MARKETING

SEED PREPARATORY KIT

2019

Research and Scholastic Development Team

In collaboration with
Contents
What is Marketing? ..................................................................................................................... 3
Marketing vs Selling .................................................................................................................... 5
Marketing mix (7 P’s) .................................................................................................................. 7
Marketing Tools ........................................................................................................................ 12
STP (Segmentation, Targeting and Positioning) ....................................................................... 15
AIDA Model in Marketing ......................................................................................................... 19
Ansoff Matrix ............................................................................................................................ 21
BCG Matrix ................................................................................................................................ 25
Porter’s Five Forces ................................................................................................................... 28
4C Model ................................................................................................................................... 31
Product Mix ............................................................................................................................... 35
Levels of Product ....................................................................................................................... 37
Types of Consumer Products .................................................................................................... 39
Product Life Cycle...................................................................................................................... 41
Promotion Mix .......................................................................................................................... 43
Sales promotion ........................................................................................................................ 45
Net Promoter Score .................................................................................................................. 53
Service Characteristics .............................................................................................................. 56
Buyer Decision Process ............................................................................................................. 57
Customer Lifetime Value .......................................................................................................... 59
Types of Marketing ................................................................................................................... 61
Traditional Advertising vs Unconventional Advertising ............................................................ 67
Intermediaries ........................................................................................................................... 68
Market Place Model Vs Inventory Model ................................................................................. 71
Distribution Channel ................................................................................................................. 72
Brand ......................................................................................................................................... 75
Brand Resonance ...................................................................................................................... 82
Go-To-Market Strategy ............................................................................................................. 85
Rural Marketing ........................................................................................................................ 88
Digital Marketing....................................................................................................................... 93

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What is Marketing?
Marketing refers to the activities of a company associated with buying and selling a product
or service. It is everything a company does to acquire customers and maintain a relationship.
It includes advertising, selling and delivering products to people. People who work in
marketing departments of companies try to get the attention of target audiences by using
slogans, packaging design, celebrity endorsements and general media exposure.

If we were to understand this through the prism of a famous brand then we could take a look
at Marlboro, whose ‘Marlboro Man’ marketing campaign was instrumental in spurring the
brand’s growth. Marlboro began the ‘Marlboro Man’ campaign ads in the fifties but instead
of promoting the actual product, the brand focused on emphasizing the supposed ‘lifestyle’
that the average consumer lives. For example, ‘being a real man’ and ‘living free like a
cowboy’ is the image a Marlboro Man should possess. This epitome of masculinity gave
consumers the illusion that the said cigarette was a way of life. Although it was an infamous
perception of what masculinity should be, it still sent shock waves across the buying
majority.

A similar example of this would be Red Bull, which took marketing to the extremes with the
famous Stratos project. In 2012, the brand followed Austrian skydiver Felix Baumgartner
break five Guinness World Records by performing a freefall jump from 24 miles above the
earth. Initially, the Stratos project was meant to be a scientific mission conducted by the
company. However, footage from the stunt was featured in a 2013 ad campaign for the
company, which soon raised eyebrows on whether or not the whole project was nothing more
than a publicity stunt. Either way, Stratos helped boost sales by generating millions in media
ads, leaving Red Bull with a 7% increase in sales.
Need, Want & Demand:
Needs - Human needs are the basic requirements and include food clothing and shelter.
Without these humans cannot survive. An extended part of needs today has become education
and healthcare. Generally, the products which fall under the needs category of products do
not require a push. Instead the customer buys it themselves. But in today's tough and
competitive world, so many brands have come up with the same offering satisfying the needs
of the customer that even the “needs category product” has to be pushed in the customers
mind.

Example – you are thirsty

Wants – Wants are a step ahead of needs and are largely dependent on the needs of humans
themselves. For example, you need to take a bath. Wants are not a mandatory part of life.
One does not need a good smelling soap. But you will definitely use it because it is you want.

Example of wants – you want Soft drinks to quench your thirst

Demands – You might want a BMW or a Mercedes for a car. You might want to go for a
cruise. But can you actually buy a BMW or go on a cruise? You can provide you have the
ability to buy a BMW or go on a cruise. Thus, a step ahead of wants is demands. When an
individual wants something which is premium, but he also has the ability to buy it, then these
wants are converted to demands. The basic difference between wants and demands is desire.
A customer may desire something but he may not be able to fulfil his desire.

Example of demands – Sprite, Pepsi, e.t.c.

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Marketing vs Selling
Marketing: Marketing is an integrated communications-based process through which
individuals and communities are informed or persuaded that existing and newly-identified
needs and wants may be satisfied by the products and services of others. Marketing creates
the atmosphere to make it easy for sales to happen.

Eg - ITC launched Fiama. Here are some marketing activities:

o Market research, customer surveys

o Market planning and strategizing
o Branding, creating your sales message
o Design and creation of collateral materials
o Advertising and public relations. Direct mail and e-newsletters
o Special promotional events
o Handling incoming inquiries
o Asking your current customers for referrals for more business
o Networking and building relationships
o Merchandising and merchandise selection
o Holding sales, offering preferred customer bonuses
o Doing cold calls to set appointments
o Building and maintaining your web site, blog, Facebook page, Twitter
o Getting articles published, Blogging

Selling: Selling includes the activities that get customers to make a purchase. Selling is
closing sales that make you money.
E.g., an insurance agent trying to sell insurance, a salesperson selling encyclopaedias door to
door. A few things included in selling are: presenting, answering questions, making
suggestions, doing proposals or estimates, addressing concerns, negotiating, and most
important, asking for the sale and then completing the sales agreement, etc.

The Difference: If we were to look at the difference between marketing and selling in an
accessible format, then it would be something similar to the representation given below :-
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Marketing mix (7 P’s)

Product:

A tangible object or an intangible service that is mass produced or manufactured on a large

scale with a specific volume of units. Intangible products are often service based like the
tourism industry & the hotel industry. Typical examples of a mass produced tangible object
are the motor car and the disposable razor. A less obvious but ubiquitous mass-produced
service is a computer operating system.

Methods used to improve differentiate the product or increase sales or target sales more
effectively or to gain competitive advantage

 Extension Strategies
 New Edition
 Improvement
 Changed packaging
 Technology
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  Specialized
 Versions

Price:

The price is the amount a customer pays for the product. It is determined by a number of
factors including market share, competition, material costs, product identity and the
customer's perceived value of the product. The business may increase or decrease the price of
product if other stores have the same product. There are many ways to price a product. Let's
have a look at some of them and try to understand the best policy/strategy in various
situations. The following are the five primary pricing strategies:

1. Penetration Pricing: The price charged for products and services is set artificially
low in order to gain market share. Once this is achieved, the price is increased. This
approach was used Hyundai in US and most airline companies in India.
2. Price Skimming: This is opposite of Penetration pricing. Charge a high price
initially because you have a substantial competitive advantage or have developed
strong loyalty in a set of consumers. However, the advantage is not sustainable for a
long period of time. The high price tends to attract new competitors into the market,
and the price inevitably falls due to increased supply or the pool of consumers willing
to pay the price is exhausted. Example would include Gaming consoles, and latest
launches of books.
3. Premium Pricing: Use a high price where there is uniqueness about the product or
service. This approach is used where a substantial competitive advantage exists. Such
high prices are charge for luxuries such as Cunard Cruises, Savoy Hotel rooms, and
Concorde flights.
4. Value Pricing: This approach is used where external factors such as recession or
increased competition force companies to provide ‘value’ products and services to
retain sales. For a lot of companies’ value pricing simply becomes a long term
strategy to keep a high barrier for entry in the category. e.g. Value meals at
McDonalds, Prices offered at Walmart and Big Bazaar.
5. Target Based Pricing: In this type of pricing, the ROI is calculated in the first place,
and the cost is arrived at by back calculation. This approach is usually used by
companies which require a high capital investment like Automobile manufacturers,
electric and gas companies etc.

Premium pricing, penetration pricing, economy pricing, and price skimming are the four
main pricing policies/strategies. They form the bases for the exercise. In addition, the
following are few more pricing strategies. The list is not exhaustive but these should be
enough to answer most summers questions on pricing.

6. Penetration Pricing: The price charged for products and services is set artificially
low in order to gain market share. Once this is achieved, the price is increased. This
approach was used Hyundai in US and most airline companies in India.
7. Price Skimming: This is opposite of Penetration pricing. Charge a high price
initially because you have a substantial competitive advantage or have developed
strong loyalty in a set of consumers. However, the advantage is not sustainable for a
long period of time. The high price tends to attract new competitors into the market,
and the price inevitably falls due to increased supply or the pool of consumers willing
to pay the price is exhausted. Example would include Gaming consoles, and latest
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 launches of books.

8. Trial Pricing: This is similar to penetration pricing but differs in the objective.
Penetration pricing is used to increase market share of the brand whereas trial pricing
is used to increase trials for a new product| brand. Eg: Nivea face balm.
9. Economy Pricing: This is a no frills low price. The cost of marketing and
manufacture are kept at a minimum. Supermarkets often have economy brands for
soups, spaghetti, etc.
10. Psychological Pricing: This approach is used when the marketer wants the consumer
to respond on an emotional, rather than rational basis. For example, pricing apparels
at 699 or 999; Garnier men’s white face wash at Rs 49.
11. Product Line Pricing: Where there is a range of product or services the pricing
reflects the benefits of parts of the range. For example, car washes. Basic wash could
be $2, wash and wax $4, and the whole package $6. Another example could be Gym
packages.
12. Optional Product Pricing: Companies will attempt to increase the amount customer
spend once they start to buy. Optional 'extras' increase the overall price of the product
or service. For example, airlines will charge for optional extras such as guaranteeing a
window seat or reserving a row of seats next to each other or offering a life insurance.
13. Captive Product Pricing/ Bait and Hook Strategy: Where products have
complements; companies will charge a premium price where the consumer is
captured. For example, a razor manufacturer will charge a low price and recoup its
margin (and more) from the sale of the only design of blades which fit the razor.
14. Product Bundle Pricing: Here sellers combine several products in the same package.
This also serves to move old stock. Videos and CDs are often sold using the bundle
approach.
15. Promotional Pricing: Pricing to promote a product is a very common application.
There are many examples of promotional pricing including approaches such as
BOGO (Buy One Get One Free) or giving 20% off, etc.
16. Price Discrimination: Price Discrimination is a pricing strategy where identical or
largely similar goods or services are transacted at different prices by the same
provider in different markets. Example – Different costs of soft drinks at different
channels.
17. Cost Plus: Cost-plus pricing is a pricing method used by companies. It is used
primarily because it is easy to calculate and requires little information. There are
several varieties, but the common thread in all of them is that one first calculates the
cost of the product, and then includes an additional amount to represent profit. Cost-
plus pricing is often used on government contracts and has been criticized as
promoting wasteful expenditures. The method determines the price of a product or
service that uses direct costs, indirect costs, and fixed costs whether related to the
production and sale of the product or service or not. These costs are converted to per
unit costs for the product and then a predetermined percentage of these costs is added
to provide a profit margin.
18. Loss Leader: Loss leader or leader is a product sold at a low price (at cost or below
cost) to stimulate other, profitable sales. It is a kind of sales promotion, in other words
marketing concentrating on a pricing strategy. The price can even be so low that the
product is sold at a loss. A loss leader is often a popular article. How one makes profit
is by selling other products or services along with this and making net overall profit.
Eg: Supermarkets selling one thing at exceptionally low price and hence inviting
footfall. These people end up buying a lot many things making an overall profit for
the supermarket owner.
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Place:

A channel of distribution comprises a set of institutions which perform all of the activities
utilized to move a product and its title from production to consumption.

Place is also known as channel, distribution, or intermediary. It is the mechanism through

which goods and/or services are moved from the manufacturer/ service provider to the user or
consumer. There are six basic 'channel' decisions:

1. Do we use direct or indirect channels? (e.g. 'direct' to consumer, 'indirect' via a

wholesaler). Single or multiple channels.
2. Cumulative length of the multiple channels. Types of intermediary.
3. Number of intermediaries at each level (e.g. how many retailers in Southern India).
4. Which companies as intermediaries to avoid 'intra-channel conflict' (i.e. in-fighting
between local distributors)
 Selection Consideration - how do we decide upon a distributor?
 Market segment - the distributor must be familiar with your target consumer and
segment
 Changes during the product life cycle - different channels can be exploited at
different points in the PLC e.g. Foldaway scooters are now available everywhere.
Once they were sold via a few specific stores.
 Producer distributor fit - Is there a match between distributors’ policies, strategies,
image, and yours? Look for 'synergy'.
 Qualification assessment - stablish the experience and track record of your
intermediary.
 Training-How much training and support will your distributor require?

Promotion:

This includes all of the tools available to the marketer for 'marketing communication'. You
can 'integrate' different aspects of the promotions mix to deliver a unique campaign. The
elements of the promotions mix are:

 Personal Selling
 Sales Promotion
 Public Relations
 Direct Mail
 Trade Fairs and Exhibitions
 Advertising
 Sponsorship

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Extended marketing mix: In the 1980s Booms and Bitner included three additional 'Ps' to
accommodate trends towards a service or knowledge-based economy:

People:

People are the most important element of any service or experience. Services tend to be
produced and consumed at the same moment, and aspects of the customer experience are
altered to meet the 'individual needs' of the person consuming it. Most of us can think of a
situation where the personal service offered by individuals has made or tainted a tour,
vacation or restaurant meal. Remember, people buy from people that they like, so the attitude,
skills and appearance of all staff need to be first class. Some ways in which people add value
to an experience, as a part of the marketing mix, are - training, personal selling and customer
service.
Process:

It refers to the process and methods of offering a service. For instance, the method of
handling sales, processing of orders and after-sale service can be very important elements of
the marketing mix.

Physical evidence:

Physical evidence is the material part of a service. Strictly speaking there are no physical
attributes to a service, so a consumer tends to rely on material cues. There are many examples
of physical evidence, including some of the following:

1. Packaging (considered in the product dimension in the traditional 4Ps)

2. Internet/web pages Paper work (such as invoices, tickets and dispatch notes).
3. Brochures
4. Furnishings
5. Signage (such as those on aircraft and vehicles)
6. Uniforms
7. Business cards
8. The building itself (such as prestigious offices or scenic headquarters)
9. Mailboxes

A sporting event is packed full of physical evidence. Your tickets have your team's logos
printed on them, and players are wearing uniforms. The stadium itself could be impressive
and have an electrifying atmosphere. You travelled there and parked quickly nearby, and
your seats are comfortable and close to restrooms and store. All you need now is for your
team to win! Some organizations depend heavily upon physical evidence as a means of
marketing communications, for example tourism attractions and resorts (e.g. Disney World),
parcel and mail services (e.g. UPS trucks), and large banks and insurance companies (e.g.
Lloyds of London)

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Marketing Tools
Companies market their products in a number of ways. These ways fall into either of these
two categories:

Above the line (ATL): Above The Line (ATL) refers to promotional activities done at macro
level. It is done at national, regional or at bigger territory level and mass audience is covered
in this type of promotion. A brand image is created about the company and its product. Media
such as television, cinema, radio, newspapers, and magazines are used to create an impact
about the company and its product. ATL communication is more of conventional in nature.

Below the line (BTL): Below The Line (BTL) communication is unconventional in nature,
done at micro level and forms part of non- media communication. Measures include direct
mailing, distribution of flyers, brochures, and usage of sponsorships, public relations, tele-
marketing and point of sale.

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Through The Line (TTL): "Through the line" refers to an advertising strategy involving
both above and below the line communications. This strategic approach allows brands to
engage with a customer at multiple points (for example, the customer will see the television
commercial, hear the radio advert and be handed a flyer on the street corner). This enables an
integrated communications approach where consistent messaging across multiple media
create a customer perception.
The advent of social media has blurred the ‘line’ segregating the marketing techniques. These
days, companies use an integrated approach involving both ATL and BTL and it is called
Through the Line (TTL) approach. This approach allows brands to engage with their
customers at multiple points and thus generate a solid perception regarding the company and
the product, the main aim of Marketing!

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Examples of BTL Campaigns

o Scotch Brite Wash Your Bill: In April 2015, Scotch-Brite, the scrub-sponge brand
owned by 3M, launched an innovative on-ground activity where participants could
quash their bill at an expensive restaurant by merely washing a few utensils. Titled
'Wash Your Bill', the campaign was executed in four cities across India - Mumbai,
Delhi, Pune and Bengaluru. The brand tied up with Barbeque Nation and gave people
the option of washing their dishes instead of paying their bill.
o When Vivel launched its Facebook page, it came out with an application that could
give personalized skin care solution. The application was designed in a manner to
subconsciously position Vivel as a skin care expert in the mind of its consumers.
Apart from this there was an option of requesting a free sample. This received a good
response amongst consumers with a total of more than 6500 requests of free sample in
the first weekend of the application launch.

