Marketing(As per the Revised Syllabus of Mumbai University for T.Y. B.Com, Vth Semester)

Dr. Khushpat S. JainAssociate Professor,

Ph.D. (Commerce), M.Com. (Banking & Finance),M.B.A. (Human Resource Management),

M.A. (Economic and Political Science), NET, SET

Apexa V. JainVisiting Faculty,

M.Phil. (Commerce),M.Com. (Business Management),

M.B.A. (Human Resource Management).

MUMBAI NEW DELHI NAGPUR BENGALURU HYDERABAD CHENNAI PUNE LUCKNOW AHMEDABAD ERNAKULAM BHUBANESWAR INDORE KOLKATA GUWAHATI

© AuthorsNo part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form orby any means, electronic, mechanical, photocopying, recording and/or otherwise without the priorwritten permission of the publisher.

First Edition : 2015

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DTP by : Khushpat JainPrinted at : Rose Fine Art, Mumbai. On behalf of HPH.

PrefaceIt gives us immense pleasure to put forth a book on revised syllabus in the subject of“Marketing” for T.Y.B.Com., Semester V for the students of the University ofMumbai. The book has been divided into Four Modules and contains Eight Chapters.The language of the book is simple and lucid to enable undergraduate students tocomprehend easily. A number of examples have been given to make understanding ofthe subject matter easy. Each chapter is followed by a Chapter Summary to enablestudents to revise chapter with easy efforts. A number of objective questions such asfill in the blanks, match the columns and true or false have been given to facilitatequick revision and help students to prepare for the internal examinations.

We hope that the book meets the requirements of the Students and TeachingCommunity.

Authors

SyllabusModule No. of

Lectures

I INTRODUCTION TO MARKETING 11

1.1

1.2

1.3

1.4

Marketing1.1.1 Meaning of Marketing – Features, Importance1.1.2 Functions of Marketing – Evolution of Marketing Concepts

Strategic Marketing Management – Meaning – Comparison betweenTraditional and Strategic Marketing ManagementRecent Trends in Marketing

1.3.1 Customer Relationship Management (CRM) – Meaning,Techniques

1.3.2 Social Marketing – Meaning, Significance – Concept of GreenMarketing

1.3.3 Digital Marketing – Meaning, Forms (Internet Marketing, SocialMedia Marketing, Viral Marketing, Telemarketing, MobileMarketing)

1.3.4 Event Marketing – Meaning, Steps1.3.5 Emerging Ethical Issues in Marketing – Importance of Ethics in

MarketingChallenges before Marketing Managers in Changing BusinessEnvironment (Global Market, Compressed PLC, Increasing CustomerAwareness, Technology Boom, Emergence of Social Media)

II MARKETING INFORMATION SYSTEM, CONSUMER BEHAVIOUR ANDMARKET SEGMENTATION

11

2.1

2.2

2.3

2.4

Marketing Information System (MIS)2.1.1 MIS – Meaning – Features – Components – Essentials of Good

MIS2.1.2 Marketing Research – Meaning – Features – Process

Consumer Behaviour2.2.1 Consumer Behaviour – Meaning – Factors Affecting Consumer

Behaviour – Buying Decision ProcessMarket Segmentation

2.3.1 Market Segmentation – Meaning – Importance2.3.2 Bases of Market Segmentation – Niche Marketing

Product Positioning – Meaning – Importance – Positioning Strategies

III MARKETING MIX – I (PRODUCT DECISIONS AND PRICE DECISIONS) 11

3.13.2

3.3

Marketing Mix – Meaning – Elements/Components – ImportanceProduct Decisions

3.2.1 Product Decision Areas3.2.2 Product Line (Length, Depth, Width) and Product Mix –

Packaging, Labelling, Product Life Cycle3.2.3 Branding – Meaning – Components of a Brand – Factors

Influencing BrandingBrand Equity – Meaning – Factors Influencing Brand EquityBrand Extension –- Meaning – AdvantagesBrand Loyalty

Price Decision3.3.1 Meaning – Significance of Pricing3.3.2 Factors Affecting Pricing Decision3.3.3 Pricing Objectives3.3.4 Pricing Methods and Strategies

IV MARKETING MIX – II(PHYSICAL DISTRIBUTION AND PROMOTION DECISIONS)

11

4.1

4.2

4.3

Place/Physical Distribution4.1.1 Meaning – Physical Distribution – Factors Affecting the Selection

of Distribution Channels4.1.2 Types of Distribution Channels4.1.3 Recent Trends in Distribution (Horizontal – Third Party Delivery

Channel – Multi-channel Marketing – Multi-level Marketing)4.1.4 Components of Distribution (Logistics – Transport – Warehousing

– Inventory System)Promotion Decision

4.2.1 Meaning of Promotion – Objectives of Promotion Decision4.2.2 Elements of Promotion

Advertising – Meaning – FeaturesPublicity – Meaning – FeaturesSales Promotion – Meaning – TechniquesDirect Marketing – Meaning – FormsPublic Relations – Meaning – Parties in Public RelationsIntegrated Marketing Communication – Meaning – Features –Components

