Marketing Theory Practice 5005

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Muhammad Zeeshan Zia
Roll # BY549268
Marketing Theory & Practice
(5005)
M.Sc. Administrative Science
Reference: 1[ CITATION www \l 1033 ]

Reference: 2[ CITATION The \l 1033 ]1936
Reference: 3 [ CITATION ied20 \l 1033 ]
Reference: 4 [ CITATION Stu20 \l 1033 ]
Reference: 5 The Future of Business: The Essentials [ CITATION Law \l 1033 ]
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Question No. 1.
Discuss the implications for a business organization of adopting the marketing concept. In
terms of key objectives, main activities and system of values, how marketing department is
different from other departments. Explain with examples.
Implications of Marketing Concept:

Implementation of a marketing strategy can improve business profitability because of
implications for all aspects of the company's operations. The marketing strategy focuses
company attention on particular target market segments and makes it clear what product
characteristics are required for successfully satisfying customer needs. This focus eliminates
marginal operations that don't contribute to business growth and promotes a streamlined
approach to the company's business.
 Customers:
The main implication of a marketing plan is the orientation toward meeting customer needs that
results in increased customer satisfaction. Once you have identified your target market and the
characteristics of your targeted customers through surveys and market studies, you can focus on
strategies to serve your customers better than your competition. Customer impressions of your
company improve with this focus, and your image in the marketplace becomes more positive.
Such a marketing strategy is designed to gain new customers as you build a more favorable
reputation.
 Products:
A marketing strategy has important implications for product design and promotion. Once you know
what your customers want, you have to ensure that the product features meet their needs or change
the design to add corresponding features. Instead of convincing customers to buy the product you
have, you offer them the product they need and promote the features they want. A marketing

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strategy focused on offering products that suit your target market promotes innovation and improves
product quality. The marketing strategy then specifies that you run ads promoting the innovative
nature and high quality of your products
 Performance:
With improved customer satisfaction and innovative products of high quality, your company can
increase both sales and profitability. Your marketing strategy projects the increased demand based
on market studies and allows you to plan production to meet it. At the same time, your marketing
strategy identifies the price that members of the target market are willing to pay for the newly revised
product. A well-implemented marketing strategy lets you plan for increased production with
confidence while reducing costs by eliminating expensive product features that your target market
members don't value. The result is improved company performance.
 Employees:
For employees, an effective marketing strategy implementation means working for a more
successful company. Better company performance improves employee morale, and high-quality
products result in high levels of commitment to the organization. The customer-orientation of the
marketing strategy gives employees increased job satisfaction as they deal with customers who
have positive experiences with company products and in customer service. Such an atmosphere is
conducive to excellent team spirit and employee cooperation to achieve ambitious company
objectives.
Marketing and Other Departments:

How marketing department is differ from other departments has explained below in detail:

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Marketing vs. Finance Department:
Finance and marketing are distinctly different, but valuable functions within a typical
organization. The finance division or department is involved in financial planning, accounting
and decision making, whereas the marketing department is involved in developing marketing
plans and strategies to deliver messages to target markets about the company's brands,
products and services.
All marketing plans should include a major financial dimension. Evolution of cost and profit
expressed in monetary units or percentage of sales, budgets needed to implement strategies and
marketing plans are all necessary components of the marketing plan. Budgeting and profitability
analysis are also key aspects of marketing planning and control, which implies financial tools.
Many of the marketing decisions are and should be viewed as investment decisions. Whenever a
new product decision is made, financial instruments and criteria should be used to evaluate the
investment. This type of evaluation of marketing decisions should not be limited to new products
and should include decisions on advertising, promotion, price and distribution.
The link between marketing and finance is not limited to the use of financial input when
developing marketing strategies and plans. The development of any financial plan involves
capital requirements, cash flow analysis, credit and other financial policies that require marketing
inputs. Such inputs, especially those related to sales and revenues forecasts that are listed in
different marketing plans are essential for any financial planning.
Marketing vs. Production:
Your primary business goal is to sell. You might think this makes it obvious that your marketing
department should sell as much as possible and that your production department should strive to
keep up. However, legitimate conflicts can arise between production and marketing, and your