‘Igen’ – A cigarette brand was built through below the line marketing efforts. The brand of
cigarette was promoted through organizing parties for the BPO employees on weekly basis
and collecting their database and then making the cigarette available at their door steps, the
exercise was continued for quite a few months and a strong database and customer base was
developed for the brand among the BPO employees.

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STP (Segmentation, Targeting and Positioning)

Segmentation

The basic idea of segmentation is to identify the different parameters based on which you
further group your customers into segments which will have common needs or will respond
similarly to a marketing action.

Geographic Demographic Psychographic Behavioural

Country Age Lifestyle Decision Roles

Region Gender Personality Purchase Modes

City Income Benefits

Rural-Semi Urban Occupation Usage Rates

Cities

Education Readiness

Cultural Background Loyalty

Psychographic Segmentation:

o Lifestyle
The customer might be school going, college going, office going or other. Thus, by
lifestyle we mean, where does the customer stand in his life cycle. Similarly, the
lifestyle of a rural area customer might be different from urban areas.

o Personality Personality in psychographic segmentation is dependent on both –

lifestyle as well as social class. A person will have a rich personality only if he has
high buying power as well as the taste in clothes to maintain such a lifestyle. Thus the

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 term “Brand personality” came into effect. The reason for that is that different brands
target different personalities.
A simple example would be if i ask you what comes in mind if i talk about a “Harley
Davidson biker” more commonly known as Hogs. They would be people unshaven,
tall, manly who like to live a rough lifestyle. That’s the personality built for Harley
over time. Thus, brands target their customers even based on their personality.

Behavioural segmentation:

o Occasions Groups individuals according to the occasions when they purchase, use or
think of buying a product.
o Benefits Sought Groups individuals according to the benefits they seek from the
product.
o Usage Rate Groups individuals according to the level of usage they make of the
product, be it Heavy, Medium or Light usage.
o User Status: Groups individuals according to whether they are non-users, potential
users, first-time users, regular users, or ex-users of a product.
o Loyalty Status: Groups individuals according to their level of loyalty to the product.
'Hard core loyal' always purchase the product / brand in question. Whilst 'Soft core
loyal' will sometimes purchase another brand, and 'Switchers' will not specifically
seek out a particular brand, but rather purchase the brand available to them at time of
need, or that which was on sale.
o Buyer Readiness Stage: Groups individuals according to their readiness to purchase
the product. This segmentation model is particularly useful in formulating and
monitoring the marketing communication strategies employed to move consumers
towards purchase of a product or brand.
Stages in Buyer-Readiness

1. Awareness
2. Knowledge
3. Liking
4. Preference
5. Conviction
6. Purchase

Targeting
Once the parameters are decided and the different groups corresponding to each parameter
are decided, the next step for a marketer is to decide upon the groups that he shall target to
sell his product. The aim for every marketer is to decide upon clearly-defined target groups
before embarking upon marketing their product.

The list below refers to what’s needed to evaluate the potential and commercial attractiveness
of each segment.

 Criteria Size: The market must be large enough to justify segmenting. If the market is
small, it may make it smaller.
 Difference: Measurable differences must exist between segments.

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 Money: Anticipated profits must exceed the costs of additional marketing plans and other
changes.
 Accessible: Each segment must be accessible to your team and the segment must be able
to receive your marketing messages
 Focus on different benefits: Different segments must need different benefits.

Positioning

Once the organization decides on its target market, it strives hard to create an image of its
product in the minds of the consumers. The marketers create a first impression of the product
in the minds of consumers through positioning. Positioning helps organizations to create a
perception of the products in the minds of target audience.

Ray Ban and Police Sunglasses cater to the premium segment while Vintage or Fastrack
sunglasses target the middle-income group. Ray Ban sunglasses have no takers amongst the
lower income group.

Example: Amazon Kindle

Segmentation: Urban vs Rural, City, Income, Education, Lifestyle, Personality, Benefits,

Usage Rate, Readiness Stage, Attitude towards Product.

Targeting: Urban, Tier-I and Tier- II cities, Income > 5 lpa, Graduates, Culture-oriented,
Ambitious and information seeking, People seeking a convenient mode of reading and buying
books, Voracious readers and people who read while on the move, People with high
awareness of such a technological product, People enthusiastic and positive about an
alternative way of reading books which makes it more convenient for them

Positioning: An alternative way of reading books which makes it more convenient and offers
a technological solution which feels closest to reading a physical book.

Example : The Cola Wars

A good example of the STP process (segmentation, targeting, positioning) can be found
during the Cola Wars in the 1980s between Coca-Cola and Pepsi-Cola. As you may be aware,
Coca-Cola eventually took the dramatic act of reformulating their flagship Coca-Cola product
and withdrawing it from the market to replace it with “new” Coke.

During this era, where Pepsi were quite aggressive with their marketing programs, including
the Pepsi Challenge taste test advertising and the “choice of a new generation” positioning,
Pepsi segmented the market on a very simplistic basis, using an attitude and loyalty
segmentation approach.

Pepsi segmented the market into three consumer segments only, namely:

a) Consumers with a positive attitude to the Coke brand and 100% loyal to Coke
b) Consumers with a positive attitude to the Pepsi brand and 100% loyal to Pepsi
c) Consumers with a positive attitude to both Coke and Pepsi, with loyalty to both brands,
but switching their purchases between these two brands from time to time
It is in this third market segment that the battle for market leadership in the cola market was
always waged, up to the New Coke decision in 1985. This switching segment were
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responsive to sales promotions consisting of point-of-purchase displays, discounts, general
advertising, as well as personal factors such as mood, social situation, taste preference, and so
on.

Therefore, the combined promotional budgets of Coke and Pepsi – which at the time were in
the vicinity of $350 million per annum (with Coke spending $200 million and Pepsi spending
$150 million) – were essentially targeting the 50% of cola drinkers that would switch
between the Coke and Pepsi brands.

However, following the launch of the New Coke product, Pepsi modified their target market
selection that started targeting loyal Coke drinkers (approximately 25% of the market). This
is because there was dissatisfaction among existing Coke drinkers that the “classic” Coca-
Cola product was no longer available in the marketplace.

As a result of this shift in target market selection, Pepsi positioned their product as the main
reason that Coca-Cola replaced their classic Coca-Cola with New Coke. This positioning
change was demonstrated in TV commercials that Pepsi ran at the time. The first showed a
teenage girl who is virtually discussing a breakup scenario and is emotionally upset that
Coca-Cola has changed. This positioning is consistent somewhat with Pepsi’s youth target
market at the time.

However, the second TV commercial shows an older demographic of very traditional and
loyal Coke drinkers. It is tapping in nicely into the dissatisfaction among Coke drinkers. This
is particularly highlighted in a line in the Pepsi TV commercial where a character says that
“they changed my Coke”. The key word here is the word “my”– which demonstrates the
mood of the time that Coca-Cola belonged to the consumer market, not to the company.
Following this decision, and the relaunch of “classic” Coca-Cola, Coca-Cola’s management
did recognize that they were caretakers of an American icon.

This change in marketing strategy by Pepsi in response to the competitive action by Coke,
clearly highlights the three steps of segmentation – targeting – positioning. By a change in the
segmentation view, and the selection of a new target market, the company is enabled to
construct a modified market positioning, which should have the effect of increasing market
share.

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AIDA Model in Marketing
The AIDA model, which stands for Attention, Interest, Desire, and Action model, is an
advertising effect model that identifies the stages that an individual goes during the process of
purchasing a product or service. The AIDA model is commonly used in digital
marketing, sales strategies, and public relations campaigns.

The steps involved in an AIDA model are:

 Attention: The first step in marketing or advertising is to consider how to attract the
attention of consumers.
 Interest: Once the consumer is aware that the product or service exists, the business
must work on increasing the potential customer’s interest level. For
example, Disney boosts interest in upcoming tours by announcing stars who will be
performing on the tours.
 Desire: After the consumer is interested in the product or service, then the goal is to
make consumers desire it, moving their mind-sets from “I like it” to “I want it.” For
example, if the Disney stars for the upcoming tour communicate to the target audience
about how great the show is going to be, the audience is more likely to want to go.
 Action: The ultimate goal is to drive the receiver of the marketing campaign to
initiate action and purchase the product or service.

Therefore, the AIDA model says that Awareness leads to Interest, which leads to Desire,
and finally, Action.

Let us consider ways to use the AIDA model by looking into each part of the hierarchy.

o Attention Often, the attention part is overlooked by many marketers. It is assumed

that the product or service already got the attention of the consumers – which may or
may not be the case. In any event, don’t just assume that everyone is already aware of
your product. One of the best approaches to attracting consumer attention is what’s
called “creative disruption” – breaking existing patterns of behaviour through a highly
creative message. This can be done in several ways:

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 o Placing advertisements in unexpected situations or locations. This is often
referred to as guerrilla marketing.
o Creating shock in advertisements through provocative imagery.
o An intensely targeted message. This is also referred to as personalization.
Essentially, the goal is to make consumers aware that a product or service
exists.
o Interest Creating interest is generally the hardest part. For example, if the product or
service is not inherently interesting, this can be very difficult to achieve. Make sure
that advertising information is broken up and easy to read, with interesting
subheadings and illustrations. Focus on what is most relevant for your target market in
relation to your product or service, and on conveying only the most important
message you want to communicate to consumers.
A good example of this is Wendy’s “Where’s the beef?” ad campaign that focused on
the fact that Wendy’s hamburgers contained more beef than their competitors’
hamburgers.

o Desire The second and third steps of the AIDA model go together. As you are
hopefully building interest in a product or service, it is important that you help
customers realize why they “need’ this product or service. Think about how the
content in infomercials is presented – they aim to provide interesting information on
the product, along with benefits of buying it – benefits that ideally make consumers
want the product more and more. Infomercials do this extremely well by showing the
product being used in several creative situations. Convey to the audience the value of
the product or service, and why they need it in their life.

o Action The last step of the AIDA model is getting your consumer to initiate action.
The advertisement should end with a call to action – a statement that is designed to
get an immediate response from the consumer.
For example, Netflix uses persuasive text to convince the consumer to try their free
trial. Netflix communicates how convenient their product is and highlights its value,
then urges consumers to sign up for a free trial.
Good advertising should elicit a sense of urgency that motivates consumers to take
action RIGHT NOW. One commonly used method for achieving this goal is making
limited time offers (such as: free shipping).

20
Ansoff Matrix
The Ansoff Product-Market Growth Matrix is a marketing tool created by Igor Ansoff and
was first published in his article "Strategies for Diversification" in the Harvard Business
Review (1957). The matrix allows marketers to consider ways to grow the business via
existing and/or new products, in existing and/or new markets – there are four possible
product/market combinations.
Ansoff's matrix provides four different growth strategies:
1. Market Penetration - the firm seeks to achieve growth with existing products in their
current market segments, aiming to increase its market share.
2. Market Development - the firm seeks growth by targeting its existing products to new
market segments.
3. Product Development - the firms develop new products targeted to its existing market
segments.
4. Diversification - the firm grows by diversifying into new businesses by developing new
products for new markets.

21
The matrix illustrates, in particular, that the element of risk increases as the strategy moves
away from the known quantities - the existing product and the existing market. Thus, product
development (requiring, in effect, a new product) and market development (a new market)
typically involve a greater risk than ‘penetration’ (existing product and existing market); and
diversification (new product and new market) generally carries the greatest risk of all.

Market Penetration
Market penetration is a growth strategy where the business focuses on selling existing
products into existing markets. Market penetration seeks to achieve some objectives:
1. Maintain or increase the market share of current products – combination of competitive
pricing strategies, advertising, sales promotion and perhaps more resources dedicated to
personal selling
2. Secure dominance of growth markets
3. Restructure a mature market by driving out competitors – aggressive promotional
campaign, supported by a pricing strategy designed to make the market unattractive for
competitors
4. Increase usage by existing customers – introducing loyalty schemes.

Market penetration is the least risky way for a company to grow.

Market Development
Market Development is a growth strategy where the business seeks to sell its existing
products into new markets.
There are many possible ways of approaching this strategy, including:
• New geographical markets; for example, exporting the product to a new country
• New distribution channels
• Different pricing policies to attract different customers or create new market segments
For example, Lucozade was first marketed for sick children and then rebranded to target
athletes. This is a good example of developing a new market for an existing product. Again,
the market need not be new in itself; the point is that the market is new to the company.
Product Development
Product development is a growth strategy where a business aims to introduce new products
into existing markets. This strategy may require the development of new competencies and
requires the business to develop modified products that appeals to the existing markets.
For example, McDonald's is always within the fast-food industry, but frequently markets new
burgers. Frequently, when a firm creates new products, it can gain new customers for these
products.

Diversification
Diversification is a growth strategy where business markets new products in new markets.
This is an inherently more risk strategy because the business is moving into markets in which
it has little or no experience. For a business to adopt a diversification strategy, therefore, it
must have a clear idea about what it expects to gain from the strategy and an honest
assessment of the risks.
For example, Virgin Cola, Virgin Megastores, Virgin Airlines, Virgin Telecommunications
are examples of new products created by the Virgin Group of UK, to leverage the Virgin
brand. This resulted in the company entering new markets where it had no presence before

22
Example: Ansoff Matrix for Coca Cola

Market Penetration: (EXISTING Market, EXISTING Product)

This strategy involves an attempt to increase market share within existing industries, either by selling
more product to established customers or by finding new customers within these markets – typically
by adapting the ‘Promotion’ element of the Marketing Mix. Due to the incredible strength of Coca-
Cola’s brand, the company has been able to utilise market penetration on an annual basis by creating
an association between Coca-Cola and Christmas, such as through the infamous Coca-Cola Christmas
advert, which has helped boost sales during the festive period.

Product Development: (EXISTING Market, NEW Product)

This involves developing new products for existing markets by thinking about how new products can
meet customer needs more closely and outperform competitors. A prime example of this was the
launch of Cherry Coke in 1985 – Coca-Cola’s first extension beyond its original recipe – and a
strategy prompted by small-scale competitors who had identified a profitable opportunity to add
cherry-flavoured syrup to Coca-Cola and resell it. The company has since gone on to successfully
launch other flavoured variants including lime, lemon and vanilla.

Market Development: (NEW Market, EXISTING Product)

Thirdly, the market development strategy entails finding a new group of buyers for an existing
product. The launch of Coke Zero in 2005 was a classic example of this – its concept being identical
to Diet Coke; the great taste of Coca-Cola but with zero sugar and low calories. Diet Coke was
launched more than 30 years ago, and whilst more females drink it every day than any other soft drink
brand, it came to light that young men shied away from it due to its consequential perception of being
a woman’s drink. With its shiny black can and polar opposite advertising campaigns, Coke Zero has
successfully generated a more ‘masculine’ appeal.

23
Related Diversification: (NEW Market, NEW Product)
This involves the production of a new category of goods that complements the existing portfolio, in
order to penetrate a new but related market. In 2007, Coca-Cola spent $4.1 billion to acquire Glaceau,
including its health drink brand Vitamin water. With a year-on-year decline in sales of carbonated soft
drinks like Coca-Cola, the brand anticipates the drinks market may be heading less-sugary future – so
has jumped on board the growing health drink sector.

Unrelated Diversification: (NEW Market, NEW Product)

Finally, unrelated diversification entails entry into a new industry that lacks important similarities
with the company’s existing markets. Coca-Cola generally avoids risky adventures into unknown
territories and can instead utilise its brand strength to continue growing within the drinks industry.
That said, Coca-Cola offers official merchandise from pens and glasses to fridges, therefore
exploiting its strong brand advocacy through this strategy.

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BCG Matrix
It is also called Product Portfolio Matrix. Used for an overview of products, not for detailed
analysis.

The BCG matrix considers two parameters:

 Growth rate of the market:
The growth rate of the market dimension is used as a proxy measure of the attractiveness of
the market, with high-growth markets being seen as more attractive and offering more
potential and opportunity.
 Relative market share:
Relative market share is used as a surrogate of competitive strength. The larger the firm’s
market share, relative to its largest competitor, the stronger the firm is in the marketplace.

Therefore, the BCG matrix combines a measure of market attractiveness against overall
competitive strengths in order to identify the quadrant of the model with the firm or business
unit is situated.

• Market Share: Percentage of the total market serviced by your company/product/brand

measured in either revenue terms or unit volume terms

• Relative market share (RMS): Relative market share is the firm’s or brands market share
is an index of its largest competitor. In this way, relative market share becomes a measure of
competitive strength.

The formula for calculating relative market share is as follows:

Relative market share = firm’s market share/largest competitor’s market share
If Tang has a market share of 20% and Rasna has 30%, then RMS of Tang is 20/30 = 0.66

Market leader will have RMS >1

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Calculating the market growth rate for the BCG matrix, a simple year on year growth rate is
typically utilized. This would be calculated by:
Market growth rate = total market unit sales in current year/total market unit sales in
previous year
It is important to define the market for the BCG matrix.

