitability Functional Integration CRM / SCM / BPO / e-C / BM & RE
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Company Orientations Towards the Marketplace

Production Concept
Consumers prefer products that are widely available and inexpensive Consumers favor products that offer the most quality, performance, or innovative features

Product Concept
Selling Concept Marketing Concept

Consumers will buy products only if the company aggressively promotes/sells these products
Focuses on needs/ wants of target markets & delivering value better than competitors

 Short sighted & inward looking approach to marketing that focuses on the needs of the firm instead of defining the firm and its products in terms of the customer' needs and wants. Such self-centered firms fail to see and adjust to the rapid changes in their markets and, despite their previous eminence, falter, fall, and disappear. This concept was discussed in an article (titled 'Marketing Myopia,' in July-August 1960 issue of Harvard Business Review) by Professor of Marketing, Theodore C. Levitt, who suggests that firms get trapped in this bind because they omit to ask the vital question, "What business are we in?"

Marketing Myopia

Difference between Marketing & Selling Marketing

1. Marketing focuses on customer needs 2.Customer enjoys supreme importance

Selling
1.Selling focuses on the needs of the seller 2.Product enjoys supreme importance

3.Integrated approach to achieve long term goals 4.Converting customers needs into products 5.Cavet Vendor (Let the seller beware) 6. Profits through customer satisfaction

3.Fragmented approach to achieve immediate goals 4.Converting customer needs into profits 5.Cavet Emptor (Let the buyer beware) 6.Profits through sales volume

DIFFERENCE BETWEEN SELLING & MARKETING SELLING

Emphasis on product

MARKETING
Emphasis on consumer needs and wants

Company manufactures the product Company first determines customer first and then decides to sell it needs and wants and then decides how to deliver a product to satisfy these wants

Management is sales volume oriented

Planning is short-term oriented in terms of todays products and markets

Management is profit oriented

Planning is long-term oriented in terms of new products, tomorrows products and future products

Stresses needs of a seller Views business as a goods producing process

Emphasis on staying with existing technology and reducing cost

Stresses needs and wants of a buyer Views business as a consumer satisfying process
Emphasis on innovation in every sphere, on providing better value to customers by adopting a superior technology

DIFFERENCE BETWEEN SELLING & MARKETING

SELLING
Different departments work as highly separate watertight compartments Cost determines price

MARKETING
All departments of a business operate in an integrated manner, the sole purpose being generation of consumer satisfaction Consumers determine price, price determines cost Marketing views the customers as the very beginning of a business

Selling views customers as the last link in business

The Marketing Concept holds that the key to achieving organizational goals consists of the company being more effective than its competitors in creating, delivering & communicating customer value to its target markets.
The Marketing Concept rests on four pillars: Target Market, Customer Needs, Integrated Marketing & Protability.
Relationship Marketing aims to build long-term mutually satisfying relations with key parties : customers, suppliers & distributors in order to earn and retain their long-term preference and business.
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Relationship Marketing
Relationship Marketing is an integrated & coordinated effort to identify, maintain & build up a network with individual customers & other parties ( employees & suppliers ) & continuously strengthen the network for the mutual benefits of all the parties concerned. Transactional Marketing is one in which a Company or its employees communicate & offer their products or services to the customers only when they approach the firm. Gaining Customer-Loyalty is not a priority. There is clear lack of personal touch / focus on the customers requirements. Egs: Govt. Services, Public Sector Banks, etc. 28

Relationship Marketing
is a philosophy of doing business that focuses on keeping current customers and improving relationships with them. does not necessarily emphasize acquiring new customers. is usually cheaper for the firm ( keeping a
current customer costs less than attracting a new one ).

the focus is less on attraction & more on retention and enhancement of customer relationships.

Customer Goals of Relationship Marketing

A Loyal Customer is One Who...

Shows Behavioral Commitment
buys

from only one supplier, even though other options exist increasingly buys more and more from a particular supplier provides constructive feedback/suggestions

Exhibits Psychological Commitment

wouldnt

consider terminating the relationship has a positive attitude about the provider says good things about the provider

Underlying Logic of Customer Retention Benefits to the Organization

Customer Satisfaction

Customer Retention & Increased Profits

Quality of Products/Service

Employee Loyalty

Benefits of Relationship Marketing :

( I ) Benefits for the Firm :
1. 2. 3. 4. 5. Customer Loyalty Reduced threat from Competitors Increased revenues from existing customers Positive Word-Of-Mouth Publicity High Employee / Supplier morale

( II ) Benefits for the Customers :

1. Satisfying Service Benefits. 2. Reliable & Personalized Attention 3. Time & Cost Benefits
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The Societal Marketing Concept holds that the organizations task is to determine the needs, wants & interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumers and the societys well-being.
The Societal Marketing concept calls upon marketers to build social and ethical considerations into their marketing practices. They must balance and juggle the often conicting criteria of company prots, consumer want satisfaction and public interest.
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Holistic Marketing
Holistic Marketing is a process of integrating the : value exploration, value creation & value delivery activities, with the purpose of building long-term, mutually satisfying relationships and co-prosperity among key stakeholders.
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Holistic Marketing Dimensions

The Marketing Process

Below is a 5-step model of the Marketing Process:
1. Understand the market-place and customer needs & wants.
2. Design a customer-driven marketing strategy. 3. Construct a marketing program that delivers superior value. 4. Build profitable relationships and create customer delight. 5. Capture value from customers to create profits & customer quality.

In the first four steps, we create value for customers and build customer relationships. In the fifth step, we capture value from customers in return.
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What is a Product ?
Product is anything that can be offered to a market for attention, acquisition, use or consumption, that will satisfy a need. It is considered to be a bundle of benefits or utilities. Products include more than
just tangible goods. Broadly defined, products include physical objects, services, events, persons, places, organizations, ideas or mixes of these entities. Services are a form of product that consists of activities, benefits or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything.
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PRODUCT
Places Goods Services

Ideas

Information

Product
Persons Properties Experiences

Events

Organizations

Classification of Products
PRODUCTS
GOODS
INDUSTRIAL GOODS
1. RAW MATERIALS

SERVICES
Health Care; Education; Hotels; Hospitality; Banking; Legal Services; Travel; Transportation; Beauty & Body Care; Entertainment, Security, Auditing;

CONSUMER GOODS
( Durables & Non-Durables )

1. CONVENIENCE GOODS
Egs: Tea, Chocolates, Soap

Egs: Steel, Wood, Cotton ,etc

2. COMPONENTS Egs: Tyres, Spare Parts, Gear Box, etc
3. CAPITAL GOODS Egs: Machinery, Equipments, etc

2. SHOPPING GOODS
Egs: Furniture, TV, Bike, Jeans

3. SPECIALTY GOODS
Egs: Jewelry, Car, Flat

Recreation; etc
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4. UNSOUGHT GOODS
Egs: Gluco-Meter, Hearing Aid

Product & Service Classifications: Products fall into two classes based on how consumers use them : 1. Consumer Products & 2. Industrial Products
Consumer Products are the products bought by final consumers for personal consumption. They include: (a) Convenience Products: These are the products that customer buys frequently, immediately and with a minimum amount of comparison and buying effort. Eg: Soap, Bread, Milk, Tea/Coffee, Tooth Brush/Paste. (b) Shopping Products: These are the products that customers compare carefully on suitability, quality, price and style. They are less frequently purchased products. Eg : Furniture, TV, Cell Phones, etc.
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(c) Specialty Products: These are products with unique characteristics or brand identification for which buyers will make special purchase effort. For these kind of products, buyers can even travel to great distances & spend a lot of time before purchasing. Egs : Expensive Jewellery, Property, Cars, etc. (d) Unsought Products: These are the products that either the customer does not know or does not think of buying under normal circumstances. These products are bought due to emergency situations. Egs : Medical Aids, Life/Medical /Fire Insurance, etc.
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2. Industrial Products: are those

products which are purchased for further processing for use in conducting business or for Re-Sale. They include: ( i ) Raw Materials & Consumables ( ii ) Components & Parts. ( iii ) Capital Goods : These products
help the buyer in production or operation.
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The Marketing Mix

Marketing Mix refers to the tools available to an organization to gain the reaction it is seeking from its target market in relation to its marketing objectives. Traditionally it is known as the 4 Ps of Marketing, i.e.

1. Product 2. Price 3. Promotion 4. Place or Physical Distribution

NOTE : The success of a firm, depends upon the coordination of these ingredients in such a way as to create a suitable mix to the particular situation in hand.
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Elements of the Marketing Mix

PRODUCT
Design Quality Features PLC Branding Product Line Product Mix Packaging Labelling Warranties

PRICE
Pricing ------- Strategies Discounts Allowances Payment Terms Credit Period

PROMOTION
Advertising Sales Promotion Personal Selling Publicity / PR Direct Marketing

PLACE
[Physical Distribution ]

Channels of Distribution ( Wholesalers & Retailers ) & Logistics of Distribution (Assortments Locations Inventory Transport )
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The Marketing Mix

Blend of the Marketing Mix depends upon : Marketing Objectives Type of Product Target Market Market Structure Rivals Behaviour Global Issues (Culture/Religion, Etc. ) Marketing Position Product Portfolio

Marketing Mix : 4Ps vs

4Cs

From the Sellers view From the Buyers view

4Ps
Product Price Promotion Place

4Cs

Customer Satisfaction Cost to the customer Communication Convenience

Marketing Tasks
1. Marketing Mix 2. Segmentation 3. Targeting ( Target Markets ) 4. Positioning.

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Segmentation, Targeting & Positioning

Market Segmentation
1. Identify segmentation variables and segment the market

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

Market Positioning
5. Identify possible positioning concepts for each target segment

2. Develop profiles of resulting segments

6. Select, develop, and communicate the chosen positioning concept

Defining & Delivering Customer Value & Satisfaction

Customer Value is the ratio of the perceived benefits & costs that the customer has to incur in acquiring a product or a service. Value for Customers includes different types of benefits such as economic, functional & emotional, that they seek / expect from the product or service. Costs include monetary costs, time costs, energy costs & cognitive costs.

Michael Porter

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Michael Porter : is the founder of a nonprofit

organization called the Initiative for a Competitive Inner City and one of the founders of The Monitor Group. His main academic objectives focus on

how a firm or a region can build a competitive advantage & develop a competitive strategy.

Porter's strategic system consists of:

Porter's Five Forces Analysis, Strategic Groups , Value Chain, Generic Strategies, Global Strategy, Porter's clusters of competence for regional economic development & the Diamond model.
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VALUE CHAIN
The VALUE CHAIN, also known as Value Chain Analysis, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating & Sustaining Superior Performance.

He suggested that activities within the organisation add value to the products & services that the organisation produces, and all these activities should be run at optimum level if the organisation is to gain any real competitive advantage. If they are run efficiently the value obtained should exceed the costs of running them.

Porters Generic Value Chain

Primary Value Chain activities are :

Inbound Logistics: the receiving & ware housing of raw materials, and their distribution to manufacturing as they are required. Operations: the processes of transforming inputs into finished products and services. Outbound Logistics: the warehousing and distribution of finished goods. Marketing & Sales: the identification of customer needs and the generation of sales. Service: the support of customers after the products and services are sold to them.

These Primary Activities are supported by a set of Support Activities, such as: The Infrastructure Of The Firm : organizational structure, control systems, company culture, etc. Human Resource Management : employee recruiting, hiring, training, development, and compensation. Technology Development : technologies to support value-creating activities. Procurement : purchasing inputs such as materials, supplies, and equipment.

 It is in these activities that a firm has the opportunity to generate superior value. The firm's margin or profit then depends on its effectiveness in performing these activities efficiently, so that the amount that the customer is willing to pay for the products, exceeds the cost of the activities in the value chain.
A competitive advantage may be achieved by reconfiguring the value chain to provide lower cost or better differentiation.

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MARKETING PLAN

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Marketing Environment

Marketing Environment
The Marketing Environment consists of external forces that directly or indirectly influence an organization acquisition of inputs & creation of outputs. It can be classified into :

1. Micro Environment ( Internal ) & 2. Macro Environment ( External ).

Internal Environment include those factors over which a firm has full control & External Environment are those factors which cannot be directly controlled by an organization.

Factors Affecting Mktg. Environment Micro / Internal Macro / External

Company Employees Market / Customers Suppliers Share-Holders Financers Competitors Media Intermediaries & Public. Demographic Economic Government Political / Legal Cultural Technological & Global Environment

Environmental Scanning
The major components of Environmental Scanning are :
1. External Environmental Scanning 2. Customer Analysis 3. Competitor Analysis 4. Market Analysis 5. Company Analysis

Environmental Scanning
The major components of Environmental Scanning are :
1. External Environmental Scanning 2. Customer Analysis 3. Competitor Analysis 4. Market Analysis 5. Company Analysis

Environmental Appraisal
The

Environment of any organization is the sum of all conditions, events & influences that surround and affect it The Marketing Environment is Complex, Dynamic, Multi-faceted & has a Farreaching consequences. It is therefore crucial for any organization to understand the environmental influences on its business.

Various Environmental Components.

1) Market Environment: Clients needs, preferences, perceptions, attitudes, values, buying behavior, satisfaction. Product factors like demand, image, features, utility, design, life cycle, price, promotion, distribution, differentiation etc Competitor factors like different types of competitors, nature of competition. 2) Technological Environment : Sources of Technology; Technological development, R&D, Cost of Technology; Effects of technology on environment, human beings.

Components contd..
3) Supplier Environment:
Cost, availability, and continuity of supply of raw material, components, parts. Infrastructural support and ease of availability of the different factors of production.

4) Economic Environment:
The economic stage at which the country exists at a given point of time. The economic structure adopted, capitalistic, socialistic or mixed. Economic policies, industrial, fiscal. Per capita income, balance of payments etc.

Components contd..
5) Legal or Regulatory Environment:
Policies related licensing, monopolies, FDI, Policies related to distribution and pricing. Policies related to sick industries, public sector, backward areas, consumer protection etc.

6) Political Environment: The political system and its features, ideological forces, coalition compulsions. Political stability. Political funding of elections. Governments role in business.

Components contd..
7) Socio-Cultural Environment: Demographics like population, its density and distribution, age composition, inter state migration, income distribution etc. Socio-cultural concerns like environmental pollution, consumerism, corruption etc. Family structure changes.

Components contd..
8) International or Global Environment: Globalization process. Global economic forces. Global trade and commerce. Global financial system. Global markets and competitiveness. Global communication Global technology and quality systems.

Macro Environmental Analysis : PEST Analysis

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PEST Analysis
Political Environment : Legislations / Govt. Rules /
Pollution Control & Environmental Laws / Taxes & Duties / Pricing Policies / Consumer Protection Laws / Impex Policies FDI / Patent Laws / Labour Laws / Subsidies, etc

Economic Environment : Interest & Exchange Rates /

Inflation / GDP / Per Capita Income / Demand-Supply Situation / Economic Trend (BC) , etc

Social Environment : Values & Beliefs / Life Styles /

Culture & Tradition / Religion & Language / Demographic Factors ( Age, Gender, Income, Education, etc )

Technological Environment : Quality of Materials &

Machinery / Innovations / Mktg Research / e- Commerce ,etc
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BLUNDERS IN ADVERTISING DUE TO LANGUAGE & CULTURAL DIFFERENCES

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Micro Environmental Analysis

Consumer Analysis Competitors Analysis Market Analysis Company Analysis

-

(SWOT Analysis)

SWOT Analysis
SWOT analysis is a tool for analysing a business - organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for Strengths, Weaknesses, Opportunities & Threats. Strengths & Weaknesses are Internal factors. Opportunities & Threats are External factors.
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Strengths could be:

1. Your specialist marketing expertise. 2. A new, innovative product or service. 3. Location of your business. 4. Quality processes and procedures. 5. Any other aspect of your business that adds value to your product or service.

Weakness could be:

1. Lack of marketing expertise. 2. Undifferentiated products/services 3. Location of your business. 4. Poor quality goods or services. 5. Damaged reputation.
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Opportunity could be:

1. A developing market such as the Internet. 2. Mergers, joint ventures or strategic alliances. 3. Moving into new market segments that offer better profits. 4. A new international market. 5. A market vacated by an ineffective competitor.

Threat could be:

1. A new competitor in your home market. 2. Price wars with competitors. 3. A competitor has a new, innovative product or service. 4. Competitors have superior access to channels of distribution. 5. Taxation is introduced on your product or service.
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Simple Rules for successful SWOT Analysis :

1. Be realistic about the strengths and weaknesses of your organization when conducting SWOT analysis. 2. SWOT analysis should distinguish between where your organization is today, and where it could be in the future. 3. SWOT should always be specific. Avoid grey areas. 4. Always apply SWOT in relation to your competition i.e. better than or worse than your competition. 5. Keep your SWOT short and simple. Avoid complexity and over-analysis 6. SWOT is subjective.
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Example : Wal-Mart SWOT Analysis.

Strengths : Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store. Weaknesses : Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control. Opportunities : To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Asia Pacific Region. Threats : Being number one means that you are the target of competition, locally and globally. 79

Student Activity
Undertake SWOT Analysis of atleast two companies, each in : IT, Telecom, Retail, Automobile, Petroleum, Consumer Electronics, FMCG, Power, Steel, Infrastructure & Service Sectors.

What is e-Business?
e-business

is the continuous optimization of a firms business activities through digital technology. [Digital or
Information Technologies are things like computers & the Internet, that allow the storage & transmission of data in digital formats]

The booming growth of e-business, has

led to many solid successes today and exciting new growth areas will soon emerge.

Key Questions for Corporations:

How to use information technology profitably ? How to understand what technology means for their business strategies? How time-tested concepts by marketers can be enhanced by the Internet, databases, wireless mobile devices, and other technologies? Whats next after the rapid growth of the Internet and the dot-com bubble has marketers wondering ? How can we use technology to build new business models that add customer value and/or increase customer satisfaction ?

What is E-Marketing?
E-Marketing is the application of a broad range of information technologies for :

Transforming marketing strategies to create more customer value (more effective segmentation, targeting, differentiation and positioning strategies),
More efficiently planning & executing the conception, distribution, promotion and pricing of goods / services / ideas. Creating exchanges that satisfy individual consumer and organizational customers objectives.