Paper PatternScheme of Examination

Credit Based Grading System Scheme of Examination

Internal Assessment – 25% 25 Marks Semester End Examinations – 75% 75 Marks

Question Paper PatternDuration: 21/2 Hrs. Maximum Marks: 75

All Questions are Compulsory Carrying 15 marks each. Questions to be Set: 05

Q.1 Answer any TWO of the following (Out of Three)From Module - I

15 Marks

Q.2 Answer any TWO of the following (Out of Three)From Module – II

15 Marks

Q.3 Answer any TWO of the following (Out of Three)From Module – III

15 Marks

Q.4 Answer any TWO of the following (Out of Three)From Module – IV

15 Marks

Q.5 Objective Question covering all Four Modules(A) Fill in the blanks(B) State whether the following statements are True or False(C) Match the following

15 Marks5 Marks5 Marks5 Marks

Contents

Module – I Introduction to Marketing

1. Introduction to Marketing 1 – 21

2. Recent Trends in Marketing 22 – 45

Module – II Marketing Information System, Consumer Behaviourand Market Segmentation

3. MR, MIS and Consumer Behaviour 46 – 69

4. Market Segmentation and Product Positioning 70 – 87

Module – III Marketing Mix – I (Product Decisions and PriceDecisions)

5. Product Decisions 88 – 121

6. Pricing Decisions 122 – 138

Module – IV Marketing Mix – II (Physical Distribution andPromotion Decisions)

7. Place Decisions 139 – 155

8. Promotion Decisions 156 – 184

Introduction toMarketing

Chapter1

Scope of Syllabus:Marketing: Meaning of Marketing, Features, Importance – Functions of Marketing -Evolution of Marketing Concepts - Strategic Marketing Management: Meaning -Comparison between Traditional and Strategic Marketing Management - Challengesbefore Marketing Managers in Changing Business Environment (Global Market,Compressed PLC, Increasing Customer Awareness, Technology Boom, Emergence ofSocial Media)Structure:

1.1 *Concept of Marketing

1.2 *Features of Marketing

1.3 *Importance of Marketing

1.4 *Functions of Marketing

1.5 *Evolution of Marketing Concepts

1.6 *Concept of Strategic Marketing Management

1.7 *Traditional Marketing Management vs. Strategic Marketing Management

1.8 *Challenges before Marketing Managers

Global Market

Compressed Product Life Cycle (PLC)

Increasing Customer Awareness

Technology Boom

Emergence of Social Media

*Marked topics are related to syllabus.

Chapter Summary

Questions Bank

Marketing occupies an important place in the organisation of a business unit. The traditionalview of marketing, 'Caveat Emptor', i.e., ‘let the buyer beware’, underwent a sea change atthe turn of the last century and transformed into 'Caveat Vendor', i.e., ‘let the seller beware’.With this philosophy, the consumer has become the focal point of all marketing activities.

There are several definitions of marketing, which generally revolve around the primacy ofcustomers as a part of an exchange process. Customers' needs are the starting point for allmarketing activities. Marketing managers identify these needs through marketing researchprocess and develop products which can satisfy them through an exchange process.

“Marketing is a total system of interacting business activities designed to plan, price,promote and distribute want satisfying products and services to the present andpotential customers.” – William Stanton

“Marketing is the process of planning and executing the conception, pricing,promotion, and distribution of ideas, goods and services to create exchanges thatsatisfy individual and organisational objectives.”…

– American Marketing Association

“Marketing is a human activity directed at satisfying needs and wants throughexchange processes.” – Philip Kotler

Thus, marketing is essentially about being driven by the needs of the customers as a meansof achieving organisational goals.

Modern marketing concept is ever-evolving and so are its features. Some of the mainfeatures of modern marketing concept are:

(a) Marketing is a total system: Marketing is the process of transferring ownership ofgoods and services from producers to consumers. Thus, it is a total systemconsisting of various integrated marketing functions such as buying, selling,assembling, storage and warehousing, transportation, grading and standardisation,marketing research and marketing information system (MIS).

(b) It is a managerial function: Marketing is the managerial process of laying downmarketing objectives, planning marketing activities, organising resources, co-ordinatingmarketing functions, selection, placement and training of sales force, directingdifferent departments towards marketing goals, evaluating their performances andcontrolling wastage and deviations to achieve marketing goals.

(c) It is customer-oriented: According to Peter Drucker, 'the purpose of business is tocreate customers'. The traditional view of marketing, 'Caveat Emptor', i.e., ‘let the

1.1 Concept of Marketing

1.2 Features of Marketing

buyer beware’, underwent a sea change at the turn of the last century and hastransformed into 'Caveat Vendor', i.e., ‘let the seller beware’. Marketing begins with‘the customer needs’ and ends with ‘the customer satisfaction’.

(d) It is a dynamic process: The various environmental factors and forces thatsurround and affect the marketing activities, such as demographic, economic, social,technological and political, keep on changing. A successful marketer must bedynamic enough to adjust and grab the opportunities created and prevent the threatsposed by the changing environment.

(e) It is related to goods, services and ideas: Marketing not only includes selling anddistribution of goods but also marketing of services and ideas. Due to thephenomenal growth of service sector in recent years, the tertiary sector has assumeda great significance. Similarly, R&D activities have given boost to new discoveriesand ideas which are also marketed on a very wide scale.