Dogs: Low Market Share / Low Market Growth:

In these areas, your market presence is weak, so it's going to take a lot of hard work to get
noticed. Also, you won't enjoy the scale economies of the larger players, so it's going to be
difficult to make a profit.

Stars: High Market Share / High Market Growth:

Use large amounts of cash; they are the leaders in business so they should produce large
amounts of cash as well. These are fantastic opportunities, and you should work hard to
realize them.

Question Marks (Problem Child): Low Market Share / High Market Growth:
These are the opportunities no one knows what to do with. They are not generating much
revenue right now because you don't have a large market share. But, they are in high growth
markets so the potential to make money is there. Question Marks might become Stars and
eventual Cash Cows, but they could just as easily absorb effort with little return. These
opportunities need serious thought as to whether increased investment is warranted.

Cash Cows: High Market Share / Low Market Growth:

These units typically generate cash in excess of the amount of cash needed to maintain the
business. They are regarded as staid and boring, in a "mature" market, yet corporations value
owning them due to their cash generating qualities. They are to be "milked" continuously
with as little investment as possible since such investment would be wasted in an industry
with low growth.

Example: PepsiCo

A perfect example to demonstrate BCG matrix could be the BCG matrix of Pepsico. The
company has perfected its product mix over the years according to what’s working and what’s
not.

26
Here are the four quadrants of Pepsico’s growth-share matrix:
Cash Cows – With a market share of 58.8% in the US, Frito Lay is the biggest cash cow for
Pepsico.

Stars – Even though Pepsi’s share in the market has been reduced to 8.4%, it’s still the star for
Pepsico because of its brand equity. Other stars are Aquafina (biggest selling mineral water
brand in the USA), Tropicana, Gatorade, and Mountain Dew.

Question Marks – Since it’s a mystery whether the diet food and soda industry will boom in the
future and will Pepsico’s products will find their place or not, Diet Pepsi, Pepsi Max, Quaker,
etc. fall in the question marks section of the Pepsico’s BCG matrix.

Dogs – As of now, there isn’t any product line that falls in the dogs section of the Pepsico’s BCG
matrix. However, seasonal and experimental products like Pepsi Real Sugar, Mtn Merry Mash-
up can be inserted in this section

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Porter’s Five Forces
Porter's Five Forces Framework is a tool for analysing competition of a business. It draws
from industrial organization (IO) economics to derive five forces that determine the
competitive intensity and, therefore, the attractiveness (or lack of it) of an industry in terms of
its profitability. Five primary forces:
1) The threat of new entrants
2) The bargaining power of buyers/customers
3) The bargaining power of suppliers
4) The threat of substitute products
5) Rivalry with competitors

Attractiveness of the market depends upon:

 Intense competition allows minimal profit margins
 Mild competition allows wider profit margins

Barriers to Entry:
There are a number of factors that determine the degree of difficulty in entering an industry:
 Economies of scale
 Product differentiation
 Capital requirements vs. switching costs
 Access to distribution channels
 Cost advantages independent of scale

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  Proprietary product technology
 Favourable access to raw materials
 Favourable location
 Learning curve
 Government policy

Bargaining Power of Buyers:

A buyer group is powerful if:
 It is concentrated or purchases large volumes relative to seller's sales
 The products it purchases front the industry are standard or undifferentiated
 It faces few switching costs
 Buyers pose a credible threat of backward integration
 The industry's product is unimportant to the quality of the buyer's products or services
 The buyer has full information

Bargaining Power of Suppliers:

A supplier group is powerful if:
 It is not obliged to contend with other substitute products for sales in the industry
 The industry is not an important customer of the supplier group
 The supplier group is an important input to the buyer's business
 The supplier group's products are differentiated or it has built up switching costs
 The supplier group poses a credible threat of forward integration

Substitute Products:
Substitute products that deserve the most attention are those that:
 Compete in price with the industry's products
 Are produced by industries earning high profits

Rivalry:
Rivalry among existing competitors increases if:
 Numerous or equally balanced competitors exist
 Industry growth is slow
 Fixed costs are high
 There is lack of differentiation or switching costs
 Capacity is augmented in large increments

Example : Coca Cola

Threat of New Entrants/Potential Competitors: Medium Pressure

 Entry barriers are relatively low for the beverage industry: there is no consumer switching cost
and zero capital requirement. There is an increasing amount of new brands appearing in the
market with similar prices than Coke products
 Coca-Cola is seen not only as a beverage but also as a brand. It has held a very significant market
share for a long time and loyal customers are not very likely to try a new brand.

Threat of Substitute Products: Medium to High pressure

 There are many kinds of energy drink s/soda/juice products in the market. Coca-
Cola doesn’t really have an entirely unique flavor. In a blind taste test, people can’t tell the
difference between Coca-Cola and Pepsi.

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The Bargaining Power of Buyers: Low pressure

 The individual buyer no pressure on Coca-Cola

 Large retailers, like Wal-Mart, have bargaining power because of the large order quantity, but the
bargaining power is lessened because of the end consumer brand loyalty.

The Bargaining Power of Suppliers: Low pressure

 The main ingredients for soft drink include carbonated water, phosphoric acid, sweetener, and
caffeine. The suppliers are not concentrated or differentiated.
 Coca-Cola is likely a large, or the largest customer of any of these suppliers.

Rivalry Among Existing Firms: High Pressure

 Currently, the main competitor is Pepsi which also has a wide range of beverage products under
its brand. Both Coca-Cola and Pepsi are the predominant carbonated beverages
and committed heavily to sponsoring outdoor events and activities.
 There are other soda brands in the market that become popular, like Dr. Pepper, because of their
unique flavors. These other brands have failed to reach the success that Pepsi or Coke have
enjoyed.

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4C Model
The traditional Marketing mix is a 7P’s model and is business oriented. The 4C’s model of
marketing on the other hand is more consumers oriented because of its focus on consumers.
The 4C’s model is mainly used for Niche Marketing. However, just like the traditional
marketing mix, it can also be used for mass markets.
The four variables in the 4 C’s model are
 Consumer
 Cost
 Convenience
 Communication

Consumer
The principle of 4C’s of marketing states that your customer should be your prime focus.
Unlike the traditional marketing mix where the primary focus is on Products, in the 4 C’s
model, the primary focus is on the customer. Thus the companies which follow this model
believe in making products which satisfy their customers. They are generally ready to offer
customizable products and because they have a general set of target customers, this principle
is only applicable for smaller market segments and not for mass markets. For mass markets,
the traditional marketing mix can be used.

Questions that need to be asked are:

 Who is your customer - or prospective customer?
 What are their needs?
 Where do they live; where do they work; and what do they do for fun?
 Where do they get information?

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Cost
Cost is equivalent to Pricing in the traditional marketing mix. Cost is a very important
consideration during consumer decision making and hence in the 4 C’s principle, the cost
variable is given special attention. The 4 C’s model generally plans on the basis of Customers
and not products. And hence they have to plan the cost of the product on the basis of their
customer.

The socio-economic classification (SEC) is a measure used to classify and target consumers
based on certain parameters. The Urban SEC Grid, which uses Education levels and
Occupational criteria of the Chief Wage Earner (CWE) of a household as measures to
determine socio-economic classification, and segments urban India into 7 groups (A1 to E2)

If you are targeting a SEC A segment, then the costing of the product needs to be premium to
have proper psychological positioning. On the other hand, if your product is for the SEC B
and SEC C classes, then it needs to have a lower costing. Thus, over here, costing of the
product depends on the customer.

Communication
The concept of communication remains same for both, the traditional marketing mix as well
as for the 4 C’s of marketing. Off course, the marketing communications for a company
following the 4 C’s of marketing is completely different as it needs a completely different
Segmentation, targeting and positioning.
As said before, the 4 C’s of marketing are generally used for Niche products. The media
vehicles used for marketing communications for a mass product and that for a niche product
are different. A niche marketing company might use more of BTL rather than ATL whereas
in a mass marketing company, ATL communications are very important.

Ask yourself;
 How will you communicate your offering to customers?
 What modes of communication are available to you (or your client)? Which will be
most effective
 What will be the strategic mix of communications?

Convenience
Convenience is equivalent of distribution or placement of the traditional marketing mix.
When you have a niche customer base, the convenience of the customer in acquiring your
product plays a critical role.
Take a niche product like Heavy machinery as an example or even products like television
and air conditioners. What if the companies who sell these products do not give you delivery
and installation? You will not buy the product as you won’t be ready to pick up the machine
and install it yourself. You will be looking out for your own convenience. Thus convenience,
like distribution, plays a critical role. The customer will not buy your product if it is not
convenient to him.

All in all, the traditional marketing mix model helps a company define its strategy more
efficiently. However, the 4 C’s model, although not much different, really helps if you are a
customer-oriented firm.

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Example : Walmart.com

New technology changed the competitive landscape in many ways. There was more
awareness among consumers, there were newer ways of marketing and selling and businesses
shifted their focus to the consumer. This paradigm shift made marketing more aggressive and
in 1993 Robert Lauterborn suggested the 4Cs which are a 4Ps substitute in the marketing
mix.

Consumer – It is suggested that businesses must shift focus from what a firm wants to sell to
what the consumer wants to buy. This change in perspective forced firms to conduct business
differently so as to benefit the end user by creating a fair market place where only the best
firm wins.

The idea of walmart.com is centered on providing the consumer a channel of shopping at the
one place where he spends a lot of time today – the internet. Like they say on their website,
their aim is to provide easy access to more of walmart. Customized functionality, wide
product choices and purchase and delivery options are all focused on the consumer.

Cost – Cost here not only refers to the one-time cost that a consumer incurs in acquiring a
product but also refers to the repeat costs associated with it like maintenance and the cost of
letting go of an existing product to acquire the new one. Looking at the ‘cost to consumer’
rather than ‘price of product’ brings transparency in the market, thereby benefitting the
consumer.

Well ‘lowest prices always’ is a phrase that is best associated with Walmart. Clearly,
Walmart is bringing it to online retailing too. While there is a huge gap in revenues of
amazon.com and walmart.com (with amazon being well ahead in the game with $19.7bn of
sales vis a vis $1.7bn of walmart), walmart is known to provide better prices for similar
products on amazon.com. Clearly, Walmart is serious about grabbing a large share of the
33
online-spend pie.

Convenience – With the advances in internet and mobile technology, the Place of the 4Ps is
becoming less and less relevant. Consumers now have many ways of learning about a
product, comparing similar products and purchasing them. According to most, winning
businesses craft the convenience factor extremely well in their marketing mix.

This one is a no-brainer. The digital store was created with the aim of providing convenience
to consumer. But Walmart doesn’t stop at just creating the channel. They are leveraging their
immaculate supply chain by introducing concepts like site to store (buy online, pick it up from
a store) which provide free shipping – an inherent cost associated with online shopping.

Communication – This aspect of MM is different from Promotion in the sense that it is not
just about a firm advertising its product in different ways. Communication refers to any form
of contact a business has with its customers – whether it is to gather feedback, provide
support or simply reach out to its target audience by way of viral videos.

Walmart always considered marketing a support function. With the economic slump, walmart
was forced to revisit this belief. That is when walmart started focusing on the communication
part of MM. ‘Save Money, Live Better’ campaign was the turning point in walmart’s
communication with its consumers. Walmart.com also pioneered the idea of a ‘showcase
store’ (brick and mortar stores in malls) for its online customers. We are yet to see the
benefits of such a store for a retailer whose primary channel of sale is its big-box stores.
Also, walmart has not actively invested in mobile technology which can prove expensive in
the long run.

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Product Mix
The complete range of products present within a company is known as the product mix. The
product mix includes four elements.
The width of the assortment refers to how many product lines the company markets.
The length signifies how many products a given line includes.
Depth touches on how many versions of a given product a line offers.
Consistency denotes the uniformity relative to how products are used by consumers, or by
how they are produced or distributed.
None of the organizations wants to take the risk of being present in the market with a single
product. If a company has only a single product, then it is understood that the demand of the
product is very high or the company does not have the resources to expand the number of
products it has.

Product line
The product line generally refers to a type of product within an organization. As the
organization can have a number of different types of products, it will have similar number of
product lines. Like, in Nestle, there are milk-based products like milkmaid, Food products
like Maggi, chocolate products like KitKat and other such product lines. Thus, Nestlé’s
product mix will be a combination of the all these three product lines.

Product line length

If a company has 4 product lines, and 10 products within the product line, then the length of
the product mix is 40. Thus, the total number of products in the total number of product lines
forms the length of the product mix. This equation is also known as product line length.

35
Product line width
The width of the product mix is equal to the number of product lines within a company.
Taking the above example, if there are 4 product lines within the company, and 10 products
within each product line, then the product line width is 4 only. Thus, product line width is a
depiction of the number of product lines which a company has.

Product line depth

Depth of a product mix pertains to the total number of variations for each product. Variations
can include size, flavour and any other distinguishing characteristic. For example, if your
company sells three sizes and two flavours of toothpaste, that particular line of toothpaste has
a depth of six. Just like length, companies sometimes report the average depth of their
product lines; or the depth of a specific product line. If the company also has another line of
toothpaste, and that line comes in two flavours and two sizes, its depth is four. Since one line
has a depth of six and the second line has a depth of four, your company's average depth of
product lines is five (6+4=10, 10/2=5).

Product line consistency

Product mix consistency describes how closely related product lines are to one another--in
terms of use, production and distribution. The lesser the variations between the products, the
more is the product line consistency. For example, Amul has various product lines which are
all dairy related. So that product mix consistency is high. But Samsung as a company has
many product lines which are completely independent of each other. Like Air conditioners,
televisions, smart phones, home appliances, so on and so forth. Thus, the product mix
consistency is low in Samsung.

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Levels of Product
A product meets the needs of a consumer. In addition to a tangible value, it also has an
abstract value. In order to shape this abstract value, Philip Kotler states that there are five
product levels that can be identified and developed. These five product levels indicate the
value that consumers attach to a product. The customer will only be satisfied when the
specified value is identical or higher than the expected value.
There are 5 levels of a product.
1. Core Product
2. Expected Product
3. Actual Product
4. Augmented Product
5. Potential Product

1. Core Product: The core product is the intangible product. It is the BENEFIT that we
get out of a product.
For Example - The core product of a restaurant is offering food. It is not the building
of the restaurant or the service in itself. The core product is the food.

2. Generic Product: If we talk about restaurants, there are various types of restaurants.
Some are 3 star, some 4 star, some 5 star and even 7 stars are found in this world.
However, the basic level of a restaurant is the one found in your locality, offering
basic food. If a hotel, wanted to turn its core product (rest and food) into a basic
product, then the building of the hotel, the type of bed, the type of food, all together

37
 form the basic product. A version of the product containing only those attributes or
characteristics absolutely necessary for it to function.

3. Expected Product: The set of attributes or characteristics that buyers normally

expect and agree to when they purchase a product. A 5-star hotel, will just not be
expected to have a bed and normal food, but expect a lot more. The expectation is
built on the fact that the hotel is a 5-star hotel. As the brand grows in reputation, you
have to take care of the expectations of the consumer.

4. Augmented Product: This refers to all additional factors which sets the product apart
from that of the competition. And this particularly involves brand identity and image.
It involves deciding the additional non-tangible benefits that a product can offer.
Competition at this level is based around after sales service, help lines, warranties,
free/cheap delivery and so on. In other words, it is things that the product does not do
but customers may find them useful.
For example, non-tangible benefits such as product warranties offer customers peace
of mind and demonstrate the manufacturer has faith in the quality of its product. A 5-
star restaurant, giving a fantastic four course meal, with the relaxation and the
ambiance of your life, is serving as an augmented product.

5. Potential Product: This includes all the augmentations and transformations a product
might undergo in the future. To ensure future customer loyalty, a business must aim to
surprise and delight customers in the future by continuing to augment products. A best
example of Potential product is the rivalry between Facebook and Google for virtual
reality. Where Facebook has Occulus rift for gaming, Google has google glass for day
to day usage. Each of them is progressing forward to dominate in the potential
product – Virtual reality.

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Types of Consumer Products
A consumer product is a product bought by end customers for personal consumption. But not
every consumer product is the same. There are four different types of consumer products.
Marketers usually classify consumer products into these 4 types:

 Convenience products
 Shopping products
 Speciality products
 Unsought products.
These 4 types of consumer products all have different characteristics and involve a different
consumer purchasing behaviour. Thus, the types of consumer products differ in the way
consumers buy them and, for that reason, in the way they should be marketed.

Convenience products:

A convenience product is a consumer product or service that

customers normally buy frequently, immediately and without great
comparison or buying effort. Examples include articles such as
laundry detergents, fast food, sugar and magazines. As you can see,
convenience products are those types of consumer products that are
usually low-priced and placed in many locations to make them
readily available when consumers need or want them.

