Evolving views of marketing

• Attracting customers Todays customers are smarter, more price conscious,more demanding and approached by more players

• The challenge is not to produce satisfied customers but to produce delighted and loyal customers

• Companies seeking to expand their profits and sales have to spend time and resources leading to suspects,prospects and sales effort

• Computing the cost of lost customers-First the company must define and measure its retention rate

• Second the company must distingush the causes of customer attrition and identify those can be managed better

• Third,the company needs to estimate how much profit it loses while losing customers,the lost profit is equal to the customers life time value

• Fourth, the company needs to figure out how much it would cost to reduce the defection rate, and finally nothing beats listening to customers

• The need for customer retention-A company would be wise to measure customer satisfaction regularly as its the key toretention

• A highly satisfied customer stays loyal longer buys more as the company introduces new products,less bothered by competition,pricing

• Companies think they are getting a sense of customer satisfaction by tallying complaints

• Measuring customer life time value- describes the present value of the stream of future profits expected over the customers lifetime

• The company must subtract from expected revenues the expected costs of attracting, selling and serving that customer

• Of course,a company needs,in addition to an average customer estimate,a way ofestimating CLV for each individual customer

• Customer relationship management,the key- The aim of CRM is to produce high customer equity

• CRM is the process of managing detailed information about individual customers and care fully managing all customer touch points

• There are three drivers of customer equity; value equity,brand equity and relationship equity

• Value equity is the customers objective assesment of the utility of an offering based on the perceptions of its benefits

• Brand equity is the customers subjective and intangible assesment of the brand,above its perceived value

• Relationship equity is the customers tendency to stick with the brand above and beyond all objective and subjective assesments

• Customer relationship management- is perhaps the most important concept of modern marketing

• It involves managing detailed iformation of individual customers and carefully managing customer touch points to maximise loyalty

• More recently CRM is the overall process of building and maintaining profitable customer relationships by superior value and satisfaction

• Customer value- Attracting and retaining customers can be a difficult task

• Customers have a big line of products and services to chose from

• A customer buys from the firm that offers highest perceived value

• The difference between all the benefits and cost of marketing offer compared to other offers eg: Federal express

• Customer satisfaction- Depends on the products perceived performance relative to a buyers expectations

• If the product performance falls short of expectations the customer is disastisfied

• If performance matches expectations,the customer is satisfied and if the performance exceeds expectations there iscustomer delight

• Oustanding marketing companies go out of their way to keep important customers satisfied

• Highly satisfied customers repeat purchases and also constitute to good word of mouth

• Smart companies aim to delight customers by promising only what they can deliver and then delivering more than they promise

Customer relationship levels and tools• At one extreme,a company with many low-margin

customers may seek to develop basic relationships with them

• P&G does not call and talk to all tide customer instead they do brand building,get to promotions,toll free no. and website

• At the other extreme in markets with few customers and high margins sellers want to create full partnership with key customers

• Eg:P&G work closely with walmart&boeing with airline service providers

• Today most of the leading companies are offering customer loyalty and retention programs beyond consistent quality

• Marketers use specific marketing tools like frequency marketing programs to reward regular buyers like flierprograms,hotel upgrad

• Club marketing programmes and communities • Harley- davidsons Harley owners group(HOG)

Types of buying decision behaviour

• Complex buying behaviour-undertake this behaviour ,they are highly involved inpurchase perceive significant difference among brands

• Consumers may be highly involved when the product is expensive,risky,purchased infrequently and highly self expressive

• Typically the consumer has to learn about the product category,for eg: a PC buyer may not know what attributes to consider

• Dissonance –reducing buying behaviour -occurs customers are highly involved in infrequent purchase but see little difference among brands

• For eg:Customers buying carpeting may face a high involvement decision because carpeting is expensive and self expressive

• Yet buyers may consider most carpet brands in the given price range to be the same

• After purchase the customer might experience post purchase dissonance as they notice disadvantages in the purchased prod or adv.in the non-purchased

• Habitual buying behaviour- occurs under conditions of consumers low involvement and a little significant brand difference

• For eg:Common salt,the consumers simply go to a store and search for a brand

• If they reach out the brand in future its out of habit rather than strong brand loyalty

• Because they are not committed to any brands marketers use price and sales promotions to stimulate product trial

• Variety seeking buying behaviour- is undertaken by consumers in situations of low involvement but significant brand differences

• In such cases consumer often do a lot of brand switching

• For eg; When buying cookies consumer may hold some beliefs,choose a cookie without much evaluation,evaluate during consumption

• But next time the customer may pick another brand just for a variety not due to disatifaction

The buyer decision process

• Need recognition- the first stage of buyer decision process in which the consumer recognises a problem or need eg:ad of a car