E - Marketing Implications
Marketers who grasp what Internet technologies can do will be better poised to capitalize on information technology. Internet : creates opportunities beyond those possible with the telephone, television, postal mail, or other communication media. It leads to more effective & efficient implementation of the marketing strategies. Corporates & Customers can have easy, & quick access to information & can transact business in an inexpensive way. The market reach can be extended to the entire world.

E-marketing Implications..
E-marketing is the result of information technology applied to traditional marketing. Increases efficiency in traditional marketing functions. The technology of e-marketing transforms many marketing strategies. New trends such as Integrated & Collaboration Software, Web services, Data Security, Wireless Technologies, Portable-Computing, etc will help businesses move forward with e-marketing.

Modern Trends in Marketing

Green Marketing Cause Marketing Buzz Marketing Mobile Marketing Network Marketing E - mail Marketing CRM Event Marketing Niche Marketing Social Marketing Viral Marketing WOM Marketing Social Networking Media Online Search Ads Sports Marketing Grey Marketing

Modern Marketing Trends....

Increased use of digital media and a decrease in radio & print media. Increased use of internet & e-mail to reach out to prospects and customers more frequently at a very low cost. Increased use of quality, targeted content (textual / video) that tells a company's story & engages the prospective customer. Increased use of blogs, social networking, & other social media to create dialog and relationships with customers / prospects.

Modern Marketing Trends....

Increased use of analytics tools (e.g., Google Analytics) to spot ways to improve ROI. Increased focus on Search Engine Optimization (SEO) content targeting & other trackable paid marketing techniques such as pay-per-click and other. Increased use of online webinars & decreased use of large trade shows. Increased use of outsourced marketing functions, especially specialised functions such as Marketing Research & Advertising.

Types of E-Markets
E-marketplace

is a marketplace in which sellers & buyers exchange goods & services for money using electronic medium such as computers & phones.

E-marketplace is an online market,

usually B2B, in which buyers and sellers exchange goods or services. The three types of e-marketplaces are : Private, Public & Consortia.
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1. Private e-marketplaces: Online markets owned by a single company; can be either Sell-side or Buy-side market-places
Sell-side e-marketplace: A private e-market in which a company sells either standard or customized products to qualified companies Buy-side e-marketplace: A private e-market in which a company makes purchases from invited suppliers.

2. Public e-marketplaces: B2B markets, usually owned and/or managed by an independent third party, that include many sellers and many buyers; also known as exchanges

3. Consortia: E-marketplaces owned by a small group of large vendors, usually in a single industry

Types of Internet Advertising / Marketing

Banner Ads:

most popular, different sizes and

styles Pop-up ads: popular, another type is PopBehind or Pop-Under Ads : E-mail Marketing: powerful, economical, legal implications, spam. Affiliate marketing: commission-based, benefit of the selling sites brand in exchange for the referral.

Search Engine Positioning

Potential customers find web sites in many different ways :
Some site visitors will be referred by a friend, others by affiliates, some will see the sites URL in a print advertisement or on television Many site visitors will be directed to the site by a search engine, such as Google Search.

Student Activity

Write down the Definitions, with suitable examples, of all the terms listed-out under the : Modern Trends in Marketing

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The Importance of Information

Companies need information about their : Customer Needs Competition Marketing Environment Managers need timely, accurate, relevant ( TAR ) & up-to-date information, for better decision-making. According to AMA, Marketing Information System (MkIS or MIS) is a set of procedures & methods for the regular, planned collection, analysis & presentation of information for use in marketing decisions. Information for use in MkIS is gathered from customers, competitors & from the market itself.
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Philip Kotlers definition says, an MkIS is more than a system of data collection or a set of information technologies:

"A Marketing Information System is a continuing and interacting structure of people, equipment & procedures to gather, sort, analyse, evaluate and distribute pertinent, timely & accurate information for use by marketing-decision makers to improve their marketing planning, implementation & control".

MkIS helps Marketing Managers to :

1. Assess Information Needs, 2. Develop Needed Information, 3. Distribute Information.
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Kotlers Model of MkIS

Target Markets, Marketing Channels, Suppliers, Competitors, Publics, Macroenvironment Forces

Marketing Managers

Marketing Information System

Analysis, Planning, Implementation, Control

Marketing Environment

Assessing Information Needs Distributing Information

Developing Information Internal Marketing Records Intelligence Decision Support Marketing Research

Marketing Decisions & Communications

The three main constituent parts of an MkIS in developing information are : 1. The Internal Reporting Systems 2. Marketing Intelligence System & 3. Marketing Research System
Information needed by Managers can be obtained from:
Internal Data
Computerized Collection of Information from Data Sources (i.e. Accounting) within the Company. Collection and Analysis of Publicly available Information about Competitors & the Marketing Environment Design, Collection, Analysis & Reporting of Data about a Specific Marketing Situation Facing the Organization.
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Marketing Intelligence
Marketing Research

Marketing Info. System

Developing Information
Internal Data
Marketing Intelligence Marketing Research

Internal data is gathered via customer databases, financial records, and operations reports. Advantages of internal data include quick/easy access to information. Disadvantages stem from the incompleteness or inappropriateness of data to a particular situation.
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Marketing Info. System

Developing Information
Internal Data

Marketing Intelligence
Marketing Research

Marketing Intelligence is the systematic collection and analysis of publicly available information about competitors and trends in the marketing environment. Competitive intelligence gathering activities have grown dramatically. Many sources of competitive information exist.
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Sources of Competitive Intelligence

Company Employees Internet Published Information Other Sources
Competitors Employees Trade Shows Benchmarking Channel Members & Key Customers

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Marketing Info. System

Developing Information
Internal Data

Marketing Intelligence

Marketing Research

Marketing Research is the systematic design, collection, analysis & reporting of data relevant to a specific marketing situation facing an organization. Marketing Research Process.
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Definition of Research
RE-SEARCH means To Search Again. It is the systematic investigation & study of material and sources in order to establish new facts and reach new conclusions.
Research is defined as human activity based on intellectual application in the investigation of nature & matter. The primary purpose of research is discovering, interpreting & development of methods & systems for the advancement of human knowledge on a wide variety of matters of our world.
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Types of Research :
1. Basic Research: (also called Fundamental

or Pure Research) is primarily concerned with the advancement of knowledge and the theoretical understanding of the relations among variables. It is often driven by the researchers curiosity, interest & intuition. 2. Applied Research: is research accessing and using some part of the research communities' accumulated theories, knowledge, methods, and techniques, for a specific or client driven purpose.

MARKETING RESEARCH Marketing Research is the systematic & objective identification, collection, analysis, dissemination & use of information for the purpose of improving decision making related to the identification & solution of problems & opportunities in Marketing.

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Types of Marketing Research

( I ) Exploratory Research: to gather preliminary information that will help define problems and suggest hypotheses. ( uses Secondary Data & Focus
Groups )

( II ) Conclusive Research : ( a ) Descriptive Research : to describe things, such as the market potential for a product or the demographics & attitudes of consumers who buy the product.(Hypotheses Testing) ( b ) Experimental Research : (Causal Research) to establish the cause-and-effect relationships.
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Qualitative Research & Quantitative Research Qualitative Research explores attitudes, behaviour & experiences through such methods as Interviews & Focus Groups with the idea of getting an in-depth opinion from participants. Quantitative Research involves analysis of numerical data. It involves the generation of statistics through the use of large-scale survey research, using methods such as questionnaires or structured interviews.

The Quantitative approach views human phenomena as being amenable to objective study i.e. able to be measured.
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The Marketing Research Process

Defining of the Research Problem 2. Cost vs Value Analysis of the Information 3. Selecting the Research Design 4. Selection of the Data Collection Method 5. Selection of the Sample 6. Selection of the Method of Data Analysis 7. Estimate the Resources required 8. Data Collection / Analysis 9. Interpretation of Results / Conclusions 10. Report Writing / Presentation.
1.
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The 3 Rs of Marketing
In the process of Marketing Research, companies collect a lot of different types of information. David G. Bakken is of the opinion that it is easy to think of all these in terms of Three Rs of Marketing:

1. Recruiting New Customers. 2. Retaining Current Customers. 3. Regaining Lost Customers.

 To Recruit New Customers, the researchers study different market segments to develop the right products & services consumers need & want. To Retain Existing Customers, the marketer may conduct customer satisfaction studies. Marketers realise that good relationship with customers is important for long-term positive sales results. Regaining Lost Customers can be a formidable problem. It needs innovative marketing & outstanding communications.

Many companies face the dilemma of deciding for or against Marketing Research Firms. That is why it is advisable for you to know the needs of your concern well before making any decisions; as Market Research is a highly important for a good marketing strategy.
In-house Market Research divisions can only yield results when people with thorough knowledge of research techniques are employed. Major business houses, usually have a vast inhouse Marketing Research Division.

Outsourcing makes good business sense, especially when the firm lacks expertise or time in a particular area of business. Many companies prefer to off-load Advertising & Marketing Research to specialized companies, who have the expertise & experience to do a much more effective & efficient job. Market Research Companies are concerns, which help their clients scan & understand their consumers thus helping them to successfully promote and sell their product. Companies that fulfill market research needs, specialize in data analysis i.e. their employees are specifically trained for gathering and analyzing information.

Student Activity
List out the top ten Indian & top ten Global :
1. Market Research Companies.

2. Advertising Companies

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What is Strategy ?
The word Strategy has been derived from the Greek word stratgos, which derives from two words: Stratos (Army) & Ago (ancient Greek for Leading). i.e. Stratgos referred to a 'Military Commander' during the age of Athenia Democracy.

Strategy is a set of key or crucial decisions taken or a grand design or a comprehensive master-plan or a specific course of action which a person or an organisation chooses to achieve the primary or long term goals & objectives.

Simply put by Edward de Bono :

Strategy means putting things in place carefully, and with a great deal of thought. It is the opposite of just waiting for things to happen. In a changing environment one of the most difficult things in business is to know when to stick to your strategy and when to change it.

Basic Definitions:
Plan : is a future course of action where in we select
our goals & determine the means to achieve it.

Policy : is an understanding by a group of people that makes action of each member more predictable to the other members. It is essentially a guide for taking action. Procedure : is a system that describes in detail the specific steps to be taken in order to accomplish a job. Principle : is a universal & enduring statement which remains true in all circumstances & is always followed.
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Strategic Management : is a process of

designing & implementing an effective set of strategies with an overall approach to deal with both internal & external agencies by taking appropriate decisions & actions in order to achieve pre-determined goals & objectives. It was Igor Ansoff (popularly known as the Father of Strategic Management), who pioneered the concept of Strategy during 1950s & 60s. Later, Henry Mintzberg, Michael Porter & Peter Drucker enriched the concept with their original contributions to the field of Strategic Management.
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Henry Mintzbergs 5Ps of Strategy

Plan

Perspective

5 Ps

Ploy

Position

Pattern

Henry Mintzberg, in his book, The

Rise & Fall of Strategic Planning in
1994, points out that "Strategy" is used in

several different ways, the most common being :

1. Strategy is a PLAN, a "how," a means of getting from here to there. 2. Strategy is a PATTERN in actions over time; for example, a company that regularly markets very expensive products is using a "high end" strategy. 3. Strategy is POSITION; that is, it reflects decisions to offer particular products or services in particular markets. 4. Strategy is PERSPECTIVE, that is, vision and direction. 5. Strategy is a PLOY, i.e. It is a specific manoeuvre intended to outwit an opponent or competitor.

Student Activity
( I ) Write down the history & ------- contributions of : 1. Igor Ansoff 2. Henry Mintzberg, 3. Michael Porter & 4. Peter Drucker ( II ) Read at least one book, each, written by these eminent Management Gurus.

Corporate Planning : includes all

functional aspects of management such as setting up of objectives, decision making, organizing work, resources / people / systems/, budgeting, directing, motivating & controlling in a economical way so as to achieve the organisational goals & objectives. It can be classified into :

Strategic Planning & Operational Planning

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Definition : Strategic Planning is the process of identifying an organization's long-term goals & objectives and then determining the best approach for achieving those goals and objectives.

The Objective of Strategic Planning is :

To guide the company successfully through all changes in the environment. To create competitive advantage, so that the company can outperform the competitors in order to have dominance over the market.

Need for Strategic Planning :

1. It encourages management to think ahead . 2. It forces managers to clarify objectives & -------- policies. 3. It leads to better coordination of company -- efforts. 4. It provides clearer performance standards for - control. 5. It is useful for a fast-changing environment ---- since strategic planning helps the company --- anticipate & respond quickly to changes & -- sudden developments in the environment.
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New Advertisement by Parle to Attack Brittania

Characteristics of Strategic Decisions :

Strategic issues require top management decision. Strategic issues involve the allocation of large amount of company resources. Strategic issues are likely to have a significant impact on the long term prosperity of the firm. Strategic issues are future oriented Strategic issues usually have major multi functional or multi-business consequences. Strategic issues necessitate considering factors in the firm's external environment.

Components of Strategic Management or Steps in Strategic Planning : 1. Company Vision & Mission 2. Situational Analysis (Envrmtal. Scanning) 3. Long Term & Short Term Objectives 4. Corporate Strategy (Grand Design) 5. Designing the Business Portfolio 5. Functional or Operational Strategies 6. Implementation (Organising) 7. Evaluation (Measuring Results) 8. Control (Taking Corrective Action)
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Mission and Vision Statements are written mainly for the customers and the employees of companies or corporations. Mission Statements are sentences or short paragraphs written by companies, corporations or businesses which reflects their core purpose, identity, values and principle business aims.

The Vision Statement is a sentence or a short paragraph providing a broad and inspirational image of the future.
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Vision
A Vision articulates the position that an organization would like to attain in the distant future. Vision therefore is future aspirations that lead to an inspiration to be the best in ones field of activity. The Companys Vision is should provide a description of what the organization is trying to do & to become. It gives a view of the organizations future direction & course of business activity.

Why should organizations have a Vision

Good

visions are inspiring & exhilarating. It creates a common identity and a shared sense of purpose. They are competitive, unique and simple. Good visions foster risk-taking and experimentation. They represent integrity.

COMPANY MISSION : is a statement of the organization's purpose. Mission is what an organization is and why it exists. It should be realistic, specific & motivating.
Mission should define the essential purpose of the organization, concerning philosophical questions like What is our business, the nature of business it is in, who are our customers it looks to satisfy.

The Mission of a company should identify the scope of the companys operations, describe the companys products, markets, technological areas of thrust & should reflect the values & priorities of its strategic decision makers. It should also set apart a company 131 from its competitors.

Mission Statements
They

should be feasible: Though mission should aim high, it should be realistic & achievable. It should be precise: It should not be very narrow nor should it be too broad. It should be clear enough to lead to action. It should be motivating: It should motivate employees to achieve its mission. It should be unique and distinctive: unique because an organization should be seen by market and customers as different. It should indicate the strategic direction for the organization.

General Motors Mission Statement : "G.M. is a multinational corporation engaged in socially responsible operations, worldwide. It is dedicated to provide products and services of such quality that our customers will receive superior value while our employees and business partners will share in our success and our stock-holders will receive a sustained superior return on their investment." General Motors Vision Statement : "Over the past 100 years, GM has been a leader in the global automotive industry. And the next 100 years will be no different. GM is committed to leading the industry in alternative fuel propulsion."
133

Ford Motor Mission Statement: "We are a global family with a proud heritage passionately committed to providing personal mobility for people around the world. Wal-Mart Stores Mission Statement: "Wal-Marts mission is to help people save money so they can live better.
<,

INFOSYS : Vision : "To be a globally respected corporation that provides best-of-breed business solutions, leveraging technology, delivered by best-in-class people. Mission : "To achieve our objectives in an environment of fairness, honesty, and courtesy towards our clients, employees, vendors and society at large." 134

Student Activity
Write down the Vision & Mission statements of atleast ten Indian Companies & ten Global Companies.

Setting-up of Goals & Objectives

The second step in the Strategic Planning process requires the manager to set company goals & objectives and be responsible for achieving them. The mission leads to a hierarchy of objectives including business & marketing objectives. Objectives should be as specific as possible. Objectives are an organisation's performance targets - the results and outcomes it wants to achieve.

 The Goals & Objectives function as yardsticks for tracking an organisation's performance and progress. Strategic objectives relate to outcomes that strengthen an organisation's overall business position and competitive vitality. Objectives are open-ended attributes that denote the future state or outcomes, whereas Goals are close-ended attributes, which are precise & expressed in specific terms.

Role of Objectives :
Objectives define the organisation's

relationship with its environment. Objectives help an organisation pursue its mission and purpose. Objectives provide the basis for strategic decision making. Objectives provide the standards for performance appraisal.

Characteristics of Objectives
1. Objectives should be understandable 2. Objectives should be concrete and specific 3. Objectives should be related to a time frame 4. Objectives should be measurable and ------- controllable 5. Objectives should be challenging 6. Different objectives should correlate with ----- each other 7. Objectives should be set within constraints

Strategic Management Model

Perform external analysis to identify key opportunities & threats Functional-Level Strategy Identify current mission, objectives, and strategies SWOT, Strategic choice Business-Level Strategy Global Strategy Corporate-Level Strategy Perform internal analysis to identify key strengths & weaknesses Match strategy, structure, and controls Manage strategic change Design organization structure

Design control systems

Levels at which Strategy operates

For many companies, a single strategy is not enough. There is a need for multiple strategies at different levels. Many companies are organized on the basis of operating divisions. These divisions are known as Strategic Business Units (SBU) or Profit Centers.

Levels of Strategy Planning :

1.
2. 3.

Corporate Level Long Term Business Level Medium Term

Functional Level Medium & Short Term 4. Operational Level Short Term

Strategy at Different Levels

Corporate Office

SBU A Finance

SBU B

SBU C Personnel

Marketing

Operations

Corporate & SBU Level Strategies.

CLS is a master-plan of action, covering the various functions performed by different SBUs. The Corporate Level Strategies deal with the objectives of the company, allocation of resources and coordination of the S B Us for optimal performance. SBU Level Strategies is a comprehensive plan providing objectives for SBUs, allocation of resources among functional areas, and coordination between them for making an optimal contribution to the achievement of corporate level objectives.

Functional & Operational Strategies

Functional Level Strategies deal with a relatively restricted plan providing objectives for a specific function, allocation of resources among different operations within that functional area, and coordination between them for optimal contribution to the achievement of SBU and corporate level objectives. Operational Strategies are also needed to be set at lower levels, one step below the functional level. Eg : A Functional Strategy such as
in Marketing could be sub divided into Operational Strategies such as Sales, Distribution, Pricing, Product & Advertising Strategies.