Shopping products
Shopping products are a consumer product that the customer
usually compares on attributes such as quality, price and style in the
process of selecting and purchasing. The shopping product is
usually less frequently purchased and more carefully compared
than convenience products. Therefore, consumers spend much more
time and effort in gathering information and comparing
alternatives.
Examples are: furniture, clothing, used cars, airline services etc. As
a matter of fact, marketers usually distribute these types of
consumer products through fewer outlets but provide deeper sales
support in order to help customers in the comparison effort.

Specialty products
Speciality products are consumer products and services with unique
characteristics or brand identification for which a significant group
of consumers is willing to make a special purchase effort. Examples
include specific cars, professional and high-prices photographic
equipment, designer clothes etc. speciality products are usually less
compared against each other.

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Unsought products
Unsought products are those consumer products that a consumer either does not know about
or knows about but does not consider buying under normal conditions. Thus, these types of
consumer products consumers do not think about normally, at least not until they need them.
Most new innovations are unsought until consumers become aware of them. Other examples
of these types of consumer products are life insurance, pre-planned funeral services etc. As a
consequence of their nature, unsought products require much more advertising, selling and
marketing efforts than other types of consumer products.

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Product Life Cycle

Stage 1. Market Development / Introduction

This is when a new product is first brought to market, before there is a proven demand for it,
and often before it has been fully proved out technically in all respects. Sales are low and
creep along slowly.

The need for immediate profit is not a pressure. The impact on the marketing mix and
strategy is as follows:

 Product branding and quality level is established and intellectual property protection,
such as patents and trademarks are obtained.
 Pricing may be low penetration to build market share rapidly or high skim pricing to
recover development costs.

Stage 2. Market Growth

Demand begins to accelerate and the size of the total market expands rapidly. It might also be
called the “Take-off Stage.”

Competitors are attracted into the market with very similar offerings. In the growth stage, the
firm seeks to build brand preference and increase market share.
 Product quality is maintained and additional features and support services may be
added.
 Pricing is maintained as the firm enjoys increasing demand with little competition.

41
  Distribution channels are added as demand increases and customers accept the
product.
 Promotion is aimed at a broader audience.

Stage 3. Market Maturity

Demand levels off and grows, for the most part, only at the replacement and new family-
formation rate.

Those products that survive the earlier stages tend to spend longest in this phase. At maturity,
the strong growth in sales diminishes. Competition may appear with similar products. The
primary objective at this point is to defend market share while maximizing profit.

 Product features may be enhanced to differentiate the product from that of

competitors.
 Pricing may be lower because of the new competition.
 Distribution becomes more intensive, and incentives may be offered to encourage
preference over competing products.
 Promotion emphasizes product differentiation.

Stage 4. Market Decline

The product begins to lose consumer appeal and sales drift downward.

At this point, there is a downturn in the market. For example, more innovative products are
introduced or consumer tastes have changed. There is intense price cutting, and many more
products are withdrawn from the market. Profits can be improved by reducing marketing
spending and cost cutting.

As sales decline, the firm has several options:

 Maintain the product, possibly rejuvenating it by adding new features and finding new
uses.
 Harvest the product–reduce costs and continue to offer it, possibly to a loyal niche
segment.
 Discontinue the product, liquidating remaining inventory or selling it to another firm
that is willing to continue the product.
 By imaginatively repositioning their products, companies can change how customers
mentally categorize them. They can rescue products struggling in the maturity phase
of their life cycles and get them back to the growth phase. And in some cases, they
might be able take their new products forward straight into the growth phase.

The Con of Using Product Life Cycles to Direct Strategies

Though the product life cycle concept has been used successfully in past, it has made
marketers assume that there is only one trajectory for successful products. By viewing the
product life cycle in the same way, marketers pursue similar positioning strategies for
products and services during each stage of the life cycle. In the process, they miss out on
opportunities to differentiate themselves.

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 Promotion Mix
Definition: The Promotion Mix refers to the blend of several promotional tools used by the
business to create, maintain and increase the demand for goods and services.
The fourth element of the 4 P’s of Marketing Mix is the promotion; that focuses on creating
the awareness and persuading the customers to initiate the purchase. The several tools that
facilitate the promotion objective of a firm are collectively known as the Promotion Mix.
The Promotion Mix is the integration of Advertising, Personal Selling, Sales Promotion,
Public Relations and Direct Marketing. The marketers need to view the following questions
in order to have a balanced blend of these promotional tools.
 What is the most effective way to inform the customers?
 Which marketing methods to be used?
 To whom the promotion efforts be directed?
 What is the marketing budget? How is it to be allocated to the promotional tools?

Elements of Promotion Mix

1. Advertising: The advertising is any paid form of non-personal presentation and promotion of
goods and services by the identified sponsor in the exchange of a fee. Through advertising,
the marketer tries to build a pull strategy; wherein the customer is instigated to try the product
at least once. The complete information along with the attractive graphics of the product or
service can be shown to the customers that grab their attention and influences the purchase
decision.

2. Personal Selling: This is one of the traditional forms of promotional tool wherein the
salesman interacts with the customer directly by visiting them. It is a face to face interaction
between the company representative and the customer with the objective to influence the
customer to purchase the product or services.

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3. Sales Promotion: The sales promotion is the short-term incentives given to the customers to
have an increased sale for a given period. Generally, the sales promotion schemes are floated
in the market at the time of festivals or the end of the season. Discounts, Coupons, Payback
offers, Freebies, etc. are some of the sales promotion schemes. With the sales promotion, the
company focuses on the increased short-term profits, by attracting both the existing and the
new customers.

4. Public Relations: The marketers try to build a favourable image in the market by creating
relations with the general public. The companies carry out several public relations campaigns
with the objective to have a support of all the people associated with it either directly or
indirectly. The public comprises of the customers, employees, suppliers, distributors,
shareholders, government and the society as a whole. The publicity is one of the form of
public relations that company may use with the intention to bring newsworthy information to
the public.
E.g. Large Corporates such as Dabur, L&T, Tata Consultancy, Bharti Enterprises,
Services, Unitech and PSU’s such as Indian Oil, GAIL, and NTPC have joined hands with
Government to clean up their surroundings, build toilets and support the Swachh Bharat
Mission.

5. Direct Marketing: With the intent of technology, companies reach customers directly
without any intermediaries or any paid medium. The e-mails, text messages, Fax, are some of
the tools of direct marketing. The companies can send the emails and messages to the
customers if they need to be informed about the new offerings or the sales promotion
schemes.
E.g. The Shopper Stop send SMS to its members informing about the season end sales and
extra benefits to the golden card holders.

Thus, the companies can use any tool of the promotion mix depending on the nature of a
product as well as the overall objective of the firm

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Sales Promotion
Sales promotion is a type of Pull marketing technique. If you have a product which is new in
the market or which is not receiving a lot of attention, then you can promote this product to
customers via sales promotions. You can use various techniques like giving discounts on the
product, offering 1 + 1 free schemes.

When a brand wants to increase the sales of its products, it uses Sales promotion.
The brand can increase the sales by attracting new customers to their products or by retaining
the old customers by various means. The company can also motivate the dealers and
distributors of their channel to perform better for their brand, and to get their stock moving.

There are two types of Sales promotions

a) Consumer sales promotions
Any sales promotion activity that you do keeping the end consumer in mind is known as
consumer sales promotions. Example – if an E-commerce website gives 10% discount on its
products, then it wants the consumers to make the best of this deal. This is a consumer-
focused promotional activity and hence can be called as consumer sales promotions.

b) Trade Sales promotions

If your promotional activities are focused on Dealers, distributors or agents, then it is known
as trade promotions. There is a lot of competition in any field. And in channel sales, to get the
products moving and to motivate the dealer to perform better, trade discounts are given.

Example – You are a dealer for Televisions. Now Sony comes and tells you, you will be
given 5% discount if you cross a sale of 100 televisions. Naturally, you will be very
motivated because 5% in television sales is huge. Plus selling Sony TV’s is easy because it is
already a brand. Thus, you divert all potential customers to Sony Televisions so that you can
achieve the target.

As the noise of competitors rises, you will find more and more companies using sales
promotions techniques. The advantage of sales promotion is that they are not too expensive
for the company when compared with ATL advertising mediums like Television or
newspaper. Hence, even small businesses use it quite effectively.

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Sales promotion techniques
Below are some of the most common type of sales promotion techniques used across all
industries. Some industries, like FMCG, see a lot of these techniques being implemented
simultaneously mainly because of the sheer volume of business as well as because of the
competition in FMCG. Other businesses, like Consumer durable, furniture etc also use a
combination of these sales promotion techniques.

Let us delve deeper into each of these types of sales promotions.

1) Discounts – Trade / consumer
The most common type of sales promotions is consumer discounts or trade discounts.
If there is a 10% discount on the product for the consumer, then it is known as consumer
discount. However, if there is a 10% discount to the dealer when he is purchasing from the
company, it is known as trade discount.
In trade discounts, the dealer may or may not forward the discount to the customer. It is not
necessary that the dealer will give additional 5% discount to customers when he is himself
receiving 10% additional discount. However, many dealers know the importance of achieving
sales volumes hence they pass on discounts to customers whenever they receive trade
discounts.

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2) Gifting

One of the most common ways to promote your store during festival time or when there is a
huge walk in expected is Gifting. It is also a way to increase the sales of the products because
customers have an anticipation that they might win a gift from the store.

3) Coupons

Quite commonly used to motivate people to purchase when they think the price is high or it
can be incentive to buy your product above the competitors. Domino’s, Pizza
hut and McDonalds very prominently use coupons in their marketing. If you have their
coupon in hand, you get a discount of X amount on the purchase.

What the coupon does is, it instigates you to take action. If today i get a coupon saying i will
get 10% off on whatever i purchase from an XYZ store, then i will surely get off my butt and
go purchasing. I will purchase all those products anyways. But the coupon got me purchasing
from the XYZ showroom. That’s the objective of the coupon which it has accomplished.

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4) Financing

Financing is ingenious amongst the various types of sales promotions. It is a combination of

various factors. Companies which have huge resources generally act as Financers. They allow
customers to purchase a product on EMI or on different financing options. All this happens
for a minor processing fee and less interest.
As a result, the customer, who does not have complete money to buy the product, will likely
purchase the product using financing options. Such financing helps the dealer to liquidate the
product faster and also helps the customer in making purchasing decisions.

5) Sampling

It is predominantly used in the FMCG industry for perfumes, deodorants, soaps or even
eatables. Sampling is an excellent way to introduce your product in the market and at the
same time to increase the awareness of the product.
The customers who are being targeted by sampling carry a huge ** lifetime value **. Once
they get hooked onto your product, they won’t leave it that early. Hence, Sampling might be
of higher cost to the company but it is quite successful in the various types of sales
promotions.

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6) Bundling

Bundling is when you put a combination of products on sale for the same price. So, for
example, normally 100 dollars might buy you just a shirt. However, with product bundling,
100 dollars might buy you a set of shirt and pants. As a result, the consumer is much more
likely to buy this bundled offer as compared to a single offer.

7) Contests
There are different forms of contests which can be run to gather more customer information
or to motivate the customer to try the product or to create awareness about the new retail
place. Contests can be as simple as winning a gift through a scratch card, or it can be an in-
house game in a retail showroom or it can be an online contest for which users have to enter
their information.

Due to the phenomenal rise of the internet, online contests have become very easy and
important. They also penetrate faster and reach a lot of customers.

8) Refunds & Rebates

As the name suggests, refunds are a marketing tactic when you get a partial amount refunded
to you based on an action you have taken. For example – if you bring the parking ticket to the
showroom, your parking amount will be refunded by the store. Such refunds make the
customer excited to visit a store.

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Similarly, rebate is a type of partial refund which is most popular in the United states, though
not much popular in other countries. In rebates, you fill forms while checking out of stores.
And if you have won the rebate, you will have to mail your details to the company and the
company will refund you the rebate amount in your bank or via a PayPal account.

9) Exchange offers

Exchange offers are quite commonly used all across the world and used strongly in festive
season when sales will be more and people are in a purchasing mood. In exchange offer, you
can exchange an old product for a new product. You will receive a discount based on the
valuation of your old product.

10) Free trial

Chances are, you have come across several software’s or online programs which offer a free
trial to you before you purchase the product. Shareware programs are also a kind of free trial
programs where you can use the product for some time but later on have to purchase the
product to use it completely.

This is done so that the customer gets a chance to trial run the product before he pays for the
product in full. Programs like Adobe Photoshop, Microsoft office 365 and others are known
to give free trial programs of upto a month so that the customer can know more about the
product, he can try it and then purchase.

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11) Email Marketing
Email marketing was, is and is touted to always be one of the best ways to promote your
business. It is one of the most commonly used types of sales promotions across the world
because of its ease of implementation and because of its penetration. Each and every one of
us has an email account which we access regularly. Thus, an Email is personal to us when
received in our phone and we are bound to check it out. Chances are, email marketing
bundled with an exciting and irresistible offer can really entice the customer in purchasing
your product. As a result, Email marketing is actually widely used, be it online industry or
offline.

12) Exhibitions

More commonly used in Food, Jewellery, Clothing, Chemicals and similar such industries
where sellers want to showcase the products they have to their buyers. These buyers might be
consumers or they may be industrial buyers. An exhibition generally consists of one player
who is exhibiting his goods. However, it can also be a combination of players who are all
there to showcase their wares.

13) Trade Shows

While exhibitions are targeted towards individual buyers, Trade shows are targeted towards
resellers, dealers, distributors and bulk buyers. A trade show is typically a display point for
all top companies within an industry. These companies are there to compete and grab the
maximum eyeballs of retailers, dealers and distributors. While Exhibitions
are concentrated mostly on individual buyers, trade shows are concentrated towards bulk
buyers.

14) Demonstrations
One of the most popular products to be sold through product demonstrations were vacuum
cleaners which used to be sold house to house. However, because of privacy concerns, such
type of promotional activities was stopped. Instead, now you will see water purifiers being
promoted through demonstrations in malls, showrooms and other places. Demonstrations are
an excellent way to create more awareness of the product and to make customers comfortable
towards a technical product.

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15) Continuity programs

One of the best example of continuity programs is the frequent flyer program introduced by
most airlines. These airlines give more “miles” to the customers who are flying more and
more with the airline. Because you are awarded gifts the more you fly with one airline, you
are likely to continue flying with that airline so that you receive more miles.

16) Quantity Discount

The more quantity of the product you buy, the more is the discount. So, for example, a single
soap may cost $1 but a combined package of 5 units of soap might cost you $4, giving you a
20% discount on the purchase. Such type of quantity discount is common for customers.
However, the quantity discount is not applicable only to consumers. It is also applicable in
trade where a dealer or distributor might be given a discount of 5-10% if he purchases a
higher quantity of product. So, a kitchen appliance distributor might be given a discount if he
buys higher number of units in the festive season. The higher he sells and the more
aggressive he is, the better he will earn.
Above are all the different types of sales promotions. Each and every business is different and
therefore, the type of sales promotion used by each business needs to be different. Being a
competitive world, most companies use a combination of various sales promotional methods
to defeat competitors, attract and retain customers and most importantly, to increase the sale
of their products or services.

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Net Promoter Score
As a business, you are always trying to impress your customers – that much is obvious. If you
can leave a good impression in the mind of your customers, those customers are more likely
to provide value to your business at a later date. They may decide to make more purchases,
they may buy more expensive items, or they may positively refer your business to others.
On the other end of the spectrum, it is bad news when a customer has a negative impression
of something about your business. Maybe they are unhappy with a recent purchase, or they
had a negative interaction with customer service. Whatever the case, their negative feelings
are likely to be passed on to others – especially in the high-tech world of social media in
which we live. Making a good impression on your customers is essential if you want to
survive and thrive well into the future.

If you would like to gain a better understanding of how your customers feel about your
business and your brand, using NPS is a great way to go.

Surprisingly Simple
One of the reasons that this metric has become so popular so quickly is the fact that it is
incredibly simple. In fact, the entire metric is based around one basic question. The question
goes roughly as follows –

How likely is it that you would recommend our product to a friend?

When this question is posed, it is usually associated with a scale of one to ten. Respondents
are simply asked to select a number on the scale, and they are finished.

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Scoring the Results
After you have collected a fair amount of data, you will want to start analyzing that data for
anything that you can use to judge your reputation in the eyes of your customers. Despite the
fact that this survey is presented as a scale from one to ten, all responses are going to be
placed into one of three categories.

Those categories are as follows –

 Anyone who responds with a score of nine or ten is placed in the ‘promoter’ category
 Anyone who responds with a score of seven or eight is placed into the ‘passive’
category
 Anyone who responds with a score of six or lower is placed into the ‘detractor’
category.

To make this concept clearer, let’s look at an example. Imagine that you have posted this
survey question on your website where customers will find it after they complete a purchase.

