Marketing Management

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MBA 2nd SEMESTER (DDE) Examination

Marketing ManagementUnit – 1

Q1. Define Marketing. Also describe the nature and scope of marketing.

Ans. Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering and exchanging products of value with others.

Marketing has its origins in the fact that humans are creatures of needs and wants. Needs and wants create a state of discomfort, which is resolved through acquiring products that satisfy these needs and wants. Since many products can satisfy a given need and wants, these products are obtainable in several ways: Self – production, coercion, begging and exchange. Most modern societies work on the principle of exchange, which means that people specialize in producing particular products and trade them for the other things they need. The engage in transactions and relationship building. A market is a group of people who share similar needs. Marketing encompasses those activities involved in working with markets, that is, in trying to actualize potential exchanges.Marketing management is the conscious effort to achieve desired exchange outcome with target markets. The marketer’s basis skill lies in influencing the level, timing and composition of demand for a product service, organization, place, person or idea.Marketing is so basic that it cannot be considered a separate function. It is the whole business seen from the point of view of its final result, that is, from the customer’s point of view. The marketing concept rests on four main pillars, namely a market focus, customer orientation, coordinated marketing and profitability.Market Focus: No Company can operate in every market and satisfy every need. Nor can it even do a good job within one broad market. Companies do best when they define their target markets carefully. The do best when they prepare a tailored marketing programme for each target market.Customer Orientation: a company can define its market carefully but still needs customer orientated thinking i.e. satisfy customer needs from the customer point of view, and not from its own point of view. Company’s sales come from two groups: new customer’s and repeat customers. It always costs more to attract new customers than to retain current customers. Therefore, customer retention is customer satisfaction. A satisfied customer:

- Buys again- Talks favourably to others about the company- Pays less attention to competing brands- Buys other products from the same company

Thus a Company would be wise to regularly measure customer satisfaction.The delighted customers are more effective advertisers than the advertisement placed in media.Coordinated Marketing: Marketing requires the company to carry out internal marketing as well as external marketing. Internal marketing is the task of successfully hiring trained and motivating able employees to serve the customers well. Internal marketing must precede the external marketing. It makes no sense to promise excellent service before the company’s staff is ready to provide excellent service.Coordinated marketing means two things, first the various marketing functions – sales force, advertising product management, marketing research, and so on must be coordinated among themselves. Second, marketing must be well coordinated with the other company department. Marketing does not work when it is merely a department. It only works when all employees appreciate the effect they have on customer satisfaction.Profitability: The purpose of the marketing concept is to help organizations achieve their goals. In case of private firms, the major goal is profit, in the case of non-profit and public organizations; it is surviving and attracting enough funds to perform their work. The key is not to aim for profits as such but to achieve them as a buy product of doing the job well. A company makes money by satisfying customer’s needs better than a profitable way to satisfy some target group’s wants for personal satisfaction.

Ques.2 What is Marketing? Discuss in detail the different philosophies of MarketingAns. 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.According to the American Marketing Association, “Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goods”There are six competing philosophies under which organizations conduct marketing activities “the production concept, product concept, selling concept, marketing concept, customer concept; and societal concept.1. The Production Concept : The production concept is one of the oldest concepts in business. The production concept holds that consumers will prefer products that are widely available and inexpensive. Managers of production-oriented businesses concentrate on achieving high production efficiency, low costs and mass distribution. They assume that consumers are primarily interested in products availability and low prices. This philosophy makes sense in developing

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LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 countries, where consumers are more interested in obtaining the product than its features. It is also used when a company wants to expand the market.2. The Product Concept – Product concept holds that consumer will favour these products that offer the most quality, performance and innovative features. Managers in these organizations focus on making superior products and improving them over time. They assume that buyers admire well-made products and can evaluate quality and performance product oriented companies often trust that their engineers can design exceptional products. They get little or no customer input, and very often they will not even examine competitor’s products.3. The Selling Concept: The selling concept holds that consumers and businesses, if left alone, will ordinarily not buy enough of the organization’s products. The organization most, therefore, undertakes an aggressive selling and promotion effort. This concept assumes that consumers typically show buying inertia or resistance and must be coaxed into buying. It also assumes that the company has a whole battery of effective selling and promotion tools to stimulate more buying. The selling concept is epitomized by the thinking that “The purpose of marketing is to sell more stuff to more people for more money in order to make more profitMost firms practice the selling concept when they have over capacity. Their aim is to sell what they make rather then make what market wants.4. The Marketing Concept: The marketing concepts hold that the key to achieving its organizational goals consists of the company being more effective then competitors in creating, delivering and communicating superior customer value to its chosen target markets.The marketing concept rests on four pillars: target market, customer needs, integrated marketing and profitability. There is a contrast between selling and marketing concepts: “Selling focuses on the needs of the seller; marketing on the needs of the buyer”.Selling is preoccupied with the seller’s need to convert his product into cash; marketing with the ideas of satisfying the needs of the customers by means of the product and the whole cluster of things associated with creating, delivering and finally consuming it.5. The Customer Concept: Under customer concept, companies shape separate offers, services and messages to individual customers. These companies collect information on each customer’s past transactions, demographics, psychographics and media and distribution preferences. They hope to achieve profitable growth through capturing a larger share of each customer’s expenditures by building high customer loyalty and focusing on customer lifetime value.The ability of a company to deal with customers are at a time become practical as a result of advances in factory customization, computers, the internet and database marketing software.6. The Societal Marketing Concept: The societal marketing concept holds that the organization’s goal is to determine the needs, wants and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer’s and the society’s well being.The societal marketing concept calls upon marketers to build social and ethical considerations into their marketing practices. They must balance and juggle the often-conflicting criteria of company profits, consumer want satisfaction and public interest.Companies see cause-related marketing as an opportunity to enhance their corporate reputation, raise brand awareness, increase customer loyalty, build sales and increase press coverage. They believe that consumers will increasingly look for signs of good corporate citizenship that go beyond supplying rational and emotional benefits.SOME IMPORTANT DEFINATIONSNeeds, Wants and Demands / Products

Needs : A human need is a state of felt deprivation of some basis satisfaction. People require food, clothing, shelter, safety and few other things for survival. These needs are not created by their society or by marketers; they exist in the very texture of human biology and the human condition.

Wants : Wants are desires for specific satisfiers of deeper needs. A person needs food wand wants and hamburger.

Demand : Demands are wants for specific products that are backed up by an ability and willingness to buy them. Wants become demands when backed up by a purchasing power.

Products : Product is anything that can be offered to someone to satisfy a need or want to distinguish between physical objects and intangible ones.

MARKET RESEARCHMarket research is the systematic design, collection, analysis and reporting of data and findings relevant to a specific marketing situation facing the company.Scope of Market ResearchMarket researchers have expanded their activities and techniques. The ten most common activities of market research are –

1. Determination of marketing characteristics2. Measurement of market potentials3. Market share analysis4. Sales analysis5. Studies of business trends


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 6. Short range forecasting7. Competitive product studies8. Long range forecasting9. Pricing studies, and10. Testing of existing products

Marketing Research ProcessMarketing research is undertaken to understand a marketing problem better. Effective marketing research involves five steps –

a. Defining the problem and research objectivesb. Developing the research planc. Collecting the informationd. Analysing the informatione. Presenting the findings.

I. Defining the problem and research objectives: The first step in research calls for the marketing manager is to define the problem carefully and agree on the research objectives. A problem will defined is half solved.Three types of research projects can be distinguished. Some research is exploratory i.e. to gather preliminary data to shed light on the real nature of the problem and possibly suggest some hypothesis or new ideas. Some research is descriptive i.e. to describe certain magnitudes. Some research is casual – that is to test a cause and effect relationship.II. Developing the Research Plan: The second stage of marketing research calls for developing the most efficient plan for gathering the needed information. Research plan calls for decisions on the data sources, research approaches, research instruments, sampling plans and contact methods.

a) Data Source : The research plan can call for gathering secondary data, primary data or both. Secondary data consists of information that already exists somewhere, having been collected for another purpose. Primary data consist of original information gathered for the specific purpose at hand.

b) Research Approaches : Primary data can be collected in four broad ways: observation, focus group, Surveys and experiments.Observation – Fresh data can be gathered by observing the relevant actors and settings.

Focus Group - A focus group is a gathering of six to ten persons who spend a few hours with a skilled interviewer to discuss a project, service, and organization of other marketing entity.

Survey Research – Companies undertake surveys to learn about people’s beliefs, preferences, satisfaction and so on and to measure these magnitudes in the population.

Experiments – Experimental research calls for selected matched groups of subjects, subjecting them to different treatments, controlling extraneous variables and checking whether response differences are statically significant.

Generally speaking observation and focus groups are best suited for exploratory research, surveys are best suited for descriptive research and experiments are best suited for casual research.

c) Research Instruments – Marketing researchers have a choice of two main research instruments in collecting primary data: the questionnaire and mechanical devices.Questionnaire consists of a set of questions presented to respondents for their answers. The questionnaire is very flexible in that there is any number of ways to ask questions.Mechanical instruments are less frequently used in marketing. Galvanometers are used to measure the strength of a subject’s interest on emotions aroused by an exposure to a specific and or picture. The tachistoscope is a device that flashes on and to a subject with an exposure interval that may range from less then one-hundredth of a second to several seconds. After each exposure, the respondent describes everything he recalls. Eye cameras are used to study respondent’s eye moments to see at what points their eyes land first, how long they linger on a given item? The audiometer is an electronic device that is attached to television sets in participating homes to record when the set is on and to which channel it is tuned.

d) Sampling Plan – The marketing researcher must design a sampling plan, which calls for three decisions

i) Sampling Unit – This answers who is to be surveyed.ii) Sample Size – This answers why many people should be surveyed.iii) Sampling Procedure – This answers who should the respondents to chosen.

e) Contact Methods – This answers how should the subject be contacted? Choices are meant, telephone or personal interviews.

III. Collecting the information – The researcher must now arrange for collecting the data. This phase is generally the most expensive and most liable to error. Four major problems arise. Some respondents will not be at home and must be re-contacted or replaced. Other respondents will refuse to cooperate. Still other will give biased or dishonest answers. Finally, some interviewers will occasionally be biased or dishonest.


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 IV. Analyzing the information – The next step is the marketing research process is to extract pertinent findings from the data. The researcher tabulates the data and develops one way and two-way frequency distributions. Averages and measures of dispersion are computed for the major variables.

V. Presenting the findings – the researcher should present major findings that are relevant to the major marketing decisions facing management. The study is useful when it reduces management’s uncertainty concerning the right move to take.

CHARACTERISTICS OF GOOD MARKETING RESEARCH

(a) Scientific Method : Effective marketing research was the principles of scientific method: careful observation, formulation of hypothesis, prediction and testing.

(b) Research Creativity : At its best, marketing research develops in various ways to solve a problem.

(c) Multiple Methods : Competent marketing researches shy away from over reliance on any one method, preferring to adopt the method to the problem rather than the other way around. They also recognize the desirability of gathering information from multiple to give greater confidence.

(d) Independence of models and Data : Competent marketing researches recognize that the facts derive their meaning from models of the problem. These models guide the type of information sought and therefore should be made as explicit as possible.

(e) Value and cost of information : Competent marketing researches show concern for measuring the value of information against its cost. Value / cost helps the marketing research department which research project to conduct, which research to use etc.

MARKETING ENVIRONMENTS

Marketing managers can effectively monitor changes in the marketing environment using marketing intelligence system.

“A marketing intelligence system is a set of procedures and sources used by managers to obtain their everyday information about pertinent developments in the marketing environment”.

Managers scan the environment in four ways:

- Undirected viewing : General exposure to information where the manager has no specific purpose in mind.- Conditional viewing : Directed exposure, not involving active search, to a more or less cleanly identified area or

type of information.- Informed Search : A relatively limited and unstructured effort to obtain specific information or information for a

specific purpose.- Formal Search : A deliberate effort usually following a pre-established plan, procedure or methodology – to

secure specific information or information relatively to a specific issue.

Marketing Managers carry on marketing intelligence mostly on their own by reading books, newspapers and trade publications, talking to customers, suppliers, distributors and other outsiders and talking with other managers within the company. Well-run companies take additional steps to improve the quality and quantity of marketing intelligence. First, they train and motivate the sales force to spot and report new developments. Sales representatives are the company’s ‘eye and ears’. They are in an excellent position to pick up information missed by other means. Secondly, the company motivates distributors, retailers and other middlemen to pass along important intelligence. Some companies appoint specialists to gather marketing intelligence. They send out “Ghost Shoppers” to monitor the presentations of retail personnel. Much can be learned about competitors through purchasing their products, attending open houses and trade shows, reading competitor’s published reports and attending stock holders meeting; talking to their former employees and present employees, dealers, distributors, suppliers and freight agents collecting competitors’ ads. Thirdly, the company purchases information from outside suppliers such as NRS (National Readership Survey Report) etc. These research firms can gather store and consumer-panel data at much less cost than it each company carried out its own panel operations.

Q.No.3 – Why the study of marketing environment is important for a marketer? Discuss.