• Information search- The stage of buyer decision process in which the consumer is keen to search for more information

• Evaluation of alternatives-At this stage the consumer uses the information available to evaluate the alternate brands

• Purchase decision- Generally the consumers purchase decision will go in favour of the most preferred brand

• Influence of others and unexpected situational factors can come in between the decision

• Post puchase behaviour – After purchasing the product,the consumer will be satisfied or dissatisfied and will engage in post purchase behaviour

Business markets

• Business markets fetch more business and money than consumer markets

• Take an eg:of a tyre co (good year),various suppliers sell goodyearrubber,steel,equipment and other goods to produce tyres

• Good year sells this to retailers who inturn sells it to the conumers,they sell it to the OEMs,and sell to fleet owners for repalcement

Charecteristics of business markets• Market structure and demand-the business

marketer deals with fewer buyers than consumer marketer

• For eg:the good year sells replacement tyres to final customers,its potential customers are lot of vehicle owners

• But the companys fate lies in an order from an auto maker&placing in key retailers

• Business markets are geographically concentrated and business demand is derived demand

• B-to-B marketers sometimes promote the products to the final customer to increase business demand

• Many business have inelastic demand not directly related to price changes&business markets have fluctuating demand

Participants in the buying process

• The decision making unit of an organisation is called the buying centre

• This group includes the actual users of the product or service,those who make the buying decision,who do the actual buying etc.

• The buying centre includes all members of the organisation who play 5 roles in the purchase decision process

• Users- are members of the organisation who will use the product or service

• In many cases users initiate the buying proposal and help define product specifications

• Influencers- provide information for evaluating alternatives,technical personnel are particularly important influencers

• Buyers- have formal authority to select the supplier and arrange terms of purchase

• Buyers may help shape product specifications,but major role is selecting vendors and negotiating

• In more complex puchases buyers may include high level officers participating in negotiations

• Deciders- have formal or informal power to select or approve final suppliers

• In routine buying the buyers are often deciders or at least approvers

• Gate keepers- control the flow of information to others

• Examples are technical personnel or even personnel secretaries

Market segmentation

• Market consists of buyers and buyers differ in one or more ways

• They may differ in their wants,resources, attitudes and buying practices

• Through market segmentation, the companies divide large heterogeneous markets in to smaller segments t reach more efficiently

• A marketer has to try different segmentation variables in consumer markets

• Geographic segmentation- calls for dividing the market in to different geographical units like nation,state,district etc

• A company may operate in one area or few areas or operate in all possible areas but pay attention to geographical differences in needs

• Companies are going for untapped territories and mini stores in high density urban areas

• Demographic segmentation- divides the market in to groups based on variables such as age,gender,family size,income,occupation,relig

• These are the most popular basis for segmenting customer groups

• A major reason is that the customer needs,wants,and usage rates vary with demographic variables

• Psychographic segmentation- divides buyers in to different groups based on social class, lifesyle or personality charecteristics

• People in the same demographic group can have very different psychographic makeups

• Eg:the marketing for Honda appears to target the 20 plus guys but its actually aimed at a much broader personality group

• Behavioral segmentation- divides buyers in to groups based on their knowledge,attitudes, users or responses to a product

• Marketers believe that behaviour variables are the best starting point for building market segments

• Ocassions- buyers can be grouped according to ocassions when they get the idea to buy actually make the purchase or use a purchased item

• Benefits sought- a powerful form of segmentation is to group buyers according to the different benefits they seek from it

• User status- markets can be segmented in to groups of non-users,ex-users,potential users,first –time users &regular users

• Usage rate- light,medium and heavy users• User status- non-users,ex-users,potential users,first

time users&regular users• Loyalty status- A market can also be segmented by

consumer loyalty

Target marketing

• Once the segmentation is done,the firm has to evaluate the various segments and decide which segments it can serve best

• Evaluating the market segments- a firm must look at three facts; segment size and growth, segmentstructural attractiveness&coresources

• Selecting target market segments- a target market consists of a set of buyers who share common needs that the co needs to serve

• Undifferentiated marketing- using a mass marketing strategy a firm ignores the segment differences and targets the whole market

• Differentiated marketing- here a firm decides to target several market segments and designs separate offers for each

• Concentrated marketing-isespecially appealing when company resources are limited,instead of going for a small share in a large market

• Micromarketing- is the practice of tailoring products and marketing programs to meet the needs of various market segments and niches

• Choosing a target market strategy- best depends on the companys resources

• Socially responsible target marketing- biggest issues usually involve the targetting of vulnerable or disadvantaged consumers

Positioning

• A products position is the way the product is defined by consumers on important attributes place the product occupies in consumers mind

• Positioning involves implanting the brands unique benefits and differentiation in customers minds

