Fundamentals of Marketing Concepts and Strategies

*
SELF--NOTES
* Fundamentals of Marketing, Customer Value and Satisfaction,

Customer Delight, Conceptualizing Tasks and
* Philosophies of Marketing Management, Value Chain, Scanning

the Marketing Environment, Marketing Mix
* Elements, Difference between marketing and Selling,

Relationship marketing, Social marketing, Strategic
* Planning in marketing, formulating the marketing plan.
* Module I: Understanding Marketing in New

perspective
Marketing is the delivery of the customer satisfaction at
profit. The two fold goal of marketing is to attract new customer by promising superior value and to keep and grow current customers by delivering satisfaction. delivering on its promise. always low pricesalways.
EXAMPLEWal- Mart has become the world largest retailer by

Dell leads the personal computer industry by consistently
making good on it promise to be direct. Making it easy to the customers to custom design their own computers and have them delivered them at the door steps or desktops. experiences for their hotel guests.
Ritz Carlton promises and delivers truly memorable
And Coca-Cola the world leading soft drink, delivers on the
simple but enduring promise that with Coca-Cola, life tastes good
* ..the process of discovering and translating consumer needs and wants

into product and service specifications, creating demand for these products, services, and in turn expanding the demand at managing customer demand , they seek to influence the level , timing and composition of demand.
* Marketer is skilled
* Marketing is the management process that identifies, anticipates and
satisfies customer requirements profitably(The Chartered Institute of Marketing)
* The right product, in the right place, at the right time, and at the right
price (Adcock et al )
* Marketing is the human activity directed at satisfying human needs and

wants through an exchange process (Kotler 1980)
* Marketing is a social and managerial process by which
individuals and groups obtain what they want and need through creating, offering and exchanging products of value with others Kotler 1991
* From a managerial point of view Marketing is a process of
planning and executing the conception pricing and promotion and distribution of ideas and goods/ services to create exchanges that satisfy individual and organizational goals.
* MM is art and science of choosing target markets, and getting ,
keeping and growing customers through creating , delivering and communications superior customer value
* NEED human need are the state of felt deprivation. They
include basic physical needs for food, clothing , warmth, and safety. Social needs for belonging and affection and individual needs for knowledge and self-expression. These needs are not invented by marketers, they are a basic part of the human develop.
shaped by culture and individual personality. An American needs food but want a hamburger, French fries and a soft drink. A person in Mauritius needs food but want mango rice, lentils and beans . Wants are shaped by the society and are described in terms of objects that will satisfy needs. they choose the products that provide the most value and satisfaction for the money. And when these are backed by buying power, wants become DEMANDS
* WANT these are the form of human needs take as they are
* People have almost unlimited wants but limited resources. Thus
* PRODUCT it is anything that can be offered to a market to
satisfy a need or want. The concept of the product is not limited to physical objectsanything capable of satisfying a need can be called a product. are activities or benefits offered for sale that are essentially tangible and dont result in the ownership of anything.
* In addition to tangible goods, products include services , which

* EXAMPLE--: banking, airline, hotel, tax preparation and home
repair charges.
* If, more broadly defined, products also include other entities
also include other entities such as experiences, persons, places, organization, information and ideas.
* EXAMPLE---:Disney land is an experience.
* GOODSphysical goods constitute the bulk of most countries
production and marketing efforts. Each year, Indian companies market cars, trucks television sets, machine tools, machines, industrial chemicals, watches, cosmetics and various other mainstay of an economy.
activities focuses on the production of services. Services include the work of airlines, hotels, cars rental firms, barbers, beautician, bankers, lawyers, etc. many market offerings consist of a variable goods and services. In a fast food restaurant consumer consumes both a product and a service. trade shows, artistic performances and company anniversaries. Global sporting events such as Olympics and the World cup are promoted aggressively to both companies and both.
* SERVICESas economies advance, a growing proportion of their
* EVENTSMarketers promote time based events such as major
* EXPERIENCESby orchestrating several services and goods , a firm
can create, stage and market experiences. An amusement park or a water park represents experimental marketing , customers, by taking different rides in the amusement parks and enjoy the thrill provided by these experiences. * PERSONScelebrity marketing is the major business. Artist, musicians, CEO, physicians, high profile lawyers, and other professionals all get help from celebrity marketers. Some people have done a masterful job of marketing themselvesthink of David beckham, and the rolling stone celebrities like Amitabh bachchan, Sachin Tendulkar, Shahrukh khan. * PLACEScities, states, and regions and whole nations compete actively to attract tourists factories, company headquarters and new residents. Place marketers include economic development specialists, real state agents, commercial banks, local business * EXAMPLEIn the software industry Bangalore is positioned as the silicon valley
* PROPERTIESproperties are intangible right of ownership of either
real property (real property) or financial property(stocks and bonds). Properties are bought and sold, and these exchanges require marketing. Real state agents work for the property owners or sellers or they buy or sell residential and commercial real estate. Investment companies and bank markets securities to both institutional and individual investors. favorable, and unique image in the minds of their targets publics. In the united kingdom Tescos every little help marketing program reflects the food marketers attention to detail in everything it does within as well as outside the store in the community. Revson once observed in the factory we make cosmetics; in the store we sell hope. Products and services are platforms for delivering some ideas or benefits.
* ORGANIZATIONSorganizations actively work to build a strong,
* IDEASEvery market offerings includes a basic idea . Charles
* VALUEvalue reflects the sum of the perceived tangible and
intangible benefits and costs to the customers. Its primarily a combination of quality, service and price(QSP) called the customer value triad. Value increases with quality and service and decreases with price, although other factors can also play an important role in our perceptions of value.
of marketing as creation, communication, delivery, and monitoring of customer value. perceived performance(or outcome) in relationship to expectations.
* Value is the central marketing concept. It is because we can think * SATISFACTIONit reflects a persons judgment of a products * QUALITYQuality has a direct impact on the product service and
performance. Thus it is closely linked to customer value and satisfaction. It can be defined in other words as freedom from defects.
* Customer value is the difference between the values the customer

gains from owing and using a product and the costs of obtaining a product. EXAMPLE_--- FedEx customers gains a number of benefits. The most obvious are fast and reliable package delivery.
* However FedEx customers also get some status and image values. * When deciding whether to send a package via FedEx, customers
Using Fed Ex both the package sender and the receiver feels more important. will weigh these and other values against the money, effort, and psychic cost of using the service. Moreover they compare the value with other shippers.
* OFFERINGcompanies address needs by putting forth for a value

proposition, a set of benefits that they offer to customer to satisfy their needs. The intangible value proposition is made physical by an offering which can be a combination of products and service, information and experinces.
* BRANDit an offering from a known source. A brand name such as

Mcdonalds carries many associations in peoples mind that make up the brand image(hamburger, fun, children, fast food, ). All companies strive to build a strong favorable and unique brand image.
* To reach a target market, the marketers uses three kind of

channel which are as follow--:
* Communication channel--:it delivers and receive message from
target buyers and include newspaper, magazine, radio, television, telephone, bill boards, posters, fillers, CD, audio tapes and internet.
* Distribution channelto display the physical product or services to

the buyer or user. They indicate distributors, wholesalers, retailers and agents.
* Service channelsto carry out the transactions with potential

buyers. They include warehouse, transportation companies, banks, insurance companies that facilitate transactions.
*choosing and targeting appropriate customers
*positioning your offering

*interacting with those customers *controlling the marketing effort
*continuity of performance
*Developing marketing strategies & plans *Capturing marketing insights
*Connecting with customers

*Building strong brands
*Shaping the market offerings

*Delivering value *Communicating value
*Creating long-term growth
* The supply chain is a longer channel stretching from raw materials

to components to final products that are carried to final buyers. The supply chain for womens purpose starts with hides and moves through training, cutting, manufacturing and the marketing channel to bring the products to customer.
* Each company captures only a certain percentage of the total

value generated by the supply chains value delivery system.
* When a company acquires competitors or expands upstream or
downstream. Its aim is to capture a higher percentage of supply chain value
* It includes all the actual and potential rival offerings and
substitutes a buyer might consider. Suppose an automobile company is planning to buy steel for its cars. There are several possible levels of competitors. India, or import from abroad. Or buy aluminum for certain parts to lighten the car weight
* The company can buy steel from Tata Steel, Steel Authority of
* The another option is that to buy engineered plastics for bumpers

instead of steel. In fact in the long run the steel companies are more likely to be hurt by substitute products than by other steel companies.
* PRODUCTION CONCEPTit holds that the consumers will favor
the products that are available and highly affordable. Therefore, management should focus on improving production and distribution efficiency. This concept is one of the oldest philosophies that guides sellers.
first occurs when the demand for a product exceeds supply. Here management should look for ways to increase production. and improved productivity is needed to bring it down.
* This concept is still useful philosophies in two situations. The
* The second situation occurs when the products cost is too high * EXAMPLEfor many years Texas instruments followed a
philosophies of increased production and lower cost in order to bring down prices. It won a major share of American handheld calculator market by using this approach.
* It holds the consumer will favor the product that offer the most in
quality performance, and innovative features. Thus, an organization should denote energy to making continuous products improvements . Some manufactures believe that if they can build a better mouse trap, the world will beat a path to their doors. But they are often rudely shocked. Buyers may well be looking for a better solution to this mouse trap problem but not for a better mouse trap. or something that works out better than a mouse trap. Further a better mouse trap will not sell unless manufacture designs packages, and price it attractively , place it convenient distribution channel, brings it to the attention of the people who need it and convinces buyer that it is a better product.
* The solution might be a chemical spray, an exterminating service,
* Product concept can be a marketing myopia because it overlooks

the competition.
* It holds that the consumer will not buy enough of the
organizations products unless it undertakes a large scale selling and promotion effort. The concept is typically practiced with unsought goods(those goods that buyers do not normally think of buying such as encyclopedia, insurance. These industries must be good at tracking down prospects and selling them on product benefits. sell what they make rather than make what market wants. Such marketing carries high risks. It focuses on creating sales transaction rather than on building long term profit, profitable, relationship with the customers. It assumes that the customers who are coaxed into buying will like it. Or if they dont like it they will forget their disappointment and will buy it later.
* Most firm practice this when they are overcapacity. Their aim is to
* There are usually poor assumptions to make about buyers. Most of

the studies shows that disappointment customers will not buy it again.
* This concept emerged in 1950s. instead of product-centered,
make and sell philosophy, business shifted to a customercentered sense and respond philosophy. The job is not to find right customers for the product, but to find right products for your customers. make perfect computers for their users. Rather it provide product platforms on which each person customizes the feature he desires in the computer. that companies that embrace marketing concept achieve superior performance. market orientation by understanding and meeting the customers expressed needs. Some says that high level of innovation is possible if the focus is on the customers latent needs. This is called proactive marketing orientation.
* EXAMPLEDell computer dont
* It focuses on the needs of the buyer. Several scholars have found
* This was first demonstrated by the companies practicing Reactive
* Successful companies learn through probe-and learn process
* The holistic marketing concept is base on the development,
design, and implementation, of marketing programs, processes and activities that recognizes their breadth and interdependencies. It recognizes that everything matters in marketing and that a broad, integrated perspective is often necessary.
* It is thus an approach that attempts to recognizes and reconcile

the scope and complexities of marketing activities
* Successful companies are those that can keep their marketing
changing with change in their market place and market space.
Marketing department
Performance Internal marketing marketing

communications
Relationship Integrated marketing marketing
Product and services channels
*2) The Value Chain

