Engineering Economics & Management

Chapter:1
Introduction to Marketing Management

Meaning of Marketing and Marketing Management

Marketing:
According to Wikipedia Marketing is an integrated
communication based process through which individuals and
communities discover that existing and newly identified needs
and wants may be satisfied by product and services of others.
Marketing Management:
According to Philip Kotler, Marketing Management
is an art and science of choosing target market and getting,
keeping and growing customers through creating, delivering
and communicating superior customer value.
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Four Ps of Marketing
1.

Product

1.

Price

1.

Place

1.

Promotion

1.Product
I. Product mix

III. Packaging

Product Width
Product Length
Product Depth
Product Consistency

Protection
Easy Identification
Convenience
Innovation

II. New product Decisions

IV. Product Quality

Idea Generation
Idea Screening
Concept testing and Analysis
Product Development
Product testing (Sample test)
Commercialization

Conformance Quality
Durability
Reparability
Reliability
Style and design
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V. Branding
Individual Branding
Blanket family branding
Separate family branding
Company and Individual name (Combined name)

VI. Labeling
VII. Guarantee and Warrantee

2.Price
I.

Price setting process

a. Select the pricing objectives:

Survival
Profit
Market share
Market Skimming
b. Estimating the demand
c. Estimation of costs
d. Analyzing the competitors' price,
discounts and offers
e. Selecting the pricing method and
final price

II. Pricing Methods

Mark up pricing
Target return pricing
Perceived value pricing
Going rate pricing
Value pricing
Sealed bid pricing
Differential pricing

III. Pricing policy

Market skimming
Penetration pricing
Psychological pricing
Transfer pricing

IV. Discounts

Quantity discount
Cumulative discount
Seasonal discount
Promotional discount
Cash discount
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3.Place
I. Channel levels
Zero level:
Mfg-Customers

One level
Mfg-Wholeseller -Customer

Two level
Mfg-Wholeseller-Retailer-customer

Three level
Mfg-Wholeseller-Agent-Retailer-customer

4.Promotion
I.

Advertising

II. Sales promotions

Television
Newspaper
Magazine
Pamphlets
Hoardings
Direct mail
Newsletters
Radio
Brochures

For trade:

Free samples
Coupons
Point of purchase coupons
Contests, Games, sweepstakes

For Trade promotion:

Discounts to wholeseller and
retailer
Free goods etc
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III. Public relation

Customers
Shareholders
Suppliers
Trade groups etc.

IV. Personal Selling

Face to face selling

Via telephone
Online interaction
Video conferencing
chatting
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Different concepts of Marketing

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

Production concept
Product concept
Selling concept
Marketing concept
Societal concept
Holistic concept of marketing

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Demand forecasting
Meaning:
A demand forecast is the predication of what will
happen to your companys existing product sales.
It is the activity of estimating the quantity of a
product or services that consumer will purchase.

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Importance of Demand forecasting

Planning and scheduling the production.
Budgeting of costs and sales revenue.
Making policies of long term investments.
Controlling inventories.
Helps in achieving targets of the company.
Planning of finance.
Planning of labour.
Continuous supply of communities in the market.

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How is demand forecast determined?

Or
Methods of demand forecasting
1. Qualitative forecasting method:

Qualitative demand forecasting used when situation is vague and less

data exist .(e.g., New products and Technology)
Generally four types of methods are included in demand forecasting.
A. Survey of buyers intention (Consumer Market Survey)
B. Sales force opinion method (Sales force composite)
C. Expert opinion method (Delphi method)
D. Market test method (test marketing)

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A. Survey of buyers intention

(Consumer Market Survey)
Merits :
Simple to understand and easy to implement.
It is basic method of all the methods and so it is the most popular among all
the methods.
A direct connection with the customer is built up.
Effective for short run estimates.

Demerits:
This method is not suitable because intention or willingness of customers
which is regular and affected by the change in fashion, it is not advisable to
take decision for long run.
This method is costly compared to other methods.
The respondents may not themselves be quite clear about their
consumption.
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B. Sales force opinion method (Sales force composite)

Merits :
The sales force is aware of the ground realities of the area in which they
operate. Their experience is put to good use.
As it is quite in house method the cost of forecasts is less.
As the sales force is actively involved in the forecasting their morale
increase and this leads to improved performance and achieving targets.

Demerits:
Sometimes sales person under and over estimates how much they sales. So
it is harmful for the company.
The method may not take into account in changing scenario.
This method has no scientific backing.
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C. Expert opinion method (Delphi method)

Merits :
One of the most significant is its versatility. The technique can be used in a
wide range of environment, e.g., Government planning, business and
industry predictions, etc.
Another important advantage lies in the area of expenses. For example, the
Delphi technique saves corporations money in travel expenses. This is
particularly beneficial to multinational corporations whose executives and
key personnel may be based in cities as far apart as Melbourne, Newyork,
Tokyo, and London.

Demerits:
This method is somewhat time consuming.
People acting together in a group setting benefit from others idea.
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D. Market test method (test marketing)

Through correct and accurate market research, you will get following
important information:
1. Demand for a product or services in your market.
2. Sales figures with in a market for a particular product or services.
3. Who your customer are.
4. What your those customers think about your products or services and what
they think about your competitors, so you can capitalize your strengths.
5. Where and how customers buy your product or services, so you can
establish the most effective distribution and marketing channels.
6. Who your direct and indirect competitors are.
7. Which sales, advertising , display and promotion methods are most
effective.
8. To know the position of the product.

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2. Quantitative forecasting method:

Quantitative demand forecasting used when situation is
stable and historical data exist.
It is also involves mathematical techniques.
Generally two types of methods are included in demand
forecasting.
A. Time series method
B. Statistical demand analysis (Causal model)

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A. Time series method

Time series method of forecasting demand uses a model to forecast future
evens based on known past events.
In this time series method, the forecast is based on only in PAST VALUES
and assumes that factors that influence the past, the present and the future
sales of your products will be continue.

B. Statistical demand analysis (Causal model)

The causal model uses a mathematical technique known as the regression
analysis that relates a dependant variable ( for example, demand etc) to a
independent variable ( for example, price etc) in the form of linear
equation.

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Market Segmentation and its importance

Meaning of market segmentation:
Market segmentation is the process of dividing market on the basis of
tastes and preferences along with the paying capacity of customer.

Importance of market segmentation:

1.
2.
3.
4.
5.
6.
7.
8.
9.

Helps in better understanding of consumers needs and wants.

Innovation by identifying the need of the particular product.
Two way communication among the potential buyer and the organization.
Better targeting and position of the product.
Helps in maintaining good relationship with the customers.
Helps in retaining the existing customers and attracting new ones.
Helps in reducing costs/expenses.
Improves service delivery standards.
Targeted communication about the product.

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Basis for market segmentation of consumer product

Demographic

Gender
Age and life cycle stage
Income and social class
Generation

Geographic

Countries
States
Cities
Regions
Zones

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Behavioral

Benefits
Occasions
Usage rate
Attitude
Loyalty status

Psychographic
Lifestyle
Personality
Values

a. Staunch loyalists
b. Split loyalists
c. Shifting loyalists
d. Switchers

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Basis for market segmentation of Industrial product

Demographic
Industry
Company size
Customer

Purchase approach
Power structures
Organizations purchasing
function
Relation between buyers and
sellers
General purchase policy

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Operating variables
Company technology
Product and brand use status
Customer capabilities

Situational factors
Product application
Order size
Order fulfillment urgency

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