Strategic Decision Making

Successful business strategies result not from rigorous analysis but from a particular state of mind. The people at the Helm of Affairs or Top Management, such as Chairman, CEO, MD, BoD, Entrepreneurs, Management Consultants, etc are involved in the Strategic Decision making process, implementation & control. Strategists do not reject analysis, but they use it only to stimulate the creative process, to test the ideas that emerge, to work out their strategic implications, or to ensure successful execution of high potential wild ides that might otherwise never be implemented Read The Mind of The Strategist by Kenichi Ohmae

Grand Strategies
1. Survival Strategy or ----Stability Strategy 2. Expansion Strategy or --Growth Strategy. 3. Retrenchment Strategy. 4. Combination Strategy.

Stability Strategy
Is adopted by on organization when it attempts at an incremental improvement of its functional performance by marginally changing one or more of its business. Eg: A copier machine company provides better after sales service to improve its image and product image too.

Expansion or Growth Strategy

This strategy is followed when a company aims at high growth by increasing the scope of one or more of its businesses in terms of their respective customer groups, functions and technology.

Retrenchment Strategy
This is followed when a company aims at contraction of its activities through substantial reduction or elimination of its business. E.g. A pharmaceutical company may withdraw from its retail operations so that it can focus on institutional sales.

Combination Strategy
This is followed when a company adopts a mixture of all the strategies either at the same time in its different businesses, or at different times in the same business with the aim of improving its performance.

Marketing Strategy
Demographic Economic Environment Marketing Channels Technological Natural Environment

Product Suppliers Place Target Consumers Promotion Price Publics

Political Legal Environment

Competitors

Social Cultural Environment

Marketing Strategies for Competitive Advantage

Market Leader Market Challenger

STRATEGY A COMPANY ADOPTS DEPENDS ON ITS INDUSTRY POSITION

Market Nicher

Market Follower

Depending upon their market shares in a particular market, companies can be classified as : 1. Leaders 2. Challengers & 3. Followers 4. Nichers
The Challenger companies have to attack the Leader, other comparable firms & smaller firms in their bid to gain market share. Attack has a greater probability of success when there is customer dissatisfaction with the current leader.
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Market Structure
Depending upon their market shares in a market, companies can be classified as :
Market Leader : the firm with the largest market
share.

Market Challenger : a runner-up firm that is

fighting hard for an increased market share.

Market Follower : another runner-up firm that is

willing to maintain its market share and not rock the boat.

Market Nicher : firms that serve small market

segments not being served by larger firms.

Strategic Analysis
1. Company Level :
i. SWOT ( Strength, Weakness, Opportunities & Threats ) ii. ETOP ( Environmental Threat & Opportunities Profile ) iii. PIMS ( Profit Impact of Marketing Strategies ) iv. VA ( Vulnerability Analysis )

2. Corporate Level : ( Portfolio Analysis )

i. BCG Growth - Share Matrix
ii. GE

Nine Cell Planning Grid ( GE Spot Light Grid ) iii. ADL Life Cycle Approach iv. Ansoff Product - Market Matrix.
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The Ansoff Product - Market Growth Matrix is a marketing tool created by Igor Ansoff and first published in his article "Strategies for Diversification" in the Harvard Business Review (1957). The matrix allows marketers to consider ways to grow the business via existing and/or new products, in existing and/or new markets there are four possible product/market combinations. This matrix helps companies decide what course of action should be taken given current performance. The matrix consists of four strategies :

1. 2. 3. 4.

Market Penetration (existing markets, existing products) Product Development (existing markets, new products) Market Development (new markets, existing products) Diversification (new markets, new products).
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Ansoffs Product - Market Growth Matrix

157

1. Market Penetration: This involves increasing sales of an existing product & penetrating the market further by either promoting the product heavily or reducing prices to increase sales. 2. Product Development: The organisation develops new products to aim within their existing market, in the hope that they will gain more custom & market share. Eg : Sony launching the Play-Station2 to replace their existing model.
3. Market Development: The organisation here adopts a strategy of selling existing products to new markets. This can be done either by a better understanding of segmentation, i.e who else can possibly purchase the product or selling the product to new markets, overseas. 4. Diversification: Moving away from what you are selling (your core activities) to providing something new. Eg : Moving over from selling foods to selling cars.
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Business Portfolio & PA

A Business Portfolio is the collection of businesses &/or products that make up the company. Four basic questions to be answered:
Which SBUs need to be Built ? Which SBU to be Maintained ? Which SBU to be Harvested ? Which SBU to be Divested ?

Tools for Portfolio Analysis

Most Portfolio Analyses evaluate the SBUs of a firm on two important dimensions: the Attractiveness of the SBUs market & the Strength of the SBUs position in the market. The best known Portfolio-planning & analysis methods / tools are : BCG Matrix & GE Nine Cell Grid.

B C G MATRIX
The BCG Matrix ( Boston Consulting Group ) is a
matrix / model that was created by Bruce Henderson for the Boston Consulting Group in 1970 to assist Corporations with analyzing their Strategic Business Units or Product Lines. This helps the company allocate resources and is used as an analytical tool in brand marketing, product management, strategic management, and portfolio analysis. Companies that are large enough to be organized into strategic business units face the challenge of allocating resources among those units.
161

B C G MATRIX

162

Resources are allocated to business units according to where they are situated on the grid as follows:
1. Cash Cow - a business unit that has a large market share in a mature, slow growing industry. Cash cows require little investment and generate cash that can be used to invest in other business units. 2. Star - a business unit that has a large market share in a fast growing industry. Stars may generate cash, but because the market is growing rapidly they require investment to maintain their lead. If successful, a star will become a cash cow when its industry matures. 3. Question Mark (or Problem Child) - a business unit that has a small market share in a high growth market. These business units require resources to grow market share, but whether they will succeed and become stars is unknown. 4. Dog - a business unit that has a small market share in a mature industry. A dog may not require substantial cash, but it ties up capital that could better be deployed elsewhere. Unless a dog has some other strategic purpose, it should be liquidated if there is little prospect for it to gain market share.
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Four strategies suggested by the BCG Matrix : Build, Hold, Harvest or Divest BUILD : Invest more in the business unit in order to build (increase) its share. HOLD : Invest just enough to hold (keep) the SBUs share at the current level [ i.e. Preserve
SBUs market share ]

HARVEST : The Company can harvest the SBU, milking its short-term cash flow regardless of the long-term effect . DIVEST : ( Sell or Liquidate ) Get rid of the SBU by selling it or phasing it out and using the resources elsewhere.

Porter's Generic Competitive Strategies

( Ways of Competing )
A firm's relative position within its industry determines whether a firm's profitability is above or below the industry average.
Michael Porter developed three generic strategies that can be used to create a defendable position & to outperform competitors, whether they are within an industry or across nations. These strategies are generic because they are applicable to a large

variety of situations and contexts. The strategies are :

(1) Overall Cost Leadership, (2) Differentiation, & (3) Focus [ on a particular Market Niche ]

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Porter's Generic Competitive Strategies

166

1. Cost Leadership : The low cost leader in any market gains competitive advantage from being able to many to produce at the lowest cost. Factories are built & maintained, labor is recruited and trained to deliver the lowest possible costs of production. Cost Advantage' is the focus. Costs of every element of the value chain are reduced. Products tend to be 'no frills.' However, low cost does not always lead to low price. Producers could price at competitive parity, exploiting the benefits of a bigger margin than competitors.
Eg : Toyota is very good not only at producing high quality autos at a low price but have the brand & marketing skills to use a premium pricing policy. 167

2. Differentiation : Differentiating the product or service, requires a firm to create something about its product or service that is perceived as unique throughout the industry. Customers must perceive the product as having desirable features not commonly found in competing products. The customers also must be relatively price-insensitive. Adding product features means that the production or distribution costs of a differentiated product may be somewhat higher than the price of a generic, non-differentiated product.
168

Differentiation may be attained through many features that make the product or service appear unique. Possible strategies for achieving differentiation may include: Warranties ( Khaitan Fans, Whirlpool ) Brand image ( Nike Shoes ) Technology (Hewlett-Packard Printers, I Pods) Features ( Nokia Mobile Hand sets ) Quality / Value ( Sony ) Service / Dealer Network ( Maruti Cars )
169

Differentiation makes a firm's products less susceptible to cost pressures from competitors because customers see the product as unique and are willing to pay extra to have the product with the desirable features. Differentiation may lead to customer brand loyalty and result in reduced price elasticity. Differentiation may also lead to higher profit margins and reduce the need to be a low-cost producer.

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A Niche Market refers to that small segment of the overall market base, which if targeted in a focused manner, results in higher yields rather than focusing on all the market segments. It is such focused and targetable group of potential customers, which if targeted, will result in higher yield due to its unique value proposition (UVP).
Features Of Niche Marketing: a) The customers in the niche have a distinct set of needs b) They will pay a premium to the firm that best satisfies their needs. c) The niche is not likely to attract other competitors d) The niche gains certain economies through specialization. e) The niche has size, profit and growth potential.
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3. Focus Strategy :
Segmentation Strategy)

(also called Niche Strategy or

involves concentrating on a particular customer, product line, geographical area, channel of distribution or a market niche. The underlying premise of the Focus Strategy, is that a firm is better able to serve a limited segment more efficiently than competitors can serve a broader range of customers. Focus strategies are most effective when customers have distinctive preferences or specialized needs.
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A Focus Strategy is often appropriate for small, aggressive businesses that do not have the ability or resources to engage in a nationwide marketing effort. Such a strategy may also be appropriate if the target market is too small to support a large-scale operation. Many firms start small and expand into a national-organization.
A firm following the Focus Strategy concentrates on meeting the specialized needs of its customers. Products and services can be designed to meet the needs of buyers. Firms utilizing a focus strategy may also be better able to tailor advertising and promotional efforts to a particular market niche.
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Unit - II

Buyer Behaviour, Market Segmentation & Targeting, Positioning & Differentiation Strategies Life Cycle strategies, New Product Development, Product Mix & Product Line Decisions, Branding & Packaging. Setting: Objectives, Factors & Methods, Price Adapting Policies, Initiating & responding to Price changes.
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Product

Price

CONSUMER BEHAVIOUR
175

A Customer is any person or group or organization who buy or purchase products /services, but a Consumer" is the one who consumes the products or services.

Definition : Consumer is an individual (or a group) who buys products or services for personal use (or house-hold use) and not for manufacture or resale.

Behavior or Behaviour refers to the actions of a system or organisms or people, usually in relation to its environment. i.e. Behaviour is the response of the system or people to various stimuli or inputs, whether
internal or external, conscious or subconscious, overt or covert & voluntary or involuntary. Generally, human-beings have a greater capacity to learn new responses and thus adjust their behavior.

Human Behavior (and that of other organisms & mechanisms) can be common, unusual, acceptable or unacceptable. Humans evaluate the acceptability of behavior using social norms and regulate behavior by means of social control. Buyers or Consumers, at any given time, are generally influenced by a set of motives, which may vary at different times & occasions.

Consumer Behaviour is the acts of 'individuals' which are directly involved in making decisions to spend their available resources (time, money, energy) in obtaining and using goods / services.

Definition of Consumer Behaviour

Consumer Behaviour is the study of individuals / groups / organizations & the processes they use to select, secure, use & dispose products (goods, services, experiences or ideas) to satisfy needs and the impacts that these processes have on the consumer & society.

Consumer Behaviour deals with the study of

various aspects of purchase & consumption & disposal of products / services by individuals, families & organisations, keeping the personal social, environmental, psychological & factors in mind. The study of Consumer Behaviour is an inter-disciplinary approach. i.e. It uses concepts from a variety of fields such as Anthropology, Sociology, Psychology, Economics & Marketing.
180

Marketers need to study the potential / existing customers needs, perceptions, attitudes, preferences, buying behaviour & buying patterns in order to develop their marketing plans. Studying Consumer Behaviour is absolutely essential in: a) Market Analysis b) Market Segmentation c) Product Positioning d) Developing Marketing Strategies e) Designing the Marketing Mix & f) Social Marketing.
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Consumer Buying Role

Initiator
User Influencer

Buying Decision

Buyer

Decider

182

Different Roles played by Buyers/Consumers:

Consumers often play different roles in the purchase process, such as : 1. Initiator: the person who first suggests or thinks
of the idea of buying a particular product or service. 2. Influencer: a person whose views or advice ---carry weight in making the final buying decision. 3. Decider: the person who ultimately makes the --- final buying decision or any part of it. 4. Buyer: the person who makes the actual purchase. 5. User: the person who consumes the product or service.
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Consumer Buying & Decision-Making Process

Need Recognition
Information Search
Cultural, Social, Individual and Psychological Factors affect all these steps

Evaluation of Alternatives Purchase Post-Purchase Behavior

The Buyer Decision Process

Step 1. Need Recognition
Need Recognition
Difference between an actual state and a desired state

Internal Stimuli Hunger

Thirst
A persons normal needs

External Stimuli
TV advertising

Magazine ad
Radio slogan

Stimuli in the environment

The Buyer Decision Process Step 2. Information Search

Personal Sources Commercial Sources Public Sources Experiential Sources
Family, friends, neighbors Most influential source of information Advertising, salespeople Receives most information from these sources Mass Media Consumer-rating groups Handling the product Examining the product Using the product

The Buyer Decision Process

Step 3. Evaluation of Alternatives
Product Attributes
Evaluation of Quality, Price, & Features

Degree of Importance
Which attributes matter most to me?

Brand Beliefs
What do I believe about each available brand? Based on what Im looking for, how satisfied would I be with each product?

Total Product Satisfaction

Evaluation Procedures
Choosing a product (and brand) based on one or more attributes.

The Buyer Decision Process Step 4. Purchase Decision

Purchase Intention Desire to buy the most preferred brand

Attitudes of others

Unexpected situational factors

Purchase Decision

Types of Consumer Decisions

Based on the level of involvement, Consumers may exhibit three types of problem-solving behavior : 1. Extensive Problem Solving occurs when buyers purchase more expensive, less frequently purchased products in an unfamiliar product category requiring information search & evaluation. 2. Limited Problem Solving occurs when buyers are confronted with an unfamiliar brand in a familiar product category. 3. Routinised Response Behavior occurs when buyers purchase low cost, low risk, brand loyal, frequently purchased or items with which they are familiar.

189

The Buyer Decision Process

Step 5. Post-Purchase Behavior
Consumers Expectations of Products Performance Products Perceived Performance

Satisfied Customer !

Dissatisfied Customer

Cognitive Dissonance

Post-Purchase Dissonance
Post-purchase Dissonance : is a consumer reaction after making a difficult decision that involves doubt and anxiety.
Probability of experiencing dissonance increases based on: Degree of commitment or irrevocability Importance of the decision Difficulty in choosing Individuals tendency to experience anxiety
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Model of Consumer Buying Behavior

Marketing Stimuli
Product Price Place Promotion

Other Stimuli
Economic Technological Political Cultural

Buyers Characteristics
Cultural Social Personal Psychological

Buyers Decisions
Product Choice Brand Choice Dealer Choice Purchase Timing Purchase Amount

Buyers Decision Process

Problem Recognition Information Search Evaluation Decision Post-Purchase Behavior

Consumer purchases are highly influenced by two factors.

Internal
Psychological Personal

External
Cultural Social

Factors Influencing Buying Decisions

Cultural Factors Personal Factors
Cultural Culture Subculture Social Class

Social Factors Psychological Factors

Social
Reference Groups.

CONSUMER BUY / DECISIONMAKING DONT BUY PROCESS

Personal
Age & Life cycle stage

Psychological Motivation Perception Learning

Family

Occupation
Economic sit. Lifestyle Personality & Self Concept

Role and Status

Beliefs & Attitudes

Cultural Factors Affecting Consumer Behavior:

Most basic cause of a person's wants & behavior.

1. Values 2. Perceptions
Subculture
Groups of people with shared value systems based on common life experiences. Hispanic Consumers African American Consumers

Social Class
People within a social class tend to exhibit similar buying behavior.
Occupation

Income

Asian American Consumers

Mature Consumers

Education
Wealth

Social Influences
Culture
Behavior is learned so the traditions, values, attitudes of society all influence it Has a major influence on consumers behavior Formal or Informal Groups to which we belong or would like to be associated with. Key group in terms of attitudes, beliefs & learned behavior
Personal characteristics such as age, occupation, family lifestyle, etc

Social Class Reference Groups

Family Personal Influences

1. CULTURE : The sum total of learned beliefs, values, and

customs that serve to regulate the behavior of members of a particular society. Culture offers order, direction & guidance in all phases of human problem solving.

2. SOCIAL CLASS : Relatively permanent & ordered

divisions in a society whose members share similar values, interests and behavior. It is the division of members of a society into a hierarchy of distinct status classes, generally based on wealth, power & prestige. Egs : Working Class, Middle Class, Upper Class, Rich Class, etc

3. REFERENCE GROUP : Any person or Group (actual or

imaginary) that serves as a point of comparison for an individual in the formation of either general or specific values, attitudes, or behavior. These are people whom consumers tend to look to for influence or advice. The more important a Group is in our lives, the greater our desire to accept & conform to its norms.
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Psychological Factors Affecting Consumer Behavior:

Motivation

Beliefs and Attitudes

Psychological Factors

Perception

Learning

1. Motivation : Human drive to attain a goal

object.
Drive : Energy that impels us to act Goal Object : Something we seek, with the assumption that it will bring us comfort / value.

2. Learning : A process by which individuals

acquire the purchase-and- consumption knowledge & experience that they apply to future related behavior.

3. Perception : The process by which people

become aware of & interpret a stimulus.

4. Attitude : A learned predisposition to respond to

an object in a consistently favorable/unfavorable way. 199

Personal Factors Affecting Consumer Behavior

Personal Influences
Age and Family Life Cycle Stage Economic Situation Occupation

Personality & Self-Concept

Lifestyle Identification
Activities Opinions

Interests

Personality is a particular combination of emotional, attitudinal & behavioral response patterns of an individual. It is the inner psychological characteristics (psyche or mental make-up) that both determine & reflect how a person responds to his or her environment.
Thus Personality depends upon unique psychological traits such as: Sociability, Self confidence, Dominance, Autonomy, Adaptability, Defensiveness, etc

Activities, Interests & Opinions (AIO)

are characteristics of an individual used by researchers to create a psychographic profile of the individual.
When combined with quantifiable characteristics such as age, income, or education level, an AIO Profile provides great insight into an individual's likes & dislikes as a consumer. Product-specific AIOs, may be used in new product development or copyrighting to predict consumer response.