Ans. The marketing environment consists of the task environment and the broad environment.The task environment includes the immediate actors involved in producing, distributing and promoting the offering. The main actors are the company, suppliers, distributors, dealers and target customers. Included in the supplier group are –


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 material suppliers and service suppliers such as marketing research agencies, advertising agencies, banking and insurance companies, transportation and telecommunication companies. Included with distributors and dealers are agents, brokers and others who facilitate finding and selling to customers.The broad environment consists of six components: demographic environment, economic environment, natural environment, technological environment, political-legal environment and social-cultural environment. These environments contain forces that can have major impact on the actors in the task environment.The major responsibility for identifying significant market place changes falls to the company’s marketers. More than any other group in the company, they must be the trend trackers and opportunity sectors. Marketers are keenly interested in the size and growth rate of population in cities, regions and nations; age distribution etc. Exposure population growth has major implications for business. A growing population does not mean growing markets. Unless these markets have sufficient power nonetheless the companies that carefully analyse their markets and find major opportunities.National populations vary in their age mix. At one extreme is Mexico a country with a very young population and rapid population growth. At the other extreme is Japan, a country with one of the world’s oldest populations. Milk diapers, school supplies and toys would be important products in Mexico. Japan’s population would consume many more adult products. A population can be sub divided into six age groups – pre-school, school-age children, teens, young, adults age 25 to 40, middle-aged adults aged 40 to 65 and older adults aged 65 and up. For marketers, the most populous age groups shape up the marketing environment.Marketing requires purchasing power as well as people. The available purchasing power in an economy depends on current income, prices, saving, debt and credit availability. Marketers must pay close attention to major trends in income and consumer-spending patterns because they can have a strong impact on business especially for companies whose products are geared to high income price-sensitive consumers.The deterioration of the natural environment is a major global concern. Steel companies and public utilities have hard to invest billions of dollars in pollution-control equipment and more environmentally friendly fuels marketers need to be aware of the threats and opportunities associated with four trends in the natural environment, the storage of raw materials especially the water, the increased cost of energy, increased pollution levels and the changing rate of the governments.

UNIT- IIConsumer decision-making processConsumer passes through five stages : Problem recognition, information search evaluation of alternatives, purchase decision and post purchase behaviour, while deciding the purchase of product / services.Problem Recognition: The buying process starts when the buyer recognizes a problem of need. The buyer senses a difference between his or her actual state and desired state. The need can be triggered by internal or external; stimuli. In the former case, one Person’s normal needs- hunger thirst-rises to be threshold level and becomes a drive. From previous experiences, the person has learned hoe to cope with this drive and its motivated towards a class of objects that will satisfy the drive. Or a need can be aroused by an external stimulus. A person passes a bakery and sees freshly baked bread that stimulates her hunger, she admires a neighbour’s car, or she watches a television commercial advertisement a Jamiacian vacation. All these stimuli can trigger problem or need.Information Search: An aroused consumer will be inclined to search for more information. This search can be at two levels:

a) The middle search State called heightened attention. Here the consumer simply becomes more receptive to information about product in which he/she is interested. He/She pays attention to products ads, similar products purchased by friends, and conversation about product.

b) Or consumer may go into active information search where consumer looks for reading material, and engages in other search activities to learn about product in which he/she is interested. How many search consumers undertakes depends upon strength of his/her drive; the amount of information he/she initially has, the ease of obtaining additional information etc. Consumer information sources fall into four groups:

- Personal sources: Family, friends, neighbour, acquaintances- Commercial sources: Advertising, Salesperson, dealers, displays etc.- Public sources: Mass media, consumer rating organization.- Experiential sources: handling, examining, and using the product.

The relative amount and influence of these information sources varies with the product category and the buyer’s characteristics. Generally speaking, the consumer receives the sources, that is, marketer dominated sources. On the other hand, the most effective exposures come from personal sources. Each information source performs a somewhat different function in influencing the buying decision. Commercial information normally performs and informing function and personal sources performs a legitimizing and /or evaluation function. For example, physicians often learn of new drugs from commercial sources but turn to other doctors fro evaluation information.


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 Evaluation of alternatives : consumer from product judgments regarding brand choices largely on a conscious and rational basis.Consumer is trying to satisfy some need and is looking for certain benefits from the product solution. The consumer sees each product as bundle of attributes with varying capabilities of delivering the sought benefits and satisfying this need.Consumers will differ as to which product attributes are seen as relevant or salient. They will pay the most attention to the ones that will delivery the sought benefits. The consumer is likely to develop a set of brand beliefs about where each brand stands on each attribute. The brand beliefs make up the brand image. The consumer’s brand belief will vary with his/her experiences and the effect of selective retention. The consumer is assumed to have a utility function for each attribute. The consumer arrives at attributes (judgement, preferences) towards the brand alternatives through evaluation procedure.

Purchase Decision: In the evaluation steps the consumer forms preferences among the brands. The consumer may also forms a purchase intention to buy the most preferred brand. But actual purchase decision is influenced by (a) attitudes of other and (b) unanticipated situational factors.

The extent to which another person’s attitude reduces one’s preferred alternative depends upon two thins (i) the intensity of the other person’s negative attitude towards the consumer’s preferred alternative and (ii) the consumer’s motivation to comply with the other person’s wishes.

Purchase intention is also influenced by unanticipated situational factors. A Consumer’s decision to modify, postpone or avoid a purchase decision is heavily influenced by perceived risk varies with the amount of money at stake, the amount of attribute uncertainty and the amount of consumer self confidence.

A consumer who decides to execute a purchase intention will be making up to five purchase sub decisions: (a) brand decision (b) vendor decision (dealer) (c) quality decision (d) timing decision and (e) payment method decision.

Post purchase behaviour : The buyer’s satisfaction is a function of the closeness between the buyer’s product expectations and the product’s perceived performance falls short of customer expectation, the customer is disappointed, if it exceeds expectations, the customer is delighted. The feelings make a difference in whether the customer buys the product again and talks favourably or unfavourably about the product to other.

UNIT – II

Ques.4) What do you understand by Consumer Behaviour? Also distinguish between consumer market and our industrial market.

Ans. The aim of marketing is to meet and satisfy target customer’s needs and wants. The field of consumer behaviour studies how individuals, groups and organizations select, buy, use and dispose of goods, services, ideas or experiences to satisfy their needs and desires.A consumer’s buying behaviour is influenced by cultural, social, personal and psychological factors.I. Culture, sub-cultures and social class are particularly important in buying behaviour. Culture is a fundamental determinant of a person’s wants and behaviour. The growing child acquires a set of values, perceptions, preferences and behaviours through his or her family and other key institutions.

Each culture consists of smaller subcultures that provides more specific identification and socialization for their members. Subcultures include nationalities, religions, social groups and geographic regions. Enough companies often design specialized marketing programs to serve them. Such are known as “diversity marketing”

Virtually all human societies exhibit social satisfaction, stratification sometimes takes the form of caste system where the members of different castes are reared for certain roles and cannot change their caste membership. More frequently, it takes the form of ‘Social Classes’ relatively homogeneous and enduring divisions in a society, which are hierarchically ordered and whose members share similar values, interests and behaviour. Social classes show distinct product and brand preferences in many areas, including clothing, home furnishings, leisure activities and automobiles. Social classes differ in media, magazines & books and lower class consumers preferring television. Even within a media category such as TV, upper-class consumers prefer news and drama, and lower-class consumers prefer soaps operas and sports programmes

II. Social Factors – In addition to cultural factors, a consumer’s behaviour is influenced by such social factors as reference groups, family and social roles and statuses.

A person’s reference group consists of all the groups that have a direct (face to face) or indirect influence on the person’s attitudes or behaviour. Groups having direct influence on a person called “ membership groups”. Some members groups are primary groups, such as family, friends, neighbours and co-workers with whom the person interacts fairly continuously


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 and informally. People also belong to secondary groups, such as religious, professional and trade-union groups, which tend to be more formal and require less continuous interaction.

People are significantly influenced by their reference groups in at least three ways. Reference group expose an individual to new behaviours and lifestyles and influence attitudes and self-concept; they create pressure for conformity that may effect actual product and brand choices.

Family is the most important consumer buying organization in society, and family members constitute the most influential primary reference group. The family orientation consists of parents and siblings. From parents a person acquires an orientation towards religion, politics and economics and a sense of personal achievement, self-worth and love. Even if the buyer no longer interacts very much with is parents, their influence on the buyer’s behaviour can be significant.Role and statuses: A person participates in many groups- family, clubs, organizations. The person position in each group can be defined in terms of role and status. A “role” consists of the activities a person is expected to perform. Each role carries a “Status”. A Supreme Court justice has more status than a sales manager, and a sales manager has more status than an office their role and status in society.

III Personal Factors: A buyer’s decision are also influenced by personal characteristics. These include the buyer’s age and stage in the life cycle, occupation, economic circumstances, lifestyles and personality and self concept.

People buy different goods and services over a lifetime. The eat baby food in the early years, most foods in the growing and mature years and special diets in the later years. Taste in clothes, furniture and recreation is also age related.

Occupation also influences consumption pattern. A blue-collar worker will buy work clothes, work shoes and lunch boxes. A company president will buy expensive suits, air travel and country club membership.

IV. Psychological Factors: A Person buying choices are influenced by four major psychological factors- motivation perception, learning and beliefs and attitudes.

A Person has many needs at any given time. Some needs are biogenic, they arise from psychological states of tension such as hunger, thurst or discomfort. Other needs are psychogenic; they arise from psychological states of tension such as the need for recognition, esteem or belonging. A need becomes a motive when it is aroused to a sufficient level of intensity. A motive is need that is sufficiently pressing to drive a person to act.

When people act, they learn. Learning involves changes in an individual’s behaviour arising from experience. Most human behaviour is learned. Learning theorists believe that learning produced through the interplay of derives, stimuli, cues, responses and reinforcement. A derive is a strong internal stimulus impelling action. Cues are minor stimuli that determine when, where and how a person responds. Learning theory teaches marketers that they can build up demand for a product by cues and providing positive reinforcement.

Through doing and learning, people acquire beliefs and attitudes. These in turn influence buying behavior. A belief is a descriptive thought that a person holds about something. People’s beliefs about product or brand influence their buying decisions.

Segmentation

Market segmentation is the process of dividing a market into subsets of consumers with common needs or characteristics.

The bases for segmenting the market can be a) Geographic segmentation b) Demographic segmentation c) Phychographic segmentation and d) Behavioral segmentation.

Geographic Segmentation: Geographic Segmentation calls for diving the market into different geographical units such as nations, states, regions, cities, etc. The company can decide to operate in one or a few graphic areas or operate in all but pay attention to local variations in geographic needs and preferences eg. Wagh Bakri tea brand has 60% market share in state of Gujrat (90% in Ahemdabad).

Demographic Segmentation: Demographic Segmentation consists of diving the market into groups on the basis of demographic variables such as age, sex, family size, family life cycle, income occupation, education, religion, race and nationality demographic variables are the most popular bases for distinguishing customer groups. One reason is that consumer wants preferences and usage rates are often associated with demographic variables. Another is that demographic variables are easier to measure than most other type of variable. Even when the target market is described in non-demographic terms, the link back to demographic characteristics is necessary in order to know the size of the target market and how to reach it efficiently eg. Sex segmentation is applied in clothing, cosmetic and magazines. Income segmentation is used in products like automobile etc.

Psychographic Segmentation : In psychographic segmentation, buyers are divided into different groups on the basis of social class, lifestyle, and /or personality characteristics. People within the same demographic group can exhibit very different psychographic profiles.


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 Social class has a strong influence on the person’s preference in cars, clothing, home furnishing, reading habits and so on.Behavioural Segmentation : In behavioural segmentations buyers are divided into groups on the basis of occasions benefits, loyalty states, attitude towards products etc.

A powerful form of segmentation is the classification of buyers according to the different they seek from the product. Benefit segmentation calls for identifying the major benefits that people look for in the product class, the kinds of people who look for each benefit and the major brands the deliver each benefit. Benefit segmentation usually implies that a company should focus on satisfying one benefit group. Thus ‘Anchor’ toothpaste offered the benefit of “anti-cavity protection” which became its unique selling proposition.

Requirement for Effective Segmentation

To be maximally useful, market segments must exhibit four characteristics:a) Measurability:- The degree to which the size and purchasing power of the segments can be measured.b) Substantiality :- The degree to which the segments are large and/or profitable enough. A segment should be the

largest possible homogeneous group worth going after with tailored marketing programme.c) Accessibility :- A degree to which the segment can be effectively reached and served.d) Actionability :-The degree to which effective programs can be formulated for attracting and serving the segments.

TARGET MARKETINGIn target marketing, the seller distinguishes the major market segments, targets one or more of these segments and develop products and marketing programs tailored to each selected segment. Target marketing help sellers identify marketing opportunities better. The sellers can develop the right offer for each target market. They can adjust their prices, distribution channels and advertising to reach the target market effectively.

Target marketing calls for three major steps. The first is market segmentation, the act of dividing the market into distinct of buyers who might require separate products and/or marketing mixes. The second step is market targeting, the act of developing measures of segment attractiveness and selecting one or more market segment to enter. The third step is product positioning, the act of establishing a variable competitive positioning of the firm and its offer in each target market.

Market targeting involves two steps:-a) Segment Evaluation b) SelectionIn evaluating different market segments, the firm must look at three factors namely segment size and growth,

segment structural attractiveness and company objective and resources.i) Segment size and growth :- The first criteria of segment evaluation is whether a potential segment and right

growth and size characteristics. The right size is a relative term. Large companies prefer segments with large sales volumes and often overlook or avoid small segments. Small companies in turn avoid large segments because they require too many resources.

Segment growth is a describe characteristics, since companies generally want growing sales and profit.ii) Segment Structural Attractiveness:- A segment might have desirable size and growth and still not be

attractive from a profitability point of view. The company has to appraise the impact on long run profitability of five groups: a) industry competitors b) Potential entrants c) substitute d) buyer e) supplier.

a) Threat of Intense segment Rivalry: A segment is unattractive if it already contains numerous strong or aggressive competitors.

b) Threat of view entrants: A segment is unattractive if it is likely to attract new competitors who will bring in new capacity, substantial resources and a drive for market share growth.

c) Threat of substitute Products: A segment is unattractive if there exist actual or potential substitutes for a product. Substitute place a limit on the potential prices and profits that can be earned in a segment.

d) Threat of growing bargaining power of buyers: A segment is unattractive if the buyers possess strong or increasing bargaining power. Buyers will try to force prices down, demand more quality or services and set competitors against each other, all at the expense of seller profitability.

e) Threat of Growing Bargaining Power of Suppliers: A segment is unattractive if the company’s suppliers raw material and equipment suppliers, bank, trade unions and the like-are able to raise prices or reduce the quality or quality of ordered goods and services.