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After leaving the question on the site for a week, you now have 500 total responses to sort
through. Those responses are sorted out into the three categories and the totals look like this –
 300 of your respondents are placed into the category of a promoter
 100 of your respondents are passives
 100 of your respondents are detractors
It only takes a bit of basic math to figure out your net promoter score from these results.
 300 promoters out of 500 total respondents are 60%.
 100 detractors out of the 500 responses is 20%.
 By subtracting 20 from 60, you are left with a total Net Promoter Score of 40.
As anything in the positive range is considered to be acceptable, most business would be
pretty happy with an NPS of 40.

The Comments
Net Promoter Score has quickly become a popular metric to measure customer satisfaction
because it is both informative and easy to use. If you put this simple survey into action for
your business, you are sure to gain valuable insights into the opinions and preferences of your
customer base. A good NPS can indicate that you are already on the right track, while a poor
NPS (and the comments that come with it) can help you find ways improve over time. Any
company that is serious about building long lasting customer relationships should give strong
consideration to the use of Net Promoter Score.

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Service Characteristics
A service is the action of doing something for someone or on something. It is largely
intangible. A product is tangible since you can touch it and own it. A service is an experience
that is often consumed at the point where it is purchased and cannot be owned since is
quickly perishes.
For example, McDonald’s sell physical products i.e. burgers but consumers are also
concerned about the quality and speed of service. Characteristics of services apply
universally to any service. The most important characteristics of services are:

1. Lack of ownership: You cannot own and store a service like you can a product. Services
are used or hired for a period of time. For example, when buying a ticket to the USA the
service lasts maybe 22 hours each way, but consumers want and expect excellent service
for that time. Because you can measure the duration of the service consumers become
more demanding of it.
2. Intangibility: Service is intangible and does not have a real, physical presence as in case
of a product. For example, car insurance may have a certificate, but the financial service
itself cannot be touched i.e. it is intangible.
3. Inseparability: Services cannot be separated from the service providers. A product when
produced can be taken away from the producer. However, a service is produced at or near
the point of purchase. While visiting a restaurant, the waiting and delivery of the meal,
the service provided by the waiter/ress is all a part of the service production process and
is inseparable of the process as well as the quality of food provided.
4. Perishability: Perishability is used in marketing to describe the way in which service
capacity cannot be stored for sale in the future. For example, an airline can only sell seats
prior to departure. This service is only available for that definite time period. An empty
seat on a plane never can be utilized and charged after departure. Once the plane has left
for its scheduled flight that service cannot be offered for that particular flight.
5. Heterogeneity: Due to the human involvement in service delivery means that no two
services will be completely identical. The features of service by a provider cannot be
uniform or standardised. A Doctor can charge much higher fee to a rich client and take
much low from a poor patient.
Difference between Goods and Services
Goods Services
A physical commodity A process or an activity
Tangible and Homogenous in nature Intangible and Heterogenous in nature
Core value of a good is produced in a firm Core value of a service is produced at the
or factory or manufacturing unit. time of buyer and seller interaction
Customers don't participate in production Customers participate in the production
process of goods process of services
Goods can be kept in stock for future sales, Services cannot be kept in stock, inventory
inventory of goods is possible of services is not possible
In case of goods, production and In case of services, production, distribution
distribution can be separated from and consumption occur at a same point of
consumption time
Goods purchased can be returned if not Services bought cannot be returned but, in
satisfied and can get refund some cases, can get refund of money

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Buyer Decision Process

If marketing has one goal, it’s to reach consumers at the moments that most influence their
decisions. That’s why consumer electronics companies make sure not only that customers see
their televisions in stores but also that those televisions display vivid high-definition pictures.
It’s why Amazon.com, a decade ago, began offering targeted product recommendations to
consumers already logged in and ready to buy. And it explains P&G’s decision, long ago, to
produce radio and then TV programs to reach the audiences most likely to buy its products—
hence, the term “soap opera.”

Marketing has always sought those moments, or touch points, when consumers are open to
influence. For years, touch points have been understood through the metaphor of a
“funnel”—consumers start with a number of potential brands in mind (the wide end of the
funnel), marketing is then directed at them as they methodically reduce that number and
move through the funnel, and at the end they emerge with the one brand they chose to
purchase But today, the funnel concept fails to capture all the touch points and key buying
factors resulting from the explosion of product choices and digital channels, coupled with the
emergence of an increasingly discerning, well-informed consumer. A more sophisticated
approach is required to help marketers navigate this environment, which is less linear and
more complicated than the funnel suggests. We call this approach the consumer decision
journey.

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The decision-making process is now a circular journey with four phases: initial consideration;
active evaluation, or the process of researching potential purchases; closure, when consumers
buy brands; and post-purchase, when consumers experience them.

Initial-consideration set: Customers consider one set of potential brands that could fulfil
their needs. They already hear about it from various sources and are able to cite names.

Active evaluation: They now evaluate all the possibilities and the pros & cons of each
options. They basically reduce the list of “potential brands” to a minimum.

Moment of Purchase: They decide to go for one specific brand and actually execute their
purchase. They’re now your Customers.

Post-purchase experience: They’re using your product for a while. They experience various
emotions & feelings about your brand & product. In brief, customers will compare products
with their previous expectations and will be either satisfied or dissatisfied. Therefore, these
stages are critical in retaining customers. This can greatly affect the decision process for
similar purchases from the same company in the future, having a knock-on effect at the
information search stage and evaluation of alternatives stage. If your customer is satisfied,
this will result in brand loyalty, and the Information search and Evaluation of alternative
stages will often be fast-tracked or skipped altogether.

On the basis of being either satisfied or dissatisfied, it is common for customers to distribute
their positive or negative feedback about the product. This may be through reviews on
website, social media networks or word of mouth. Companies should be very careful to create
positive post-purchase communication, in order to engage customers and make the process as
efficient as possible.

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Customer Lifetime Value
Customer lifetime value (or life-time value (LTV), is the average amount of money your
customers will spend on your business over the entire life of your relationship.
For instance, if a customer continues to buy products or services from your business for 10 years
and spends $10 per year, his or her customer lifetime value is $100, minus any money you spent
to acquire that customer.

Imagine that you sell socks from an e-commerce store.

You spend $5 in advertising to attract a customer. He or she buys an average of seven pairs of
socks every year for 10 years. Your profit margin on each pair of socks is $10.

Based on this data, you profit $70 per year from the customer, which works out to $700 over the
decade. You then subtract the amount of money you spent to acquire the customer, which results
in a net customer lifetime value of $695.

That’s a simplistic example, of course, but it demonstrates important data.

Importance of Customer Lifetime

our customers aren’t just worth the amount of money they spend on your business today. They
have future value if you’re able to retain them as customers.

In the example above, we took advertising into account. It cost us $5 to attract one customer who
wound up spending more than $700 in our fictional e-commerce store.
But what if we sold those 70 pairs of socks to 70 different customers?

We’d have to spend $5 per customer to acquire them, which would reduce our profits
considerably. Plus, our brand loyalty would take a huge hit. Customer lifetime value is important
because, the higher the number, the greater the profits. You’ll always have to spend money to
acquire new customers and to retain existing ones, but the former costs five times as much.

When you know your customer lifetime value, you can improve it. Work on retaining your
existing customers through email marketing, SMS marketing, social media marketing, and more.
You still want new customers, but don’t forget about the old ones.

How to Calculate Customer Lifetime Value

Several different methods exist to calculate CLV. The customer lifetime value can be either
historic or predictive.

In other words, you might want to calculate CLV based on actual purchases over the years or
based on what you predict customers will spend.

Regardless, you need to know the average profit margin for purchases, the amount you spend to
acquire a customer — customer acquisition cost — and the length of your relationship with
customers.

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 The way you calculate customer lifetime value can also vary based on your business model. For
instance, it’s easier to calculate CLV if you have a subscription model than if you’re in e-
commerce. That’s because sales become more predictive.

Companies like BarkBox and ButcherBox charge the same amount every month for their
deliveries, and their customers pay monthly or annually. It’s harder to predict how often a
customer will return to buy new socks from your online retail storefront.

Customer Lifetime Value Formula

The simplest customer lifetime value formula is the historic model. The CLV is equal to the total
value of each transaction multiplied by your average gross margin.

Let’s say a customer visits your website 10 times and spends $10 each time.
Your average gross margin is $5 after taking into account how much you spend to get the average
customer to spend money, which means you’ll multiply $100 (the total amount spent) by $5
(your average gross margin) to get $500.

If you want to take the predictive approach, you’ll need to get a little more complex.

This average customer lifetime value formula requires several data points:
 Average monthly transactions
 Average amount spent per transaction
 Average number of months your customers remain loyal
 Average gross margin

Multiplying these numbers together will give you the predictive CLV.

Many retailers optimize their customer acquisition strategies by trying to minimize how much
they spend to acquire each customer (cost per acquisition of customer or CAC). When you
understand the lifetime value of different customers, however, you can optimize more
effectively for the long run. Rather than simply optimizing for CAC, you can look at the
difference between CAC and CLV. After all, if one customer is 10x more valuable than
another, it is certainly worth spending a little more to acquire him. It is useful metric used by
marketing managers especially at a time of acquiring a customer. Ideally, lifetime value
should be greater than the cost of acquiring a customer. Some also call it a break-even point.

The two forms of lifetime value analysis:

Historical lifetime value simply sums up profit per customer till date.
Predictive lifetime value projects what new customers will spend over their entire lifetime.

Advantages of calculating CLV

 CLV makes us look at customer retention expenses as an asset rather than a liability
 It brings out a balance between cost of attracting new customers and profits in
retaining old customers
 CLV can be a basis for costs to be associated in promotions and communications to
attract new customers and retain old customers
 CLV can be used to calculate customer equity

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Types of Marketing
Account-based marketing — is a strategic approach to business marketing based on account
awareness in which an organization considers and communicates with individual prospect or
customer accounts as markets of one.
Affiliate marketing — paying affiliates to send traffic/customers to your website/business
(Affiliate Scout)
Agile marketing — is an organizational effectiveness strategy that drives growth through
focusing team efforts on those that deliver value to the end-customer.
Algorithmic marketing — using software algorithms to execute (semi-)automated marketing
(computational)
Ambush marketing — strategy in which an advertiser "ambushes" an event to compete for
exposure against competing advertisers.
A marketing technique in which advertisers work to connect their product with a particular
event in the minds of potential customers, without having to pay sponsorship expenses for the
event.
Analytical marketing — quantitative methods and models of marketing (Carnegie Mellon
program)
Article marketing — writing articles (online and offline) to promote one’s business.
B2B (business) marketing — marketing to other businesses (B2B Magazine)
B2C (consumer) marketing — marketing to consumers (B2C Marketing Insider)
B2P (person) marketing — marketing to persons, in business and life (New Marketing Labs
post)
Behavioral marketing — targeting advertising/offers based on user behavior (ClickZ column)
Blackhat marketing — primarily in SEO, unethically fooling the search engines to game rank
(About.com)
Brand marketing — developing your brand, often contrasted to direct marketing (Best Brands
2010)
Buzz marketing — getting people to talk about your stuff, similar to viral (Mark Hughes
book)
Call center marketing — outbound telemarketing and handling of inbound prospect/customer
calls
Campus marketing — marketing to (and often by) college students, campus ambassadors
(Boston Globe)
Catalog marketing — marketing through printed catalogs delivered in the mail
Cause marketing — businesses marketing cooperatively with nonprofit(s) to mutual benefit
(Alden Keene)
Celebrity marketing — use of celebrities as spokespeople, for endorsements or testimonials
channel marketing — marketing promotions through wholesalers, distributers, resellers
Closed loop marketing — measuring ROI from lifecycle of marketing to sales (Closed Loop
Marketing blog)

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Cloud marketing — using software-as-a-service (SaaS) applications for marketing
(CloudMarketing.org)
Cooperative marketing — companies co-marketing a jointly developed product, service or
brand
communal marketing — engaging the public in the development of a marketing campaign
(Wikipedia)
Community marketing — marketing by building an online community (Jeremiah Owyang’s
blog)
Computational marketing — the marketing equivalent of computational finance (my post)
content marketing — producing useful or entertaining content for your audience (Chris
Brogan’s post)
Contextual marketing — delivering relevant, optimal messages/offers, esp. online (HBS
article)
Controversial marketing — generating attention through controversy or conflict (Michael
Gray’s post)
Conversational marketing — actively engaging with consumers in two-way conversations
(Nokia preso)
Conversion (rate) marketing — optimizing conversion rate in online marketing and sales
(ion’s blog)
Corporate marketing — company-wide marketing and standards, esp. in multi-product firms
(Forrester report)
Cross-marketing — co-marketing, product bundling, co-promotion, licensing, etc.
(Wikipedia)
Culture marketing — branded content, the intersection of culture and marketing (Chief
Marketer article)
Data (web) marketing — using data as a marketing channel, esp. with the semantic web (my
post)
Database marketing — using databases, such as CRM systems, to drive marketing programs
(The Book)
Data-driven marketing — use data, especially analytics, to direct marketing decisions
(Kellogg program)
Digital marketing — marketing through digital channels, primarily the Internet (AdAge
Digital)
Direct marketing — marketing directly to audience, often without TV, radio, or print ads
(DMA)
Direct response marketing — direct marketing expressly designed to solicit a response
(Wikipedia)
Disruptive marketing — applying disruptive innovation in marketing to create new markets
(Digital Tonto post)
Diversity marketing — marketing to different culture groups in audience, i.e. in-culture
marketing (TransCity)

62
Door-to-door marketing — salespeople walking to houses, knocking on doors (MSNBC
story)
Drip marketing — sending pre-planned messages to prospects/customers on a schedule
(Inside CRM article)
Email marketing — emailing prospects/customers, either by list rental or express permission
(Email Insider)
Entrepreneurial marketing — marketing in start-ups and new ventures, often guerilla style
(MIT course)
Ethical marketing — marketing ethics for being socially/morally responsible (Wikipedia)
Event marketing — running events such as trade shows, conferences, seminars, festivals
(Event Marketer)
Expeditionary marketing — forging new markets before competitors (HBR article)
Experiential marketing — enabling sensory interactions with brands (Experiential Marketing
Forum)
Facebook marketing — marketing on and through Facebook (SEOmoz Ultimate Guide)
Field marketing — people selling and promoting in person, “in the field” (The Handbook)
Geo marketing — geo-targeting for marketing tactics such as price, promotion
(Geomarketing in Practice)
Global marketing — marketing of products/firms worldwide, global strategy and structure
(Forbes article)
Green marketing — explicit promotion of products that are environmentally friendly (Green
Marketing book)
Guerilla marketing — low-budget, high-impact marketing, typically entrepreneurial (Jay
Conrad Levison)
Horizontal marketing — similar message across different groups/industries, in contrast to
vertical marketing
Inbound marketing — pulling in customers via content, instead of pushing ads or cold-calls
(HubSpot)
Industrial marketing — B2B marketing but specifically for large firms, esp. manufacturers
(Wikipedia)
Influence(r) marketing — focus on convincing a few influential people in a market
(Influencer Marketing book)
Informational marketing — providing useful/educational material to nurture audience, like
content marketing
In-game marketing — in-game advertising, also known as advergaming, and in-game
promotions (Wikipedia)
In-store marketing — promotions based at a retailer’s location (In-Store Marketing Institute)
Integrated marketing — coordination and integration of multiple marketing tools, channels,
vehicles (ClickZ)
Interactive marketing — interactions between marketers and prospects, mostly online
(Forrester blog)

63
Internet marketing — synonymous with online marketing and web marketing (Wikipedia)
Internal marketing — marketing to one’s own employees to synchronize customer
experiences (Wikipedia)
International marketing — marketing overseas/across national borders, same as global
marketing (Wikipedia)
Keyword marketing — researching and optimizing keywords in search marketing
(WordStream blog)
Left-brain marketing — roughly synonymous with analytical marketing (Left Brain
Marketing blog)
Local marketing — ad targeting and promotions to support brick-and-mortar stores
(WilsonWeb)
Long Tail marketing — marketing to many niche segments that aggregate to a huge audience
(Wikipedia)
Loyalty marketing — focus on growing and retaining existing customers, e.g., rewards
programs (Wikipedia)
Mobile marketing — marketing delivered via mobile devices such as (smart)phones (Mobile
Marketer)
Multichannel marketing — using multiple channels to reach customers (Multichannel
Marketing Metrics)
Multicultural marketing — pursuing ethnic audiences with products, advertising, experiences
(The Book)
Multi-level marketing — marketing by recruiting others, who recruit more; e.g., pyramid
scheme (Wikipedia)
Neuro marketing — the intersection of brain/cognitive science and marketing
(Neuromarketing blog)
New media marketing — essentially synonymous with online marketing, fading term
(Wikipedia)
Newsletter marketing — delivering regular newsletters to target audience via email or print
(DIRECT article)
Niche marketing — targeting very specific audience segments (Entrepreneur article)
Non-traditional marketing — methods outside the norm, e.g., publicity stunts, guerrilla
marketing (Inc. article)
Offline marketing — all marketing that doesn’t happen online, traditional marketing
(MarketingSherpa)
One-to-one marketing — marketing to individual consumers: identify, differentiate, interact,
customize (book)
Online marketing — marketing online, same as Internet or web marketing (Online Marketing
Summit)
Outbound marketing — contact prospects via ads, cold calls, list rental; opposite of inbound
(BridgeGroup)
Outdoor marketing — examples: door hangers, car advertising, billboards, balloons (eHow
article)