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ability to understand and resolve these conflicts can determine the success or failure of your
business. There are some conflict in these two departments.
 Quality Control Issues:
One myth that permeates many marketing departments is that production personnel want to slow
down so they won't have to work so hard. This myth can cause conflicts. Production may want to
go slower in order to make a higher-quality product, which can cut down on customer returns
and complaints. If marketing insists that production must always be at capacity, you may need to
step in and determine if the value of quality control measures is worth the price of lower
production.
 Lack of Feedback:
Conflicts can develop between managers without upper-level executives hearing about it. If
marketing is screaming for more products and production is screaming for more time, resentment
grows and personnel may not be able to focus on their jobs. Executives need to be in the
feedback loop, and regular meetings with marketing and production managers can help resolve
conflicts before they fester into battles.
 Isolation from Market Forces:
Conflicts often develop when the production department doesn't sense the pressures of the
marketplace. Marketing staff may see changing demand or tastes, increased competition and
improved versions of competitors' products that can hurt your company's sales. If production
insists on doing things the way it always has done them, conflict may arise. In such a case, a top-
level manager must step in and create production standards that address changes in the market.
Marketing vs. Procurement:
Marketing is identified as dynamic, creative & innovative. It is driven by intangible elements

such as insights & creativity which are slightly different from procurement. Generally in
Procurement, negotiation is the key requirement and they make sure that they have best strategic
supplier portfolio at the best possible price. Same is the case with marketing, they have the

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suitable agencies working for different brands at some specific cost. In marketing the main
agenda is to get more value & innovation out of agencies. Procurement should treat marketing as
more of an investment to maximize rather than the cost to minimize. We should find out how we
can bridge the gap between procurement and marketing to get more value from both sides.
Marketing and Research & Development:
The Research & Development (R&D) effort of any organization must be linked very closely to
the marketing and product development efforts of the organization. Ignoring the links between R
& D and marketing has resulted in many technology oriented companies developing products
that are the engineer’s dream and the marketer’s nightmare. To avoid an R&D effort which is
detached from relevant marketing input, it is essential to understand the interrelationship
between the two.
The marketing – R&D interface should recognize the potential contribution of each. Marketing
research can rarely find innovative new product ideas. It can, however, provide insight
consumers’ unsolved problems and needs, assess their reactions to product concepts, and help
the engineers in the generation and evaluation of new product ideas. Realistic expectations and
an organizational climate which encourages the interface between the two functions and
stimulates innovation are essential ingredients for successful new product development efforts.

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Question No. 2
In the context of marketing, what do you understand by the term ‘learning’?
Discuss any one learning theory which you think is most relevant to an
understanding of consumer behavior?
‘Learning’ is the time the product as tell to understand the market dynamics, in order to get
popularity, in a way say to gain demand. Behavioral modification especially through experience
or conditioning.
Context of marketing:
When content meets or exceeds customer expectations, when it solves an issue or teaches the
audience something new, when it’s adapted to what the consumer is looking for – we can speak
of context marketing.
Context marketing is the ability to deliver the right content or experience to the right person, in
the right place, and at the right time based on the sum total of that person’s past brand
interactions and current needs.
“Context marketing is the ability to deliver the right content or experience to the right person, in
the right place, and at the right time based on the sum total of that person’s past brand
interactions and current needs”
There are five easy steps to succeed our marketing context.
 Know your audience:
As previously mentioned, writing and distributing content just for the sake of it won’t cut it.
Even a broken watch is right twice a day, meaning that eventually your “one size fits all” content
will strike a chord with someone.
However, in order to successfully create meaningful content, you need to know exactly who it is
you’re talking to, what their intentions are and how you can help them move forward.
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 Content isn’t just words:
When we think of content, we tend to think mostly of text on a website, in an email or in

brochures. But content is much more than that – and it can be in the right context as well, no
matter its shapes or forms.
Customers don’t like to read only text – think of info graphics, videos, short stories, pictures,
animations and much more. A good content and context strategy manages to serve the right
media as well as the right content to the audience.
 Data, data and more data:
If you know nothing about your audience, it’s extremely complicated if not downright
impossible to market anything within context. That’s why the importance of data can’t be
overstated.
Big data is a term that’s been thrown around a lot in the past few years and while AI and
Machine Learning are opening up even more avenues for data gather, you need to understand
that the value of data can only be measured around its usefulness. That’s why “intelligent data”
is a better way of looking at it.
Collect and gather only what you need, when you need it and if you can use it to actually provide
content with an added value to your audience. Remember to keep your data in one place and
make sure it’s clean and reliable.
 Personalize more than on a first name basis:
You couldn’t be reading point 3 without thinking point 4 is going to come up. That’s because
personalization without data is impossible – but this data can come from many places. There’s
implicit and explicit data you can use to convey your message in the right context.
Implicit data looks at customer behavior online while explicit data is customer data that was
provided by the audience itself.