Theories of Personality

Freudian Theory : Unconscious needs or drives are at the heart of human motivation Neo-Freudian Personality Theory : Social relationships are fundamental to the formation and development of personality Trait Theory : Quantitative approach to personality as a set of psychological traits

Family Stages in Consumers Life Cycle

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Some of the important Theories of Motivation are:

1. Maslows Hierarchy of Needs. 2. Herzberg's Two Factors Theory Of Motivation 3. Mc Clellands Trio of Needs Theory.

4. McGregor's Theory X and Theory Y

5. Victor Vrooms Expectancy Theory, etc
205

Maslows Hierarchy of Needs

206

Maslows Hierarchy of Needs : The most basic or pre-potent needs are shown at the bottom of the pyramid, with prepotency decreasing as one progresses upwards.
5. SELF - ACTUALISATION : reaching your maximum potential, doing your own best thing, realising your inner-most self, 4. ESTEEM : respect from others, self-respect, recognition

3. BELONGING ( Social Needs ) : affiliation, acceptance, love, friendship, being part of something
2. SAFETY & SECURITY : physical safety, psychological security 1. PHYSIOLOGICAL : ( Biological Needs ) hunger, thirst, sleep, sex
207

Abraham Maslow's Theory of Hierarchy of Needs is one of the most widely discussed theories of motivation. The theory can be summarized as follows: 1. Human beings have wants and desires which influence their behavior. Only unsatisfied needs influence behavior, satisfied needs do not. 2. Since needs are many, they are arranged in order of importance, from the basic to the complex. 3. The person advances to the next level of needs only after the lower level need is satisfied. 4. The further the progress up the hierarchy, the more individuality, humane & psychological health a person 208 will demonstrate.

Frederick Herzbergs Two - Factor Theory of ( Intrinsic / Extrinsic ) motivation, concludes that certain factors in the workplace result in job satisfaction, but if absent, lead to dissatisfaction.
The factors that motivate people can change over their lifetime, but "respect for me as a person" is one of the top motivating factors at any stage of life. He distinguished between: Motivators (egs: challenging work, recognition, responsibility, status) which give positive satisfaction & Hygiene factors; (egs: job security, salary, fringe benefits, etc) that do not motivate if present, but, if absent, result in demotivation.
The name Hygiene Factors is used because, the presence will not make you 209 healthier, but absence can cause health deterioration.

3. McClellands Theory of Needs : David McClelland

developed a theory on three types of motivating needs : [ Trio of Needs ]

i. Need for Power :

McClelland noticed that many of those who reach the top of organisations and are rated as highly effective in their positions, demonstrate a concern for influencing people. Power motivation refers to a need to have some impact, to be influential and effective in achieving organisational goals. The individual with a high need for affiliation will reflect sensitivity to the feelings of others, a desire for friendly relationships & a reference to situations which involve human interactions. The need for affiliation is similar to Maslow's need for Belonging or Social need. achievement, have a number of distinctive characteristics which separate them from their peers. First of all, they like situations where they can take personal responsibility for finding solutions to problems. This allows them to gain personal satisfaction from their achievements. They do not like situations where success or failure results from chance. The important thing is that the outcome be the result of their own skill and effort.
210

ii. Need for Affiliation :

iii. Need for Achievement : Individuals with a high need for

211

Segmentation, Targeting & Positioning

212

Market Segmentation

Market Segmentation is the process by which a Market is divided into distinct buyer groups. Market Segmentation is defined as the process of defining & sub-dividing a large heterogeneous market into clearly identifiable segments having similar needs / wants or demand characteristics. Its objective is to design a marketing mix that precisely matches the expectations of customers in the targeted segment.

Once the market is segmented the company has to select those segments that they find profitable to cater to & these selected segments constitute the 213 Target Market.

WHY MARKET SEGMENTATION ?

By segmenting the market, the marketer is attempting to break the market into more strategically manageable parts, which can then be targeted and satisfied far more precisely by developing product and marketing program tailored to each segment.
214

Factors considered for Market Segmentation :

1. Needs / Benefits sought 2. Importance attached to Attributes/Feature 3. Usage Rate

4. Brand Loyalty
5. Purchase Influencers

6. Product Adoption Stage

7. Geographic Location

8. Channel Type
9. Life Style / Status / Personality.
215

Requirements for Effective Segmentation

216

Requirements for Effective Segmentation 1. Accessibility : The firm should be able to reach
out to the market segments through various distribution & promotion channels economically. 2. Measurability : The variables used for market segmentation should be easily understandable & assessable. 3. Substantiability : The ROI from the selected segments should be attractive & profitable. 4. Actionability : The chosen segments should exhibit variations in their market behaviour & respond differently to marketing mixes that are designed on an individual basis. 217

Benefits of Market Segmentation

1. 2. 3. 4. 5. 6. 7. Understand potential customers Pay proper attention to particular areas Formulate effective marketing programs Select channels of distribution Understand competition Use marketing resources efficiently Efficient & Customized design of the marketing mix : i.e Product , Price, Promotion & Place

SEGMENTATION BASES

The first step in Segmentation of customers, in a heterogeneous market is to select a set of variables or characteristics (called Segmentation Bases) to assign potential-customers to homogeneous groups. These variables should be related to some aspect of potential customers needs or wants and should reflect differences between customers.
219

Bases for Segmentation

A Segmentation Variable is a characteristic of individuals, groups or organisations that marketers use to divide and create segments of the total market.

Segmentation Descriptors fall under four major categories : Geographic, Demographic, Psychographic & Behaviouristic Variables.
Geographic : focus on where the customers are located. Demographic : identify who the target customers are. Psychographic : refer to lifestyle & values. Behaviouristic : identify benefits customers seek & product usage rates.

Types of Market Segmentation

221

Types of Market Segmentation

222

Demographic Segmentation
Demographic Segmentation consists of dividing the market into groups based on measurable population characteristics such as age, gender family size, income, occupation, education, religion, race, nationality, etc. It considers a number of potential influences on buying behaviour, including attitudes, activities & expectations of consumers. If these are known, then products and marketing campaigns can be customized so that they appeal more specifically to customer motivations.
223

DEMOGRAPHIC SEGMENTATION
Demographic variables are the most popular bases for distinguishing customer groups. One reason is that consumer wants, preferences and usage rates are often associated with demographic variables. Another is that demographic variables are easier to measure. Consumer wants and abilities change with age. Persons in the same part of the life cycle may differ in their life stage.

224

DEMOGRAPHIC SEGMENTATION

Men & Women tend to have different attitudinal and behavioral orientations, based partly on their genetic makeup & partly on socialization practices.

Income

is a popular demographic variable for segmenting customers because income level influences consumers wants and determines their buying power.

Occupation

& Education have also very

225

important bearing on consumers purchasing behaviour.

DEMOGRAPHIC SEGMENTATION.
The

Demographic approach assumes that customers differ according to some criteria about themselves. information on its own doesn't define the consumer needs, it doesn't define the product or service required, or the promotional stance to take.

Demographic

The

role demographic plays is to help you identify for each segment a profile of the typical customer to be found in each segment. This in turn will help you understand how to reach each segment.

226

Geographic Segmentation
Geographic Segmentation tries to divide markets into different geographical units, such as :
Zones, Regions, States, Districts, City / Town / Village, etc Population: Urban, Suburban, Rural, Semi-Rural Climate: Coastal / Inland / Rainy, etc

Most MNCs & other large companies have different regional and national marketing programmes and need to alter their products, advertising & promotion to meet the individual needs of different geographic units.

227

GEOGRAPHIC SEGMENTATION

The Geographic approach assumes that customers found within a particular geographic zone would have common preferences and therefore, can be targeted with the same offer. Like climate has strong impact on residents needs and purchasing behaviour such as their clothing, airconditioning and heating system, foods, sports and entertainments.
228

GEOGRAPHIC SEGMENTATION

While there could be some common preferences of people residing in same geographic area, it does not mean that everyone down a particular street buys the same items. Everyone in the northern regions of our country (as individual consumers or as businesses) does not have the same buying criteria, or responds to only one type of message.
229

GEOGRAPHIC SEGMENTATION.

This approach on its own doesn't define the consumer needs, it doesn't define the product or service required, or the promotional stance to take. It can, however, play a role in segmentation by providing further help in identifying how to reach the customers found in particular segments.
230

Psychographic Segmentation :divides

the market into Customers Groups according to

Lifestyles, Personalities & Values. It considers a number of potential influences on buying behaviour, including attitudes, expectations & activities of consumers. If these are known, then products & marketing campaigns can be customized so that they appeal more specifically to customer motivations.
Eg: Recent examples include the growth of demand for organic foods
or products that are ( perceived to be) environmentally friendly.231

PSYCHOGRAPHIC SEGMENTATION..

People within the same demographic group can exhibit very different psychographic profiles. Although this approach on its own does not define the product or service required, by identifying the internal drivers of decision makers it can help define the most appropriate promotional stance to take for different segments. The opinions that consumers hold & the activities they engage in will have a huge impact on the products they buy & marketers need to be aware of any changes.
232

Psychographic Factors for Segmentation

1. Lifestyle : Culture, Sports,

Outdoor, Page 3, etc

2. Personality : Introvert,
Extrovert, Compulsive, Ambitious, Authoritarian, etc

Behaviouristic Segmentation
Dividing the market on the basis of such variables as use occasion, benefits sought, user status, usage - rate, loyalty status, buyer readiness stage & attitude is termed as Behaviouristic Segmentation.

Behavioral Factors for Segmentation

1. Occasions : Regular, Special 2. Benefits : Utility, Durability 3. User Status : Non User, Regular 4. Usage Rate : Light, Heavy 5. Loyalty Status : Medium, Strong 6. Readiness Stage : Unaware, Aware 7. Attitude Toward Product : Positive,

Negative, Indifferent

Consumer & Business Markets

Markets can be broadly divided into : Consumer Markets (B2C) & Business Markets (B2B). Ultimate Consumers buy goods or services for their own personal or household uses that are satisfying strictly non-business ones. That constitutes what is called a Consumer Market. Business Users are business, industrial or institutional organizations that buy goods or services to use in their own organizations, to resell or to make other products. Business Users constitute the

Business Market.

Segmenting Business Markets

Some of the bases for segmenting the consumer market are also useful for segmenting the business market for example, geographic basis, business demographics like size, etc., business market generally can be segmented by:

Type of customer Size of the customer Type of buying situation

Steps in Segmentation & Targeting

STEP 1:
Identify Bases for Segmenting the Market

STEP 2:
Develop Profiles of Resulting Segments

STEP 3:
Develop Measures of Segment Attractiveness

STEP4:
Select the Target Segments

STEP 5:
Ensure that Segments Are Compatible

The Marketing Segmentation Process

Find ways to group consumers according to their needs Find ways to group marketing actions available to the organization
Develop a market/product grid to relate the market segments to the firms products and actions

Select the product segments toward which the firm will direct its marketing actions

Take marketing actions to reach target segments

SEGMENTATION TOOLS
Three important Statistical tools commonly used for Market Segmentation are:

Conjoint Analysis

Cluster Analysis Factor Analysis

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Market Coverage Strategies based on Segmentation

Undifferentiated Multi-Segment Concentrated

Market Coverage Strategies based on Segmentation :

1. Undifferentiated Marketing Approach : [ Mass Market Approach ] : aims at serving all the customers by offering a single marketing mix.
Eg : Fire Insurance or Health Insurance.

2. Differentiated Marketing Approach : aims at targeting customers of various segments by offering different products / services for each segment.
Eg : Travel Agencies approach to Domestic Travelers, Business Travelers & International Travelers.

3. Concentrated Marketing Approach : or Single Segment Strategy aims at serve a single or just a few segments in the total market.
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Targeting Market Segments

Instead of aiming a single product & a single marketing programme at the mass market, most companies identify relatively homogeneous segments and accordingly develop suitable products & marketing programmes by matching the wants and preferences of each segment.

The chosen segments ( Target Market ) should be the most profitable for the company & should help in delivering superior value to the chosen customer base.

Factors for Targeting include :

1. Segment Size & Growth Potential 2. Structural Attractiveness : analysing present

& potential competitors, substitute products / services & the relative power of suppliers & buyers. 3. Companys Objectives & Resources
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The Target Marketing Process

Identify markets with unfulfilled needs Determine market segmentation Select market to target Position through marketing strategies

Product Positioning: Developing a

marketing program in such a way that the product is perceived to be very different from competitors products.

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PRODUCT POSITIONING
Positioning in Marketing is a process by which marketers try to create an image or identity in the minds of their target market for its product, brand or organization. Re-positioning involves changing the identity of a product, relative to the identity of competing products, in the collective minds of the target market. De-positioning involves attempting to change the identity of competing products, relative to the identity of your own product, in the collective minds of the target market.
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Product Positioning is a decision reached by a marketer to try to achieve a defined brand image relative to competition within a market segment. Product positioning decisions are strategic decisions and have an impact on long-term success of the brand.

Process of Determining the Positioning Strategy :

The following steps need to be taken to reach a decision about Positioning : Identify Competitors

Assessment of Consumers Perceptions of Competition

Determining Competitors Position Analysing the Consumers Preferences Making the Positioning Decision.

Product Differentiation (also known simply as Differentiation") is the process of distinguishing a product or offering from others, to make it more attractive to a particular target market. This involves differentiating it from competitors' products as well as a firm's own product offerings. Differentiation can be a source of competitive advantage. This is done in order to demonstrate the unique aspects of a firm's product and create a sense of value. The term Unique Selling Proposition refers to advertising to communicate a product's differentiation

UNIQUE SELLING PROPOSITION (USP)

A company must decide how many ideas (benefits, features, etc) to convey in its positioning to its target customers. Many marketers advocate promoting only one central benefit, which is called as the Unique Selling Proposition or USP for each brand and stick to it.
i.e. companies should favour one consistent positioning message. The brand should tout itself as "number one" on the benefit it selects. Number one positioning includes 'best quality', 'best performance', 'best service', 'lowest price', 'safest', 'fastest' etc.

UNIQUE VALUE PROPOSITION (UVP) : It may so happen that single benefit positioning i.e. USP may not be able to overpower competition, in which case a company should try to offer a unique combination of multiple benefit positioning known as Unique Value Proposition (UVP) in order to be successful.
For Eg : An Automobile can be positioned as a most fuel efficient, cheapest in its category, and providing best service.

Common bases used for Positioning include: Features Benefits

Usage
Manufacturing Process

Ingredients
Endorsements

Comparison
Product Class Price/Quality Country or Geographic Area

Positioning Statement or a Value Proposition : It is a statement expressed clearly in few words that identifies the target market for which the product is intended. It also specifies the product category in which it competes and highlights the unique benefit it offers. How Many Differences to Promote ?
Successful positioning depends on effectively communicating the brands differential advantage. A USP is an outstanding advantage and the best strategy to create a products position, provided it is not only persuasive for the consumers but also sustainable.

Some popular positioning approaches are:

Positioning by Corporate Identity Positioning by Brand Endorsement Positioning by Product Attributes and/or Benefits Positioning by Use Occasion & Time Positioning by Price-Quality Positioning by Product Category Positioning by Product User Positioning by Competitor

Repositioning

Developing a Positioning Strategy

What position do we have now? Does our creative strategy match it? What position do we want to own?

Do we have the tenacity to stay with it?

The Position
Do we have the money to do the job?

From whom must we win this position?

Positioning Strategies
How should we position ?
Attributes and Benefits? Price or Quality? Use or Application? Product Class?

Product User ?
Competitor ?

Cultural Symbols?

Developing a Positioning Platform

1. Identify the competitors

2.
3. 4. 5. 6.

Assess perceptions of them

Determine their positions Analyze consumer preferences Make the positioning decision Monitor the position

Positioning Errors
1. Under Positioning : When the brands position is so vague that it is seen as just another entry in a crowded marketplace. 2. Over Positioning : Buyers may have too narrow an image of the brand and they may think it to be unaffordable for them.

Positioning Errors.
3. Confused Positioning : Buyers might have a confused image of a brand resulting from company's making too many claims or changing the brand's positioning too frequently. 4. Doubtful Positioning : Buyers may find it hard to believe the brand claims in view of the product's features, price or manufacture.

Differentiation
Differentiation is the process of creating a different and distinguished offering by a company through a number of available tools, which adds meaningful value to the offering. Criteria for Differentiation : All products can be differentiated to some extent, but not all brand differences are meaningful or worthwhile for which it should satisfy one or more of the following criteria : Important, Distinctive, Superior, Preemptive Affordable, Profitable, etc.

Differentiation may be attained through many features that make the product or service appear unique. Possible strategies for achieving differentiation may include: Warranties ( Khaitan Fans, Whirlpool ) Brand image ( Nike Shoes ) Technology (Hewlett-Packard Printers, I Pods) Features ( Nokia Mobile Hand sets ) Quality / Value ( Sony ) Service / Dealer Network ( Maruti Cars )
261

Types of Differentiation

1. 2. 3. 4.

Product Differentiation Service Differentiation Personnel Differentiation Image Differentiation

Differentiation.
There are several variables through which a company can differentiate its market offerings such as : 1. Product Differentiation : A product can be differentiated in many ways such as : by changing the form and by varying the features or by setting a superior performance quality or by having a unique and superior design or by having a high degree of reliability or higher durability or simply by having a unique style. Eg : I-Pod, I-Phone, etc

Differentiation.
2. Service Differentiation : When the physical product cannot be easily differentiated, the key to competitive success may lie in adding valued services & improving their quality. A company does so by providing miscellaneous Services, offering an improved product warranty or maintenance contract; it can also offer rewards, provide customer training, etc. Eg: Maruti Cars

3. Personnel Differentiation : Companies can gain a strong competitive advantage through having better trained people. Better trained personnel exhibit six
characteristics: Knowledge & Competence, Courtesy towards Customer, Individual Credibility, Reliability, l Responsiveness towards Customers, & l Communication Skills.