III) Company Objectives and Resources : The company needs consider its own objectives and resources in relation to a segment under consideration. Some attractive segments could be dismissed because they do not mesh with company’s long-run objectives. They may be tempting segments in themselves, but they do not move the company forward towards its goods. Even if the segment fits the company’s objectives, the company must consider whether it possesses the requisite skills and resources to succeed in that segment. But even if the company possesses the requisite competences, it needs to develop some superior advantages to the competition. It should not enter markets or market segments where it cannot produce some form of superior value.



II. Selecting the Market Segment: a target market consists of a set of buyers sharing common needs or characteristics that the company decides to serve. The company can consider five patterns: a) Single-segment concentration b) Selective specialization c) Market Specialization d) Product Specialization and e) Full Coverage.

a) Single- Segment Concentration:- In the simplest case, the company selects a single segment. Through concentrated marketing, the firm achieves a strong market position in the segment owing to its greater knowledge of the segment’s needs and the special reputation it builds. At the same time, concentrated marketing involves higher than normal risks. The particular market segment can turn sour. Or the competitors may decide to enter the same segment. Foe these reasons, many companies prefer operate in more than one segment.

b) Selective specialization:- Here the firm selects a number of segments, each of which is objectively attractive and matches the firm’s objectives and resources. Each segment promises to be a money maker. This strategy of multi segment coverage has an advantage over single segment coverage of diversifying the firm’s risk. Even if one segment becomes unattractive, the firm can continue to earn money in other segments.

c) Product Specialization:- Here the firm concentrates on making a certain product that it sells to several segments. Through this strategy, the firm builds up a strong reputation in the specific product area.

d) Market Specialization:- Here the firm concentrates on serving many needs of a particular customer group. The firm gains a strong reputation of specializing in serving this customer group and becomes a channel agent for all new products that this customer group could feasibly use.

e) Full Market Coverage:- Here the firm attempts to serve all customer groups with all the products that they might need. Only large firms can undertake a full market coverage strategy. Examples would include coca cola (non-alcoholic beverage) ; IBM (Computer market) etc.

Large Firms can cover a whole market in two broad ways:- namely through undifferentiated marketing or differentiated marketing.Undifferentiated Marketing:- The firm might ignore market segment differences and go after whole market with one market offer. It designs a product and a marketing programme that will appeal to the broadest number of buyers. It relies on mass distribution and mass advertising.Undifferentiated Marketing depends on the grounds of cost economics. The narrow product line keeps down production, inventory and transportation cost.

Differentiated Marketing:- Here the firm operates in most market segments but designs different programmes for each segment. General motor claims to do this when it says that it produces car for every purse, purpose and personality. However, it also increases the cost of doing business.

POSITIONINGPositioning is an act of designing the company’s offer so that it occupies a distinct and valued position in the

target customer’s mind. Positioning is not what you do to a product, positioning is what you do to the mind of prospect.Many marketers advocate promoting only one benefit to the target market. A company should develop a unique selling proposition (U.S.P) for each brand & stick to it. Buyers tend to remember “Number one” better than other message, specially in & over communicated society. Once a brand has occupied a specific position in the mind of the customer, a competitor has only three strategy options:- One strategy is to strengthen its own current position in the mind of customers. The second strategy is to search for a new unoccupied position that is valued by enough customer & to grab it. The third strategy is to deposition or reposition the competitor.

Q4. Write a detailed note on the tools of Product Differentiation.Ans: Differentiation can be defined as the process of adding a set of meaningful & valued difference to distinguish the companies offering from competitors offerings.All products can be differentiated to some extend, but not all differences are meaningful or worthwhile. A difference will be stronger to the extent that it satisfies the following criteria:-

Important : The difference delivered a highly valued benefit to a sufficient number of buyers. Distinctive: The difference delivered in a distinctive way. Superior: The difference is superior to other ways of obtaining the benefit. Preemptive: The difference can not be easily copied by the competitors. Affordable: The buyer can afford to pay for the difference. Profitable: The company will find it profitable to introduce the difference.

The number of differentiation opportunities varies with the type of industry. There exist four types of industry based on the numbers of available competitive advantages & their sizes.


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 a) Volume Industry : One in which company is can gain only a few but large competitive advantages. In

the construction equipment industry, a company can strive for a low cost position or highly differentiated position & win big on either basis. Profitability is correlated with the company size & market shares.

b) Stalemated Industry : One in which there are few potential competitive advantages & each is small. In the steel industry it is hard to differentiate the product or decrease manufacturing costs. Company can try to heir better sales people, entertain more lavishly, and the like, but these are small advantages. Profitability is unrelated to company market share.

c) Fragmented Industry : One in which companies faces many for competitive advantages is small. A restaurant can differentiated in many ways but end up not gaining a large market share. Both small and large restaurant can be profitable or unprofitable.

d) Specialized Industry : One in which companies face many differentiation opportunities, and each differentiation can have a high pay off. Among companies making specialized machinery for selected market segments, some small companies can be profitable as some large companies.

A company can differentiated its market. Offering along five dimensions:- a) Product; b) Services; c) Personnel; d) channel and e) Image.Product Differentiation: Here the seller faces an abundance of design parameters, including form, features, performance quality, conformance quality, durability, reliability, style, reparability and design.

a) Form:- Many product can be differentiated from the size, shape of physical structure of a product.b) Features:- Most products can be offered with varying features that supplement the product’s basic

functions. Being the first to introduce valued new features is one of the most effective ways to compete.c) Performance Quality: Most products are established one of four performance levels: low, average, high or

superior. Performance Quality is the level at which the products primary characteristics operate.d) Conformance Quality: Buyers expect products to have a high conformance quality, which is the degree to

which all produced units are identical and meet the promised specifications.e) Durability: Durability, a measure of the products expected operating life under natural stressful conditions,

is a valued attribute for certain products.f) Reliability: Reliability is a measure of the probability that a product will not malfunction or fail within

specified time period.g) Repairability : Repairability is a measure of the ease of repairing a product when it malfunctions or fails.h) Style: style describes the product’s look and feel to the buyer. Style has the advantage of creating

distinctiveness that is difficult to copy.i) Design: As competition intensifies, design offers a potent way to differentiate and position a company’s

products and services. Design is the totality of features that effect how a product looks and functions in terms of customer requirements.

Service Differentiation : When the physical product can not easily be differentiated, the key to competitive success may lie in adding valued service and improving their quality. The main service differentiators are ordering ease, delivery installation, customer training, customer consulting and maintenance and repair.

a) Ordering Ease: Ordering ease refers to how easy it is for the customer to place an order with the company.b) Delivery: Delivery refers to how well the product or service is delivered to the customer. It includes speed,

accuracy and care attending the delivery process.c) Installation: Installation refers to the work done to make a product operational in its planned location. Buyers of

heavy equipment expect good installation service. Differentiation at this point in the consumption chain is particularly important for companies with complex products.

d) Customer Training: Customer training refers to training the customer’s employers to use the vender’s equipment properly and efficiently.

e) Customer Consulting: Customer consulting refers to data, information systems and advice services that the seller offers to buyers

f) Maintenance and Repair: Maintenance and repair describes the service programme for helping customers keep purchased products in good working order.

Personal Differentiation: Companies can gain strongly through having better- trained people. Better trained personnel exhibit six characteristics:-i) Competence: They posses the required skill and knowledge.ii) Courtesy: They are friendly, respectful and considerate.iii) Credibility: They are trustworthy.iv) Reliability: They perform the service consistently and accurately.v) Responsiveness: They respond quickly to customer’s requests and problems.vi) Communication: They make an effort to understand the customer and communicate clearly.Channel Differentiation: Companies can achieve competitive advantage through the way they design their distribution channel’s coverage expertise and performance.Image Differentiation: Buyers respond differently to company and brand image. Image is the way the public perceives the company or its product.



UNIT – III

Q5. Discuss in detail the process of new product development.Ans: Every company must develop new products. New product development shapes the company’s future. Improved or replacement products must be created to maintain or build sales. Customers want new products and competitors will do their best to supply them. Companies that fail to develop new products are putting themselves at great risk.New product development requires senior management to define business domains, product categories and specific criteria. Senior management must decide how much to budget for new product development. New product development undergoes eight stages: (i) Idea generation (ii) Idea screening (iii) Concept development and Testing (iv) Marketing strategy development (v) Business analysis (vi) Product development (vii) Market Testing (viii) Commercialization.I) Idea Generation: The new product development process starts with the search of ideas. New product ideas can come from interacting with various groups and from using creative generating techniques.

Ideas for new products can come from customers, scientists, competitors, employees, channel members and top management.

Several creative techniques can be used for generating ideas for new products. These techniques include:a) Attribute listing: List the attributes of an object and then modify each attribute.b) Forced listing: List several ideas and consider each one in relation to each other one.

II) Idea Screening: A company should motivate its employees through rewards to reward to submit their new ideas. Ideas should be written down and reviewed each week by an idea committee. The company then sorts the proposed ideas into three groups: Promising ideas, marginal ideas and rejects. The promising ideas then move into a full scale screening process. The purpose of screening is to drop poor ideas as early as possible. The rational is that product development cost rise substantially with each successive development stage.III) Attractive Development and Testing: Attractive ideas must be refined into testable product concepts. A product idea is a possible product the company might offer to the market. A product concept is an elaborated version of the idea expressed in meaningful consumer terms. Each concept represents a category concept that defines the product’s competition.

Next, the product concept has to be turned into brand concept.Concept testing involves presenting the product concept to appropriate target customers and getting

their reactions. The concept can be presented physically or symbolically. The more the tested, concept resembles the final product or experience, the more dependable concept testing is.IV) Marketing Strategy: Following a successful concept test, the new product manager will develop a primarily marketing strategy plan for introducing the new product into the market. The plan consists of three parts. The first part describes the target market size, structure and behavior, the planned product positioning: and the sales market share and profit goals sought in the first few years.

The second part outlines the planned price, distribution strategy are marketing budget for the first year.The third parts of the marketing- strategy plan describe the long run sales and profit goals and marketing mix

strategy over time.V) Business Analysis: After management develops the product concept and marketing strategy, it can evaluate the proposal’s business attractiveness. Management needs to prepare sales, cost and profit projections to determine whether they satisfy company objectives.

Total estimated sales are the sum of estimated first time sales, replacement sales and repeat sales. Sales estimation method depends upon whether the product is one-time purchase (such as engagement ring etc), an infrequently purchased product, or a frequently purchased product. For one-time purchased products, sales rise at the beginning, peak and later approach zero as the number of potential buyers is exhausted. Infrequently purchased products such as automobiles, toasters and industrial equipment – exhibit replacement cycles dictated by physical wearing, out or by obsolescence associated with changing styles, features and performance. Sales forecasting for this product category scale separately.

In case of frequently purchased goods such as consumer and industrial non- durables, the number of first time buyers initially increases and then deceases as fewer buyers are left. Repeat purchases occur soon, providing that the product satisfies some buyers. The sales curve eventually falls t a plateau representing a level of steady repeat-purchase volume, by this time; the product is no longer a new product.

Cost is estimated by the R&D manufacturing, marketing and finance companies use various financial measures to evaluate the merit of a new product proposal. The simplest is break-even-analysis, in which management estimates how many units of the product the company would have to sell to break-even with the given price and cost structure. Or the estimate may be in terms of how many years it will take to break even. If the management believes sales could easily reach the break-even number, it is likely to move the project into product development.

VI) Product Development: at this stage the company will determine whether the product can be translated into a technically and commercially feasible product. The job is to translate customer requirement into a working prototype. When the prototypes are ready, they must be put through rig rows functional tests and customer tests. The product is tested to see how it performs in different applications. Consumer testing can take several forms, from bringing consumers into a laboratory to giving them samples to use in their homes.



VII) Market Testing: After management is satisfied with functional and psychological performance, the product is ready to be dressed up with a brand name and packing, and put into a market test. The new product B introduced into an authentic setting to learn how large the market is and how consumers and dealers react to handling, using and repurchasing the product.

The amount of market testing to influenced by the investment cost and risk on one hand, at the time pressure and research cost on the other. High investment-high risk products, where the changes of failure to high, must be market tested; the cost of market tests will be insignificant percentage of the total project cost, high-risk products-those that create new product categories, or have novel features- warrant more market testing than modified products.

The amount of market testing may be severely reduced if the company is under great time pressure because competitors are about to launch their brands. The company may therefore prefer to face the risk of a product failure to the risk of losing distribution or market penetration on a highly successful product.VIII) Commercialization: If the company goes ahead with commercialization, it will face its largest cost to date. The company will have to contract for manufacture or build or rent a full scale manufacturing facility. Plant size will be critical promotion.

The company must decide whether to launch the new product in a single locality, a region, several region, the national market or the international market. The company size is an important factor here. Small companies will select an attractive city to put on a blitz campaign. They will enter other cities one at a time. Large companies will introduce their product into a whole region and then move to a next region. Companies with national market, such as auto companies will launch their new models in the national market. Most companies design new products to sell primarily in the domestic market. If the product does well, the company considers exporting to foreign countries, redesigning if necessary.

BUSINESS MARKETS & BUSINESS BUYINGOrganisational Buying as the decision- making process by which formal organizations establish the need for purchased products and services and identity, evaluate and choose among alternative brands and suppliers.

The business market consists of all the organizations that acquire goods and services that are sold, rented, or supplied to others.