(f) It precedes and follows production: Marketing is a complex system of manymarketing functions, such as, buying, selling, transportation, storage, etc. Some ofthese functions precede production while some others succeed it. For example,marketing research is undertaken before production while selling is undertaken afterproduction. Thus, marketing precedes and follows production process.

(g) It is an integrated approach: Marketing is an integrated process of all individuals anddepartments in the organisation and not only of the marketing department alone. Underthe modern marketing approach, activities of all individuals and departments in theorganisation, viz., purchase department, sales department, marketing department, etc.,must be co-ordinated properly to achieve marketing objectives.

(h) It is target-oriented: Marketing, being a consumer-oriented process, is not targetedat masses but at a specific class of consumers. A market consists of heterogeneousgroup of consumers. Therefore, it is necessary to segregate it into smaller units onthe basis of homogeneous variables such as gender, income, age, location, sex, etc.,through the process of market segmentation.

(i) It is an art as well as a science: Marketing is an art as well as science. Thehandling of marketing responsibilities calls for a diversity of human talents andpersonality traits such as judgement, intuition, analytical ability and creativity. It is nota perfect science but every marketing manager must possess scientific temper tohandle marketing problems effectively.

(j) It is an evolutionary concept: The concept of marketing is closely related to thelevel of socio-economic and technological developments in the society. The conceptof marketing has been refined and upgraded with the progress of the society. It has

passed through a number of stages during its evolution from the stage of self-sufficiency to the stage of modern customer-oriented philosophy.

(k) It creates utility: Marketing is an integrated system of actions that create value ingoods. Production creates form utility (by changing form of materials), warehousingcreates time utility (by making goods available at the right time), transportationcreates place utility (by making goods available at the right place) and selling createspossession utility (by transferring ownership).

Marketing plays an important role in the modern business world. It directly or indirectlybenefits everyone in the society.Benefits of Marketing for a Firm:

(a) Marketing generates revenue: Profit is the pre-requisite for the survival of anybusiness activity. Marketing facilitates the transfer of goods and services from thecentres of production to the centres of consumption and thereby, widens the marketfor them. This increases sales and sales revenue, which can be reinvested forgenerating further profits and initiating growth and expansion of business.

(b) It assists in marketing decision-making: The basic problems of any marketer arewhat, how, when, how much and for whom to produce. Marketing provides answersto these questions through marketing functions such as, marketing research, demandforecasting, market segmentation, storage and transportation and thereby, assists inmarketing decision-making process.

(c) It initiates innovations and changes: Consumer tastes and preferences changerapidly than they are absorbed. Hence, every marketer is expected to be dynamicand innovative. Information is the basis of such innovations, which is passed onthrough marketing intermediaries from consumers to retailers, from retailers towholesalers and finally from wholesalers to the manufacturers.

(d) It facilitates the discovery of new products and new markets: Marketingresearch is an important function of marketing process. Marketing research assessesthe market potentials in terms of present offerings and need for product innovation,product adaptation and product modification. It explores the new markets for theexisting products and the requirements of the new markets.

(e) It leads to large-scale production and economies of scale: Marketing widens thedistributive limits for goods through its various promotional tools such as advertising,sales promotion and public relations. This increases the demand for goods andservices and their production, resulting in economies of large-scale operations and costsavings. This increases revenue and competitive abilities of the marketer.

1.3 Importance of Marketing

(f) It brings about effective allocation of resources: Resources are scarce andtherefore, should be optimally utilised. Marketing forecasts the demand for goods andservices and discovers new markets and likes and dislikes of consumers throughmarketing research process. This prevents wasteful production and brings abouteffective allocation of scarce resources.

Benefits of Marketing for Consumers:(a) Marketing improves the quality of goods and services: Marketing Research (MR)

and Marketing Information System (MIS) provide necessary information for researchand development. Research and development leads to product innovations, productinventions, new product development and improvement in the quality of products andservices. Thus, marketing provides consumers with quality goods and services.

(b) It reduces costs and prices: Marketing widens the market for goods and services.The increased production and distribution bring down costs and prices of goods andservices and make them available to the consumers at reduced prices. Marketingalso facilitates price control by striking a balance between demand and supply bytransferring goods from the centres of abundance to that of scarcity.

(c) It provides services to the consumers: Marketing provides consumers with variousservices such as, information about existing and new products, their maintenance,availability, after-sales service, etc., through marketing functions such as advertising,sales promotion and distribution channels. Thus, consumers get many essentialservices free of cost at their doorsteps.

(d) It educates the consumers: Marketing not only informs the consumers but alsoeducates them. The present and potential consumers are educated about variousbenefits of using a product or service with the help of advertisements and othercommunication media. The concept of social marketing can be used to bring aboutsocial awareness among the masses.

Benefits of Marketing for the Society:(a) Marketing increases national income and per capita income: National income is

defined as the money value of goods and services produced in an economy in anaccounting year. Marketing stimulates the demand for goods and services andthereby, contributes to the national product of the economy. This increases thenational income and per capita income of the country.

(b) It improves the general standard of living: Standard of living depends on theeconomic, social, cultural and educational environment of an economy. Marketingimproves the general standard of living by educating people through advertising,creating cultural and social bond through transportation and communication andimproving economic conditions by providing employment.

