Marketing Management Notes

MARKETING MANAGEMENT
For MBA I Semester Students Under Osmania university

Dr. C. V. Krishna MBA, PhD
Associate Professor
Suprabhath Institute for Management &
Computer Studies
CONTENTS

Contents Page
UNIT I 1
UNIT II 9
UNIT III 25
UNIT IV 43
UNIT V 51
Important Questions 57
OU Q Paper Jan 2011 59

Dr. C.V.KRISHNA

1 | P a g e M a r k e t i n g M a n a g e m e n t

UNIT I

Definition: Marketing Management
The American Marketing Association offers this managerial definition: Marketing
(management) is the process of planning and executing the conception, pricing, promotion, and
distribution of ideas, goods, and services to create exchanges that satisfy individual and
organizational goals

Definition: Marketing
Marketing is a societal process by which individuals and groups obtain what they need and want
through creating, offering, and exchanging products and services of value freely with others.

Marketing Tasks
A recent book, Radical Marketing, praises companies such as Harley-Davidson for succeeding
by breaking all of the rules of marketing. Instead of commissioning expensive marketing
research, spending huge sums on advertising, and operating large marketing departments, these
companies stretch their limited resources, live close to their customers, and create more
satisfying solutions to customers needs. They form buyers clubs, use creative public relations,
and focus on delivering quality products to win long-term customer loyalty. It seems that not all
marketing must follow the P&G model.
In fact, we can distinguish three stages through which marketing practice might pass:

1. Entrepreneurial marketing: Most companies are started by individuals who visualize an
opportunity and knock on every door to gain attention. Jim Koch, founder of Boston Beer
Company, whose Samuel Adams beer has become a top-selling craft beer, started out
in 1984 carrying bottles of Samuel Adams from bar to bar to persuade bartenders to carry
it. For 10 years, he sold his beer through direct selling and grassroots public relations.
Today his business pulls in nearly $200 million, making it the leader in the U.S. craft
beer market.
2. Formulated marketing: As small companies achieve success, they inevitably move
toward more formulated marketing. Boston Beer recently began a $15 million television
advertising campaign. The company now employs more that 175 salespeople and has a
marketing department that carries on market research, adopting some of the tools used in
professionally run marketing companies.
3. Intrepreneurial marketing: Many large companies get stuck in formulated marketing,
poring over the latest ratings, scanning research reports, trying to fine-tune dealer
relations and advertising messages. These companies lack the creativity and passion of
the guerrilla marketers in the entrepreneurial stage. Their brand and product managers
need to start living with their customers and visualizing new ways to add value to their
customers lives.

The bottom line is that effective marketing can take many forms. Although it is easier to learn
the formulated side (which will occupy most of our attention in this book), we will also see how
creativity and passion can be used by todays and tomorrows marketing managers.

Dr. C.V.KRISHNA

2|P a g e M a r k e t i n g M a n a g e m e n t

A Broadened View of Marketing Tasks
Marketers are skilled in stimulating demand for their products. However, this is too limited a
view of the tasks that marketers perform. Just as production and logistics professionals are
responsible for supply management, marketers are responsible for demand management. They
may have to manage negative demand (avoidance of a product), no demand (lack of awareness
or interest in a product), latent demand (a strong need that cannot be satisfied by existing
products), declining demand (lower demand), irregular demand (demand varying by season, day,
or hour), full demand (a satisfying level of demand), overfull demand (more demand than can be
handled), or unwholesome demand (demand for unhealthy or dangerous products). To meet the
organizations objectives, marketing managers seek to influence the level, timing, and
composition of these various demand states.

The Decisions That Marketers Make
Marketing managers face a host of decisions in handling marketing tasks. These range from
major decisions such as what product features to design into a new product, how many
salespeople to hire, or how much to spend on advertising, to minor decisions such as the wording
or color for new packaging.
Among the questions that marketers ask (and will be addressed in this text) are:

How can we spot and choose the right market segment(s)? How can we differentiate our
offering?
How should we respond to customers who press for a lower price?
How can we compete against lower-cost, lower-price rivals?
How far can we go in customizing our offering for each customer?
How can we grow our business? How can we build stronger brands?
How can we reduce the cost of customer acquisition and keep customers loyal?
How can we tell which customers are more important? How can we measure the payback from
marketing communications?
How can we improve sales-force productivity?
How can we manage channel conflict? How can we get other departments to be more customer-
oriented?

MARKETING PHILOSOPHIES

The Production Concept
The production concept, one of the oldest in business, holds that consumers prefer products that
are widely available and inexpensive. Managers of production-oriented businesses concentrate
on achieving high production efficiency, low costs, and mass distribution. This orientation makes
sense in developing countries, where consumers are more interested in obtaining the product than
in its features. It is also used when a company wants to expand the market. Texas Instruments is
a leading exponent of this concept. It concentrates on building production volume and upgrading
technology in order to bring costs down, leading to lower prices and expansion of the market.
This orientation has also been a key strategy of many Japanese companies.

Dr. C.V.KRISHNA


The Product Concept
Other businesses are guided by the product concept, which holds that consumers favor those
products that offer the most quality, performance, or innovative features. Managers in these
organizations focus on making superior products and improving them over time, assuming that
buyers can appraise quality and performance. Product-oriented companies often design their
products with little or no customer input, trusting that their engineers can design exceptional
products. A General Motors executive said years ago: How can the public know what kind of
car they want until they see what is available? GM today asks customers what they value in a
car and includes marketing people in the very beginning stages of design.
However, the product concept can lead to marketing myopia.16 Railroad management thought
that travelers wanted trains rather than transportation and overlooked the growing competition
from airlines, buses, trucks, and automobiles. Colleges, department stores, and the post office all
assume that they are offering the public the right product and wonder why their sales slip. These
organizations too often are looking into a mirror when they should be looking out of the window.

The Selling Concept
The selling concept, another common business orientation, holds that consumers and businesses,
if left alone, will ordinarily not buy enough of the organizations products. The organization
must, therefore, undertake an aggressive selling and promotion effort. This concept assumes that
consumers must be coaxed into buying, so the company has a battery of selling and promotion
tools to stimulate buying. The selling concept is practiced most aggressively with unsought
goodsgoodsthat buyers normally do not think of buying, such as insurance and funeral plots.
The selling concept is also practiced in the nonprofit area by fund-raisers, college admissions
offices, and political parties.
Most firms practice the selling concept when they have overcapacity. Their aim is to sell what
they make rather than make what the market wants. In modern industrial economies, productive
capacity has been built up to a point where most markets are buyer markets (the buyers are
dominant) and sellers have to scramble for customers. Prospects are bombarded with sales
messages. As a result, the public often identifies marketing with hard selling and advertising. But
marketing based on hard selling carries high risks. It assumes that customers who are coaxed into
buying a product will like it; and if they dont, that they wont bad-mouth it or complain to
consumer organizations and will forget their disappointment and buy it again. These are
indefensible assumptions. In fact, one study showed that dissatisfied customers may bad-mouth
the product to 10 or more acquaintances; bad news travels fast, something marketers that use
hard selling should bear in mind.
The Marketing Concept
The marketing concept, based on central tenets crystallized in the mid-1950s, challenges the
three business orientations we just discussed.18 The marketing concept holds that the key to
achieving organizational goals consists of the company being more effective than its competitors
in creating, delivering, and communicating customer value to its chosen target markets.
Theodore Levitt of Harvard drew a perceptive contrast between the selling and marketing
concepts: Selling focuses on the needs of the seller; marketing on the needs of the buyer.
Selling is preoccupied with the sellers need to convert his product into cash; marketing with the
idea of satisfying the needs of the customer by means of the product and the whole cluster of
things associated with creating, delivering and finally consuming it.
Dr. C.V.KRISHNA


The marketing concept rests on four pillars: target market, customer needs, integrated
marketing, and profitability. The selling concept takes an inside-out perspective. It starts with the
factory, focuses on existing products, and calls for heavy selling and promoting to produce
profitable sales. The marketing concept takes an outside-in perspective. It starts with a well-
defined market, focuses on customer needs,
coordinates activities that affect customers, and produces profits by satisfying customers

The Societal Marketing Concept
Societal marketing concept, holds that the organizations task is to determine the needs, wants,
and interests of target markets and to deliver the desired satisfactions more effectively and
efficiently than competitors in a way that preserves or enhances the consumers and the societys
well-being.
The societal marketing concept calls upon marketers to build social and ethical considerations
into their marketing practices. They must balance and juggle the often conflicting criteria of
company profits, consumer want satisfaction, and public interest. Yet a number of companies
have achieved notable sales and profit gains by adopting and practicing the societal marketing
concept. Some companies practice a form of the societal marketing concept called cause related
marketing. Pringle and Thompson define this as activity by which a company with an image,
product, or service to market builds a relationship or partnership with a cause, or a number of
causes, for mutual benefit.

Marketing Mix
Marketers use numerous tools to elicit the desired responses from their target markets. These
tools constitute a marketing mix: Marketing mix is the set of marketing tools that the firm uses
to pursue its marketing objectives in the target market. As shown in Figure 1-3, McCarthy
classified these tools into four broad groups that he called the four Ps of marketing: product,
price, place, and promotion. Marketing-mix decisions must be made to influence the trade
channels as well as the final consumers. Typically, the firm can change its price, sales-force size,
and advertising expenditures in the short run. However, it can develop new products and modify
its distribution channels only in the long run. Thus, the firm typically makes fewer period-to-
period marketing-mix changes in the short run than the number of marketing-mix decision
variables might suggest.

Robert Lauterborn suggested that the sellers four Ps correspond to the customersfour Cs.
Four Ps Four Cs
Product Customer solution
Price Customer cost
Place Convenience
Promotion Communication

Winning companies are those that meet customer needs economically and conveniently and with
effective communication

Dr. C.V.KRISHNA


PRODUCT
A product is anything that can be offered to a market to satisfy a want or need. Products include
physical goods, services, experiences, events, persons, places, properties, organizations,
information, and ideas. The customer will judge the offering by three basic elements: product
features and quality, services mix and quality, and price appropriateness (Figure 4-1). As a result,
marketers must carefully think through the level at which they set each products features,
benefits, and quality.

Product Mix
A product mix (also called product assortment) is the set of all products and items that a
particular marketer offers for sale. At Kodak, the product mix consists of two strong product
lines: information products and image products. At NEC (Japan), the product mix consists of
communication products and computer products. The product mix of an individual company can
be described in terms of width, length, depth, and consistency. The width refers to how many
Dr. C.V.KRISHNA


different product lines the company carries. The length refers to the total number of items in the
mix. The depth of a product mix refers to how many variants of each product are offered. The
consistency of the product mix refers to how closely related the various product lines are in end
use, production requirements, distribution channels, or some other way.
These four product-mix dimensions permit the company to expand its business by (1) adding
new product lines, thus widening its product mix; (2) lengthening each product line; (3)
deepening the product mix by adding more variants; and (4) pursuing more product-line
consistency.

PRICE

Price is the only one of the four Ps that produces revenue. In setting prices, a company follows a
six-step procedure: (1) Select the pricing objective, (2) determine demand, (3) estimate costs, (4)
analyze competitors costs, prices, and offers, (5) select a pricing method, and (6) select the final
price.
Companies do not usually set a single price, but rather a pricing structure that reflects variations
in geographical demand and costs, market-segment requirements, purchase timing, order levels,
and other factors. Several price-adaptation strategies are available: (1) geographical pricing; (2)
price discounts and allowances; (3) promotional pricing; (4) discriminatory pricing, in which the
company sells a product at different prices to different market segments; and (5) product-mix
pricing, which includes setting prices for product lines, optional features, captive products, two-
part items, by-products, and product bundles.
After developing pricing strategies, firms often face situations in which they need to change
prices by initiating price cuts or price increases. In these situations, companies need to consider
how stakeholders will react to price changes. In addition, marketers must develop strategies for
responding to competitors price changes. The firms strategy often depends on whether it is
producing homogeneous or non homogeneous products. Market leaders who are attacked by
lower-priced competitors can choose to maintain price, raise the perceived quality of their
product, reduce price, increase price and improve quality, or launch a low-price fighter line.

PROMOTION MIX
Each promotional tool has its own unique characteristics and costs.12
Advertising. Advertising can be used to build up a long-term image for a product (Coca-Cola
ads) or trigger quick sales (a Sears ad for a weekend sale). Advertising can reach geographically
dispersed buyers efficiently. Certain forms of advertising (TV advertising) typically require a
large budget, whereas other forms (newspaper advertising) can be done on a small budget. We
discuss advertising in more detail later in this chapter.
Sales promotion. Although sales-promotion toolscoupons, contests, premiums, and the
likeare highly diverse, they offer three distinctive benefits: (1) communication (they gain
attention and usually provide information that may lead the consumer to the product); (2)
incentive (they incorporate some concession or inducement that gives value to the consumer);
and (3) invitation (they include a distinct invitation to engage in the transaction now). Sales
promotion can be used for short-run effects such as dramatizing product offers and boosting
sales. Later in this chapter we
discuss sales promotion in more detail.
Dr. C.V.KRISHNA


Public relations and publicity. The appeal of public relations and publicity is based on three
distinctive qualities: (1) high credibility (news stories and features are more authentic and
credible than ads); (2) ability to catch buyers off guard (reach prospects who prefer to avoid
salespeople and advertisements); and (3) dramatization (the potential for dramatizing a company
or product). This underused technique is examined later in this chapter.
Personal selling. Personal selling has three distinctive qualities: (1) personal confrontation
(it involves an immediate and interactive relationship between two or more persons); (2)
cultivation (it permits all kinds of relationships to spring up, ranging from a matter-of-fact selling
relationship to a deep personal friendship);
and (3) response (it makes the buyer feel under some obligation for having listened
to the sales talk).
Direct marketing. All forms of direct marketingdirect mail, telemarketing, Internet
marketingshare four distinctive characteristics: They are (1) nonpublic (the message is
normally addressed to a specific person); (2) customized (the message can be prepared to appeal
to the addressed individual); (3) up-to-date (a message can be prepared very quickly); and (4)
interactive (the message can be changed depending on the persons response).