Michael Porter of Harvard has proposed the value chain as a tool for identifying ways to create more customer value. According to this model, every firm has combination of activities performed to design, produce, market, deliver, and support its product. The value chain identifies nine strategically relevant activities that create value and cost in a specific business. These nine value-creating activities consist of five primary activities and four support activities.
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* 2) The Value Chain

The primary activities cover the sequence of: 1) bringing materials into the business (inbound logistics), 2) converting them into final products (operations), 3) shipping out final products (outbound logistics), 4) marketing them (marketing and sales), and 5) servicing them (service).
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*2) The Value Chain

The support activities: 1) technology development, 2) human resource management, 3) firm infrastructureare handled in certain specialized departments, as well as elsewhere. 4) Procurement and hiring
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*The traditional view of marketing is that the firm makes
something and then sells it. In this view, marketing takes place in the second half of the process.
*The company knows what to make and the market will buy
enough units to produce profits.
*Companies that subscribe to this view have the best chance

of succeeding in economies marked by goods shortages where consumers are not fussy about quality, features, or style
*for example, with basic staple goods in developing markets.
*The traditional view of the business process, however, will

not work in economies where people face abundant choices.
*The smart competitor must design and deliver offerings for

well-defined target markets.
*This belief is at the core of the new view of business
processes, which places marketing at the beginning of planning.
* The value creation and delivery sequence can be divided into

three phases.
* The first phase is choosing the value ---it represents the
homework marketing must do before any product exists. The marketing staff must segment the market , select the appropriate market target, and develop the offerings value position.
* Second phase is providing the value. Marketing must determine

specific products, features, prices and distribution.
* Third phase is communicating the value---by utilizing the sales

force, sales promotion, advertising and other tools of communication to announce and promote the product
* Each of the product has its cost implications.
*
* *
The holistic marketing framework is designed to address three key management questions: 1. Value exploration - How can a company identify new value opportunities? 2. Value creation- flow can a company efficiently create more promising new value offerings? 3. Value delivery- How can a company use its capabilities and infrastructure to deliver the new value offerings more efficiently?
* Holistic Marketing Framework
* A Holistic Marketing Orientation And Customer

Value
A Holistic Marketing Orientation And Customer Value
VALUE EXPLORATION
VALUE EXPLORATION Because value flows within and across markets that are themselves dynamic and competitive, companies need a well-defined strategy for value exploration. Developing such a strategy requires an understanding of the relationships and interactions among three spaces: (1) the customer's cognitive space; (2) the company's competence space; and (3) the collaborator's resource space. The customer's cognitive space reflects existing and latent needs and includes dimensions such as the need for participation, stability, freedom, and change
A Holistic Marketing Orientation And Customer Value
VALUE CREATION
To exploit a value opportunity, the company needs valuecreation skills. Marketers need to: 1) identify new customer benefits from the customer's view; 2) utilize core competencies from its business domain; and 3) select and manage business partners from its collaborative networks. To craft new customer benefits, marketers must understand what the customer thinks about, wants, does, and worries about. Marketers must also observe who customers admire, who they interact with, and who influences them
* VALUE DELIVERY
*Delivering value often means substantial investment in

infrastructure and capabilities.
*The company must become proficient at customer

relationship management, internal resource management, and business partnership management.
*Customer relationship management fallows the company to

discover who its customers are, how they behave, and what they need or want.
*It also enables the company to respond appropriately,

coherently, and quickly to different customer opportunities.
* The Central Role of Strategic Planning

Companies should have the capabilities to:
Developing Marketing Strategies and Plan
1) 2) 3) 4) 5)
understanding customer value, creating customer value, delivering customer value, capturing customer value, and sustaining customer value.
The Central Role of Strategic Planning
Only a handful of companies stand out as master marketers: Procter & Gamble, Southwest Airlines, Nike, Disney, Nordstrom, Wal-Mart, McDonald's, Marriott Hotels, and several Japanese (Sony, Toyota, Canon) and European (IKEA, Club Med, Bang & Olufsen, Electrolux, Nokia, Lego, Tesco) companies These companies focus on the customer and are: 1)organized to respond effectively to changing customer needs. 2)have well-staffed marketing departments, and 3) all their other departmentsmanufacturing, finance, research and development, personnel, purchasingalso accept the concept that the customer is king.
Part 2: Corporate and Division Strategic Planning
1) 2) 3) 4)
Defining the corporate mission Defining the business Assessing growth opportunities Organization and organizational culture
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What is Strategic Planning?

It is the managerial process that helps to develop a strategic and viable fit between the firms objectives, skills, resources with the market opportunities available.
It helps the firm deliver its targeted profits and growth through its businesses and products.
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planning, implementation, and control cycle
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1)
Defining the corporate mission
How to go about it?

Defining the corporate mission Establishing SBUs Allocating resources for SBUs Planning for new business
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Corporate Mission
This seeks to embody the entire goals of the organization and the objective of its existence. It seeks to provide a sense of purpose, direction and opportunity
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* Defining the Corporate

Mission
According to Peter Drucker, it is time to ask some fundamental questions. What is our business? Who is the customer? What is of value to the customer? What will our business be? What should our business be? Successful companies continuously raise these questions and answer them thoughtfully and thoroughly.
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A business must be viewed as a customer-satisfying process, not a goods-producing process. Products are transient; basic needs and customer groups endure forever. Transportation is a need: the horse and carriage, the automobile, the railroad, the airline, and the truck are products that meet that need.
Strategic Business Units
The purpose of identifying the company's strategic business units is to develop separate strategies and assign appropriate funding.
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SBU has three characteristics: 1. It is a single business or collection of related businesses that can be planned separately from the rest of the company. 2. It has its own set of competitors. 3.It has a manager who is responsible for strategic planning and profit performance and who controls most of the factors affecting profit.
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Assessing Growth Opportunities

1. planning new businesses, 2. downsizing, or 3. terminating older businesses.
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1. 2. 3. 4.
INTENSIVE GROWTH Integrative Growth Diversification Growth Downsizing and Divesting Older Business
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1. market-penetration strategy The company first considers whether it could gain more market share with its current products in their current markets . 2. market-development strategy the company considers whether it can find or develop new markets for its current products. 3. product-development strategy the company considers whether it can develop new products of potential interest to its current markets 4. diversification strategy the company will also review opportunities to develop new products for new markets.
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Business Unit Strategic Planning

Strategic planning:
Developing a strategic fit between organizational goals and capabilities, and changing marketing opportunities
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Process whereby an organization allocates it marketing mix resources to reach its target markets. Planning Implementation
Evaluation
Strategic Marketing Process
* Planning Phase Situation Analysis

* This is a complete analysis of the firms situation which
assesses internal strengths and weaknesses and external threats and opportunities (SWOT) * Internal analysis (controllable factors) assess the firm itself to identify strengths and weaknesses * External analysis (uncontrollable factors) assess the firms external environment to identify opportunities and threats
* Specific levels of performance desired for a product or

product line to be achieved by a given date.
* Stated in terms of market share, sales, profit * Should be measureable, attainable, specific, and
consistent with organizational objectives
* Planning Phase Marketing

Objectives
* The process where marketers try to create a product

image or identity in the minds of their target market relative to competitive products.
* Planning Phase:
Product Positioning
* Process of putting the marketing plan into action. * Involves great attention to detail
*Implementation
Phase
* Involves measuring the results of the actions from the
implementation phase and comparing them with goals set in the planning phase.
sales analysis
market share analysis

expense to sales analysis
*Evaluation
SBU
Establishing Strategic Business Units A business can be defined in terms of three dimensions: customer groups, customer needs, and technology.
It is a company within a company The business is differentiated from the rest of the company It has its own set of competitors It is a separate profit centre
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*Assigning Resources to SBUs

The purpose of identifying the companys strategic business units is to develop separate strategies and assign appropriate funding to the entire business portfolio.
Senior managers generally apply analytical tools to classify all of their SBUs according to profit potential. Two of the best-known business portfolio evaluation models are the Boston Consulting Group model and the General Electric model. 1-61
* It is a single business or collection of related businesses * It has its own set of competitors * It has a leader responsible for strategic planning and
profitability
*Characteristics of
SBUs
* Market penetration strategy * Market development strategy * Product development strategy * Diversification strategy
* Ansoffs Product-Market
Expansion Grid
Ansoffs Product-Market Grid

Current products New products Current Mkts Mkt penetration strategy Product development strategy
New Mkts
Mkt development strategy
Diversification strategy
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The Planning Process

Analysing Market opportunities Developing Marketing strategies Planning Marketing Programs Managing the Marketing Effort
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Marketing Control
Annual Plan control Profitability control Strategic Control
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Market-oriented strategic is the managerial process of developing and maintaining a viable fit among the organizations objectives, skills, and resources and its changing market opportunities. The aim of strategic planning is to shape the companys businesses and products so that they yield target profits and growth and keep the company healthy despite any unexpected threats that may arise.
* Market-oriented strategic planning