Differentiation.
4. Image Differentiation: Brand Identity & Brand Image need to be distinguished. Identity comprises the ways that a company aims to identify or position itself or its products. Image is the way the public perceives the company or its product. Eg : Nike Sports wear, Sony, etc

Positioning is the result of differentiation decisions. It is the act of designing the company's offering and identity (that will create a planned image) so that they occupy a meaningful and distinct competitive position in the target customer's minds. The end result of Positioning is the creation of a
market-focused value proposition, a simple clear statement of why the target market should buy the product. Once the company has developed a clear positioning strategy, the company must choose various signs and cues that buyers use to confirm that the product delivers the promise made by the company.

267

Product
Product is anything that can be offered to a market, such goods, services, places, ideas, information, etc, for attention, acquisition, use, or consumption that might satisfy a need. It is considered to be a bundle of benefits / utilities. A Brand is an offering from a known source.
Value and Satisfaction : In terms of Marketing, the Product or Offering will be successful, if it delivers value & satisfaction to the target buyer.
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Types of Products
PRODUCTS

Consumer Products

Services

Industrial Products
269

Product Classification: Consumer Goods

Convenience Goods
Buy frequently & immediately

Shopping Goods
Buy less frequently

Low priced Mass advertising Many purchase locations i.e Candy, newspapers

Higher price Fewer purchase locations Comparison shop i.e Clothing, cars, appliances

Specialty Goods
Special purchase efforts

Unsought Goods
New innovations

High price Unique characteristics Brand identification Few purchase locations i.e Lamborghini, Rolex

Products consumers dont want to think about Require much advertising & personal selling i.e Life insurance, blood donation
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Product Classification: Industrial

Goods

Raw materials, manufactured materials, and parts

Capital Items

Materials and Parts

Industrial products that aid in buyers production or operations

Supplies and Services

Operating supplies, repair/ maintenance items

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Product Item / Line / Mix

Product Item

A specific version of a product that can be designated as a distinct offering among an organizations products.

Product Line

A group of closely-related product items.

Product Mix
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All products that an organization sells.

Product Mix

Width : No. of Product Lines a company has

Length : No. of Products in a Product Line

Depth : No. of variants of each product within

a Product Line.

Consistency : How closely related the

Product Lines are in end use
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Eg -1 : Gillettes Product Lines & Mix

Depth of the Product Lines

Width of the Product Mix

Blades & Razors
Fusion 5 blade Mach 3 Turbo Mach 3 Sensor Trac II Atra Swivel Double-Edge Lady Gillette Super Speed Twin Injector Techmatic

Toiletries
Series Adorn Toni Right Guard Silkience Soft and Dri Foamy Dry Look Dry Idea Brush Plus

Writing Instruments
Paper Mate Flair S.T. Dupont

Lighters
Cricket S.T. Dupont

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Line Stretching : Line stretching occurs

when the company lengthens its product line beyond its current length. Down Market Stretch: A company position in the middle market may want to introduce a lower price line for any of three reasons:
1. The company may notice strong growth opportunities down the line. 2. The company may wish to tie up lower end competitors who may otherwise try to move up market and thus offer low priced offering. 3. The company may find that the middle market is stagnating or declining.

 Up Market Stretch : Companies may wish to enter the high end of the market for more growth, higher margins or simply to position themselves as full-line manufacturers. Two Way Stretch: A company serving the middle market might decide to stretch their line in both directions. Line Filling : A product line can be also be lengthened by adding more items within the present range. Eg: Maruti introduces Alto in

between Zen & 800

THE PRODUCT LIFE CYCLE

PLC concept is concerned with the courses that a products sales and profits take over its life time. The concept holds that these two parameters (sales & profits) change over time in a predictable way, and that products go through a series of five distinct stages: 1. 2. 3. 4. 5. New Product Development or Pre-Introduction Introduction Growth Maturity Decline

Each of these stages provide distinct opportunities and threats, thereby affecting the firms strategies and marketing programmes.

Product Life Cycle Curve

Sales & Profits in Rs.
Sales

Profits

Time
New Product Development Introduction Growth Maturity Decline

Sales & Profits Over the Products Life From Inception to Demise

Features of Each Stage of the PLC Curve

S a l e s

Introduction Growth High & Increasing Low sales Low growth Profit is zero Few competitors
sales / profits

Maturity
Static but high sales and profits Emphasis on low costs

Decline
Declining sales

Entry of competitors
Stable price

Declining profit or losses

Exit of competitors

High promotional expenditure

Fight for market Stable promotional share with established expenditure competitors Competition is the peak

Reduced promotional expenditure

Reduced price

Time

Product Life Cycle has five distinct stages:1. New Product Development : Begins when the company finds and develops a new product idea. At this stage sales are zero, companys investment costs mount. 2. Introduction : A period of slow sales growth as product is introduced in the market. Profits are non existent at this stage because product introduction cost are high. 3. Growth : A period of rapid market acceptance & increasing profits. 4. Maturity : A period of slowdown in sales growth as product gets acceptance by almost all potential buyers. Profits level off or decline because of increased marketing outlay to defend the product against competition.

PLC STAGES

5. Decline : A period when sales fall off and profits drop .

PRODUCT LIFE CYCLE STRATEGIES

THE INTRODUCTION STAGE

Starts when the product is first launched . Takes time and the sales growth is slow. Profits are negative or low as sales are low and distribution and promotion expenses are high. As market is not ready to accept product refinement at this stage the firm produces a basic version of the product. Selling is focused on those buyers who are ready to buy. The market pioneer must choose a launch strategy consistent with the intended product positioning. It should realize that it is the first step in the total marketing plan for the PLC. If pioneer uses launch strategy to make a killing it sacrifices long revenue for short term gain. As pioneer moves to later stages it will have to continually formulate new pricing , promotion and other marketing strategies.

PRODUCT LIFE CYCLE STRATEGIES

THE GROWTH STAGE

If the new product satisfies the market, it will enter he growth stage. Sales will start climbing quickly. Early adopters will continue to buy, later buyers will start following their lead especially if they hear favourable word of mouth New competitors may now make an entry attracted by the profit opportunities by adding new features Market will now expand Increasing competition leads to an increase in number of distribution outlets Prices remain where they are or fall only slightly Promotion spending may be the same or slightly higher Goal is educating the customers and meeting competition Profits increase as promotion costs are over large volumes and unit manufacturing costs fall

PRODUCT LIFE CYCLE STRATEGIES

THE GROWTH STAGE ( Contd )

The firm uses several strategies to sustain rapid growth as long as possible It improves product quality and adds new product features and models It enters new market segments and develops new distribution channels Shifts some advertising from building product awareness to product conviction and purchase It lowers product prices to at the right time to attract more buyers At his stage the firm faces a trade off between high market share and high current profit By spending a lot of money on product improvement, promotion, and distribution the firm can capture a dominant position In doing so it gives up maximum current profit which it hopes to make up in the next stage

PRODUCT LIFE CYCLE STRATEGIES

THE MATURITY STAGE

At some point of time the products sales growth slows down and the product enters the maturity stage This stage lasts longer than the previous stages The slowdown in sales growth results in many producers with many products to sell The overcapacity in the market leads to greater competition Competitors begin marking down prices, increasing their advertising and sales promotion The R&D budgets are increased to find better versions of the product These steps lead to a drop in profit Weaker competitors start dropping out (decline) The market eventually contains only well established competitors Most successful products are in a stage of continuous evolution to meet changing customer needs and preferences

PRODUCT LIFE CYCLE STRATEGIES

THE MATURITY STAGE ( Contd )

At this stage firms may also chose to modify he market , the product or he marketing mix In modifying the market the firm tries to increase the consumption of the current market It looks for new users and market segments. Looks for ways to increase usage among present customers The firm may also try modifying the product by changing the characteristics such as quality, features, or style to attract the new users and inspire more usage It may improve the products quality and performance, its durability, reliability, speed and taste The firm can also try modifying the marketing mix to improve sales by changing one or more marketing mix elements. Can cut prices to attract new users and competitors customers. Better ad campaigns, aggressive sales promotion, trade deals. New and improved services.

PRODUCT LIFE CYCLE STRATEGIES

THE DECLINE STAGE

At this stage sales of most product forms and brands eventually dip. Decline may be slow or rapid Sales may plunge to zero or they may drop to a low level where they continue for many years Sales decline may be due to technological advances, shifts in consumer tastes, and increased competition As sales and profits decline some firms withdraw from the market Those remaining prune their product offering, drop smaller market segments and marginal trade channels Some firms cut the promotion budget and reduce the prices further Carrying a weak product is costly for a firm Products failing reputation can cause customer concerns about firm and its other products Keeping a weak product delays the search for replacements, creates a lopsided product mix, hurts current profits, weakens companys foothold on the future.

PRODUCT LIFE CYCLE STRATEGIES

THE DECLINE STAGE ( Contd )

At this stage a firm needs to pay more attention to the ageing products . The firms task is to identify those products in the decline stage by regularly reviewing sales, market share, costs and profit trends The firms has to decide whether to maintain, harvest or drop each of these declining products Firm may decide to maintain the brand in the hope that competitors will leave the industry May also decide to reposition or reformulate the brand in the hope of moving it back to the growth stage Firm may decide to harvest the product, which means reducing various costs (plant and equipment, maintenance, R&D, advertising, sales force) and hoping that sales hold up. Harvesting, if successful, increases firms profit in the short run Firm may also decide to drop the product from its line May sell it to another firm or liquidate it at salvage value

New Product Development

In Business, New Product Development (NPD) is used to describe the complete process of bringing a new product or service to market.
There are two parallel paths involved in the NPD process: one involves the idea generation, product design & detail engineering; the other involves market research and marketing analysis. Companies typically see new product development as the first stage in generating & commercializing new products within the overall strategic process of Product Life Cycle management used to maintain or grow their market share.
288

Causes of New Product Failures

Overestimation of Market Size Product Design Problems Product Incorrectly Positioned, Priced or Advertised Costs of Product Development Competitive Actions
a. b.

To create successful new products, the company must :

understand its customers, markets and competitors. develop products that deliver superior value to customers.

New Product Development Process

290

New Product Development Process

Idea Generation Idea Screening Conceptual Testing Business Analysis Product Development Test Marketing Commercialization

Idea Generation & Screening

Idea

Generation stage includes alternative specifications for product concepts utilizing end user analysis or problem analysis. Focus groups and direct observation provide insights for product development. Brainstorming is used for Idea Generation of new product or service The Idea Screening Stage begins to confirm the new product concept. Product candidates are evaluated on initial estimates of potential demand & the chances/barriers to success.

NPD Process : 1. Idea Generation

Systematic Search for New Product Ideas

Internal sources
Customers Competitors Distributors Suppliers

Lab Experiments

2. Idea Screening : The object is to eliminate unsound concepts prior to devoting resources to them.
The screeners must ask at least these questions: i. Will the customer in the target market benefit from the product? ii. What is the size and growth forecasts of the market segment/target market? iii. What is the current or expected competitive pressure for the product idea? iv. What are the industry sales and market trends the product idea is based on? v. Is it technically feasible to manufacture the 294 product?

3. Concept Development & Testing :

Develop the Marketing & Engineering details :
i. ii. iii. iv. v. vi. vii. 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? 295

4. Business Analysis :

Estimate likely selling price based upon competition and customer feedback :
Estimate sales volume based upon size of market b. Estimate profitability and breakeven point
a.
296

5. Product Development : ( Technical Implementation ) :

a) New program initiation b) Resource estimation

c) Requirement publication
d) Engineering operations planning e) Department scheduling f) Supplier collaboration g) Logistics plan

h) Resource plan publication

i) Program review and monitoring j) Contingencies planning
297

6. Market Testing :
i. Produce a physical prototype & test

the product in typical usage situations. ii. Conduct focus group customer interviews or introduce at trade show. iii. Make adjustments where necessary. iv. Produce an initial run of the product and sell it in a test market area to determine customer acceptance.

7. Commercialization : (often considered post-NPD) Launch the product Produce & place advertisements & other promotions Fill the distribution pipeline with product
299

Stages in the Consumer Adoption Process

Awareness

Interest

Evaluation

Trial

Adoption

Adopter Categories
Percentage of Adopters

Early Majority Innovators

Late Majority

Early Adopters
13.5%

34%

34% 16%

Laggards

2.5%

Time of Adoption Late

Early

The Diffusion of Innovations Theory : 1. Innovators : Risk Takers, Variety Seekers, High
Product Interest, Less Well Integrated, More Individualistic.

2. Early Adopters : Independent, Quick to Assess

Social Leaders, Popular, Educated;

3. Early Majority : Deliberative, Adopt only if they see

No Risk, Many informal social contacts;

4. Late Majority : Skeptical, Traditional, Lower SocioEconomic Status, Extremely Risk Averse.

5. Laggards : Resist / Postpone / Avoid Spending,

Neighbours & Friends are main info sources, Fear of Debt.

302

Influence of Product Characteristics on the Rate of Adoption

Communicability Can results be easily observed or described to others? Relative Advantage Is the innovation superior to existing products?

Divisibility
Can the innovation be used on a trial basis?

Product Characteristics

Compatibility Does the innovation fit the values and experience of the target market?

Complexity
Is the innovation difficult to understand or use?

Brand Management
A Brand is an identifying name, term, symbol, word/s, design or mark or a combination of these that distinguishes a product or a company from its competitors.
Usually Brands are registered (trade-marked) with a regulatory authority and so cannot be used freely by other parties. Branding is an essential part of marketing. Brand Management is the application of marketing techniques to a specific product, product line or brand. It seeks to increase the perceived value to the customer and thereby Increase brand image & brand equity.

Brand Name

Brand Name refers to Words, Letters or Symbols that make up a name used to identify and distinguish the firms offerings from those of its competitors. Brand Identity refers to a unique set of brand associations that the brand strategist aspires to create or maintain.

Brands Marks or Logos

Trademark is a Registered Brand Name / Mark

Trade Mark is a Brand that has

been given legal protection and has been granted solely to its owner.

Most Valuable Global Brands

Brands Brand value

Coca Cola Marlboro Nescafe Kodak Microsoft Budweiser Kellogg's Motorola Gillette Bacardi
Source: Financial World

$ 36 $ 33 $ 11 $ 10

Billion Billion Billion Billion

$ 9.8Billion $ 9.7 Billion

$ 9.3 Billion $ 9.2 Billion $ 8.2 $ 7.1 Billion Billion

What is a Brand ?

Its the companys definition of what they have to offer. A brand is a product that has a personality. A promise to the customer, but it must be backed up by performance. What the customer knows about your specific product. Its your image. A brand signifies a relationship with the customer. It is the companys most valuable asset. Its also the main differentiator, the best defense against price competition & the key to customer loyalty.

Meanings conveyed by a Brand

Attributes Benefits Values Culture Personality Satisfaction

Advantages of Branding :
Easy Selling Legal Protection Customer Loyalty Easy Market Segmentation Image Building

According to Jean-Noel Kepferer, a brand is complex symbol and capable of conveying up to six dimensions or meanings: 1. Physique: Physique dimension refers to the tangible, physical aspects. The physical dimensions are usually included in the product such as name, features, colours, logos & packaging. Eg : The physique of IBM brand would be, Servers, Desktop / Notebook - PCs & Service, Etc. 2. Personality: Marketers deliberately may try to assign the brand a personality; or people on their own may attribute a personality to a brand. It is not surprising that people often describe some brands by using adjectives such as young, masculine, feminine, exciting, rugged, rebel, energetic, etc., as if they are living persons. Brands usually acquire personalities because of deliberate communications from marketers and use of endorsers. Bajaj Pulsar ads communicate Definitely male. The personality of Boost is seen as young, dynamic, energetic and an achiever.

3. Culture: Culture includes knowledge, belief, rites and rituals, capabilities, habits & values. A brand reflects its various aspects and values that drive it. Culture manifests various aspects of a brand. For instance, Apple computers reflect its culture. It is a symbol of simplicity, and friendliness. Its symbol (munched Apple) connotes being different from others and not following the beaten path. Mercedes symbolises disciplined, efficient, high quality German Engineering. 4. Relationship: Brands are often at the heart of transactions and exchanges between marketers and customers. The brand name Nike is Greek and relates to Olympics & suggests glorification of human body. Just Do It is all about winning, the unimportance of age, and encourages us to let loose. Apple conveys emotional relationship based on friendliness. Relationship is essentially important in service products.

5. Reflection: This refers to defining the kind of people who use it. It is reflected in the image of its consumers: young, old, rich, modern and so on. For example, Pepsi reflects young, fun loving, carefree people. The reflection of Allen Sollys brand is a typical young executive. However, it does not by any chance mean that they are the only users. The concept of target market is broader than reflection. 6. Self-Image: This means how a customer relates herself / himself to the brand. Self-Image is how a customer sees herself / himself. The self-image of users of Bajaj Pulsar motorcycle is believed to that of be tough, young males. Users of Nike see their inner reflection in the brands personality.

Major Branding Decisions

315

Characteristics of a Brand : At the time of choosing a

brand name, various aspects require careful consideration. Very often, manufacturers invite brand names from the consumers, & Distributors.

General Considerations in Branding :

1. The name should be easy to read, pronounce,

understand & recall. Eg : Pepsi, Dettol, Tide, etc 2. The name should be appropriate for the product. Eg: All Clear, Head & Shoulders, Close Up, etc 3. It should be short & easy to remember like Vim, Lux, Zen, Gems, Wheel, Dove, Ikon, Alto, etc. 4. It should not have any negative meanings associated in the local language. Eg : NOVA, HENKO, 5. As far as possible, it should be descriptive in nature. Eg : Fair & Lovely, First Flight Courier, DTDC,
316

Types of Brands :
(Brand Sponsor Decisions)

Manufacturers Brand
Private Brand (Distributors Brand) Generic Brand

Licensed Brand

Manufacturer Brands : are initiated by

manufacturers & identify the producer. This type of brand generally requires the initiator involvement in its distribution, promotion & pricing decisions. The brand quality is assured / guaranteed & the aim of promotion-mix is to build company and / or Brand Image and encourage Brand Loyalty.