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By gathering and combining these two different types of data, you can personalize each customer
experience in part by understanding intent from the first page visit to the last interaction on any
channel.
 Test and optimize:
No matter how well you gather data, personalize the customer experience and deliver different
types of content for each audience member in part, customer behavior will be unpredictable at
times. And that’s ok, you can’t be 100% accurate at all times.
It’s important to learn what works and what doesn’t though for the most part and the only way to
do that is by testing and optimizing. The beauty of digital marketing is the speed with which you
can launch campaigns, content and offers, all the while adapting on the fly by constantly testing
everything to increase conversions and keep customers happy.
Don’t be afraid to fail – be afraid to not learn.
Conditional Learning Theory:
The Conditioning Theory of learning states that the mind is conditioned to react in a certain way
to a certain situation or a certain stimulant. It means that when a certain type of situation is
created, or in the presence of a specific stimulant, our mind will make us react in a way that we
have gotten used to it. This theory is in fact the force of habit. It plays its role in consumer
behavior too. We have gotten used to responding to certain products or certain selling techniques
or promotional techniques in specific ways. I will give you an example.
Say, you go to Mart and the blue light turns on. Now what do you think people will do? Most of
the cost conscious customers will make a bee line to that table where the blue light is turned on
because they associate the blue light with a good sale. And, research has already proved that
people are more likely to buy the sale product on the table under the blue light even if the
product is not a good value.
Classical conditioning also works with advertising. For example, many ad of beer feature

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attractive young women wearing revealing bikinis. The young women naturally bring out a
favorable, mildly aroused feeling in the target audience which are of course mostly men. The
beer simply gets associated with this effect.
Question No. 2 (b)
How would you use segmentation approach to improve your marketing efforts in each of
the following markets?
1. Women’s magazines
2. Toilet soaps
3. Computers
When we are trying to approach the customers with our marketing massage or ad campaign,
customer will target the right market with the right message. If our message is not optimized our
audience, we will end up with a lot of wasted advertising money and time. May our message is
reached a few people who end up becoming our customers but we will also reach a lot of people
who are not interested in our products or services. Market segmentation can help us to target just
those people which are satisfied customers of our company. We can base a segment on one or
more qualities, splitting up the audience in this way that allows for more precisely targeted
marketing and personalized content. When we trying to reach the customers with any campaign
or marketing message, targeting the right market is necessary with the right message. If our aim
is too broad, our message might be reached on a few people who end up becoming customers
and we will reach many people which are not interested in our product or services.
Significance of Market Segmentation:

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Market segmentation can help us to define and better understand our target customers and ideal
audience. If you are the marketer, this allows you to identify the right market place for the right
product and then target your marketing more effectively. Similarly, publishers can be use market
segmentation to offer more effectively targeted advertising options and to customize their
content for different customers groups.
Example:
For example, you’re a marketer who’s advertising a new brand of Tide bleach. You could split
an audience into segments based on whether they have wearing products. You could then
segment that, customers further based on what kind of clothes they have wearied and then show
them ads for bleach formulated for their clothing’s. A publisher can use the same information to
show content about ‘Tide knows the fabric best.’
Market segmentation allow us to target our content to the right people in the right way, rather
than targeting your entire people with a generic message because may all audience not be
interested like, which people are to be needed. This help us to increase the chances of people
engaging with your ad or content, in the form of result more efficient campaigns and improved
return on investment (ROI).
Demographic Segmentation:
Demographic segmentation is one of the most common forms marketing segmentation. It refers
to splitting up the audiences based on observable, people-based differences. These all qualities
include things like age, sex, marital status, family size, occupation, education level, income,
race, nationality and religion. One benefit of this kind of segmentation is that, the information is

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relatively easy accessible and low-cost to obtain. Some products are targeted explicitly towards a
specific demographics. One personal care company, for example, might make two beauty
products — one labeled as men’s beauty face wash and one labeled as women’s face wash. In the
other hand, Automotive companies often segment their audience by income and market different
makes and models of cars to each segment. One company has three different brands, may have a
luxury brand, an economy brand and a mid-range brand. There are many ways to get the
demographic data. One way is to ask your customers directly. This can be time-consuming, but
getting the information directly from customers will help ensure its correctives. We may also be
able to obtain demographic data directly from customers by looking the social media and other
online profiles, where they may provide information about themselves. We can also get a
demographic data from second and third parties data provider including marketing service
providers and credit bureaus. Public records, such as those kept by the Pakistan NADRA and the
Pakistani Postal Service, can also provide useful information collecting this data in a data
management platform (DMP) will help you to organize it and use it to target your marketing
campaigns or content personalization efforts.
Behavioral Segmentation:
We can also segment our market based on consumer’s behaviors, especially regarding our
product. Dividing our audience based on behaviors and they display allows us to create
messaging that caters to those behaviors. Many of the actions we might look at relate to how
someone interacts with our product, website, app or brand.
Types Of Behavior To Look At Include:

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 Benefits sought: This refers to the need a customer is trying to meet by purchasing a
product.
 Usage rate: We can categorize users based on usage rate. Our messaging will be
different depending on whether someone is a heavy user, medium user, light user or non-
user of our product.
 Online shopping habits: We might consider a user’s online shopping habits across all
sites, as this may correlate with the likelihood they will make an online purchase on our
website.
Geographic Segmentation:
Geographic segmentation, splitting up our market based and on their locations, is a basic but
highly useful segmentation strategy. A customer’s location can help us to better understand their
needs and enable us to send out location-specific ads. There are many kinds of geographic
segmentations. The most basic is identifying users based on their locations such as their country,
state, city and zip code. We can also identify consumers based on the characteristics of the area
they live in, such as its climate, the population density and whether it’s urban or rural.
Identifying characteristics can require us to get more specific since one county could have rural
and urban areas. We may need to change the language of our message depending on the region
we’re targeting. People who live in different countries may also have different interests
according their cultures. For example, Tennis is very popular in the United States, while cricket
is more popular in Pakistan. If we’re marketing sports equipment or publishing sports articles,
we will want to take these different preferences into account.
Psychographic Segmentation:
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Psychographic segmentation is similar to demographic segmentation, but it deals with
characteristics that are more mental and emotional. These attributes may not be as easy to
observe as demographics, but they can give us valuable insight into our audience’s motives,
preferences and needs. If we find that, members of a demographic segment are responding
differently to our content, we might want to add in some psychographic information. While
demographics provide the basic facts about who our audience is, psychographics give us insight
into why people decide to purchase or not purchase our product, click on or ignore our ad and
otherwise interact with us. Say we’re a furniture and home decor company, and we have a
market segment consisting of newlyweds in their 20s and 30s with a household income above
$60,000. Some members of this segment are converting, while others are not converting. When
we add psychographic information into the mix, we may find that people are purchase our
products often value community and friendships and are environmentally conscious. We can
collect this data in many of the same ways, we can gather demographic data. We can ask our
existing customers for this information using surveys. We can also look at the way people
interact with our website and see what types of content they engage with, which gives us insight
into their interests and preference. Demographic, psychographic, interactive and geographic
segmentation are measured the four main types of market segmentation, but there are also many
other plans we can use, including frequent differences on the four main types. Here are some
more systems we may want to look into.
Firm graphic segmentation:

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Business-to-business (B2B) corporations may use firm graphic segmentation to split up the
businesses in a market. This is alike to demographic breakdown with individual consumers but
as an alternative looks at the features of companies that may become clients. Illustrations of data
to look at include industry, profits, number of employees and site.
Life stage segmentation:
We can also fragment our market into collections created on where they are in their lives. Going
to institution, getting married and having children are instances of key life events to ponder.
People at dissimilar stages of life need dissimilar things. For example, soon-to-be college
students may need flat furniture. New parents will be viewing to acquisition baby food.
Seasonal segmentation:
Correspondingly to how people purchase different goods in different epochs of their lives, people
also buy diverse items at different times of the year. Chief holidays such as Christmas and
Hanukkah also pointedly impact buying behaviors.
Generational segmentation:
Businesses may section consumers by age group and group them into category that comprise
Generation A, Millennial, Generation B, Baby Boomers and the Silent Generation. These
generations are thought to share certain favorites, performances, personality traits and opinions.
Of course, not every member of a generation is the same, but generational segmentation can give
us some extra insight into our spectators.
Target Marketing and Market Segmentation for;
(i) women’s magazines