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Corporate culture is the shared experiences, stories, beliefs, and norms that characterize an organization.
*What is Corporate
Culture?
*
* Industry is a customer satisfying process not a goods
producing process.
* It is important therefore how you redefine your business. * Lack of foresight,effective forecasting, vision and mission
steadfastness.Lack of anticipation of the future trends.
COMPANYS MARKET SHARE High Low
High INDUSTRY GROWTH RATE Stars Question marks
Low
Cash cows
Dogs
*Cash Cows SBUs that have a high market share of a

low sales growth market.
*Stars SBUs that have a high market share of a high

sales growth market.
*Question marks SBUs that have a low market share of

a high sales growth market.
*Dogs SBUs that have a low market share of a low

sales growth market.
*
??? Stars
Dogs
Cash Cows
Mkt Share
Product
Production
Selling
Marketing
Societal Mktg
As business philosophy has evolved, so has the role of marketingcustomer satisfaction is now at the core of most successful corporations
* Marketing Environment: * The actors and forces outside marketing * * * *
that affect marketing managements ability to build and maintain successful relationships with target customers Microenvironment Includes the actors close to the company Macroenvironment Involves larger societal forces
*
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Goal 1: Understand environmental factors
*
Actors
1. The company
* Marketing must consider
other parts of the organization including finance, R&D, purchasing, operations and accounting relate to broader company goals and strategies
2. Suppliers
3. Marketing intermediaries 4. Customers 5. Competitors 6. Publics
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* Marketing decisions must
Goal 1: Describe environmental factors
*
Actors
1. The company
* Marketers must watch supply
availability and pricing
* Effective partnership
2. Suppliers
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relationship management with suppliers is essential
*
Actors
1. The company
* Help to promote, sell and
distribute goods to final buyers distribution firms, marketing services agencies and financial intermediaries management is essential
* Include resellers, physical
2. Suppliers
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* Effective partner relationship
*
Actors
1. The company
* The five types of customer
markets
2. Suppliers
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*Consumer *Business *Reseller *Government *International
*
Actors
1. The company
* Conducting competitor
analysis is critical for success of the firm competitors offerings to create strategic advantage
* A marketer must monitor its
2. Suppliers
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*
Actors
1. The company
* A group that has an actual or
potential interest in or impact on an organization * Seven publics include:
2. Suppliers
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*Financial *Media *Government *Citizen-action *Local *General *Internal
* Financial publicsinfluence the company ability to obtain funds.

Banks, investment house, and stock holders are the major financial publics. * Media publics carry the news, features, and editorial opinions. They include newspapers, magazines, radio and television situations. * Government publicsmanagement must take government developments into account. Marketers must often consult the companys lawyers on issues of product safety, truth in advertising and other matters. * Citizen-action publicsa companys marketing decisions may be questioned by consumer organizations, environmental groups, minority groups and others. * Local publicsinclude neighborhood residents and community organizations. Large companies usually appoint a community officer to deal with the community and attend the meeting s, answer questions and contribute to worthwhile causes
* General publica company needs to be concerned about the
general public attitude toward its products and activities. The public image of the company affects its buying.
* Internal publics---include workers, managers , volume and board

of directors. Large companies use newsletter and other means to inform and motivate the internal publics .when employees feels good about their company, the positive attitude spills over to external publics
*The Macroenvironment
Macroenvironmental Forces
*Demographic *Economic *Natural

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*Technological *Political *Cultural
* Demographic Environment:
* The study of human populations in terms of size, density,
location, age, gender, race, occupation and other statistics
*
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Goal 2: Learn how demographic & economic factors affect marketing
Changing age structure of the U.S. population is the single most important demographic trend
Baby boomers, Generation X, and Generation Y are the key groups
*
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Goal 2: Learn how demographic & economic factors affect marketing
Key Generations
Baby Boomers Generation X Generation Y
Born between 1946 and 1964 Represent 28% of the population; earn 50% of personal income Many mini-segments exist within the boomer group Entering peak earning years as they mature
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Key Generations
Born between 1965 and 1976

First latchkey children Maintain a cautious economic outlook Respond to socially responsible companies
Will be primary buyers of most goods by 2010
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Key Generations
Born between 1977 and 1994

72 million strong; almost as large a group as their baby boomer parents New products, services, and media cater to GenY Challenging target for marketers
* Natural Environment:
* Involves the natural resources that are needed as
inputs by marketers or that are affected by marketing activities
* Trends
* Shortages of raw materials * Increased pollution * Increased government intervention
*
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Goal 3: Identify trends in natural and technological environments
* The most dramatic force shaping our destiny * Rapidly changing force which creates many new marketing
opportunities but also turns many existing products extinct
*
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Goal 3: Identify trends in natural and technological environments
*Consists of laws, government agencies

and pressure groups that influence or limit various organizations and individuals in a given society
* Legislation affecting businesses worldwide
has increased * Laws protect companies, consumers and the interests of society * Increased emphasis on socially responsible actions
*
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Goal 4: Explore political and cultural environments
Marketers create link between brand
and charitable organization Demonstrates social responsibility Helps build positive brand image Examples include General Mills Box Tops for Education, Tang and Mothers Against Drunk Driving, Eddie Bauer and local schools
*
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* Made up of institutions and other forces that affect a

societys basic values, perceptions, preferences and behaviors.
*
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Cultural Environment Includes * peoples views of

Themselves
Identify with brands for self-expression
Society
Patriotism on the rise
Others
Recent shift from me to we society
Nature
lifestyles of health and sustainability (LOHAS) consumer segment
Organizations
Trend of decline in trust and loyalty to companies
Universe
Includes religion and spirituality
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* There are three kinds of companies:
those who make things happen, those who watch things happen, and those who wonder whats happened.
*
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Goal 5: Realize how companies react to the marketing environment
* The factors influencing consumer behaviour. The stages in the

buying process, the buying decision making
* process, factors effecting the buying decision., Market

Segmentations, Levels of Market Segmentations,
* Patterns, Procedures, Requirement for Effective Segmentation,

Evaluating the Market Segments, Selecting the
* Market Segments, Tool for Competitive Differentiation, Developing

a Positioning Strategy.
*refers to the buying behavior of final consumers (individuals &

households) who buy goods and services for personal consumption. *Study consumer behavior to answer:
How do consumers respond to marketing efforts the

company might use?
*the actions a person takes in purchasing and using

products and services, including the mental and social processes that come before and after these actions
*
Product Price Place Promotion
Marketing and Other Stimuli
Economic Technological Political Cultural Characteristics Affecting Consumer Behavior
Buyers Decision Process
Buyers Black Box
Product Choice Brand Choice Dealer Choice
Buyers Response
Purchase Timing Purchase Amount
*
Culture Social Personal
Psychological
Buyer
*
* Most basic cause of a person's wants and behavior. * Values * Perceptions
Subculture
Groups of people with shared value systems based on common life experiences. Hispanic Consumers African American Consumers Asian American Consumers Mature Consumers
Social Class
People within a social class tend to exhibit similar buying behavior.
Occupation
Income Education Wealth
*
Groups
Membership
Reference Family Husband, wife, kids Influencer, buyer, user
Social Factors
Roles and Status
w e al th
ed uc at io n oc cu pa ti on
Upper uppers(1 percent) the social elite who live in on inherited wealth. They give large sums to charity, own more than one home, and send their children to the finest schools. Lower uppers(2 percent) Americans who have earned high income or wealth through exceptional ability. They are active in social and civic affairs and buy expensive homes, educations, and cars. Upper middles(12 percent) professionals, independent businesspersons and corporate managers who possess neither family status nor unusual wealth. They believe in education, are joiners and highly civic minded and want better things in the life. Middle class(32 percent) average pay white and blue collar workers who live on the better side of the town . They buy popular products to keep up with the trends. Better living means owing a nice neighborhood with good schools. Working class (38 percent) those who lead a working class lifestyle. Whatever their income, school background or job. They depend heavily on relatives for economic and emotional support for advice, purchases and for assistance in time of trouble
in c o m e
*
Personal Influences
Age and Family Life Cycle Stage Economic Situation Occupation
Personality & Self-Concept
Lifestyle Identification
Activities Interests Opinions
*
Principle Oriented
Actualizers
Abundant Resources
Status Oriented
Action Oriented
Fulfilleds
Achievers
Experiencers
Believers
Strivers
Makers
Strugglers Minimal Resources
Factors Affecting Consumer Behavior: Psychological

Motivation
Beliefs and Attitudes
Psychological Factors
Perception
Learning
*
Self Actualization
(Self-development)
Esteem Needs (self-esteem, status) Social Needs

(sense of belonging, love)
Safety Needs
(security, protection)
Physiological Needs
(hunger, thirst)
*
High Involvement Significant differences between brands Low Involvement
Complex Buying Behavior DissonanceReducing Buying Behavior
VarietySeeking Behavior
Few differences between brands
Habitual Buying Behavior
*
Need Recognition
Information Search
Evaluation of Alternatives
Purchase Decision
Postpurchase Behavior
The Buyer Decision Process Step 1. Need Recognition

Difference between an actual state and a desired state
Need Recognition
Internal Stimuli Hunger

Thirst
External Stimuli
TV advertising
Magazine ad Radio slogan Stimuli in the environment
A persons normal needs
*
Personal Sources Commercial Sources Public Sources
Family, friends, neighbors Most influential source of information Advertising, salespeople Receives most information from these sources
Mass Media Consumer-rating groups

Handling the product Examining the product Using the product
Experiential Sources
The Buyer Decision Process Step 3. Evaluation of Alternatives

Evaluation of Quality, Price, & Features
Product Attributes
Which attributes matter most to me?
Degree of Importance
What do I believe about each available brand? Based on what Im looking for, how satisfied would I be with each product? Choosing a product (and brand) based on one or more attributes.
Brand Beliefs
Total Product Satisfaction
Evaluation Procedures
* The Buyer Decision Process

Step 4. Purchase Decision
Purchase Intention Desire to buy the most preferred brand
Attitudes of others
Unexpected situational factors
Purchase Decision
The Buyer Decision Process Step 5. Post purchase Behavior

Consumers Expectations of Products Performance Products Perceived Performance
Satisfied Customer!
Dissatisfied Customer
Cognitive Dissonance
* Stages in the Adoption Process

Awareness Interest Evaluation Trial Adoption of rejection
*
Percentage of Adopters
Early Majority
Late Majority
Innovators
Early Adopters
13.5%
34%
34%
Laggards
16%
2.5%
Time of Adoption Late
Early
Diffusion Process and Profiles of Product Adopters

Early adopters 13.5% Innovators 2.5% Laggards 16%
Early majority Late majority 34% 34%
Time Innovators: Early majority: Laggards:
Venturesome, higher educated, use multiple information sources
Deliberate, many informal social contacts
Fear of debt, neighbors and friends are information sources
Early adopters:
Leaders in social setting, slightly above average education
Late majority:
Skeptical, below average social status
*
Communicability
Can results be easily observed or described to others?
Relative Advantage
Is the innovation superior to existing products?
Can the innovation be used on a trial basis? Is the innovation difficult to understand or use?
Divisibility
Product Characteristics
Complexity
Does the innovation fit the values and experience of the target market?
Compatibility
6. Develop Marketing Mix for Each Target Segment 5. Develop Positioning for Each Target Segment 4. Select Target Segment(s) 3. Develop Measures of Segment Attractiveness 2. Develop Profiles of Resulting Segments 1. Identify Bases for Segmenting the Market
Market Positioning
Market Targeting
Market Segmentation
Market segmentation Identify bases for segmenting market Develop segment profile
Market targeting Identify the existing and future wants in the market. Examine the attributes that distinguish the segments
Market positioning
Market
segmentation is the process of dividing a potential market into distinct sub markets of consumers with common needs and characteristics.
For example, Cadbury India functions in three different markets namely, malted foods, cocoa powder and drinking chocolates and chocolates and sugar confectionary.
*
The process of market segmentation.
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1. Identify
existing and future wants in the current market
*
* *
Marketers must understand the changing needs of customers.