Private Brands are resellers initiated brands

& the manufacturers are not identified on the products. Wholesalers & Retailers use Private Brands to develop more efficient promotions to build store image & generate higher gross margins. The Resellers have the freedom and advantage of
buying specified quality at an agreed upon cost from the manufacturer without disclosing manufacturer identity. Nearly 20% of he consumer goods sold in most of the Supermarkets / Hypermarkets in developed countries are Private Brands. Egs : Wal-Mart, Shoppers Stop, Food World, Nilgiris

Generic Brands are those, which indicate only the product category, such
as Aluminium-Foil, Cellophane-Tape, Granite,
Tissue-Paper, Teak-Wood, Medicated-Cotton, etc . Only the generic name of the product is mentioned & the manufacturing companys name is written just to conform to legal requirements, such as DDT, Urea, Paracetamol, Tetracycline, etc. They do not include any other identifying marks. Generic Brands are usually sold at lower prices than their branded versions.

Generic Brands are fairly common in the AgroIndustry, Pharmaceutical Industry, Industrial Raw -Materials, Pesticides, etc

Licensed Brand is a relatively new trend & involves licensing of trademarks. Entering into a licensing agreement, a company allows approved manufacturers to use its trademark for a mutually agreed fee. The royalties may range anywhere between 2 % to10 %.
The company obtaining the license would be responsible for all production and promotional activities, & would bear the costs in case the licensed product fails. The benefits of this arrangement can bring extra revenues, free -publicity, new images & protection of trademark. Eg : P&G licensed its Camay brand of soap in India to Godrej for a few years.

Methods of Branding
( Brand Name Decisions)

1. Individual Branding : Separate Names for all Products of one company. Eg : HUL Soaps : Lux, Rexona, Dove, Life Bouy, Pears, Liril, Breeze, etc 2. Umbrella or Family Branding : Blanket Family Name for all Products or separate Family Names for separate Product Lines Eg : Lakme, Ponds, Maggie, Nescafe, etc

Methods of Branding..

3.Corporate Branding : Also known as

Endorsement Branding is using Companys
Trade Name combined with individual product names. Eg : TATA STEEL, TATA SALT, SONY, GODREJ, BAJAJ, HONDA, TOYOTA, etc.

4.Co - Branding : Associating & promoting

two brands together. Co-branding, also called Brand Partnership, is when two companies form an alliance to work together, creating marketing synergy.
Eg : HP & Intel, Citibank & Indian Oil, Maruti Auto Card & SBI Credit Card, etc

Co-Branding is an arrangement that associates a

single product or service with more than one brand name, or otherwise associates a product with someone other than the principal producer. The typical co-branding agreement involves two or more companies acting in cooperation to associate any of various logos, color schemes, or brand identifiers to a specific product that is contractually designated for this purpose. The object for this is to combine the strength of two brands, in order to increase the premium consumers are willing to pay, make the product or service more resistant to copying by private label manufacturers, or to combine the different perceived properties associated with these brands with a single product.

List of HULs Famous Brands:

Product Category : Household Care, Fabric Cleaning, Skin Cleansing, Skin Care, Oral Care, Hair Care, Personal Grooming & Tea-based Beverages, under following famous Brands:

Lux, Lifebuoy, Dove, Pears, Hamam, Breeze, Liril, Rexona, Vaseline, Fair & Lovely, Ayush, Ponds, CloseUp, Surf, Sunsilk, Lipton, Bru, Vim, Surf, Pepsodent, All Clear, Wheel, Lakme, Kissan, Kwality Walls, etc

Four Brand Strategies

Existing
Existing

Product Category New Brand Extension

Line Extension Multibrands

Brand Name

New

New Brands

326

Brand Strategy
Line

Extension : Existing brand names

extended to new forms, sizes & flavors of an existing product category. Brand Extension : Existing brand names extended to new or modified product categories. Multibrands : New brand names introduced in the same product category. New Brands : New brand names in new product categories.
327

Brands Equity
Brands have equity because they have high awareness, many loyal consumers, a high reputation for perceived quality, proprietary assets such as access to distribution channels or to patents, or the kind of brand associations (such as personality associations) Brand Equity is defined in terms of marketing effects uniquely attributed to the brands.

Brand Equity

329

Brand Equity is the difference between the expected future sales of a branded product & an unbranded product.
i.e. Brand Equity is the value of a brand built up over a period of time. It is composed of four major components namely : Image, Perception,

Awareness and Loyalty.

330

BRAND AWARENESS: is the ability of prospective customers to recall a brand & its product category.
BRAND ASSOCIATION : conveys the meaning of the

product in terms of how it fulfills a customer need. Brand Associations create positive feelings which create a sense of uniqueness in favour of the Brand. Companies & people who behave in a socially responsible manner are much more likely to enjoy ultimate success than those whose actions are motivated solely by profits.
BRAND LOYALTY : is the physical / emotional relationship

between a company / product & its customers.

Brand Loyalty is the biased behavioural response expressed over time by some decision-making unit, with respect to one or more alternative brand out of a set of such brands, and is a function of psychological processes. Advantages of Brand Loyalty :
Generates higher sales volume / profits Gives flexibility in pricing & in the introduction of new products 3. Lower cost for the company 4. Publicity & WOM recommendations attract new customers 5. Greater Trade advantages.
1. 2.

Walfried Lasser. Banwari Mittal & Arun Sharma identified 5 dimensions of

Customer Based Brand Equity:

1. Performance: The aspect of brand equity focuses on the physical and functional attributes of a brand. Customers are concerned about how fault free and durable the brand is, based on their judgement. 2. Social image: This focuses on what social image the brand holds in terms of its esteem for customers social and reference groups. 3. Value: This refers to the customers value perception of the brand. This is the ratio between what are the involved costs and the perceived delivered value. 4. Trustworthiness: This means the customers extent of faith in the brands performance, quality, and service. This reflects reliability of the brand, that it would always take care of customers interest and the people behind the brand can be trusted. 5. Identification: To what extent customers feel emotionally attached to the brand. Their association with the brand is important because it matches their self-concept & aspirations. This means psychological association with what the brand stands for in the customers perceptions.

Packaging is the science, art & technology of enclosing or protecting products for storage, distribution, sale & use.
Packaging also refers to the process of design, evaluation & production of packages. Packaging can be described as a coordinated system of preparing goods for transport, warehousing, logistics, sale & end use. Purpose of Packaging :- To :contain, protect,
preserves, transport, inform & sell a Product
334

PACKAGING

Packaging & Labelling

Packaging is the art & science of designing & producing the container or wrapper for a product. It has become extremely important & is often referred to as the 5th P of the Marketing Mix Steps in developing a good package:
Develop specific elements of the package, Elements must support products position and marketing strategy.

Labeling

: Package Labelling or a

Label is any written, electronic or graphic communications on the packaging or on a separate associated Label.

Label performs several functions:

Identifies product or brand Describes several things about the product Promotes the product through attractive graphics

336

Purposes of Packaging & Labels

Packaging & Package Labeling have several objectives, namely : 1.Physical Protection : The objects enclosed in the
package may require protection from, shock, vibration, compression, temperature, etc.

2. Barrier Protection : A barrier from oxygen, water

vapour, dust, etc., is often required in order to keep the contents clean, fresh, sterile and safe for the intended shelf life .

3. Containment or Agglomeration : Small objects

are typically grouped together in one package for reasons of convenience & efficiency.
337

4. Information transmission : Packages & Labels communicate how to use, transport, recycle, or dispose of the package or product. For certain items like pharmaceuticals, food, medical & chemical products, some types of information are statutatory requirements. Some packages and labels also are used for track & trace purposes. 5. Marketing : The packaging and Labels can be used by marketers to encourage potential buyers to purchase the product. Package graphic design and Marketing communications are applied to the surface of the package and (in many cases) the point of sale display. 6. Security : Packaging can play an important role in reducing
the security risks of shipment. Packages can be made with improved tamper resistance to deter tampering and also can 338 have tamper-evident features to help indicate tampering.

7. Convenience : Packages can have features that add convenience in distribution, handling, stacking, display, sale, opening, reclosing, use, dispensing, and reuse. 8. Portion Control : Single serving or single dosage packaging has a precise amount of contents to control usage. Bulk commodities (such as salt) can be divided into packages that are a more suitable size for individual households. It is also aids the control of inventory. Eg: selling sealed one - litre bottles or packets of milk, rather than having people bring their own bottles to fill themselves.
339

340

What is Price ?
Price Has Many Names
Rent Fee Rate Commission Assessment Tuition Fare Toll Premium Retainer
Bribe

Salary Wage Interest Tax

341

Definition of Price
Price is the amount of money charged for a
product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service. It is the only
element in the Mktg. Mix that generates revenues.

Pricing refers to the process of setting a specific

price for a product or service offered. Pricing allows

Sellers to :
Charge lower prices & / or reap higher margins. Monitor customer behavior & tailor offers. Alter prices to adjust for changes in demand / costs. Negotiate prices in online auctions and exchanges. 342

Pricing Process
1. Set Pricing Objectives 2. Analyze demand 3. Draw conclusions from competitive intelligence 4. Select pricing strategy appropriate to the P, E, S, T Environment. 5. Determine specific prices
343

PRICING OBJECTIVES
1. SURVIVAL (short-term objective, i.e. due to
heavy competition, changing customer needs, too much production, not enough sales ) RETURN ON INVESTMENT PROFIT MAXIMIZATION MARKET STABILISATION MARKET SHARE LEADERSHIP (lower price due to economy of scale) MEETING / FOLLOWING COMPETITION
344

2. 3. 4. 5.

6.

Pricing Objectives

(Contd .)

6. PRODUCT DIFFERENTIATED (i.e.

car manufacturing -add on purchases) 7. MARKET SKIMMING (enter market with

high price, lower as market matures) 8. MARKET PENETRATION (enter market with low price, increase as market stabilizes) 9. EARLY CASH RECOVERY 10. PREVENTING NEW ENTRY (Low price may prevent new entrants)
345

Factors to Consider in Pricing :

Internal Factors
Marketing Objectives Marketing Mix Strategies Costs Organizational considerations

External Factors
Nature of market and demand Competitors costs, prices & offers Other Environmental elements
346

Factors to Consider in Pricing : Internal Factors

Marketing Objectives Marketing Mix Strategies Costs Organizational considerations
Market positioning influences pricing strategy Other pricing objectives:
Survival Current profit maximization Market share leadership Product quality leadership

Not-for-profit objectives:
Partial or full cost recovery Social pricing
347

Factors to Consider in Pricing :

Internal Factors
Marketing objectives Marketing Mix strategies Costs Organizational considerations

Pricing must be carefully coordinated with the other marketing mix elements Target costing is often used to support product positioning strategies based on price Non-Price positioning can also be used
348

Factors to Consider in Pricing :

Internal Factors
Marketing objectives Marketing mix strategies
Types of costs:
Variable Fixed Total costs

Costs
Organizational considerations

How costs vary at different production levels will influence price setting
349

Factors to Consider in Pricing :

Internal Factors
Marketing objectives Marketing Mix strategies Costs
Who sets the price?
Small companies: CEO or Top Management Large companies: Divisional or Product Line Managers

Organizational Considerations

Price negotiation is common in Industrial settings Some Industries have Pricing Departments
350

Factors to Consider in Pricing : External Factors

Nature of Market & Demand
Competitors costs, prices & offers Other environmental elements
Types of markets
Pure competition Monopolistic competition Oligopolistic competition Pure monopoly

Consumer perceptions of price and value Price-demand relationship

Demand curve Price elasticity of demand
351

Factors to Consider in Pricing : External Factors

Nature of market and demand
Consider competitors costs, prices, and possible reactions when developing a pricing strategy Pricing strategy influences the nature of competition
Low-price low-margin strategies inhibit competition High-price high-margin strategies attract competition

Competitors costs, prices & offers

Other environmental elements

Benchmarking costs against the competition is recommended

352

Factors to Consider in Pricing :

External Factors
Economic conditions
Affect production costs Affect buyer perceptions of price and value

Nature of market and Reseller reactions to demand prices must be Competitors costs, prices, considered and offers Government may restrict

Other Environmental elements

or limit pricing options Social considerations may be taken into account

353

Pricing Methods (Approaches to Pricing)

1. 2. 3. 4. Cost Based Pricing Value Based Pricing Competition Based Pricing. Market Based Pricing

PRICING STRATEGIES
1. Skimming Price For Introducing New Products 2. Penetration Price 3. Loss Leader Price 4. Psychological Price
354

General Pricing Approaches

( I ) Cost-Based Pricing :

1. Cost-Plus Pricing :
Adding a standard markup to cost Price = Cost of Production + Margin of Profit. Ignores demand and competition

Popular Pricing technique because:

It simplifies the pricing process Price competition may be minimized It is perceived as more fair to both buyers & sellers 355

General Pricing Approaches : ( I ) Cost-Based Pricing :

2 ) Break-Even Analysis & Target Profit Pricing

Break-even charts show total cost and total revenues at different levels of unit volume. The intersection of the total revenue and total cost curves is the break-even point. Companies wishing to make a profit must exceed the break-even unit volume.
356

General Pricing Approaches..

( II ) Value-Based Pricing:

Uses buyers perceptions of value rather than sellers costs to set price. Measuring perceived value can be difficult. Consumer attitudes toward price and quality have shifted during the last decade.
Introduction of less expensive versions of established brands has become common.
357

General Pricing Approaches.. ( III ) Competition-Based Pricing : Also called Going-Rate Pricing
May price at the same level, above, or below the competition Sealed - bid Pricing : Bidding for work is another variation of competitionbased pricing

358

Pricing Strategies
Market-Skimming Pricing :
Setting a high price for a new product to skim maximum revenues layer by layer from segments willing to pay the high price.

Market-Penetration Pricing :
Setting a low price for a new product in order to attract a large number of buyers and a large market share.
359

3. Loss Leader Pricing :

Loss Leaders are goods or services offered at steep discounts (generally below cost) in order to attract new customers to a store.
It is a time-honored practice that has been met with much success, especially by large discount retailers. The intent of this pricing strategy is to not only have the customer buy the (Loss Leader) sale item, but other products that are not discounted.
360

When to Use Loss Leader Pricing ?

Move Overstock: If you have inventory that isn't moving or if you're overstocked on a particular item, a Loss Leader can move it. By cutting the price of such an item, you'll not only free up the shelf space and reduce inventory, but you'll also increase cash flow. Brand Awareness: If you would like to be known for having low prices then the loss leader pricing strategy will help associate your business with that belief. Keep in mind that people want good quality merchandise for less money and not junk. Increased Traffic: Using loss leaders as a marketing tool can help gain new customers & increase return visits. People are likely come back to shop, when they 361 like a bargain .

PSYCHOLOGICAL PRICING
Psychological Pricing approach is suitable when consumer purchases are based more on feelings or emotional and factors such as love, affection, prestige, self-image etc, rather than rational factors. Price sometimes serves as a surrogate indicator of quality. Companies attempt to differentiate their offers based on non-functional product attributes, such as image and lifestyle etc.

Marketers set artificially high prices to communicate a status or high quality image. Psychological Pricing method is appropriate for perfumes, jewellery, autos, liquor, and ready-to-wear garments etc. and is not appropriate for industrial products.

Price Changes
Initiating Price cuts is desirable when a Firm : Has excess capacity Faces falling market share due to price competition Desires to be a market share leader
364

Price Changes.. Price Increases are desirable :

If a firm can increase profit, faces cost

inflation, or faces greater demand than can be supplied. Methods of Increasing Price Alternatives to Increasing Price Reducing product size, using less expensive materials, unbundling the product.
365

Price Changes
Buyer reactions to price changes must be considered. Competitors are more likely to react to price changes under certain conditions, such as : Number of firms is small Product is uniform Buyers are well informed
366

Unit - III

Marketing Channel System :Functions & flows; Channel Design.

Channel Management :- Selection, Training, Motivation & Evaluation of Channel Members; Channel Dynamics:- VMS, HMS, MMS; Market Logistics Decisions.
367

CHANNEL MANAGEMENT & DISTRIBUTION

368

PLACE or PHYSICAL DISTRIBUTION

is the third P of the Marketing Mix. It consists of two parts, namely ( I ) Channels of Distribution &

( II ) Logistics of Distribution Place is the market-place where the customer buys / consumes the product /service.
Place refers to how an organisation will distribute the product or service they are offering to the end user. The organisation must distribute the product to the user at the right place at the right time. Efficient and effective distribution is important if the organisation is to meet its overall marketing objectives. Place is sometimes referred to as the Marketing Channels, Physical Distribution, Logistics or Location. 369

Distribution
Distribution: includes activities that make

products available to customers when and where they need them. A Channel of Distribution or Marketing Channel is an organisation or a set of individuals that directs the flow of products from producers to the consumers. Marketing Intermediaries : link producers to other intermediaries or to the ultimate users of the product. Operate between the producer or manufacturer and the final buyer.
370

Distribution Functions
Types of utilities Distribution offers: TIME...when the customers want to purchase
the product. PLACE...where the customers want to purchase the product. POSSESSION...facilitates customer ownership of the product. FORM...sometimes, if changes have been made to the product in the distribution channel, i.e. Pepsi/Coke, concentrate to bottlers.
371

The Distribution Channel

Manufacturers

Wholesalers / Brokers / Agents

Retailers Consumers
372

Channels of Distribution
Marketing Intermediary or Middleman is a marketing organization that links a producer & user within a marketing channel. Merchant Middleman : takes title to products by buying them Functional Middleman : helps in the transfer of ownership of products but does not take title to the products Retailer: buys from producers or other middlemen & sells to consumers Wholesaler : sells products to other firms
373

A Channel of Distribution comprises of a set of organizations which perform all of the activities required to move a product & its title from production to consumption. Types of Channel Intermediaries : There are many types of intermediaries such as Wholesalers, Agents, Retailers, Internet, Overseas Distributors, Direct Marketing (from manufacturer to user without an intermediary) etc. Two types of Channel of Distribution methods are commonly used : Indirect & Direct.
374

Indirect Distribution involves distributing your product by the use of one or more intermediaries such as : Manufacturer to Wholesaler to Retailer to a Consumer. Direct Distribution involves distributing direct from a manufacturer to the consumer. For Eg : Dell Computers selling directly
to its target customers.