(ii) toilet soaps
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(iii) Computers
Target marketing involves breaking a market into segments and then concentrating your
marketing efforts on one or a few key segments consisting of the customers whose needs and
desires most closely match your product or service offerings. It can be the key to attracting new
business, increasing sales, and making your business a success.
The beauty of target marketing is that aiming your marketing efforts at specific groups of
consumers makes the promotion, pricing, and distribution of your products and/or services easier
and more cost effective and provides a focus to all of your marketing activities. social media
platforms, such as Facebook, LinkedIn, Twitter, and Instagram, have sophisticated options to
allow businesses to target users based on market segments. A bed-and-breakfast business, for
example, could target married Facebook followers with an ad for a romantic weekend getaway
package. LinkedIn, on the other hand, is more B2B oriented, so you can target businesses using a
variety of criteria such as number of employees, industry, geographic location, and so on.
Although you can approach market segmentation in many different ways, depending on how you
want to slice up the pie, three of the most common types are demographic segmentation,
geographic segmentation, and psychographic segmentation.
Demographic Segmentation:
Demographic grouping is based on measurable statistics, such as:
 Gender
 Age
 Income level
 Marital status
 Education
 Race
 Religion
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These all are be noted for marketing of above products because people have different taste.
Geographic Segmentation:
Geographic segmentation involves segmenting the market based on location. Home addresses are
one example, but depending on the scope of your business, you could also use:
 Neighborhood
 Postal or ZIP code
 Area code
 City
 Province or state
 Region
 Country
After noting the demographic segmentation points we must be working on geographic

segmentation as well.
Question No. 3

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In the development of new products, what could be the areas of potential conflict between
the marketing, design and manufacturing departments? How can these conflicts be
resolved?
Quality Control Issues:

One myth that infuses many marketing sections is that manufacture employees want to slow
down so they won't have to work so hard. This myth can cause clashes. Production may want to
go slower in order to make a higher-quality merchandise, which can cut down on customer yields
and criticisms. If marketing insists that production must always remain at volume, you may need
to step in and control if the value of quality control measures is worth the price of lower
production.
Misperception over Ability:
Department executives can become hungry for authority. For example, the production manager
may interpretation himself as the person who controls the beat of the company; if he doesn't put
the products out, no one can send them. This type of manager gradually achieve authority and
may begin to set a production pace that pleases him instead of one that meets demand. The
solution is to lay out clear lines of authority. Management can set production quotas, thereby
demonstrating that authority for production levels comes from above, not from the production or
sales departments. This eliminates the problem of sales staff accusing production personnel of
holding them back by not making enough products to meet customer demand.
Deficiency of Opinions:
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Struggles can develop between managers without upper-level administrators reach about it. If
marketing is shattering for more products and production is screaming for more time, offence
grows and personnel may not be able to focus on their jobs. Managers need to be in the advice
loop, and regular meetings with marketing and production managers can help resolve clashes
before they rankle into clashes.
Departure from Market Services:

Clashes frequently grow when the production department doesn't sense the burdens of the
marketplace. Marketing run may see varying demand or tastes, increased competition and better-
quality types of participants' products that can hurt your company's sales. If production asserts on
doing things the way it always has done them, conflict may ascend. In such a circumstance, a
top-level manager must step in and generate production standards that discourse changes in the
market.
Approach For Making Best Strategies:
The marketing and industrial strategies of any firm should be in agreement with each other to
promise synchronization. Some companies have coupled a low cost manufacturing strategy with
a highly discriminated, high cost marketing plan which generates entry blockades for
competitors. In this case, the stumpy cost manufacturing strategy permits the company to keep
close to competitors in cost, while offering expensive marketing replacements in order to have
substantial value in the market place. In another study the strategic importance of the concurrent
M/M decision making has been emphasized with respect to strategy preparation like market
determined pressures to accelerate new product development and to supply chain management in
the form of make/buy decision-making. We claimed that manufacturing process life cycles
should be coordinated to the product life cycle. As products grow from low to high volume and
calibration, processes should evolve from job shop to continuous flow. Since the stage in a
product's life cycle is partly a function of the marketing strategy, the need for synchronized
interaction between marketing and manufacturing strategies is vital. Cross-functional strategy
execution is also vital in assimilating systems like JIT, TQM, CIM and QFD.