PLACE/DISTRIBUTION:
Marketing channels are sets of interdependent organizations involved in the process of making
a product or service available for use or consumption. Why would a producer delegate some of
the selling job to intermediaries? Although delegation means relinquishing some control over
how and to whom the products are sold, producers gain several advantages by using channel
intermediaries:
Many producers lack the financial resources to carry out direct marketing. For example,
General Motors sells its cars through more than 8,100 dealer outlets in North America alone.
Even General Motors would be hard-pressed to raise the cash to buy out its dealers.
Direct marketing simply is not feasible for some products. The William Wrigley Jr.
Company would not find it practical to establish retail gum shops or sell gum by mail order. It
would have to sell gum along with many other small products, and would end up in the drugstore
and grocery store business. Wrigley finds it easier to work through a network of privately owned
distribution organizations.
Producers who do establish their own channels can often earn a greater return by increasing
their investment in their main business. If a company earns a 20 percent rate of return on
manufacturing and only a 10 percent return on retailing, it does not make sense to undertake its
own retailing.

PEOPLE
In Booms and Bitners 7Ps services marketing framework, people are all people directly or
indirectly involved in the service encounter, namely the firm's contact employees, personnel and
other customers. Due to the inseparability of production and consumption for services which
involves the simultaneous production and consumption of services, service firms depend heavily
on the ability of contact employees to deliver the service. Contact employees contribute to
service quality by creating a favorable image for the firm, and by providing better service than
the competitions. Service providers (such as hair stylists, personal trainers, nurses, counselors
and call centre personnel) are involved in real time production of the service. They are the
service. Much of what makes a service
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special derives from the fact that it is a lived-through event.

Service firms must find ways in which they can effectively manage the contact employees to
ensure that their attitudes and behaviors are conducive to the delivery of service quality. This is
especially important in services because employees tend to be variable in their performance,
which can lead to variable quality i.e. heterogeneity in the performance of services. The quality
of a service (a visit to a hospital for medical check-up, having a meal at the restaurant,
accountancy and consulting services) can vary from service providers and customers among
many other factors. This lack of homogeneity in services creates difficulties for the service firms.
As delivery of services occurs during interaction between contact employees and customers,
attitudes and behaviors of the service providers can significantly affect customers' perceptions of
the service. This is important, because customers' perceptions of service quality and its value
can influence customer satisfaction, and in turn, purchase intentions.

PROCESS
Process is referred to the procedures, mechanisms and flow of activities by which the service is
delivered i.e. the service delivery and operating systems. The process of travelling with a budget
airline, is very different from that with a full-fledged premium airline. Because services are
performances or actions done for or with the customers, they typically involve a sequence of
steps and activities. The combination of these steps consitute a service process which is
evaluated by the customers.
Furthermore, in a service situation customers are likely to have to queue before they can be
served and the service delivery itself is likely to take a certain length of waiting time. It helps if
marketers ensure that customers understand the process of acquiring a service and the acceptable
delivery times. Creating and managing effective service processes are essential tasks for service
firms.

PHYSICAL EVIDENCE
Physical evidence refers to the environment in which the service is assembled and in which the
seller and customer interact, combined with tangible commodities that facilitate performance or
communication of the service. The physical evidence of service includes all the tangible
representations of service such as brochures, letterhead, business cards, reports, signage, internet
presence and equipment. For example, in the hotel industry, the design, furnishing, lighting,
layout and decoration of the hotel as well as the appearance and attitudes of its employees will
influence customer perceptions of the service quality and experiences. Because of the
simultaneous production and consumption of most services, the physical facility i.e. its
servicescape can play an important role in the service experience. For theme park, restaurant,
health club, hospital or school, its servicescape is critical in communicating about the service
and making the entire customer experience positive.

Dr. C.V.KRISHNA


UNIT II

LEVELS OF MARKET SEGMENTATION

Segment Marketing
A market segment consists of a large identifiable group within a market, with similar wants,
purchasing power, geographical location, buying attitudes, or buying habits. For example, an
automaker may identify four broad segments in the car market: buyers who are primarily seeking
(1) basic transportation, (2) high performance, (3) luxury, or (4) safety.

Niche Marketing
A niche is a more narrowly defined group, typically a small market whose needs are not being
well served. Marketers usually identify niches by dividing a segment into subseg tobacco
company might identify two subsegments of heavy smokers: those who are trying to stop
smoking, and those who dont care.

Local Marketing
Target marketing is leading to some marketing programs that are tailored to the needs and wants
of local customer groups (trading areas, neighborhoods, even individual stores). Citibank, for
instance, adjusts its banking services in each branch depending on neighborhood demographics;
Kraft helps supermarket chains identify the cheese assortment and shelf positioning that will
optimize cheese sales in low-, middle-, and high-income stores and in different ethnic
neighborhoods.
Individual Marketing
The ultimate level of segmentation leads to segments of one, customized marketing, or one-
to-one marketing.6 For centuries, consumers were served as individuals: The tailor made the
suit and the cobbler designed shoes for the individual. Much business-to-business marketing
today is customized, in that a manufacturer will customize the offer, logistics, communications,
and financial terms for each major account. Now technologies such as computers, databases,
robotic production, intranets and extranets, e-mail, and fax communication are permitting
companies to return to customized marketing, also called mass customization.7 Mass
customization is the ability to prepare individually designed products and communications on a
mass basis to meet each customers requirements

Bases for Segmenting Consumer Markets

Geographic Segmentation
Geographic segmentation calls for dividing the market into different geographical units such as
nations, states, regions, counties, cities, or neighborhoods. The company can operate in one or a
few geographic areas or operate in all but pay attention to local variations. Some marketers even
segment down to a specific zip code. Consider Blockbuster, which has databases to track the
video preferences of its 85 million members and buys additional demographic data about each
stores local area. As a result of this segmentation, it stocks its San Francisco stores with more
gay-oriented videos, reflecting the citys large gay population, while it stocks Chicago stores
with more family-oriented videos. Blockbuster can even distinguish between patterns of East
Dallas and South Dallas customers
Dr. C.V.KRISHNA


Demographic segmentation
The market is divided into groups on the basis of age and the other variables in Table 3.5. One
reason this is the most popular consumer segmentation method is that consumer wants,
preferences, and usage rates are often associated with demographic variables. Another reason is
that demographic variables are
easier to measure. Even when the target market is described in non-demographic terms (say, a
personality type), the link back to demographic characteristics is needed in order to estimate the
size of the target market and the media that should be used to reach it efficiently. Here is how
certain demographic variables have been used to segment consumer markets:

Age and life-cycle stage. Consumer wants and abilities change with age, as Gerber realized
when it decided to expand beyond its traditional baby foods line because the market was growing
more slowly due to lower birthrates, babies staying on formula longer, and children moving to
solid foods sooner. The company hopes that parents who buy its baby food will go on to buy its
Graduates foods for 1- to 3-year olds.13 However, age and life cycle can be tricky variables. For
example, Ford originally designed its Mustang automobile to appeal to young people who
wanted an inexpensive sport car. But when Ford found that the car was being purchased by all
age groups, it recognized that the target market was not the chronologically young, but the
psychologically young.
Gender. Gender segmentation has long been applied in clothing, hairstyling, cosmetics, and
magazines. Occasionally other marketers notice an opportunity for gender segmentation. The
Internet portal iVillage.com reaped the benefits of gender segmentation after initially trying to
appeal to a broader market of baby boomers. Noticing that Parent Soup and other offerings for
women were the most popular, iVillage soon evolved into the leading womens on-line
community. Its home page entreats visitors to Join our community of smart, compassionate, real
women.

Income. Income segmentation is a long-standing practice in such categories as automobiles,
boats, clothing, cosmetics, and travel. However, income does not always predict the best
customers for a given product. The most economical cars are not bought by the really poor, but
rather by those who think of themselves as poor relative to their status aspirations; medium-price
and expensive cars tend to be purchased by the overprivileged segments of each social class.
Generation. Each generation is profoundly influenced by the times in which it grows upthe
music, movies, politics, and events of that period. Some marketers target Generation Xers (those
born between 1964 and 1984), while others target Baby Boomers (those born between 1946 and
1964).15 Meredith and Schewe have proposed a more focused concept they call cohort
segmentation.16 Cohorts are groups of people who share experiences of major external events
(such as World War II) that have deeply affected their attitudes and preferences. Because
members of a cohort group feel a bond with each other for having shared these experiences,
effective marketing appeals use the icons and images that are prominent in the targeted cohort
groups experience.
Social class. Social class strongly influences preference in cars, clothing, home furnishings,
leisure activities, reading habits, and retailers, which is why many firms design products for
specific social classes. However, the tastes of social classes can change over time. The 1980s
were about greed and ostentation for the upper classes, but the 1990s were more about values
Dr. C.V.KRISHNA


and self-fulfillment. Affluent tastes now run toward more utilitarian rather than ostentatious
products

Psychographic Segmentation
In psychographic segmentation, buyers are divided into different groups on the basis of lifestyle
or personality and values. People within the same demographic group can exhibit very different
psychographic profiles.
Lifestyle. People exhibit many more lifestyles than are suggested by the seven social classes,
and the goods they consume express their lifestyles. Meat seems an unlikely product for lifestyle
segmentation, but one Kroger supermarket in Nashville found that segmenting self-service meat
products by lifestyle, not by type of meat, had a big
payoff. This store grouped meats by lifestyle, creating such sections as Meals in Minutes and
Kids Love This Stuff (hot dogs, hamburger patties, and the like). By focusing on lifestyle
needs, not protein categories, Krogers encouraged habitual beef and pork buyers to consider
lamb and veal as wellboosting sales and profits.18 But lifestyle segmentation does not always
work: Nestl introduced a special brand of decaffeinated coffee for late nighters, and it failed,
presumably because people saw no need for such a specialized product.
Personality. Marketers can endow their products with brand personalities that correspond to
consumer personalities. Apple Computers iMac computers, for example, have a friendly, stylish
personality that appeals to buyers who do not want boring, ordinary personal computers.
Values. Core values are the belief systems that underlie consumer attitudes and behaviors.
Core values go much deeper than behavior or attitude, and determine, at a basic level, peoples
choices and desires over the long term. Marketers who use this segmentation variable believe
that by appealing to peoples inner selves, it is possible to influence purchase behavior. Although
values often differ from culture to culture, Roper Reports has identified six values segments
stretching across countries: strivers (who focus more on material and professional goals),
devouts (who consider tradition and duty very important), altruists (who are interested in social
issues), intimates (who value close personal relationships and family highly), fun seekers (who
tend to be younger and usually male), and creatives (who are interested in education, knowledge,
and technology).

Behavioral Segmentation
In behavioral segmentation, buyers are divided into groups on the basis of their knowledge of,
attitude toward, use of, or response to a product. Many marketers believe that behavioral
variablesoccasions, benefits, user status, usage rate, loyalty status, buyer-readiness stage, and
attitudeare the best starting points for constructing market segments.
Occasions. Buyers can be distinguished according to the occasions on which they develop a
need, purchase a product, or use a product. For example, air travel is triggered by occasions
related to business, vacation, or family, so an airline can specialize in one of these occasions.
Thus, charter airlines serve groups of people who fly to a vacation destination. Occasion
segmentation can help firms expand product usage, as the Curtis Candy Company did when it
promoted trick-or-treating at Halloween and urged consumers to buy candy for the eager little
callers. A company can also consider critical life events to see whether they are accompanied by
certain needs. This kind of analysis has led to service providers such as marriage, employment,
and bereavement counselors.
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Benefits. Buyers can be classified according to the benefits they seek. One study of travelers
uncovered three benefit segments: those who travel to be with family, those who travel for
adventure or education, and those who enjoy the gambling and fun aspects of travel.
User status. Markets can be segmented into nonusers, ex-users, potential users, first time
users, and regular users of a product. The companys market position also influences its focus.
Market leaders (such as America Online) focus on attracting potential users, whereas smaller
firms (such as Earthlink, a fast-growing Internet service provider) try to lure users away from the
leader.
Usage rate. Markets can be segmented into light, medium, and heavy product users. Heavy
users are often a small percentage of the market but account for a high percentage of total
consumption. Marketers usually prefer to attract one heavy user rather than several light users,
and they vary their promotional efforts accordingly.
Repps Big & Tall Stores, which operates 200 stores and a catalog business, has identified 12
segments by analyzing customer response rates, average sales, and so on. Some segments get up
to eight mailings a year, while some get only one to three mailings. The chain tries to steer low-
volume catalog shoppers into nearby stores, and it offers infrequent customers an incentive such
as 15 percent off to buy during a particular period. Repp gets a 6 percent response to these
segmented mailings, far more than the typical 0.5 response rate for nonsegmented mailings.
Loyalty status. Buyers can be divided into four groups according to brand loyalty status: (1)
hard-core loyals (who always buy one brand), (2) split loyals (who are loyal to two or three
brands), (3) shifting loyals (who shift from one brand to another, and (4) switchers (who show no
loyalty to any brand).23 Each market consists of different numbers of these four types of buyers;
thus, a brand-loyal market has a high percentage of hard-core loyals. Companies that sell in such
a market have a hard time gaining more market share, and new competitors have a hard time
breaking in. One caution: What appears to be brand loyalty may actually reflect habit,
indifference, a low price, a high switching cost, or the nonavailability of other brands. For this
reason, marketers must carefully interpret what is behind observed purchasing patterns.
Buyer-readiness stage. A market consists of people in different stages of readiness 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 intend to buy. The relative numbers make a big
difference in designing the marketing program.
Attitude. Five attitude groups can be found in a market: (1) enthusiastic, (2) positive, (3)
indifferent, (4) negative, and (5) hostile. So, for example, workers in a political campaign use the
voters attitude to determine how much time to spend with that voter. They may thank
enthusiastic voters and remind them to vote, reinforce those who are positively disposed, try to
win the votes of indifferent voters, and spend no time trying to change the attitudes of negative
and hostile voters.