The main advantage of Direct Distribution is that it gives a manufacturer complete control over their product.
375

Why a Firm May Want to Use Direct Channels :

Greater Control Lower Cost Value added subsequent to production process

Some Reasons for Choosing Direct Channels

11-4

Direct contact with Customer Needs

Quicker Response or Change in Marketing Mix

Suitable Middlemen Not Available

Distribution Channel Functions

Distribution Channel
Information

Key Functions
Gathering and distributing marketing research about the environment

Promotion Contact
Matching Negotiation Physical Financing Risk Taking

Developing and spreading persuasive communications about an offer Finding and communicating with prospective buyers
Shaping and fitting the offer to the buyers need Agreeing on price and terms of the offer so ownership or possession can be transferred Distribution: transporting and storing goods Acquiring and using funds to cover the costs of channel work Assuming financial risks such as the inability to sell inventory at full margin

Distribution Strategies
Depending on the type of product being distributed there are three common distribution strategies available: 1. Intensive Distribution: involves distribution through as many retail outlets as possible. It is mainly used to distribute low priced or impulse purchase products. Eg : Chocolates, Soft Drinks, etc. 2. Exclusive Distribution: Involves limiting distribution to a single outlet usually for is usually highly priced-products. Eg : Sale of Vehicles thro Exclusive Dealers.
378

3. Selective Distribution: A small

number of retail outlets are chosen to distribute the product. Selective Distribution is common with ConsumerElectronics i.e. products such as
computers, televisions, washing-machines, refrigerators, household -appliances, etc

where consumers are willing to shop around & where manufacturers want a large geographical spread.
379

Channels for Consumer Products (B2C)

A manufacturer may use multiple channels To reach different market segments To increase sales or capture a larger market share

15 | 380

Channels for Industrial Products

Producer to Industrial User ( B2B )

Usually

used for heavy machinery, airplanes, major equipments, etc Allows the producer to provide expert and timely services to customers

381

Channels for Industrial Products (contd)

Producer to Agent Middleman to Industrial User

Usually

used for operating supplies, accessory equipment, small tools, components, standardized parts, etc

382

Marketing Intermediaries
Justifications for marketing intermediaries :

Intermediaries perform essential marketing services Manufacturers would be burdened with additional record keeping & maintaining contact with numerous retailers Costs for distribution would not decrease, and could possibly increase due to the marketing inefficiencies of producers
383

Intermediaries are specialists in the exchange process, provide access to and control over important resources for the proper functioning of the marketing channel. ( Division of labour ).

Functions of Intermediaries :
Primary role of middlemen is to transform the assortment of products made by producers in the assortments desired by consumers. Producers make narrow assortments in large quantities, consumers want broad assortments in small quantities, discrepancy in quantity and assortment .i.e. to match Supply and Demand.
384

Other functions of Marketing Intermediaries include:

Assuming

Risk : Provide working

capital by paying for goods before they are sold.

Information flow Financing Payment & Title Negotiation Contacts Promotion

Flow.

385

CHANNEL TERMS & CONDITIONS The producer stipulates terms and condition and responsibilities of channel partners to develop better mutual understanding and usually include : Price Policy, Trade Margins,
Payment Terms, Territorial Demarcation, Guarantee/Returns Policy, & Mutual Responsibilities etc.

EVALUATION OF CHANNEL ALTERNATIVES : In making a decision about channel alternatives, producers evaluation criteria is generally based on some combination of the following factors: Product characteristics. Buyer behaviour and location. Severity of competition. Cost effectiveness and channel efficiency. Degree of desired control on intermediaries. Adaptability to dynamic market conditions.

Selecting Channel Members Customer needs : Attracting channel members : A

small chain hotel be advised to choose one travel agency chain or work in key cities that are likely to generate business.

Evaluating major channel alternatives

1. Economic Criteria : MGM Hotel : Tour Operators vs. Travel Agencies. 2. Control Criteria : Franchise control / Quality control

CHANNEL SELECTION & TRAINING After determining the most appropriate Distribution Channel, the producer has to select the most qualified parties and arranges for their training.
In case of Exclusive Dealerships & Franchisees where personal contact with customers and service delivery are important, company appointed dealers play an important role. They practically become the company for the customers and any negative impressions may severely damage company image & reputation.

MOTIVATING INTERMEDIARIES
Motivating channel intermediaries is a challenging task for producers, but essential to obtain best possible performance from them. Motivation programmes for channel

intermediaries focus mainly on Financial & Nonfinancial Rewards. Financial Rewards usually include higher margins, extended credit facilities, bonuses and allowances, special deals, and sharing intermediaries promotional expenses.

MOTIVATING INTERMEDIARIES
Non-financial Rewards include training programmes at company expenses in areas such as technical skills, service, selling territory -management, human resource, etc. Other Nonfinancial Rewards include sales and display contests, recognition for outstanding performance, company paid holidays, spending money on arranging lavish distributors/dealers meet at exotic places, etc.

PERFORMANCE EVALUATION OF INTERMEDIARIES : Producers must periodically evaluate performance of dealers against laid down and agreed upon parameters. The evaluation criteria differ across industries and from one company to another in the same industry. Companies may use a set of criteria that may include some combination of factors with differing weight given to each element in order of its importance, such as achievement of sales targets, average inventory maintained, performing promotional activities, customer service & attending training programmes etc.

Types of Wholesale Intermediaries

There are 2 main types of Wholesalers:

1.Merchant Wholesalers : who buy products from manufacturers & resell them to other intermediaries.

2.Functional Wholesalers : who do not take title, but only facilitate exchanges among producers and resellers, compensated by fees and/or commission.
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Types of Wholesalers ( Contd )

Merchant Wholesalers are of two types:
( 1 ). Full Service Wholesalers :- offer widest possible range of functions. Categorized as: a) General Merchandise MW : wide mix (unrelated), limited depth. b) Limited Line MW : only few products but an extensive assortment. c) Specialty Line MW : narrowest range of products. d) Rack Jobbers : are specialty line that own and maintain display racks, take back unsold products.
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Types of Wholesalers ( Contd )

( 2 ) Limited Service Merchant Wholesalers : provide only some of the marketing functions.
a) Cash

and Carry wholesaler : customers pay for and make their their own arrangements for transportation. No credit is extended. Mainly B2B. b) Truck Jobbers : Operate rolling
warehouses and sell a limited line of products directly from their trucks to their customers. Follow regular routes, primarily perishable products. Egs : Vegetables, Fruits, Flowers
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Types of Wholesalers ( Contd )

( 2 ) Limited Service Merchant -- Wholesalers : c) Drop Shippers or Desk Jobbers : take title, negotiate sales but do not take possession. d) Mail Order Wholesalers : use catalogues instead of sales force to sell.
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Types of Wholesalers ( Contd ) Agents & Brokers :

Negotiate purchases, expedite sales but do not take title. They are Functional Middlemen who bring buyers and sellers together. Compensated with commission / brokerage. Agents represent buyers and sellers on a long term basis. Brokers represent buyers and sellers on a temporary basis.
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Types of Agents & Brokers

1. Manufacturers Agent : Represent two or more sellers and offer customers complete lines. Handle non- competing or complementary products & have written agreements with the manufacturers. 2. Selling Agent : market either all specified line or manufacturers entire output. Perform every wholesaling activity except taking title of the product. Used in place of a marketing department. Represent non-competing product lines.
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Types of Agents & Brokers ( Contd.. )

3. Commission Merchant : focus primarily on the selling task. Receive goods on consignment from local sellers and negotiate sales in large central markets. 4. Auction Companies : provide storage for inspection. Sales made to the highest bidder. 5. Brokers : negotiate exchanges & perform the fewest intermediary functions. Assume no risk.
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Types of Wholesalers ( Contd )

Manufacturers Sales Branches & Sales Offices : are manufacturer owned & resemble merchant wholesalers operations. Sales Branches : sell product & provide support services to manufacturers sales forces
Sales Office : are normally associated

with Agents. Like Sales Branches, they are located away from a manufacturing plant & do not carry any inventory.
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Wholesalers Responsibilities
Buy

in large quantities and then sell in smaller quantities Deliver goods Stock in one place a variety of goods Promote products to retailers Provide market information for both producers and retailers Provide financial aid to Retailers in the form of delayed billing, loans, inventory management, etc
15 | 401

Wholesalers Services to Manufacturers

Provide instant sales forces to manufacturers Reduce manufacturers inventory costs by purchasing finished goods in sizable quantities Assume the credit risks associated with selling to retailers Furnish vital market information to the manufacturers
15 | 402

HIERARCHY OF MARKETING SYSTEM With the passage of time and changes in business environment and strategies, marketing channel systems evolve and new Wholesaling & Retailing Institutions appear. The traditional marketing channels include members who are independent entities and no party has complete control over others in the channel system. Each seeks to maximise its own profit goals without much concern for others in the same system.

VMS, HMS & MMS

Some recent changes in channel systems that have emerged include:
1. Vertical Marketing Systems (VMS),

2. Horizontal Marketing Systems (HMS), and 3. Multichannel Marketing Systems(MMS)

{ or Hybrid Systems }

Conventional Distribution Channel Vs. Vertical Marketing Systems

Manufacturer
Conventional Marketing Channel Wholesaler Retailer Vertical Marketing Channel Manufacturer

Retailer

Consumer

Consumer

Wholesaler

Vertical Marketing Systems (VMS)

Vertical Marketing System refers to an arrangement in which the whole channel focuses on the same target market at the end of the channel.
This includes Producer, Distributors, Wholesalers, & Retailers acting in an integrated manner.

Vertical Marketing Systems (VMS)

In a VMS, any channel member, a

Manufacturer, Distributor, Wholesaler, or a Retailer can become a Channel Captain, who helps direct the activities of the entire channel and tries to eliminate or resolve conflict. The Channel Captain assumes the leadership role because the captain is either the owner, a franchisee, or wields so much power that all others cooperate.

Types of Vertical Marketing Systems

Common Ownership at Different Levels of the Channel

1. CORPORATE

Degree of Direct Control

Contractual Agreements Among Channel Members

2. CONTRACTUAL

Leadership is Assumed by One or a Few Dominant Members

3. ADMINISTERED

Corporate VMS
Corporate VMS refers to the producers ownership of the entire channel, right from manufacturing to wholesaling & Retailing.
Egs : Vimal Fabrics, Titan Watches, Bata, etc
Manufacturer can accomplish this through vertical integration (acquiring firms at different levels of channel activity). This offers greater buying power, stable sources of supplies, better control of distribution and quality & lower overheads.

Administered VMS
Administered VMS is achieved when some members, because of their size, position and power in the industry, are in a commanding position to secure cooperation and support from resellers at different levels.
Members informally agree to cooperate with each other on matters like routine ordering, sharing inventory & sales information over networks, standardize accounting and integrate their promotional activities.

Administered VMS
The agreement is informal and the members retain some of the flexibility of traditional distribution system. Companies with strong brands command substantial market power & are able to get cooperation from resellers at different levels of distribution.
Egs: Hindustan Unilever Ltd., Procter & Gamble, Maruti Udyog Ltd, ITC, IBM, Sony, TELCO etc.

Contractual VMS
Contractual VMS consists of independent businesses at different levels in the channel including production & distribution, and is most popular. Members agree to cooperate with each other by entering into contract that spells each members rights & obligations and gain economies of size and sales impact.

Contractual VMS can be Franchiser, Wholesaler or Retailer Sponsored, such as Coke, Pepsi ,Body Shop, Shahnaz Herbal,

Vertical Marketing Systems

Type of Channel
Characteristics
Traditional
Administered Contractual Corporate

Vertical Marketing Systems

Amount of cooperation Control maintained by

Little or none
None

Some to good
Economic power and leadership

Fairly good to good Contracts

Complete
One company ownership

Typical

Examples

Independents

General Florsheim McDonalds Electric

Franchising
Formal contract governing : Supply Responsibilities Division of profits Franchisors provide : Use of trademark & Access to product Co-operative advertising Training & Standardized operating procedures Site selection & Plant design Financing, etc

Vertical Marketing System

Franchising

The franchisor permits the franchise to use its trademark, name and advertising. In U.S.A. 700,000 franchise ~about $ 850 billion sales Franchised hotels account ~ 65 percent of room supply.
Starting a new business: 20 percent chance for survival Buying an existing business: a 70 percent chance for survival Buying a franchise: a 90 percent chance for survival

Hotel franchises: Choice Hotels, Holiday Inns, Sheraton Inns, Hilton inns

Restaurant franchises: Mc Donalds, Burger King, KFC, Pizza Hut, T.G.I. Franchises

Vertical Marketing System

Franchising
Franchisor

Advantages
1. Capital for growth 2. Faster growth 3. Additional management 4. Additional income

Disadvantages
1. Lower potential profits 2. Controlling service quality 3. Controlling firm image

Franchisee
1. Lower risk 1. Franchisee fees 2. Established brand name 2. Lack of freedom 3. Successful business plan 3. Controlled by franchisor 4. Expert assistance

Horizontal Marketing System

Horizontal marketing system occurs when two or more related or unrelated companies working at the same level come together to exploit marketing opportunities. By coming together they have the option to combine their capital, production capabilities, marketing strengths to gain substantial advantage than by each company working alone.

Horizontal MS
In a Horizontal VMS, the arrangement can be on a temporary or permanent basis. Horizontal marketing system particularly offers efficiencies & economies of scale in promotion, marketing research, and bringing together specialists.
Egs : Credit Card Companies, Banks, Retail Petrol businesses & Consumer Goods companies have joined hands. Auto manufacturers have joined hands with finance institutions to finance customers.

Multi-Channel Marketing System

Companies use two or more channels to distribute same products to the same target market. Some companies use several marketing channels simultaneously to reach diverse target markets. Each channel involves different group of intermediaries. This system is also called Hybrid Channels or Multi-Channels MS or Dual Distribution.

Egs. of Hybrid Channels or MCMS :

1. LG sells its goods through retailers, company shop, and online.

2. Coca Cola supplies direct to McDonalds, and the fast food chain sells no other soft drinks but Coca Cola.

CHANNEL CONFLICTS
The goal of all channel members is to distribute products profitably and efficiently. However, at times they disagree about the methods to accomplish this goal. It is fairly common among channel members to make little or no effort to cooperate with each other.

Defn.: Channel conflict is a situation in which one channel member perceives another channel member(s) to be engaged in behaviour that prevents or impedes it from achieving its goals. The amount of conflict is, to a large extent, a function of goal incompatibility, domain and differing perceptions of reality.

Channel Conflict Management

To manage conflict, it is first of all necessary to understand the type, cause & intensity of the conflict. Types of Channel Conflict : 1. Vertical Channel Conflict : conflict between the
producer & distributors, or between wholesalers & retailers.

2. Horizontal Channel Conflict : situation

developing between channel members at the same level, such as when one stockiest starts price-cutting and others at the same level start complaining,

3. Multichannel Conflict : results when the producer

has established two or more different channels to sell the product to the same target market.

Causes of Channel Conflicts

Goal

Incompatibility : Manufacturer

wants to achieve rapid market growth via lower prices; Retailer interested in large margins Unclear Roles & Rights : Territory boundaries, (who gets credit for sale) Differences in Perception : Optimistic manufacturer, pessimistic retailer Level of Dependence : of Retailer on Manufacturer or vice-versa

Intensity of Conflict
This refers to how serious is the conflict. In some cases, the intensity of conflict might be just minor and at other times, the severity might demand immediate attention from the producer otherwise the consequences might be serious if it is not resolved.
Eg : Managing incidences of price-cutting or territory jumping can be handled relatively easily.

Managing the Channel Conflict

Managing conflict in certain cases may be quite a demanding task. Conflict magnitude can range from minor to serious leading to termination, lawsuits, or company boycotts. The frequency and seriousness of conflict determines how speedily the situation must be managed. Some of the common approaches for effective conflict management are : Regular Communication Forming Dealer Councils Arbitration & Mediation Co-option

PHYSICAL DISTRIBUTION
Physical Distribution or Outbound Logistics refers to the forward movement of products, services & information from a manufacturer to Its customers, and involves defined network of transportation links, warehousing / storage, and finally delivery at the destination in a cost effective manner within the desired time.
Terms such as Supply Chain Management & Logistics Management are much broader concepts than Physical Distribution.

Physical Distribution System includes Warehouse Management Transportation & Material Handling

Delivery & Storage

Transaction Processing

Cross Docking ( Re-Packing )

Ticketing & Marking ( Labels & Tags )
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Inventory Management : involves building

and maintaining enough product assortments to meet the customer demand. Investment in inventory forms a significant part of company assets and affects physical distribution costs in a major way.
Very little inventory can create shortages of products or out-of-stock situation. This is detrimental to company and can lead to brand switching, lower sales, and the most serious consequence of losing customers. When too much inventory of products is carried, particularly of slow moving products, costs and risks of product obsolescence, damage, or pilferage increase. To strike a balance, companies focus on determining when and how much to order.

Inventory Management .
To find out when to order, the marketer must know the order lead time, the usage rate, and the safety stocks required. Order Lead-time refers to average time lapse between placing the order and receiving supplies. The usage rate represents the rate at which the inventory of product gets sold during a specified time period. Buffer Stock is the extra inventory that is maintained to guard against out-of-stock situation from increased demand or to cover longer lead-time than expected. Following formula can be used to calculate when to reorder: Reorder Point = (Order Lead Time Usage Rate) + Buffer Stock

Inventory Management .

EOQ : To determine how much to order, its

necessary to examine inventory carrying costs and order processing costs. Considering both sets of costs determines Economic Order Quantity (EOQ), which is the order size that has the lowest total of both inventory carrying and order processing costs.
However, the aim of minimising total inventory costs must be weighed against meeting or exceeding customer service level objectives.

Inventory Management .
JIT : Just-in-Time approach is a system where-in products arrive as and when they are needed for use in production process or for resale. This allows companies to maintain very low inventory levels and purchases at that time are also in smaller quantities. JIT system reduces physical distribution costs, especially inventory and handling related costs.

Physical Distribution (contd) Materials Handling : deals with the

physical handling of goods, in warehousing & during transportation. Physical handling of products is necessary for efficient warehouse functions & transportation from the point of manufacture to final points of consumption. The nature of product often influences how a product should be moved and stored.

Materials Handling (contd)

Techniques & procedures used for material handling can increase warehouse capacity, reduce the number of times a product is handled, improve customer service and their satisfaction. Various activities such as packaging, loading, movement, labelling systems must be coordinated to reduce costs and increase customer value . Equipments such as Cranes, Conveyors, Fork-Lifts, Stackers, etc are used in Factories & Warehouses for Material Handling.