64
Out-of-home marketing — marketing to people in public places, e.g., outdoor marketing
(Wikipedia)
Performance marketing — marketing driven by performance metrics and ROI (Performance
Insider)
Permission marketing — inspiring your audience to want to hear from you (Seth Godin’s
book)
Personalized marketing — like one-to-one marketing, including product customization
(Wikipedia)
Persuasion marketing — derived from “persuasion architecture” for effective web marketing
(the Eisenbergs)
Point-of-sale marketing — advertising to customers at point of a purchase in a store (eHow
article)
Post-click marketing — user experience after an ad/email click, e.g., landing pages (ion’s
blog)
PPC marketing — pay-per-click marketing on search engines, ad networks, social sites (PPC
Hero)
Product marketing — marketing around a particular product, versus corporate marketing
(Wikipedia)
Promotional marketing — broadly speaking, almost any kind of marketing to attract
customers (PROMO)
Proximity marketing — localized wireless distribution of advertising associated with a place
(Wikipedia)
Pull marketing — pushing messages to prospects, synonymous with inbound marketing (The
Power of Pull)
Push marketing — prospects pull messages from you, synonymous with outbound marketing
(Wikipedia)
Real-time marketing — accelerating marketing in the age of speed (David Meerman Scott
book)
Referral marketing — encouraging/incentivizing existing customers to refer new customers
(Wikipedia)
Relationship marketing — emphasis on building long-term relationships with customers
(Regis McKenna)
Remarketing — modern meaning: behaviorally-targeted advertising (Google Ad Innovations)
Reply marketing — replying to end-users with personalized messages, e.g., Old Spice
campaign (Wikipedia)
Scientific marketing — application of analytical testing/statistical methods in marketing
(Scientific Advertising)
Search (engine) marketing — organic and paid promotion via Google, Bing, etc. (Search
Engine Land)
Self-marketing — marketing yourself, also known as personal branding (U.S. News article)
Services marketing — approaches for selling services instead of products (Delivering Quality
Service)

65
Shadow marketing — unexpected marketing outside the control of the marketing department
(my post)
Shopper marketing — understanding how consumer shop across channels and formats
(Wikipedia)
Social marketing — changing people’s behaviors for the better, not social media marketing
(Squidoo)
Social media marketing — interacting with prospects in social media channels (Social Media
Insider)
Sports marketing — use of sporting events, teams, and athletes to promote products
(Wikipedia)
Stealth marketing — ways of marketing surreptitiously to people, undercover marketing
(HBR article)
Street marketing — unconventional marketing in public places meant to engage prospects
(Wikipedia)
Surrogate Marketing - Surrogate marketing is a form of marketing to promote illegal or
banned product in legal way, in disguise of other product
Technical marketing — marketing with technical depth to a technical audience (great post)
Telemarketing — calling people on the phone with a pitch, usually uninvited (Wikipedia)
Test-driven marketing — systematically and iteratively testing marketing ideas (Test-Driven
Marketing)
Time marketing — research on when to release and promote products in the market
(Wikipedia)
Trade show marketing — subset of event marketing, exhibiting and promoting at trade shows
(TSNN)
Traditional marketing — pre-Internet marketing methods and channels (MarketingProfs)
Undercover marketing — when consumers don’t know they’re being stealthily marketed to
(Wikipedia)
User-generated marketing — marketing created by consumers, communal marketing (Disney
campaign)
Vertical marketing — packaging a solution differently for different industries (Wikipedia)
Video marketing — incorporating videos in online marketing, leveraging YouTube
(Pixability)
Viral marketing — tapping into existing social networks to spread a marketing idea
(Wikipedia)
Web marketing — marketing on the web, synonymous with online marketing (Web
Marketing Today)
Word-of-mouth marketing — when happy customers spread your marketing message
(WOMMA)
Youth marketing — targeting young audiences, often using emerging channels (Wikipedia)

66
Traditional Advertising vs Unconventional Advertising
Traditional advertising includes methods such as ads in magazines and newspapers, radio and
TV spots and direct mail. More recently, website banner ads have become the norm for many
businesses. Unconventional advertising, often referred to as guerrilla marketing, often
consists of creative, low-cost marketing methods used by small businesses to temporarily
promote a product or service. Both have advantages and disadvantages and analysing each
will help you choose the best advertising tactics for your business.

Traditional Advertising
Advertising using methods chosen by most other businesses includes placing display ads in
print publications, running broadcast spots, buying billboard ads and sending direct-mail
pieces. On the Internet, pay-per-click advertising lets you display your message on websites,
paying only when a potential customer clicks on your ads, taking her to your website. Online
advertising also includes paying a set fee for a display ad on a website page, regardless of
whether anyone clicks on it, adding links to your site or placing short videos on website.
Unconventional Advertising
Using methods to promote your product beyond traditional advertising techniques, especially
those you create yourself or use only once or infrequently, falls under the classification of
unconventional advertising. Examples include having people wear clothing with your logo at
events, giving out free samples at events, creating a partnership with a local charity, and
unusual public displays, such as sidewalk paintings and skywriting. Coordinated social media
campaigns using free or low-cost online tools such as Facebook, Twitter, Pinterest, Groupon,
Constant Contact and LinkedIn also have become integral parts of small-business advertising
efforts. Because of the number of small and large businesses using social media, this form of
marketing might soon be considered a conventional method of advertising.
Pros and Cons
Traditional advertising has a track record of working for businesses, which is why these
methods are so frequently used. You usually buy media from expert salespeople who can
help you identify a target audience before you buy, create more effective ads and test your
ads before you commit your entire budget. Using traditional advertising often costs more
money than guerrilla marketing, and you’ll compete with many other advertisers for the
attention of consumers. Unconventional marketing often makes people look twice, since they
haven’t seen what you’re doing before, can be a more personal experience for potential
customers and can make a bigger impression. Using newer advertising methods, you might
not be able to target a specific buying group, deliver a specific message or test the results
before you spend your budget. Unconventional advertising is often more fleeting than a
printed ad or a broadcast spot run many.

67
Intermediaries
Product distribution is the way an organization moves a product into the hands of their
consumers. Most organizations focus on the design and production of the product or service
they sell, and not on the distribution channels that connect them to the users themselves.
Instead, they outsource many of these aspects to intermediaries.
Intermediaries are specialists for a specific function along the value chain. This could include
distribution, marketing, sales, retail, e-commerce, web development, branding, packaging,
storing, and a variety of other functions.
Collaborating with one or more partners can enable an organization to focus on what it is that
they do best (core competency) and, in turn, outsource other aspects of the value chain to
organizations who are best at that particular function.

Porter Value Chain

Understanding the value chain is central to the concept of intermediaries. The value chain
shows all the steps a business must take to get a product developed from the raw materials
and into the hands of the consumer. Organizations benefit significantly from understanding
the opportunity cost of intermediaries.

Porter's Value Chain focuses on systems, and how inputs are changed into the outputs
purchased by consumers. Using this viewpoint, Porter described a chain of activities common
to all businesses, and he divided them into primary and support activities, as shown below.
Primary Activities
Primary activities relate directly to the physical creation, sale, maintenance and support of a
product or service. They consist of the following:

 Inbound logistics – These are all the processes related to receiving, storing, and
distributing inputs internally. Your supplier relationships are a key factor in creating
value here.
 Operations – These are the transformation activities that change inputs into outputs that
are sold to customers. Here, your operational systems create value.

68
 Outbound logistics – These activities deliver your product or service to your customer.
These are things like collection, storage, and distribution systems, and they may be
internal or external to your organization.
 Marketing and sales – These are the processes you use to persuade clients to purchase
from you instead of your competitors. The benefits you offer, and how well you
communicate them, are sources of value here.
 Service – These are the activities related to maintaining the value of your product or
service to your customers, once it's been purchased.

Support Activities
These activities support the primary functions above. In our diagram, the dotted lines show
that each support, or secondary, activity can play a role in each primary activity. For
example, procurement supports operations with certain activities, but it also supports
marketing and sales with other activities.

Procurement (purchasing) – This is what the organization does to get the resources it needs to
operate. This includes finding vendors and negotiating best prices.

Human resource management – This is how well a company recruits, hires, trains, motivates,
rewards, and retains its workers. People are a significant source of value, so businesses can
create a clear advantage with good HR practices.

Technological development – These activities relate to managing and processing information,

as well as protecting a company's knowledge base. Minimizing information technology costs,
staying current with technological advances, and maintaining technical excellence are sources
of value creation.

Infrastructure – These are a company's support systems, and the functions that allow it to
maintain daily operations. Accounting, legal, administrative, and general management are
examples of necessary infrastructure that businesses can use to their advantage.

Companies use these primary and support activities as "building blocks" to create a valuable
product or service.

Common Intermediaries
Distribution
Some of the most common intermediaries are related to product distribution. Moving a good
from the producer to the buyer is a logistically complex and resource-heavy process.
Ensuring that shipping resources are available (e.g., trucks, ships, planes, and trains
primarily) and that items move from supplier to warehouse to user is often handled by an
intermediary such as FedEx or UPS. These organizations can utilize economies of scale and a
vast network of resources to offer highly specialized delivery services at a relatively low cost
and, more importantly, low risk.

Retail
Buying real estate to store and sell physical goods can be extremely cost prohibitive.
Investing in retail outlets all across the world requires a huge amount of fixed investments,

69
and likely will incur a high amount of debt. This debt is a business risk most smaller
producers do not want to incur. As a result, they sell their items wholesale to various retail
outlets. This allows both parties to mitigate risk, as the retailer can sell a variety of goods
without having to produce them all, and the producer can acquire sales channels across the
globe without investing significantly in real estate. Consider a store like Macy's, where the
shelves are stocked with brand name goods. Macy's in downtown Manhattan is an expensive
piece of land, but the suppliers themselves are not liable for the purchase and maintenance of
that property. Instead, Macy's diversifies its portfolio of goods while producers provide them
at lower wholesale prices to share risk.

Ad Agencies
Another popular intermediary is the ad agency. Ad agencies specialize in building
communities and brands, utilizing a wide variety of paid and organic channels. This can
include social networks such as Facebook, LinkedIn, Twitter and Instagram, as well as paid
ad production on popular TV channels or affiliate advertising. Ad agencies utilize the entire
marketing mix (and more, nowadays) to craft customized brand building initiatives centered
on the unique target market and product of their strategic partners.

E-commerce and Web Development. Maintaining an online storefront nowadays is relatively

straight-forward, so more and more companies do this internally now. However, managing a
large e-commerce team with strong web development skills (such as copy, graphic design,
UX, and other e-commerce roles) can become a pricey endeavor. As a result, some
organizations prefer outsourcing this as well. Amazon is a great example of an e-commerce
website designed to enable smaller businesses. Amazon actually handles quite a bit of
intermediary responsibilities (i.e. shipping, storing, and e-commerce for starters). The value
Amazon adds is not only limited to the skills of building strong websites, however. Amazon
has a huge and loyal following of consumers, which makes them an attractive potential
strategic alliance for many smaller firms.

Conclusion
What's most important to understand about intermediaries is that they are a trade-off, where
an organization recognizes the value of outsourcing a function relative to the opportunity cost
of building that competency internally. While considering working with a third party,
consider the core competency of that partner compared to the core competency of your own
organization and determine if synergy exists (as opposed to redundancy).

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Market Place Model Vs Inventory Model

Marketplace model
According to the FDI policy guideline, “Marketplace model of e-commerce means providing
of an information technology platform by an e-commerce entity on a digital and electronic
network to act as a facilitator between buyer and seller.” Marketplaces are platforms that
enable a large, fragmented base of buyers and sellers to discover price and transact with one
another in an environment that is efficient, transparent and trusted.
The main feature of the market place model is that the e-commerce firm like Flipkart,
Snapdeal, Amazon etc. will be providing a platform for customers to interact with a selected
number of sellers. When an individual is purchasing a product from Flipkart, he will be
actually buying it from a registered seller in Flipkart. The product is not directly sold by
Flipkart. Here, Flipkart is just a website platform where a consumer meets a seller. Inventory,
stock management, logistics etc. are not supposed to be actively done by the ecommerce firm.
Inventory model
According to the FDI policy, “Inventory model of ecommerce means an ecommerce activity
where inventory of goods and services is owned by e-commerce entity and is sold to the
consumers directly. “The main feature of inventory model is that the customer buys the
product from the ecommerce firm. He manages an inventory (stock of products), interfaces
with customers, runs logistics and involves in every aspects of the business. Alibaba of China
is following the inventory model.

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Distribution Channel
The distribution function of marketing is comparable to the place component of the
marketing mix in that both center on getting the goods from the producer to the consumer. A
distribution channel in marketing refers to the path or route through which goods and services
travel to get from the place of production or manufacture to the final users. It has at its center
transportation and logistical considerations.

Business-to-business (B2B) distribution occurs between a producer and industrial users of

raw materials needed for the manufacture of finished products. For example, a logging
company needs a distribution system to connect it with the lumber manufacturer who makes
wood for buildings and furniture.

Business-to-customer (B2C) distribution occurs between the producer and the final user. For
instance, the lumber manufacturer sells lumber to the furniture maker, who then makes the
furniture and sells it to retail stores, who then sell it to the final customer.

Direct vs. Indirect

In marketing, goods can be distributed using two main types of channels: direct distribution
channels and indirect distribution channels.

Direct Distribution
A distribution system is said to be direct when the product or service leaves the producer and
goes directly to the customer with no middlemen involved. This occurs, more often than not,
with the sale of services. For example, both the car wash and the barber utilize direct
distribution because the customer receives the service directly from the producer. This can
also occur with organizations that sell tangible goods, such as the jewelry manufacturer who
sells its products directly to the consumer.

Indirect Distribution
Indirect distribution occurs when there are middlemen or intermediaries within the
distribution channel. In the wood example, the intermediaries would be the lumber
manufacturer, the furniture maker, and the retailer. The larger the number of intermediaries
within the channel, the higher the price is likely to be for the final customer. This is because
of the value adding that occurs at each step within the structure.
While a distribution channel can sometimes seem endless, there are three main types of
channels, all of which include a combination of a producer, wholesaler, retailer and end
consumer.

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Every channel of product distribution comprises of producers, retailers, distributors and
wholesalers before it reaches the end consumers. Every producer/manufacturer/creator can
choose from numerous avenues of distribution to get the products before consumers across
state and national boundaries. To keep the product in demand and make it available to buyers
at a competitive price, manufacturers have to constantly maintain feedback from users and
improve the product. Every distribution channel contains four essential individuals namely
manufacturer, wholesaler, distributor and retailer before it reaches the consumer. While small
retailers directly deal with wholesalers as they require limited quantities, large warehouse
retailers directly work with manufacturers as they are able to buy in large quantities and use
their own warehouses and transportation for moving the products across their stores

The first channel is the longest in that it includes all four, from producer to the end
consumer.

The second channel is one where the producer sells directly to a retailer, who then sells the
producer's product to the end consumer. This means the second channel contains only one
intermediary. Dell, for example, is large enough where it can sell its products directly to
reputable retailers such as Best Buy.

The third and final channel is a direct to consumer model where the producer sells its
product directly to the end consumer. Amazon, using its own platform to sell Kindles to its
customers, is an example of a direct model, which is the shortest distribution channel
C2C Model: Customer to customer (C2C) is a business model whereby customers can trade
with each other, typically, in the online environment. Two implementations of C2C markets
are auctions and classified advertisements. C2C marketing has soared in popularity with the
arrival of the internet, and companies such as OLX and Quikr.
FMCG Distribution Network

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The typical chain for a grocery store FMCG product will be:

 Manufacturing plant -> Company Ware House -> Regional Ware House -> Regional
Stockist or Depot -> Super Stockist or Depot -> Stockist/Depot -> Distributor ->
Retailer

 Main Godown -> C&F Agents/Super Stockists -> Distributors as per the territories ->
Wholesalers/Retailers

So, the retailers either buy from the distributor or they buy from the local wholesaler. Each
has its own advantages and disadvantages.
Distributor provides you with better servicing, replacement of spoilt products, credit facility
of 2 weeks, etc. On the other hand, the wholesaler will give you more margins, but no credit
facilities, and you don’t have compulsion of storing a set of SKUs, etc.
(https://brandalyzer.blog/2011/07/16/fmcg-distribution-network/

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Brand
A brand is a product, service, or concept that is publicly distinguished from other products,
services, or concepts so that it can be easily communicated and usually marketed. A brand
name is the name of the distinctive product, service, or concept.
Branding is the process of creating and disseminating the brand name. Branding can be
applied to the entire corporate identity as well as to individual product and service names.
Legal protection given to a brand name is called a trademark.