MARKET TARGETING

Evaluating Market Segments
In evaluating different market segments, the firm must look at two factors: (1) the segments
overall attractiveness, and (2) the companys objectives and resources. First, the firm must ask
whether a potential segment has the characteristics that make it generally attractive, such as size,
growth, profitability, scale economies, and low risk. Second, the firm must consider whether
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investing in the segment makes sense given the firms objectives and resources. Some attractive
segments could be dismissed because they do not mesh with the companys long-run objectives;
some should be dismissed
if the company lacks one or more of the competences needed to offer superior
value.
Selecting and Entering Market Segments
Having evaluated different segments, the company can consider five patterns of target market
selection, as shown in Figure 3-7.
Single-Segment Concentration
Many companies concentrate on a single segment: Volkswagen, for example, concentrates on the
small-car market, while Porsche concentrates on the sports car market. Through concentrated
marketing, the firm gains a thorough understanding of the segments needs and achieves a strong
market presence. Furthermore, the firm enjoys operating economies by specializing its
production, distribution, and promotion; if it attains segment leadership, it can earn a high return
on its investment. However, concentrated marketing involves higher than normal risks if the
segment turns sour because of changes in buying patterns or new competition. For these reasons,
many companies prefer to operate in more than one segment.
Selective Specialization
Here the firm selects a number of segments, each objectively attractive and appropriate. There
may be little or no synergy among the segments, but each segment promises to be a
moneymaker. This multi-segment coverage strategy has the advantage of diversifying the firms
risk. Consider a radio broadcaster that wants to appeal to both younger and older listeners using
selective specialization. Emmis Communications owns New Yorks WRKSRM, which describes
itself as smooth R&B [rhythm and blues] and classic soul and appeals to older listeners, as
well as WQHT-FM, which plays hip-hop (urban street
music) for under-25 listeners.

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PRODUCT DIFFERENTIATION

Product Form
Products can be differentiated based on their form i.e. size, shape and other physical attributes of
the product. Product form is the sum total of the physical attributes of a product. For example, a
medicine can be in the form of a tablet or a syrup or an injection. Marketers differentiate their
products by changing the forms of products. HLL changed the form of its Lux toilet soap from
bar form to a liquid form and marketed it as a separate product. Similarly, Godrejs Fair Glow
cream, which used to come in the form of a cream, is now offered in the form of a bar.

Design
A good product design takes care of the aspect of functionality or usefulness. Customers
usually look for functionality, apart from the design or shape of the product. For example, Sony
products are known for their excellent design. They incorporate new features; they are easy to
use; and require little or no maintenance. Sony revolutionized the audio equipment market
when it designed the Walkman in 1979. The design of a product should be functional and
aesthetically pleasing. Apple Computers differentiated its PC line, iMac, on the basis of its
aesthetically appealing design.

Features
Product features are the characteristics that allow a product to perform certain functions. A firm
can differentiate its product from that of the competitor by adding or removing certain features. It
is generally found that adding new features enhances the value of the product and helps a
company gain competitive advantage. For example, when Tata Engineering and Locomotive
Company launched Tata Indigo, it added a number of features to the product like independent
three-link suspension shock absorbers, new front seats that gave additional lumbar and thigh
support, 14-inch wheels, fire preventing inertia switch to minimize fuel leakage and a steel
monochrome frame that met the European standards of full frontal and offset frontal crash tests
as well as endurance safety tests. A company that offers more features often charges a higher
price, which consumers are willing to pay as they perceive the product as being of a superior
quality.

Size of Package
Firms also differentiate their products on the basis of the size and weight of the pack. e.g., Pepsi
captured a major part of Cola market in India by bringing about a change in the packaging of its
product. Through market research, Pepsi discovered that customers purchase only the amount of
the product that they find convenient to carry. So Pepsi introduced a new style of packaging the
plastic bottle. The plastic bottle held more of the beverage, but was light to carry. Though the
cost of producing plastic bottles was fairly high at that time, the move worked to Pepsis
advantage and the company captured a sizable market share, as Coke was not able to enter the
market immediately with its own version of the product.

Product Quality
Quality of a product refers to the characteristics of the product that enable it to perform
according to the expectations of customers and meet customers needs. According to the findings
of The Strategic Planning Institute, there is a positive correlation between product quality and a
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firms return on investment. Firms that produce premium quality products, such as Sony Corp,
often charge premium prices for their offerings. For example, Sony Corporation enjoys a
competitive edge over its rival firms because it is reputed for manufacturing products of
excellent quality. Companies spend huge amounts of money to maintain the quality of the
products. Many of them are trying to achieve the six sigma level in quality so that product
defects can be totally eliminated. They are also encouraging their employees to identify problems
or defects in the product and rewarding them suitably.

Durability
Products are expected to perform satisfactorily during their useful life. If a product is durable,
customers are ready to pay a premium. However, the extra amount customers will pay for the
durability of a product is not known with certainty. If the technology used in a product becomes
obsolete fast, the advantage derived by the marketer from its durability also gets reduced. In such
a case, customers do not pay a premium for the durability of the product.

SERVICE DIFFERENTIATION
In order to differentiate itself from its competitors on the basis of the service related with its
product, a company must segment its customers on the basis of how they prefer to make the
purchase. In such cases, both the tangible and the intangible attributes of the product form a
source of differentiation for the company.
Customer service can include anything from ease of ordering, delivery, installation, ease of
payment, financial arrangements, customer training, guarantees, maintenance, repair and
disposal. These aspects of customer service are discussed in detail below:
Ordering ease: Ordering ease refers to the ease with which the customer can
place the order for the product. Dell Computers has made the ordering of computers so
simple that customers who are not aware of new developments in the field can find
various options (which include the latest components) to select from, and the computer
system will be delivered at the place they want. Similarly, ordering books has become
so simple after Amazon.com introduced the concept of ordering online. Earlier, it was
difficult for customers to know which were the latest books on a topic and where they
could obtain them. But, now, they can obtain all this information at the click of the
mouse and order them as well.
Delivery: This refers to how well the product has been delivered to the
customer. It includes speed and care in delivering the products, e.g., the courier
services, Federal Express Corporation (FedEx) and United Parcel Service (UPS) are
known worldwide for their speed and efficiency in delivering and handling the
products. Dominos Pizza had been known for the fastest and the most reliable delivery
of pizza in the world.
Installation: Differentiation on the basis of installation plays a vital role in
industrial markets in which heavy equipment is purchased. Customers prefer the
company to send its personnel to install the equipment. Ease of installation can help a
company capture a significant share of the market, especially when the target market is
new to the technology.
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Guarantees: Guarantees can often be used as a differentiator and can be
leveraged as a competitive advantage. Guarantees are most often given for products
such as household appliances, automobiles, electronic devices, etc. How can a company
differentiate itself on the basis of guarantees?

Financial arrangement: Some companies tie up with financial institutions that offer loans to help
customers purchase new products through easy installment schemes, e.g. Maruti Udyog Ltd. has
tied up with eight financial institutions, Citicorp Maruti, Maruti Countrywide, ICICI, HDFC
Bank, Standard Chartered, ABN-AMRO, Kotak Mahindra and Sundaram Finance to help its
customers with car finance.
Customer training: Some companies also train their customers or the customer's employees to
use the equipment. For example, HPCL trains its dealers employees regarding handling of the
equipment and in the necessary soft skills to serve customers more efficiently. Some firms also
provide a hot line or a toll-free number for customer assistance and for further information about
new products and services.
Maintenance and repair: Companies provide after-sales maintenance and repair services for their
products. Subsequent business from the customer depends to a large extent on whether his
experience of maintenance and repair services from the company has been good or bad. For
example, LG provides free service and replacement of accessories for its hand sets up to one year
to customers of Reliance India Mobile.
Disposal: Companies can also differentiate their products on the basis of disposability of the
product after use. For instance, some companies use plastic containers or wrappers to pack their
product. They invite the customer to return the empty packs to the company in exchange for
another pack of the same product. This strategy helps the firm in increasing its sales as well as
establishing itself as an environment-friendly organization. For example, Hewlett Packard asks
its customers to send back empty cartridges, which it claims it will reuse.
PERSONNEL DIFFERENTIATION
In a market of cutthroat competition, companies try to identify unique differentiation platforms
and strategies to differentiate themselves against their competitors. Companies have realized that
technology cannot provide much competitive advantage because the cost of acquiring it has
reduced significantly. They need to depend on innovation in products, strategies, processes, etc.
People are an integral part of an innovation. Without them, innovation is simply not possible.
Therefore, it is the people or employees in an organization alone who can provide sustainable
advantage. For example, British Airways differentiates itself from other airways on the basis of
its personnel. In a service business, the people are the product, and the people at BA have made a
significant contribution to the airline's success. Its customer service has been the backbone of its
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success. And its people provide high quality services. Its staff knows the job. Its people
understand the responsibility for customer satisfaction.
CHANNEL DIFFERENTIATION
Companies can achieve a distinct differentiation for their products on the basis of the
distribution channels they use. A firms choice of distribution channel, its coverage, expertise
and performance helps it to differentiate itself from its competitors. A firm can add value to its
product on the basis of the channels that carry its product. Differentiating through the channels
of distribution involves making the product available to customers in places where competitors
have not entered. The availability of the product everywhere makes the customers search
process less complicated, less expensive and more habitual. Thus, by managing its distribution
channels, a firm can bring about a significant improvement in its business. Many firms have
realized this and are focusing on managing their distribution channels effectively, e.g., Indias
largest car maker, Maruti Udyog Limited (MUL), makes its cars available to customers through
several different distribution channels. The company realized that there is a huge market for
second hand cars and that this market has been dominated by unorganized players. To cater to
this need, it established a separate distribution channel. MUL opened True Value outlets
where the company acts an intermediary to bring sellers and buyers together.

IMAGE DIFFERENTIATION
The brand and image of a company evokes different reactions in different customers. Some
customers base their purchase decision on the brand name whereas some base the decision on the
image of the company. Over the years, firms have shifted their strategy from overemphasizing
cost management to creating and promoting features that foster a unique image or value for their
products. Image is an important aspect not only to large companies but to smaller companies too
as the latter may eventually grow and even go public or may be sold to another companies later
at higher prices. Thus, creating a positive image in market is important for every company.
Symbols: A firm can enhance its image or the image of its product by associating it with some
symbol. The symbol helps differentiate the company from its competitors on the basis of its
image and may be in the form of (a) a physical symbol like the Alsatian dog which represents
Syndicate bank, Apple which represents Apple Computers, Gattu (a small kid) for Asian Paints,
and the symbol of a sailor for Captain Cook salt. (b) a famous personality like Michael Jordan
for Nike, Liz Taylor for Passion brand of perfume, Cindy Crawford for Omega watches, Pierce
Brosnan for Reid & Taylor suitings, etc. (c) a color like yellow for Kodak, navy blue for HDFC
Bank, or (d) a musical piece which acts as a signature tune, for example, Britannia biscuits, Titan
and Airtel tunes.
Logos: A logo is an emblem, a graphic picture or a sign that represents and conveys an image of
a company. By displaying its logo widely on its brochures, annual reports, letterheads, business
cards, as well as advertisements in the audio-visual or print media, a company projects a certain
public image.
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Atmosphere: A company also creates the desired image by creating the right atmosphere at its
premises or headquarters in terms of ambience, color and lighting, material and furnishings, and
the building architecture. Companies have come to realize the importance of creating an
atmosphere that is consistent with the image they wish to portray to their customers. This has
resulted in an emphasis on the use of the physical space or atmosphere in the premises
appropriately. The physical space or atmosphere thus acts as an image generator for a company.
Events: A firm can also build its image based on the type of events it sponsors. For example, the
United Breweries group and The Hindu newspaper group sponsor many horse races and motor
sports, the ITC Group and the Taj Group usually sponsor tourism and food festivals. Beverage
companies such as Pepsi and Coca Cola sponsor cultural programs and other youth-centered
events to convey a youthful image. Samsung recently sponsored the cricket series between India
and Pakistan in Pakistan.
POSITIONING
The word positioning dates back to 1972, and was coined by Al Ries and Jack Trout.
According to them, positioning is not what you do to a product; rather it is what you do to the
mind of the customer. In other words, product positioning refers to all the activities undertaken
by a marketer to create and maintain the concept of value regarding its brand in the minds of
customers as against competitors brands. This concept soon caught the attention of marketers
and advertisers who began developing positioning strategies for their products and services.
Exhibit 12.2 describes how positioning effects the sale of products in a retail scenario. Marketers
try to position the product in such a manner, that it seems to possess all the desired
characteristics.
Creating a position for its products in the market helps a company develop a competitive
advantage. Al Ries and Jack Trout, in their book Positioning: The Battle for your Mind, have
elaborated upon the positioning strategies that need to be devised by companies to reach the
target customers in a marketplace that is swamped by competitors. Various positioning strategies
suggested by Al Ries and Jack Trout are discussed below.
Getting into the mind of the consumer
Getting into the mind of the customer is easier if the product or service happens to be the first in
the market. It is very easy to remember who is first but very difficult to remember who is second.
For instance, if you were asked to name the first man to land on moon, you would immediately
say "Neil Armstrong" but if you were asked to name the second person to land on the moon,
would you be able to confidently give the right answer Buzz Aldrin. Similarly, in the
marketplace, customers find it easy to remember products that were introduced first in the
market. Subsequent products in that category, however good they may be, are difficult to bring to
mind.
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Positioning of a leader
It is traditionally believed that the number one brand in the market occupies twice the market
share of number two brand. Likewise, the number two brand occupies twice the market share of
number three brand. The success of a company is not just due to its successful marketing
strategies, but a major reason is that it was first in the market. For instance, Xerox being the first
in the plain-paper copier market was able to attain market leadership. However, the company
failed several times to introduce products in other categories where it did not have market
leadership. Another example is IBM, the market leader in manufacturing computers. When IBM
tried to compete with Xerox in the copier market where it did not have first mover advantage, it
failed. It is therefore important for a market leader to maintain its position by positioning its
products intelligently. Most important of all, a market leader should not boast about its being
number one in the market. The danger is that customers may believe that the insecurity of being
number one in the market is forcing the company to do so.
Positioning of a follower
As already mentioned, if a brand is not the first that comes to mind, then it is better to identify an
unoccupied position where the brand can be the first. For example, when large cars like
Ambassador and Fiat were popular in India in the 80s, Maruti introduced a smaller car with an
800 cc capacity and it turned out to be immensely successful because it was the first in the small
car segment.
Repositioning the competition
Marketers sometimes try to reposition their products. The reasons might be that competitors are
also positioning for the same segment or that the market has become overcrowded or that the
target segments do not turn out to be as attractive as forecasted. For example, When Tata Sumo
of TELCO was introduced in the market, it was positioned on the takes the rough with the
smooth and the tough one ideas. However, when Toyotas Qualis was introduced in the
market much earlier than expected and the rural market did not turn out to be as attractive as
forecasted due to poor harvests in several states, TELCO had to reposition Sumo as a multi
utility vehicle (MUV) suitable for the urban market. Before repositioning, it modified the design
of Sumo. It redesigned the exterior, giving it a more urban look, took better care to soundproof
the cabin, and added power steering and central locking to make the Sumo attractive for the
urban segment. To communicate the change in the positioning, Tata Sumo came out with a teaser
campaign in August 2001. Its advertisement in the leading newspapers said, If you can identify
the family vehicle shown here, dont bother paying us for it. Readers had to call a toll-free
number to register their responses. Readers responses varied widely. In September 2001, the
new look Sumo was unveiled and it received a favorable response in the market.