Warehousing
Warehousing is an important physical distribution function and refers to the design & operation of facilities for storing and moving goods. Warehousing functions offer time utility and help companies to adjust for dissimilar production & consumption rates. Especially, mass produced products create a much greater stock of products than can be sold in the market immediately and companies store excess stocks till the time, customers are ready to buy.

Warehousing
Warehousing activities include : Receiving, Identifying, Sorting, Dispatching, Goods to Storage, Holding Goods, Recalling, Picking & Assembling goods, etc Types of Warehouses : Private Warehouses :- owned and operated by the manufacturer or by another company. Public Warehouses :- Third Party owners offer their services to all firms.

Choice of Warehouses : can

range between Companys Own Dedicated Warehouses or shared space with others in Third Party Owned Warehouses. A company can also decide to have some kind of combination of both. By making the right choices, a company may minimise physical distribution costs.

TRANSPORTATION
Companies are concerned with transportation decisions because choices affect the pricing, delivery time & condition of goods when they arrive at destination. There are five main

transportation modes for moving goods that include Railways, Roadways, Waterways, Airways & Pipelines. Each of these offers
certain advantages & disadvantages. Some companies prefer to use a combination of these modes, depending on product nature, delivery schedule, and geographic locations.

Student Activity List out the Advantages & Disadvantages of each mode of Transportation.
438

Transportation (contd)

Carrier : A firm that offers

transportation services to producers.

Common Carriers : Services are available for

hire to all shippers

Contract Carriers : available for hire by one or

several shippers; not available to the general public Private Carriers : owned and operated by the shipper

Freight Forwarders : Agents who

facilitate the transportation process for shippers by handling the details of the process

Not in BhU Syllabus

A few Slides on Retailing have been included just for Students info - NP

Definition of Retailing
Retailing is the last stage in the distribution process & encompasses all the business activities involved in selling goods & services to Consumers for their personal, family or household use.
441

Classification of Retailers
1. Store Based & Non-Store Based

Under Store Based (depending on

type of Ownership)

1. Independent Store 2. Chain Store 3. Franchise Store 4. Leased Store 5. Consumer Co-operatives
442

Classification of Retailers
2. Food Oriented & General Merchandise Retailer: -

1. 2. 3. 4. 5.

Convenience Store Specialty Store Conventional Supermarket Departmental Store Hypermarket

443

Classification of Retailers (Contd .)

Non - Store Based Retailers ( I ) Traditional :

1. Direct Marketing / Selling 2. Telemarketing 3. Tele-Shopping ( TV ) 4. Network Marketing 5. Vending Machine

( II ) Non Traditional :
1. Internet ( On-Line Shopping ) 2. Video Kiosk / Catalog
444

Classes of In-Store Retailers

Independent Retailer : A firm that operates only one retail outlet Chain Retailer : A company that operates more than one retail outlet Department Store : A retail store that (1) employs 25 or more persons and (2) sells at least home furnishing, appliances, family apparel, and household linens and dry goods, each in a different parts of the store. Discount Store : A self-service, general merchandise outlet that sells products at lowerthan-usual prices
445

Classes of In-Store Retailers (contd) Convenience Store : A small food store that sells a limited variety of products but remains open well beyond normal business hours. Catalog Showroom : A retail outlet that displays well-known brands and sells them at discount prices through catalogs within the store Warehouse Showroom : A retail facility in a large, low-cost building with large onpremises inventories and minimal service
446

Classes of In-Store Retailers (contd)

Supermarket : A large self-service store

that sells primarily food and household products Superstore : A large retail store that carries not only food and nonfood products ordinarily found in supermarkets but also additional product lines Warehouse Club : A large-scale, members-only establishment that combines features of cash-and-carry wholesaling with discount retailing
447

Global Players in Retailing

Wal-Mart, Kmart, Target, Woolworth, Wendy, Tesco, Carrefour, Safeway, Home Depot, Costco, Toys R Us, KFC, McDonalds, Pizza Hut, Starbucks, Metro, Barista, Sears, Burger King, Ikea, etc
448

Indian Retail Companies

HYPER

MARKET : Big Bazaar, Spencers, Vishal Retail ,

Sparr, Magnet, Star India Bazaar, Shop Rite, etc

DEPARTMENT STORES : Shoppers Stop, Pantaloons,

Lifestyle, Globus, Westside, etc

CONVENIENCE STORES / SUPERMARKETS :

Nilgiris, Food World, Subhishka, Reliance Fresh, Spencers

SPECIALITY STORES : Bata, Titan, Tanishq, etc SPECIALITY FORMATS : Archies, Landmark, Planet M, FURNITURE RETAILING : Concept, Living Room, Style- Spa,

CONSUMER DURABLE CHAINS : Viveks, E- Zone,

Vijay Sales, etc
449

Unit - IV
Integrated

Marketing Communication Process & Mix; Advertising, Sales Promotion & Public Relation decisions. Direct Marketing - Growth, Benefits & Channels; Telemarketing; Sales Force : Objectives, Structure, Size And Compensation.
450

MARKETING COMMUNICATION
& SALES MANAGEMENT
451

What is Communication ?
It is the transfer & understanding of meaning.
Transfer means the message was received in a form that can be interpreted by the receiver. Understanding the message is not the same as the receiver agreeing with the message.
Interpersonal

Communication Communication

Communication between two or more people

Organizational

All the patterns, network, and systems of communications within an organization

Marketing Communication Process

The Communication Process is a two-way process involves the following elements : 1. Source or Sender 2. Encoding 3. Medium 4. Receiver 5. Decoding 6. Response or Feed back. 7. Noise or Disturbance.
453

454

Components in the Communication Process

1.

2.

3.

4. 5.

Source or Sender : Presumably a person who creates a message. Message : which is both sent by the information source and received by the destination. Transmitter : encompasses a wide range of transmitters. The simplest transmission system, that associated with face-to-face communication, has at least two layers of transmission. Signal : which flows through a channel. Channel : or Medium of Communication includes air (TV), electricity, radio, paper & postal systems.

Noise : secondary signals that obscure or confuse the signal carried. Today we use noise more as a metaphor for problems associated with effective listening. 7. Destination or Receiver : is the person or group who receive, understand and processes the message. 8. Feed Back : is the acknowledgement or reply or from the Receiver back to the Sender, for having received & understood the message.
6.

Promotional Decisions
SL. No.

Promotion Decision
Who is the target audience ?

Element in the Comnctn. Model

1. 2. 3. 4. 5. 6.

Receiver Responses & What responses are sought ? Decoding What message should be Message & developed ? Encoding What media should be Media selected ? What source should be Sender chosen? What feedback should be Feedback collected ?

The Promotion Mix

Promotion serves three essential roles : It informs, persuades & reminds existing & prospective customers about the company and its products / services. The Promotion-Mix is a specific mix of Advertising, Personal Selling, Sales Promotion, Public Relations & Direct Marketing tools that a company uses to pursue its marketing objectives.

Promotion Mix

Main Elements of the Promotion Mix

1. Advertising : Any paid form of non-personal presentation & promotion of ideas, goods or services by an identified sponsor.
Different types of Media used in Advertising : Print Media, Radio, Television, Billboards, Direct Mail, Brochures / Catalogs, Signs, Posters, In-store Displays, Motion Pictures, Web Pages, Banner Ads, E-mails, etc.
460

2. Personal Selling: Setting sales

appointments & meetings, home parties, making presentations and any type of one-to-one communication, to inform & persuade your prospects / customers & strengthen your relationship with them.
Personal Selling occurs where an individual Salesperson sells a product, service or an idea to a prospect / customer. Sales-People match the benefits of their offering to the specific needs of a customer. Today, Personal Selling involves the development of longstanding customer relationships. Egs : Sales Presentations / Meetings , Telemarketing, etc
461

3. Sales Promotions : Incentives designed to stimulate the purchase or sale of a product, usually in the short term.
Egs: Coupons, Sweepstakes, Contests, Samples, Rebates,, Trade Shows, Exhibitions, etc.

4. Public Relations : Paid form of presenting

the company or its products/services/ideas in a positive light by planting significant news about it or a favorable presentation of it in the media to build trust and goodwill with its stake holders.
Egs: Articles/Reports in Newspapers, Magazines, TV &/or Radio, Charitable Contributions, Event Sponsorship, 462 Issue advertising, Corporate Social Responsibilities, etc.

5. Publicity: is a form of non-personal, mass communication involving the organisation &/or its ideas / products & services not paid for by the organisation. It occurs usually in the form of Editorials, News Story, TV Talk Shows, Films, etc. 6. Direct Marketing: is the use of mail / email, catalogs, etc in order to reach targeted audiences to increase sales and test new products &/or alternate marketing tactics.
463

Integrated Marketing Communications

is a management concept that is designed to make all aspects of marketing communication such as advertising, sales promotion, public relations, direct marketing, etc work together as a unified force, rather than permitting each to work in isolation. IMC ensures that all forms of marketing communications and messages are carefully linked together, so that they work together in harmony & convey the desired message to the target customers.
464

Factors Leading to IMC

Two major factors are changing the face of today's marketing communications :
Mass

markets have fragmented, which is why marketers are shifting away from mass marketing & moving toward focused programs. in computer & IT are speeding the movement toward segmented marketing. New technologies have provided means to reach smaller segments with tailored messages.

Improvements

Some of these changes include :

Changing technology, which has made it possible for media organizations to identify, segment, select, and attract smaller audiences for their respective vehicles. The trend toward de-regulation that has allowed for increased competition within many industries, such as air travel, banking, and utilities. Globalization of the marketplace, which causes promotional efforts, including advertising, sales promotion, public relations and personal selling, to be implemented throughout a worldwide market. Customisation for different cultures is key to competing successfully in this arena. Changes in the demographic & psychographic profiles of today's consumers, that have paved the way for new product category opportunities.

Advertising
Advertising is the structural and composed nonpersonal communication of information, usually paid for and usually persuasive nature, in about organization, products, services, ideas by identified sponsors through various media. An ad campaign includes a series of ads placed in different media based on an analysis of marketing and communications situations.
Examples: Print Media, Radio, Television, Billboards, Direct Mail, Brochures / Catalogs, Signs, In-store Displays, Posters, Motion 467 Pictures, Web Pages, Banner Ads, E-mails, etc.

The Functions of Advertising

Builds awareness of products & brands Provides product & brand information Creates a brand image Persuades people Provides incentives to take action Provides brand reminders Reinforces past purchases and brand

experiences

How Advertising Works ?

The marketer can also be seeking a cognitive, effective or behavioural response from the consumer through the process of advertising. The marketer has to study the present state of the consumers' mind in terms of its knowledge about the organisation and its products and also the attitude towards them. The advertisement works in the consumers mind in a Response Hierarchy Model. It is assumed that the buyer, after being exposed to the advertisement, passes through a cognitive, effective and behavioural state in that order. Four best known

Response Hierarchy Models are : 1. AIDAS Model 2. Hierarchy of Effects Model 3. Innovation- Adoption Model 4. Communications Model

AIDA is an acronym used in marketing that describes a common list of events that may be undergone when a person is selling a product or service. { The term & approach
are attributed to American advertising & sales pioneer, E. St. Elmo Lewis. According to Lewis, the most successful salespeople followed a hierarchical, four layer process using the four cognitive phases that buyers follow when accepting a new idea or purchasing a new product. }

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 & desire the product or service and that it will satisfy their needs. A - Action: Lead customers towards taking action i.e. purchasing.

Producing An Effective Advertisement for Print, Broadcast or Electronic Media

Copy : The Verbal Appeal Art : The Visual Appeal Auditory Appeal
ILL BUY IT!

ACTION DESIRE INTEREST

BLENDED TOGETHER

ATTENTION

AIDA

Steps in Advertising - Planning

1. Identify the target audiences
2. 3. 4. 5. 6. Set Advertising Objectives Decide on In-house Advertising or Agency. Establish a tentative Advertising Budget. Consider Co-operative Advertising (partnership). Decide on Advertising Message Strategy:

Message Idea Copy Platform Message or Creative Format

Steps in Advertising - Planning.

7. Select Advertising Media. 8. Decide on timing of advertisements. 9. Pretest Advertisements. 10. Prepare final Advertising Plan and Budget. 11. Measure & evaluate Advertising success.

ADVERTISING OBJECTIVES & PLANNING

Steps involved in a Advertising Plan :
1. Establishing Advertising Objectives 2. Selecting the Advertising Message 3. Setting the Advertising Budget 4. Developing a Media Strategy 5. Evaluating Advertising Effectiveness.
474

1. Establishing Advertising Objectives : i. Creating Awareness & Encouraging Information Search

ii. Persuading & Prompting Direct Action iii. Reminding or Reinforcing Attitudes iv. Relating the Product to Needs v. To Modify Attitudes vi. To increase Sales / Market Share

2. Selecting the Advertising Message :

I. II. III. IV. V. VI. Generic Strategy Pre-emptive Strategy Unique Selling Proposition or USP Strategy Brand Image Strategy Positioning Strategy Resonance Strategy

475

3. Setting the Advertising Budget :

( a ) Methods Used : Objectives. & Task Method / Percentage
of Sales Method / Competitive Parity Method / Affordable Method, Marginal Analysis Method, etc

( b ) Factors influencing the Advertising Budget are:

i. ii. iii. iv.

Stage in the PLC Competition Product Differentiation Market Share

4. Developing a Media Strategy :

i. Determining the Target Audience ii. Media Selection iii. Media Scheduling iv. Media Buying
476

Categories of Advertising Objectives

Informative / Persuasive / Reminder Advertising 1. Informative Advertising:

To create awareness of the organization. To explain the characteristics of the organization. To correct false impressions about the organization. To reduce peoples apprehensions or fears about visiting the organization. To build (or enhance) the organizations image or position.

Advertising Objectives..

2. Persuasive Advertising :
To

increase customer preference for the organizations services. To increase customer loyalty to the organization. To encourage customers to switch from using a competitive organization. To convince customers to book at the organization now or in the future. To change customers perceptions.

Advertising Objectives..
3. Reminder Advertising :
To remind customers about where they can

book the organizations services. To remind customers about facilities or services that are unique to the sponsoring organization. To remind customers about when they should book or reserve the organizations services. To remind customers of the existence of the organization.

Difference between Consumer Ads & Trade Advertising

Consumer Advertising : aimed at the

end-customers or consumers, who will actually use products / services being promoted. Trade Advertising : aimed at the marketing intermediaries, such as Wholesalers & Retailers who will distribute the products & influence customers buying decisions.

Advertising Message Strategy

The Advertising Message Strategy describes what is to be communicated & how it is to be communicated. It consists of the : Message Idea : the main theme, appeal, or benefit to be communicated in the message. Copy Platform : a written statement that fully describes the message idea. Message or Creative Format : a broad creative approach used to communicate the message idea to the target audiences.

Advertising Appeals
Appeal is the central idea of an advertisement. An appeal is the earnest request or a plea to the prospects. It is the approach to attract the attention of the consumers To influence consumers feeling towards products, services or concepts

Appeals & Execution Style

Advertising Appeals
The approach used to the The approach used to attractattract attention of consumers the attention of consumers Toinfluence consumer feelings To influence consumer feelings toward a product, toward a product, service or a service or cause cause

Execution Style

The way appeal is turned into an The way anan appeal is turned advertising message into an advertising message The way the message is presented to the consumer

CREATIVE STRATEGY
The Creative Strategy must define the Target Audience; Product Concept; Communications Media & the Advertising Message which should be relevant to the target-audience. The Advertising Appeal is the manner in which an advertising message is developed & expressed, to derive a particular consumerresponse or influence decision-making. They can be broadly classified into three categories :

1. Rational or Logical Appeal 2. Emotional Appeal 3. Other Appeals.

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Types of Advertising Appeals

Rational/Logical Appeal
Price (Tide)
Quality (BB Tea) Feature (Apple i-Fone)
Competitive Advantage

Emotional Appeal
Humor (Sprite) Fear (Saffola) Music (Airtel) Sex (Axe)

Additional Appeal
Star (ThumsUp) Reminder Advt.
(Vardhman Wools)

Teaser Advt.
(Ponds)

(Head & Shoulders) News (Matiz) Product / Service Popularity ( Hero Honda)

Creative Formats in Ads :

1. Animation
2. Slice - of - Life 3. Testimonial 4. Authoritative 5. Demonstration

6. Fantasy
7. Informative
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The Creation Stage :

1. Idea Generation : Orientation; Preparation;
Analysis; Ideation; Incubation; Synthesis & Evaluation

2. Copywriting :

Headline; Subhead; Body Copy; Slogan; Logo / Address; Visual Photographs; Computerised Visuals

3. Illustration : Hand-made Paintings; Clip Art;

4. Layout : Thumbnail / Preliminary Layout /

Comprehensive Layout / etc

5. Copy Testing & Diagnosis : Pre-Testing &

Post -Testing
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PRE - TESTING : 1. Consumer Jury ( For ranking the various copies ) 2. Rating Scales ( Dimensions such as relevancy, confusion,
entertainment, brand reinforcement etc are numerically rated by respondents & weights are assigned for each dimensions )

3. Portfolio Tests

( Series of Ads are shown & responses are recorded )

4. Psychological Tests 5. Physiological Tests

( Projection Techniques for testing the emotional content in the Ad such as Humour, Fear, Sex Appeal, Nostalgia ) ( Lab Tests & Special Eqpmts are used. Egs : Pupil Dilation, Galvanic Skin Response, )

POST - TESTING : ( To test the Effectiveness of the Ads )

1. Recall Tests ( Aided & Unaided )

2. Recognition Tests
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Media Planning : is a process of designing a

Course of action that shows how advertising time & space will be used to contribute to the achievement of Advertising & Marketing Objectives. It consists of four key steps :
1. 2. 3. 4.

Environmental Analysis Setting up of Media Objectives

Reach (C/R) / Frequency / Continuity (C/P/D) / Costs

Developing the Media Strategy

Target Audience / Media Budgeting, Selection & Scheduling

Implementation & Follow-up

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Advertising Media Selection Considerations

Target

markets and their reading, viewing, and listening habits. Positioning approach, promotional goals, and advertising objectives. Media evaluation criteria. Relative strengths and weaknesses of each media alternative. Creative requirements. Competitive media placements. Approximate total advertising budget available.

Media Evaluation Criteria

Costs.

Reach.
Frequency.

Waste.
Lead time and flexibility.

Clutter and dominance.

Message permanence.

Persuasive impact and mood.