Business markets have several characteristics that contrast sharply with those of consumer markets.1) Fewer Buyers: The business marketer normally deals with far fewer buyers than consumer marketers. Good year company’s fate depends on getting orders from few major automobile makers.2) Larger Buyers: A few large buyers do most of the purchasing in such industries as aircraft engines and defence weapons.3) Close supplier-customer Base: Because of the smaller customer base and the importance and power of the larger customers, suppliers are frequently expected to customize their offerings to individual business customer needs.4) Derived Demand: The demand for business goods is ultimately derived from the demand for consumer goods. For this reason, the business marketers must closely monitor the buying patterns of ultimate consumer.5) Professional Purchasing: Business goods are purchased by qualified professional who must follow their organisation’s purchasing policies, constrains and requirements. Many business buyers requests for quotations, proposals and purchase contracts, -not typically found in consumer buying.6) Several buying influences: More people typically influence business buying decisions. Buying committees consisting of technical experts and even senior management are common in the purchase of major goods. Business marketers have to send well trained sales representatives and sal;es teams to deal with well-trained buyers.7) Multiple Sales Calls: Because more people are involved in the selling process, it takes multiple sales calls to win most business orders, and some sales cycles can take years.8) Direct Purchasing: Business buyers often buy directly from manufactures rather than through intermediaries, especially items that are technically complex or expensive.9) Leasing: Many industrial buyers lease instead of buy heavy equipment like machinery. The lease gains a number of advantages: Conserving capital, getting the latest products, receiving better service and gaining tax advantages. The lesser often ends up with a larger net income and chanceto sell to customers who could not afford outright purchase.Buying SituationThere are types of buying situation:- the straight rebuy, Modified rebuy and new task.

Straight Rebuy: The straight rebuy is a buying situation in which the purchasing department reorders on a routine basis(e.g. office Supplies, bulk chemicals). The buyer choose from supplier on an approved list. These supplier make an effort to maintain product and service quality. The outside supplier attempt to offers something new or to exploit dissatisfaction with a current supplier.

Modified Rebuy: The modified rebuy is a situation in which the buyers want to modify product specifications, prices delivery requirements, or other terms. The modified rebuy usually involves additional decision participants on both sides.

New Task: The new task is a buying situation in which a purchase buys a product or service for the first time. The greater the cost or risk, the larger the number of decision participants and the greater their information gathering and therefore the longer the time to decision completion.


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 Many business buyers prefer to buy a total solution to their problem from one seller called System Buying , the

buyer would solicit bids from prime contractors, who would assemble the package or system. The contractor who was awarded the contract would be responsible for bidding out and assembling the system’s subcomponents from second tier contractors. The prime contractor would thus provide a turnkey solution , so called because the buyer had to turn one key to get the job done.

Participents in the business buying process

The decision unit of the buying organization includes all the members of the organization who play any role in the purchase decision process. They include:-1) Initiators:- Those who request that something be purchased. They may be users or others in the organization.2) Users:- Those who will use the product or service. In many cases, the users initiate the buying proposals and help define the product requirement.3) Influencer:- People who influence the buying decision. They often help define specifications and also provide information for evaluating alternatives. Technical personnel are particularly important influences.4) Deciders:- People who decide on product requirements or supplies.5) Approvers:- People who authorise the proposed actions of deciders or buyers.6) Buyers:- People who have formal authority to select the supplier and arrange the purchase terms. They play a major role in selecting vendor and negotiating.

Types of Purchasing Processes

There are four product related purchasing processes.1) Routine Products: These products have low value and cost to the customer and involve little risk. Customer will seek the lowest price and emphasize routine ordering. Suppliers will offer standardise and consolidate orders through blanket contracts and facilities management.2) Leverage Products: These products have high value and cost to the customer but involve little risk to supply because many companies make them. The supplier knows that the customer will compare market offerings and costs, and it needs to show that its offerings minimize the total cost.3) Strategic Products: These products have high value and cost to the customer will want a well known and trusted suppliers and be willing to pay more than average price. The supplier should seek strategic alliances taking the form of early supplier involvement, co-development programmes and co-investment.4) Bottleneck Products: These products have low value and cost to the customer but they involve some risk. He customer will want a supplier who can guarantee a steady supply. The supplier should propose standard parts and offer a tracking system, delivery on demand, and a help desk.STAGES IN THE BUYING PROCESSThere are seven in buying process. They are:-1) Problem Recognition: The buying process begins when someone in the company recognizes a problem or need that can be met by acquiring a good or service.2) General need description and product specification : The buyer identifies the needed item’s general characteristics and required quantity. It includes characteristics like reliability, durability or price. Business marketers can help by describing how their products meet the buyer’s needs.3) Supplier Search: The buyers now try to identify the most appropriate suppliers. The buyer can examine trade directors, contact other companies for recommendations. Watch trade advertisement and attend trade shows. Now a days, they can even search internet.4) Proposal Solicitation: The buyer invites qualified supplier to submit proposals. If the item is complex or expensive the buyer will require a detailed written proposal from a qualified supplier. After evaluating the proposals, the buyer will invite a few suppliers to make formal presentation.5) Supplier Selection: Before selecting a supplier, the buyer will specify desired supplier attributes and indicate their relative importance. It will then rate suppliers on these attributes and identify the most attractive suppliers.6) Order-Routine specification: after selecting suppliers, the buyer negotiates the final order, listing the technical specifications, policies, warranties and so on. In the case of maintenance, repair and operating items, buyers are inclined towards signing blanket contracts. A blanket contract establishes a long term relationship in which suppliers promises to re-supply the buyer as needed, at agreed-upon prices, over a specified period of time. The buyer’s computer automatically sends an order to the seller when stock is needed.7) Performance Review: The buyer periodically reviews the performance of the chosen suppliers. Three methods are commonly used. The buyer may contact the end user and ask for the evaluations; 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. The performance review may lead the buyer to continue, modify or end the relationship with the supplier.

PRODUCT LIFE CYCLE


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 The Product Life Cycle (PLC) is an important concept in marketing that provides insights into a product

competitive dynamics.The product life cycle portrays distinct stages in the sales history of a product. PLC portrays four things

Product have a limited life. Product sales pass through distinct stages, each posing different challenges to the seller. Profits rise and fall at different stages of the product life cycle. Product require different marketing, financial, manufacturing, purchasing and personnel strategies in each stage

of their product life cycle.

A typical PLC follows an S-Shaped curve. This curve is typically divided into four stages, known as introduction, growth, maturity and decline.

Introduction:- A period of slow sales growth as the product is introduced in the market. Profits are non-existent in this stage because of heavy expenses of product introduction.

Growth:- a period of rapid market acceptance and substantial profit movement.

Maturity:- A period of a slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits stabilize or decline because of increased marketing out lays to defend the product against competition.

Decline:- The period when sales show a downward drift and profit erode.

Rational Behind PLCThe theory of diffusion and adoption of innovation provides the underlying rational. When a new product is

introduced, the company has to stimulate awareness, interest, trial and purchase. This takes time, and at introduction stage only a few persons (innovators) will buy it. If the product is satisfying, larger number of buyer are drawn in. The entry of competitors into the market speeds up the adoption process by increasing the market’s awareness and by causing prices to fall. Eventually, the growth rate decreases as the number of potential new buyers approaches zero. Sales become steady at the replacement purchase rate. Eventually sales decline as new –product classes, forms and brands appear and divert buyers interest from the existing product. Thus, the product life cycle is explained by normal developments in the diffusion and adoption of new products.

Introduction stage : The introduction stage starts when the new product is launched. It takes time to roll out the product in several markets and to fill dealers pipelines, so sales growth is apt to be slow.

In this stage, profits are negative or low because of the low sales and heavy distribution and promotion expenses. Much money is needed to attract distributors and fill the pipeline.

Promotional expenses are at the highest ratio to sales because of the need for a high level of promotional efforts to (i) inform potential consumers of the new and unknown product (ii) include trial of the product and (iii) Secure distribution in retail outlets.

Considering only price and promotion, an organisation can pursue one of the four strategies in introduction stage.(a) Rapid Skimming (b) slow Skimming (c) Rapid Penetration (d) Slow Penetration

(A) Rapid Skimming: - Consist of launching the new product at a high price in order to recovers as much gross profit per unit as possible. It spends heavily on promotion to convince the market of the products merit even at a high price level. This strategy makes sense under the following assumptions:-i) a large part of the market is unaware of the product.ii) those who become aware are eager to have the product and can pay the asking price.iii) the firm faces the potential competition and wants to build up the brand preference.

B) Slow Skimming:- Strategy consists of launching the new product at a high price and low promotion. The high price helps recover as much gross profit per unit as possible and low level of promotion keeps marketing expenses down. This strategy makes sense when

i) the maket is limited in size.ii) most of the market is aware of the product.iii) buyers are willing to pay a high price.iv) Potential competition is not imminent.

C) Rapid Penetration: Consist of launching the product at a low price and spending heavily on promotion. This strategy promises to bring about the fastest market penetration and the largest market share. This strategy makes sense wheni) the market is large.ii) the market is unaware of the product.iii) most buyers are price sensitive.


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 iv) there is strong potential competitionv) the company’s unit manufacturing experience

D) Slow Penetration Strategy: Consist of launching the new product at a low price and low level of promotion. The low price will encourage rapid product acceptance; and the company keeps its promotion costs down in order to realize more net profit. The company believes that market demand is highly price elastic but minimally promotion elastic. This strategy makes sense wheni) the market is large.ii) the market is highly aware of the product.iii) the market is price sensitive and iv) there is some potential competition.

GROWTH STAGE: The growth stage is marked by a rapid climb in the sale. The early adopters like the product, and the middle majority consumers start buying the product. New competitors enter the market, attracted by the opportunities for large scale production and profit. They introduce new product features and this move further expands the market. The increased number of distribution outlets leads to an increase in the number to fill the distribution pipeline.

Price remains where they are or fall insofar as demand is increasing quite rapidly. Companies maintain their promotional expenditure at the same or at a slightly increased level to meet competition and to continue to educate the market.

Profits increase during this stage as promotion costs are spread over a larger volume and unit manufacturing costs fall faster than declines owing to the experience curve effect.

Marketing Strategies during Growth Stage- The firm improves product quality and adds new product features and improved styling.- The firm adds new models and flanker products.- It enters new market segments.- It enters new distribution channels.- It shifts some advertising from building product awareness to bring about product convicted and purchase.- It lowers prices at right time to attract the next layer of price sensitive buyers.

MATURITY STAGE: At some time, a product’s rate of sales growth will slow down and the product will outer a stage of relative maturity. The maturity stage is divided into three phases. In the first phase, growth maturity, the sales growth rate starts to decline. There are new distribution channels to fill. In the second phase, stable maturity, sales flatter on a per capita basis because of market saturation. Most potential consumers have tried the product, and future sales are governed by population growth and replacement demand. In the third phase, decaying maturity the absolute level of sales now starts to decline and consumers starts to other products and substitutes.

The slowdown in the rate of sales growth creates overcapacity in the industry. This overcapacity leads to intensified competition. Competitors scramble to find and enter niches. They engage is frequent markdowns and off-list pricing. They increase their advertising and trade and consumer deals.

Marketing Strategies in the Maturity Stage: In the maturity state, some companies abandon their weaker products, believing there is little they can do. They think the best thing is to conserve their money and spend it on newer products in the development pipeline.

Marketers systematically consider strategies of market, product and marketing mix modification.

Market Modification: The company can try to expand the number of brand users in three ways:a) Convert Non Users: The company can attract non users to the product.b) Enter New Market Segment: The company can try to enter new market segments- geographic, demographic and so on.c) win Competition’s Customers: The company can attract competitors customers to try or adopt the brand.

Volume can also be increased by getting current brand users to increase their annual usage of the brand by convincing the customers to

a) Use product more frequentlyb) More usage per Occasionc) New and more varied uses.

Product Modification: Managers also try to stimulate sales by modifying the product’s characteristics. This can take several forms:a) A strategy of quality movement aims at increasing the functional performance of the product - its durability, reliability, speed, taste etc.b) a strategy of features improvement aims at adding new features that expand the product’s versatility, safely or convenience.c) A strategy of style improvement aims at increasing the aesthetic appeal of the product.


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 Marketing Mix Modification : Product managers might also try to stimulate sales by modifying one or more marketing mix elements which include Prices, Distribution, Services, Advertising, Sales Promotion or Personal selling.

DECLINE STAGE: The sales of most product forms and brands eventually decline. Sales decline for a number of reasons including technological advances, consumer shifts in tastes and increased and foreign. All lead to overcapacity, increased price cutting and profit erosion.

As sales and profits decline, some firms withdraw from the market. Those remaining may reduce the number of product offerings. They may withdraw from smaller market segments and weaker trade channels. They may cut the promotion budget and reduce their price further.Marketing Strategies during the Decline Stage:

- Increasing the firm’s investment (to dominate or strengthen its competitive position)- Maintaining the firm’s investment level until the uncertainties about the industry are resolved- Decreasing the firm’s investment level selectively, by sloughing of unprofitable customer groups, while

simultaneously strengthening the firms investment in lucrative niches.- Harvesting (or milking) the firm’s investment to recover cash quickly.- Divesting the business quickly by disposing of its assets as advantageously as possible.

Q6. What is Product? Elaborate the major product line decision for a car manufacturer.

Ans: A Product is anything that can be offered to a market to satisfy a want or need. Products that are marketed include physical goods, services, experiences events, persons, places, properties, organizations, information and ideas.Each product is related to certain other products. The product hierarchy stretches from basic needs to particular items that satisfy those needs. Six levels of the product hierarchy can be identified:-a) Need Family:- The core need that underlines the existence of product family. e.g. security in case of life insurance.Product line managers need to know the sales and profits of each item in their line in order to determine which items to build, maintain, harvest or divest. They also need to understand each product line’s market profile. Every company’s product portfolio contains product with different margins. A company can classify its products into four types that yield different gross margins depending upon sales volume and promotion. To illustrate with personal computers.

- Core Product:- Basic computers that produce high sales volume and are heavily promoted but with low margins because they are viewed as undifferentiated products.

- Staples:- Items with lower sales volume and no promotion such as faster CPU’s or bigger memories. They yield some what higher margins.