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The power of a name
Creating a unique position for the brand in the mind of the customer becomes easy if the brand
has a suitable name. Names like Uncle Chipps, Pepsodent, Close Up, Head & Shoulders, Clinic
All Clear, Timex, Speed (branded petrol), etc reveal something about the product's utility and
therefore have a large recall value for customers. These examples indicate the power of a name
in positioning a product suitably. At the same time, condensing the company name into a series
of initials may not help significantly because it tends to confuse the customer as to what business
the company is involved in. This strategy may benefit large companies, but not small companies.
DEMAND MEASUREMENT AND FORECAST
A company conducts marketing research to find out the credibility of the product in the market,
its sales patterns, buyer acceptance levels and, most importantly, to forecast future sales. Proper
sales forecast results give the company an idea of various resource requirements such as finance
to be acquired, the plant capacity, the human resource base, inventory levels, etc., which can then
be planned for. Most of the time, sales forecasts are estimated on the basis of the market demand.
Market demand may mean different things to different marketers, but the marketer needs to have
a clear idea what it means to his company, and estimate it accordingly
Market Classification
The number of customers who are likely to become customers and buy a product represents the
size of the market for a product. The concept of the market is understood in differing senses such
as the potential market, the available market, the qualified available market, the target market
and the penetrated market.
A market, which represents the set of buyers interested in buying a product, constitutes a
potential market. For example, all men aged above 18 years who shave regularly are potential
customers for razors and other shaving accessories. The available market refers to the number of
buyers who have an interest in the product as well as purchasing capacity and access to the
market.
When access to a product or a service is restricted to a certain group of customers, even though
others have an interest in the product, purchasing capacity and access to the market, this
restricted market is referred to as the qualified available market. For example, the government
does not permit people below 21 years of age to enter pubs and bars. So, for bars or pubs, people
above 21 constitute the qualified available market.
The target market is the part of the available qualified market that a company is focusing its sales
and promotional activities on. For example, if an educational institute starts a postgraduate
program in Civil Engineering in Andhra Pradesh, all civil engineering graduates are the qualified
available market. If the institute targets only civil engineers from Andhra Pradesh, they are its
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target customers. Similarly, when NIIT launched a computer course for housewives, all educated
housewives became the target market for NIIT.
The penetrated market is the market that comprises of customers who have already purchased the
product.
The Concept of Market Demand for Marketing
The market demand for a product under a specified marketing activity is the sales volume of the
product in the target market for a specified time period in a particular region.
Market Potential
The market potential refers to the optimum sales volume that can be reached where any further
increase in marketing efforts will not have any significant impact in further increasing the sales
in the given environment. A manager can assess the worldwide and countrywide market potential
for pagers, for example, by using secondary and historical data on wireless telephone and paging
service diffusion. To get an idea of the market potential for both paging and a related new
service, he can use information such as the number of current subscribers, telephone
infrastructure, population, gross national product, income distribution, travel patterns,
occupations, and so forth. Company Demand
Company demand is measured on the basis of its marketing efforts with respect to its
competitors. The company's efforts such as effective promotional and advertising strategies,
pricing patterns, distribution of the product and effective after sales service determine the
company's market share of the product. If other factors remain constant, the market share of a
company's product depends on the amount of expenditure spent on marketing relative to the
competitors.
Company Sales Forecast
After determining the company demand, the firm must determine the level of marketing effort
that is needed to generate an expected sales volume. The sales forecast refers to the amount of
sales a firm expects to generate with a chosen marketing plan, in a given marketing environment.
Here it is important to understand the interdependence between a companys sales forecast and
the marketing effort. It is often cited that a firm should develop its marketing plan on the basis of
its sales forecast. However, this approach is effective only when company demand is non
expansible i.e. market demand is not very much affected by the level of marketing expenditure.
This method of developing a marketing plan should not be followed when the market demand is
expansible or when the term forecast implies company sales. A company sales forecast as we
have seen does not form a basis for determining the marketing expenditure. On the other hand,
the company sales forecast is the result of a marketing plan.
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Sales Quota and Sales Budget
The sales quota is the target that has been set for a particular marketing parameter; e.g. the
parameter could be the marketing manager's sales in a region and/or the sales of a product range.
The sales quota is normally defined in order to encourage efforts to push sales to the maximum
possible limit. The sales budget is prepared on the basis of the estimations of sales forecasts and
in general, a conservative estimate is used so that the expenditure involved in processing, sales
and other related activities does not go out of control.
Current Demand Estimation
The current market demand can be estimated using environmental factors such as total market
potential, area market potential, total industry sales, etc. The total market potential is the
maximum market available to an industry under a given set of conditions. For example, the total
market potential for a premium automobile product such as Mercedes Benz is the number of
people in the highest income group not yet possessing the same car or any other equivalent car.
We will look at examples of estimation of the current demand in consumer and industrial
markets in the following paragraphs.
For estimating the industrial market demand, let us take an example where we have to estimate
the market potential of a product called SKO (Superior Kerosene Oil), which can be used as a
substitute in large scale industrial generators. We have to first find out the list of all the
industries, which are currently using diesel generators, then find out the potential customers who
are willing to shift to a low cost substitute, then estimate the monthly or weekly requirement of
the SKO in liters, and then finally analyze the capacity of the company to supply that quantity.
Consumer markets are difficult to analyze, since the size of the market is huge compared to the
industrial markets. Therefore, usually a marketer estimates the sales of a particular product in a
specific region and then extrapolates it in proportion to the population of that area. For example,
a laptop manufacturer wants to estimate the sales potential of laptops in India. He has the data for
the sales potential of laptops in Karnataka. If this figure is 4% of the total population of
Karnataka, he can extrapolate that the total market for laptops in India is around 4% of the total
population of India. But unfortunately, we cannot estimate sales in this manner, as there are lots
of other factors, which influence the sales of laptops. For instance, the maximum sales of laptops
in India are in Bangalore, the capital city of Karnataka. Therefore, factors like computer literacy,
number of technology savvy persons, etc. are some of the factors that affect the sales of such
products.
Future Demand Estimation
Estimation of future demand is an essential part of any business activity. A good estimation gives
a fair idea of the sales in the near future and helps in taking effective steps to realize the sales.
Estimation for products which have fairly consistent sales, or which are frequently used
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products, is relatively easy compared to estimation for products whose sales keep fluctuating.
The demand estimation techniques used for products with fluctuating sales should be highly
effective and accurate, as estimating the future demand for such products carries immense
significance to the marketer.
The demand estimation process is generally carried out by research agencies, which observe
environmental factors such as the effects of government regulations, population trends, etc. and
then estimate the demand depending on the industry patterns for sales in the particular product
range. Following this, the estimation depends on the firms performance on various parameters.
These forecasts are made with the help of techniques such as the composite sales force opinion,
survey of buyer intentions, expert opinions, etc.
Composite sales force opinion
Using the composite sales force opinion, the sales team is involved in estimating future demand
patterns. The company asks its salespeople to estimate sales patterns in the near future depending
upon their experience in the market. This method is reliable and advantageous, but does have
certain inherent fallacies. A sales representative might underestimate demand, perhaps relying on
some bad experiences he may have had in the immediate past. On the other hand, he/she might
project the sales excessively high on the basis of positive experiences in the recent past. Different
sales people project sales very differently on the basis of their intuition.
However, the company must take measures to deal with this possibility by providing all the
relevant and essential data about the market, competition and customers to the sales people.
Providing incentives for proper projections also help motivate sales people, and make them more
responsible. They will realize the importance of accurate estimation since the sales projections
and targets that they have to achieve are being determined on this basis.
Survey of buyer intentions
Consumer behavior patterns are generally the most critical part of demand estimation.
Consumers behave differently at different times, and therefore to forecast sales, it is essential to
conduct consumer research surveys. These surveys are aimed at eliciting the factors, which will
give an idea of the consumers demand patterns in the near future. For the launch of New Coke
in 1985, Coca Cola conducted a customer survey as detailed in Exhibit 7.4. Though buyers
reacted negatively to the new product it, Coca Cola went ahead with the launch, but it later had
to withdraw the product from the market.
Expert opinion
The companies also sometimes seek the help of experts in the field to estimate sales on the basis
of their experience and knowledge. These experts may be dealers, suppliers and consultants who
can share their expertise in the projection of the future sales.
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Past sales analysis
Companies also use past sales information for projecting future sales patterns. There are several
techniques for this like time series projections.
Exponential smoothing: This method looks at the weighted average of past sales giving a
higher weightage to more recent sales.
Statistical demand analysis: This method determines the effect of factors such as marketing
expenditure and the price of the product on its sales.
Econometric analysis: This type of analysis determines the sales system using statistical tools
by developing sets of equations.
Test marketing method
Test marketing is nothing but testing the sales of the product in the market for a few days. Test
marketing is employed for products where effective estimation is not possible, or where
forecasting is not suitable for the products. For such products, directly testing the product in the
market is preferred.

Dr. C.V.KRISHNA


UNIT III

Product Levels
Marketers plan their market offering at five levels, as shown in Figure 4-2. Each level adds more
customer value, and together the five levels constitute a customer value hierarchy. The most
fundamental level is the core benefit: the fundamental service or benefit that the customer is
really buying. A hotel guest is buying rest and sleep; the purchaser of a drill is buying holes.
Effective marketers therefore see themselves as providers of product benefits, not merely product
features. At the second level, the marketer has to turn the core benefit into a basic product. Thus,
a hotel room includes a bed, bathroom, towels, and closet. At the third level, the marketer
prepares an expected product, a set of attributes and conditions that buyers normally expect when
they buy the product. Hotel guests expect a clean bed, fresh towels, and so on. Because most
hotels can meet this minimum expectation, the traveler normally will settle for whichever hotel is
most convenient or least expensive. At the fourth level, the marketer prepares an augmented
product that exceeds customer expectations. A hotel might include a remote-control
television set, fresh flowers, and express check-in and checkout. Todays competition essentially
takes place at the product-augmentation level. (In less developed countries, competition takes
place mostly at the expected product level.) Product augmentation leads the marketer to look at
the users total consumption system: the way the user performs the tasks of getting, using, fixing,
and disposing of the product. As Levitt notes: The new competition is not between what
companies produce in their factories, but between what they add to their factory output in the
form of packaging, services, advertising,customer advice, financing, delivery arrangements,
warehousing, and other things that people value.

Product Classifications
In addition to understanding a products position in the hierarchy, the marketer also must
understand how to classify the product on the basis of three characteristics: durability,
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tangibility, and consumer or industrial use. Each product classification is associated with a
different marketing-mix strategy

Durability and tangibility. Nondurable goods are tangible goods that are normally consumed
in one or a few uses (such as beer and soap). Because these goods are consumed quickly and
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 preference. Durable
goods are tangible goods that normally survive many uses (such as refrigerators). These products
normally require more personal selling and service, command a higher margin, and require more
seller guarantees. Services are intangible, inseparable, variable, and perishable products (such as
haircuts or cell phone service), so they normally require more quality control, supplier
credibility, and adaptability.
Consumer-goods classification. Classified according to consumer shopping habits, these
products include: convenience goods that are usually purchased frequently, immediately, and
with a minimum of effort, such as newspapers; shopping goods that the customer, in the process
of selection and purchase, characteristically
compares on the basis of suitability, quality, price, and style, such as furniture; specialty goods
with unique characteristics or brand identification, such as cars, for which a sufficient number of
buyers are willing to make a special purchasing effort; and unsought goods that consumers do
not know about or do not normally think of buying, such as smoke detectors. Dealers that sell
specialty goods need not be conveniently located but must communicate their locations to
buyers; unsought goods require more advertising and personal sales support.
Industrial-goods classification. Materials and parts are goods that enter the manufacturers
product completely. Raw materials can be either farm products (e.g. wheat) or natural products
(e.g., lumber). Farm products are sold through intermediaries; natural products are generally sold
through long-term supply contracts, for which price and delivery reliability are key purchase
factors. Manufactured materials and parts fall into two categories: component materials (iron)
and component parts (small motors); again, price and supplier reliability are important
considerations. Capital items are long-lasting goods that facilitate developing or managing the
finished product. They include two groups: installations (such as factories) and equipment (such
as trucks and computers), both sold through personal selling. Supplies and business services are
short-lasting goods and services that facilitate developing or managing the finished product.