(c) It generates employment opportunities: Development of marketing activitiescreates multiple employment opportunities in the economy. It not only increasesemployment avenues in the manufacturing and marketing sectors but also in otherrelated sectors such as warehousing, banking, insurance, advertising, salespromotion, transportation, etc.

(d) It ensures economic stability: Economic stability can be ensured only when thereis a proper balance between demand and supply. Excess of supply over demandleads to depression while excess of demand over supply causes inflationary pressure.Marketing equates demand and supply in the economy and thereby, brings abouteconomic stability.

(e) It creates utilities: Marketing, as an economic activity, creates utilities: Exchange creates ownership and possession utilities. Transport creates place utility. Storage creates time utility. Promotional activities create information utility.

On the Basis of Exchange: Buying & Assembling SellingOn the Basis of Physical Handling: Packing & Packaging Transportation Storage & Warehousing Inventory ControlOn the Basis of Services: Standardisation & Grading Branding Pricing Financing Risk-taking PromotionOn the Basis of Research & Development: Product Planning & Development Marketing Research Marketing Information System

Fig. 1.1 Classification of Marketing Functions

The functional approach to marketing consists of a number of activities called marketingfunctions.

1.4 Functions of Marketing

"Marketing function is a major specialised activity performed in marketing. It is an act,operation or service by which original product and the final consumer are linkedtogether." – Professors Tousely, Clark and Clark

There is no unanimity among authorities on marketing regarding the classification ofmarketing functions. Many marketing professors and experts like J.F. Pyer, Converse Huegy,Mitchell, Clark and Clark and others have given their own classifications. These writers havelisted from 5 to as many as 150 marketing functions. The following is the classification ofmarketing functions given by Professors Tousley, Clark and Clark.

The various marketing functions can be studied under the following broad heads:On the Basis of Exchange:

(a) Buying and Assembling: Buying is the first step in the marketing process. Ascientific buying refers to buying materials of the right quality, at the right time, fromthe right place and the right source. Assembling refers to the task of collecting goodsfrom various sources of supply to a central place for processing and distribution. It ismainly essential in the case of agricultural goods.

(b) Selling: Selling is the most important function in the entire marketing process. This isbecause all marketing activities are directed towards the maximisation of salesrevenue and profit. Selling refers to the process whereby goods and services flowfrom the producer or the seller to the ultimate consumer. It is the sum total of allthose activities that push commodities to the buyers.

On the Basis of Physical Handling:(a) Packing and Packaging: Packaging is a part of the function of product planning. It

refers to the inner wrapping, which covers one or more units of a product. On theother hand, packing is the outer casing, which is used to transport a number of unitsof a product. Attractive and durable packaging not only protects the product but alsoacts as a silent salesman for the promotion of the product.

(b) Transportation: Transportation creates place utility. It transfers goods from thecentres of production to the centres of consumption or from the places of abundance tothe places of scarcity. Roads and railways are the most commonly used means oftransportation in the internal trade while waterways and airways are used in the globaltrade. The concept of multimodal transport is taking roots in the foreign trade.

(c) Storage and Warehousing: Storage creates time utility. Storage is necessarybecause there is a time gap between the production and consumption of goods. Duringthis time gap, it is necessary to protect and preserve goods quantitatively as well asqualitatively. There are different types of warehouses, viz., public and private, bondedand duty-paid and specialised warehouses which perform this function.

(d) Inventory Control: Inventory control means maintaining the optimum level ofinventories, viz., raw materials, work-in-progress and finished goods. It is necessaryin order to avoid the problem of overstocking and understocking. Overstocking leadsto wastage of resources and blockage of funds while understocking leads tobottlenecks in the process of production.

On the Basis of Services:(a) Standardisation: Standardisation is a mental process of setting standards, norms or

criteria for goods and services. These standards are generally determined on thebasis of colour, weight, quality and other special or general features of a product. InIndia, for example, Indian Standards Institute (ISI) issues ISI mark to manufacturedgoods. Standardisation is followed by grading.

(b) Grading: The words 'grade' and ‘standard’ are used interchangeably. However,standard is a broad term and established standards are known as grades. Gradingbegins where standardisation ends. Grading refers to the physical process of sortingof goods according to the set standards and norms. For example, in India, AGMARKis the grade issued to the agricultural products.

(c) Branding: Branding is done on a product or on the package of a product for easyidentification. It is the name, mark, symbol, design or distinctive number or letter(s)(or a combination of these) given to a product for distinguishing it from other products.By using or establishing well-known brands, companies obtain public acceptance,mass distribution and higher prices.

(d) Pricing: Price is the value of the utility of goods and services expressed in terms ofmoney. It is an important marketing decision as demand, sales, market share, profitmargin and ability of a marketer to face competition directly depend upon his pricingpolicy. Thus, an appropriate pricing policy should be formulated after considering thefactors such as market demand, elasticity of demand, competition, etc.

(e) Financing: Although financing is considered to be an ancillary function of marketing,its importance in the present day economy cannot be underestimated. It has beenrightly remarked that finance is the lifeblood for any industrial or commercial businessunit. It is difficult to carry on smooth marketing without the availability of adequateand cheap finance.

