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Social
Definition of
Marketing
Marketing is a
societal process by
which individuals
and groups obtain
what they need and
want through
creating, offering
and freely
exchanging
products and
services of value
with others.
Scope of Marketing A good marketer must be able to answer the following questions:
Understanding Marketing Management
Chapter 1
What is Marketing?
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
Marketing is an essential art and science that is engaged in a vast number of activities
by both persons and organizations. It has become an increasingly vital ingredient in the
success of a business. Good marketing is the result of careful planning and execution.
There are two sides to marketing – the formulated side and the creative side. It is
important to lay the foundation in marketing concepts, tools, frameworks and issues of
the formulated side while at the same time instil the real creativity and passion for
marketing, as we shall come to see in this chapter.
Marketing is increasingly becoming an important function in all organizations to ensure
that demand for a product or service persists along with customer retention.
The formal definition of marketing is, Marketing is an organizational function and a set
of processes for creating, communicating and delivering value to customers and for
managing customer relationship in ways that benefit the organization and its
stakeholders.
Some of the common entities that are marketed are goods, services, events,
experiences, persons, places, properties, organizations, information and ideas.
What is Marketed?
A marketer is someone who seeks a response, attention, purchase, vote, donation etc
from another party called the prospect. Marketing managers are responsible for demand
management.
Eight demand states are possible:
• Negative demand
• Nonexistent demand
• Latent demand
• Declining demand
• Irregular demand
• Full demand
• Overfull demand
• Unwholesome demand
The key customer markets are consumer markets, business markets, global markets,
non-profit and governmental markets.
Chapter 1 - Understanding Marketing Management
• Needs - state of felt deprivation for basic items such as food and clothing and
complex needs such as for belonging. i.e. I am hungry.
• Wants - form that a human need takes as shaped by culture and individual
personality i.e. I want a hamburger, French fries, and a soft drink.
• Demands - human wants backed by buying power. i.e. I have money to buy this
meal.
• Target Markets are the market segments identified by the marketer which
present the greatest opportunity.
• Value Proposition is a set of benefits that companies offer to customers to
satisfy their needs. The intangible value proposition is made physical by as
offering. A brand is an offering from a known source.
• Value reflects the sum of the perceived tangible intangible benefits and costs to
customers. Satisfaction reflects a person’s judgements of a product’s perceived
performance.
• To reach a target market a marketer uses different marketing channels like
communication channels, distribution channels and service channels.
• Supply chain is a longer channel stretching from raw materials to components
to final products that are carried to final buyers.
Who Markets?
Core Marketing Concepts:
The five key
functions of a
marketing
manager or
CMO are:
• Strengthening
the brand
• Measuring
marketing
effectiveness
• Driving new
product
development
based on
customer needs
• Gathering
meaningful
customer
insights
• Utilizing new
marketing
technology
New
Marketing
Realities:
Some of the major
societal forces that
marketers have to
deal with today are
network
information
technology,
globalization,
deregulation,
privatization,
heightened
competition,
industry
convergence,
consumer
resistance, retail
transformation and
disintermediation.
The major marketing philosophies are:
• The Production Concept
o Consumers favor products that are available and highly affordable.
o Improve production and distribution.
• Product Concept
o Consumers favor products that offer the most quality, performance, and
innovative features.
• Selling Concept
o Consumers will buy products only if the company promotes/ sells these
products.
• Marketing Concept
o Focuses on needs/ wants of target markets & delivering satisfaction better
than competitors.
• Societal Marketing Concept
o Focuses on needs/ wants of target markets & delivering superior value.
• Holistic Marketing Concept
o Based on the development, design and implementation of marketing
programs, processes and activities that recognize their breadth and
interdependencies.
• Relationship Marketing
o Aims to build mutually satisfying long-term relationships with key
constituents in order to earn and retain their business.
Chapter 1 - Understanding Marketing Management
Company orientation towards Marketplaces:
Marketing Management Tasks: The following are the most important marketing management tasks:
• Developing Marketing Strategies and Plans
• Capturing Marketing Insights
• Connecting with Customers
• Building Strong Brands
• Shaping the Marketing Offerings
• Delivering Value
• Communicating Value
• Creating Long-Term Growth
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Supply
Chain
Many companies
today outsource less
critical resources if
they can obtain
better quality or
lower cost. Also,
many companies
partner with specific
suppliers and
distributors to
create a superior
value delivery
network, also
known as Supply
Chain.
Developing Marketing
Strategies And Plans
Chapter 2
The Value Delivery Process
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
In this chapter, mainly the following points have been discussed
• How does marketing affect customer value?
• How is strategic planning carried out at different levels of the organization?
• What does a marketing plan include?
Developing the right marketing strategy over time, through discipline and a creative
thought process can go a long way in the marketing management process. Firms must
constantly strive to improve every aspect of their strategy and the plans to guide the
marketing process.
In the new view of business processes, marketing is viewed at the beginning of the
planning stage. A smart competitor must design and deliver products for well-defined
micro-markets and cater to their specific wants, perceptions and preferences. The Value
Creation and Delivery Sequence can be divided into two segments of marketing:
Strategic Marketing and Tactical Marketing.
Core Competencies Core Competency refers to areas of special technical and production expertise, whereas
distinctive capability describes excellence in broader business processes. Market-driven
organizations generally excel in three distinctive capabilities: market sensing, customer
linking and channel bonding.
Holistic
Marketing
Holistic marketing
orientation means,
integrating the
value exploration,
value creation and
value delivery
activities with the
purpose of building
long-term,
mutually satisfying
relationships and
co-prosperity
among key
stakeholders. It
helps manage a
superior value
chain that delivers
a high level of
product quality,
service and speed,
in addition to
expanding
customer share,
building customer
loyalty and
capturing customer
lifetime value.
The value chain is a tool which is used for identifying ways to create more customer
value. There are 9 strategically relevant activities – 5 primary and 4 support.
Chapter 2 - Developing Marketing Strategies And Plans
Companies need to focus on the customer and organize to respond effectively to their
changing needs, to be known as master marketers. The marketing plan is the central
instrument for directing and coordinating the marketing effort. The marketing plan
operates at two levels: strategic and tactical.
• The strategic marketing plan lays out the target markets and the value
proposition the firm will offer, based on an analysis of the best market
opportunities.
• The tactical marketing plan specifies the marketing tactics, including product
features, promotion, merchandising, pricing, sales channels and service.
A firm must coordinate all the department activities to conduct its core business
processes, through cross-functional teams
• Market-sensing process
• New-offering realization process
• Customer Acquisition process
• Customer Relationship Management Process
• Fulfillment Management Process
Strategic Planning
Value Chain
Corporate Headquarters
All corporate headquarters undertake four planning activities
• Defining the corporate mission
• Establishing strategic business units
• Assigning resources to each Strategic Business Unit
• Assessing growth opportunities
Innovation in marketing is critical. Senior management should identify and encourage
fresh ideas from a youth perspective, from people new to the field and organization, to
gain an understanding and a new approach to marketing.
The best Mission Statement reflects a vision, an almost impossible dream that provides
a direction for the company for the next 10 or 20 years. A good mission statement
focuses on limited number of goals, links the company’s policies and values and gives a
long term view. It is as short, relevant and meaningful as possible.
Chapter 2 - Developing Marketing Strategies And Plans
Mission Statement
Business Unit Strategic Planning
The Business Unit Strategic Planning process consists of the following steps
1. The Business Mission: Each business unit needs to define its specific mission
within the broader company mission.
2. SWOT Analysis: The overall analysis of a company’s Strengths, Weaknesses,
Opportunities and Threats is called SWOT analysis. It is a way of monitoring the
external and internal marketing environment.
To evaluate opportunities, companies can use Market Opportunity Analysis.
3. Goal Formulation: Developing specific goals for a short term is known as Goal
Formulation. They are specific with respect to magnitude and time. Goals must
be consistent and realistic and could be a mix of various objectives.
4. Strategy Formulation: Strategy is a game plan for achieving the goals. It consists
of a Marketing Strategy, Technology Strategy and a Sourcing Strategy.
5. Program Formulation: The unit must plan programs in accordance with its goals
and strategy and thus work upon the various departments, to strengthen them
and integrate all of them together.
6. Implementation: Even a great marketing strategy can be sabotaged by a poor
implementation. It must coordinate its tasks to implement its plan properly.
These tasks must be in line with the interests of the stakeholders as well.
7. Feedback and Control: The key to organizational health is willingness to
examine the changing environment and adopt new goals and behaviors. In the
rapidly changing market environment, even large organizations which are
subject to inertia can be changed through strong leadership.
Strategic
Business Unit
A Strategic
Business Unit is a
single business (or
a collection of
similar businesses)
that can be
planned
separately from
the rest of the
company. By
identifying the
company’s SBUs, it
is easy to develop
separate strategies
and assign
appropriate
funding.
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MIS
(Marketing
Information
System)
Consists of people,
equipment and
procedures, to
gather, sort,
analyze, evaluate
and distribute
needed, timely and
accurate
information to
marketers.
Capturing Marketing insights
and Spotting Market Trends
Chapter 3
MIS (Marketing Information System)
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
To provide insight into an inspiration for marketing decision making, companies must
possess comprehensive, up-to-date information about macro trends as well as micro
trends particular to their business. This chapter deals with various modes of obtaining
this information and also looks into the major macroeconomic forces that affect
marketing decisions.
MIS can provide data e.g. Swiss eat most chocolates, Greeks eat most cheese. It relies
on internal company records, marketing intelligence activities and Market Research.
MIS provides information on market happenings and changes in environment. Purposes
of MIS have been noted below.
• Train the sales force for intelligence gathering by observing competitors
activities and listening to customer comments.
• Motivate retailers and distributors to pass intelligence. E.g. mystery shoppers to
identify customer treatment and possible flaws.
• Network externally using competitor’s annual reports, talking with their
retailers, distributors and employees, attending shareholder meetings. It should
be done ethically and legally.
• Use government sources (Census, NSSO reports) or purchase data from outside
suppliers (AC-Nielsen, etc)
• Create a panel of largest, sophisticated and important customers for feedback.
• Use online forums, sites offering customer and expert reviews, Customer
compliant sites,
Analyzing the
Macro
Environment
Fad –
Unpredictable,
short-lived, without
any economic or
social significance
Trend -
Sequence of events
that have
momentum and
durability, reveals
the future.
Megatrend –
Large social and
economic influence,
slow in formation
but has lasting
effect.
Demographic 16.7% of World population in India; Male to Female ratio of 933:1000
Population Age mix : median age of 23.8 years, 34% b/w 12 and 25yrs, 24% b/w 25 and
34 years
Literacy level: 65.38% literate, 75.8% males and 54.16% females, 76% literacy between
15-24yrs age group, 64.5% literacy between 25-34yrs age group.