This process helps to know whether the customer is satisfied with the existing products or not. It also helps to test the companys new and innovative concepts.
124
2. Examine * *
the attributes among segments.
that
distinguish
In this process, marketers separate different types of wants into similar categories. The separation may be done on the basis of product features, lifestyle or behavior.
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3. Evaluate
the proposed segment attractiveness on the basis of measurability, accessibility and size
Segments selected in second step should be analyzed for measurability, accessibility, substantial, actionable and differentiability. The further plans of the company depend on the result of this process.
126
1. Understanding the needs of Consumers 2. To adopt better positioning strategies. 3. Proper allocation of marketing budget. 4. Helps in preparing a better competitive strategy. 5. Provides guidelines in preparing media plan of
company.
the
6. Different offerings in different segments enhance the

sales.
7. Customer gets more customized product. 8. Helps Company to identify niches. 9. Provides opportunities to expand market 10.Encourages innovations
*
Mass Marketing
Same product to all consumers (no segmentation)
Segment Marketing
Different products to one or more segments (some segmentation)
Niche Marketing
Different products to subgroups within segments ( more segmentation)
Micromarketing
Products to suit the tastes of individuals or locations (complete segmentation)
* Instead of Selecting Mass Market as Target
Market Segment , When Market targets specific segment , it is called Niche Marketing.
e.g. Restaurants offering all food are example of Mass Marketing. White PIzza Hut has targeted Pizza Market out of thousands of food products. It is called Niche Marketing
*
* When the marketing mix is altered to suit the local conditions
e.g.. Giving a higher/ lower discount than whats prevailing in the rest of the markets or implementing a different promotion scheme
*
* When the firm deals with each customer on a one to one
basis
* Customerization- When products are customized for the

customer
*
Geographic
Nations, states, regions or cities
Demographic
Age, gender, family size and life cycle, or income
Psychographic
Social class, lifestyle, or personality
Behavioral
Occasions, benefits, uses, or responses
* Bases for Segmenting Consumer Markets

1. Geographic
Dividing the market into different geographical units such as nations, states, regions, cities or neighborhoods In this segmentation the market is divided into groups on the basis of variable such as age, family size, family life-cycle, gender, income, occupation, education, religion, race, generation, nationality and social class.
segmentation:
2. Demographic
Segmentation:
Some factors used for demographic segmentation are:
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Age and life cycle stage The needs and wants of consumers change with age. On the basis of age, a market can be divided into four classes, children, young, adults and old. A good marketing manager should understand the age group for which the product is most suitable and then plan his marketing, pricing and advertising policy accordingly. For example, Hindustan Unilever launched Pepsodent Kids for small children.
Gender Segmentation on the basis of gender is useful in clothing, hair-styling, cosmetics and magazines.
Income Segmentation on the basis of income is useful for products and services like automobiles, clothing, cosmetics and travel.
134
3.Psychographic
Segmentation: In this segmentation, buyers are classified into different groups on the basis of life-style or personality and values. * People belonging to the same demographic group may show very different psychographic characteristics. * Some factors used for psychographic segmentation are a)Life-style: Different people have different life-styles and the products they use shows their life-style. * One of the most common psychographic profiling scheme is the VALS,
developed by SRI International, INC. * VALS defined adult consumers into eight segments. They are 1.Innovators: They are successful, sophisticated, active, take charge. They are people with high self-esteem and rich resources. They are business leaders and interested in growth, innovation and change. They are image conscious. 2.Thinkers: They are mature, satisfied, comfortable, thoughtful people who value order, knowledge and responsibility.
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3. 4.
5.
6. 7. 8.
Achievers: They are successful career and work oriented people who want a controlled life. They prefer predictability and stability over risk. They are committed to work and family. Experiencers: They are young, enthusiastic, impulsive, disloyal, disobedient. They want variety and excitement. They like variety and enjoy new things. They like exercise, sports, outdoor recreation and social activities. Believers: They are traditional people with high commitment to family, community and nation. They have a moral code. They prefer American products and established brands. Strivers: They look for motivation and approval from others. They are unsure of themselves and have less economic, social and psychological resources. Makers: They are practical people who have constructive skills and value self-sufficiency. They are happy with their families and have little interest outside their family. Survivors: They are poorly educated, low skilled and concerned about their health. They satisfy urgent needs of the present. They are concerned for security and safety. They are cautious consumers. They are loyal to favorite brands.
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b) Personality: c) Social
Marketers use personality variables to segment the market. They promote their products with brand personality that resembles consumer personalities.
class: It has a strong influence on preference in cars,
clothing, home furnishings, leisure activities, reading habits, etc. Many companies design products and services for specific social classes.
137
4. In
behavioral segmentation, buyers are divided into groups on the basis of their knowledge or attitude towards the use of, or response to a product.
* Some factors used for behavioral segmentation are 1. Occasions 2. Benefits 3. User status 4. Usage rate 5. Loyal status 6. Buyer readiness stage
138
1. 2. 3. 4.
Occasions: Buyers develop a need, purchase or use a product according to occasion. For example, Tanishq offer schemes and promotions for purchasing on Akshaya Truthiya. Benefits: Buyers can be classified according to the benefits they are looking for. User status: Markets can be segmented into non-users, potential users, first time users and regular users of a product. Marketing strategy for each segment is different. Usage rate: Markets can be segmented into light, medium and heavy product users. Heavy users are less in number but responsible for a large part of total consumption. Marketers like to attract one heavy user rather than many light users. For example, textile brand Allan Paine offered 4 cotton trousers for Rs. 999. It wanted to earn profits from sales volume.
139
5.
Loyal status: Consumers have different levels of loyalty for different brands and stores. According to brand loyalty status, buyers can be divided into four groups:
a) b) c) d)
6.
Hard core loyal: Such consumers buy only one brand all the time.
Split loyal: Such consumers are loyal to two or three brands. Shifting loyal: Such consumers shift from one brand to another. Switchers: Such consumers show no loyalty to any brand.
Buyer readiness stage: A market consists of buyers who are at different stages of willingness to buy a product. Some are unaware of the product, some are aware, some are informed, some are interested, some desire the product and some plan to buy.
*Tweens and Teens *Rapidly growing market *Significant purchasing power *Cohert Effect *Tendency among members of a
generation to be influenced and drawn together by significant events occurring during their key formative years, roughly 17 to 22 years of age
9-141
*Baby Boomers *Born from 1946 until 1965 *Nearly 42 percent of U.S. adults *Values influenced both by the Vietnam War and the
career-driven era *Huge disposable income
*Seniors *By 2025, 1 in 5 over age 65 *Median age is now 35.2 years *Life expectancy 74 for men and 79 for women *Heads of households aged 55-plus control about threequarters of the countrys total financial assets.
9-142
*Segmenting by Ethnic Group *By 2050, nearly half of the population of

the US will belong to nonwhite minority groups. *Hispanic *African Americans *Asian Americans *Native Americans *People of Mixed Race
9-143
Family Life Cycle Stages Segmentation The process of family formation and dissolution Life stage, not age per se, is the primary determinant of many consumer purchases
Segmenting by Household Type Todays U.S. households are very diverse Married couples and their children Blended by divorce or loss of spouse Headed by single parent, same-sex parents, grandparents
9-144
*Segmenting by Income and Expenditure

Patterns
*Engels Laws, as family income increases: *A smaller percentage of expenditures go

for food
*The percentage spent on housing and

household operations and clothing remains constant
*The percentage spent on other items

(such as recreation and education) increases
9-145
Demographic Segmentation Abroad Obtaining the data necessary for global demographic segmentation is often difficult Many countries do not operate regularly scheduled census programs For example, the most recent census of Holland is now over 20 years old, and Germany skipped its census from 1970 to 1987 Daily life cycle data is difficult to apply in global demographic segmentation efforts
9-146
*Using Psychographic
Segmentation *Psychographic profiles produce rich descriptions of potential target markets *Greater detail aids in matching a companys image and its offerings with the types of consumers who are likely purchasers
9-147
*Product-Related Segmentation
Dividing a consumer population into homogeneous groups based on characteristics of their relationships to the product *Can take the form of segmenting based on: *Benefits that people seek when they buy *Usage rates for a product *Consumers brand loyalty toward a product
9-148
*Brand Loyalty *Segmenting consumers grouped according *Frequent flyer programs of airlines and
many hotels
to the strength of brand loyalty felt toward a product
9-149
*Using Multiple Segmentation Bases *Increase accuracy in reaching the right

markets *Combine multiple bases *Geographic and Demographic *Product-related with income and expenditure patterns *Others
9-150
1.Measurable and obtainable The size, profile and other
characteristics of the segment must be measurable and should be obtained in the form of data.
2.Substantial The size of the segment should be such that it is
profitable. For small segments the cost is high and hence the products are priced very high.
3.Accessible We should be able to reach the segment through existing

network at affordable cost.
4.Differentiable The segments are different from each other and

hence require different 4Ps and programs.
5.Actionable The segments which a company wants to target must be

actionable, i.e., there should be sufficient finance, personnel, and capability to target the segment.
*
* Targeting is defined as a group of people or organizations for which an organization
designs, implements and maintains the marketing mix.
* After segmentation, it is important to identify the people or organization for which

the product is meant.
* Selecting target market segments * A company chooses its market

factors
segmentation strategy on the basis of following
* Homogeneous preference showing no natural segments as in case of cold drinks. * Diffused preference showing clear preferences as in case of automobiles. * Clustered preference, market showing natural segments as in case of occupation
having impact on the types of clothes worn.
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*
* Single segment concentration * Selective specialisation * Product specialisation * Market specialisation * Full Market coverage * -undifferentiated marketing * -differentiated marketing
* The farm equipment division of Mahindra and Mahindra
concentrates on tractors, primarily, targeted at agricultural markets.