Decisions involved in Branding
Selection of a Brand Name
Selection of a brand name is crucial for the success of a brand. There are several factors that
have to be considered before the brand name is selected. It is necessary to ensure that the brand
name is easy to remember. It should have an easy recall value and people should be able to
spell and pronounce it easily. The brand name should be such that it arouses curiosity when
heard. A brand name, which arouses curiosity, will attract the attention of the target audience.
Brand Strategy Decision
A brand signifies some value to the customers and a brand strategy decision involves the
necessary steps that have to be taken to deliver this value to the customers.
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Steps: identification of the availability of resources for allocating budgets for brand building,
the commitment of the company, and its capability to take an initiative that is required. These
steps form part of a brand building exercise and if an organization is unable to take such steps,
the brand becomes a liability to the organization rather than an asset. The strategic implication
of building a brand is that it should help improve the business of the organization.
Line Extension
A line extension is the development of a product that is closely related to one or more products
in the existing product line but is designed specifically to meet the somewhat different needs of
customers. For example, Godrej had a face cream with the name Fair Glow Fairness cream and
came out with the Fair Glow toilet soaps to cater to the people who wished to use soap bars
rather than cream.
Brand Extension
Brand extensions are brand names extended to new product categories. Market dynamics throw
up opportunities for extending a brand in three forms:
Extending the brand to another form of the same product: The primary benefit derived
from both the products is the same. For instance, the benefit derived from brushing the teeth
with either Colgate toothpaste or toothpowder is the same. The efficacy levels of both forms
are assumed to be similar. Several brands have grown in value through this route. For example,
Colgate is available both as a toothpaste and toothpowder. Similarly 'Vim bar' has been
extended to a powder form. In the pharma sector, a branded anti-allergy medication from Dr
Reddy's Laboratories sells both in syrup as well as tablet form. By offering the same brand in
different forms, the marketer enhances the scope of application of a brand and reaches a larger
audience.
Product line extensions: Adding related products to a brand that is well established. A
marketer resorts to this when he wants a brand to cover different sub-segments within the same
product category. HLL extended its Flora brand of sunflower oil to the gingelly oil sub-
segment of the edible oils category. Such a move is common in very competitive markets.
Reaching out to a new category: When the brand has the potential of providing benefits in
another category either through a carefully chosen name or through its wide acceptance in a
category, this form of extension is followed. Godrej Consumer Products extended its Fair Glow
brand, having a presence in fairness creams, to soaps. By extending the brand to soaps, the
assurance that Fair Glow promoted fairness was expected to easily flow to soaps as well. The
brand enables this extension conveniently by standing for a product that promises fairness.

Packaging Decisions
Packaging
Packaging is the process of developing a design and a container for a product. Packaging adds
value to the product in the form of easier handling and secured usage. Packaging plays a
prominent role in the sales of a product since a properly packaged product will result in repeat
purchases by the customers. A secured, transparent and easy-to-use packaging will have better
sales. A clear transparent packaging will help the customers view the contents of the product
and will help them in their purchase decision-making.

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Labeling
Labeling is the process of exhibiting important information on the product's package. Labeling
has become increasingly important and legally essential. Manufacturers have to display the
ingredients of the product on the package, with warnings and safety precautions along with
instructions about the best possible utilisation of the product.
The Government of India encourages the manufacture of products that are eco-friendly. One
such step in this direction is to provide a labeling with the name 'ECOMARK' for those
products that meet certain criteria. Such criteria could lead to effective reduction in the harm
caused to the environment, when such products are disposed of. The Government of India
issues this ECOMARK, when the products meet the set standards along with the requirements
of the Indian Standards Institute. This process has been started to encourage the industries in
India to contribute to the protection of the environment.
Universal Product Codes
Labeling many products is done by attaching a universal product code which consists of a
unique sequence of lines that identifies a product with the help of an electronic scanner usually
placed at the retail checkout counters. In India, the usage of the bar code started in the 1990's
with the Indian Institutes of Technologies (IITs) using it for coding their library books. The
concept was later introduced in retail outlets like Food World. Most of the logistics firms are
increasingly using the bar coding technology in India. Bar codes, however cannot help a firm in
effectively tackling piracy or imitations. But it has advantages like reducing the amount of data
entry work. EAN (European Article Number), a Delhi-based organization, is responsible for
issuing bar codes for products. The Government of India has made it compulsory for exporters
to bar code their products.

Product Mix Decisions
The product mix is the set of all the products that an organization offers to its customers. For
instance HLL offers detergents, shampoos, hair care products, cosmetics, beverages, health care
products, ice creams, etc. A product mix consists of all the product mix lines and categories. It
has a certain characteristic features like product width, length, depth and consistency.
Width: This is the total number of product lines a company carries. In Table 11.1 we see that
HLL's product mix width consists of 10 lines.
Length: The length of the product mix is the total number of items in that mix. In our example
of HLL (Table 11.1), it is 46. The average length of a line is obtained by dividing the total
length by the number of lines i.e. 46/10 = 4.6
Depth: The depth of a product mix is the assortment of sizes, colors and variations offered for
each product in the product line, for example, Lifebuoy Active Red comes in three sizes:
125gm, 100gm and 60gm cakes.
Consistency: Consistency refers to the closeness exhibited by the products lines in production
requirements, distribution, end usage, etc. For instance, most of the HLL product lines are
consistent as they are consumer goods, distributed by the same channels of distribution and are
produced in similar manufacturing facilities.

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Product Mix Strategies
Manufacturers and middlemen use several strategies to manage their product mix effectively.
We will discuss a few of these strategies here.
Expansion of product mix: An organization may opt to expand its existing product mix by
increasing its product lines and/or the depth within the line. New product lines may be either
related or unrelated to the existing product lines.

Table 11.1: Product Mix of HLL

Contraction of product mix: It has been noted that companies contract their product mix during
economic slumps, and when the competition is intense. Organizations contract their product mix
either by eliminating the entire product line or by simplifying the assortments within the lines.
The product mix is contracted to eliminate low profit yielding products and to get a better profit
margin from fewer products.
Altering existing products: Companies should consider altering the existing products instead of
adding new products to their product mix. Redesigning or adding new features to the existing
product can prove to be less risky and more lucrative. Packaging is an equally important tool in
altering the look and the usage of the product. Creative packaging has been found to increase the
attractiveness of even mundane products like cheese, paper napkins, eggs, etc. For example, the
tetra pack of milk/juices increases the ease of handling and storage. Colgate toothpaste's plastic
packaging makes it easy to use and dispense the product.

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STAGES OF NEW PRODUCT DEVELOPMENT
Before the introduction of a product into the market it goes through several stages of
development. These stages of development usually include (a) idea generation, (b) screening, (c)
concept testing and business analysis, (d) product development, (e) test marketing and (f)
commercialization.
Idea Generation
Companies seek new ideas to enhance the performance of their existing products and/or to
innovate new products. The act of searching for new ideas is called idea generation. New
product ideas can come from customers, dealers, in-company resources, advertising agencies
and the external research consultants. But the main source of ideas for generating new products
or improving the existing product is the customers. Their complaints and grievances are a rich
source of ideas. This is true in case of customer products as well as industrial products. Most
companies prefer user stimulus strategies and announce attractive prizes for people who
suggest ideas.
Idea Screening
The main purpose of idea generation is to collect a large number of ideas. However, not all ideas
can be commercially viable. Therefore, companies filter the less viable ideas with the help of a
systematic process. Companies can use various parameters to screen the ideas such as market
size, technical capabilities, potential competition, compatibility with the known customer needs,
etc. Addressing the following issues will also help companies analyze the attractiveness of ideas:
The main purpose of idea screening is to reduce the number of ideas to a manageable few that
deserve further attention for development. Screening calls for spotting good ideas and dropping
poor ones as soon as possible. If poor ideas are not dropped at the appropriate time, the company
will have to bear the expense of product development and disposal. Therefore, marketers must be
prudent in selecting the ideas.
Concept Testing and Analysis
After passing the initial screening stage, the product idea proceeds to the next stage i.e. concept
testing. Concept testing is one of the crucial stages of product development. But companies
often do not take this stage seriously or omit it completely. As a result, many new products fail.
They fail because they reflect only the preferences and capabilities of the company and not the
customer needs or product benefits that significantly distinguish them from competitive
offerings.
Marketers use various tools to explain the product attributes, like drawings, sample designs,
computer aided designs and virtual reality programs, etc. Companies use research like a focus
group survey and/or broad market survey to collect the feedback about customer needs,
perceived value, believability of the idea, comparison with competitive products, and purchase
intentions. The results of concept testing help in understanding what attributes and benefits a
customer is looking for in a product.
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Business analysis
After testing the product concept, the firm makes a plan for developing, producing, and
marketing the new product. This requires research on the market size, competitive structure and
preliminary technical analysis for providing the basis for the design and production approach,
and also the appropriate legal and patent search.
Business analysis is the first in-depth financial evaluation of the new-product to be developed. It
undergoes several revisions. Business analysis is considered as one of the important stages in the
new product development process, as it involves estimating the total investment required in
developing the product and the expected sales.
Total sales estimation
Total estimated sales are a sum of the estimated first-time sales, replacement sales and repeat
sales. For one time purchased products, sales rise at the beginning, peak and later approach zero.
For infrequently purchased products such as cars, replacement cycles are dictated by physical
wearing out or by obsolescence. Sales forecasting calls for estimating first-time sales and
replacement sales separately. In case of frequently purchased products, the number of first time
buyers initially increases and then decreases. If repeat purchases occur soon after the first
purchase, it indicates that the product satisfies some buyers.
Estimating costs and profits
The R&D, manufacturing, marketing and finance departments estimate the cost. The profitability
of the new product is estimated through various financial tools. Break-even analysis is the
simplest technique which estimates the number of units of a product a company would have to
sell to break even with the given price and cost structure.
Product Development
After completing concept testing and business evaluation, the next stage involves the actual
product development. In this stage, detailed technical analysis is conducted to know whether the
product can be produced at costs low enough to make the final price attractive to the customers.
A working model or a prototype is developed which reveals all the tangible and intangible
attributes of the product. These prototypes are developed in limited numbers for customer testing
purposes.
Product use testing
Marketers identify a sample of target customer group to test the functionality of the prototype
and the final product. They can select the sample from either the employees of the company or
volunteers who will test the product. The prototype developed is tested for its feasibility and
functionality. Product testing is carried out to evaluate the product characteristics and examine
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the functional performance of the product. It gives useful information like customers first
impression about the product and provides early use experiences of the customers and their
further expectations. Product testing further helps in:
Test Marketing
Test marketing is the stage where the product is introduced in a few select cities. Test
marketing comes with its own cost. The company bears the following expenses:
i.High advertising costs considering the low volume,
ii.High manufacturing costs because of lack of economies of scale,
iii.High distribution costs, because of low volumes
iv.Other costs like cost of distributing samples, coupons, etc.
Commercialization
The results of test marketing help marketers decide the changes that are needed in the marketing
mix before entering the market. It also helps the marketers decide the amount of production, the
distribution strategy, selling efforts and other issues like providing guarantees, warranties, post
purchase repair and replacement services etc.
PRODUCT LIFE CYCLE
Product life cycle (PLC) analysis is a very valuable tool in the hands of a marketer. As shown in
Figure 11.2, a typical product goes through four stages in its life, i.e. (a) introduction, (b) growth,
(c) maturity and (d) decline. And it varies according to the type of product. Studying the patterns
of PLC, from time to time, helps the business to prosper. It gives marketers a better
understanding in managing their profitable products and eliminating the unprofitable ones. As
the product moves from one stage of its life cycle to another, marketers try to evaluate and adjust
strategies for promoting, pricing and distributing the product. We will explain the various stages
below.
Introduction
In the introduction stage, the product is introduced to the customer. Introducing a new product is
difficult because (a) only a few sellers can afford the technological know-how, marketing and
other costs to launch the product and (b), the risk of new product failure is quite high. The
introduction stage is marked by zero profits and negative or negligible sales. This is because
initial revenues generated are low. Promotional expenses are at their highest because the
company needs to (i) inform the customer about the product (ii) induce product trial and (iii)
secure distribution in retail outlets. Advertising is one of the most effective tools at this stage of
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PLC because marketers must communicate their product's features, usage and advantages to
potential customers.