Economic Purchasing Power depends on income, savings, prices, credit availability. India’s GDP is
$1.2 trillion, per capital income of $3100
Income distribution: 77.7% of urban households have income up to Rs3000/month while
only 2.1% have income more than Rs 10,000/month.
Categories of Indian consumers: Destitute ( less than Rs16,000 annually, inactive
participants in market exchange), Aspirants ( Rs 16,000 to Rs22,000, new entrants in
consumption system), Climbers, (Rs 22,000 to Rs 45,000, have desire and willingness to
buy but has limited cash), Consuming Class ( Rs 45, 000 to Rs 2,15,000, majority have
money and are willing to pay), Rich ( more than Rs 2,15 000, have money and own a
variety of products).
Trend shows increasing % of Consumers and Climbers while a decreasing % of Destitute
and Aspirants.
Social-Cultural Society shapes beliefs, values, demands, and requirements. It affects dress codes, food
habits, brand preferences. Trend shows an increasing role of children on purchasing
decisions e.g. bicycles, computers, wrist watches, shoes and other FMCG goods.
Chapter 3 - Capturing Marketing insights and Spotting Market
Trends
• Order to Payment cycle - Customer places order for goods -> Sales team sends
invoice to various departments -> Sales team back orders out of stock items ->
Suppliers send goods and sales team pays suppliers -> Sales team delivers order and
receives payment. Purpose is to minimize number and duration of cycles.
• Sales Information System - Keeping constant track of sales, customers, etc. It can
help in identifying trends.
• Database / Data warehousing / Data Mining - Separate databases are there for
products, salespersons and customers. Purpose is to analyze (mine) data using
statistical methods and discover trends.
Major Macro Environmental Forces
Internal Company Records
Natural Deterioration of environment is a significant concern e.g. Greenhouse Effect, Ozone
layer and fossil fuel depletion. Government concerns in this aspect are Euro-2
emissions norms and CNG.
Although majority feels necessity of environmental friendly products, they do not buy
because
(a) Perception of green good being of inferior quality and (b) Perception that good does
not contribute majorly to the environment.
Corporate Environmentalism is recognizing the importance of environmental issues
affecting the firm and integrating those in its strategic plans is fast gaining ground. E.g.
Focus on Non-renewable sources like Jatropha oil, Pollution Control Systems like
landfills, recycling centers and focus on CNG initiatives.
Technological Four major trends are
(a) Accelerated Pace of Change: e.g. Apple selling 23.5 million in 2006
(b) Unlimited Opportunities for Innovation e.g. Developments in Bio-tech,
telecommunication, Robotics, aid vaccines, contraceptive pills.
(c) Varying R & D Budget: e.g. Increasing R & D in Pharmaceutical companies like Cipla,
Dr. Reddy’s, and Ranbaxy
(d) Increasing regulation of technological change e.g. Drugs and cosmetic act, control
on clinical trial, standard for drugs.
Political and Legal Two major trends are
(a) Increase in business legislation: to protect companies from unfair competition, to
protect consumers from unfair business practices, to protect society from unbridled
business behavior and to charge businesses with social costs created by their products
or processes
(b) Growth of special interest groups and improvements like the Consumer Protection
Act.
Chapter 3 - Capturing Marketing insights and Spotting Market
Trends
What is the
difference
between a
Fad and a
Trend?
A fad becomes a
trend when it
affects a large
number of people,
has functional
value, has lesser
number of
substitutes, and has
other trends
promoting it.
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What is
Marketing
Research?
Systematic Design,
collection, analysis
and reporting of
data and findings
relevant to a
specific marketing
situation facing the
company.
Why Marketing Research? Successful Marketing Managers need timely, accurate and actionable information about
consumers, competition and their brands to assess past performance, plan future
activities and take strategic decisions leading to successful product launch or increase
growth of a brand.
Conducting Marketing Research
and Forecasting Demand
Chapter 4
What are the major steps of Marketing Research
Process?
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
Step 6 : Make the decision
Step 5 : Present the findings
Step 4 : Analyze the information
Step 3 : Collect the information
Step 2 : Develop the research plan
Step 1 : Define the problem, the decision alternative and the research objective
Secondary
Data:
Already existing
somewhere which
was collected for
some other
purpose
Primary
Data:
Freshly gathered
data for research
only. Expensive to
collect.
Step 1:
Achieve clarity on the content, the scope of market research and what all decisions
to be made on the basis of research.
Step 2:
Primary Data c
Chapter 4 - Conducting Marketing Research and Forecasting
Step 3:
Data collection is one of the most expensive, time
market research as it entirely depends on availability, honesty and consistency of
respondents. However technology has eased the problem to a great extent.
Step 4:
This is the process to extract findings by tabulating the data and developing frequency
distributions in hope of discovering additional findings.
Step 5:
The researcher presents finding relevant to the major marketing decisions facing
management
Research Methods
•Observational Research: Observing
consumers, informal interviews, using
tools from anthropology to provide
deeper understanding of consumers.
•Focus Group Research: A meeting of a
group of people who represent potential
customers or important actors for
research discussing issues relevant to
research
•Survey Research: Companies undertake
descriptive research to learn about
people’s beliefs, preferences and
satisfaction.
•Behavioral Data: Customer’s actual
purchases do not match their
statements made in surveys always
hence certain techniques help in
exposing these discrepancies
•Experimental Research: This captures
cause and effect relationship in
observed findings.
Achieve clarity on the content, the scope of market research and what all decisions
to be made on the basis of research.
Primary Data can be collected through following:
Conducting Marketing Research and Forecasting
Data collection is one of the most expensive, time-taking and most error prone phase of
market research as it entirely depends on availability, honesty and consistency of
respondents. However technology has eased the problem to a great extent.
This is the process to extract findings by tabulating the data and developing frequency
stributions in hope of discovering additional findings.
The researcher presents finding relevant to the major marketing decisions facing
management.
Research Methods
Observational Research: Observing
consumers, informal interviews, using
tools from anthropology to provide
deeper understanding of consumers.
Focus Group Research: A meeting of a
group of people who represent potential
customers or important actors for
research discussing issues relevant to
Survey Research: Companies undertake
descriptive research to learn about
people’s beliefs, preferences and
satisfaction.
Behavioral Data: Customer’s actual
purchases do not match their
statements made in surveys always
hence certain techniques help in
exposing these discrepancies
Experimental Research: This captures
cause and effect relationship in
observed findings.
•Questionnaires: A set of questions
soliciting responses that is of relevance
to market situation. They can be either
open-ended or closed
•Qualitative Measures: Relatively
unstructured measurement approach
for exploring consumer’s responses
•Technological Devices: devices like skin
sensors brain wave scanners to
capture consumer’s response.
•Sampling Plan: A plan addressing
questions like whom all to survey, how
many people to survey, how should we
select people for survey.
•Contact Methods: Mail Questionnaire,
Telephone Interview, Personal
Interview, Online Interview.
Achieve clarity on the content, the scope of market research and what all decisions are
Conducting Marketing Research and Forecasting
taking and most error prone phase of
market research as it entirely depends on availability, honesty and consistency of
respondents. However technology has eased the problem to a great extent.
This is the process to extract findings by tabulating the data and developing frequency
The researcher presents finding relevant to the major marketing decisions facing
Research Tools
Questionnaires: A set of questions
soliciting responses that is of relevance
to market situation. They can be either
ended or closed-ended.
Qualitative Measures: Relatively
unstructured measurement approach
for exploring consumer’s responses
Technological Devices: devices like skin
sensors brain wave scanners to
capture consumer’s response.
Sampling Plan: A plan addressing
questions like whom all to survey, how
many people to survey, how should we
select people for survey.
Contact Methods: Mail Questionnaire,
Telephone Interview, Personal
Interview, Online Interview.
Step 6:
Market research is just a tool to provide insight to the managers. Depending on their
confidence in the findings, managers decide to use it
Barriers to Marketing Research
• Narrow approach to Marketing Research
• Uneven Caliber of researchers
• Poor framing of problem
• Late and occasionally erroneous findings
• Personality & presentational differences
Measuring Marketing Productivity
To assess the efficiency and effectiveness of marketing of marketing activities there are
• Marketing metrics to assess marketing effects
• Marketing mix modeling to estimate casual relationships and measure how
marketing activity affect outcomes
• Marketing Dashboard are a structured way to disseminate the insights gleaned
from these two approaches within the organizations
Types of Demand
Market Demand
• It is the total volume that would be bought by a defined customer group in a
defined geographical area in a defined time period in a defined marketing
environment under a defined marketing program
Company Demand
• It is the company’s estimated share of the market demand at alternative levels of
company marketing effort in a given time period
Current Demand
• It is the demand that companies attempt to determine by measuring total
market potential, area market potential industry sales and market share
Future Demand
• It is the demand that companies determine by surveying buyer’s intentions,
solicit their sales force’s input, gather expert opinions, analze past sales or
engage in market testing mathematical models, advanced statistical techniques
and computerized data collection procedures
To estimate current demand companies attempt to determine total market potential,
area market potential industry sales and market share
To estimate future demand companies’ survey buyer’s intentions solicit their sales
force’s input, gather expert opinions, analyze past sales or engage in market testing
mathematical models, advanced statistical techniques and computerized data collection
procedures are essential to all types of demand and sales forecasting.
Types of
Market
Potential
market
Set of consumers who
profess a sufficient
level of interest in a
market offer.
Available
market
Set of consumers who
have interest income
and access to a
particular offer.
Target market
The part of the
qualified available
market the company
decides to pursue.
Penetrated
market
Set of consumers who
are buying the
company's product.
Chapter 4 - Conducting Marketing Research and Forecasting
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Customer
Perceived
Value:
Customer
Perceived Value: It
is the difference
between the
prospective
customer’s
evaluation of all the
benefits and all the
costs of an offering,
and the perceived
alternatives.
Creating Customer Value, Satisfaction and Loyalty
Chapter 5
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
In the face of increasing competition, companies today face their toughest test of
survival. Moving from a product-to-sales philosophy to a holistic marketing philosophy,
however, may provide a better chance of outperforming competition. And at the
cornerstone of this philosophy are strong customer relations.
This chapter discusses the importance and various methods of creating customer value
and sustaining customer loyalty. As customers have become more informed and
educated than ever, organisations have started to adopt business models where the
customer is at the top.
Total Customer Benefit It is the perceived monetary value of the bundle of economic, functional, and
psychological benefits customers expect from a given market offering because of the
products, services, personnel and image involved.
Total Customer Cost It is the perceived bundle of costs customers expect to incur in evaluating, obtaining,
using, and disposing of the given market offering, including monetary, time, energy, and
psychological costs.
Very often, a customer value analysis is undertaken by managers to better understand
the company’s strengths and weaknesses in comparison with competition. It follows the
pattern below
1. Identify the major attributes and benefits that customers value.
2. Assess the quantitative importance of the different attributes and benefits.
Total
Customer
Satisfaction:
It is the measure of
a customer’s
feelings of pleasure
or disappointment
that results from
comparing a
product’s perceived
performance to
their expectations.