(f) Risk-taking: Risk-taking is the primary function of any marketing activity and profit isthe reward for taking such risks. Marketing risks can be classified into insurable andnon-insurable risks. Insurable risks are risks arising out of theft, fire and naturalcalamities. Non-insurable risks are change in demand pattern, change in consumerpreferences, increasing competition, etc.

(g) Promotion: Many good products fail in the market for the want of appropriate andadequate promotion strategy. The various elements of promotion mix are advertising,sales promotion, public relations, personal selling, publicity, packaging and trade fairsand exhibitions. These factors must be blended together to accomplish the firm’spromotional and marketing objectives.

On the Basis of Research and Development:(a) Product Planning and Development: Product planning is a systematic process of

decision-making with regard to all aspects of the development and management of aproduct. A well-structured product planning enables a company to pinpoint potentialopportunities, develop appropriate marketing programme, co-ordinate a product mixand extend the life cycle of a product.

(b) Marketing Research: Marketing Research is the systematic gathering, recordingand analysing of data about problems relating to the marketing of goods and services.It is composed of a series of activities, viz., the definition of the problem, examinationof data source, generation of primary data, analysis of information andrecommendations and implementation of findings.

(c) Marketing Information System (MIS): MIS is a continuing and interacting structureof people, equipment and procedures to gather, sort, analyse, evaluate and distributepertinent, timely and accurate information for use by marketing decision-makers toimprove their marketing planning and control. The data required for MIS can begathered from both internal as well as external sources.

There are seven competing concepts under which business and other organisations conducttheir marketing activities. These concepts have been evolved out of the needs of thebusiness to survive and earn profit. During its evolution from the exchange concept to themodern marketing concept, marketing had always been responsive to the cultural demands,social and political changes, economic growth and changes in business. Let us analysethese concepts in detail:

(a) The Exchange Concept: The exchange concept is the oldest philosophy or in fact,the base of all marketing activities.

The exchange concept holds that it is only through exchange that people canobtain a desired level of satisfaction and hence, exchange is the starting pointof all marketing activities.

The exchange concept led to the emergence of barter exchange, i.e., exchange ofgoods against goods. But, barter system suffered from various drawbacks such as,double coincidence of wants, indivisibility of certain goods, etc.

1.5 Evolution of Marketing Concepts

(b) Production Concept: The production concept was the direct outcome of theindustrial revolution.

The production concept holds that consumers will favour those products,which are easily available at affordable prices and therefore, managementshould concentrate on improving production and distribution efficiency.

The production concept led to increased production through the use of machines.However, this concept led to increased supply in relation to demand and finallyculminated into the Great Depression of 1929.

(c) The Product Concept: The product concept emerged as a result of increasedresearch and development and innovation and invention.

The product concept holds that consumers will favour those products,which offer the most quality performance and innovative features andtherefore, the organisation should devote its energy in making continuousproduct improvement.

The product concept also failed as it led to marketing myopia, i.e., giving undueconsideration to the product contents, designs and features rather than needs andrequirements of consumers.

(d) The Selling Concept: Failure of the product concept led to the emergence of sellingconcept.

The selling concept holds that consumers will not buy enough of theorganisation's products unless the organisation undertakes a substantialselling and promotion effort.

Initially, the concept did boost up sales but at the later stage, it failed as most studiesshow that an average satisfied customer tells three others about good experienceswhile an average dissatisfied customer tells ten others about bad experiences.

(e) The Marketing Concept: The marketing concept originated in fifties. It focuses moreon the needs and requirements of consumers.

The marketing concept holds that the key to achieving organisational goalslies in determining the needs and wants of target markets and delivering thedesired satisfaction more efficiently and effectively than competitors do.

Managers began to discover the vastness of marketing activities. As the marketingenvironment became more complex and aggressive, marketing tools became moresignificant. Consumer became the focal point of all marketing activities.

However, in their bid to deliver maximum satisfaction to consumers, producersoverexploited nature and natural bounties, causing a direct harm to society andsocial welfare.

(f) The Societal Marketing Concept: The societal concept tries to strike a balancebetween consumer satisfaction and social welfare.

The societal marketing concept holds that the organisation's task is todetermine the needs, wants and interests of target markets and to deliver thedesired satisfaction more effectively and efficiently than the competitors, in away that preserves or enhances the consumers' and the society's well-being.

The societal marketing concept calls upon marketers to balance three considerations. Society (Human welfare) Consumers (Want satisfaction) Company (Profits).

(g) The Relationship Concept: The relationship concept of marketing is the directoutcome of increasing international competition and globalisation.

Relationship marketing (RM) marks a paradigm shift in marketing – amovement from thinking solely in terms of competition and conflict towardsthinking in terms of mutual interdependence and co-operation. It recognisesthe importance of various parties – suppliers, employees, distributors, dealersand retailers – co-operating to deliver the best value to the target customers.

Due to globalisation, various stakeholders of the company such as customers,employees, suppliers, distributors, dealers and retailers are spread in different partsof the world with little direct communication between them. Any slips in theserelationships will hurt the company’s performance. Thus, it is necessary forcompanies to maintain healthy relationships with these stakeholders throughconstant communication and feedback mechanism.