and professionals.
* The Zodiac brand concentrates on the formal shirts for executive
* Specialty hospitals focus on specific therapeutic areas such as

cancer care, heart specialty, neonatal care, gynecology. production, distribution and promotion.
* Firm enjoys operating economies through specializing its * However there are certain risks. A particular segment can turn
sour or competitor may invade the segment.
* When digital camera technology took off, Polaroid's earnings fell

sharply . Thats why companies prefer to work in one segment.
* A firm selects a number of segments, each objectively

attractive and appropriate.
* There may be little or no synergy among the segments, but

each promises to be a money maker.
* This multi-segment strategy has the advantage of diversifying

the firms risk.
* Example--: when proctor and gamble launched Crest white
strips, initial target segments included newly engaged women and brides
* The firm makes a certain product that it sells to several
different market segments. A microscope, for instance, sells to university, government and commercial laboratories
* The firm make different microscopes for different customer
groups and builds a strong reputation in the specific product area
* The downside risk is that product may be supplanted by an

entirely new technology
* The firm concentrates on the serving many needs of a particular

customer group. For instance, firm can sell an assortment of products only to university laboratories.
* The firm gains a strong reputation in serving this customer

group and becomes a channel for additional products the customer group can use.
* The downside risk is that the customer group may suffer budget
cuts or shrink in size.
* The firm attempts to serve all the customers groups with all the
products that they might need.
* Only large firms like Microsoft(software market), general
motors(vehicle market), and Coca-cola(non-alcoholic beverage drink), can undertake a full market coverage strategy.
* Large firms can cover market in two ways

* Undifferentiated * differentiated
*
* Undifferentiated Marketing:
when a firm produces only one product or product line and promotes it to all customers with a single marketing mix when a firm produces numerous products and promotes them with a different marketing mix designed to satisfy smaller segments
* Differentiated Marketing:
* Concentrated Marketing (niche marketing):
when a firm commits all of its marketing resources to serve a single market segment
* Micromarketing: involves targeting potential customers at a

very basic level, such as by ZIP code, specific occupation, lifestyle, or individual household
* Selecting and Executing a Strategy

* No single, best choice strategy suits all firms * Determinants of a market-specific strategy:
*Company resources *Product homogeneity *Stage in the product life-cycle *Competitors strategy
*
* Single product addressing all segments with a single
marketing program.
* Mass production is possible giving scale economies * Pushes price downwards enabling to attract price
sensitive segments
*
* A separate market offering for every segment * Marketing programs for every segment could be different * Pushes up costs at various levels, necessitating sufficient
volumes for viability * Generates inter-segment rivalry
Comparison of Market Coverage Strategies
Focus
Undifferentiated Marketing One/Few
Differentiated Marketing Many
Concentrated Marketing One/Few
Product
Segment
All
Many
One/Few
Marketing Mix
One
Many
One/Few
164
Choosing a Market Coverage Strategy
Undifferentiated Marketing
Constrained Firm Resources Common Usage Products Different need satisfying products More suitable
Differentiated Marketing
Least suitable
Concentrated Marketing
Most suitable
Most suitable
More suitable
Lease suitable
Least suitable
Most suitable
More suitable
165
*
Company Marketing Mix
A. Undifferentiated Marketing
Market
Company Marketing Mix 1 Company Marketing Mix 2 Company Marketing Mix 3

B. Differentiated Marketing
Segment 1 Segment 2
Segment 3
Company Marketing Mix
Segment 1 Segment 2
Segment 3
C. Concentrated Marketing
Company Resources
Product Variability Products Stage in the Product Life Cycle
Market Variability Competitors Marketing Strategies
*
* Positioning
is defined as the process of designing the companys products and image to occupy a unique place in the target markets mind. called it as a unique selling proposition. Some unique selling propositions (USPs) companies use are best quality, best service, lowest price, best value, safest, more advanced technology, etc.
* Many marketers favor promoting only one major benefit and Rosser Reeves
168
*Under
positioning: Some companies find that buyers have only an unclear idea of the brand.
*Over positioning: Buyers have very narrow image of the brand.

*Confused
positioning: Buyers have confused image of the brand because the company has made too many claims or changed the brand positioning too frequently.
*Doubtful positioning: Buyers do not easily believe the claims made by

brands about the products features, price or manufacturer.
169
Bases of positioning the product 1.Attribute positioning: The company positions

2.Benefit
itself on the basis of attribute like size or number of years in existence. Sunfeast positions its snacky brand as bigger, lighter and cheaper.
positioning: The company positions its product as leader in providing a certain benefit. For example Santro positioned itself as Indias simplest car to drive. for certain use or application. For example, Kenstar positioned its products as unexpectedly cold.
3.Use or application positioning: The company positions its products as best 4.User positioning: The company positions its product as best for some user
group. For example, Parle-G positions the boy in the advertisement as rock star targeting the kids and boys.
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5.Competitor 6.Product
positioning: The company claims its products as better than a named competitor. category positioning: The company positions its product as leader in certain product category. For example, Bajaj CT 100 was positioned as leader in the entry segment bikes. the best value. For example, the vegetable oil brand Dhara positions itself as anokhi shuddata, anokha asar. This means the company offers unique purity and unique effect.
7.Quality or price positioning: The product is positioned as offering
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*Positioning map
Graphic illustration that shows differences in consumers perceptions of competing products
*Reposition
Marketing strategy to change the position of its product in consumers minds relative to the positions of competing products
Hypothetical Competitive Positioning Map for Selected Retailers
*Products Position - the place the product
occupies in consumers minds relative to competing products; i.e. Volvo positions on safety.
*Marketers must:
* Plan positions to give products the greatest advantage * Develop marketing mixes to create planned positions
Product Class
Product Attributes
Away from Competitors
G H C
Benefits Offered
Against a Competitor
D E B F
Usage Occasions
Users
Marketing Mix (4ps)
Product
Price
Place
Promotion
The marketing mix principles are controllable variables which have to be carefully managed and must meet the needs of the defined target group. All elements of the mix are Linked and must support each other.
www.learnmarketing.net
Marketing Mix (4ps) Product

Product Decisions
Branding
Quality Benefits offered
Features
We must remember that Marketing is fundamentally about providing the correct bundle of benefits to the end user, hence the saying Marketing is not about providing products or services it is essentially about providing changing benefits to the changing needs and demands of the customer (P.Tailor 7/00)
Marketing Mix (4ps) Pricing

Penetration Skimming
Pricing Strategies
Competition Product Line Bundle

Psychological
Pricing is the only mix which generates a turnover for the organisation. The remaining 3ps are the variable cost for the organisation. It costs to produce and design a product, it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship.
Marketing Mix (4ps) Promotion

Advertising Public Relations
Promotional Mix
Sales Promotion Personal Selling
A successful product or service means nothing unless the benefit of such a service can be communicated clearly to the target market. An organisations promotional mix can consist of:
Direct Mail
Internet/ E-commerce
Marketing Mix (4ps) Place

Direct Distribution Indirect Distribution
Manufacturer Manufacturer
Retailer
Consumer Consumer
MARKETING Marketing starts with the buyer and focuses constantly on buyers needs. Seeks to convert customer needs into products. Views business as a customer satisfying process Marketing effort leads to the products that the customers actually want to buy in their own interest
SELLING Selling starts with the seller and is preoccupied all the time with the sellers needs Seeks to convert products into Cash. Views business as a goods producing process. The company makes the product first and then figures out how to sell it and make a profit
Marketing communication is looked upon as a tool for communicating the benefits/ satisfactions provided by the product
Consumers determine the price; price determines cost Customer satisfaction is the primary motive.
Sellers motives dominate marketing communication (promotions).
Cost determines the price. Sales is the primary motive.
Marketing views the customer as the very purpose of the business. It sees the business from the point of view of the customer. Customer consciousness permeates the entire organization all departments, all the people and all the time
Selling views the customer as the last link in the business.
External market orientation.

Marketing concept takes an outside in perspective It is a broad composite and worldwide concept, more so in this era of globalization. Marketing is more pull than push Marketing begins much before the production of goods and services, i.e. with identification o f customers needs. It continues even after the sale to ensure customer satisfaction through after sales service
Internal company orientation

Selling concept takes an inside-out perspective It is a narrow concept related to product, seller and sales activity Selling involves push strategy Selling comes after production and ends with the delivery of the product and collection of payment
Marketing Marketing has a wider connotation and includes many activities like marketing research, product planning & development, pricing, promotion, distribution, selling etc It concerns itself primarily and truly with the value satisfactions that should flow to the customer from the exchange It assumes: Let the seller beware. Marketing generally has a matrix type of organizational structure. The main job is to find the right products for your customers. The mindset is What is that we can make here or source from outside to satisfy the needs of the target customers. Conceptual and analytical skills are required
selling Selling is a part of marketing.
It over emphasizes the exchange aspect, without caring for the value satisfactions inherent in the exchange It assumes: Let the buyer beware It has a functional structure The main job is to find the customers for your customers The mindset is Hook the customer
Selling and conversational skills are required.
*Classification of products, New Product
development, stages of product development, Adoption process,
*Product mix decisions and line management,
Length, width and depth of a line, line analysis, and brand management affecting each stage, Managing product lifecycles.
*product life cycle, stages in lifecycle and factors *Setting the price, adapting the price, initiating
and responding the price changes
* Product: bundle of physical, service, and symbolic attributes

designed to enhance buyers want satisfaction
* A product is any offering by a company to a market for
acquisition, use, or consumption that serves to satisfy customer needs and wants.
* It can be an object, service, idea,etc. * It includes more than just tangible goods. It include physical
objects, services, events, persons, places, organizations, ideas, or mixes of these entities.
* In planning its market offering, the marketers needs to address

five product levels. Each level adds more customer value, and five constitute a customer value hierarchy.
* The fundamental level is the core benefit ---the service or
benefit the customer is really buying. A hotel guest is buying rest and sleep. The purchaser of the buyer is purchasing holes
* Marketers must see themselves as benefit providers * At the second level the marketer must turn the core benefit into
a Basic product. Thus a hotel room includes a bed, bathroom, towels, desk, dresser, and closet.
* At the third level, the marketer prepares an expected product,

as set of attributes and conditions buyers normally expect when they purchase this product. and a relative degree of quiet.
* Hotel guest expect a clean bed, fresh towels, working lamps, * At the fourth level, the marketer prepares an augmented
product that exceeds customer expectations. takes place at this level. expected product level
* In the developed countries, brand positioning and competition