Satisfaction is
usually measured
with the help of
customer surveys.
The two major
factors involved in
customer
satisfaction are
complaint handling
and product/service
quality.
Chapter 5 - Creating Customer Value, Satisfaction and Loyalty
Trends
3. Assess the company’s and competitors’ performances on the different customer
values on each attribute and benefit.
4. Assess how customers in a specific segment rate the company’s performance
against a major competitor on an individual attribute or benefit basis.
5. Monitor customer values over time as the economy, technology, and features
change.
Customer profitability
A profitable customer is one that over time yields a revenue stream that is significantly
greater than that company’s cost stream for attracting, selling and servicing that
customer.
150-20 Rule The 20% most profitable customers generate as much as 150% of the profits of the
company; the 20% least profitable customers lose 100% of the profits.
Measuring customer profitability lies in the concept of Customer Lifetime Value (CLV).
CLV describes the net present value of the future stream of profits expected over the
customer’s lifetime purchases. CLV calculations are generally used by marketers to
develop a long-term perspective.
Customer Relationship Management (CRM) It is the process of carefully managing detailed information about individual customers
and all occasions where a customer encounters a brand/product to maximise customer
loyalty.
CRM can be conducted using the following 4 steps –
1. Identify your prospects and customers.
2. Differentiate customers in terms of their needs and their value to your
company.
3. Interact with individual customers to improve your knowledge about their
needs and to build stronger relationships.
4. Customize products, services, and messages to each customer.
The value of the customer base can be increased by improved by measures such as
reducing the rate of customer defection, increasing the longevity of the customer
relationship, making low-profit customers more profitable or terminating them, etc.
Building Customer Loyalty
It involves the following procedures –
1. Interacting with customers
2. Developing loyalty programs
3. Personalising marketing
4. Creating institutional ties
Database marketing It is the process of building, maintaining and using customer databases and other
databases to contact, transact and build customer relationships.
Customer Database It contains customers’ past purchases, past volumes, past prices and profits; buyers’
personal details, status of current contacts, the company’s share of the buyer’s
business, competitive suppliers, etc.
Datamining Through datamining, marketers can extract information about individuals, trends, etc.
from the customer database. It uses techniques such as cluster analysis, predictive
modelling, etc.
Disadvantages of Datamining and CRM 1. Building and maintaining a database requires huge amounts of investment in
terms of computer hardware.
2. Convincing employees to be customer oriented than using traditional methods.
3. Customer attitudes about privacy of personal data.
Probability of error of CRM methods or assumptions made thereof.
Chapter 5 - Creating Customer Value, Satisfaction and Loyalty
Trends
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Analyzing Consumer Markets
Chapter 6
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
Since marketing starts from the customer, it is of primary importance to understand the
psyche of the customers and their buying motives. This chapter talks about the various
behavioural patterns that govern the decision making process of a customer. A
marketer needs to understand these factors affecting the customer’s purchase
decisions so as to design an appropriate marketing strategy.
Factors affecting Consumer Buying
Behaviour 1. Cultural Factors
a. Culture - Frames traditions, values, perceptions, preferences. E.g. Child
learning from family & surroundings.
b. Sub-culture - Provides more specific identification and socialization. Include
nationalities, religions, racial groups and geographic regions.
c. Social Class – Homogeneous and enduring divisions in a society which are
hierarchically ordered. Members share similar tastes and behaviour.
2. Social Factors
a. Reference Groups – Have direct or indirect influence on person’s attitude
and behaviour. Primary groups: regular interaction, e.g. family, friends,
neighbours. Secondary groups: religious, professional, trade union groups.
Aspirational Groups: ones that a person hopes to join. Dissociative groups:
whose values or behaviour and individual rejects.
b. Family – Family of orientation: parents and siblings. Acquires orientation
towards religion, politics and economics, sense of personal ambition, self
worth and love. Family of procreation: spouse and children. More direct
influence on buying behaviour.
c. Roles and Status – Role consists of activities a person is expected to
perform. Each role carries a status. Marketers must be aware of the status
symbol of each product.
Chapter 6 - Analyzing Consumer Markets
3. Personal Factors
a. Age and Stage in the Life Cycle – Tastes are age related. Markets should also
consider critical life events or transitions.
b. Occupation and Economic Circumstances – Economic Circumstances like
spendable income, savings, assets, debts, borrowing power etc affect
consumption patterns.
c. Personality and Self Concept – Personality, set of distinguishing
characteristics that influence his/her buying behaviour. Consumers match
brand personality with their ideal self concept instead of their actual self
concept.
d. Lifestyle and Values
4. Psychological Factors
a. Motivation: Freud’s theory of id, ego and super ego; Maslow’s need
hierarchy theory; Herzberg’s two factor model.
b. Perception: Process by which we select, organize and interpret information
inputs. In marketing, perceptions are more important than reality.
c. Learning – Induces changes in behaviour arising from experience. Marketers
can build demand by associating the product with positive drives.
d. Memory – Short term and long term memory. Build brand knowledge and
brand recall as node in memory.
Problem Recogniton
Information Search
Evaluation of Alternatives
Purchase Decision
Postpurchase Behaviour
The Buying Decision Process
• Problem Recognition - Customer recognises a need triggered by internal or
external stimuli. Marketers need to identify circumstances that trigger needs.
• Information Search - Two levels of involvement – Heightened attention when
person becomes more receptive to information about the product. At next level
consumer may enter into active information search, looking for reading
material, phoning friends etc.
• Evaluation of Alternatives - Factors influencing a particular choice over the
other include attitudes, beliefs and expectancy value.
• Purchase Decision - Between purchase intention and purchase decision, 2
intervening factors come into play- Attitudes of others and Unanticipated
situational factors. Marketers should understand that these factors provoke risk
and should provide information to reduce it.
• Post purchase Behaviour - Marketers must monitor postpurchase satisfaction,
postpurchase actions, and postpurchase product uses.
Complex
Buying
Behaviour
Variety Seeking
Dissonance
Reducing
Habitual
Level of customer involvement
Chapter 6 - Analyzing Consumer Markets
Trends
Involvement
High Low
Differences in Brands
Insignificant Significant
1. Complex Buying Behaviour: When a customer purchases something for the
first time.
2. Variety Seeking: Consumers will keep switching varieties just out of
boredom. Eg- Biscuits. Marketer should keep introducing new products and
display the product prominently.
3. Habitual: Buying the same thing out of habit and not out of loyalty.
Distribution network should be excellent in this case. Maintain consistency
in product and advertising.
4. Dissonance Reducing: In case of repeat purchase of same product.
logo copy.tif
Organizatio-
nal buying
is the decision-
making process by
which
organizations
establish the need
for purchased
products and
services and
identify, evaluate,
and choose among
alternative brands
and suppliers.
Analyzing Business Markets and Buyer Behavior
Chapter 7
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
Business buyers purchase goods and services to achieve specific goals, such as making
money, reducing operating costs, and satisfying social or legal obligations. Therefore to
provide superior customer value to the business buyers this chapter familiarizes you
with the underlying dynamics and process of business buying.
Blanket contract establishes a long-term relationship in which the supplier promises to
resupply the buyer as needed at agreed-upon prices over a specified period. Because
the seller holds the stock, blanket contracts are sometimes called stockless purchase
plans.
Product value analysis is an approach to cost reduction in which components are
carefully studied to determine if they can be redesigned or standardized or made by
cheaper methods of production.
The Business Market versus the Consumer
Market • Fewer buyers: Business marketers normally deal with far fewer buyers than do
consumer marketers.
• Larger buyers: Buyers for a few large firms do most of the purchasing in many
industries.
• Close supplier customer relationship: Smaller customer base and importance of
larger customers, suppliers have to customize offerings to meet the needs of
individual customers.
• Geographically concentrated buyers
• Derived demand: Demand for business goods is derived from demand for consumer
goods, so business marketers must monitor the buying patterns of ultimate
consumers.
• Inelastic demand: Not much affected by price changes as producers cannot make
quick production changes.
•
Three types of
Business
Buying
Situations:
Straight rebuy:
situation in which
the purchasing
department
reorders on a
routine basis (e.g.,
office supplies, bulk
chemicals).
Modified rebuy:
situation in which
the buyer wants to
modify product
specifications,
prices, delivery
requirements, or
other terms.
New task:
situation in which a
purchaser buys a
product or service
for the first time
(e.g., office
building, new
security system).
Chapter 7 - Analyzing Business Markets and Buyer Behavior
• Fluctuating demand: Demand for business products is more volatile than consumer
products.
• Professional purchasing: Organizational purchasing policies and constraints are followed
• Multiple buying influences: More people typically influence buying decisions
• Multiple sales calls: Multiple sales calls to win most business orders, and the sales cycle
can take years.
• Direct purchasing: Business buyers often buy directly from manufacturers rather than
intermediaries
• Reciprocity: Business buyers often select suppliers who also buy from them.
• Leasing: Many industrial buyers lease rather than buy heavy equipment to conserve
capital, get the latest products, receive better service, and gain tax advantages.
The Buying Center
(Decision-making unit of a buying organization)
Seven roles in the purchase decision process:
• Initiators: People who request that something be purchased
• Users: use the product or service; often, users initiate the buying proposal and help
define product requirements.
• Influencers: People who influence the buying decision, including technical personnel.
• Deciders: Those who decide on product requirements or on suppliers.
• Approvers: People who authorize the proposed actions of deciders or buyers.
• Buyers: People who have formal authority to select the supplier and arrange the
purchase
• Gatekeepers: People who have the power to prevent sellers or information from reaching
members of the buying center
Major Influences on Business Buying Environmental Factors
Attention to numerous economic factors, including interest rates and levels of production,
investment, and consumer spending. Business buyers also monitor technological, political-
regulatory, and competitive developments.
Organizational Factors
Business marketers need to be aware of the following organizational trends in purchasing:
• Purchasing department upgrading: Strategically positioned and highly
• Cross-functional roles: strategic, technical, team-oriented, and involving more
responsibility
• Centralized purchasing: recentralized their purchasing, to gain more purchasing clout and
savings.
• Decentralized purchasing of small-ticket items
• Long-term contracts: Buyers are increasingly initiating long-term contracts
• Internet purchasing: Low transaction and personnel costs reduce time between order and
delivery, purchasing companies moving towards internet purchasing.
• Purchasing-performance evaluation & incentive systems and buyers’ professional
• Lean production: incorporates just-in-time (JIT) production, stricter quality control,
development frequent and reliable supply delivery, suppliers locating closer to
customers, computerized purchasing, and stable production schedules.