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Estimating’s The Production Schedules:

In the short period, market predictions are needed to develop production timetables to balance
the wants of marketing for speedy and reliable delivery. Forecasting is also significant in the
long run to fulfil the need for steady work flow and truthful response times and the needs of
finance for low costs and minimum catalogue.
The order-delivery cycle:
This is especially important in the short term with respect to the one who makes the
commitments, the side who is responsible for the financial cost of carrying the finished goods
and to the length of the period during which no manufacturing schedule changes are made.
Merchandise streak:
Marketing needs variety in the product line and dressmaking to customer segments, where
stretchy manufacturing system with economic order quantities is a good tool in doing so.
Though, the manufacturing department requires limited product lines with bulky batch size. This
boundary also points out one of the major contradictory issues between manufacturing and
marketing departments.
Quality:
From the lookout of manufacturing, quality is defined as “conformance to specifications whereas
marketing’s definition of quality is “the totality of features and characteristics of a product that
bear on its ability to satisfy needs. Although these two definitions focus on different points,
management should perceive these definitions as complementary to each other in defining
quality in order to run successful business operations.
Customer service:
It is a delay of both production and marketing in its interaction with customers and its ability to
assure the customer that the company will solve the problems in post-sale period.
Question No. 4

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What are the basic differences between the marketing of industrial and consumer goods?
Which distribution channel would you consider the most appropriate for the sale of each of
the items listed below? Please give reasons of your selection.
Basic chemicals
Computers
Electric components
Office supplies
Machine tools
Plastic pipe
Industrial marketing and consumer marketing are often assumed to be the same but both vary in
many aspects. Industrial marketing is more related to B2B marketing where customers are
mainly manufacturers and consumer marketing deals with B2C marketing where customer is the
end user who is the ultimate consumer of goods and services.
Industrial Marketing:
Consider the differences between a candy store selling a chocolate bar to a single customer, and
a chocolate manufacturer selling thousands of chocolate bars to a single candy store.
While selling candy to an individual customer might rely on salesmanship and knowledge about
individual tastes and cravings, selling candy to a store takes more than attractive packaging.
Rather, the manufacturer must ensure a safe, profitable agreement between the two
organizations. The manufacturer will market the quality, cost, and customer appeal of its
chocolate bars to convince the candy store it will have an easy time selling them.
What is industrial marketing?

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Industrial marketing, also known as business-to-business (B2B) marketing, is a branch of

communications and sales that specializes in providing goods and services to other businesses,
rather than to individual customers.
Because industrial marketing often involves large orders and long-term relationships between the
producer and client, the process from first pitch to close of sale is often more complex than the
process between a business and a private customer.
While B2C sales might focus on one-on-one interactions between two parties, businesses are
usually made up of a number of individuals. Before the product appears on the other store's
shelves, the two businesses must reach a deal that will involve the manufacture, purchase, and
shipping of thousands of products.
Consumer Marketing:
Consumer marketing has two different marketing definitions: First, in network marketing,
"consumer marketing" is generally considered a deceptive term because it simply calls those who
sell and promote products and services "consumers" instead of "distributors." Therefore, to be
accurate in consumer direct marketing, to be called a "consumer" the distributor is required to
buy the product for their own personal use. Secondly, the term consumer direct marketing can
also refer to the practice of direct target marketing a group of consumers such as homeowners,
retirees, or other groups that represent a specific marketing demographic. Below is more
information about this particular type of marketing.
Difference b/w Consumer and Industrial Marketing:
Consumer Marketing Industrial Marketing
Less technical Can be technically complex
Non personal relationship Personal relationship
Less exchange of information Exchange of information

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Individual Purchasing Departmental purchasing
Family Involvement Functional involvement
Indirect channels More direct
Factors to Consider While Selecting Distribution Channels:
Some of the factors to consider while selecting channels of distribution are as follows:
(i) Product (ii) Market (iii) Middlemen (iv) Company (v) Marketing Environment (vi)
Competitors (vii) Customer Characteristics (viii) Channel Compensation.
1. Product:
Perishable goods need speedy movement and shorter route of distribution. For durable and
standardized goods, longer and diversified channel may be necessary. Whereas, for custom made
product, direct distribution to consumer or industrial user may be desirable. Also, for technical
product requiring specialized selling and serving talent, we have the shortest channel. Products
of high unit value are sold directly by travelling sales force and not through middlemen.
2. Market:
(a) For consumer market, retailer is essential whereas in business market we can eliminate
retailing.(b)
(b) For large market size, we have many channels, whereas, for small market size direct
selling may be profitable.
(c) For highly concentrated market, direct selling is preferred whereas for widely scattered
and diffused markets, we have many channels of distribution.
(d) Size and average frequency of customer’s orders also influence the channel decision. In
the sale of food products, we need both wholesaler and retailer.