* In developing markets competition almost takes place at the
* At the fifth level it stands as the potential product which
encompasses all the possible augmentations and transformations the product or offerings might undergo in future.
*
Product Classifications
*Nondurable *Durable
* Tangible * Rapidly consumed * Example: Milk * Tangible * Lasts a long time * Example: Oven * Intangible * Example: Tax preparation
*Durability and
tangibility
*Consumer goods *Industrial goods
*Services
*
*Classified by
shopping habits:
*Durability and
tangibility
*Convenience goods *Shopping goods *Specialty goods *Unsought goods
*
*Materials and parts
*Durability and
tangibility
*Capital items
* Installations * Equipment
* Farm products * Natural products * Component materials * Component parts
*Supplies and business

services
* Maintenance and repair * Advisory services
* these are tangible goods normally consumed in

one or few areas, such as soft drinks and soap. Because these goods are purchased frequently, the appropriate strategy is to make them available in many locations, charge only a small markup, and advertise heavily to induce trial and build performance
* These are tangible goods that normally survive

refrigerators, machine tools and clothing.
many uses:
* Durable products normally require more personal selling and

services, command a higher margin, and require more seller guarantees.
* Services are intangible, inseparable, variable, and perishable
products. As a result, they normally require more quality control, supplier, creditability and adaptability.
* Examples--- include haircuts, legal advice, appliances repairs
* These are the products and services bought by the final
consumers for personal consumption. Marketers usually classify these products and services further based on how consumer go about buying them.
* Consumer products include the following type of products

* Convenience products * Shopping products * Specialty products * Unsought products
* These are the consumer products and services that customer
usually buys frequently, immediately, and with a minimum of comparison and buying effort.
* Example---include soap, candy, newspaper, and fast food.
Convenience products are usually low priced and marketers place them in many locations to make them readily well available when customer need them.
* These are less frequently purchased consumer products and

services that customer compare carefully on suitability, quality, price and style.
* When buying shopping products and services consumer spend

much time and effort in gathering information and making comparisons
clothing, cars, major appliances, and hotel airline services. fewer outlets but provide deeper sales support to help the customers in their comparisons efforts
* Examplefurniture,
* Shopping products usually distribute their products through
* These are the consumer products and services with unique
characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort
* Examples---specific brands and types of cars , high priced
photographic equipment, designer clothes and services, of medical and legal specialists. buyers are usually willing to travel great distance to buy new one.
* A Lamborghini automobile is a specialty type of product because

* Buyers normally dont compare specialty products
* These are consumer products that the consumer either dont

know or knows about but dont normally think of buying. through advertising.
* Most major innovations are unsought until consumer know it * Examples---life insurance, pre-planned funeral services, and
blood donations to red cross society.
* By their very nature, unsought products require a lot of
advertising, personal selling and other marketing efforts
* Industrial products are those purchased for further processing of
for further processing of for use in conducting a business. Thus, the distinction between a consumer product and industrial product is based on the purpose for which the product is bought.
* Examplelawn mower for homeconsumer product * Lawn mower to use in landscaping business * The three group of industrial products include
* Material and parts * Capital items * Supplies and services
* Material and parts include raw material and manufactured

material and parts.
* Raw material consists of farm products (wheat, cotton,
livestock, fruits and vegetables) and natural products(fish, crude, lumber, petroleum, iron ore)
* Manufactured material and parts consists of component
material(iron, yarn ,cement, wires)and component parts(small motors, tires, casting)
* Most manufactured materials are sold directly to industrial users
* Capital items are the industrial products that aid in the buyers
production or operations , including installations and necessary equipment.
* Installations consist of major purchases such as building (factories

and offices), and fixed equipment(generators, drills, presses, large computer systems, elevators)
* Accessory equipment include portable factory equipment and
tools(hand tools, lift trucks) and office equipment(computer, fax machines)
* They have a shorter life than installations and simply aid in the
production process
* The final group of products is supplies and services * Supplies and services includes operating supplies(lubricants,
coal, paper, pencil) and repair maintenance items (paint, nails, brooms)
* Supplies are the convenience products of the industrial field
because they are usually purchased with a minimum effort or comparison.
* Business services include maintenance services(window cleaning,

computer repair) and business advisory service(management, consulting, advertising)
*
*Overestimation of Market Size *Product Design Problems *Product Incorrectly Positioned, Priced or
Advertised *Costs of Product Development *Competitive Actions
*To create successful new products, the company

must:
* understand its customers, markets and competitors * develop products that deliver superior value to
customers.
*
* Idea Generation and Screening * Concept Development and Testing * Marketing Strategy * Business Analysis * Product Development * Test Marketing * Commercialization
New Product Development Process

Step 1. Idea Generation
Systematic Search for New Product Ideas Internal sources Customers Competitors Distributors Suppliers

Step 2. Idea Screening
*Process to spot good ideas and drop poor

ones *Criteria
* Market Size * Product Price * Development Time & Costs * Manufacturing Costs * Rate of Return

Step 3. Concept Development & Testing
1. Develop Product Ideas into Alternative Product Concepts
2. Concept Testing - Test the Product Concepts with Groups of Target Customers
3. Choose the Best One

Step 4. Marketing Strategy Development Marketing Strategy Statement Formulation
Part One - Overall:
Target Market Planned Product Positioning Sales & Profit Goals Market Share
Part Two - Short-Term:
Products Planned Price Distribution Marketing Budget

Part Three - Long-Term:
Sales & Profit Goals Marketing Mix Strategy

Step 5. Business Analysis Step 6. Product Development
Business Analysis Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
If No, Eliminate Product Concept
If Yes, Move to Product Development

Step 7. Test Marketing
Standard Test Market
Full marketing campaign in a small number of representative cities.
Controlled Test Market

A few stores that have agreed to carry new products for a fee.
Simulated Test Market

Test in a simulated shopping environment to a sample of consumers.
* Adoption process Stages that consumers go through in
learning about a * new product, trying it, and deciding whether to purchase it again. * Consumers go through five stages: * Awarenessindividuals first learn of the new product, but they * lack full information about it. * Interestpotential buyers begin to seek information about it * Evaluationthey consider the likely benefits of the product. * Trialthey make trial purchases to determine its usefulness. * Adoption/rejectiondecide whether to use the product regularly.
Adopter Categorization on the Basis of Relative Time of Adoption of Innovation
11-212
* Consumer innovators People who purchase new products

almost as soon
* as the products reach the market. * Diffusion process by which new goods or services are
accepted in the marketplace.
* IDENTIFYING EARLY ADOPTERS

* Firms who reach early buyers can treat them as a test market. * Tend to be younger, have higher social status, are better educated,
and
* enjoy higher incomes than other consumers.
* Relative advantageincreases the products adoption rate. *Compatibilityinnovation consistent with the values and
experiences of potential adopters.
*Complexitydifficulty understanding the innovation can slow

the speed of acceptance.
* Possibility of trial usecan accelerate the rate of adoption. *Observabilityobserving an innovations superiority increase
the adoption rate.
* Firms must be organized so personnel can stimulate and

coordinate new product development.
* New-product committees primarily review and evaluate others

new product plans rather than develop their own.
* Tend to move slowly and conservatively in large companies. * New-product departments encourage innovation as a full-time
activity.
* Product managers support the marketing strategies of an

individual product or product line.
* Venture teamsa group of specialists gathered from different

areas of an organization to work together in developing new products
* Product mix dimensions:

* Width: number of product lines * Length: total number of items in mix * Depth: number of product variants * Consistency: degree to which product lines are related
* Product-Line Analysis * Product-Line Length * Product-Line Modernization, Featuring, and Pruning
* How many product lines should we have? *Example: Delft Sensor Systems offer a comprehensive range of products, including portable and platform mounted night vision systems and thermal imaging systems, head- and helmet mounted displays, laser rangefinders and fire control systems
(Source: http://www.oip.be/press/brazil.htm)
*
218
* How many product items in each line? * Example: Both Gardenia and Bonjour launched new flavors
in January 1999 to nibble away at each others market share of a loaf estimated to be worth about $80 million
(Source: ST, Home, Jan29/99)
*
219
*
1.
Product line extension: add an item to the existing product line
Many FMCG companies introduced various sizes of the same product e.g.mini-packs for travelers, extra-large size for hospital
2.
Product category extension: add a new item or line of items for a company e.g.
P&G have Vidal Sassoon, Head & Shoulders, Rejoice, and Panthene in the same category
220
3.
Brand extension: Product category extension that uses an existing brand name e.g.
Cerebos introduced Brands Essence of Chicken with TangKwei targeting women
Nestle extended its Bear Brand condensed milk in Thailand by introducing Bear Brand with Honey
*
221
*
*Downward stretch by introducing lower range of
the products e.g.
*In 1989 the Shangri-La, a chain of deluxe hotels and
resorts in Asia established the Traders Hotels, a sister brand to deliver high value, mid-range, quality accommodation to the business traveler *Mercedes introduced the baby Merz to cater to the upper class mid-sized range of the market
*Upward stretch by entering the high end of the

market e.g.
Infiniti
*Toyota introduced the Lexus and Nissan introduced the

222
*
* Two-way stretch by filling the whole line e.g.
* Toyota has the Starlet at the lower end; the Corolla in the
executive range; the Camry in the upper-management range and the Lexus in the luxury range
223
*A companys assortment of product lines and

individual offerings offered.
*Product Width--the number of product lines *Product Length--the number of different

products a firm sells.
*Product Depth--variations in each product that

a firm markets in its mix.
11-224
*A firm may lengthen or widen its product mix *A Company may decide to add variations that will
attract new users
*A product may be pruned or altered, and new

product may extend the product life cycle
*Line extension:
introduction of a new product that is closely related to other products in the firms existing line
* A name becomes a brand when consumers associate it
with a set of tangible and intangible benefits that they obtain from the product or service benefits/services consistently to buyers
* It is the sellers promise to deliver the same bundle of
* When a commodity becomes a brand, it is said to have

equity.
* The premium a brand can command in the market * The difference between the perceived value and the
intrinsic value
* Reduced marketing costs * Trade leverage * Can charge a higher price * Can easily launch brand extensions * Can take some price competition
* Brand Equity needs to be nourished and replenished. We