8 stages of PURCHASING PROCESS Stage 1: Problem Recognition
Someone in the company recognizes a problem or need that can be met by acquiring a good
or service. Internally, developing a new product, need for new equipment and materials or
to obtain lower prices or better quality. Externally, occur when a buyer gets new ideas at a
trade show, sees a supplier’s ad, or is contacted by a sales representative offering a better
product. Business marketers can stimulate problem recognition by direct mail,
telemarketing, effective Internet communications, and calling on prospects.
Stage 2: General Need Description
The buyer has to determine the needed item’s general characteristics and the required
quantity. In this stage, business marketers can assist buyers by describing how their products
would meet such needs.
Stage 3: Product Specification
Company assigns a product value analysis (PVA) to engineering team. By getting in early and
influencing buyer specifications, a supplier can significantly increase its chances of being
chosen.
Stage 4: Supplier Search
The supplier should get listed in online catalogs or services develop communications to reach
buyers, and build a good reputation in the marketplace. After evaluating each company, the
buyer will end up with a short list of qualified suppliers
Stage 5: Proposal Solicitation
The buyer invites qualified suppliers to submit proposals. When the item is complex or
expensive, the buyer will require a detailed written proposal from each qualified supplier.
After evaluating the proposals, the buyer will invite a few suppliers to make formal
presentations.
Stage 6: Supplier Selection
The buying center specifies desired supplier attributes (such as product reliability and service
reliability) and indicate their relative. A blanket contract may be established. The buyer’s
computer automatically sends an order to the seller when stock is needed, and the supplier
arranges delivery and billing according to the blanket contract.
Stage 7: Order-Routine Specification
The buyer negotiates the final order, listing the technical specifications, the quantity needed,
the delivery schedule, and so on. In the case of MRO items, buyers are moving toward
blanket contracts rather than periodic purchase orders.
Stage 8: Performance Review
The buyer periodically reviews the performance of the chosen supplier(s). Three methods
are used. The buyer may contact the end users and ask for their evaluations. Or the buyer
may rate the supplier on several criteria using a weighted score method. Or the buyer might
aggregate the cost of poor supplier performance to come up with adjusted costs of
purchase, including price.
Chapter 7 - Analyzing Business Markets and Buyer Behavior
Major
Influences on
Business Buying:
Interpersonal Factors
Buying centers usually
include several
participants with
differing interests,
authority, status,
empathy, and
persuasiveness.
Individual Factors
Each buyer carries
personal motivations,
perceptions, and
preferences, as
influenced by the
buyer’s age, income,
education, job position,
personality, attitudes
toward risk, and
culture.
Cultural Factors
Marketers carefully
study the culture and
customs of each region
to better understand
the cultural factors that
can affect buyers and
the buying
organization.
logo copy.tif
Mass
Marketing:
The seller engages
in mass
production, mass
distribution and
mass promotion
of one product for
all buyers
Identifying Market Segments and Targets
Chapter 8
Marketing ManagementBy Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
This chapter deals with one of the quintessential concepts of Marketing:
Segmentation, Target and Positioning. It explains different levels of Market Segmentation,
bases for Segmenting Consumer Markets, choosing target Markets & finally analyses the
various requirement for effective segmentation.
Steps in market segmenta
1. Market Segmentation
2. Target Marketing
3. Market Positioning
Levels of Market Segmentation: Micromarketing
A. Segment marketing
characteristics, or wants who might require separate products or marketing mixes.
Segment Marketing offers key benefits over Mass Marketing as the company can
offer better design, price, disclose
better reflect competitors marketing.
B. Niche Marketing
distinctive mix of benefits. Marketers usually define niches by dividing segments into
sub segments. For e.g. Ezee, the liquid detergent from Godrej is a fabric washing
product for woolen clothes.
Identifying Market Segments
Marketing ManagementBy Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
This chapter deals with one of the quintessential concepts of Marketing:
Segmentation, Target and Positioning. It explains different levels of Market Segmentation,
bases for Segmenting Consumer Markets, choosing target Markets & finally analyses the
various requirement for effective segmentation.
Steps in market segmentation, targeting and
positioning
•Identify bases for segmenting the market
•Develop segment profiles
1. Market Segmentation
•Develop measure of segment attractiveness
•Select target segments2. Target Marketing
•Develop positioning for target segments
•Develop a marketing mix for each segment3. Market Positioning
Levels of Market Segmentation: Micromarketing
Segment marketing: Dividing a market into distinct groups with distinct needs,
characteristics, or wants who might require separate products or marketing mixes.
Segment Marketing offers key benefits over Mass Marketing as the company can
offer better design, price, disclose and also can fine
better reflect competitors marketing.
Niche Marketing: A niche is a more narrowly defined customer group seeking a
distinctive mix of benefits. Marketers usually define niches by dividing segments into
egments. For e.g. Ezee, the liquid detergent from Godrej is a fabric washing
product for woolen clothes.
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
This chapter deals with one of the quintessential concepts of Marketing: STP i.e.
Segmentation, Target and Positioning. It explains different levels of Market Segmentation,
bases for Segmenting Consumer Markets, choosing target Markets & finally analyses the
tion, targeting and
Identify bases for segmenting the market
Develop segment profiles
Develop measure of segment attractiveness
Select target segments
Develop positioning for target segments
Develop a marketing mix for each segment
Levels of Market Segmentation: Micromarketing
Dividing a market into distinct groups with distinct needs,
characteristics, or wants who might require separate products or marketing mixes.
Segment Marketing offers key benefits over Mass Marketing as the company can
and also can fine-tune the marketing program to
is a more narrowly defined customer group seeking a
distinctive mix of benefits. Marketers usually define niches by dividing segments into
egments. For e.g. Ezee, the liquid detergent from Godrej is a fabric washing
Chapter 8 - Identifying Market Segments and Targets
C. Local Marketing:
needs and wants of local customer groups in trading areas, neighborhoods and even
individual stores is called as Local Marketing. E.g. Many Banks in Kerala have special
‘NRI Branches’ to cat
abroad.
D. Individual Marketing:
one”,” customized marketing” or “one
customers to de
Paints retailers facilitate customers to mix and match colors of their choice from a
catalogue.
Bases for Segmenting Consumer MarketsA. Geographic Segmentation:
such as nations, cities, states, regions, neighborhoods etc
• Region: South India, Western Region, North, East
• City: Class
• Rural, urban , semi urban areas
B. Demographic Segmentation:
age, family size, family life cycle, gender, income, occupation, education, religion etc.
Demographic variables are easy to measure and are directly associated with customer
needs and wants
Stage1: Bachelorhood
Stage2: Honeymooners
Stage3: Parenthood
Stage4:Post
Stage5: Solitary Survivor(SS)
C. Psychographic Segmentation:
basis of psychological/personality traits, lifestyles or values.
• Lifestyle:
done on three parameters:
• Personality:
D. Behavioral segmentation:
attitude toward, use of, or response to a product. The behavioral variables are as
follows:
• Occasions:
Identifying Market Segments and Targets
Local Marketing: Target marketing that involves marketing programs tailored to the
needs and wants of local customer groups in trading areas, neighborhoods and even
individual stores is called as Local Marketing. E.g. Many Banks in Kerala have special
‘NRI Branches’ to cater to the needs of customers whose relatives remit money from
Individual Marketing: This is the ultimate level of marketing that leads to “segments of
one”,” customized marketing” or “one-to-one marketing”.
customers to design the product and service offering to their choice. For e.g. Asian
Paints retailers facilitate customers to mix and match colors of their choice from a
catalogue.
Bases for Segmenting Consumer MarketsGeographic Segmentation: Division of the Market into different geographical Units
such as nations, cities, states, regions, neighborhoods etc
Region: South India, Western Region, North, East
City: Class-I cities, class-II cities, Metro cities etc
Rural, urban , semi urban areas
Demographic Segmentation: The market is divided on the basis of variables such as
age, family size, family life cycle, gender, income, occupation, education, religion etc.
Demographic variables are easy to measure and are directly associated with customer
needs and wants
FAMILY LIFE CYCLE STAGES
•Single,Focus of expenditure on selfStage1: Bachelorhood
•Young married couple without kids,focus on building home and relation
Stage2: Honeymooners
•Full Nest-I,1 child less than 6 yrs old
•Full Nest-II,youngest child under 6
•Full Nest-III: all adult children
Stage3: Parenthood
•Children not living with parents
•Empty Nest1 :Working
•Empty Nest2: Not Working
Stage4:Post-ParentHood
•One spouse dies
•SS-I: Working
•SS-II: Not Working
Stage5: Solitary Survivor(SS)
Psychographic Segmentation: Here buyers are divided into different groups on the
basis of psychological/personality traits, lifestyles or values.
Lifestyle: Culture-oriented, sports oriented, outdoor oriented. Classification is
done on three parameters: AIO-Activities, Interests and Opinions.
Personality: Compulsive, gregarious ,authoritarian ,ambitious
Behavioral segmentation: Buyers are divided on the basis
attitude toward, use of, or response to a product. The behavioral variables are as
Occasions: Regular, Special
Identifying Market Segments and Targets
Target marketing that involves marketing programs tailored to the
needs and wants of local customer groups in trading areas, neighborhoods and even
individual stores is called as Local Marketing. E.g. Many Banks in Kerala have special
er to the needs of customers whose relatives remit money from
This is the ultimate level of marketing that leads to “segments of
one marketing”. Customerization empowers
sign the product and service offering to their choice. For e.g. Asian
Paints retailers facilitate customers to mix and match colors of their choice from a
Bases for Segmenting Consumer Markets into different geographical Units
such as nations, cities, states, regions, neighborhoods etc
The market is divided on the basis of variables such as
age, family size, family life cycle, gender, income, occupation, education, religion etc.
Demographic variables are easy to measure and are directly associated with customer
LIFE CYCLE STAGES
Single,Focus of expenditure on self
Young married couple without kids,focus on building
I,1 child less than 6 yrs old
II,youngest child under 6
III: all adult children
Children not living with parents
Empty Nest2: Not Working
Here buyers are divided into different groups on the
basis of psychological/personality traits, lifestyles or values.
oriented, sports oriented, outdoor oriented. Classification is
Activities, Interests and Opinions.
Compulsive, gregarious ,authoritarian ,ambitious
Buyers are divided on the basis of their knowledge of,
attitude toward, use of, or response to a product. The behavioral variables are as
• Usage Rate:
• Loyalty Status:
• Readiness Stage:
buy
• Attitude towards Product:
Requirements for Effective Segmentation
Chapter 8 - Identifying Market Segments and Targets
Evaluating and Selecting Market SegmentsFive patterns of target market selection that can be followed are:
• Single Segment Concentration
strong knowledge of segments needs and acquires a strong market presence
• Selective Specialization
attractive and appropriate, there may be little or no synergy between the segme
• Product Specialization:
different market segments.
• Market Specialization:
customer.
• Full Market Coverage:
products they may need. E.g. Coca Cola (non
(Software Market) etc.