- Specialies:- Items with lower sales volume but which might be highly promoted, such as digital moving-making euipment, or might general income for services, such as personal delivery, installation, or on site training.

- Convenience Item:- Peripheral items that sell promotion in high volume but receives less promotion such as computer monitors, printers, upscale video or sound cards and software. Consumers tend to by them where they buy the original equipment because it is more convenient than making shopping trips. These items carry higher margins.

The Product line manager must review how line is positioned against competitor’s lines. A product line is too short it profits can be increased by adding items. Company objectives influence product line length. Companies that emphasize high profitably will carry shorter lines consisting of carefully chosen items.

Every company’s product line covers a certain part of the total possible range. For example BMW automobiles are located in the upper price range of the automobiles market. “Line stretching” occurs when a company lengthen its product line beyond its current range. The company can stretch its line downmarket, upmarket or both ways.

Car manufacturer BMW may want to introduce a lower priced line automobile if it finds strong growth opportunities in that segment or if it finds upper market segment is stagnating or declining. This is called “Down-market Stretch”.

Companies like Maruti Udyog may wish to enter high end of the market for more growth higher margins or simply to position themselves as full line manufacturer. This is called upward stretch.

Branding

Branding is giving a name, term, sign, symbol or design or a combination of them, intended it identify the goods or services of one seller and to differentiate them from those of competitors.

- Brand Name: The part of a brand which can be vocalised eg. Honda, Avon etc.- Brand Mark: The part of a brand which can be recognized but is not utterable such as symbol, design, or

distinctive colouring or lettering eg. McDonald’s.- Trade Mark: A brand or part of a brand that is given legal protection because it is capable of exclusive rights to

use the brand name and/or brand mark.- Copy Right: The exclusive legal right to reproduce, publish and sell matter and from of a literary, musical or

artistic work.


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 Branding gives several advantages to the seller. First, seller’s brand name and trademark provide legal protection to unique product features, which would otherwise be copied by competitors.Second, branding gives the seller the opportunity to attract a loyal and profitable set of customers. Brand loyalty given sellers some protection from competition and greater control in planning their marketing mix.Third, good brands help build corporate image. By carrying the company’s name, the help advertise the quality and size of the company.In deciding to brand a product, the manufacturer has several options with respect to brand sponsorship. The product may be launched as manufacturer brand (sometimes called brand name) or it may be launched as a licensed name brand. Or the manufacturer may supply the product to middleman who put on a distributor brand (also called retailer, store or private brand).Manufacturer who brand their products face further choices. Three brand name strategies can be distinguished:

a) Individual Brand Names: This policy is followed by Hindustan Levers Ltd. (HLL) Surf, Wheel etc.b) A Blanket family name for all products: This policy is followed by Philips Audio System.c) Company trade name combined with individual product name: This policy is followed by Maruti Udyog Ltd.

(Maruti 800, Maruti Wagon-R, Maruti Esteem etc.)An increasing number of department stores, middleman etc. are launching store names. Retailshelf space is scarce and many manufacturers, especially the newer and smaller ones, can not introduce products into distribution under their own brand name. Middleman take special care to maintain the quality of their brands, their building consumer’s confidence. Store brands are often priced lower than comparable manufacturer’s brands thus appealing to budget-concious shoppers especially in times of inflation, middleman give more prominent display to their own brands and make sure they are better stocked.Among the desirable quantities fro a brand name are:

1) it should be easy to pronounced.2) It should be easy to remember.3) It should from positive image about the product.

PACKAGING & LABELINGPackaging is an activity of designing and producing the container or wrapper for a product. The container or wrapper is called the package. The package might include upto three levels of material. The primary package is the product’s immediate container. Thus the bottle of Old Spice After Shave Lotion is the product’s primary package. The secondary package refers to material that protects the primary package and is discarded when the product is about to be used. The cardboard box containing the bottle of after shave lotion is a secondary package and provides additional protection and promotion opportunity. The shipping package refers to packaging necessary for storage, identification or transportation. Thus a corrugated box containing six dozen of Old Spice After Shave Lotion is a shipping package.

Labeling: is part of packaging and consists of printed information that describes the product, appearing on or with the package.

Labels perform several functions. The Label identifies the product or brand, for instance, the name “Sunsilk” stamped on a bottle of Shampoo. The label describes the product who made it, where it was made, when it was made, what it contains, how it is to be used and how to use it safely. Finally, the label might promote a product through attractive graphics.

Several factors have contributed to the growing popularity of packaging as a marketing tool. An increasing number of products are sold on a self service basis at supermarkets. The package must perform many of the sales tasks. It must attract attention, describe the product features, give consumer confidence, and make a favourable overall impression. Companies are recognizing the power of well designed packages to contribute to instant recognition of buyer immediately recognizes the familiar yellow packaging of Kodak film.Rising consumer affluence means consumers are willing to pay a little more for the covenience and dependability of better packages.

PRICING STRATEGIES

Price is the only element in the marketing mix that produce revenue; the other elements produce cost. Price is the amount of money that customers have to pay for the product. There are six step procedure for price setting

a) Selecting the pricing objectives b) determining demand c) estimating costs d) analyzing competitors price and offers e) selecting a pricing method f) selecting the final price

A) Selecting the pricing Objectives: A company can pursue any six major objectives through its pricing

i) Survival- Companies pursue survival as their major objective if plagued with overcapacity, intense competition, or consumer wants. To keep the plant going and inventories turning over, they will often cut prices. Profits are less important than cut prices. Profits are less important than survival. However, survival is only a short run objectives.

ii) Maximum current Profit- Many companies try to set the price that will maximize current profits. They estimate the cost and demand associated with alternative prices and chooses the price that produces maximum current profit, cash flow or rate of return on investment.



iii) Maximum current Revenue- some companies will set a price to maximize sales revenue. Revenue maximization requires only estimating the demand function.

Many managers believe that revenue maximization will lead to long-run profit maximization and market share growth.

iv) Maximum Sales Growth: Some companies want to maximize unit sales. They believe that a higher sales volume will lead to lower unit costs and higher long run profit. They set the lowest price, assuming the market is price sensitive. This is called market penetration pricing.

v)Maximum Market skimming: Many Companies favour setting high prices to skim to the market. If estimates the highest price it can charge given the comparative benefits of its new product versus the available substitutes. Each time sales slow down; it lowers the price to draw in the next price sensitive layer of customers.

vi) Product-Quality Leadership:-A company might aim to be the product-quality leader in the market.

vii) Determining Demand: Each price that the company might charge will lead to a different level of demand and will therefore, have a different impact of its marketing objectives. In normal case, demand and price are inversely related , that is, the higher the price, the lower the demand.

Factors Affecting Price SensitivityUnique – Value Effect: Buyers are less sensitive when the product is more unique.

Substitute- Awareness Effect: Buyers are less price sensitive when they are less aware of the substitutes.

Difficult-Comparison Effect: Buyers are less price sensitive when they cannot easily compare the quality of substitutes

Total Expenditure Effect: Buyers are less price sensitive of the product is not very expensive with respect to their income.

End-Benefit Effect: Buyers are less price sensitive the less the expenditure is to the total cost of the product.

Shared Cost Effect: Buyers are less price sensitive part of the cost is borne by another party.

Price Quality Effect: Buyers are less price sensitive when the product is assumed to have more quality, prestige or exclusiveness.

Inventory Effect: Buyers are fewer prices sensitive when they cannot store the product.

III Estimating Cost: a company will like to charge a price that covers its cost of producing, distributing and selling the product, including a fair return for its efforts and risk.Types of Costs:- A company’s cost takes two forms, fixed and variable. Fixed cost are the costs that do not vary with production of sales revenue. Examples of fixed costs includes monthly rent, interest etc.

Variable costs vary directly with the level of production. These costs tend to be constant per unit produced. They are called variable because their with the number of unit produced.

Total cost consists of the sum of the fixed and variable costs for a given level of production. Management will like to charge a price that will be at least cover the total production costs at a given level of production.

IV Analysing competitors price and offers: Competitors prices and possible price reactors help the firm establish where its prices might be set. The company needs to learn the price and quality of each competitors offer.

Once the company is aware of competitors prices and offers, it can use them as an orienting point for its own pricing. If the firm’s offer is similar to a major competitor’s offer, then the firm will have to price close to the competitors or lose sales. If the firm’s offer is inferior, the firm will not be able to charge more than the competitor. If the firm offer is superior, the firm can charge more than the competitor.V. Selecting a Pricing Method: A company can select any of the following pricing method:

a. Mark-up Pricingb. Target-return Pricingc. Perceived value pricingd. Going rate Pricinge. Select-bid Pricing

A. Mark-up Pricing:The most elementary pricing method is to add a standard mark-up to the cost of the product.


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 B. Target Return Pricing: The firm determines the price that would yield its target rate of return on investment (ROI). Suppose a manufacturer has invested one million in the business and wants t set price to earn a 20 percent ROI i.e 2,00,000. he hopes to sell 50,000 pieces and the unit cost Rs. 16/-. The target return price is given by the formula

Target return price = Unit Cost + Desired return X Capital InvestedUnit Sales

= 16 0.20 X 10,00,000 =Rs. 20/- 50,000

Hence the manufactures will set a price of Rs. 20/-.The manufacturer can also use break-even analysis, the break-even volume is given by

Break-even Volume = Fixed Costs Price-Variable Cost

Suppose the fixed cost is Rs, 300000 and variable cost is Rs. 10/- and the produces wants to charge price of Rs. 20/-, then the break-even volume is given by

300000 = 30,000 Pieces 20-10

Perceived value Pricing: An increasing number of companies are basing their price on the product’s perceived value. They see the buyer’s perception of value, not the sellers cost, as the key to pricing. They use the non-price variables in the marketing mix to build up perceived value in the buyers mind, price is set to capture the perceived value.

Going Rate Pricing: In going rate pricing, the firm bases its price largely on competitors prices. With less attention paid on its own cost and demand. The firm might charge the same, more of less than its major competitors.

Sealed Bid Pricing: Competitive-oriented Pricing is common where firm for jobs. The firm bases its price on expectations of how competitors will price rather than on a rigid relation of the firm’s costs or demands. The firm wants to win the contract , and winning normally requires submitting a lower price than competitors.

VI. Selecting the Final Price: While selecting the final price, the company has to select some additional factors such as:-

Psychological Pricing:Sellers should consider the psychology of prices in addition to their economies. Many consumers use price as an indicator of quality. Image pricing is especially effective with ego-sensitive products such as perfumes and expensive cars.

The influence of others Marketing-mix elements on Price: The Final price must take into account the brander’s quality and advertising relative to competition. Brands with average relative high quality but high relative advertising budgets able to charge premium price, consumers are willing to pay higher prices for know products than for unknown products.

Adapting the PricePrice Discounts and Allowances: Most companies will modify their basic price to reward customers for such acts as early payment, volume purchases and off-search buying. These price adjustment – called discounts and allowances can be of various types such as:-

Cash Discounts: A cash discount is a price reduction to buyers who promptly pay their bills. Such discounts, serve the purpose of reducing the sellers liquidity and reducing credit-collection cost and bad-debts.

Quantity Discount: A quantity discount is a price reduction to buyers who buy large volumes. Quantity discounts must not exceed the.

Many managers believe that revenue maximization will lead to long-run profit maximization and market share growth.

Maximum Sales Growth: Some companies want to maximize unit sales. They believe that a higher sales volume will lead to lower unit costs and higher long run profit. They set the lowest price, assuming the market is price sensitive. This is called market penetration pricing.


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 Maximum Market skimming: Many Companies favour setting high prices to skim to the market. If estimates the highest price it can charge given the comparative benefits of its new product versus the available substitutes. Each time sales slow down, it lowers the price to draw in the next price sensitive layer of customers.

Product-Quality Leadership:- A company might aim to be the product-quality leader in the market.

Determining Demand: Each price that the company might charge will lead to a different level of demand and will therefore, have a different impact of its marketing objectives. In normal case, demand and price are inversely related , that is, the higher the price, the lower the demand.

Factors Affecting Price Sensitivity

Unique – Value Effect: Buyers are less sensitive when the product is more unique.

Substitute- Awareness Effect: Buyers are less price sensitive when they are less aware of the substitutes.

Difficult-Comparison Effect: Buyers are less price sensitive when they cannot easily compare the quality of substitutes

Total Expenditure Effect: Buyers are less price sensitive of the product is not very expensive with respect to their income.

End-Benefit Effect: Buyers are less price sensitive the less the expenditure is to the total cost of the product.

Shared Cost Effect: Buyers are less price sensitive part of the cost is borne by another party.

Price Quality Effect: Buyers are less price sensitive when the product is assumed to have more quality, prestige or exclusiveness.

Inventory Effect: Buyers are less price sensitive when they cannot store the product.

III Estimating Cost a company will like to charge a price that covers its cost of producing, distributing and selling the product, including a fair return for its efforts and risk.

Types of Cost:-A company’s cost takes two forms, fixed and variable. Fixed cost are the costs that do not vary with production of sales revenue. Examples of fixed costs includes monthly rent, interest etc.

Variable costs vary directly with the level of production. These costs tend to be constant per unit produced. They are called variable because their with the number of unit produced.

Total cost consists of the sum of the fixed and variable costs for a given level of production. Management will like to charge a price that will be at least cover the total production costs at a given level of production.

IV Analysing competitors price and offers:Competitors prices and possible price reactors help the firm establish where its prices might be set. The company needs to learn the price and quality of each competitors offer.