Strategic marketing management is an umbrella management process for creating,communicating and delivering value to customers and in the process achieving long-termobjectives of growth and survival of business organisation in the competitive environment.Strategic marketing management is a continuous process that mainly (but not exclusively)takes place at the top management level in the organisation. The process of strategicmarketing management includes:

(a) Developing a marketing strategy.(b) Selecting market types, audiences and market segmentation.(c) Designing competitive and co-operative behaviours.(d) Shaping the internal organisational environment – market orientation in research and

development, organisational culture and market knowledge.

1.6 Concept of Strategic Marketing Management

(e) Shaping the external organisational environment – customer relations, marketingcommunications and corporate social responsibility.

The above process of strategic marketing management can be categorised into three steps:(a) Analysis: Analysing the organisation, customers, competitors and the business

environment in which the organisation operates.(b) Planning: Matching business environment and mission and values of business

organisation. This stage focuses on two aspects: Developing products and services with a sustainable competitive advantage, and Designing an attractive and appealing brand.

(c) Execution: Communicating the company offerings to people through advertising,public relations, sales promotion, direct marketing, e-marketing, etc.

Fig. 1.2 Strategic Marketing Management Process

Traditional Marketing Management Strategic Marketing Management

(a) Meaning:

Traditional marketing management dealswith day-to-day marketing issues andproblems that have relevance in a shortperiod, generally current financial year.

Strategic marketing is a scientific processthat relates to the business environment andlong-term mission and values of the businessorganisation.

(b) Time-frame:

Traditional marketing management dealswith current marketing issues. Its decisionshave relevance only in the current period.

Strategic marketing management is future-oriented and therefore, its decisions havelong-term implications.

(c) Orientation:

Traditional marketing management isdeductive and analytical.

Strategic marketing management is inductiveand intuitive.

1.7 Traditional Marketing Management vs. StrategicMarketing Management

Analysis Planning Execution

Image

Product

Audience

Market

Productplanning

Branddevelopment

Advertising

Publicrelations

Promotion

(d) Objective:

Traditional marketing management dealswith the marketing activities of a particularstrategic business unit (SBU).

Strategic marketing management deals withthe activities of a number of interrelatedstrategic business units (SBUs).

(e) Decision Process:

The decision process in traditionalmarketing management is top-down.

The decision process in strategic marketingmanagement is generally bottom-up.

(f) Information Need:

Traditional marketing management is basedon information collected through marketingresearch process.

Strategic marketing management is basedon information about future collected from avariety of sources.

(g) Environmental Considerations:

Decisions are taken considering the externalenvironment to be constant and analytical.

Decisions are taken considering the externalenvironment to be dynamic and ever-changing.

(h) Opportunity Seeking:

Traditional marketing management seeks tofocus only on adhoc and current marketingopportunities.

Strategic marketing management process isfocussed on seeking current as well as futureopportunities.

(i) Competence Needed:

Traditional marketing management requiresmaturity, experience and analytical ability.

Strategic marketing management requireshigh degree of creativity and originality.

(j) Organisational Behaviour:

Traditional marketing management pursuesthe goals and interest of marketingdepartment alone.

Strategic marketing management constantlystrives to achieve synergy between differentfunctional departments.

The marketing scenario at the local, national and global level is changing very fast posingseveral challenges for marketing firms, which require a transformation in their capabilitiesand approaches. Some of these challenges are:

(a) Global Market: Global market is the borderless market, i.e., a market without politicalboundaries of nations. All firms, regardless of their size, have to craft strategies in thebroader context of world markets. Their global expansion may be driven by variousfactors such as saturated and intensely competitive domestic markets, diversification

1.8 Challenges before Marketing Managers

of risk on a geographical basis, opportunity to realise economies of scale and scope,entry of competitors in domestic market and the desire to compete in a market withsophisticated consumer tastes. Globalisation of markets poses several challengeswhich marketers have to anticipate, plan and face: Differences in consumer needs, wants, and usage patterns. Differences in consumer response to marketing mix elements. Differences in brand and product development. Differences in competitive environment. Differences in the legal environment, some of which may conflict with those of the

home market. Differences in organisation structure, some of which may call for the creation of

entirely new ones.Global marketing strategies have to respond to the twin needs of global standardisationand local customisation. In real life, striking the right balance between standardisationand customisation can be extremely challenging for marketers.

(b) Compressed Product Life Cycle (PLC): Products rarely, if ever, sell well forever.As product, market, and customers change over time, so should the company'sdifferentiating and positioning strategy. The sales and profitability of most productsfollow a bell-shaped curve over time known as product life cycle. Most marketersdivide this curve into four stages, viz., introduction, growth, maturity, and decline.With the advances in technology and increasing research and development, thevelocity of new product development and product turnover has increasedexponentially. This has shortened the life span of new products. Today, the productlife cycle in high-tech industries is averaging 1 to 3 years. The product life cycles of10 to 15 years were common just 30 years ago. But the situation has changed duringthe last three decades. A common rule of thumb in the world of high-tech productdevelopment is that a six-month project delay can result in a 33% loss in productrevenue share. Speed, therefore, becomes a competitive advantage; more and moreorganisations are relying on cross-functional project teams to get new products andservices to the market as quickly as possible.