must not flog the brand for equity to be diluted or dissipated
* Store brands
*Easy for the seller to track down problems and
process orders *Provide legal protection of unique product features *Branding gives an opportunity to attract loyal and profitable set of customers *It helps to give a product category at different segments, having separate bundle of benefits *It helps build corporate image *It minimizes harm to company reputation if the brand fails
* Consumers buy from a set of acceptable/ preferred

brands
* Products from different categories under one brand * Dangerous to the brand if the principal brand fails * Sometimes the company name is prefixed to the brand. In
such cases the company name gives it legitimacy. The product name individualises it.
* Product benefits * Product qualities * Easy to pronounce * Should be distinctive * Should not have poor meanings in other languages and
countries
*Line extension existing brand name extended to
new sizes in the existing product category *Brand extension brand name extended to new product categories *Multi-brands new brands in the same product category *New brands new product in a different product category *Co-brands brands bearing two or more well known brand names
* This may be required after a few years to face new

competition and changing customer preferences
* Includes the activities of designing and producing the

container for a product - primary - secondary - shipping
* Packaging is done at three levels
* Self service * Consumer affluence * Company and brand image * innovation
*Packaging concepts *Technical specifications *Engineering tests *Visual tests *Dealer tests *Consumer tests *Packaging innovations *Environmental considerations
* Identification * Grade classification * Description of product * Manufacturer identity * Date of mfg., batch no. * Instructions for use * Promotion
* Labels need to change with time or packaging changes to

give it a contemporary and fresh look
*
Sales and Profits ($) Sales
Profits Time
Product Develop-ment
Introduction
Growth
Maturity
Decline
Losses/ Investments ($)
*Firm works to stimulate demand for the new

market entry
*Promotional campaigns stress features *Additional promotions to intermediaries
attempt to induce them to carry the product losses are common due to heavy promotional and research-and-development costs
*Although prices are typically high, financial
11-242
*
Sales Costs Profits
Marketing Objectives Low sales High cost per customer Negative Create product awareness and trial Offer a basic product Use cost-plus Build selective distribution Build product awareness among early adopters and dealers
Product Price Distribution Advertising
* Growth Stage
* Sales volume rises rapidly * Firm usually begins to realize substantial profits * Success attracts competitors * Firm may need to make improvements to the product * Additional spending on promotion and distribution may be
necessary
11-244
Growth stage of PLC
Sales Costs Profits

Marketing Objectives
Rapidly rising sales Average cost per customer Rising profits Maximize market share Offer product extensions, service, warranty Price to penetrate market Build intensive distribution Build awareness and interest in the mass market
* Maturity Stage
* Industry sales continue to grow, but eventually reach a
plateau * Many competitors have entered the market, and profits began to decline * Differences between competing products diminish * Available supplies exceed industry demand for the first time * Competition intensifies and heavy promotional outlays are common
11-246
Maturity Stage of the PLC
Sales Costs Profits

Peak sales Low cost per customer High profits Maximize profit while defending market share Diversify brand and models Price to match or best competitors Build more intensive distribution Stress brand differences and benefits
* Decline Stage
* Innovations or shifts in consumer preferences cause an
absolute decline in industry sales
* Industry profits fall -- sometimes become losses * Firms cut prices in a bid for the dwindling market * Manufacturers gradually drop the declining items from their
product lines
11-248
Decline Stage of the PLC

Sales Costs Profits
Declining sales Low cost per customer Declining profits Reduce expenditure and milk the brand Phase out weak items Cut price Go selective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyal customers
* Marketers usually try to expand each stage of the

life cycle for their products as long as possible result of decisions designed to:
customers
* Product life cycles can stretch indefinitely as a

* Increase the frequency of use by current
* Increase the number of users for the product * Find new uses * Change package sizes, labels, or product quality
*
11-250
* Product lines must sometimes be pruned and marginal

products eliminated
* This decision is typically faced during the late maturity

and early declined stages of the product life cycle provide a complete line for customers
* An unprofitable item may be continued in order to
*
11-251
*What is Price?
* Price is the value that customers give up or exchange to
obtain a desired product.
* * * * *
* Payment may be in the form of:

Money. service or goods (bartering). favors. votes. or anything else that has value to the other party.
* Good pricing decisions are critical to a firms success in

the marketplace.
*
Only source of profit for most organizations is through the price charged for products. Most consumers rank reasonable price as the most important consideration in a purchase. For businesses, price may be second only to quality in buying decisions.
*The Importance of
Pricing Decisions
Signaling Quality / Assurance

Used to reinforce an image of quality
Best Used When.. Performance varies among products Search and inspection do not provide adequate knowledge of product performance Cost of search is high compared to cost of produc Cost of product malfunction is high direct consequences cost of repair time
*Price - Quality Strategies

Price
High
Medium
Low
Super Value
High
Product Quality
Premium Value
High Value
Med
Overcharging
Medium Value
Good-Value
Low
Rip-Off
False Economy
Economy
*Demand Curves for
Normal and Prestige Products
*Shifts in Demand Curves

*Non-price factors that influence
shifts in demand curves:
* advertising
campaigns promoting the
product,
* weather
and seasonal factors, of new products, conditions.
* development * economic
*Price Elasticity of Demand
Buyers will pay more when..

Unique-value effect: the product is more distinctive.
* Price Sensitivity
Substitute-awareness effect: they are less aware of substitutes.

Difficult-comparison effect: they cannot easily compare competitive products.
Total-expenditure effect: the price is a small part of their total income.

End-benefit effect: the price is a small part of the total cost of the end product. Shared-cost effect: part of the cost is borne by another party. Sunk-cost effect: the product is used with assets previously bought. Price-quality effect: the product is thought to have more quality, prestige, etc...
*Break-Even Analysis
Determines the Number of Units that a Firm Must Produce & Sell at a Given Price to Cover All Costs
Total Revenue
Dollars (thousands)
$6 $5 x $4 $3
Break-Even Revenue Total Costs
Break-Even Point
Fixed Costs
$2
$1 0 1000 2000 3000
x
4000 Break-Even Quantity 5000
Sales Volume in Units (thousands)
The Three Cs Model for Price Setting
Low Price No possible profit at this price
Costs
Competitors prices and prices of substitutes
Customers assessment of unique product features
High Price No possible demand at this price
Pricing Tactics
Price Shading - list price is reduced during negotiation. Payment Terms - discriminates against slow paying customers. Volume Discounts - buyers of large orders pay less per unit.
Pricing Tactics
Segment Pricing - some segments get a better price. Off Peak Pricing - set prices based on time of use. Couponing.- 280 billion coupons issued, 7 billion redeemed (1990)
Individual Products
* Two-Part Pricing
*
*Pricing Tactics for

* Payment Pricing
*
Two separate types of payment required to purchase the product. e.g. Cell phone companies charge a monthly fee + per minute fees.
Seeks to make the consumer think the price is doable. e.g. Three payments of $39.99 each. Monthly lease payments on a car.
*Pricing Tactics for

* Price Bundling
*
Multiple Products
* Captive Pricing
*
Selling two or more goods or services as a single package for one price. e.g. Season music tickets for a single price, computer with a monitor, keyboard, and software.
Pricing tactic a firm uses when it has two products that work only when used together. Sells one at a very lowprice (razor), and make a profit on second highmargin item (blades).
*Geographic Pricing
F.O.B. Pricing
F.O.B. Origin: Customer Pays F.O.B. Delivered: Seller Pays
Zone Pricing
Customers in Different Geographic Zones Pay Different Rates. e.g. UPS
How Firms Handle the Cost of Shipping Products
Freight Absorption Pricing

Seller Takes on Part or All of the Cost of Shipping
Uniform Delivered Pricing

Average Shipping Cost is Added to Price for all Customers
Psychological Pricing
Most Attractive?
A
32 oz.
$2.19
Better Value?
Psychological reason to price this way?

$1.99
B
26 oz.
Assume Equal Quality
*Psychological Pricing
* Odd-Even Pricing
* *
Strategies
Marketers assume there is a psychological response to odd prices that differs from the responses to even prices. $1.99 vs $2.00 Similar items in a product line sell at different prices, called price points. Refrigerator prices: $400, $600, $800, $1,000.
* Price Lining
* *
When competitors increase prices

Why did the competitor raise price? If all firms increase due to price increases, then no share increases should occur. Best Strategy: Wait before raising prices in response. can take price sensitive customers away. if competitor pulls back price increase, some of the newly acquired customers may be retained. if they dont pull back, then the firm can raise its price when the defection of new customers levels off. Often prices are not raised all the way up to the competitors new higher level -- this is called price shadowing.
When competitors lower prices

Immediate reductions can gain business from those firms who have not yet dropped price. If price cuts are delayed, then price sensitive customers will be lost. If price cutting firm is a major competitor with long term cost advantages: best to hold price and lose price sensitive customers. work hard to create a niche through improvements in quality and service. If price cut is due to a cost reducing product innovation: competitor should try to imitate and reduce price.
Considerations in Pricing
Deceptive Pricing Practices
Bait-and-Switch
* Legal & Ethical
Unfair Sales Acts

Loss Leader Pricing
Price Fixing
Horizontal and Vertical Price Fixing
Price Discrimination
Robinson-Patman Act
Customer Segment
Product-form Location Time
* Discriminatory Pricing
New product pricing strategies
Product mix strategies
Price adjustment strategies
*
*Pricing strategies usually change as the product passes
through the product life cycle.
*Introductory stage is the most challenging stage *While launching the product the company have to set the
price for the first time .
*The two broad classification can be done

Market skimming pricing Market penetration pricing
*
* It means that setting a high initial price for the product
launched.
* Many companies that invent new products set high price to

skim revenues layer by layer from the market.
* EXAMPLE---SONY frequently uses this strategy called skimming

pricing or (price skimming). When sony introduced the worlds first HDTV to japanese market in 1990 , the set costs $43000. customers who really wanted the new technology and could afford the price attract the new customers just over $6000
* At that time the tv sets were purchased by only those
* Then Sony rapidly reduced the price over the next few years to * By 1993, a 28 inch HDTV cost a buyer in the japanase market
* In 2001, the buyer in the japanese market could but it for

$2000. it is a price that many customers could afford.
* In this way the entry level of HDTV sets now sell in the united
states and other country at a price that maximum customers can afford. revenue from the various segments of the market.
* So, in this way sony skimmed the maximum amount of * MARKET SKIMMING WORKS UNDER TWO SITUATIONS-* First product quality
And image must support The high price and enough Buyers must want the product At that price
Finally , competitors should not be able to enter market easily and undercut the high price
second, cost of producing a smaller volume cannot be so high that they cancel the advantage of charging more.
* New Product Pricing: Reasons for
Using a Skimming Price