P = Product
M = Market
Usage Rate: Light, Medium, Heavy
Loyalty Status: None, medium, strong, absolute
Readiness Stage: Unaware, aware, informed, interested, desirous, intending to
buy
Attitude towards Product: Enthusiastic, positive, indifferent, negative, hostile
Requirements for Effective Segmentation
Identifying Market Segments and Targets
Evaluating and Selecting Market SegmentsFive patterns of target market selection that can be followed are:
Single Segment Concentration: Concentrated Marketing
strong knowledge of segments needs and acquires a strong market presence
Selective Specialization: a firm selects a number of segments. Each objectively
attractive and appropriate, there may be little or no synergy between the segme
Product Specialization: The firm makes a certain product that it sells to several
different market segments.
Market Specialization: The firm concentrates on serving many needs of a particular
customer.
Full Market Coverage: The firm attempts to serve a
products they may need. E.g. Coca Cola (non-alcoholic beverage segment), Microsoft
(Software Market) etc.
P = Product
M = Market
med, interested, desirous, intending to
Enthusiastic, positive, indifferent, negative, hostile
Requirements for Effective Segmentation
Identifying Market Segments and Targets
Evaluating and Selecting Market Segments Five patterns of target market selection that can be followed are:
: Concentrated Marketing where the firm gains a
strong knowledge of segments needs and acquires a strong market presence
: a firm selects a number of segments. Each objectively
attractive and appropriate, there may be little or no synergy between the segments
The firm makes a certain product that it sells to several
The firm concentrates on serving many needs of a particular
The firm attempts to serve all customer groups with all
alcoholic beverage segment), Microsoft
logo copy.tif
Technological
leapfrogging
is a bypass strategy
practiced in high-tech
industries. The
challenger patiently
researches and
develops the next
technology and
launches an attack,
shifting the
battleground to its
territory, where it has
an advantage.
Dealing with Competition
Chapter 9
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
Building strong brands requires a keen understanding of competition. To effectively devise and
implement the best possible brand positioning strategies, companies must pay attention to
their competitors. Markets have become too competitive to just focus on the consumer alone.
Vertical Integration is to integrate backward or forward i.e. with suppliers and
costumers which often lowers costs and can manipulate prices and costs in different parts of
the value chain.
Benchmarking is the art of learning from companies that perform certain tasks
better than other companies.
Competitive Forces (Michael Porter’s 5 forces) 1. Threat of intense segment rivalry - segment is unattractive if it contains numerous, strong,
or aggressive competitors.
2. Threat of new entrants - segment's attractiveness varies with the height of its entry and exit
barriers. The most attractive segment has high entry barriers and low exit barriers.
3. Threat of substitute products - A segment is unattractive when there are actual or potential
substitutes for the product.
4. Threat of buyers' growing bargaining power - A segment is unattractive if buyers possess
strong or growing bargaining power.
5. Threat of suppliers' growing bargaining power - A segment is unattractive if the company's
suppliers are able to raise prices or reduce quantity supplied.
Identifying Competitors Industry Concept
• Number Of Sellers And Degree Of Differentiation
• Entry, Mobility, And Exit Barriers
• Cost Structure
• Degree Of Vertical Integration
• Degree Of Globalization
Marketing Concept
According to marketing approach, competitors are companies that satisfy the same customer
need. The market concept of competition reveals a broader set of actual and potential
competitors. By mapping the buyer's steps in obtaining and using the product a company's
direct and indirect competitors can be identified.
Chapter 9 - Dealing with Competition
Trends Analyzing Competitors • Strategies: What strategies a company uses to enter/survive in the market?
• Objectives: What are the objectives of the competitor’s and what drives its behavior?
Factors shaping a competitor’s objectives include size, history, current management,
and financial situation.
• Strengths and Weaknesses: A company needs to gather information on each
competitor's strengths and weaknesses.
Three Important Variables for analyzing competitors
• Share of market - The competitor's share of the target market.
• Share of mind - The percentage of customers who named the competitor in
responding to the statement, "Name the first company that comes to mind in this
industry."
• Share of heart - The percentage of customers who named the competitor in
responding to the statement, "Name the company from which you would prefer to buy
the product."
Companies that make steady gains in mind share and heart share will inevitably make gains in
market share and profitability.
Competitive Strategies for Market Leaders Expanding the Total Market
New customers: Potential new users maybe divided into three groups:
• Those who might use it but do not (market-penetration strategy)
• Those who have never used it (new-market segment strategy)
• Those who live elsewhere (geographical-expansion strategy)
More usage: Two ways of increasing usage
• Increasing the level or quantity of consumption: through packaging or product
design or by increasing the availability of product
• Increasing the frequency of consumption: identifying completely new and different
ways to use the brand and communicate the advantages of using the brand more
frequently
Defending Market Share The most constructive response is continuous innovation. The leader leads the industry in
developing new product and customer services, distribution effectiveness, and cost cutting. It
keeps increasing its competitive strength and value to customers.
• Position Defense: It involves occupying the most desirable market space in the minds
of the consumers
• Flank Defense: the market leader should also erect outposts to protect a weak front or
possibly serve as an invasion base for counterattack.
• Preemptive Defense: A more aggressive maneuver is to attack before the enemy starts
its offense. A company can launch a preemptive defense in several ways
• Counteroffensive Defense: the leader can meet the attacker frontally or hit its flank or
launch a pincer movement. An effective counterattack is to invade the attacker's main
territory so that it will have to pull back to defend the territory.
• Mobile Defense: In mobile defense, the leader stretches its domain over new
territories that can serve as future centers for defense and offense through market
broadening and market diversification.
• Contraction Defense: giving up weaker territories and reassigning resources to
stronger territories.
Selecting
Competitors:
Strong versus Weak:
Weak require fewer
resources per share
point gained. The firm
should also compete
with strong
competitors to keep
up with the best.
Close versus Distant:
Most companies
compete with
competitors who
resemble them the
most
"Good" versus "Bad":
should support its
good competitors
(Play by the rules)
and attack its bad
competitors.
Expanding Market Share A company should consider four factors before pursuing increased market share:
• The possibility of provoking antitrust action
• Economic cost
• Pursuing the wrong marketing-mix strategy
• The effect of increased market share on actual and perceived quality
Competitive Strategies for Market Challengers
Defining the Strategic Objective and Opponent(S)
A market challenger must decide whom to attack:
It can attack the market leader. This is a high-risk but potentially high-payoff strategy
It can attack firms of its own size that are not doing the job and are underfinanced
It can attack small local and regional firms
Choosing a General Attack Strategy
• Frontal Attack: The attacker matches its opponent's product, advertising, price, and
distribution
• Flank Attack: Identifying shifts in market segments geographic areas that are causing
gaps to develop, and then rushing in to fill the gaps and develop them into strong
segments.
• Encirclement Attack: The encirclement involves launching a grand offensive on
several fronts. Make sense when the challenger commands superior resources
• Bypass Attack: It means bypassing the enemy and attacking easier markets to
broaden one's resource base. Three lines of approach: diversifying into unrelated
products, diversifying into new geographical markets, and leapfrogging into new
technologies to supplant existing products.
• Guerrilla Warfare: Small, intermittent attacks to harass and demoralize the
opponent and eventually secure permanent footholds (selective price cuts, intense
promotional blitzes, and occasional legal action)
Few more specific strategies: Price discount, Lower price goods, Value-priced goods and
services, Prestige goods, Product proliferation, Product innovation, improved services,
Distribution innovation, Manufacturing-cost reduction, Intensive advertising promotion
Competitive Strategies for Market-Nicher The nicher achieves high margin, whereas the mass marketer achieves high volume. Nichers
have three tasks: creating niches, expanding niches, and protecting niches. Because niches
can weaken, the firm must continually create new ones therefore multiple niching is
preferable to single niching. The key idea in successful nichemanship is specialization. Here
are some possible niche roles:
• End-user specialist: The firm specializes in serving one type of end-use customer.
• Customer-size specialist: The firm concentrates on selling to small, medium-sized, or
large customers.
• Geographic specialist: The firm sells only in a certain locality, region, or area of the
world.
• Product-feature specialist: The firm specializes in producing a certain type of
product or product feature
• Quality-price specialist: The firm operates at the low- or high-quality ends of the
market
• Channel specialist: The firm specializes in serving only one channel of distribution
Chapter 9 - Dealing with Competition
Competitive
Strategies for
Market
Follower:
A market follower must
know how to hold
current customers and
win a fair share of new
customers. It must keep
its manufacturing costs
low and its product
quality and services
high. Four broad
strategies can be
distinguished:
• Counterfeiter -
duplicates the
leader's product and
package and sells it
• Cloner - emulates the
leader's products,
name, and
packaging, with slight
variations.
• Imitator - copies
some things from the
leader but maintains
differentiation in
terms of packaging,
advertising, pricing,
or location.
• Adapter - takes the
leader's products and
adapts or improves
them.
logo copy.tif
Brand:
A name, term, sign,
symbol or design, or a
combination of them,
intended to identify
the goods or services
of one seller or group
of sellers and to
differentiate them
from those of
competitors.
Creating Brand Equity
Chapter 10
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
It is important for the marketer to create a strong brand and maintain customer loyalty. This
chapter talks about the concepts of brand and how branding works. We will understand
what brand equity is, how it is built and measured as well as the decisions involved in
branding strategy.
Brand Equity Added value endowed on products and services. Reflected in way consumers think, feel and
act with respect to a brand. Customer based brand equity – differential effect brand
knowledge has on customer response to the marketing of a brand. Maybe positive or
negative depending on how consumers respond. It has three key ingredients –
• Brand equity arises from differences in customer response
• Differences in response are a result of consumer’s knowledge of the brand. Brand
Knowledge consists of all thoughts, feelings, images, experiences, beliefs and so on that
become associated with the brand
• The differential response is reflected in perceptions, preferences and behaviour related
to all aspects of the marketing of the brand
Marketer must build a strong brand that ensures that the consumers have the right
experiences.
Brand Promise Marketer’s vision of what the brand must be and do for the consumers. The true and future
value depends on customers, their brand knowledge and their likely response to marketing
activity.
Chapter 10 - Creating Brand Equity
Trends Brand Equity Models
Brand Asset Valuator It provides comparative measures of the brand equity of thousands of brands across
hundreds of different categories.
Brand
Element:
Those trademark able
devices that identify
and differentiate the
brand. Most strong
brands employ
multiple brand
elements. Brand
element choice
criteria includes 6
main parameters –
first three being
memorable,
meaningful and
likable (‘brand
building’) and last
three being
transferable,
adaptable and
protective
(‘defensive’).