Once the company is aware of competitors prices and offers, it can use them as an orienting point for its own pricing. If the firm’s offer is similar to a major competitor’s offer, then the firm will have to price close to the competitors or lose sales. If the firm’s offer is inferior, the firm will not be able to charge more than the competitor. If the firm offer is superior, the firm can charge more than the competitor.V. Selecting a Pricing Method: A company can select any of the following pricing method:

f. Mark-up Pricingg. Target-return Pricingh. Perceived value pricingi. Going rate Pricingj. Select-bid Pricing

A. Mark-up Pricing: The most elementary pricing method is to add a standard mark-up to the cost of the product.

B. Target Return Pricing: The firm determines the price that would yield its target rate of return on investment (ROI). Suppose a manufacturer has invested one million in the business and wants t set price to earn a 20 percent ROI i.e 2,00,000. he hopes to sell 50,000 pieces and the unit cost Rs. 16/-. The target return price is given by the formula

Target return price = Unit Cost + Desired return X Capital InvestedUnit Sales

= 16 0.20 X 10,00,000 =Rs. 20/-50,000


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 Hence the manufactures will set a price of Rs. 20/-.The manufacturer can also use break-even analysis, the break-even volume is given by

Break-even Volume = Fixed CostsPrice-Variable Cost

Suppose the fixed cost is Rs, 300000 and variable cost is Rs. 10/- and the produces wants to charge price of Rs. 20/-, then the break-even volume is given by

300000 = 30,000 Pieces 20-10

Perceived value Pricing: An increasing number of companies are basing their price on the product’s perceived value. They see the buyer’s perception of value, not the sellers cost, as the key to pricing. They use the non-price variables in the marketing mix to build up perceived value in the buyers mind, price is set to capture the perceived value.

Going Rate Pricing: In going rate pricing, the firm bases its price largely on competitors prices. With less attention paid on its own cost and demand. The firm might charge the same, more of less than its major competitors.

Sealed Bid Pricing: Competitive-oriented Pricing is common where firm for jobs. The firm bases its price on expectations of how competitors will price rather than on a rigid relation of the firm’s costs or demands. The firm wants to win the contract , and winning normally requires submitting a lower price than competitors.

VI. Selecting the Final Price: While selecting the final price, the company has to select some additional factors such as:-

Psychological Pricing: Sellers should consider the psychology of prices in addition to their economies. Many consumers use price as an indicator of quality. Image pricing is especially effective with ego-sensitive products such as perfumes and expensive cars.

The influence of others Marketing-mix elements on Price: The Final price must take into account the brander’s quality and advertising relative to competition. Brands with average relative high quality but high relative advertising budgets able to charge premium price, consumers are willing to pay higher prices for know products than for unknown products.

Adapting the Price

Price Discounts and Allowances: Most companies will modify their basic price to reward customers for such acts as early payment, volume purchases and off-search buying. These price adjustment – called discounts and allowances can be of various types such as:-

Cash Discounts: A cash discount is a price reduction to buyers who promptly pay their bills. Such discounts, serve the purpose of reducing the sellers liquidity and reducing credit-collection cost and bad-debts.

Quantity Discount: A quantity discount is a price reduction to buyers who buy large volumes. Quantity discounts must not exceed the.

Cost savings to the seller associated with selling large quantities. These savings include reduced expense of selling, inventory and transportation.

Functional discounts:- functional discounts are offered by the manufacturers to trade channel members if they will perform certain functions such as storing and record keeping.

Seasonal discounts:-a seasonal discounts is a price reduction to buyers who buy merchandise or service out of season. Seasonal discounts allow the seller to maintain steadier production during the year.

Promotional pricing

Special-event pricing:- seller will establish prices in certain seasons to draw In certain seasons to draw in more customers.

Cash rebates:- customers are offered cash rebates to encourage their Purchasing the manufacturer’s product within a specified time period. The rebates can help the manufacturer clear inventories without cutting the list price .

Managing marketing channels



Marketing channel can be viewed as a set of interdependent organization involved in the process of making a product or service available for use or consumption.

Most producers do not sell their goods directly to the final users. Between them and final user stand a host of marketing intermediaries performing variety of functions and bearing variety of names? Some intermediaries-such as wholesalers and retailers-buy, take title to and resell the merchandise; they are called merchant middlemen. Others-such as brokers, manufacturers representative and sales agents-search for customers and may negotiate on behalf of the producers but do not take title to the goods; they are called agent middlemen. Still others-such as transportation companies, independent warehouses, banks and advertising agencies –assist in the performance of distribution but neither take title to goods nor negotiate purchases or sales; they are called facilitators.

Importance of marketing intermediaries:-many producers lack the financial resources to carry out direct marketing. Ex. Maruti udyog sells its cars through more than 600 dealer outlets; even maruti udyog would be hard pressed to raise the cash to buy out its dealers.

a) Direct marketing would require many producers to become middlemen for the complimentary products of other Producers in order to achieve mass distribution economies. Ex.maruti udyog will have to become middlemen for auto ancillary companies if it establish its own distribution network.

b) producers who can afford to establish there own channels can offer earn a grater return by increasing their investment in their main business. If a company earns a 20 percent rate of return on manufacturing and foresees only a 10 percent return on retailing. It will not want to undertake its own retailing.

c) Marketing intermediaries through their own contacts, experience, specialization and scale of operations, offer the firm more than it can usually achieve on its own.

Marketing channel functionsa) Information:- The collection and dissemination of persuasive. Communications about potential and current.Customers,

competitors and other actors and forces in the marketing environment.b) Promotion:- The development and dissemination of persuasive. Communication about the offer designed to attract

customers.c) Negotiation:- The attempt to reach find agreement on price and other terms so that transfer of ownership or possession can be affectedd) Ordering:- The backward communication of intentions to buy the marketing channel members to the manufacturers.

e) Financing: - The acquisition and allocation of funds required to finance Inventories at different levels of the marketing channel

f) Risk taking:- the assumptions if risks connected with carrying out the channel work..

g) Physical possession:- the successive storage and movement of the physical products from raw materials to final customers.

h) Payment:- buyers paying their bills through banks and other financial Institutions to the sellers.

i) Title:- the actual transfer of ownership from one organization or person to Another.

Channel design decisions Designing a channel systems calls for analyzing customers needs, establishing channel ob\ejectives, identifying the major channel alternatives and evaluating them.

A) Analyzing service output levels desired by customers understanding what, where, why, and how target customers buy the first step in designing the marketing channel produce five service outputs:-

a)lot size:- the lot size is the number of units that the marketing channel permits a typical customers to buy on a buying occasion. The smaller is the lot size, the greater the service output level that the channel must provide.b)Waiting time:- waiting time is the average time that customer of That channel wait for receipt of the goods. Customers normally prefer fast delivery Channels. Faster service requires a great service output level.c)special convenience:- special convenience expresses the degree to which the marketing channel makes it easy for customers to purchase the product.d)product variety:- product variety represents the assortment breath provided by the marketing channel. Normally customers prefer greater Assortment breadth because it increases the chance of exactly meeting their need.e)service backup:- service backup represents the add-on service (credit,delievery, installation, repairsI) provided by the channel. The greater the service. backup, the greater the work provided by the channel.The marketing manager must know the service output desired by the target customers provided increased levels of service output means increased costs for the channel and higher prices for customers.

B) Establishing the channel objectives and constrains:-


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 The channel objectives should be stated in terms of targeted services output level. Under competitive conditions, channel institutions should arrange their functional tasks so as to minimize total channel costs with respect to tasks desired levels of service output. Effective channel planning requires manufactures to determine which market segment to serve and the best channels to use in each case. Each producer develops its channel objectives in the face of constrains stemming from products, intermediaries, competitors, company policy, environment and the level of service output desired be target customers.

Product characteristics:- Perishable products require more direct marketing because of the dangers associated with delays and repeated handling. Bulky products require channels that minimize the shipping distance. Custom-built machinery and specialized business forms are sold directly by company sales representatives because middlemen lack the requisite knowledge. Products requiring installation and/or maintenance services are usually sold and maintained by the company or exclusively branches dealers. Competitive characteristics:- Channel design is influenced by the competitor’s channels. The produces may want to compete in or near the same outlets carrying the competitor’s products. In some other industries, producers may want to avoid the channels used by competitors.

C) Identifying the major channel alternatives- After a company has defined its target market and desired positioning it should identify its channel by three elements:-

1) The type of business intermediaries2) The number of intermediaries and 3) Terms and responsibilities of each channel participants.

1) Types of intermediaries:- The firm has following channel alternatives-Company Sales force:- Expend the company’s direct sales force. Assign to contact all prospects in the area. Or develop separate sales force for different products.Manufacture’s Agency:- Hire agencies in different regions sell the equipment.Industrial Distributors:- Find distributors in the different regions who will buy and carry device. Give them exclusive distribution adequate margins and promotional support.2) The number of intermediaries :- Company has to decide on the number of middlemen to use at each channel level. Three strategies are available.Intensive Distribution:- Producers of convenience goods etc. typically seek intensive distribution that is stocking their product in numerous outlets. These goods must have place utility. Exclusive Distribution:- Some producers limit the number of intermediaries handling their products. Through exclusive distribution the manufacturer hopes to obtain more aggressive and knowledgeable selling and more control over intermediaries polices on prices, promotion, credit and various activities.3) Terms and responsibilities of channel members: - The producer must determine the conditions and responsibilities of the

participating channel members. The main elements in the trade relation mix are price policies, conditions of sale, territorial rights and specific service to be performed by each party.

4) Evaluating the major channel alternatives:- Each channel alternative needs to be evaluated against economic, control and adaptive criteria.Economic criteria:- Each channel alternative will produce a different level of sales and cost. Company sales representatives concentrate entirely on the company’s products; they are better trained to sell the company’s products, they are more aggressive because their future depends on the company’s success on the other hand, sales agency could comically sell more than a company sales force. The sales agency has more number of sales representatives and secondly, sales agency has better knowledge of the geographical area in which he is operatingControl criteria:- Channel evolution has to include control issues. Using a sales agency poses a control problem. A sale agency is an independent business firm seeking to maximize its profits. The agents may concentrate on the customers who buy the most, not necessarily of the manufactures goods. Further, the agent might not master the technical details of the company’s product or handle its promotion materials effectively.Adaptive Criteria:- Each channel involves some duration of commitment and loss of flexibility. A manufactures seeking a sales agency might have to offer a five year contact. During this period, other means of selling such as direct mail might become more effective, but the manufactures is not free to drop the sales agency. A channel required a long commitment needs to be greatly superior on economic or control grounds to be considered.

RETAILING Retailing includes all the activities involved in selling goods or services directly to final consumer for their personal, non business ose. It does not matter how the goods or services are sold (by person, mail, telephone) or where they are sold( in a store, on the street, or in the consumer’s home).Retailers can be various types:-

a) Store retailerb) Non store retail

A)Store retailer:- Store retailers includes:- Specialty store:- A specialty store carries a narrow product line with a deep assortment within that line examples of specialty retailers are apparel stores, sporting goods stores.


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 Department store:- A department store carries several products lines, typically clothing, home furniture and household goods. Super market:- A supermarket is a relatively large, low cost, low margin high volume self service operation designed to serve the consumer’s total need for food and household-maintains product. Convenience store:- Convenience stores are relatively small stores that are located near residential areas; are open long house and seven days limited line of high turnover convenience products.

B) Non store retailing includes:- a) Direct Selling:- It involves oral presentation in a conversation with one or more prospective purchases for the purpose of making sales.b) Automatic vending:- Automatic vending through coined operated machines has been a major port would war-II growth area. Automatic vending has been applied to a considerable variety of merchandise including impulse goods with high convenience value (soft drinks, candy). Vending machines offer customers the advantages of twenty four hour selling, self service and unhanding merchandise.Retail marketing decisions:-

a) Target market decision::- A retailer’s most important decision concerns the target. Should the store focus on upscale, mid- scale or downscale shoppers? Do the target shoppers want variety, assortment depth or convenience?

b) Product assortment and service decision:- Retailers have to decide on three major product variable that help position their store to their target market, namely product assortment, service mix and store atmosphere.

The retailers product assortment must match the shopping expectations of the target market. The retailer has to decide on product assortment breadth and depth. Retailers must also decide on the service mix to offer customers. The old “mom and pop” grocery stores offered home delivery, credit, services that today’s supermarket have corpulently eliminated.

The store’s atmosphere is a third element in its product arsenal. Every store has a physical layout that makes it hard or easy to move around. Every store has a “look”; one store is dirty, another is charming, a third is palatial, a fourth is somber. T store must embody a planned atmosphere that suits the target market and draws them towards purchase.Price decision:- The retailer’s price are key positioning far for and must be decided in relation to the target market, the product and service assortment mix and competition. All retailers would like to charge high mark ups and achieve high volumes; but usually the two do not go together .most retailers fall into the high markup highs volume group (mass merchandisers and discount stores)Promotion Decision:- the retailer must use promotion today that support and reinforce its image positioning. Fine stores will place full page tasteful ads in magazines and train their safes people to greet customers. Discounter will use less trained people to and use tow cost promotional tools to generate traffic.

Place Decisions :- retailers are ;accustomed to saying that the key to success in retailing is “location”. For example customers primarily choose the bank that is nearest to them Department – store chains, oil companies and last food franchisers exercise great case in selecting location.

WHOLE SALINGWholesaling includes all activities involved in selling goods or services to those who buy for resale or business use.Whole sellers differ from retailers in a number of ways. first , wholes sellers pay less attention to promotion , atmosphere and location, because they are dealing with business customers rather than final consumes, second, wholesale transactions are usually cover a larger trade area than retailers. Third, the government deals with wholesalers and retailers differently in regard to legal regulations and taxes.Major Wholesaler Type :- The major types of wholesalers

1) Merchant wholesalers 2) Brokers and Agents and 3) Manufacturers’ Agents.

1) Merchant wholesalers :- They are independently owned businesses that take title to the merchandise they handle. In different trades they are called jobbers, distributors, or mill supply houses.

2) Brokers and Agents:- They differ from merchant wholesalers in two ways. They do not take title to goods, and they perform only few functions. Their main function is to facilitate buying and selling, and for their they earn a commission.