Product Benefits that Customers Want at Any Cost.
Skimming Price Charging a High, Premium Price
Little Chance that Competitors Can Enter the Market Quickly.
Several Customer Segments with Different Levels of Price Sensitivity.
*
* It means that setting a low initial price for the launch of the
new product. * Rather than setting a high initial price to skim off small but profitable market segments some use market penetration. * They set a low initial price in order to penetrate the market quickly and deeply * To attract large number of buyers quickly and win a large number of share. * The high sales volume will result in falling the costs, allowing the companies to further cut down their prices. * EXAMPLEDELL used this strategy to enter personel computer market, selling high quality computer products through lower cost direct chsnnels * It sales soared when other competitor like HP, Apple, selling through retail stores could not match its prices
*
* Several conditions for market penetration or low price
strategy to work
* First, the market must

Be highly priced so that a Low price produces more
secondly production and distribution cost must fall as sales volume increases.
Market growth
Finally, the low price must help keep out the competition and penetration pricer must maintain its low price positon --otherwise, the price advantage may be temporary.
*In this case the firm look for set of prices that can
maximize the profits on the total product mix.
*Pricing is difficult because different product have
different demand and costs and face different degrees of competition.
DIFFERENT PROCUCT MIX STRATEGIES ---
Product-line pricing Optional-product pricing Captive-product pricing By-product pricing Product-bundle pricing
*
* Companies usually develop product lines rather than single
products. * EXAMPLESAMSONITE offers some 20 different types of bags of all shapes and sizes at price that range from $50 for a smmies child backpack to more than $1250 for a bag from its black label vintage collection. * Management must decide on the price steps to set between the various products in a line. * They should account for the differences in customer perceptions of the value of different features. * EXAMPLE---Bata offers an entire range of footwear in India, as compared to the other premium European brands that are priced very high. It also offers ordinary leather shoes for 749 * It has a collection of sandals and chappals. For women it offers a wide range of footwear from fashionable to regular ones * It has a section for children also of different age groups
*
*Many companies use this to sell optional or accessory
products along with their main product.
*EXAMPLE1.)a car buyer may choose to order a GPS

2. ) refrigerators come with optional ice makers. 3.)while ordering PC you can select different types of sotwares and service plans and other facilities.
navigation system and bluetooth wireless comminication.
*
* Companies that make the products that must be used along
with a main product are using captive product pricing.
* EXAMPLESrazor blades, catridges, video games, and printer

catridges.
* Producer of the main product often price them low and set
high mark ups on the supplies
* EXAMPLEGillette sells low-priced razors but makes money

on the replacement catridges. You can buy gillette mach 3 razor with a replacement catridges and storage case for rupees 200.
* But once you have brought the product you are committed to * Companies must be careful
because consumers trapped into buying expensive supplies may come to resent brand that ensnared them.
buying replacement catridges at about Rs. 750 an eight pack.
*In case of services captive product pricing is called two
part pricing. The price of the service is Broken into a fixed fee plus Variable usage rate. EXAMPLE1)Essel world in mumbai, you pay daily ticket or season pass charge plus additional charge for food and other in park features 2.) cell phones charge flat rate for basic calling and then charge for the minutes over what the plan allows 3) like in the airline ticket the basic fare is very low and variable fee (i.e taxes and serrvice charge is high) The service firm must decide how to charge for basic charge and for variable usage. The fixed amount should be low enough to induce variable usage of the service , so that profit can be made on the variable fees.
*
*While Producing different types of products it often
generates several by products. If the by product is of no value and getting rid of them is costly then it will effect the pricing of the main product. *Company seeks a market for those by-products to help offset the cost of disposing them and to help make the price of the main product more competitive. *The by products themselves can even turn out to be profitable. *EXAMPLEpapermaker Mead Westvaco in the US has turned what was once considered chemical waste into profit making products. *It created a separate company Asphalt innovations which creates useful chemical entirely from its by-products of Mead Westvaco wood processing activities.
*
*This is used when sellers often combine their products
and offer the bundle at a reduced price.
*EXAMPLEfast food restaurents bundle a burger , fries,

and a soft drink at a combo price
*Resorts sell specially priced vacation packages that

include airfare, accomodation, meals and entertainmanent
*Price bundling can promote the sales of the products
and consumer might not otherwise buy , but combined price must be low enough to get them to buy the bundle.
*To adjust their basic price situation and account for

customer differences and changing situations.
DIFFERENT PRICE ADJUSTMENT STRATEGIES-- Discount and allowance pricing Segmented pricing Psychological pricing Promotional pricing Geographical pricing Dynamic pricing International pricing
*
* Most companies adjust their basic price to reward customer for
certain responses such as early payment of bills, volume purchases, and off season buying. These price adjustments are called discount and allownace. * The many forms of discount include cash discount(i.e price reduction to buyers who pay their bills promptly ) * A quantity discount is a price reduction to buyers who buy large volumes. * A functional discount(trade discount) is offered by seller to trade channel members who perform certain functions like selling, storing and record keeping. * A seasonal discount is a price reduction to buyers who buy merchandise or services out of season. * EXAMPLE---lawn and garden equipment manufacturers often provide discounts to retailers during the fall and winter months to encourage early ordering in anticipation of heavy spring and summer selling seasons
* Allowances are another type of reduction from the list price . * EXAMPLEtrade-in allowances are price reductions given for
turning an old item when buying new one.
* Trade in allowance are most common in automobile industry

but also are also given for other durable goods.
* Promotional allowances are the payments or price reductions
to reward the dealer for participating in advertising and sales support programs.
*
* In this company sells a product or service at two or more
prices, even though the difference in prices in not based on the difference in costs. * It can take several forms * Under customer segment pricing different customers pay different prices for the same product product or sevice. * EXAMPLEMUESEMS may charge low fee from students and senior citizens. * Under product-form pricing different versions of product are priced differntly but not on the based of differnce in their costs. * EXAMPLEa 1 litre bottle in the super market may cost you rs 13 . A 5 litre bittle of same mineral brand sells for rs 55 and its half litre easy to carry bottle cost you rs 10 * Water is all from the same source but the price varies with quantity.
*
* Using location pricing company charges different price for
different locations, even though the cost of offering each location is same. audience preferences for certain locations and even the hour.
* EXAMPLETHEATRES vary their seat prices because of

* Using time-pricing a firm vary its price by season , month, day
* Some public utilities vary their price to commercial users by

time of the day and weekend versus weekend
* Resorts
also give seasonal and weekend discounts
*
* Sellers consider the psychology of prices and not the simple
economics.
* EXAMPLE-many consumers use price to judge quality

Like a bottle of perfume that costs 4000 may contain only 400 rs worth of scent , but some people are willing to pay 4000 because price indicates something special
*
*companies will temporarily
price their products below list price and even sometimes below cost to create buying excitement and urgency.
*Promotional pricing takes several forms. *Sellers may offer simple discounts from normal prices to
increase the sales and reduce inventories. season to draw more customers. the customer
*Sellers may also use special event pricing in certain

*Manufactures sometimes offers cash rebates directly to
* Channel functions and flows. Channel design decisions. Channel

management decisions.
* Channel dynamics, vertical horizontal and multi channel marketing

systems. Market Logistics decisions.
* Effective Communication, Integrated Marketing Communication,

Marketing Communication Process,
* Promotion mix, Advertising, Personal Selling, Sales Promotion and

Publicity and Public Relations, Direct Marketing,

Fundamentals of Marketing Concepts and Strategies

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*

* Fundamentals of Marketing, Customer Value and Satisfaction,

* Philosophies of Marketing Management, Value Chain, Scanning

* Elements, Difference between marketing and Selling,

* Planning in marketing, formulating the marketing plan.

* Module I: Understanding Marketing in New

Marketing is the delivery of the customer satisfaction at

EXAMPLEWal- Mart has become the world largest retailer by

Ritz Carlton promises and delivers truly memorable

And Coca-Cola the world leading soft drink, delivers on the

* ..the process of discovering and translating consumer needs and wants

* Marketing is the management process that identifies, anticipates and

satisfies customer requirements profitably(The Chartered Institute of Marketing)

* Marketing is the human activity directed at satisfying human needs and

* Marketing is a social and managerial process by which

* From a managerial point of view Marketing is a process of

* MM is art and science of choosing target markets, and getting ,

* NEED human need are the state of felt deprivation. They

* People have almost unlimited wants but limited resources. Thus

* PRODUCT it is anything that can be offered to a market to

* In addition to tangible goods, products include services , which

* If, more broadly defined, products also include other entities

* EXAMPLE---:Disney land is an experience.

* GOODSphysical goods constitute the bulk of most countries

* SERVICESas economies advance, a growing proportion of their

* EVENTSMarketers promote time based events such as major

* EXPERIENCESby orchestrating several services and goods , a firm

* PROPERTIESproperties are intangible right of ownership of either

* ORGANIZATIONSorganizations actively work to build a strong,

* IDEASEvery market offerings includes a basic idea . Charles

* VALUEvalue reflects the sum of the perceived tangible and

* Customer value is the difference between the values the customer

* OFFERINGcompanies address needs by putting forth for a value

* BRANDit an offering from a known source. A brand name such as

* To reach a target market, the marketers uses three kind of

* Communication channel--:it delivers and receive message from

* Distribution channelto display the physical product or services to

* Service channelsto carry out the transactions with potential

*choosing and targeting appropriate customers

*positioning your offering

*Developing marketing strategies & plans *Capturing marketing insights

*Connecting with customers

*Shaping the market offerings

*Creating long-term growth

* The supply chain is a longer channel stretching from raw materials

* Each company captures only a certain percentage of the total

* When a company acquires competitors or expands upstream or

downstream. Its aim is to capture a higher percentage of supply chain value

* It includes all the actual and potential rival offerings and

* The another option is that to buy engineered plastics for bumpers

* PRODUCTION CONCEPTit holds that the consumers will favor

* This concept is still useful philosophies in two situations. The

* The solution might be a chemical spray, an exterminating service,

* Product concept can be a marketing myopia because it overlooks

* It holds that the consumer will not buy enough of the

* There are usually poor assumptions to make about buyers. Most of

* This concept emerged in 1950s. instead of product-centered,

* EXAMPLEDell computer dont

* It focuses on the needs of the buyer. Several scholars have found

* This was first demonstrated by the companies practicing Reactive

* Successful companies learn through probe-and learn process

* The holistic marketing concept is base on the development,

Developing marketing strategies & plans Capturing marketing insights