Figure 11.2: The Four Stages of the Product Life Cycle

Strategies for introduction stage
Marketers can set the price, promotion, distribution and quality of the product as either high or
low, for the introduction of a new product. Keeping only price and promotion in mind, a
marketer can adopt strategies like:
Rapid skimming: Using this strategy, marketers launch the product at a higher price and higher
promotional level to skim the market rapidly. This strategy is more successful when a large part
of the potential market is unaware of the product. Using this strategy, the firm tries to build
brand preferences.
Slow skimming: This strategy calls for launching the new product at a higher price and a low
promotional level. This strategy is feasible when the market is aware of the product, the market
size is limited, competition is not intense and the customers are ready to pay a higher price for
the product.
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Rapid penetration: Rapid penetration demands the launching of a product at a lower price and
with heavy promotion. This strategy is applied when the market is large in size, customers are
unaware of the product, they are more price sensitive, there is a strong competition among firms,
and the unit manufacturing cost comes down with the company's scale of production.
Slow penetration: Slow penetration calls for launching the new product at a lower price and a
low level of promotion. Marketers resort to this strategy when the market is large in size, the
customers are highly aware of the product, they are price sensitive, and there exists some
potential competition in the market.
Growth
The introduction stage is followed by the growth stage. The growth stage is crucial for the
product's survival in the market because the reactions of the competitors to the product's success
will affect the product's life expectancy. This stage is characterised by increase in sales, heavy
demand for the product and peaking of profits. New firms enter the market in the growth stage,
attracted by the promising opportunities in the market. They introduce new product features and
a wider distribution network. Companies increase their level of promotional expenditure to meet
the competition. The profit of the firm increases initially as (a) promotional costs are spread over
a larger volume and (b) the unit manufacturing cost falls. At a later phase in growth stage, the
profits begin to decline as competition increases, forcing the lowering of prices and heavy
spending on promotion.
Strategies for the growth stage
Firms use various strategies to cash in on the growth in the market, as quickly as possible.
(a) They restore to aggressive pricing, including price cuts to attract price sensitive
customers.
(b) They emphasize the product's benefits in order to create a competitive niche in
the market.
(c) They try to improve product quality and add new features and models. Other
changes brought about to the product include making the product available in
different sizes, flavors, etc.
(d) They may introduce new distribution channels.
(e) They enter new markets.

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Maturity
The maturity stage is marked by a steady decline in profits. The sales tend to (a) grow, (b)
stabilise and (c) then start to decline (refer the sales curve in Figure 11.2). The sales growth rate
slows down as the distribution channels get exhausted. Then the sales tend to flatten or stabilize
on a per capita basis as the market reaches its saturation. And finally the sales start declining and
customers try out new products and substitutes. Competition is fierce at this stage as many
brands compete at the same time. Each competitor tries to improve his product and highlight the
product benefits. Weaker competitors and smaller firms are squeezed out of the market.
Strategies for the maturity stage
Firms adapt various strategies to stimulate sales in the maturity stage, like:
Abandon weaker products and concentrate more on profitable products.
Increase advertising and sales promotion. Marketers resort to introducing fresh advertising
campaigns, new packaging and even product re-launches during this stage.
Invest more in R&D to bring about improvements in the product and product line extensions.
Divest the business through disposal of assets.
Limitations of PLC concept
The PLC concept helps in making marketing decisions but it needs to be implemented with care.
Managers need to be aware of the limitations of the PLC so that they are not misled by its
prescriptions.
The sales of some products rise quickly and may decline at the same rate. However, some
products may continue at the same stage for long. For example, Cadbury's Dairy Milk chocolate
has survived for decades in the mature stage of the PLC.
Increase in marketing activities like promotion may alter the shape of the PLC's sales curve to a
considerable extent. For example, an increase in advertising at the maturity and or decline stages
may increase the length of these phases.
The PLC outlines the phases but does not give any indication as regards to their duration i.e.
duration of introduction, growth, maturity stages. This limits its use as a forecasting tool since it
is not possible to predict when maturity/decline will begin.

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Pricing
The Process of Setting Prices

Setting the price involves the following steps:
Setting pricing objectives
Factors affecting demand determination
Analyzing the pricing of the competitors
Selection of a pricing method
The selection of pricing policy

Pricing Methods
Mark-up pricing
Firms fix a selling price on the products they produce, which normally exceeds the costs incurred
in producing these products. In this type of pricing, a marketer adds a mark-up on its cost of the
product. Mark-up pricing is most common in retailing, where a retailer buys a product for resale.
For example, if a retailer incurs a cost of Rs.85 to buy a product, he might add a mark-up of
Rs.15 and fix the selling price of the product at Rs.100. Mark-up is most normally expressed as a
percentage of the cost or a percentage of the selling price. In the above example, the markup
expressed as a percentage of the cost and as a percentage of the selling price is shown below.

Target return pricing
The target return pricing is set by marketers to achieve a specified rate of return on their
investments. The companies, which fix a return on their investment, are usually the leaders in
their industry. General Motors, General Electric, Dupont are examples of companies, which have
linked the prices of their products to this objective. A marketer can fix the prices of his products
on the basis of target returns that he is expecting on the investment with the help of following
formulae:

Suppose a marketer produces a product and the cost of each unit is Rs 200. He made an
investment of Rs. 100,000 to set up his business. He expects that he will be able to sell 500 units
of the product and obtain 15 percent return on his investment. He will price his product at
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Perceived value pricing
In this type (perceived value) of pricing, marketers set the prices of the products on the basis of
their perceived value in the minds of customers. Perceived value is calculated as a weighted
average of the products perceived attribute scores. Marketers normally use advertising and sales
promotional activities to enhance the perceived value of the product in the market. Firms may
conduct market surveys to analyze customers perceptions about the value of the product. This
will help marketers efficiently set the prices for their products. Dupont follows perceived value
pricing for its products. However, there is an inherent risk in using this method. If the marketer
underestimates the value of the product based on the customers belief of the perceived value of
the product, he will charge less than what he actually can from the customers and he will not be
able to maximize his profits. Similarly, if the marketer overestimates the value of the product, the
customers will not buy the product and it will be difficult for him to survive in the market.
Going rate pricing
Going rate pricing is a simple method in which a company simply follows the prevailing pricing
patterns in the market. The company adopts a pricing strategy similar to those adopted by the
major players in the market or may slightly adjust its prices to suit the companys systems and
processes. Generally, in this method, marketers give importance to price changes made by the
market leader and alter their own prices accordingly, rather than changing the prices according to
the demand patterns of the companys product in the market.
Sealed bid pricing
In some markets, business is carried out on the basis of sealed bids rather than on the basis of
openly setting prices for products. This type of pricing is more suitable for industrial products.
Many companies compete in this process, where the price of the product or service is usually
quoted in a sealed cover. This method is adopted for the products that do not possess a market
price or for products for which it is difficult to fix the price owing to attributes like varying levels
of quality and specifications. The sealed bid method is usually followed in government
organizations. Whenever a government organization needs to purchase a product or service, it is
required to call for bids and several companies are invited to quote their prices in a sealed form.
After receiving the sealed bids, the organization will normally purchase the product or service
from the company, which has bid the least price.
Differentiated pricing
In differentiated pricing, marketers adopt different prices for the same product at different
locations or for different types of customers. For instance, the cost of a 250 ml Pepsi may cost
Rs.8 in a supermarket, Rs.10 in a cinema hall and Rs.12 in a restaurant. Thus, even though the
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product is the same, it is sold at different prices at different locations. This pricing method, if
used effectively, will help a company increase its profits. Another example of differentiated
pricing can be seen in the service provided by Andhra Pradesh State Road Transport Corporation
(APSRTC), which offers tickets at a lower cost to regular travelers through various schemes,
than to those who only travel occasionally. Similarly, at hill stations, hotels keep different prices
for summer and winter seasons.
Value pricing
Value pricing is a method in which marketers offer low prices for high quality products or
services. The idea of value pricing is to help the customers perceive that they are getting a high
quality product at a low price. Value pricing is not implemented as a response to the pricing
patterns of the competitors. On the contrary, it is an outcome of improved research and
development that helps the company deliver high quality goods at low prices. For example, The
Times of India started a revolution in the newspaper market by offering the daily newspaper for
as less as Re.1 on some days of the week. Similarly, in the shampoo and detergent markets, HLL
and P&G have recently reduced their prices by 15-20% in an attempt to send a message to
customer that they are getting better value for their money.
Market skimming
Marketers usually adopt such an objective when they develop unique and innovative products or
a breakthrough technology. Certain companies prefer to set high prices for their products and
recover the costs incurred in developing and producing them as early as possible. It becomes
necessary for a marketer to do this if he feels that the product being developed or the technology
being utilized has a short life cycle. Intel, the chip producer, adopted this strategy. However, this
strategy has an inherent disadvantage. If the competitor prices his products lower than the firms
prices, it may result in the firm losing significant market share.
Distribution Channels & Levels
The producer and the final customer are part of every channel. We will use the number of
intermediary levels to designate the length of a channel. Figure 5-3a illustrates several consumer-
goods marketing channels of different lengths, while Figure 5-3b illustrates industrial marketing
channels. A zero-level channel (also called a direct-marketing channel) consists of a
manufacturer selling directly to the final customer through Internet selling, door-to-door sales,
home parties, mail order, telemarketing, TV selling, manufacturer-owned stores, and other
methods. A one-level channel contains one selling intermediary, such as a retailer.
A two-level channel contains two intermediaries; a three-level channel contains three
intermediaries. From the producers point of view, obtaining information about end users and
exercising control becomes more difficult as the number of channel levels increases. Channels
normally describe a forward movement of products. One can also talk about backward channels,
which recycle trash and old or obsolete products no longer used by customers. Several
intermediaries play a role in backward channels, including manufacturers redemption centers,
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community groups, traditional intermediaries such as soft-drink intermediaries, trash-collection
specialists, recycling centers, trash recycling brokers, and central-processing warehousing.

Channel Management Decisions
Channel Member Selection
Modern management practices suggest that organizations must focus their attention on
developing their core competencies. The firms should try to outsource activities, if the outside
agencies can perform those activities better than the firm itself. However, firms should not
outsource their critical activities. A substantial amount of time should be invested in developing
better relationships amongst the channel members. Recruiting and selecting the right channel
partners is a crucial managerial aspect of any firm. Before actually recruiting the channel
members, certain aspects of selection should be clearly defined. These include the exact role that
each channel members will play, the expected qualifications of the channel members, and the
duties and tasks of each channel member. Subsequently, a screening process eliminates
incompatible channel partners. Finally, the selection of the channel partners is made on the basis
of the evaluation of the channel members sales efficiency, product knowledge, experience,
administrative ability and the risk factors involved in selecting a particular channel member.
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Channel Members Training
The training of channel members is important for manufacturers, because it is the channel
members who actually deal with the end customers and not the manufacturers. Most
manufacturers offer distributor training programs to help channel members increase their
efficiency in performing the various business activities. For instance, Ford offers training
programs to its dealers through the satellite-based Fordstar network. Through this network, Ford
provides online training to more than 6,000 dealers.
Member Motivation and Evaluation
After careful selection of the channel members and assigning them their responsibilities, it is
very important for the manufacturers to motivate them continuously to improve their
performance. One of the strategies used for motivating channel members is relationship
marketing wherein the manufacturer tries to forge better and stronger relations with the
distributors so that they perform to their best possible levels. A suitable reward structure also
helps manufacturers motivate channel members. Manufacturers can have different tiers of
rewards to motivate channel members. Those who bring the highest business should be given the
maximum rewards. Similarly, manufacturers can call their channel members and give rewards
and recognition in the presence of others. This will motivate the one who gets the reward and
recognition and others as well to perform better. The company can also motivate the channel
members by helping distributors improve their supply chain, reduce their capital employed,
operating costs and risks involved, enhance customer finance schemes and adopt other measures
like improving the sales promotional activities, and so on.
The company can also motivate channel members by initiating cooperative programs, providing
advertising allowances, training the distributors sales force, providing payments for displays,
and providing commission on higher sales. The company can facilitate the setting up of
distributor advisory councils that help distributors to regularly meet to discuss crucial issues and
the problems faced by them and communicate the same to the top management of the company.
Modifying Channel Arrangement
Modifying channel arrangements becomes necessary when consumers purchase patterns change
or when rapid expansion of the market takes place or when a new competitor comes into the
market or when the existing channel technology becomes obsolete and is not sufficient to carry
on the business.
Promotion Mix
Advertising
Advertising is a paid form of non personal presentation of goods or services by an identified
sponsor. It can be done using any form of media like television, radio, print media, etc. A firm
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has the flexibility of choosing the target market while advertising. It can advertise its
product/service in the local newspaper to reach a small geographical area. If it is looking for
national reach, the firm can advertise its product/service on the television through a national
channel like Doordarshan or any other television channel depending on the target audience.
Advertising allows firms to communicate with the intended audience in the most interesting
format using actions and dramas. It helps in generating faster response in the form of increased
sales. However, the interactivity with the audience is negligible and their feedback is indirect.

Sales Promotion
Sales promotion is a form of attracting the consumers by offering them various benefits in the
form of incentives or by adding value to the products (Refer Exhibit 19.2). Sales promotions are
generally aimed at resellers and final consumers. The various kinds of sales promotional tools
include coupons, discounts, rebates, samples, etc. Most often organizations spend more money
on sales promotions than on advertising. Although sales promotion is often considered a short-
term tool to achieve immediate benefits in the form of increased sales, sales promotional
activities like event sponsorships, trade shows and such are used for attaining long-term benefits
in the market.
Publicity
Publicity is a non-paid form of communicating information about the company or the product or
both as a news article in newspapers or television or radio. Studies have shown that people attach
a lot of importance to news articles and read them with greater attention as compared to
advertisements in newspapers. Also, people give much more importance to the product or service
details given in a news report than in an advertisement, because they perceive news report to be
more credible. Efforts like generating repeated exposures will also help marketers effectively
communicate the desired message. Therefore, managing the marketing communication mix with
appropriate and timely publicity through newspaper articles, coupled with attractive public
relation campaigns helps marketers to a great extent.
Public Relations
Public relations is essentially a function of an organization, where it tends to develop and
manage its goodwill in the market. The primary aim is to create a suitable environment for the
firm. Public relations helps organizations create a positive opinion about the firm in the market
through appropriate communications. An organization can develop its public relations with
several member groups such as suppliers, customers, employees, the government, shareholders,
distributors, members of the public, etc. In the current market scenario, customers look forward
to having business dealings with companies that are good corporate citizens. Therefore,
companies should not neglect public relations because though it does not induce any immediate
customer action, it produces positive results for an organization in the long-run. Exhibit 19.3
discusses the importance of public relations for an organization.
Dr. C.V.KRISHNA


Personal Selling
Personal selling is the form of selling a product or a service directly to the consumer by
explaining or demonstrating the features of the product to him/her. Personal selling is highly
specific, with regard to the target audience. The costs involved are high as the salesperson has to
personally meet every potential customer.
Personal selling has a high impact on the consumers and the feedback is also almost immediate.
This form of marketing is the most effective way of communicating a companys marketing
message, because it involves direct interaction between the marketer and the customer. It helps
the marketer receive immediate feedback from the customer. Being a high cost marketing tool,
personal selling is usually implemented for high cost products and services that need detailed
demonstrations of product usage and have limited target markets. Personal selling is normally
done for industrial products and is used as a support activity for advertising in consumer goods
marketing.
Direct Marketing
In direct marketing, organizations communicate directly with the customers through mail or
telemarketing or marketing through the Internet. This is a popular form of communication for
certain types of services like real estate. Amway is the global giant in direct marketing with a
product portfolio of 450 products and operations in over 80 countries. Amways direct marketing
efforts are discussed in Exhibit 19.4. In direct marketing, there is a non face-to-face interaction
with customers, to persuade them to immediately respond to the marketing effort and initiate an
action. Direct marketing activities such as telemarketing, mailers, catalogs, etc. Have been
gaining popularity over the years. The greatest advantage of direct marketing is that it is highly
cost effective and gives the maximum mileage. Unlike other marketing tools like advertising, the
response can be easily measured with accuracy in direct marketing since it persuades the
customer to take immediate action. So, the success or failure of the marketing effort can be
immediately known. Direct marketing tools are used to communicate with both consumer
markets and industrial markets through telemarketing, mailers, catalogs, etc.