• Positioning maps- show consumer perception of brands vs competitors in important buying dimensions(price,orientation,performance)

Choosing a positioning strategy • identifying possible competitive advantages- to

understand customer needs better than competitors and deliver more value

• Choosing right competitive advantages- if a company has multiple competitive advantages the best which will build its positioning strategy

• Selecting the overall positioning strategy- to position the brands on the key benefits that they offer relative to competing brands

The product development processInvolves eight stages,they are1.Idea generation- starts with the search for ideas,the

management should decide the products and markets to emphasise

• The new product objective also should be stated whether cash flow or market domination

• 2.Idea screening-this stage is idea pruning or reducing by screening,the company must avoid drop-error,ie permitting a poor idea further or dropping a good one

• Idea rating is done by describing the product,the target market and the competition

3.Concept development and testing- surviving ideas must be now developed into product concepts

• A product idea is an idea of a possible product the company can see offering to the market

4.Marketing strategy development-consists of 3stages first describing the size,strucuture and behaviour

• The second part outlines the products planned pricing and distribution strategy and the third part says about the long-run and profit goals

5.Business analysis- the management must review the sales,cost and profit projections to determine whether they satisfy the objectives

• If they do, the product concept can move to the product development stage

6.Product development- if the product concept passes the business test,it moves to the R&D and the engineering department for developing

• This stage will answer whether the product idea can be translated in to a technically and commercially feasible product

7.Test marketing- once the management is satisfied with the products functional performance,the product is ready with a brand name

• The purpose of test marketing is to learn how consumers and dealers react to handling,using and repurchasing the actual product

8.Commercialisation- test marketing gives management enough information to make a final decision regarding the decision regarding launch

• In launching a product,the company should decide when,were to whom and how

The product life cycle

• The PLC is the course of a products sales history and profits over its life- time

• It involves 5 distinct stages- product development,introduction,growth,maturity and decline

1. Product development- product development begins when the company finds and develops a new product idea

• 2.introduction stage- starts when the product is launched commercially and made available for purchase

• High level of promotion is needed to 1,inform the potential customers2, induce trial and 3, secure distribution in retail outlets

• Marketing strategies- considering the price and promotion the marketing dept can pursue multiple strategies

• Rapid skimming strategy-launching new product at a high price and high promotion level

• Slow skimming strategy- launching the new product at a high price and low promotion

• Rapid penetration strategy- launching the new product at a low price and spending heavily on promotion

• Slow penetration strategy- consists of launching the new products at a low price and low level of promotion

• 3,Growth stage- the growth stage is marked by a rapid climb in sales

• New competitors enter the market,attracted by the opportunities for large scale production and profit

• They introduce new product features and this further expands the market

• The increased number of competitors leads to an increase in the number of outlets and production

• Marketing strategies- the strategies will try to sustain the market as long as possible

• a, the firm improves product quality and adds new product features and models

• b,it enters new market segments• c,it enters new distribution channels• d,it shifts some advertising from building product

awareness to bringing about product conviction • e,it lowers prices at the right time to attract the

price-sensitive buyers

• 4,Maturity stage- a products rate of growth will slow down and the product will enter a stage of relative maturity

• The stage lasts longer than previous stages and pose formidable challenges to the marketing department

• Most products are in the maturity stage of the life cycle and most marketers deal with mature markets

• The maturity stage is divided in to 3 phases• The first phase of growth maturity the sales growth

rate starts to decline because of distribution saturation

• The second phase,stable maturity,sales become level on a percapita basis because of market saturation

• In the third phase ,decaying maturity the absolute level of sales starts to decline and customers move towards other products and substitutes

• Marketing strategies- • a,market modification- the company should seek to

expand the market for its brand by working with the twofactors-no. of users& usage rate per user

• b,product modification- in a way that will attract the new users and more usage from current users

• c,Market mix modification- stimulate sales through modifying one or more marketing mix elements like price,distribution,advertising,sales promotion etc

• 5.Decline stage- the sales of most firms and brands eventually decline,the decline may be slow or rapid

• Sales may plunge to zero or they may be at a lower level and continue for so many years

• Sales decline for a number of reasons like technological advances,consumer shift in tastes and increased domestic and foregin cmpetition

• As sales and profits decline some products are withdrawn from the market and remaining reduce the no.of offerings and even promotion and prices

• Marketing strategies- A company faces number of tasks and decisions to handle its ageing products

• They must decide whether to maintain product without change,harvest the product or drop the products

• If the product is to continue special marketing strategies have to be evolved

Types of distribution channels• 1.Intensive distribution- stocking products in as

many outlets as possible,producers of convenience goods like toothpastes,soaps etc use this strategy