3) Manufacturer’s Agents :- manufacturer’s agents represent two or more manufacturers of complimentary lines. They enter into a formal written agreement with each manufacture covering price policy, territories, order-handling procedures, delivery service and warranties and commission rates. They use there wide contacts to sell the manufacturer’s products, manufacturer’s agents are used to sell such lines as apparel, electrical afford to maintain their own sales-force and by large manufactures who want to use agents territories.

Wholesaler Marketing DecisionsProduct Assortment and service decisions :- The wholesaler’s product is their assortment wholesalers are under great pressure to carry a full line and maintain sufficient stork for immediate delivery. Place Decision:- Wholesalers typically located in low rent, low tax area and put little money into their physical settings and offices.

ADVERTISING


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 Advertising is defined as any paid from on non-personal presentation and promotion of ideas, goods or services by an identified sponsor. Advertising could be through various media: magazine and newspaper space, radio and television; outdoor displays, direct mail, novelties, catalogs, directories and circulars. And advertising has many purposes, long term buildup of the organizations cooperate image. Long-term build up of a particular brand announcement of a special sale, advocacy of a particular cause and information dissemination about a sale/service of automobile, property etc. In developing an advertising programmer, marketing managers must always start identifying the target market and buyer motives. The five major decisions in developing an advertising program, known as five Ms-

a) What are advertising objectives?b) How much can be spent?c) What media should be usedd) what message should be spente) How should the result be evaluated

Setting the advertising objectives:-The first step in developing an advertising program is to get the advertising objectives. These objectives must flow from prior decisions on the target market, market positioning and marketing mix. The marketing positioning and marketing mix strategies define the job that advertising must do in the total marketing program.

Advertising objectives can be classified as to whether their aim is to inform, persuade or remind.Informative advertising figures heavily in the pioneering stage of a product category, where the objective is to build primary demand.

Persuasive advertising has moved into the category of comparison advertising, which seeks to establish the superiority if one brand through specific comparison with one or more other brands in the product class.Reminder advertising is highly important in the nature stage of the product to keep the consumer thinking about the product. A related from of advertising is reinforcement advertising which seeks to assure current purchasers that they have made a right choice.Deciding on the Advertising Budget (Money)Four common methods are used to set a promotion budget:-

a) Affordable method:- Many companies set the promotion budget at what they think the company.b) Percentage of sales method:- Many companies set their promotion expenditure at a specified percentage of sales or of the

sales price .c) Competitive party method:- Some companies set their advertising budget to achieve share of voice party with their

competitors. The marketing manager believes that by spending the same percentage of his sales on advertising as his competitor, he will maintain his market share.

d) Objective and task method:- The objective and task method calls upon marketers to develop their promotion budgets by defining their specific objectives, determining the objectives and estimating the costs of performing these tasks. The sum of these costs is the proposed promotion budget.

Some specific factors that are considered when setting the advertising budget are:-Stage in the product life cycle:- New product typically receive large advertising budgets to build awareness and to gain consumer trail. Established brands usually are supported with lower budgets as a ratio to sales.Market share and consumer base:- High market share brands usually require less advertising expenditure as a percentage of sales to maintain their share. To build share by increasing market size or market share requires larger advertising expenditure. Competition and cluster:- In a market with a large number of competitors and high advertising spending a brand must advertise more heavily to be heard above the noise in the market.Advertising frequency:- The number of repetitions needed to put across the brand’s message to consumers also determine the advertising budget.Product substitutability:- Brands in a commodity class require heavy advertising to establish differential image.Deciding on the message:

Ideally, the message should gain attention hold interest, arouse desire and direct action (AIDA model). Formulating the message will require solving problems like:- what to say, how to say it logically, how to say symbolically and who should say it.Message Content:- The communicators has to figure out what to say to the target audience to produce the desired response. This process is variously called appeal, theme, idea or unique selling proposition. There types of appeals can be distinguished-1) Rational appeal- appeal to the audience’s self interest. They show that the product will produced the claimed behalf. Ex.

Would be message demonstrating a product’s quality, economy, value or performance.2) Emotional appeal attempts to stir up some negative or positive emotions that will motivate purchase. Communicators have worked with fear, guilty and shame appeals in getting people to do things they should or stop doing things they should not. Communicators also use positive emotional appeals such as humour, love, pride and joy.(3) Moral appeals are proper. They are often used to exhort people to support social causes such as cleaner environment equal right for woman and aid to the disadvantaged.

Message Structure:- A message effectiveness depands on its structure as well as its contents. Order of presentation raises the question of whether a communicator should present the strongest argument first or last. The strongest message first has the advantage of establishing attention and interest. This is important in newspapers and other media where the audience does not attend to the whole message.Message Format:- The communicator must develop a strong format for the message. In a print ad, the communicator has to decide on the headline, copy, illustration and color. If the message has to be carried over the ratio, the communicator has to carefully choose words, voice quality and vocalization.


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 Message source:- Messages delivered by attractive sources achieve higher attention and recall. Advertisers of the use celebrities as spokespeople. Pharmaceutical companies want doctors to testify about their products, benefits, because doctors have high credibility.

Deciding on the media The steps involve in deciding on the media are desired reach, frequency and impact; choosing among major media types; selecting specific media vehicles .Deciding on reach, frequency and impact:-Media selection is the problem of finding the most effective media to deliver the desired number of exposures to the target audience. The effect of exposures on audience awareness depends on exposure’s reach, frequency and impact.Reach(R) The number of different persons or households exposed to a particular media schedule at least once during a specified time period.Frequency (F) The number of times within a specified time period then an average person or household is exposed to the message.Impact (I) The qualitative value of an exposure through a given medium.Reach is more important when launching new products or flanker brands, or going after an undefined target market. Frequency is more important where there are strong competitors, high consumer resistance or a frequent purchase cycle.Choosing among major media types:- Media planners make their choice among telephone, newspapers, television, mail , radio and outdoors by considering several variables, the most important being:-Target Audience media habits:- For ex. Ratio and television are the most effective media for reaching teenagers.Product:- Women’s dresses are best shown in color magazines and Polaroid cameras are best demonstrated on television. Media types have different potentials for demonstration, explanations and believability.Message:- A message announcing a major sale will require radio or newspapers. A message containing a great deal of technical or mailing.Selecting specific media vehicle :-The media planner relies of media measurement service that provide estimates of audience size, composition and media cost. Audience size has several possible measures –Circulation:- The number of physical units of exposed to the vehicle.Audience:- the number of people with the target characteristics who are exposed to the vehicle.Effective ad-exposed audience:- The number of people with the target’s characteristics who actually saw the ad.The cost per thousand criteria:- Media planners circulate the most per thousand persons reached by a vehicle. In a full page ad

in business today costs rs. 84,000 and business today’s estimated readership is three million people, the cost of reaching one thousand persons ties approx rs. 28/-. The same advertisement in business week may cost rs. 3000/- but reach only 7,75,000 person-at a cost of per thousand of rs. 39/-. The media planner would rank each magnize/newspaper by cost per thousand and favor those publications with the lowest per thousand for reaching target consumers.

Evaluating advertising effectivenessGood planning and control of advertising depend critically on measures of advertising effectiveness. Most advertisers try to measure the communication effect of an ad, that is, its potential effect on awareness, knowledge or performance.Communication effect reaches seeks to determine whether an ad is communicating effectively. Called copy testing, it can be done before an ad is put into media and after it is printed or broadcast.There are three major method of advertising pre testing. The first is the direct rating method, which asks consumers to rate alternative ads. The second is portfolio tests which asks consumers to view and/or listen to a portfolio of advertisements, taking as much time as they need. Consumers are then asked to recall all the ads and their contents, aided or unaided by the interview. The third is laboratory tests which use equipment to measure consumers physiological reactions- heat beat, blood pressure, pupil dilation, perspiration-to an ad.

Public relations (PR)Public relations is define as a variety of programmed designed to improve, maintain or protect a company or product image.PR department perform the following five activities-1) Press Relation:- The aim of pres relations is to place newsworthy information into the news media to attract the

attention to a person product or service.2) Corporate communication:- This activity covers internal and external communications and promotes understanding of

the organization.3) Product publicity:- Product publicity involves various efforts to publicize products.4) Lobbying:- lobbying involves dealing with legislators and government officials to promote or defeat legislation and

regulation.5) Counseling:- Counseling involves advising management about public issues and company position and image.The appeal of public relations is based on its three different qualities-1) High creditability:- News stories and features seem more authentic and credible to readers then ads to. 2) Off guard: - PR can reach many prospects who might avoid sales people and advertisements. The message gets to the buyer

as news rather then as sales directed communication.3) Dramatization: -PR has, like advertising, a potential for dramatizing a company or product.

Marketing PR can contribute to the following tasks:-a) Assist in the launch of new productb) Assist in repositioning a mature product


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 c) Build up interest in product categoryd) Influence specific target groupse) Defend products have encountered public problemf) Build the corporate image on its products.

Major tools in marketing PR:-Publication:- These include annual reports, brochures, company newsletter and magazines.Events:- Companies can draw attention to new products by arranging special events. These include news conference, seminars, outings, sports and cultural sponsorships.News:- one of the major tasks of PR professional is to find or create favorable news about the company, its products and its people. Getting the media to accept press releases and attend press conferences calls for marketing and interpersonal skills.Speeches:- Speeches are another tool for creating product and company publicity.Public service Activity:- Companies improve public goodwill by contributing money and time to good cause. A large company typically will ask executives to support community affairs where their offices and plants are located. In other instances, companies will offer to donate a certain amount of money to a specified cause out of consumer purchases.Sales promotionSales promotion consists of a diverse collection of incentive tools, mostly short term, designed to stimulate quicker and/or greater purchase of particular product services by consumers or the trade. Whereas advertising offers reasons to buy, sales promotion offers an incentive to buy. Sales promotion includes tools for consumer promotion; and sales force promotion.Sales promotions have three different characteristics:-

1) Communication:- They gain attention and usually provide information that may lead the consumer to the product.2) Incentive:- They incorporate some concession, inducement or contribution that gives value to the consumer.3) Invitation:- They include a different invitation to engage in the transaction now.

Purpose of Sales PromotionSales promotions tools vary in their specific objectives, A free sample stimulate consumer trial, while a free management-

advisory service cements a long-term relationship with a retailer.Sales promotion offer attract brand switches. Brand switchers are primarily looking for low price, good value or premiums.

Sales promotions used in markets of high brand similarly produce a high brand similarity produce a high sales response in short run. In market of high brand dissimilarity, sales promotions can alter market shares more permanently. Sales promotions yield faster responses in sales than advertising does. Sales promotions enable the manufacturers to adjust a short term variations in supply and demand. They induce consumers to try new products instead of never straying from their current ones.

Major consumer- Promotion Tools

(1.) Samples: Samples are offers of a free amount or a trial of a product for consumers. The sample might be delivered doors-to-door, sent by mail or found attached to another product.

(2.) Coupons: Coupons are certificates entitling the bearer to a stated savings on the purchase of a specific product.(3.) Cash Refund Offers (Rebates): Cash Refund Offer provides a Price reduction after the purchase rather than at a

retail shop. The consumer has to produce a proof of purchase to claim refunds.(4.) Price Packs: They are offers to consumers of savings off the regular price of a product.(5.) Premiums (Free Gifts) are merchandise offered at a relatively low cost or free as an incentive to purchase a particular

product.(6.) Prizes (Contest, Games): Prizes are offers of the chance to win cash, trips or merchandise as a result of purchasing

something. A contest calls for consumers to submit an entity – a single, estimate, suggestion – to be examined by a panel of Judges who will select the best entry.

(7.) Patronage Awards: Patronage awards are values in cash or in other forms that are proportional to one’s Patronage of a certain vendor or groups of vendors. Most airlines offer “frequent – flyer planes” providing points for miles traveled that can be turned in for free airline trips.

(8.) Free Trails: Free Trials consists of inviting prospective purchasers to try the product without cost in the hope that they will buy the product.

(9.) Tie – in – Promotions : Tie – in – Promotions involve two or more brands or companies that team up on coupons, refunds and contest to increase their pulling power.

Major Trade Promotion Tools(1.) Price Off:A price off (also called off – invoice or off – list) is a straight discount off the list price on each carton/case

purchased during a stated time period. The offer encourages dealers to buy a quantity or carry a new item that they might not ordinary buy. The dealers can use the buying allowances for immediate profit advertising or price reduction.

(2.) Allowance: An allowance is an amount offered in return for the retailer’s agreement to feature the manufacturer’s products in some way. Advertising allowances compensates retailers for advertising the manufacturer’s product. A display allowance compensates them for carrying a special product display.

(3.) Free Goods: Free Goods are offered for extra cartons/cases of merchandise to middlemen who buy a certain quantity. Manufacturers might offer push money, which’s cash or gifts to dealers or their sales force to push the manufacturer’s goods.


news:-

LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 Manufacturers seek four objectives from trade – promotion tools: - (a.) Trade Promotion can persuade the Retailer or wholesalers to carry the brand. (b.) Trade Promotion can persuade retailers/wholesalers to carry more goods than the normal amount.(c.) Trade Promotion can persuade the middlemen to promote the brand by featuring, display and price reductions.(d.) Trade Promotion can stimulate retailers and their sales clerks to push the product.

Global Marketing A Global Form is one that, in operating in more than one country, captures R&D, production, logistical, marketing and

financial advantages in its costs and reputation that are not available to purely domestic competitors. Global firms plan, operate and coordinate their activities on a world wide basis.

Each national market has unique features that must be grasped. A global firm has to take into account economic, political – legal and cultural factors of target country while planning its expansion programmes.Economic Environment: Three characteristics reflect a country’s attractiveness as an export market. The first is the size of country’s population. Other things being equal, large countries are more attractive to exporters than small markets.