Dr. C.V.KRISHNA


UNIT IV

Model Of Consumer Behaviour (Stimulus-Response Model Of Buyer Behaviour)
Consumers make many buying decisions every day. Most companies are interested to know what
consumers buy, where they buy, how and how much they buy, when they buy, and why they
buy. But learning about the consumer buying behavior is not easy task The central question for
marketers is how consumers respond to various marketing stimuli The company that understands
how consumers will respond to different product features, prices, and advertising appeals has a
great advantage over its competitors. The starting point is the stimulus-response model of buyer
behavior This figure shows that marketing and other stimuli enter the consumers black box
and produce certain responses.
Marketing stimuli consist of the four Ps: product, price, place, and promotion. Other stimuli
include major forces and events in the buyers environment: economic, technological, political,
and cultural. All these inputs enter the buyers black box, where they are turned into a set of
observable buyer responses: product choice, brand choice, dealer choice, purchase timing, and
purchase amount. The marketer wants to understand how the stimuli are changed into responses
inside the consumers black box, which has two parts. First, the buyers characteristics influence
how he or she perceives and reacts to the stimuli. Second, the buyers decision process itself
affects the buyers behaviour.

Stages of the consumption process:

Pre-purchase: problem recognition & information search
Purchase: mental evaluations & making of decision
Post-purchase: The activities that the consumer undertakes after the purchase and includes; how
he uses the product, his degree of satisfaction, and actions taken after the purchase is made.

Participants in the buying process (The D.M.U.-Decision Making Unit)
The marketer needs to know which people are involved in the buying decision. People might
play any of several roles in the buying decision process;
Initiator: the person who first suggests or thinks of an idea of buying a particular product or
service i.e. who initiates the buying decision.
Influencer: a person whose views or advices carries some weight in making the final decision.
Decider: is the one who ultimately makes a buying decision or any part of it, i.e. whether to
buy, what to buy, where to buy. One or more people may be a decider.
Buyer: the person who makes the actual purchase.
User: the person who uses or consumes the product.
A company needs to identify who occupies these roles because they affect product design,
promotion, and other marketing strategy

Dr. C.V.KRISHNA


7 OS Framework of Understanding Consumer Behaviour:
Who is the customer? Occupants
what does the consumer buy? Objects
why did they buy? Objectives
Who participate in the process? Organisation
When did they buy? Occasions
Where do they buy/ Outlets
How did they buy? Operations

Factors Affecting Consumer Buying Behaviour
Internal Factors
These are
Needs,
Motivation,
Perception,
Learning,
Beliefs, and
Attitudes.

External Factors
1) Culture:
It refers to the ways of life of a people. It is a set of socially transmited beliefs, attitudes, norms
and customs. Culture is learned from parents, teachers, and society in general. Culture describes
the prescribed acceptable behaviours and norms of a society. Marketers has to understand the
changes in cultural shifts in a society in order to capture opportunities to serve them in a better
manners. Any marketer must be familiar with the culture of the people they wish to sell to.
2) Social classes:
It is the division of the society into groups. It is also known as social stratification. Social
functions have to be performed by a society for it to survive. Stratification in the world is done
on the bases of education, occupation, income or economic and political station. In some
societies eight to nine strata were found but in most of the society three classes were found i.e
Upper class, middle class and lower class.
Reference groups:
Reference group is a group of people who have direct or indirect influence on the individuals
behaviour. It acts as point of comparison or refence point/frame of reference for an individuals
behaviour.
Reference groups can be classified in to many Types; based on the degree of involvement we can
classify into two groups i.e primary and secondary groups.
Primary groups: - these are groups that are small and very close to the consumer. The consumer
has direct contact with group members and often has face-to-face communication with them.
They include the family, co-workers and those one spends his leisure time with.

45|P a g e

Secondary groups: - are larger an
with this group may not be as fre
organizations, professional organiz
Rationale groups; - these are m
activities which interest the consum
goods consumed. They include YM

4) Role of Opinion leaders:
These are the pace setters or tre
sampling a new product before the
they commit themselves to buy the
respected and serve as a source of

5) The Family
A Family comprises of two or
marriage or adoption and stay tog
i.e married couples, nucle
family(parents+children+grandpar
process and the roles will depend
the family, they are husband, wife
Wife dominated decisions.
Husband dominated decisions

Stages in the adoption Process
The Consumer Buying Decision
It is made up of the following five

Dr. C.V.KRISHNA
M a r k e t i n g M a n a g e m e n t
rger and less intimate than the primary group. The co
as frequent as those of the primary groups. They in
rganizations, clubs, unions, etc.
are membership groups that a person may join. T
consumer to express his idea, be guided and influence
de YMCA, YWCA, scouting movement, etc.
or trend setters. They are the people who will fir
ore the others. They would then give information to th
uy the product or service. The opinion leaders or the
rce of advice to the rest. Characteristics of opinion lea
wo or more persons living together connected thr
ay together. Different family structures were observed
nuclear family (parents and children) a
andparents+uncles). Members of a family have a rol
epend on the product purchased. There are three impo
, wife and children. These roles may be grouped as;

cision Process
g five steps;
he consumer contact
hey include religious
oin. They engage in
luenced in the type of
ill first venture into
n to the others before
or the pace setters are
ion leaders are;
ed through blood or
served in the socieity
n) and extended
a role in the buying
e important players in

Dr. C.V.KRISHNA


STEPS IN CONSUMER BUYING DECISION PROCESS:
1)Problem recognition; It is the stage when the individual recognizes a need or problem to be
satisfied or solved. The need can be triggered by either an internal stimulus (hunger, thirst, or
sex), or externalstimulus (bread, car, or ad)

2)Information research; Of key interest to the marketer are the major information sources:
Personal source- family neighbours, acquaintances
Commercial sources- sales persons, dealers , packaging displays
Public sources- mass media, consumer-rating organizations
Experiential sources- handling, examining, or using the product
The relative amount and influence of these information sources vary with the product category
and buyers characteristics.

3) Evaluation of alternatives; The consumer develops a set of brand beliefs about a brand,
which make up the brand image. The brand image will vary with his/her experiences as filtered
by the effects ofselective perception, selective distortion and selective retention. The
consumer may evaluate brands on the basis of price, product design, colour, packaging, after-
sales service, etc.

4) Purchase decision; Having evaluated various solutions, the buyer may develop a
predisposition to make a purchase. However, two factors can intervene between the purchase
intention and the purchase decision that may change the purchase intention, e.g.
The attitude of others
Unanticipated situational factors
In executing a purchase intention, the consumer may take up to five purchase sub-decisions;
A brand decision (brand A)
Vendor decision (dealer 2)
Quantity decision (1 computer)
Timng decision (weekend)
Payment method decision (cash/credit)
5) Post purchase behaviour; The consumer will experience some level of satisfaction or
dissatisfaction. Buyers do not follow the general decision sequence at all times. The procedure
may vary depending upon;
The time available
Levels of perceived risk
The degree of involvement a buyer has with a product.
Marketers should provide after sales service and support to assure customer satisfaction.

Dr. C.V.KRISHNA


Organizational/ Industrial Buyer Behaviour
Businesses ask themselves the same questions as consumer marketers i.e. who are our buyers and
what are their needs. How do buyers make their buying decisions and what factors influence
these decisions? What marketing programs will be most effective?

Definition: industrial buying is the decision making process by which formal organizations
establish the need to purchase products and identify, evaluate and choose among alternative
brands and suppliers.

Types of organizational markets;
1) The industrial market; It consists of all organizations acquiring goods and services that enter
into the production of other goods and services that are sold or supplied to others. It is the largest
organizational market.
2) Reseller market; It consists of all individuals and organizations that acquire goods for the
purpose of reselling them to others for a profit. Resellers buy products for resale and for
conducting their operations e.g. wholesalers.
3) Government market; It consists of government units from central and local government that
purchase or rent goods and services for carrying out their main functions.
4) The institutional market; It is made up of hotels, hospitals, schools, colleges and other
institutions that also buy goods and services.

Differences between Organizational and Consumer markets
In some ways organizational markets are similar to consumer markets- both involve people who
assume buying roles and make purchase decisions to satisfy needs. But there are differences
stemming from market structure, demand, product characteristics, promotion, distribution
channels, price, nature of buying unit, and the decision process.

1. Market characteristics
Size: usually industrial consumers are few in number but purchase larger volumes on a repeat
basis.
Geographic concentration: industrial consumers tend to concentrate in specific areas especially
urban areas.
Competition: industrial organizations are more directly involved in international purchasing.
2. Product characteristics; In industrial markets products are purchased as component parts of
other products. More emphasis is given to the technical aspect of the product. Purchases of
industrial products are usually governed by customer specifications.
Buyer characteristics; Typical consumer buyers have little knowledge of the product they
purchase as contrasted with industrial buyers who are professionally and technically trained.
Many industrial purchases involve large sums of money; technically complex products and
decisions to purchase take longer and involve several people.
4. Reciprocity; Industrial buyers often select suppliers who may also buy from them e.g. a paper
company that buys needed chemicals from a chemical company that in turn buys the companys
paper.
Dr. C.V.KRISHNA


5. Channel characteristics; In industrial markets, channels are direct where buyers often buy from
producers rather than through middlemen.
6. Promotional characteristics; Personal selling is the dominant mode of promotion in industrial
markets and advertising may only be used to lay a foundation for personal selling. Sales people
act as consultants.
7. Price; Generally in industrial buying, price takes less prominence. Factors of interest are quality,
product consistency, certainty and timeless of delivery, service and technical support.
8. Demand; Demand for industrial products is derived demand. It ultimately comes from demand
for consumer goods. A cloth manufacturer buys cotton because consumers buy cloth. If
consumers demand for cloths declines, so will the demand for cotton and all other products used
to make cloth.
The demand is also inelastic in organizational markets i.e. total demand is not much affected by
price changes especially in the short-run e.g. a drop in the price of leather will not cause shoe
manufacturers to buy more leather unless it results in lower shoe prices that in turn would
increase customer demand for shoes.

Participants in the industrial buying process- The buying centre

This is the group of people who make the buying decision. The group consists of all people who
influence, whether positive or negative, at one or more stages of the purchasing process.
The Decision Making Unit (D.M.U) has people playing the following roles;
1. The gate keeper: he controls the flow of information, ideas and instructions. Such roles may be
played by the receptionist/secretary who controls the buying organizations diary. A gate keeper
could also be a specialist who can feed relevant information to the rest of the D.M.U.
2. Influencers: are people such as engineers, accountants or the board of directors. They help
define product specifications and provide information for evaluating alternatives. Technical
personnel are particularly important influencers.
3. Users: are members of the organization who will use the product. In many cases they initiate the
buying proposal and help define product specifications.
4. Buyers: they are people with formal authority to select the supplier and arrange terms of
purchase. They negotiate with the selected supplier on issues such as price, delivery time, mode
of delivery, etc.
5. Deciders: are people who have formal or informal power to select or approve the final
suppliers. In routine or straight buying, the buyers are often the deciders.
The buying centre concept presents a challenge to the industrial marketer who must learn the
following;
Who is involved in the decision?
What decisions do they make?
What is their relative degree of influence?
What evaluative criteria does each participant use?
Only when the above questions have been answered can the supplier plan the campaign to
inform the key persons within the D.M.U. A multi-faceted attack may be necessary, involving
direct mail, personal contact, as well as the use of advertising.

49|P a g e

Industrial Buying Situations (cla

1. Straight re-buy; it is where the
The items tend to be regular purc
buyer would most likely purchase
to break into such a market.
2. Modified re-buy; in this catego
existing or known supplier, or the
involves more decision participant
3. New task; involves the purch
suppliers. In this situation the buy
and suppliers. He must determine
Product specifications, price limi
order quantities, etc.
The buyer makes the fewest decis
The new task situation is the mar
with key buying influences as poss

Industrial Buyer Decision Makin

In the industrial buyer decision ma
usually go through all stages of the
buys may skip some of the stages.