Up and coming/Niche
JetBlue
Ikea
TiVo
Redbull
Leaders
USA Declining
Pringles Leaders
Nike Kodak
AAA
Tide
New/Undeveloped
Blackberry
Sephora
SAP
Brtish Airways
Eroded/Commoditized
Centrum
Entertainment Weekly
Wells Fargo
Budget Rent-A-Car
Energized Brand Strength
(Differentiation, Relevance, Energy)
Brand Structure
(Esteem & Knowledge)
(E There are the five key components of the model –
1. Differentiation – degree to which a brand is seen as different from others
2. Energy – brand’s sense of momentum
3. Relevance – breadth of brand’s appeal
4. Esteem – how well the brand is regarded and respected
5. Knowledge – how familiar and intimate customers are with the brand
Brand Resonance Model Creation of significant brand equity requires reaching the top or pinnacle of the brand
pyramid, which occurs only if the right building blocks are put into place.
Resonance
Judgement Feelings
Performance Imagery
Salience
• Brand Salience – how often and how easily customers think of the brand under
various purchase or consumption situations.
• Brand Performance – how well the product or service meets customers’ functional
needs
• Brand Imagery - describes the extrinsic properties of the product or service; also the
way in which brand attempts to meet customers’ psychological or social needs
• Brand Judgements – focus on customers’ own personal opinions and evaluations
• Brand Feelings – customers’ emotional responses and reactions with respect to the
brand
• Brand Resonance – nature of the relationship customers have with the brand and the
extent to which they feel they’re “in sync” with it
Brand Audit – consumer focussed series of procedures to assess the health of the
brand, uncover its sources of brand equity and suggest ways to improve and leverage its
equity.
Brand Valuation – Job of estimating the total financial value of the brand.
Devising a Brand Strategy When a firm introduces a new product it has 3 choices –
• Develop new brand elements for the new product
• Apply some of the existing brand elements (Product is called brand extension)
• Use a combination of new and existing brand elements (Maybe called a sub brand)
Brand Portfolios Marketers need multiple brands to cater to multiple markets. The reasons for diversifying
the brand portfolio -
1. Increasing shelf presence and retailer dependence in the store
2. Attracting customers seeking variety who may otherwise have switched to another
brand
3. Increasing internal competition within the firm
4. Yielding economies of scale in advertising, sales, merchandising and physical
distribution
Customer Equity Sum of lifetime values of all customers. The aim of Customer Relationship Management
(CRM) is to produce high customer equity.
Chapter 10 - Creating Brand Equity
Trends
Brand
Reinforcement
Brand needs to be
managed so its value
does not depreciate.
Brand equity
reinforced by
marketing actions that
consistently convey the
meaning of the brand
in terms of what it
represents and how it
makes the products
superior. Reinforcing
requires innovation
and relevance
throughout the
marketing program.
logo copy.tif
Positioning:
Positioning is the act
of designing the
company’s offering
and image to occupy
a distinctive place in
the minds of the
target market.
Positioning requires
determining on a
frame of reference
based on the
following factors:
1. Identifying the
target market.
2. Analyzing the
competition.
Crafting the Brand Positioning
Chapter 11
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
This chapter illustrates how a firm can choose an effective positioning in the market and
differentiate its brand. It describes the various strategies a firm can employ at each stage of a
products life cycle and finally shows the implications of Market evolution for marketing
strategies.
Developing and Communicating a Positioning Strategy
Category Membership: products or set of products with which the brand
competes and which function as close substitutes.
Points of Difference (POD): Attributes or benefits consumers strongly
associate with a brand, positively evaluate and believe they could not find to the same extent
in another brand.
Points of Parity (POP): They are associations that are not unique to the brand
but in fact maybe shared with other brands. It has two forms:
• Category Points of Parity: Associations customers view as essential to a legitimate and
credible offering within a certain product or service category.
• Competitive Points of Parity: Associations designed to negate a competitor’s points-
of-difference.
Choosing POPs and PODs POPs: They are driven by the needs of category membership (to create category POPs) and the
necessity of negating competitors’ PODs (to create competitive PODs)
PODs: The following two criteria are considered while choosing POP’s
Desirability Criteria Deliverability Criteria
Relevance Feasibility
Distinctiveness Communicability
Believability Sustainability
Chapter 11 - Crafting the Brand Positioning
Establishing category membership The typical approach to positioning is to inform consumers about a brands category
membership before stating its points of difference. Initial advertising often concentrates on
create brand awareness and subsequent advertising attempts to craft the Brand Image.
Differentiating Strategies
Competitive Advantages It is a company’s ability to perform in 1 or more ways that competitors can’t match. Two
sustainable competitive advantages are:
• Leverageable Advantage: is one that a company can use as a springboard to new
advantages
• Customer Advantage: is an advantage that a customer sees in the company’s
offering
Dimensions to differentiate Market Offerings
• Personnel differentiation: Better trained employees E.g. smartly dresses flight
attendants of Kingfisher Airlines.
• Channel Differentiation: more effectively and efficiently designed channels,
coverage, expertise and performance.
• Image differentiation: Companies can craft powerful compelling images. E.g.
Marlboro’s “macho cowboy” image.
Product Lifestyle Marketing Strategies Most product life-cycle curves are portrayed as bell shaped curves.
Straddle
Positing:
It is a common
positioning technique
used when a
company tries to
straddle between two
frames of reference.
E.g. BMW through a
well crafted
marketing program
straddled ‘Luxury’
and ‘Performance’ as
both POD and POP.
A company’s positioning and differentiation strategy must change as the product, market and
competitors change over the product life cycle (PLC).
Introduction Growth Maturity Decline
Characteristics
Sales Low Sales Rapidly rising
sales
Peak Sales Declining Sales
Costs High Cost per
customer
Average Cost per
customer
Low cost per
customer
Low cost per
customer
Profits Negative Rising Profits High Profits Declining Profits
Customers Innovators Early Adopters Middle majority Laggards
Marketing
Objectives
Create product
awareness and
trial
Maximize market
share
Maximize profit
while defending
market share
Reduce
expenditure and
milk the brand
Strategies
Product Offer a basic
product
Offer product
extensions,
service, warranty
Diversify brands
and items models
Phase out weak
products
Price Charge cost-plus Price to penetrate
market
Price to match or
best competitors’
Cut price
Distribution Build selective
distribution
Build Intensive
distribution
Build more
intensive
distribution
Go selective: phase
out unprofitable
outlets
Advertising Build product
awareness
among early
adopters
Build awareness
and interest in
mass market
Stress brand
differences and
benefits
Reduce to level
needed to retain
hard-core loyals
Sales Promotion Use heavy sales
promotion to
entice trial
Reduce to take
advantage of
heavy consumer
demand
Increase to
encourage brand
switching
Reduce to
minimum level
Summary of Product Lifecycle Characteristics,
Objectives and Strategies
Chapter 11 - Crafting the Brand Positioning
Trends
Market Evolution • Emergence: Before a market materializes it exists as a latent market. Here the
entrepreneur has three options:
1. Single Niche Strategy: Design a product to meet preferences of 1 segment of the
market
2. Multiple-Niche Strategy: Launch 2 or more products simultaneously to capture 2 or
more parts of the market
3. Mass Market Strategy: Design a product for the middle of the Market
• Maturity
• Decline: Eventually demand for the current products will begin to decrease because
either:
1. Society’s total need level declines
2. New Technology replaces the old
Maturity:
When the
competitors cover all
major segments of
the market maturity
stage occurs.
Competitors invade
each others profits
and as market growth
slows down, market
splits into finer
segments and market
segmentation occurs.
This is often followed
by market
consolidation caused
by the emergence of
a new attribute that
has greater appeal.
Mature markets
swing between
fragmentation and
consolidation.
logo copy.tif
Product:
Anything that can
be offered to a
market to satisfy a
need or want,
including physical
goods, services,
experiences,
events, persons,
places, properties.
Setting Product Strategy
Chapter 12
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
Product is the first and the most important element of a marketing mix. This chapter deals
with various product strategies for making coordinated decisions on product mixes, product
lines, brands, packaging, labeling and warranties and guarantees.
Product Levels Marketers need to address 5 product levels:
• Core Benefit: The benefit a customer really buys. E.g. Hotel guest buys rest and sleep
• Basic Product: e.g. hotel room includes bed, bathroom, desk, dresser, closet, towel etc
• Expected product: attributes that buyers normally expect along with their product.
• Augmented product: attributes that exceed buyer expectations. In developed countries,
brand positioning and competition take place at this level, while in developing countries
it takes place at ‘expected product’ level.
• Potential product: it encompasses all the augmentations and transformations the
product or offering might undergo in the future.
Product classification • Durability and tangibility
1. Nondurable goods: tangible goods that are normally consumed in a day or two. E.g.:
soaps, soft drinks. They are purchased frequently, thus should be made available in
many locations, charged a small markup, and advertised heavily to induce trial.
2. Durable goods: tangible goods that survive many uses. E.g. Clothes, machines.
Require more personal selling, higher margins, more seller guarantees.
3. Services: intangible, variable, perishable products. E.g. Haircuts, repairs. Require
more quality control, supplier credibility, adaptability.
• Consumer goods classification: done on the basis of shopping habits. 4 types-
1. Convenience goods: purchased frequently, immediately, with minimum effort
� Staples: purchased on regular basis
� Impulse goods: purchased w/o planning e.g. Chocolates
� Emergency goods: purchased when need is urgent e.g. Umbrellas
Product Differentiation
Form: this includes size, shape, physical structure.
Features: they supplement the basic function of the product. Company must compare
customer value v/s company cost for each potential feature.
Customization: requires gathering and using information about consumers. Mass
customization is the ability of a company to meet each customer’s requirements.
Performance quality: it is the level at which a product’s primary characteristics
operate. 4 performance levels- low, average, high, and superior. The level must be
appropriate to the target segment and not necessarily the best.
Conformance quality: the degree to which all produced units is identical and meets the
promised specifications.
Durability: buyers generally pay more for more durable products. However, the extra
price must not be excessive and the product must not be subject to rapid technological
obsolescence
Reliability: probability that a product will not fail within a specified time period.
Reparability: the ease of fixing a product when it malfunctions or fails
Style: the product’s look and feel. Creates distinctiveness that is difficult to copy.
Chapter 12 - Setting Product Strategy
2. Shopping goods: goods that consumer compares based on suitability, price etc
� Homogeneous: similar in quality but different in price.
� Heterogeneous: similar in price but different in product features.
3. Specialty goods: they have unique characteristics for which consumers can spend more.
E.g. Cars, men’s suits etc. they don’t require comparison.
4. Unsought goods: those that consumers do not know about or think of buying. E.g.
Insurance, reference books. Require advertising and personal selling.
• Industrial goods classification: done on the basis of relative cost and how they enter the
production process-
1. Materials and parts: those that enter the manufacturer’s product completely.
� Raw materials: 2 kinds- Farm products, which are seasonal and require special
marketing apart from advertising, and Natural products, which are limited in supply
� Manufactured materials and parts: 2 kinds- component materials (e.g. Iron,
cement. These are usually fabricated further), and component parts (e.g. Motors,
tires. These enter the final product w/o change.)