(c) Increasing Customer Awareness: Global competition and new technology areproviding customers with greater choice about when, how, and where to buy from.The customer has wider choice and he is demanding better quality, prompt service,customisation, convenience, speed, and competitive pricing. Many countries haveenacted laws for consumer protection, including India. Consumer education andconsumer guidance have become common phenomenon. Consumers have formedassociations and founded organisations to protect their interests. As a result,customers are becoming the determining factor in the success or failure of most

corporations. The essence of marketing concept is that the customer and not theproduct shall be the centre of business systems. All business operations revolvearound customer service and satisfaction. Some large companies have also taken upthe task of educating and training customers. Companies are following customer-oriented philosophy to ensure growth in sales, profits and market share. Thus, themarketer has to be responsive to the needs, requirements and expectations ofcustomers in different markets. This calls for detailed understanding of local marketand high degree of product and service customisation.

(d) Technology Boom: The recent technology boom has created a new digital age. Theexplosive growth in computer, telecommunications, information, transportation andother technologies has had a major impact on the ways companies bring value totheir customers. Though the technology boom has helped some marketers performbetter through the use of e-mail and web campaigns, these advancements are alsostarting to bring about many challenges for marketers. Some of the burningchallenges that marketers are facing due to technological boom are: Technology boom is making marketing more intrusive, i.e., coming without an

invitation. This includes e-mail spam, pop-up ads, and pre-recordedadvertisements which are played when the customer is on hold. Such aggressivemarketing tactics may generate short-term returns, but risk long-term damage tocustomer loyalty and brands.

In the era of mass communication system, the concept of market segmentation isvanishing fast. A number of e-mails, messages, pop-ups, etc. are targeted towrong market segment. Again, this mass approach is making it difficult to assessthe impact of advertising campaign. Such misdirected campaigns also affect thegoodwill and credibility of marketers.

A forward-thinking marketer should, therefore, shift towards more targeted, interactivemarketing campaigns to reach the appropriate audience more effectively.

(e) Emergence of Social Media: A social networking service is a platform to build socialnetworks or social relations among people who share interests, activities,backgrounds or real-life connections. Social media has revolutionised the style ofbusiness-to-customer communications. Six Degrees was launched in 1997 and wasthe first social networking site. It was sold out and was shut down in 2000. The early2000s brought some huge developments in social networking and social media.Friendster, the first social media site, was launched in 2003. MySpace, Facebook,LinkedIn, and Twitter followed immediately thereafter.According to media reports, Indian companies use social media much more than theglobal average and their counterparts in emerging economies. Some of the importantfacts about social media marketing in India:

Facebook is the most browsed social network on social media with a large baseof 100 million users.

Total Twitter users in India are 33 million and from this base, 76% of usersaccess it via their mobile phone.

In the case of Instagram, the usage is more dominated by men in comparison towomen; ratio being 75 : 25.

LinkedIn has 26 million Indian users, of the total 300+ million users. The mostshared type of videos is film or movie trailers.

Sales and marketing professionals are using social media to introduce and promotetheir products and services in a way that increases a potential target marketexponentially. The main benefits of using social media marketing are: Social networking sites enable prospects to communicate with each other and to

share their thoughts and ideas about company’s products. Social media as a sales and marketing tool is an inexpensive mode of advertising

because it reaches a vast audience almost instantly at a meagre investment. It also generates conversation on the industry-specific topic. By framing a

company-specific message, a marketer can lure more and more users.The main challenge in using social media network is that this network is free to useby everyone and therefore can generate huge rush of marketers which may confuseusers rather than helping them in making a right choice.

Concept of Marketing“Marketing is a total system of interacting business activities designed to plan, price,promote and distribute want satisfying products and services to the present and potentialcustomers.”

Features of Marketing(a) Marketing is a total system

(b) It is a managerial function

(c) It is customer-oriented

(d) It is a dynamic process

(e) It is related to goods, services and ideas(f) It precedes and follows production

(g) It is an integrated approach

(h) It is target-oriented

(i) It is an art as well as a science

Chapter Summary

(j) It is an evolutionary concept

(k) It creates utility

Importance of MarketingBenefits of Marketing for a Firm

(a) Marketing generates revenue

(b) It assists in marketing decision-making(c) It initiates innovations and changes

(d) It facilitates the discovery of new products and new markets

(e) It leads to large-scale production and economies of scale

(f) It brings about effective allocation of resources

Benefits of Marketing for Consumers

(a) Marketing improves quality of goods and services(b) It reduces costs and prices

(c) It provides services to consumers

(d) It educates consumers

Benefits of Marketing for the Society

(a) Marketing increases national income and per capita income

(b) It improves the general standard of living(c) It generates employment opportunities

(d) It ensures economic stability

(e) It creates utilities

Functions of MarketingOn the Basis of Exchange

(a) Buying and Assembling

(b) Selling

On the Basis of Physical Handling

(a) Packing and Packaging

(b) Transportation(c) Storage and Warehousing

(d) Inventory Control

On the Basis of Services

(a) Standardisation

(b) Grading

(c) Branding

(d) Pricing

(e) Financing(f) Risk-taking

(g) Promotion

On the Basis of Research and Development

(a) Product Planning and Development

(b) Marketing Research

(c) Marketing Information System (MIS)

Evolution of Marketing Concepts(a) The Exchange Concept

(b) Production Concept

(c) The Product Concept(d) The Selling Concept

(e) The Marketing Concept

(f) The Societal Marketing Concept

(g) The Relationship Concept

Concept of Strategic Marketing ManagementStrategic marketing management is an umbrella management process for creating,communicating and delivering value to customers and in the process achieving long-termobjectives of growth and survival of business organisation in the competitive environment.