Dr. C.V.KRISHNA
M a r k e t i n g M a n a g e m e n t
ns (classes):
re the buyer knows his own requirements and the pro
r purchases and the process is in most cases repeate
chase from the same supplier and it is often hard for a
category would fall the purchase of either a new p
or the purchase of an existing product from a new sup
icipants.
purchase of new unfamiliar products from previo
he buyer must obtain a lot of information about alter
rmine the following;
e limits, delivery times and terms, service terms, p
t decisions in the straight re-buy and most in the new
e marketers greatest opportunity. He tries to reach a
ossible, and providing useful product information.
Making Process
ion making process, buyers facing a new task buyer si
of the buying process and those making straight or m
tages. They are;

the products on offer.
epeated frequently. A
d for another supplier
new product from an
w supplier. It usually
previously unknown
t alternative products
rms, payment terms,
he new task situation.
each as many people
ation.
yer situation will
t or modified re-
Dr. C.V.KRISHNA


1. Problem recognition; The process begins when someone in the firm recognizes a problem or
need that can be solved by acquiring a specific product. The company may decide to launch a
new product and need new equipment and materials to produce it or a machine may break down
and need new parts etc.
2. General need description; This is description of the general characteristics and quantity of the
needed item. Emphasis here is on reliability, durability, price and other attributes desired in the
item.
3. Product specification; The items product specifications are analyzed and the purchasing
team(D.M.U.) decides on the best product characteristics and specify them accordingly.
4. Supplier search; This is carried out to find the best suppliers. Some suppliers may not be
considered because they are not large enough to supply the needed quantity or because they have
poor reputation. The suppliers task is to get listed in major directories and build reputation in the
marketplace. Salespeople should watch for companies in the process of searching for suppliers
and ensure their firm is considered.
5. Proposal solicitation; The buyer invites qualified suppliers to submit proposals. When the
item is complex or expensive, the buyer will need detailed written proposals from each potential
supplier.
6. Supplier selection; The buying centre (D.M.U.) reviews the proposals and selects a supplier.
They will consider the technical competence of various suppliers, their ability to deliver the item
on time and also deliver the necessary services. The following attributes have a strong influence
on the relationship between the supplier and customer;
Quality of products, on time delivery, competitive prices, and delivery terms.
7. Order routine specification; This involves preparing the final order with the chosen supplier,
listing the technical specifications, quantity needed, expected time of delivery, e.t.c.
8. Performance review; Here the buyer reviews the performance of the supplier. The buyer may
retain, modify, or drop the supplier in future hence the supplier should ensure that he is giving
the expected satisfaction.

Dr. C.V.KRISHNA


UNIT-V MARKETING ORGANIZATION AND CONTROL

Organization is defined as a group of people working together to achieve common goals and
objectives of the business. Marketing organization provides a vehicle for making decisions on
products, marketing channels , physical distributions, promotions and prices.

Marketing Organisation: Marketing organization is the framework for planning and making
marketing decision that are essential to marketing success. It is the vehicle for making decision
on all marketing areas such as product, price, place and promotion. Marketing organization is a
group of marketing persons working together towards the attainment of certain common
objectives. Marketing organization provides a system of relationships among various marketing
functions to be performed by coordinating among marketing people.

Need for the organization: to be competitive in the market where consumer is the king we need
to satisfy the consumer. So a good marketing organization is required to satisfy the customers.
Marketing organization is the pillar for success for many organizations and provides a
framework for the following:

a. Divide and fix authority among the sub ordinates
b. TO locate responsibility
c. To establish sales routines
d. To enforce proper supervision of sales force
e. To avoid repetitive duties
f. To enable the top executives to devote more time for planning policy matters

FACTORS AFFECTING MARKETING ORGANIZATION

Factors influencing marketing org can be categorized into internal and external factors .
Internal:
1. Top Management Philosophy: Organizational planning and its working is greatly
influenced by philosophy which can be good or bad eg: Centralization Vs Decentralization
2. Product policy: the width of product line of an org determines its size as the product
offerings becomes increasingly diverse. Eg: There could be a need to move away from straight
functional approach to product group approach.
3. People: The size of the organization is not an important factor in terms of number of
people but it is important with respect to human values which are critical and correct decisions
regarding people cannot be made unless taking into consideration
Number
Qualifications
Capabilities
Dr. C.V.KRISHNA


Personality
Attitude
Fear
Suspicion
Ambition
Are some of the above intangible factors which affect the marketing organization?

External Factors:
1. Business Environment: With regards to business environment three points are
important.
a. The type of environment in which the firm is operating in terms of operations
and size.
b. The Nature of particular requirement for success in a given business which
again determines the size.
c. The rate of change in industries being served which again decides on its size
and working.
2. Markets: This is the factor which again affects the marketing organization i.e. one
should note about its
a. Size
b. Scope
c. Nature
d. Location
Based on the above aspects we need to design the size of the organization.
3. Consumer requirements and expectations: Consumers have their own set of
requirements and expectations from the organization. The more varied and vivid
services they expect that the usual requirements. as a marketer we need to increase
the workload depending upon the consumer requirements and expectations
4. Channels of distribution: It is the type of channel of distribution which a marketing
firm selects based on its size. Egg : Incase the company opts for indirect channel or
channels it depends on outside sales force and hence the organization gets thinner
.When the organization selects direct channel its size is increased as it has its own
sales force.

TYPES OF MARKETING ORGANIZATION STRUCTURES

Types of marketing organization structures: The marketing organization of a business can be
structured on any of the following basis:
a. Line and staff organization
b. Functional Organization
c. Product oriented marketing organization
d. Customer oriented marketing organization
Dr. C.V.KRISHNA


e. Geography oriented marketing organization
f. Matrix form / Combined base

1. Line and Staff Organization: In most business forms especially medium size the marketing
job is structured around few line functions and few staff functions i.e. Major staff functions is
organized into separate department and the line function is responsible for sales department. The
required coordination between the line and staff function is managed by the executive at higher
level.

Merits:
1. Provides expert advice from specialists
2. Relives line executes of routine, specialize functions
3. Enables young sales executive to acquire expertise
4. Helps in achieving effective coordination
5. Easy to operate
6. Less Expensive
Demerits:
1. Produce confusions arriving from indeterminate authority relationships
2. Curbs the authority of experts
3. Too much is expected from executives
4. Decision making is taken by top management

2. Functional: Under the organization the departments are created on the basis of specified
functions to be performed i.e. The Activities related to marketing, distribution etc
Merits:
1. Division of work base on specialization
2. Relives line executives of routine and specialized functions
3. Promotes application of expert knowledge
4. Helps to increase overall efficiency
Demerits:
1. Leads to complex relationships
2. Makes coordination ineffective
3. Promotes centralization
4. Lack of proper coordination
5. Delay in taking decisions

3. Product Oriented Marketing Organization: Organizations that produce wide variety of
products often organize marketing, training and promotion with respect to a product.
Merits:
1. The salesmen can render better customer service as they possess good
knowledge of product and may have close contacts with customers.
Dr. C.V.KRISHNA


2. It makes individual departments responsible for the promotion of specific
products.
3. It facilitates effective coordination
Demerits:

1. It increases the employment of a number of managerial personal
2. Many salesmen of same enterprise attend same customer each representing a
separate product which creates confusion in the minds of the customer.
3. There may be duplication of activities

4. Customer Oriented Marketing Organization: When the departmentation of sales
organization is done on customer basis it is called customer oriented marketing organization.
Deparmtnetation by customer may be done in enterprise engaged in providing specialized
services to different classes of customers.

Merits:
1. It takes into account needs of each class of customers.
2. IT provides specialization among the enterprise staff

Demerits:
1. It makes coordination difficult
2. It may lead to under utilization of resources in same department
3. There may be duplication of activities
4. These types of sales organizations are not suitable for small enterprises.
5. Geography/Territory: In a territory oriented marketing organization , the responsibilities for
marketing of various products rests almost entirely with line executives .The territory managers
are given varying nomenclatures like depot manager, district manager, area manager, zonal
manager , divisional manager etc.

Merits:
1. It leads to economy in terms of times and money
2. It helps in taking knowledge of local customers
3. It helps in effective control
Demerits:
1. It requires employment of number of managerial personnel.
2. It dilutes control from head quarters

Dr. C.V.KRISHNA


Marketing Control:
Marketing control is concerned with analyzing the performance of marketing decision,
identifying the problem/opportunities and taking actions to take advantage of opportunities and
resolving problems. It is the sequel to marketing planning. All manager need to exercise control
over their decision and marketing operations.

Specifically marketing performance is measured in terms of market share, sales, profits.
Hence most control measures are designed with these parameters in mind. But today's marketing
needs to measure the following.
a) Market share
b) Sales and profits
c) Marketing effectiveness
d) Customer satisfaction
e) Customer perception of the firms and its brands

There are four types of controls with different objectives and tools and exist with different levels
of management.
1) Annual plan control: It is with top or middle level mgmt to evaluate actual performance
with targeted to analyze differences or gaps. The tools used are sales analysis, market share
analysis, sales and expense ratios, and financial analysis.
2) Profitability control: It is used by marketing department to examine profitability by
product, territory, customer segment and trade channel.
3) Efficiency control: It is used to asses the effectiveness of money spend on sales force,
advertising, sales promotion and distribution. It is used by both line and staff executives.
4) Strategic control: It is used by the top mgmt to examine wether the firm and marketing
capable to cope with environment or not. The major tool used here is marketing audit.

Marketing Control Process:

Marketing Control Process includes monitoring, evaluating and improving the performance in
each activity. There are six steps in this

a) Decide the aspect of marketing operation to be evaluated:
The first step in mcp is deciding about the marketing operation to evaluate.
Eg: effectiveness of media for product advertisement, sales person performance, or
performance of company product

b) Establish measurement criterion
In this stage performance standards are decided against which actual performance is
evaluated.
Eg: control sales person performance, in this one can measure new accounts obtained,
call frequency ratio and order per call
c) Establishing monitoring mechanism
Dr. C.V.KRISHNA


After setting the standards, the next step is to develop monitoring mechanism tools like
marketing information system(MIS). MIS is used to record performance of all marketing
areas like monthly sales volume for products.
d) Compare actual results with standards of performance
In this stage, results obtained through monitoring process are compared with pre
established standards of performance.
e) Analyze performance improvement
If the results/performance are not up to the desired standards, a corrective action is to be
taken to enhance the performance levels. For this performance improvement analysis is to
be done.

Marketing Audit:

Definition: Marketing audit is systematic review and appraisal of the basic objectives and
policies of marketing function and of the marketing organization methods, procedures and
personal employed to implement those policies and to achieve those goals. Marketing audit is
one of the important tool to asses the effectiveness of different marketing mix elements.

Types of Marketing Audit:

Marketing Environment Audit: It is divided into two groups i.e macro environment and task
environment. Macro environment audit includes analysis of political, economical, technological
and cultural aspects. Task environment audit covers customers,competitors, markets,
dealer/distributors, suppliers, marketing firms and public.

Marketing Strategy Audit: This audit reviews firms marketing mission, objectives, goals, and
strategies and to appraise their adaptability to present and future environment.

Marketing Organisation Audit: The audit evaluates the firms capability in implementing
necessary strategies for the future environment. It also reviews formal organization structure and
efficiency.

Marketing Systems Audit: It evaluates the subsystems of a system such as marketing information
system, marketing planning system, marketing control system and new product development
system.

Marketing productivity Audit: This audit critically examines the profitability of different
marketing entities and cost effectiveness of different heads of marketing expenditure.

Marketing Function Audit: It is a functional audit mainly covering marketing mix components
namely product, price, place and promotion (advertising, sales promotion, sales force and
publicity)
Dr. C.V.KRISHNA


Marketing Management-Important Questions
Essay 12 Marks
Unit I
1. What is Marketing Management? Briefly discuss the various tasks and philosophies of
marketing.
2. What do you mean by marketing mix? Explain the expanded marketing mix with
suitable examples.
3. Bring out the significance of marketing environment. Explain Companys micro and
macro environment and their interface with other functions.
4. Explain the importance of global marketing in todays globally changing marketing
environment.
Unit II
1. What are the levels and bases for segmentation? Explain segmenting consumer markets,
business markets and international markets
2. What is market targeting? How selecting and evaluating of market segment is done?
3. Explain Positioning strategies. How product positioning is done?
4. Discuss the demand measurement and sales forecasting methods. How current and future
demand is estimated?
Unit III
1. What is a product life cycle? How do you determine what stage a product is in? What
strategies you adopt in each stage of PLC?
2. How is product mix pricing different from pricing an individual product? What are the
product mix pricing strategies
3. Describe in detail the different stages of new product development
4. What is promotion mix? What is the basis of allocating the promotion task of a firm over
different elements of promotion mix?
Unit IV
1. Discuss the model of consumer behaviour. Explain factors affecting consumer behaviour
2. Discuss the various stages involved in consumer adoption process.
3. What are the characteristics of industrial and services markets? Discuss the factors
influencing industrial buyer behaviour
Unit V
1. Explain different types of marketing organisation structures. What are the factors
affecting global marketing organisation?
Dr. C.V.KRISHNA


2. Discuss the marketing organization annual plan control. What is profitability control and
strategic control?
SHORT 2 MARKS
1. Physical Evidence
2. Marketing Strategy Vs. Marketing Research
3. Competitive strategies
4. Differentiation
5. Marketing Research Vs. Customer value
6. Brand Equity Vs. Branding
7. Product line Vs. Product width
8. Distribution Channel
9. Online marketing
10. Packaging Vs. Personal Selling
11. Seven Os Structure
12. Industrial buyer
13. Marketing implementation
14. Marketing Audit
15. Efficiency control
16. Marketing myopia
17. Relationship marketing
18. Consumer Pull
19. Rural Marketing
20. Marketing Program Vs. Marketing Ethics

Dr. C.V.KRISHNA


Dr. C.V.KRISHNA


ALL THE BEST

For feedback and doubts contact
Dr. C. V. Krishna
Ph: 9966417189
Email: krishna.cvkrishna@gmail.com

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MARKETING MANAGEMENT

For MBA I Semester Students Under Osmania university

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