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(e) Customer and dealer analysis will provide information on the number, type, location,
buying habits of consumers and dealers in this case can also influence the choice of
channels. For example, desire for credit, demand for personal service, amount and time
and efforts a customer is willing to spend-are all important factors in channels choice.
3. Middlemen:
(a) Middlemen who can provide wanted marketing services will be given first preference.
(b) The middlemen who can offer maximum co-operation in promotional services are also
preferred.
(c) The channel generating the largest sales volume at lower unit cost is given top priority.
4. Company:
a. The company’s size determines the size of the market, the size of its larger
accounts and its ability to set middlemen’s co-operation. A large company may
have shorter channel.
b. The company’s product-mix influences the pattern of channels. The broader the
product- line, the shorter will be the channel.
c. If the product-mix has greater specialization, the company can favor selective or
exclusive dealership.
d. A company with substantial financial resources may not rely on middlemen and
can afford to reduce the levels of distribution. A financially weak company has to
depend on middlemen.
e. New companies rely heavily on middlemen due to lack of experience.

25
f. A company desiring to exercise greater control over channel will prefer a shorter
channel as it will facilitate better co-ordination, communication and control.
5. Marketing Environment:
During recession or depression, shorter and cheaper channel is preferred. During prosperity, we
have a wider choice of channel alternatives. The distribution of perishable goods even in distant
markets becomes a reality due to cold storage facilities in transport and warehousing. Hence, this
leads to expanded role of intermediaries in the distribution of perishable goods.
6. Competitors:
Marketers closely watch the channels used by rivals. Many a time, similar channels may be
desirables to bring about distribution of a company’s products. Sometimes, marketers
deliberately avoid channels used by competitors. For example, company may by-pass retail store
channel and adopt door-to-door sales.
7. Customer Characteristics:
This refers to geographical distribution, frequency of purchase, average quantity of purchase and
numbers of prospective customers.
8. Channel Compensation:
This involves cost-benefit analysis. Major elements of distribution cost apart from channel
compensation are transportation, warehousing, storage insurance, material handling distribution

26
personnel’s compensation and interest on inventory carried at different selling points.
Distribution Cost Analysis is a fast growing and perhaps the most rewarding area in marketing
cost analysis and control.
Question No. 5

27
What factors you think are the most important to be taken into account in developing a
price policy?
Whether we are starting out or starting over, here are five factors to consider when pricing your
products and services.
1. Expenses:
First and leading you need to be financially informed. Before you set our pricing, work out the
costs involved with running our business. These include us to fixed costs and your direct costs
(the expenses you incur by producing and delivering your products and services).
2. Clients:
Distinguish what your customers want from your products and services. Are they driven by the
cheapest price or by the value they receive? What part does price play in their purchase decision?
Also look at what you are selling, are your current customers buying high-end or low-end
products and services? This evidence will help you determine if your price is right, what level of
service or inclusions you should be offering and lastly if you are targeting the right market. It
may be that you need to change your market to make your business more profitable.
3. Arranging:
Once you understand your customer, you need to look at your positioning. Where do you want to
be in the marketplace? Do you want to be the most expensive, luxurious, high-end brand in your
industry, the cheapest, beat it by 5% brand or somewhere in the middle? Once you have decided,
you will start to get an idea of your ideal pricing.
4. Competitors:
This is one of the key times you can give yourself authorization to do a little competitor
snooping. What are they charging for different products and services? What inclusions and level
of service are they offering for those prices? What customers are they attracting with their
pricing? And how are they positioned in the marketplace? The answers to these questions will
give you an industry benchmark for your pricing.

28
5. Revenue:
One of the most important questions business owners neglect to ask themselves is, “How much
profit do I want to make?” They tend to look at what others charge and then pull a figure out of
the air to be competitive without giving consideration to how much profit the want and need.
While you may be in business for the passion and to add value to the lives of others, you also
need to add value to your own. So give careful consideration to what your time is worth.
With examples of each and reasons of its selection, describe under what circumstances
would you recommend?
(i) a ‘skimming’ approach

(ii) a ‘penetration’ policy
If your business is planning to launch a new product, penetration pricing and price skimming
are two marketing strategies you should consider. Each strategy has benefits and
disadvantages, so research your target market carefully beforehand to determine what approach
will work best for your company .
Penetration Pricing:
Penetration pricing occurs when a company launches a low-priced product with the goal of
securing market share. For example, a sponge manufacturer might use a penetration pricing
strategy to lure customers from current competitors and to discourage new competitors from
entering the industry. If the sponge’s price is low enough, consumers will flock to the new
product. Competitors who can’t produce and promote sponges for such a small profit will
avoid the market, freeing the sponge company to maximize brand recognition and goodwill.
Effects of Penetration Pricing:

Penetration pricing requires extensive planning, according to the book “The Future of
Business: by Lawrence J. Gitman and Carl McDaniel. To properly execute a penetration-
29
pricing strategy, the sponge manufacturer first must gear up for mass production and then
launch a sizable advertising campaign to publicize its new low-priced sponge. Both steps are
expensive, so penetration-pricing strategies might not work well for small businesses. Also, if
your company’s forecasts for consumer demand are off, you could end up with a large
stockpile of unwanted products.
Price Skimming:
A price skimming strategy focuses on maximizing profits by charging a high price for early
adopters of a new product, then gradually lowering the price to attract thriftier consumers. For
example, a cell phone company might launch a new product with an initial high price,
capitalizing on some people’s willingness to pay a premium for cutting-edge technology. When
sales to that group slow or competitors emerge, the company progressively lowers its price,
skimming each layer of the market until the low price wins over even frugal buyers .
Effects of Price Skimming:

Price skimming offers four major advantages, according to “The Future of Business: The
Essentials.” It can offer insight into what consumers are willing to pay. It can create an aura of
prestige around your product. If the initial price is too high, you can lower it easily. Finally,
late adopters might be pleased to get your prestigious product at a bargain price, which creates
goodwill for your company. A major disadvantage, however, is that large profits attract
competitors, so this price strategy only works well for businesses that have a significant
competitive advantage, such as proprietary technology.

30
Differences between Penetration Pricing and Skimming Pricing:

The difference between penetration and skimming pricing are presented hereunder:
1. Penetration Pricing can be described as a pricing method adopted by the firm to attract
more and more customers, in which the product is offered at low price at the early
stage. Conversely, skimming pricing is used to mean a pricing technique, in which high
price is charged at the beginning to earn maximum profit.
2. Penetration pricing aims at achieving a greater market share, by offering the product at
low prices. As against the object of using skimming pricing strategy is to earn
maximum profit from the customers, by offering the product at the highest price.
3. Penetration pricing strategy is put into practice when the demand for the product is
relatively elastic. On the other hand, skimming pricing is used when the demand for the
product is inelastic.

31
4. In case of penetration pricing, the profit margin is low, whereas, in skimming pricing,
the profit margin is very high.
5. As the price of the product is initially low in penetration pricing, huge quantities of
product is sold by the firm. As against, due to high price of the product customer
demand small quantity of the product, in case of skimming pricing.
Conclusion:
When a new product enters a market having no to little product differentiation, penetration
pricing strategy is used. On the contrary, skimming pricing strategy is when a new product
is launched in the market for which there is no competition.
END-----


Marketing Theory Practice 5005

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Marketing Theory Practice 5005

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1

Muhammad Zeeshan Zia

Marketing Theory & Practice

M.Sc. Administrative Science

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Implications of Marketing Concept:

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nature and high quality of your products

members don't value. The result is improved company performance.

Marketing and Other Departments:

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Marketing vs. Finance Department:

Marketing vs. Production:

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 Isolation from Market Forces:

Marketing vs. Procurement:

Marketing is identified as dynamic, creative & innovative. It is driven by intangible elements

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Marketing and Research & Development:

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There are five easy steps to succeed our marketing context.

 Know your audience:

 Content isn’t just words:

When we think of content, we tend to think mostly of text on a website, in an email or in

 Data, data and more data:

 Personalize more than on a first name basis:

Reference: 1[ CITATION www \l 1033 ]

 Test and optimize:

Conditional Learning Theory:

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Question No. 2 (b)

the following markets?

Significance of Market Segmentation:

content for different customers groups.

show content about ‘Tide knows the fabric best.’

return on investment (ROI).

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campaigns or content personalization efforts.

someone interacts with our product, website, app or brand.

Types Of Behavior To Look At Include:

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 Benefits sought: This refers to the need a customer is trying to meet by purchasing a

user of our product.

we will want to take these different preferences into account.

Psychographic segmentation is similar to demographic segmentation, but it deals with

more systems we may want to look into.

Firm graphic segmentation:

to look at include industry, profits, number of employees and site.

Life stage segmentation:

Hanukkah also pointedly impact buying behaviors.

us some extra insight into our spectators.

Target Marketing and Market Segmentation for;

(i) women’s magazines

Demographic grouping is based on measurable statistics, such as:

After noting the demographic segmentation points we must be working on geographic

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Quality Control Issues:

Misperception over Ability:

Departure from Market Services:

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Estimating’s The Production Schedules:

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