2. Capital items: long lasting goods that facilitate developing or managing the finished
products. They include-
� Installation: includes buildings and heavy equipments. Advertising less important
that personal selling
� Equipment: includes portable factory tools and equipments. Sales force more
important than advertising.
3. Supplies: short term goods that facilitate developing or managing finished products.
They include-
� Maintenance and repair items. E.g. Paint, broom.
� Operating supplies. E.g. Lubricants, writing paper, pencils.
4. Business services: short term services that facilitate developing or managing finished
products. They include-
� Maintenance and repair services. E.g. Air conditioner maintenance.
� Business advisory services. E.g. Management consulting, advertising.
Differentiation
Straddle
Positing:
It is a common
positioning technique
used when a
company tries to
straddle between two
frames of reference.
E.g. BMW through a
well crafted
marketing program
straddled ‘Luxury’
and ‘Performance’ as
both POD and POP.
Services Differentiation
Ordering ease: ease of placing an order
Delivery: includes speed, accuracy, and care throughout the process.
Installation: work done to make a product operational in its planned location. Becomes
a selling point when the target market is technologically novice.
Customer training: training customer’s employees to use vendor’s equipment
efficiently and properly.
Customer consulting: data, information and advice services that seller offers to buyers.
Maintenance and repairs: helps customers keep products in working order.
Returns: they are of two types-
1. Controllable: result from problems, difficulties, or errors of seller or customer and
can be eliminated with proper strategies.
2. Uncontrollable: can’t be eliminated by the company in the short run.
Chapter 12 - Setting Product Strategy
Product Hierarchy 1. Need family: the core need that underlies the existence of a product family. E.g.
Security.
2. Product family: product classes that satisfy a core need. E.g. Savings and income
3. Product class: a group of products within a family that have functional coherence
4. Product line: a group of products within a class that perform similar function, are sold
to same customers, are marketed through same channels. E.g. Life insurance.
5. Product type: a group of items within a line that share of possible forms of the
product. E.g. Term life insurance.
6. Item: a distinct unit within a brand or product line distinguishable by size, price,
appearance, etc. ICICI prudential term life insurance.
Product system: a group of diverse but related items that function in a
compatible manner.
Product Mix
It is the set of all products and items a particular seller offers for sale.
• Width: how many product lines the company carries.
• Length: the total no. of items in the mix.
• Depth: how many variants are offered of each product in the line?
• Consistency: how closely related the various product lines are in end use.
Product line Product line analysis: based on –
• Sales and Profit: a company can classify its products based on the margins.
o Core products: basic products that have a high sales volume but with low margins
as they are essentially undifferentiated commodities. E.g. Basic computers.
o Staples: lower sales volume, higher margins, no promotions. E.g. Faster CPU
o Specialties: lower sales volume, highly promoted. E.g. Installation, delivery.
o Convenience items: peripherals selling in high volumes, less promotion, high
margins. E.g. Software, carry cases.
• Market Profile: product line managers must review how the line is positioned against
competitor’s lines.
Product line
length:
Companies seeking
higher market share
have longer product
lines, those seeking
higher profitability
have shorter product
lines. They lengthen
over time. Excess
manufacturing forces
production of newer
items. However,
other costs increase
and thus some non
performing items are
eliminated.
Chapter 12 - Setting Product Strategy
Line stretching: occurs when companies try to go beyond their current range
offered. Companies stretch in the following ways-
• Down Market Stretch: introducing lower-priced line than the one being offered. It can be
risky as the price may not be less enough for competitors or some customers may shift the
cheaper version.
• Up-Marker Stretch: entering high end of market for better growth, higher margins.
• Two way Stretch: middle level companies entering both high end and low end markets.
Helps in establishing market dominance. E.g. Titan started as mid level watch, and then
introduced Sonata for low end and Edge, Xylus for high end.
Note: a high end model of a low end brand is preferred over a low end model of a high end
brand.
Line filling: lengthening product line by introducing more items in the present range.
Line modernization, Featuring and Pruning: product
lines need to change with the times. Can be done piecemeal or all at once. Piecemeal allows
company to gauge the effect of change on consumers, but allows competitors to copy and
pose greater challenge. Improvements must not occur too early (as they will affect sales of
current product) and too late (as competitors would get more time).
The company may choose between featuring their most selling items and promoting their
weak items from time to time.
Companies also need to optimize their brand portfolio. For this, they need to identify the weak
items, and weed them away. E.g. Unilever found only 400 of its 1600 items generated 90% of
company’s profits.
Product-Mix Pricing: searching for a set of prices that maximizes profits on
the total mix.
• Product Line Pricing: companies develop product lines and introduce price steps. Their
task is to establish perceived quality differences that justify price differences.
• Optional Feature Pricing: e.g. Automobile cos. Advertise entry level models at low prices
to attract more customers. These modes are stripped of several features that buyers
usually end up buying.
• Captive Product Pricing: e.g. Manufacturers of razors price them low and set high markups
on razor blades. If price is too high, counterfeiting and substitutions can erode sales.
• Two-Part Pricing: fixed fee+ variable usage fee. Fixed fee should be low to encourage more
sales; profit can be maximized from variable fees.
• By-Product Pricing: e.g. Production of petroleum products produces several by products. If
producer can sell these to the customer, he can price the main product lower.
• Product Bundling Pricing
1. Pure bundling: products offered only as bundles. E.g. tour operators bundle stay and travel.
2. Mixed bundling: products offered individually as well as in bundles. E.g. Auto
manufacturers. Customers may not plan to buy all components, but may be lured by the
saving.
Chapter 12 - Setting Product Strategy
Co-Branding: 2 or more brands are combined into a joined product or are
marketed together in some fashion. It includes same company co-branding (Gillette launched
Mach 3 Turbo with its shaving gel), joint venture co-branding (Indian oil and Citibank co-
branded credit cards), multiple sponsor co-branding ( Taligent, a one time alliance of Apple,
IBM and Motorola) and retail co-branding (2 retail establishments using the same location to
optimize space and profits).
It allows products to be convincingly positioned and generating greater sales as 2 well known
images are combined.
However, consumer expectations with the level of involvement are high, so an unsatisfactory
performance will be damaging for the partner company as well.
For co-branding to succeed, both brands must have brand equity, and must fit in terms of
values, goals and capabilities.
Packaging: activities of designing and producing containers for a product. Packages
may include 3 levels of materials. Package is the buyer’s first encounter with the product.
Factors leading to growing use of packaging:
• Self service
• Consumer affluence
• Company and brand image: package leads to instant recognition of brand
• Innovation opportunity: packaging can be used to target different segments.
Packaging needs to achieve the following objectives:
• Identify the brand
• Convey descriptive and persuasive information
• Facilitate product transportation and protection
• Assist at-home storage
• Aid product consumption
After designing, the packaging needs to be tested:
• Engineering tests: ensure that package stands up under normal circumstances
• Visual tests: ensure that script is legible and colors harmonious
• Dealer tests: dealers should find package attractive and easy to handle
• Consumer test: buyers must respond favorably
Labeling: labels identify the product, grade the product, describe the product and
promote the product (through attractive graphics).
Warranties and Guarantees: warranties are formal statements of
expected product performance by the manufacturer. Products under warranties can be
returned to the manufacturer for replacement, repair.
Guarantees reduce the buyer’s perceived risk. They are especially helpful when the company is
not well known or when product quality is superior to that of competitors.
Ingredient
Branding:
special case of co-
branding. It created
brand equity for
materials,
components, parts
that are contained
within other branded
products. Ingredient
brands create
preference for their
products so that
customers do not but
a host product which
does not have that
ingredient.
logo copy.tif
Designing and Managing
Services
Chapter 13
Marketing ManagementBy Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
Today as product companies find it harder and harder to distinguish their physical products,
they turn to service differentiation. Service providers find significant profitability in delivering
superior services.
How do we define and classify services and how do
they differ from goods• A service is any act or performance one party can offer to another that is
intangible and does not result in the ownership of anything .Its production may or may
not be tied to physical product Categories of services mix.
• Services can be equipment based or people based & they differ in their objectives and
ownership.
• Service companies can choose among different processes to deliver their service.
• Services needs client presence & may meet a personal or business need.
Pure Tangible Goods
Tangible Goods with
accompanying services
Hybrid
Major service with
accompanying minor
goods and services
Pure Service
Service
marketing is
different from goods
marketing as service
consumer relies on
word of mouth, they
rely heavily on price,
personnel & physical
cues to judge
quality. They are
highly loyal to
service providers
who satisfy them &
because switching
costs are high,
consumer inertia
can make it
challenging to entice
a customer away
from a competitor.
Designing and Managing
3
Marketing ManagementBy Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
Today as product companies find it harder and harder to distinguish their physical products,
service differentiation. Service providers find significant profitability in delivering
superior services.
How do we define and classify services and how do
they differ from goods A service is any act or performance one party can offer to another that is
intangible and does not result in the ownership of anything .Its production may or may
not be tied to physical product Categories of services mix.
Services can be equipment based or people based & they differ in their objectives and
ownership.
Service companies can choose among different processes to deliver their service.
Services needs client presence & may meet a personal or business need.
Categories of services mix
• No services accompany the product. E.g
Soap,toothpastePure Tangible Goods
•The offering accompanied by one or more services E.g
Computers, Cell Phones & cars
Tangible Goods with
accompanying services
•The offering contains equal parts goods and services. E.g
restaurantsHybrid
•The offering consists of major service along with
additional services or supporting goods. E.g Airplane
travel alog with its services
Major service with
accompanying minor
goods and services
•The Offering consists of only a service.E.g psycotherapyPure Service
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
Today as product companies find it harder and harder to distinguish their physical products,
service differentiation. Service providers find significant profitability in delivering
How do we define and classify services and how do
A service is any act or performance one party can offer to another that is essentially
intangible and does not result in the ownership of anything .Its production may or may
not be tied to physical product Categories of services mix.
Services can be equipment based or people based & they differ in their objectives and
Service companies can choose among different processes to deliver their service.
Services needs client presence & may meet a personal or business need.
Categories of services mix
No services accompany the product. E.g
The offering accompanied by one or more services E.g
Computers, Cell Phones & cars
The offering contains equal parts goods and services. E.g
The offering consists of major service along with
additional services or supporting goods. E.g Airplane
The Offering consists of only a service.E.g psycotherapy
Chapter
External Marketing
•It describes the normal
work of
preparing,pricing,distribut
ion,and promoting the
service to customers.
Intangibility
Inseparability
Variability
Perishability
Distinctive Characteristics of Services
Developing Brand Strategies for services
Identify what is most valuable to customer and include repair & maintainence services
Create a brand hierarchy and brand portfolio that permits positioning, targeting of
desgin marketing communication, information programs and building brand personality
Chapter 13 - Designing and Managing Services
Holistic Marketing for Services
External Marketing
It describes the normal
preparing,pricing,distribut
ion,and promoting the
service to customers.