Breaking down a brand

A brand is seen as one of a company's most valuable assets. It represents the face of the
company, the recognizable logo, slogan or mark that the public associates with the company.
In fact, the company is often referred to by its brand, and they become one and the same. A
company's brand carries with it a monetary value in the stock market (if the company is
public), which affects stockholder value as it rises and falls. For these reasons, it's important
to uphold the integrity of the brand.

Creating a Brand
When a company decides to settle on a brand to be its public image, it must first determine its
brand identity, or how it wants to be viewed. For example, a company logo often incorporates
the message, slogan or product that the company offers. The goal is to make the brand
memorable and appealing to the consumer. The company usually consults a design firm or
design team to come up with ideas for the visual aspects of a brand, such as the logo or
symbol. A successful brand accurately portrays the message or feeling the company is trying
to get across and results in brand awareness, or the recognition of the brand's existence and
what it offers.

Brand Equity
Brand equity refers to the total value of the brand as a separate asset. It is the aggregate of
assets and liabilities attached to the brand name and symbol which results in the relationship
customers have with the brand.
The concept of Brand Equity comes into existence when consumer makes a choice of a
product or a service. It occurs when the consumer is familiar with the brand and holds some
favourable positive strong and distinctive brand associations in the memory.
Strong brand equity provides the following benefits:
 Facilitates a more predictable income steam
 Increases cash flow by increasing market share, reducing promotional costs and
allowing premium pricing
 Brand equity is an asset that can be sold or leased

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Factors Contributing to Brand Equity
Brand Awareness: It is the probability that consumers are familiar about the life and
availability of the product. It is the degree to which consumers precisely associates the brand
with the specific product. It is measured as ratio of niche market that has former knowledge
of brand. Brand awareness includes both brand recognition as well as brand recall.
Brand recognition is the ability of consumer to recognize prior knowledge of brand when
they are asked questions about that brand or when they are shown that specific brand, i.e.,
the consumers can clearly differentiate the brand as having being earlier noticed or heard.

Brand recall is the potential of customer correctly recover brand from the memory when
given a clue or he can recall the specific brand when the product category is mentioned. It
is generally easier to recognize a brand rather than recall it from the memory.

Brand Associations: Brand Associations are not benefits, but are images and symbols
associated with a brand or a brand benefit. For example- The Nike Swoosh, Nokia sound,
signature tune Ting-ting-ta-ding with Britannia, White colour with Apple, etc. Associations
are not “reasons-to-buy” but provide acquaintance and differentiation that’s not replicable. It
is relating perceived qualities of a brand to a known entity. For instance- Hyatt Hotel is
associated with luxury and comfort; BMW is associated with sophistication. The customers
must be persuaded that the brand possess the features and attributes satisfying their needs.
This will lead to customers having a positive impression about the product.

Brand association is anything which is deep seated in customer’s mind about the brand. The
customers must be persuaded that the brand possess the features and attributes satisfying their
needs. This will lead to customers having a positive impression about the product.

Brand Loyalty: Brand Loyalty is a scenario where the consumer fears purchasing and
consuming product from another brand which he does not trust. Brand loyalty is the extent to
which a consumer constantly buys the same brand within a product category. Brand loyalty
can be developed through various measures such as quick service, ensuring quality products,
continuous improvement, wide distribution network, etc. Brand loyalty can be defined as
relative possibility of customer shifting to another brand in case there is a change in product’s
features, price or quality.
Perceived Quality: It refers to the customer’s perception about the quality of the brand.
While evaluating quality the customer takes into account the brand’s performance on factors
that are significant to him and makes a relative analysis about the brand’s quality by
evaluating the competitors’ brands also. Thus, quality is a perceptual factor and the consumer
analysis about quality varies. Perceived quality affects the pricing decisions of the
organizations. Perceived quality gives the customers a reason to buy the product.

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Types of Branding
Corporate branding: This type of branding involves using company’s name as product
brand name. Here, several products of the company are marketed under the single
brand name and such practice is referred as family branding or umbrella branding.
Eg: Nike - Just Do it, Abbott - Life. To the Fullest.

Personal Branding: In this type of branding, individuals and their careers are considered as
brands. Athletes, musicians, political leaders etc. promote the products under their
name.
Eg: Shiv Khera

Ingredient Branding: This type of branding involves branding a component of certain

product in order to project high performance and quality of that particular component.
Eg: Turmeric in Vicco Products

Community Branding: Here, a company looks for taking care of an entire community by
helping the needy, supporting the elderly, contributing to public education, or
providing emergency relief and jobs for the unemployed. Thus company keeps a
promise in the community that it will take care of them and stands as beneficiary.
Eg: P&G Shiksha

Rebranding: This type of branding involves designing new symbol or logo or sort of, to
already existing brand in order to create a differentiation among the customers. Aimed
at repositioning the brand or company’s name, it is applied to new products or
products still under development.
Eg: Bajaj

Co-Branding: In this type of branding, two or more brands of different products are
promoted at a time. This can give consumer a choice of one-stop shopping of his/her
favourite brands
Eg: One Plus phones using Snapdragon Processor
.

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Brand Architecture Models
In a Branded House the
company brand (or a main
overarching brand) becomes
the dominant source of
identification and
meaning. All the sub brands
draw their energy from a
single brand identity. This
stymies the brands’
independence at the product
level, but the energy of the
brand overall pervades and
strengthens each company
despite the lack of shared
product commonality.
In a House of Brands
model, individual products
or companies can focus on
what they each do best
without limiting the broader
group’s businesses growth
trajectory. Taking Alphabet
as example, Google will
continue to operate in the
sphere which it knows best –
to be single-minded at search
and analytics whereas
YouTube can focus on video
content.
A Hybrid Model is typically
used when a firm is changing
Brand architectures or
acquiring existing brands
through mergers or
acquisitions. In such cases,
the firm has to preserve older
product names and designs
to keep customers happy, or
to avoid confusion, while
paving the way for future
offers. The classic example
of this architecture is that of
Volkswagen. VW owns
brands like Bugatti, Seat,
Audi and Skoda. But it also
carries a brand on its own
name.
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Brand Identity Vs Brand Image

Brand Identity Brand Image

1 Brand identity develops from the source Brand image is perceived by the receiver or
or the company. the consumer.

2 Brand message is tied together in terms Brand message is untied by the consumer in
of brand identity. the form of brand image.

3 The general meaning of brand identity is The general meaning of brand image is
“who you really are?” “How market perceives you?”

4 Its nature is that it is substance oriented Its nature is that it is appearance oriented or
or strategic. tactical.

5 Brand identity symbolizes firms’ reality. Brand image symbolizes perception of

consumers

6 Brand identity represents “your desire”. Brand image represents “others view”

7 It is enduring. It is superficial.

8 Identity is looking ahead. Image is looking back.

9 Identity is active. Image is passive.

10 It signifies “where you want to be”. It signifies “what you have got”.

Brand Extension

The Brand Extension is the marketing strategy wherein a new product is launched under the
existing brand name. Brand extension involves offering a completely different product,
service or business. The category in which product is launched may be related or unrelated to
the brand’s current category. The brand that gives rise to a new product under its name is
called “The Parent Brand”. For instance, Nike’s brand core product is shoes. But it is now
extended to sunglasses, soccer balls, basketballs and golf equipments.

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 Extending a brand outside its core product category can be beneficial in a sense that it helps
evaluating product category opportunities, identifies resource requirements, lowers risk, and
measures brand’s relevance and appeal.
Instances where brand extension has been a success are-

i. Wipro, which was originally into computers has extended into shampoo, powder, and
soap.
ii. Mars is no longer a famous bar only, but an ice-cream, chocolate drink and a slab of
chocolate.

Instances where brand extension has been a failure are-

In case of new Coke, Coca Cola has forgotten what the core brand was meant to stand for. It
thought that taste was the only factor that consumer cared about. It was wrong. The time and
money spent on research on new Coca Cola could not evaluate the deep emotional attachment
to the original Coca- Cola.

Advantages of Brand Extension:

Product finds the Acceptability:
1. Consumers can easily relate to the new product and form expectations on the basis of their
prior experience with the parent brand.
2. Wholesalers and retailers can be convinced easily to maintain the stock of a new product on
the basis of their relationship with the brand.
3. The launching campaign will be less costly since it will not require the introduction of both
the brand and the product. The full attention can be given to the product itself.
4. The expenses incurred on labelling, packaging, branding, etc. reduces.
5. There are packaging and labelling efficiencies.
6. The readiness of consumers to switch to a new product because of their prior experience with
that brand.

Feedback benefits to the Parent Brand:

1. The brand gets better recognition in the market through the launch of new product variant.
2. The customer’s loyalty will be enhanced with the extension.
3. Through extension parent brand can again gain the interest of customers who have left the
brand.
4. It revives the brand.
5. It allows subsequent extension.
6. Brand meaning is clarified.
7. It increases market coverage as it brings new customers into brand franchise.
8. Customers associate original/core brand to new product; hence they have quality associations.

Limitations of Brand Extension:

1. There are chances that consumer no longer associates the brand with a particular product but
instead focuses on a product itself and the competing products available in the market. This is
well known as “Brand Dilution”.
2. If the extension is done too far i.e. not in an appropriate category, the brand may lose the
credibility.

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3. The brand extension may result in spoiling the image of the parent brand due to the failure of
the new product.
4. The brand can have two or more related categories; there is a possibility that product in the
particular category makes profits at the cost of another.
5. Through Brand Extension, the company loses a chance of creating a new and an innovative
identity for the product.
6. If the brand extensions have no advantage over competitive brands in the new category, then
it will fail.

Brand Extension vs Line Extensions

Brand extension refers to the expansion of
the brand itself into new territories or
markets. For instance, if a soft drink
manufacturer unveils a line of juices or
bottled water products under its company
name, this would constitute an example of
brand extension. As the brand is an
established name, so the name alone can
serve to drive customers to try new
products, completely unrelated to the
existing product lines.
Line extension refers to adding variety to
its existing product for the sake of reaching
a more diverse customer base and enticing
existing customers with new options. For
instance, a soft drink manufacturer might
introduce a "Diet" variety to its cola line,
while a toy manufacturer might introduce
new characters or accessories in its line of
action figures.

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Brand Resonance
Brand Resonance refers to the relationship that a consumer has with the product and how
well he can relate to it.

Level 1 - Brand Identity – Who are you?

a) Brand Salience: The brand salience means, how well the customer is informed
about the product and how often it is evoked under the purchase situations?
The marketer should not only focus on just creating the awareness about the product
but also includes the ease with which the customers can remember the brand and the
ability to recall it under the different purchase situations.

Level 2 – Brand Meaning – What are you?

b) Brand Performance: The Brand performance means, how well the functional
needs of customers are met?
At this level of the pyramid, the marketers check the way in which product is
performing and how efficiently it is fulfilling the needs of the customers.
c) Brand Imagery: The Brand Imagery means, what product image the customer
creates in their minds?
This aspect deals with the customer’s psychology or the feelings that how they
relate to the product in terms of their social needs.

Level 3 – Brand Response – What are the feelings about the brand?

d) Brand Judgements: The Brand Judgement means, what customer decides with
respect to the product?
The customers make the judgment about the product by consolidating his several
performances and the imagery associations with the brand. On the basis of these,

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 the final judgment is made about the product in terms of its Perceived Quality,
Credibility, Consideration, and Superiority.
e) Brand Feelings: The Brand feelings means, what customers feel, for the product
or how the customer is emotionally attached to the product?
The consumer can develop emotions towards the brand in terms of fun, security,
self-respect, social approval, etc.

Level 4 – Brand Resonance – A strong relationship

f) The Brand Resonance means, what psychological bond, the customer has
created with the brand?
This is the ultimate level of the pyramid, where every company tries to reach.
Here the focus is on building the strong relationship with the customer thereby
ensuring the repeated purchases and creating the brand loyalty.

The resonance is the intensity of customer’s psychological connection with the brand and the
randomness to recall the brand in different consumption situations.

Examples explaining Brand Resonance

1. Chanel

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2. Heineken

3. Mercedes-Benz

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Go-To-Market Strategy
Go-to-market(GTM) strategy is the plan of an organization, utilizing their inside and outside
resources (e.g. sales force and distributors), to deliver their unique value proposition to
customers and achieve competitive advantage.
The end goal of a go-to-market strategy is to enhance the overall customer experience taking
into account various aspects of the value proposition such as the quality of the product and
pricing.

Driving factors in a go-to-market strategy.

When considering to develop a go-to-market strategy, there are 3 essential factors to focus:

Customers
Delivering exceptional customer experiences leads to loyalty and advocacy of the customer.
Consequently, that triggers increase in product purchase, customer retention and low cost of
service.

Company
Taking company's mission and vision into account is a key determining factor when
performing a go-to-market strategy. Motivating employees to perform well is a decisive
factor to include. Thus, defining company's vision and what kind of impact it is trying to
create is essential in the earliest stages of a go-to-market strategy.

Competition
Understanding the competition is crucial in deciding what product or service to offer.
Gathering information about how competitors are performing in the market, what customers
think of the different products available and what is missing in the market through
conducting research using different methods such as SWOT and PEST analyses.

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Components of a Go-To-Market Strategy
The action plan is a start-to-finish process for getting your product or service to market in an
impactful way. There are multiple ways and steps to employ a GTM strategy. A GTM plan
generally employs these essential components:
Define your markets
A tight market definition is the foundation of your plan. Be specific about the prospects you
want to target. Consider verticals, company size, and any other factors that define your ideal
buyer. Identify your customers by company and title, focusing in on decision makers. Use
this information to create prospect profiles, pinpointing the specific needs, buying habits, and
other qualifying information for each.
Determine value proposition
Building on your prospect profiles, it’s time to clarify the message. The right strategy can
move your product or service from a “nice to have” to a “need to have.” Map your best
features/services to prospect needs and evaluate how well you hit that goal. Pay attention –
each prospect profile will likely end up with a slightly different result.
Identify goals and timeline
Focus on three to five actionable items at a time. Ensure your goals are S.M.A.R.T. (specific,
measurable, attainable, realistic, and time bounded). Create a timeline for these goals,
including specific times to reassess and adjust.
Hone your sales process
Establish a strategy for tackling territory, allowing yourself to attack direct and indirect
channels. Up front training and continual sales team coaching and mentoring guarantee
success.
Execute effective marketing
Consider the various distribution channels: SEO, paid search, email, content-driven organic
search, social media, and even traditional paid advertising. Determine the best channels and
messaging for each of your prospect profiles. Messaging is connected to value proposition
and should be distributed in correlation with the sales cycle.
Employ data
Effective campaigns rely on gathering and analysing data. Use a CRM system to inform and
adjust your pipeline, converting prospects to customers faster. Marketing automation not only
structures conversations and creates pathways for prospect profiles, it also evaluates
effectiveness.

When is a go-to-market plan important?

Go-to-market planning can be useful across a multitude of key initiatives from transforming
an entire business to transforming one aspect of the business like the sales, marketing or the
brand. Of course, they're also essential in launching start-ups into the marketplace and
introducing new products, services or brand extensions.
The reason go-to-market planning is so vital to these key initiatives is because when it is
effectively executed, it drives alignment across all stakeholders and sets forth a timeline to
ensure all stakeholders meet the desired milestones and outcomes -- making strategies and
opportunities actionable. An effective plan will require an understanding of the current
environment, mapping the work streams, and putting in place a system to manage the
program.

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This is where a lot of plans miss the mark. The focus is too heavily emphasized on the what -
-the messaging, design elements, PR, advertising strategy, etc. -- and doesn't take into
account the current state of things, how the strategies tie into overall business goals, and the
infrastructure needed to support it all.

Example of a GTM Strategy

In the automobile insurance industry, a company has to choose the right segment of the
market (market segmentation). If the customers are considered individual households, then
the company works on creating interest to their prospective customers using different forms
of media such as TV advertisements, social media and billboards. Once the customers are
persuaded to proceed, they are offered to purchase for the service through different channels
such as the internet (company's website) or agents, both of which act as entities responsible
for customer service.
In case of customers being corporate accounts during the market segmentation process,
interest creation and purchase are done through direct sales, agents or the internet. Tele-
service and direct service representatives serve as contacts after the purchase is done.