The second is the country’s industrial structures, four types of industrial structures can be distinguished: - (a.) Subsistence Economics: - In Subsistence economics the vast majority of people engage in simple agriculture. They

consume most of their output and barter the rest for simple goods and services. They offer few opportunities for exporters.(b.) Raw Material Exporting Economics: - These economics are rich in one or more natural recourses but poor in other

respects. Much of their revenue comes from exporting these resources Examples are Chile (tin and copper); Zaire (rubber). These countries are good markets for extracting equipment, tools and supplies, materials handling equipment and trucks. Depending on the number of foreign residents and wealthy native rulers and landlords, they are also a market for western – style commodities and luxury goods.

(c.) Industrializing Economies: - In an industrializing economy, manufacturing begins to account for between 10 and 20 percent of the country’s grogs national product. Examples include India, Egypt etc. As manufacturing increases, the country relies more on imports of textile raw materials, steel and heavy machinery and less on imports of finished textiles, papers products and automobiles. The industrialization creates a new rich class and small but growing middle class, both demanding new types of goods, some of which can be satisfied only by imports.

(d.) Industrial Economies: - Industrial economies are major exporters of manufactured goods and investment founds. They trade manufactured goods among themselves and also export them to other type of economies in exchange of raw materials and semi-finished goods. The large and varied manufacturing activities of these industrial nations and their sizable middle class make them rich markets for all sorts of goods.

The third economic characteristics are the country’s income distribution. Income distribution is related to a country’s industrial structure but is also offered by the political system.

II Political – Legal Environment A company should consider four factors in deciding whether to do business in a particular country.

(1.) Attitude towards International Buying: - Some nations are very receptive, indeed encouraging to foreign firms and others are very protectionist. For example, Mexico for a number of years has been attracting foreign investment by offering investment incentives, while India in the post required the exporter to cope with import quotes, blocked currencies and so on.

(2.) Political Stability: - Government in some countries changes hands, sometimes quite violently. And with changes in government foreign trade policies also change. The foreign company’s property might be expropriated, or its currency holdings might be blocked. In such conditions international marketers might prefer export marketing to direct foreign investment. They will convert their currency rapidly. As a result, the people in the host country pay higher prices, have fewer jobs and get less satisfactory products.(3.) Monetary Regulation: - Sellers want to realize profits in a currency of value to them. Foreign firms want payments in hand

currency with profit repatriation rights, but that may not be available in many markets.(4.) Government Bureaucracy: - A fourth factor is the extent to which the host government runs an efficient system for assisting

foreign companies: quick licensing procedures, efficient custom handling adequate market information and other factors conductive to doing business.

III. Cultural Environment: - Each nation has its own values, customs and taboos. Foreign business people, if they are to be effective, must drop their ethnocentrism and try to understand the culture and business practices of their hosts, who often out on different concepts of time, space and etiquette. The way foreign consumers perceive and use certain products must be checked out by the seller before planning the marketing programme.

Deciding which Market to Enter

Five steps are involved in estimating the probable rate of return on investment and thus determining which foreign market to enter: - (1.) Estimate of current Market Potential: - The first step is to estimate total industry sales in each market. This task calls for

using published data and primary data collated through company surveys.(2.) Forecast of Future Market Potential and Risk: - Te firm also needs to forecast future industry sales. It requires Predicting

economic and Political developments and their impact on industry sales.(3.) Forecast of Sales Potential: - Estimating the company’s sales requires forecasting its probable market share based on its

competitive advantages.


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 (4.) Forecast of cast of Costs and Profits: - Costs will depend n the company’s contemplated entry strategy. If it exports or

licenses, its costs will be spelled out in the contracts. If it locates manufacturing facilities in the country, its cost estimation will require understanding local labor conditions, taxes trade practices and so on. The company subtracts estimated costs from estimated sales to derive company subtracts estimated cost from estimated sales to derive company profits each year of the planning horizon.

(5.) Estimate of Rate of Return in Investment: - The forecasted income stream should be related to the investment stream to derive the implied at the rate of return. This should be high enough to cover the company’s normal target return on its investment and risk of marketing in that country.

How to Enter Foreign Market

Once a Company decides to target a particular country it has determine the best mode of entry. Its broad choices are indirect exporting, direct exporting, licensing, Joint Ventures and direct investment.

Indirect Export Companies typically start with indirect exporting, that is, they work through independent middlemen. Four types of middlemen are available to the company.

(a.) Domestic-based Export Merchant: - This middleman buys the manufacturer’s products and sells it abroad on its own account.

(b.) Domestic-Based Export Agent: - This agent seeks and negotiates foreign purchases and is paid commission. Included in the group are trading companies.

(c.) Cooperative Organization: - A Cooperative organization carries on exporting activities on behalf of several producers and is partly under their administrative control. This form is often used by producers of primary products fruits, nuts and so on.

(d.) Export-management Company: - The middleman agrees to manage a company’s exports for a fee.

Direct Export A Company can carry on direct exporting in several ways.

(a.) Domestic-Based Export Department or Division: - An export sales manager carries on the actual selling and draws on the market assistant as needed. It might involve into a self-contained export department performing all activities involved in export and operating as a profit centre.

(b.) Overseas Sales Branch or Subsidiary: - An overseas sales branch allows the manufacturer to achieve greater presence and programme control in the foreign market. The sales branch handles sales distribution and might handle warehousing and promotion as well. It often serves as a display centre and customer service centre.

(c.) Traveling Export Sales Representatives: - The Company can send home-based sales representatives abroad to find business.

(d.) Foreign-Based Distributors or Agent: - Foreign Based Distributors would buy and own the goods; Foreign based agents would sell the goods on the behalf of the company. They might be given exclusive rights to represent the manufacturer in that country or only general rights.

Licensing

Licensing represents a simple way for manufacturer to become involved in international marketing. The licensor enters an agreement with a license in the foreign market, offering the rights to use a manufacturing process, trademark patent, or other item for value for a fee or loyalty. The licensor gains entry into the market at little risk; the license gains production expertise or a well known product or name without having to start from scratch.

Joint Venture

In Joint Venture, foreign Investor joins with Local Investor to create a new company in which they share Joint Ownership and control.

Direct Investment

The ultimate form of foreign involvement is direct ownership of foreign based assembly or manufacturing facility. The foreign company can buy part or full interest in a local company or build its own facilities.

Marketing Programme

Product

A company can adopt following strategies of product and promotion to a foreign market: - (a.) Straight Extension: - It means introducing the product in the foreign market without any change. Straight Extension

has been successful with cameras, consumer electronics etc.


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 (b.) Product Adoption: - It involves altering the product to meet local conditions or preferences, International

companies often develop a product version to meet basic needs in developing economics.(c.) Product Invention: - It is creating something new. It can take two earlier product forms that are well adapted to a

foreign country’s needs. Forward invention is creating a new product to meet a need in another country.

II Promotion: - The Company can change the message at three different levels. The company can use one message around the

world by varying only the language, name and colors.The next possibility is to use the same theme globally but adapt the copy to each local market.Finally, some companies encourages their and agencies to make a full adoption of theme and execution

to the local market.

III Price: - In setting a global pricing policy, companies have three choices: -

(a.) Setting a Uniform Price Everywhere. But this would be too high a price in poor countries and not high enough in rich counters.

(b.) setting a Market based Price in each country: Here a company would charge what each country would bear. But this ignores difference in the actual cost from country to country. Also it would lead to a situation where middlemen in low price countries transship their product to high price country.

IV Distribution Channel s The international company must take a while channel view of the problem of distributing its products to the final

users. These are three major links between the sellers and ultimate user. In the first link, seller’s international marketing headquarters, the export department or international division marks decisions on channels and other marketing-mix element The second link, channels between nations, gets the products to the borders of the foreign nation. It consists of decisions on the types of intermediaries (agents; trading companies and the like) the type of transportation (air, sea and so on) and the financing and risk arrangements the third link, channels between foreign nations, get the products from their foreign entry point to the final buyer and user.WHY GO GLOBALSeveral factors are drawing more and more companter into international agena;

a) global firms offer better products and tower prices can attack company’s domestic market. The company might want to counterattack these competitors in their home market.

b) The company discovers that some foreign markets present higher profit opportunities that the elomestic market.c) The company needs a larger customer base to achieve economies of scale.d) The company wants to reduce its dependence on any one market.

Web MarketingWeb Marketing describes the use of electronic means and platform to conduct a company’s business . the advent of internet has greatly increased the ability of a company to conduct their business faster, more accurately, over a wider range of time and space at a reduced cost, countless companies have set up web sites to inform and promote their products and services.

E-commerce is more specific than e-business, it means that in addition to providing information to visitors about the company, its history, policies, products and services and job opportunities, the company or site offers to online. E-commerce has given rise to e-purchasing and e-marketing. E-purchasing means companies decide to purchase goods, services and information from various online suppliers. E-marketing company efforts to inform, communicate, promote and sell its products and services.

E-business and e-commerce take place over four major internet domains : B2c (Business to consumer) ; B2B (Business to business ) ; C2C (Consumer to consumer ) and C2B (Consumer to Business).Evaluating and controlling marketingPERFORMANCEThe marketing department’s job B to plan and control marketing activity four types of marketing control can be distinguished.

a) Annual plan control b) Profitability controlc) Efficiency controld) Strategic control

1. Annual plan controlThe purpose of annual plan control is to ensue that the company achieves the sales, profit and other goals established in its annual plan. The heart of annual plan control is management by objectives. Four steps are involved. First, management sets monthly or quarterly goals. Second, management monitors its performance in the market place. Third, management determines the causes of serious performance deviations. Fourth, management takes corrective action to close the gaps between its goals and performance.


LIIT Lal Institute of Information Technology - 0129-3257439, 9811436692 Managers use various tools to check on plan performance; sales analysis, market share analysis, marketing expense to share analysis and customer attitude tracking.

a) Sales Analysis sales analysis consists of measuring and evaluating actual sales in relation to sales goals.

b) Market share Analysis company sales do not reveal how well the company. If the company ‘s market share goes up. The company is gaining on competitors; if it goes down, the company is losing relative to competitors.

c) Marketing Expense to Sales Analysis : - annual plan control requires making sure that the company is not overspending to achieve its sales goals. The key ratio is to watch is marketing expense to sales. The are five components in expence to sales satio:-1) Sales force to sales2) Advertising to sales 3) Marketing research to sales and 4)sales administration to sales.

D) Customer Satisfaction tracking alert concpanter set up systems to monitor the attitude and satisfaction of customers, dealers and other market system participants, by monitoring changing levels of customers preference and satisfaction before they affect sales, management can take earlier action. The main customer satisfaction tracking system are:-1) complaint and suggestion system:- market oriented companies record, analyze and respond to written and oral complaints that come from the customer.2) customer panel:- some companies run panels of customers who have agreed to communicate there attitude periodically through phone calls or mail questionnaires 3) customer surveys; - some companies periodleally mail questionnaire to a random saeuple of customer to evaluate the friendliness of the staff, the quality of service etc

Profitability controlBesides annual-plan control companies need to measure the profitability of their various products, territories, customer groups, trade channels and orders sizes. This information will help management determine whether any products of marketing activites should be expanded, reduced or eliminated .

Efficiency control

Suppose profitability qualysis reveals that the company is earning poor profits in connection with certain products, territories, customer groups etc. in such a ease company has to find more efficient ways to improve the performance of there marketing entities.

Sales Force Efficiency Sales manager should keep traek of the following key indicators of sales force efficiency in their territory.

1. Average number of sales calls per salerperson per day.2. Average sales eall time per contact 3. average revenue per sales call4. average cost per sales call 5. percentage of orders per hundred sales call 6. number of new customers per period 7. number of lost customers per period 8. sales force cost as a percentage of total sales.

When a company starts investigating sales force efficiency it can often find areas improvement.

Advertising Efficiency

Marketing managers keep track of advertising efficiency by following the following key indicators

1. Advertising cost per thousand target buyers reached by media category and media vehicle .2. Percentage of audience who noted, saw and read most for each print media vehicle.3. consumer opinions on the ad contents and effectiveness 4. before after measures of attitudes toward the product 5. number of inquiries stimulated by the ad6. cost per inquiry

Sales promotion efficiency Sales promotion includes dozens of devices for stimulating buyer interest and product trial. To improve sales promotion efficiency , management should record the costs and sales impact of each sales promotion management should watch the following statistics.



1. percentage of sales sold on deal 2. display cost per sale rupee 3. percentage of compos redeemed 4. number of inquiries generated from a demonstration.

Distribution efficiency Management needs to search for distribution economies several tools are available for improving inventory control, warehouse and transportation modes

Strategic control Companies need under take a critical review of their overall marketing effectiveness, two tools are available namely, marketing effectiveness rating review and marketing qudit

Marketing effectiveness rating reviewThe marketing effectiveness of a company or division is reflected in the degree to orientation; customer philosophy , integrated marketing organization , adequate marketing information, strategic orientation and operational efficiency;

Marketing AuditA marketing audit is a comprehensive systematic, independent and periodic examination of a company’s marketing environment objectives ,. Strategies and activities with a view to determine problem areas and opportunities and recommending a plan of action to improve the company’s marketing performance

Components of the marketing audit The marketing audit examines six major components of the company’s marketing situation:-

1. marketing environment audit:- this audit analyzes major microenvironment n forces and trends in the key components of the company’s task environment marketing customers, competitors, distributors and facilitators

2. marketing strategy audit :- this audit reviews the company’s marketing objectives and marketing strategy to appraise how well these are adapted to the current and forecasted marketing environment.

3. marketing organization audit:- this audit evaluates the capabilities of the marketing organization for implementing the necessary strategy for the forecasted environment.

4. marketing systems audit :- this audit assesses the quality of the company systems for analysis, planning and control5. marketing productivity audit :- this audit examines the profitability of different marketing and the cost effectiveness of

different marketing expenditures.6. marketing functions audit :- these audits make in depths evaluation of major marketing mix components namely products

price, distribution , sales-force , advertising , promotion and publicity.


Marketing Management

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