Internal Marketing
•It describes the training
and motivating
employees to serve the
customers well.Engage
every employee in the
organization to practise
marketing
• Services are intangible Service marketers must be able to transform
intangible services into concrete benefits.Intangibility
• Services are typically produced and consumed simultaneously .Thus
service providers must learn to work in larger groups to provide
services to customersInseparability
•Services are variable and buyers are aware of this variability and often
talk to others about quality before selecting a services.
•Invest In Good Hiring
•Standardize the service-performance process
•MonitorCustomer Satisfaction process
Variability
•Services cannot be stored hence there is always a mismatch between
demand & supply.Stratgies that marketers must use :
•Demand Side - Differential Pricing,Nonpeak Demand,Complementary
Services,Reservation Systems
•Supply Side - Part-Time employees ,Peak Time efficiency,Increased
consumer participation,shared services,Facilities for future expansion
Perishability
Distinctive Characteristics of Services
Developing Brand Strategies for services
Provide Post-Sales support
Identify what is most valuable to customer and include repair & maintainence services
Devising Branding Stratgey
Create a brand hierarchy and brand portfolio that permits positioning, targeting of
different market segments
Establishing Image Dimensions
desgin marketing communication, information programs and building brand personality
Chosing Brand Elements
Focus on logos,symbols,slogans to build brand awareness
Designing and Managing Services
Marketing for Services
Interactive Marketing
•It describes the employee
skills in serving the client
Services are intangible Service marketers must be able to transform
intangible services into concrete benefits.
Services are typically produced and consumed simultaneously .Thus
service providers must learn to work in larger groups to provide
Services are variable and buyers are aware of this variability and often
talk to others about quality before selecting a services.
performance process
Services cannot be stored hence there is always a mismatch between
demand & supply.Stratgies that marketers must use :
Differential Pricing,Nonpeak Demand,Complementary
Time employees ,Peak Time efficiency,Increased
consumer participation,shared services,Facilities for future expansion
Distinctive Characteristics of Services
Developing Brand Strategies for services
Sales support
Identify what is most valuable to customer and include repair & maintainence services
Devising Branding Stratgey
Create a brand hierarchy and brand portfolio that permits positioning, targeting of
Establishing Image Dimensions
desgin marketing communication, information programs and building brand personality
Focus on logos,symbols,slogans to build brand awareness
Best Practices of Service Quality Management
Chapter 13 - Designing and Managing Services
Trends
STRATEGIC
COMPONE
NT
•Top
companies
are
customer
obsessed
•They have
clear sense
of target
customer
and their
need
TOP
MANAGEM
ENT
COMMITME
NT
•Thorough
commitme
nt to
service e.g
Marriot,Xer
ox
•Both
financial &
service
performanc
e
monitored
by top
manageme
nt
HIGH
STANDARDS
•Setting
high
service
standards
•developing
reliable,resi
lient &
innovative
customer
Intefrace
systems
SELF-
SERVICE
TEHNOLOGI
ES
•replacing
person to
person
interaction
s with self
service
technologie
s e.g ATMs
•Helping
customers
to use
these
facilities
MONITORIN
G SYSTEMS
•Auditing
service
performanc
e of own &
competitor
s
SATISFYING
EMPLOYEES
&
CUSTOMERS
•Instilling a
possitive
attitude
about
customer
satisfaction
in
employees
logo copy.tif
Pricing
Environment:
Many firms are
nowadays following
the low-price trend
and have seen success
in converting the
acquired customers to
more expensive
products by
combining unique
product formulations
and engaging
marketing campaigns.
Developing Pricing Strategies and Programs
Chapter 14
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
Traditionally, price has been the major determinant of a buyers’ choice. And this is still the
case with large segments of markets across the world. Although non-price factors have
recently risen in importance, pricing remains an important factor in determining sales and
profitability. Also, price is the only component in the marketing mix that provides revenue and
not costs.
Buyers can : • Get instant price comparisons from thousands of vendors: Websites like
pricescan.com offer data about products like prices and reviews from hundreds of
merchants.
• Name their prices: The consumer can state his desired price for a product and find the
seller willing to meet this price on sites like priceline.com. Also, volume-aggregating
sites collate orders from many customers and press the supplier for a deeper discount.
• Get products free: The open source software movement has eroded margins for
almost any major software player. Also, the recent emergence of low-cost airlines
providing tickets only for the amount of taxes levied on a ticket is an example how
firms have been successful with free offerings.
Sellers can : • Monitor customer behaviour and customize offers: Firms use software to analyse
pricing requests with pricing factors such as past sales data, discounts, etc. to reduce
processing time of these requests greatly.
• Offer certain customers special prices: Certain customers are offered lower prices by
firms in order to capture a certain market segment on ensure the loyalty of existing
customers further.
Setting the price Firms set a price when they introduce a new product, or venture into a new market with an
existing product. This is usually achieved by following a six-step process as follows
Chapter 14 - Developing Pricing Strategies and Programs
Step 1: Selecting the Pricing Objective – The firm first decides where it wants to position
its market offering. The five major pricing objectives are
• Survival: Companies pursue survival if they are plagued with over-capacity, intense
competition, or changing consumer wants.
• Maximum current profit: Many firms try to set a price that maximises their current
profits and delivers a high return on investment.
• Maximum market share: Here, firms believe that a higher sales volume will lead to
lower unit costs and higher long-run profits and thereby maximise their market
share.
• Maximum market skimming: Companies offering new technologies often set high
prices initially in order to gain high profits from various segments of the market
early on.
• Product-Quality Leadership: Many firms aspire to be the product-quality leader in
the market.
Step 2: Determining Demand – Each price leads to a different level of demand and
therefore has a different impact on a company’s marketing objectives. The factors
entailing this are
• Price Sensitivity: The relation between price and demand, i.e. the demand curve can
be analysed to determine the market’s probable purchase quantity at various prices.
This helps a firm to maximise its profits.
• Estimating Demand Curves: Most companies use the following methods to estimate
demand curves: Market Surveys, Price Experiments, Statistical Analysis, etc.
• Price Elasticity: Marketers need to know how responsive, or elastic, the demand
would be, to a change in price. If the price elasticity is high, increasing prices would
lead to a great reduction in demand, while decreasing prices would lead to increase
in demand. Hence, marketers prefer inelastic markets where price changes do not
elicit great shifts in demand.
Step 3: Estimating Costs – While demand sets a ceiling on the range of price a firm can
charge for its product, costs determine the floor.
• Types of Costs and Levels of Production: Costs are classified as Fixed costs and
Variable costs. Fixed costs include salaries, electricity bills, etc. which do not depend
upon quantity produced. Variable costs include processing costs, packaging costs,
shipping costs, etc. which depend upon quantity produced. Hence, companies must
decide on a level of production which will more or less guarantee no losses on the
cost of production.
• Accumulated Production: As firms gain experience in production of a good, the
costs involved begin to decline. This is due to various factors such as workers finding
shortcuts, smoother flow of materials, etc. This decline in cost with production
experience is called experience curve.
• Target Costing: Other than production scale and experience, costs also change a
result of concentrated efforts by designers, engineers, purchase agents etc. They
examine each cost component and try to find ways to reduce the costs involved in
each of these.
Consumer
psychology and
pricing:
• Reference prices:
Consumers often employ
reference prices,
comparing an observed
price to an internal
reference price or a posted
‘regular retail price’.
Sellers manipulate this by
product positioning,
suggesting that the actual
price of the product is
much higher or by
pointing to a competitor’s
high price.
• Price-Quality inferences:
Many consumers use price
as an indicator of quality.
High-price cars are
perceived to be of higher
quality and vice versa.
• Price cues: Consumer
perceptions of prices are
also affected by the
manner in which prices are
displayed. Many sellers
believe setting a price of
Rs.2999 puts a product
into the 2000 range
instead of the 3000 range
as perceived by the
consumer. Putting ‘Sale’
signs near the price
display have also been
known to be effective.
Step 4: Analyzing Competitors – The introduction of any change in price, cost, offers given by
any seller can elicit a response in the market.
A firm must analyse the value offered by a competitor to a customer in terms of prices, add-
ons, post-sale services, etc. and thereby modify its own price in order to be competitive in the
market.
Step 5: Selecting Pricing Methods – There are six major pricing methods:
• Mark-up Pricing: The most elementary pricing method is to add a standard mark-up to
the producer’s cost.
• Target-return Pricing: In target-return pricing, the firm determines the price that would
yield its target return on investment.
• Perceived-value Pricing: Perceived-value pricing is made up of several factors like the
buyer’s image of the product, the channel deliverables, warranty quality, customer
support, supplier’s reputation, etc.
• Value Pricing: Here, high quality products are assigned a fairly low price. The basic aim
here is to attract a value-conscious customer base by reengineering the company to
become a low-cost producer without sacrificing quality.
• Going-rate Pricing: Here, firms base their prices largely on competitors’ prices, charging
nearly the same as major competitors in the market do.
• Auction-type Pricing: There are three types in this pricing method –
English Auctions (Ascending bids): Here, the seller puts up an item and the bidders raise
the price until the top price is reached.
Dutch Auctions (Descending bids): Here, the seller announces a high price and then goes
on lowering the price until a bidder accepts it. Or, a buyer announces his desire for a
product and sellers compete to offer him the lowest price.
Sealed-bid Auctions: Here, potential suppliers submit their bids without knowledge of
other bids made and the best bid is selected.
Step 6: Selecting the Final Price – After the pricing methods have narrowed the range of the
price, the company selects the final price by taking into account factors as listed below:
• Impact of other marketing activities: The final price must take into account the brand’s
quality and advertising relative to the competition.
• Company Pricing Policies: The final price must be compliant with the company’s pricing
policies.
• Gain-and-Risk-sharing Pricing: Buyers may resist accepting a supplier’s proposal because
of a high perceived level of risk. Hence, the seller has the option of offering to absorb part
or all of the risk if the promised value is not delivered.
• Impact of price on other parties: The final price’s effect on other parties such as
distributors, dealers, competitors, government should also be taken into account by the
management.
Adapting the Price • Geographical Pricing
• Price Discounts and Allowances
• Promotional Pricing
• Differentiated Pricing
Chapter 14 - Developing Pricing Strategies and Programs
Trends Initiating and
responding to
price changes:
• Initiating price
cuts: Companies
sometimes initiate
price cuts in order to
dominate the market
through lower prices.
• Initiating price
increases: Companies
initiate price increase
to increase their profits
by taking into account
the feasibility of the
price rise. A major
factor leading to these
price increases is over
demand, where the
company cannot
supply all its customers
and hence raises its
prices.
• Responding to
competitors’ price
changes: Firms respond
to price cuts/raises by
competitors by
considering various
factors like the
product’s stage in the
life cycle, its
importance in the
company portfolio, etc.