• 2.Exclusive distribution- only limited number of dealers are granted exclusive rights of distribution in a territory

• Selective distribution- appointing more than one, but less than all the dealers willing to carry a product eg; TV,fridge,washing machine

Selection of a channel• In the process of designing channels, companies

have to study and compromise between the ideal and practicable

• The different steps involved in the channel design process are

• 1.Determining the channel objectives- effective channel planning starts with the determination of what is to be achieved using it

• The objectives include effective coverage of the target market,efficient and cost effective distribution,making products available near etc

• 2.Identifying functions- Out of the various functions like providing information,promotion,contact, breaking bulk etc

• Out of all of these the function expected of the channel has to be decided

• 3.Matching channel design to product attributes- Products differ from each other and hence require different channel systems

• The channel system that is suitable for that particular product should be selected

• 4. Evaluating legal aspects and distribution – the distribution environment in the country or territtory has to be considered while deciding on the channel

• The proposed channel should be compatible with features of the distribution environment

• 5. Assessing competitors channel design- the channel partners of competitors should be evaluated before deciding on channel design

• The strength and weaknesses of competitors channels have to be assessed in order to get an edge over them

• 6. Assessing company resources and matching channel design to it-

• Company with limited resources may opt for conventional channels and those with larger resources will opt for wider distribution channels

• 7.Final selection of best design- after the various alternatives are evaluated,the company choses the best among them

• Each alternative needs are to be evaluated against economic,control and adaptive criteria

Channel management decisions• After a company has chosen a channel

alternative,individual intermediaries must be selected,trained ,motivated and evaluated

• Channel arrangements must be modified over time• 1.Selecting channel members-Companies need to

select their channel members carefully• To customers the channels are the company and

any unpleasant and inefficient behaviour from the channel will get a negative impression of the company

• Producers vary in their ability to attract qualified intermediaries eg:Epson corporation

• Whether producers find it easy or difficult to find intermediaries, they should distingush the charecters of best intermediaries

• They should evaluate the number of years in business,other lines carried,growth and profit record,financial strength and co-operation

• The size and quality of the sales force is also taken in to account

• 2.Training channel members- Companies need to plan and implement careful training programs for intermediaries

• This is because they will be viewed as the company by end users

• Microsoft requires third party service engineers to take complete a set of courses

• The passing out people are formally recognised as MCP and they can use this desgnation to promote business

• 3.Motivating channel members- A company needs to view its intermediaries in the same way it views it end users

• The co. should provide training programs, market research programs and other capabiity building programs to improve the performance

• The company must constantly communiacte that the intermediaries are partners in a joint effort to satisfy end users of the product

• 4.Evaluating channel members- producers must periodically evaluate intermediaries performance against standards such as sales targets,delivery time

• The producer will ocassionally discover that its paying too much to certain intermediaries for what they are actually doing

• Under performers must be counselled,remotivated or else terminated

• 5.Modifying channel arrangements- A producer must periodically modify its channel arrangements

• When the distribution channel is not working as planned consumer patterns change,market expands and new competition arise

• Also innovative distribution channels emerge and the product moves in to the later stages in the life cycle

Channel conflicts

• Diasgreement among channel members on goals and roles leads to channel conflicts

• The ideal condition is to work smoothly understanding their roles and goals

• Horizontal conflict can happen with dealers in the same level of the channel

• For eg; some fertilizer dealers may complain that others are selling at a discount or they are selling outside their territory

• Vertical conflict is conflicts between different levels of the same channel

• Dealer of Hyundai may complain if the company gets in to a direct outlet

• Multichannel conflict exists when the manuafctuer has established two or more channels to sell to the same market

Causes of channel conflict

• One major cause is goal incompatibility,for eg; a manufacturer wants a low pricing penetrating strategy whereas the dealer looks for more margins

• Conflict can also stem from diffrences in perception, for eg; a manuafcturer wants to have a higher level of inventory but the dealer is pessimistic about it

• Conflict can also occur by the channel partners over dependence on the manuafacturer

• The product and pricing decisions for eg create conflicts in auto dealers

Managing channel conflict• There are several mechanisms for effective conflict

management• 1.Adoption of superordinate goals- channel

members come to an agreement on the fundamental goal they are jointly seeking

• It could be survival,market share,high quality or customer satisfaction

• 2.Another useful step is to exchange persons between two or more channel levels

• In this case the company executives may work some time in dealerships too

• 3. Co-optation is effort by one organisation to win the support of the leaders of another organisation

• This is possible by including them in advisory councils,boards of directors etc

• 4.Much can be accomplished by encouraging joint membership in and between trade associations

• This could be grocery marketing association,food marketing institute etc

• 5.When conflict is chronic or acute, the parties have to resort to diplomacy,mediation or arbitration