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Rural Marketing
Rural Marketing refers to the activities undertaken by the marketers to encourage the people,
living in rural areas to convert their purchasing power into an effective demand for the goods
and services and making these available in the rural areas, with the intention to improve their
standard of living and achieving the company’s objective, as a whole.
To be precise, rural marketing in India Economy covers two broad sections, namely:
i. Selling of manufactured products in the rural regions
ii. Selling of agricultural products in the urban area.
“Rural marketing is now a two-way marketing process. There is inflow of products into rural
markets for production or consumption and there is also outflow of products to urban areas”

Some Facts about Rural Population in India

The National Sample Survey Organisation (NSSO) defines ‘rural’ as follows:
 An area with a population density of up to 400 per square kilometre
 Villages with clear surveyed boundaries but no municipal board
 A minimum of 75% of male working population involved in agriculture and allied
activities

RBI defines rural areas as those areas with a population of less than 49,000 (tier -3 to tier-6
cities).
 Rural areas house up to 70% of India’s population.
 Rural India contributes a large chunk to India’s GDP by way of agriculture, self-
employment, services, construction etc.
 As per a strict measure used by the National Sample Survey in its 63rd round, called
monthly per capita expenditure, rural expenditure accounts for 55% of total national
monthly expenditure.
 The rural population currently accounts for one-third of the total Indian FMCG sales.

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The marketers are following the strategy to go rural because of the following attractions in
the rural market:
1. Large Population: Still, the majority of the population in India resides in Villages
and therefore, the marketers find more potential in the rural areas and direct their
efforts to penetrate the rural market.
2. Increased Income: The income and the purchasing power of the rural people have
increased. With the use of modern agricultural equipment and technology, the farmers
can produce more and can get better returns for their agricultural produce.The
increased income motivates a farmer to improve his livelihood by purchasing a good
quality product and thus, the marketer gets an opportunity to enter into the rural
market.
3. Competition in Urban Market: There is a lot of competition in the Urban market,
where people are well aware of the goods and services and have created a brand
loyalty. Therefore, the marketers move to the rural market to escape the intense
completion and generate revenues from the untapped areas.
4. Improved Infrastructure facilities: Today, many villages are well connected with
the roads and transportation facilities that enables the marketer to access the rural
market and promote his goods and services. With the growth in telecom services, the
rural people can be reached easily via mobile phones.
5. Saturated Urban Market: Also, the marketers may move to the rural markets, when
the urban market has reached the saturation point, the i.e. market is well stuffed with
the products, and the consumers are not likely to make a frequent purchase due to the
varied options available in the market.
6. Support of Financial Institutions: Several Co-operative banks and public-sector
banks offer the loan facility to the rural people at low-interest rates. With the loan, the
purchasing power of an individual increases, thus resulting in a better standard of
living.
7. New Employment Opportunities: The Government is running several employment
opportunity programmes, with the intention to engage people in other activities apart
from the agriculture occupation. The Integrated Rural Development Programme
(IRDP), Jawahar Rozgar Yojana (JRY), Training Rural Youth for self-Employment
are the certain programmes, designed to increase the livelihood of rural people.
Due to so much potential in the rural areas, the companies are focussing more on the needs
and desires of people living in here and are taking every possible step to stimulate people to
buy products and services and improve their livelihood.

The 4A Approach

 Availability: The first challenge is to ensure availability of the product or service.

India's 627,000 villages are spread over 3.2 million sq. km; 700 million Indians may
live in rural areas, finding them is not easy. However, given the poor state of roads, it
is an even greater challenge to regularly reach products to the far-flung villages. Any
serious marketer must strive to reach at least 13,113 villages with a population of
more than 5,000. To service remote village, stockists use auto rickshaws, bullock
carts and even boats in the backwaters of Kerala. To ensure full loads, the company
depot supplies, twice a week, large distributors which who act as hubs.

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  Affordability: The second challenge is to ensure affordability of the product or
service. With low disposable incomes, products need to be affordable to the rural 11
consumers; most of them are on daily wages. Some companies have addressed the
affordability problem by introducing small unit packs.

 Acceptability: The third challenge is to gain acceptability for the product or service.
Therefore, there is a need to offer products that suit the rural market. The rural
consumer expressions differ from his urban counterpart. Consumption of branded
products is treated as a special treat or indulgence.

 Awareness: Stockists reach out to customers by organizing promotional events at the

local level. Some companies use radio to push their brands into the interior areas, to
reach the local people in their language. Some companies use a combination of TV,
cinema and radio to reach 53.6 per cent of rural household

Distribution in Rural Markets

While a company operating in a developed market needs to carefully consider its distribution
network design in order to achieve profitability, companies operating in rural emerging
market face particular challenges because of the low density of the population and poorly
developed transportation infrastructure.

"The majority of populations in emerging markets continue to live in low-density areas. As a

consequence of the low population density companies may be faced with continuously
escalating inventory holding and transportation costs as they are forced to stock and manage
sales points in thousands of villages to meet customer expectations for product availability

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 Distribution Strategy
1. Ensuring reach & visibility
2. Reaching up to mandis, towns & suburban centres
3. Targeting larger villages
4. Understanding of peak seasons
5. Collaboration for distribution
6. Converting unorganised sector manufacturers into distributors
7. Company’s own distribution network

Distribution Network

FMCG industry adopting various Distribution Models

I. Hub and Spoke

FMCG companies have had success with the hub-and-spoke (with the spokes being local
entrepreneurs) model.
Coca-Cola has successfully employed the hub-and-spoke model in multiple rural
emerging markets. In Africa, for instance, Coca-Cola set up “Manual Distribution
Centres” in which an independent person was given the rights to distribute Coca-Cola
products within a defined radius.
Similarly, in India local entrepreneurs sell Coca-Cola using all possible means of
transport, ranging from trucks, auto-rickshaws, cycle rickshaws and hand carts, to even
camel carts in Rajasthan and mules in hilly areas, to transport its product from the nearest
hub.

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 It addresses the inventory cost and transportation infrastructure issues that are associated
with distributing products in rural emerging markets while also providing for good
product availability at the small-village level.
II. Hypermarts
While these large-format stores are located in rural areas, they provide many products and
services and cater to a large number of consumers in the surrounding towns and villages.
ITC‟s Choupal Saagar in India can often be found on major roads in rural areas, and they
sell everything from clothing to fertilizer to motorcycles. These stores are effective at
aggregating rural consumer demand.

III. Piggybacking
A low-cost market entry strategy in which two or more firms represent one another’s
complementary (but non-competing) products in their respective markets
In India, The Energy and Resource Institute (TERI) found that piggybacking their solar
light distribution on “existing infrastructure and entrepreneurial networks” lowered the
cost of their supply chain.

IV. Local Non-Profit Organizations

HUL wanted to reach deep into rural India where villages have less than 2,000 residents,
but HUL‟s standard distribution network could not do so in a cost-effective manner. On
the other hand, local SHG’ were looking for new entrepreneurship opportunities.
HUL Project Shakti targeted rural women (called Shakti Ammas) from existing self-help
groups to work as “direct-to-home” distributors for HUL products. Project Shakti
initiative currently employees 45,000 women entrepreneurs and services three million
consumers in 100,000 villages.

V. Corporate Partnerships
An example of a successful corporate piggybacking relationship is Proctor & Gamble and
Indian consumer goods company Marico Industries. Seeking to distribute deodorant,
detergent, and diapers into rural India, Proctor & Gamble formed a “distribution alliance”
with Marico in order to capitalize on the Indian company’s distribution network.

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Digital Marketing
Digital marketing encompasses all marketing efforts that use an electronic device or the
internet. Businesses leverage digital channels such as search engines, social media, email,
and their websites to connect with current and prospective customers. This can also be
referred as ‘online marketing’, ‘internet marketing’ or ‘web marketing’. In simple terms any
form of marketing that exists online is called as digital marketing.

Process
A digital marketing process is a broad term to explain any number of steps you take to
achieve a digital strategy. The digital marketing process involves varied steps, which are
essential to know how online marketing campaign works well in the promotion of business
online to maximize your product/service reach. Digital Marketing process broadly involves
the following steps:

Optimise
Measure
Implement and Audit

Plan and
Research Stratergize

Digital Marketing Strategy

Digital marketing strategy is the series of actions that help you achieve your company goals
through carefully selected online marketing channels. These channels include paid, earned,
and owned media, and can all support a common campaign around a particular line of
business. In simple terms, a strategy is just a plan of action to achieve a desired goal, or
multiple goals

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Steps to an effective digital marketing strategy:-

Define the
Objective

Make the Set your

Plan KPIs

Resource Analyse and

manageme keep
nt and editing the
Budgeting stratergies

Customise
your
Language

1. Define the objective

Know what you want to achieve E.g. What is your mission? Do you wish to create a brand
presence or focus on sale of products? Do you want to focus on local markets or expand?
Etc.

E.g. – Assuming that one of your KPI’s is to measure the no. of people visiting your page; If
you wish to know this, you can do so by using Google analytics. This will help you understand
the type of audiences who are visiting your page, what are they clicking on most, what is
their online journey and more. Accordingly, you can tweak your offering to suit their needs
and increase conversions.

2. Set your key performance indicators (KPI’s)

Analyse your own and competitor’s strategy carefully to avoid common mistakes. E.g. –
Check what is drawing customers to visit a similar offering to yours. Check what kind of
words / images are people using/ referring to search for products /services and how are you
ranking amongst all. Re-tweak and keep analysing for better results.

3. Analyse and keep editing the strategies

Considering your Target Group of customers see that you change the tone of voice as well as
the local language to be considered while doing promotions.
E.g. - Start with the basics and note down all the demographic information you know about
your target consumer – like age, gender, education and location.
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 4. Customise your language

E.g. – What kind of money will you require to create, say a website or a social media page
and how would that be aligned to the objective set for the business is also essential. It is
better to have a defined budget and allocate the resources to manage the input and output
goals for any online channel management. Re-visiting promotion strategies is crucial at
regular intervals, which require budget.

5. Resource management and budgeting

It is good to have a well laid out digital marketing plan with set goals and objectives but one
must keep reviewing it to identify changes and integrate new ones with old ones.
Digital Marketing Planning (DMP) is a term used in marketing management and it’s the 1st
stage of forming a strategy for the wider digital marketing system outreach

Digital Marketing Channels

Digital marketing has multiple channels, as an marketer, one's core objective is to find
right channels which will result in maximum two-way communication and a better overall
ROI for the brand.

To name few popular ones that are:

1. Search Engine Optimization (SEO):

It is applicable to those entrepreneurs who is having their own business website. Search
Engine Optimization or SEO as it is popularly called, is basically getting websites or specific
web pages to show up on search engines (e.g. Google) when specific keywords are used as
search terms. SEO helps a brand gain visibility across search engines and across online
geographies.

1. On Page SEO: Optimizing code elements that search engines use to understand page.
2. Off Page SEO: Increasing a page’s rank in search engines because of its perceived value in a
community. This perceived value leads to other sites linking, sharing or referring to the page.

The difference between on page and off page SEO is that on page SEO refers to optimizing
page code elements, while off page SEO is about promoting value

Example:- Keywords that CNN.com uses:

CNN, CNN news,CNN.com,CNN TV,news,news online,breaking news,U.S. news,world

news,weather,business,CNN money,sports,politics,law,technology,
entertainment,education,travel,health,special reports,autos,developing story,news video,CNN
Intl

Notice that the keywords relate exactly to what CNN does. Also, they don't repeat CNN in every
single keyword. CNN could have easily put CNN news travel, CNN news autos, etc.. but they
know that repeating keywords is not a best-practice.

2. Pay-per-click advertising (PPC):

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 This is a model of internet marketing in which advertisers pay a fee each time a potential
customer clicks on one of their ads. Essentially, it’s a way of buying visits to your site, rather
than attempting to “earn” those visits through a direct type on google or any other search. In
other words, if we pay $3 for a click, but the click results in a $300 sale, then we’ve made a hefty
profit.

Paid Search Marketing is the process of gaining website traffic by purchasing ads on search
engines
Key Elements of Paid Search Marketing:
1) Keywords
2) Ads
3) Landing Pages

Paid Search Marketing – Measurement Metrics

1. Click Through Rate (CTR)
a. It is the percentage of impressions that turn into clicks.
b. CTR = Clicks/Impressions
2. Conversion Rate (CR)
a. It is the percentage of clicks that turn into conversions
b. Conversion Rate = Conversions/Clicks
3. Cost Per Click (CPC)
a. It is the amount of money you’re spending on each click
b. CPC = Spend/Clicks
4. Cost Per Acquisition (CPA)
a. It is the amount of money you’re spending on each conversion
CPA = Spend/Conversions

3. Content marketing:

Content is central to all marketing campaigns and activities. Content marketing involves
Marketing various pieces of content on several digital marketing channels. The content
displayed in this form of marketing can be in form of blogs, infographics or video and it must
be very focused as per the target audience.

For Example:- Zomato is a restaurant finder mobile app available for 24 countries. The
company uses humour liberally in its marketing strategy. In particular, it creates and shares
images referencing popular culture, as this recent example spoofing an Oscar-nominated film
shows.

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 They are simple, creative, and entertaining, proving that a minimalist approach can do the trick.
It must be working, because the company’s got 1.3 million followers on Twitter, and the same on
Facebook, and the app’s been downloaded hundreds of thousands of times.

4. Social Media Marketing(SMM):

Social media marketing, as the name suggests, is a digital marketing channel used to
promote and market brands or businesses on various social media platforms. Some of the
popular social media marketing platforms include Facebook, Twitter, LinkedIn, Instagram,
etc. The platform you choose depends on whether you are B2B or B2C apart from a whole
lot of other factors including your brand’s business goals.

The different types of social media platforms to serve Ads:

Social networking (Facebook, LinkedIn, etc.)

Microblogging (Twitter, Tumblr).
Photo sharing (Instagram, Snapchat, Pinterest).
Video sharing (YouTube, Facebook Live, Instagram, etc.).

For Example:-The little snack cookie that could, Oreo has a very playful Twitter account that
highlights new products—including collaborations—responds to users comments, and deftly
incorporates puns, pickup lines and one-liners into their feed. They also use pictures and short, 6-
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 second Vine videos to get people talking. By interacting with fans and never taking themselves
too seriously, Oreo has developed a rabid following from celebrities, customers and other
companies.

5. Affiliate marketing:

It is a platform where one business is promoted on other business website and traffic is
drawn through that route. Affiliate marketing is a business which brings profit at both ends.
Your partners or referrals can mention your website and backlink it to your own. This way
both can mutually take advantage of customers visiting each other’s pages online.

For Example:- Amazon is one of the best affiliate programs. Amazon is one of the most popular
sites across the world. Millions of people trust this brand. You can get lot of promotion tools and
good commissions to earn. Amazon affiliate program is all about the choice of promoting
products that interest you. You can promote the products by writing reviews or articles about the
products. This platform has more than one million merchants. No other affiliate program comes
close to this.

6. Display advertising:

As the term infers, Online Display Advertisement deals with showcasing promotional messages
or ideas to the consumer on the internet. This includes a wide range of advertisements
like advertising blogs, networks, video ads, contextual data, ads on the search engines,
classified or dynamic advertisement, etc.

7. Video Advertisement

Where advertisement are played on online videos, this is now one of the biggest way to
advertise and promote your business. YouTube is a platform where you can upload promotional
videos of your business.

8. Influencer Marketing

Influencer marketing is the process of identifying, researching, engaging and supporting the
people who create high-impact conversations with customers about your brand, products or
services.

Influencer marketing offers brands the potential to unify their marketing, PR, sales, product,
digital marketing, and social media through powerful and relevant relationship-based
communication. Both the ROI and marketing potential of influencer marketing are immense.

For Example:- Motorola decided to launch a new range of smartphones call the Moto Z family
and Moto Mods. The key differentiating factor between these and the standard commodity
smartphone is that you can swap “mods” in and out of the phone, to make them exactly how you
want them. You can even latch a projector onto your phone if you so choose. Motorola marketed
these phones to a young demographic, and they realized that their target audience spent much of
their time on YouTube. They saw the possibilities for YouTube influencers to demonstrate the
possible uses of the Moto Z Force of YouTube … even strapping it onto a 10’ rocket!

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 Agency partner Weber Shandwick developed a YouTube influencer program to drive
awareness around the Moto Z products. They worked with 13 influencers across multiple
verticals and target audiences to reach a broad range of consumers. Each influencer created
one "partnership announcement" post, one "hero" YouTube video that featured a unique use-
case for Moto Mods and two or more extra social posts. The 13 videos that the influencers
created were all very different, ranging from the one that launched the phone attached to a
10’ rocket to a video showing how to survive a haunted high school. The videos generated
11.6 million views and 38.1 million social impressions. This led to 122,000 clicks to
motomods.com

9. Native Advertising

Native advertising refers to advertisements that are primarily content-led and featured on a
platform alongside other, non-paid content. BuzzFeed sponsored posts are a good example,
but many people also consider social media advertising to be ‘native’ -- for example,
Facebook advertising and Instagram advertising.

Here’s a quick rundown of some of the most common assets:

Assets
1. Your website
2. Blog posts
3. Ebooks and whitepapers
4. Infographics
5. Interactive tools
6. Social media channels (Facebook, LinkedIn, Twitter, Instagram, etc.)
7. Earned online coverage (PR, social media, and reviews)
8. Online brochures and lookbooks
9. Branding assets (logos, fonts, etc.)

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