Traditional Marketing Management vs. Strategic Marketing Management(a) Meaning

(b) Time-frame

(c) Orientation(d) Objective

(e) Decision Process

(f) Information Need

(g) Environmental Considerations

(h) Opportunity Seeking

(i) Competence Needed(j) Organisational Behaviour

Challenges before Marketing Managers(a) Global Market

(b) Compressed Product Life Cycle (PLC)

(c) Increasing Customer Awareness

(d) Technology Boom(e) Emergence of Social Media

Q.1 Objective Questions:(A) Choose the correct alternative of the following: (1 mark each)

(1) The traditional view of marketing was based on _____________ principle.

(a) Caveat Emptor (b) Caveat Vendor (c) Caveat Producer

(2) _____________ is the process of transferring ownership of goods and services.

(a) Selling (b) Marketing (c) Advertising

(3) According to Peter Drucker, 'the purpose of business is to create _____________'.(a) Goods (b) Competitors (c) Customers

(4) _____________ creates place utility.

(a) Advertising (b) Transportation (c) Warehousing

(5) _____________ is the first step in marketing process.

(a) Buying (b) Production (c) Selling

(6) _____________ means collecting goods at one central place.(a) Buying (b) Storage (c) Assembling

(7) Assembling is necessary in the case of _____________ goods.

(a) agricultural (b) electrical (c) consumer

(8) Standardisation is a _____________ process.

(a) physical (b) mental (c) technical

(9) Grading is a _____________ process.(a) physical (b) mental (c) technical

(10) Grading begins where _____________ ends.

(a) storage (b) assembling (c) standardisation

(11) _____________ is the oldest concept of marketing.

(a) Exchange (b) Marketing (c) Societal

(12) _____________ concept of marketing is the result of the Industrial Revolution.(a) Exchange (b) Product (c) Production

(13) _____________ concept of marketing resulted in ‘marketing myopia.’

(a) Exchange (b) Product (c) Production

(14) _____________ marketing is inductive and intuitive.

(a) Traditional (b) Modern (c) Strategic

Questions Bank

(15) _____________ is the most browses social network on social media.

(a) Facebook (b) Twitter (c) InstagramAns.:

(1) Caveat Emptor (2) Marketing (3) customers

(4) Transportation (5) Buying (6) Assembling

(7) Agricultural (8) mental (9) physical

(10) standardisation (11) Exchange (12) Production

(13) Product (14) Strategic (15) Facebook

(B) Match the Columns: (1 mark each)

Column A Column B(1) Production

(2) Warehousing

(3) Transportation

(4) Exchange

(5) Promotion

(a) Information utility

(b) Possession utility

(c) Place utility

(d) Time utility

(e) Form utility

Ans.: (1) – e, (2) – d, (3) – c, (4) – b, (5) – a.

Column A Column B

(1) Exchange concept(2) Production concept

(3) Product concept

(4) Marketing concept

(5) Societal concept

(6) Relationship concept

(a) Long-term customer loyalty(b) Considers environmental issues

(c) Centres around consumer

(d) Undue importance to product

(e) Industrial revolution

(f) Barter exchange

Ans.: (1) – f, (2) – e, (3) – d, (4) – c, (5) – b (6) – a.

(C) State whether the following statements are TRUE or FALSE: (1 mark each)(1) The modern marketing concept is based on the principles of 'Caveat Emptor.’

(2) ‘Caveat Emptor’ means ‘let the seller beware.’

(3) Marketing is a broader concept than selling.(4) Large scale production results in economies of scale.

(5) Promotion creates information utility.

(6) Exchange creates ownership and possession utilities.

(7) Assembling is essential in the case of capital goods.

(8) Packaging is a part of the function of product planning.

(9) Overstocking leads to bottlenecks in the process of production.

(10) Standardisation is a physical process of setting product standards.

(11) Grading follows standardisation.(12) AGMARK is the grade issued to the agricultural products.

(13) Exchange concept led to barter exchange.

(14) Product concept followed by the Great Depression of 1929.

(15) Technology boom is one of the reasons for compressed product life cycle.Ans.:

(1) False (2) False (3) True (4) True (5) True

(6) True (7) False (8) True (9) False (10) False

(11) True (12) True (13) True (14) False (15) True

Q.2 Answer the following questions: (71/2 marks each)(1) Define marketing. What are the features of marketing?(2) Discuss the importance of marketing for the firm and the society.(3) What are the various functions of marketing? Explain them in detail.(4) Discuss the various stages in the process of the evolution of marketing.(5) Distinguish between the traditional and strategic marketing management.(6) Analyse the various challenges faced by the marketing managers in the modern time.